-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TUaBcA2Txwr8pzS9We5+I3c7aL50ZEukAS9/dDWj8+l53GBy3KyiBGLlyArHvfp/ ro77MV5JsogAxh9vofQzKg== 0000912057-96-027664.txt : 19961202 0000912057-96-027664.hdr.sgml : 19961202 ACCESSION NUMBER: 0000912057-96-027664 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19961126 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JWH GLOBAL PORTFOLIO TRUST CENTRAL INDEX KEY: 0001027099 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 364113382 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-16825 FILM NUMBER: 96672669 BUSINESS ADDRESS: STREET 1: C/O CIS INVESTMENTS INC STREET 2: 233 S WACKER DR SUITE 2300 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124604000 MAIL ADDRESS: STREET 1: C/O CIS INVESTMENTS INC STREET 2: 233 S WACKER DR SUITE 2300 CITY: CHICAGO STATE: IL ZIP: 60606 S-1 1 S-1 As Filed with the Securities and Exchange Commission on November 26, 1996 Registration No. 333- - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 JWH GLOBAL PORTFOLIO TRUST (Exact name of registrant as specified in its charter) DELAWARE 6793 36-4113382 (State of Organization) (Primary Standard Industrial (I.R.S. Employer Classification Number) Identification Number) C/O CIS INVESTMENTS, INC. 233 SOUTH WACKER DRIVE, SUITE 2300 CHICAGO, ILLINOIS 60606 (312) 460-4000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) L. CARLTON ANDERSON CIS INVESTMENTS, INC. 233 SOUTH WACKER DRIVE, SUITE 2300 CHICAGO, ILLINOIS 60606 (312) 460-4000 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------------- COPIES TO: JOSEPH H. HARRISON, JR. WOON-WAH SIU SIDLEY & AUSTIN ONE FIRST NATIONAL PLAZA CHICAGO, ILLINOIS 60603 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: /X/ CALCULATION OF REGISTRATION FEE - -----------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM MAXIMUM AMOUNT OF SECURITIES TO BE REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE REGISTERED PER UNIT* PRICE Units of Beneficial 500,000 Units $100 $50,000,000 $15,152 Interest
- ---------------------------------------------------------------------------- * Estimated solely for purposes of calculating the registration fee. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- JWH GLOBAL PORTFOLIO TRUST CROSS REFERENCE SHEET ITEM NO. PROSPECTUS HEADING - ---- ------------------ 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus. . . . . . . . . . . . . . . . . Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus . . . . . . . . . . . . Inside Cover Page; Table of Contents 3. Summary Information. Risk Factors and Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . . . Risk Disclosure Statement; Summary; Risk Factors; Charges 4. Use of Proceeds . . . . . . . . . . . . . . Use of Proceeds; The Futures and Forward Markets 5. Determination of Offering Price . . . . . . Inside Cover Page; Plan of Distribution 6. Dilution. . . . . . . . . . . . . . . . . . Not Applicable 7. Selling Security Holders. . . . . . . . . . Not Applicable 8. Plan of Distribution. . . . . . . . . . . . Inside Cover Page; Plan of Distribution 9. Description of Securities to Be Registered . . . . . . . . . . . . . . . . Cover Page; Redemptions; Net Asset Value; The Trust and Its Objectives; The Managing Owner. 10. Interests of Named Experts and Counsel . . . . . . . . . . . . . . . . . . Legal Matters; Experts 11. Information with Respect to the Registrant . . . . . . . . . . . . . . . . Summary; Risk Factors; The Trust and Its Objectives; The Trust and the Trustee; Investment Factors; The Managing Owner; Use of Proceeds; Charges; Redemptions; Net Asset Value; Brokerage Arrangement; Conflicts of Interest; The Futures and Forward Markets; Index of Financial Statements 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities . . . . . . . . . . . . . . . . Not Applicable INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. JWH GLOBAL PORTFOLIO TRUST $50,000,000 OF UNITS OF BENEFICIAL INTEREST $10,000,000 MINIMUM MINIMUM PURCHASE: $5,000 EXCEPT AS PROVIDED BELOW JWH Global Portfolio Trust (the "Trust") is a Delaware business trust organized to engage in the speculative trading of futures contracts on currencies, interest rates, energy and agricultural products, metals and stock indices, options on such futures contracts, and spot and forward contracts on currencies and precious metals. CIS Investments, Inc. ("CISI" or "Managing Owner") will serve as managing owner of the Trust. John W. Henry & Company, Inc. ("JWH" or "Trading Advisor") will serve as the sole trading advisor of the Trust. Cargill Investor Services, Inc. ("CIS," "Futures Broker" or "Lead Selling Agent"), an affiliate of CISI, will act as the Trust's futures broker and lead selling agent. CIS Financial Services, Inc. ("CISFS" or "Foreign Currency Broker"), an affiliate of CISI, will act as the Trust's counterparty in the Trust's spot and forward currency and precious metals trades. See "Conflicts of Interest." The Trust will trade in the global futures and forward markets pursuant to the Trading Advisor's proprietary trading strategies, initially under its Financial and Metals Portfolio and Original Investment Program (the "Trading Programs"). The Trust's objective is substantial capital appreciation. There can be no assurance that the Trust will achieve its objectives or avoid substantial losses. The Trust initially will allocate 50% of its assets to each Trading Program, with quarterly automatic rebalancing by the Trading Advisor between the Programs. The Trust may utilize other JWH programs or other combinations of JWH programs as agreed between CISI and JWH. The initial sale of the units of beneficial interest (the "Units") will occur on _________ __, 1997 (subject to extension until up to _________ __, 1997 in the discretion of the Managing Owner), or such earlier date as the Managing Owner may determine, provided that a minimum of $10,000,000 in subscriptions has been accepted. Units will initially be offered at $100 per Unit. Once the Trust has begun operating, Units will be offered for sale as of the last day of each calendar month at Net Asset Value (assets less liabilities divided by Units outstanding). The minimum initial investment is $5,000; $2,000 for trustees or custodians of eligible employee benefit plans and individual retirement accounts (subject to higher minimums in certain States); and $1,000 for existing investors in the Trust (the "Unitholders"). Incremental investments are permitted in multiples of $100. The Trust may register additional Units in 500,000-Unit increments until a total of 2,000,000 Units are registered. THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. THESE SECURITIES ARE SUITABLE FOR INVESTMENT ONLY BY THOSE INVESTORS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE "COMMODITY FUTURES TRADING COMMISSION RISK DISCLOSURE STATEMENT" AT PAGE 1 AND "RISK FACTORS" AT PAGES 16 TO 24. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. An investment in the Trust involves significant risks, including the following: - - The speculative, volatile and leveraged nature of futures and forward trading could result in the loss of all or a substantial part of an investment. See page 17. Trading on foreign futures and forward markets may involve additional risks. See page 16. - - The Trust has not commenced trading and does not have any performance history. See page 19. - - The Trust's profitability is dependent on JWH's performance. See pages 17 to 18. JWH's performance has been volatile. See page 20. The single-advisor structure of the Trust and the positive correlation between the Trading Programs may further increase the risk of loss. See pages 18 and 21. - - The Trust is subject to substantial charges, payable irrespective of profitability. The Managing Owner estimates that based on the $10,000,000 minimum Trust size the Trust will need to achieve trading profits of approximately 7.92% (assuming the Trust will earn interest income at the 91-day Treasury bill rate prevailing on or about the date of this Prospectus) in its first twelve months of trading to offset expenses. See page 18. See also "Break-even Table" at pages 13 and 14. - - The Trust is subject to certain potential and actual conflicts of interest. See page 19. - - The Units are not liquid as Unitholders have limited ability to redeem Units. See page 19. 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. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------------------------------------------- Selling Commissions, Organizational and Offering Proceeds to Trust Price to Public (1) Expenses (2)(3)(4)(5) - ----------------------------------------------------------------------------------------------------------------- Prior to Initial Closing, Per Unit $100 (2)(3)(4) $100 - ----------------------------------------------------------------------------------------------------------------- After Initial Closing, Per Unit Net Asset Value (2)(3)(4) Net Asset Value - ----------------------------------------------------------------------------------------------------------------- Minimum Total Proceeds $10,000,000 (2)(3)(4) $10,000,000 - ----------------------------------------------------------------------------------------------------------------- Maximum Total Proceeds $50,000,000 (2)(3)(4) $50,000,000 - -----------------------------------------------------------------------------------------------------------------
See notes on pages (i)-(ii). THE DATE OF THIS PROSPECTUS IS __________, 1996 (NOT FOR USE AFTER _________, 1997) NOTES TO COVER PAGE (1) The Units will be sold at $100 per Unit prior to the initial closing date (the "Initial Offering Period") and thereafter at the Net Asset Value per Unit as of the last day of each calendar month (the "Ongoing Offering Period"). The $100 initial offering price was arbitrarily determined. Once the Trust has begun trading, the Net Asset Value per Unit will equal the aggregate Net Assets of the Trust, reflecting the initial subscription price and the Trust's trading results net of fees and expenses (all the assets of the Trust will have, except in highly unusual circumstances, a readily ascertainable market value), divided by the number of Units outstanding. see "Redemptions; Net Asset Value -- Net Asset Value" at page 67. The Units are offered on a "best efforts" basis without any firm underwriting commitment through Cargill Investor Services, Inc. (the "Lead Selling Agent"), as well as certain Additional Selling Agents (including those introduced by "wholesalers" ("Wholesalers")) selected by the Lead Selling Agent (together with the Lead Selling Agent, the "Selling Agents") with the consent of the Managing Owner. With the consent of the Managing Owner and the Lead Selling Agent, certain Additional Selling Agents may distribute Units through correspondent "introducing brokers." Units may be sold in each State only by persons appropriately registered as broker-dealers or exempt from registration in such State. No Units will be sold unless acceptable subscriptions for at least 100,000 Units ($10,000,000) are received on or before __________ __, 1997 (subject to extension until up to _________ __, 1997 in the discretion of the Managing Owner). If no units are ultimately sold, all subscriptions will be promptly returned to subscribers with all interest earned thereon while held in escrow. All subscription funds, plus all interest earned on such funds, will be promptly returned to subscribers in the event that their subscriptions are rejected. All investors will have the right to revoke their subscriptions (and receive a refund of their subscriptions promptly after revocation) for a period of five business days following receipt of a final Prospectus. This Prospectus will first be used to solicit investors on or about the date hereof. (2) No selling commissions are paid from the proceeds of subscriptions. The Selling Agents receive, from the Lead Selling Agent, (i) selling commissions of up to 4% of the subscription price of all Units sold by them and (ii) provided that they (a) are registered with the Commodity Futures Trading Commission ("CFTC") as "futures commission merchants" or "introducing brokers" and (b) sell Units through Registered Representatives who are themselves registered with the CFTC, ongoing compensation of up to 4% per annum of average month-end Net Asset Value per Unit on Units sold by them that have been outstanding for twelve months. Such ongoing compensation will accrue from the first day of the thirteenth month after a particular Unit is issued and continue for as long as such Unit remains outstanding and will be payable monthly in arrears. Such ongoing compensation may be deemed to constitute "underwriting compensation." see "Federal Income Tax Aspects -- Syndication Expenses" at page 77. The selling commissions and ongoing compensation with respect to Units eligible to be charged the Special Brokerage Fee Rate as described under "Charges -- Brokerage Fee -- Special Brokerage Fee Rate" will be up to 2% of, respectively, the subscription price and average month-end Net Asset Value of such Units. Registered Representatives who are not registered with the CFTC will not be eligible to receive ongoing compensation. Rather, such Registered Representatives are restricted to receiving installment selling commissions. The total amount of installment selling commissions and initial selling commission received by any such Registered Representative on each Unit sold by him or her may not exceed 9% of the initial subscription price of the Unit. The Lead Selling Agent may engage Wholesalers who will introduce Additional Selling Agents to the Lead Selling Agent, in which case such Wholesalers and Additional Selling Agents will share the selling commissions and ongoing compensation (or installment selling commissions) payable on Units sold by such Additional Selling Agents. Certain Additional Selling Agents may distribute Units through correspondent "introducing brokers," in which case such Additional Selling Agents share with their respective correspondents the selling commissions and ongoing compensation (or installment selling commissions) described above due in respect of Units sold by such correspondents. Wholesalers and correspondents must either be registered or exempt broker- dealers and must satisfy the same eligibility requirements as those applicable to the Selling Agents in order to receive ongoing compensation. See "Plan of Distribution -- The Selling Agents" at page 85. -i- (3) The Trust's organizational and initial offering costs are estimated to be approximately $500,000-$600,000. The organizational and initial offering costs will be advanced by CISI and reimbursed, without interest, to CISI by the Trust at the initial closing. The actual amount available for trading by the Trust will be the amount shown as proceeds to the Trust less the amount of such organizational and initial offering costs. The amount of such organizational and initial offering costs shall be amortized over 60 months commencing with the end of the calendar month in which the initial closing occurs (irrespective of whether such month is a full month). At no month-end will the amount amortized by the Trust exceed 1/60 of 2% of Net Assets of the Trust as of such month-end. The amount amortized each month-end shall be the lesser of (i) the product of (x) one divided by the number of months remaining in the amortization period times (y) the unamortized balance of the capitalized organizational and initial offering costs, or (ii) 1/60 of 2% of the month-end Net Assets at that month-end. If (i) the Trust is terminated prior to the end of such 60-month period, or (ii) the entire amount of the organizational and initial offering costs reimbursed to CISI is not amortized at the end of the 60-month period due to the 2% limitation, CISI shall return to the Trust, without interest, an amount equal to the unamortized balance of the capitalized organizational and initial offering costs. see also "Use of Proceeds --Proceeds of Subscriptions" at page 58. The costs of the ongoing offering of the Units, including the costs of updating this Prospectus, will be paid by the Trust; provided that the Managing Owner will absorb all such costs to the extent that they exceed 0.5% of the Trust's average month-end Net Assets during any fiscal year. (4) The Trust is not a "no load" fund: the Trust will pay organizational and initial offering costs up to 2% of its average month-end Net Assets for the first 60 months of operations and ongoing offering costs up to 0.5% of average month-end Net Assets in each fiscal year, and early redemption charges apply. (5) The Trust will maintain an escrow account at The First National Bank of Chicago, Chicago, Illinois (the "Escrow Agent"). The Selling Agents will deposit accepted subscription proceeds in escrow, pending investment in the Units as of the initial closing date or, during the Ongoing Offering Period, as of the last day of each calendar month, as the case may be. Interest actually earned on subscriptions while held in escrow will be invested in the Trust, and investors will be issued additional Units reflecting each investor's attributable share of such interest. _______________________ UNTIL _________ ___, 199_, ALL DEALERS EFFECTING TRANSACTIONS IN THE UNITS, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. THE SELLING AGENTS MUST DELIVER ANY SUPPLEMENTED OR AMENDED PROSPECTUS ISSUED BY THE TRUST DURING THE INITIAL AND ONGOING OFFERING PERIODS. THIS PROSPECTUS (AFTER THE TRUST BEGINS OPERATING) MUST BE ACCOMPANIED BY THE MOST CURRENT ACCOUNT STATEMENT (OR PERFORMANCE INFORMATION, CURRENT WITHIN 60 CALENDAR DAYS, RELATING TO THE TRUST) AND, IF APPLICABLE, THE MOST CURRENT ANNUAL REPORT OF THE TRUST. _______________________ NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST, CISI, ANY SELLING AGENT OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE. -ii- _______________________ SUBSCRIBERS WILL BE REQUIRED TO MAKE CERTAIN REPRESENTATIONS AND WARRANTIES IN THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY. _______________________ THE BOOKS AND RECORDS OF THE TRUST WILL BE MAINTAINED AT ITS PRINCIPAL OFFICE, C/O CIS INVESTMENTS, INC., 233 SOUTH WACKER DRIVE, SUITE 2300, CHICAGO, ILLINOIS 60606, TELEPHONE NUMBER (312) 460-4000. UNITHOLDERS WILL HAVE THE RIGHT DURING NORMAL BUSINESS HOURS TO HAVE ACCESS TO AND COPY (UPON PAYMENT OF REASONABLE REPRODUCTION COSTS) SUCH BOOKS AND RECORDS (OTHER THAN RECORDS OF SPECIFIC TRADES MADE BY THE TRUST) IN PERSON OR BY THEIR AUTHORIZED ATTORNEY OR AGENT. CISI WILL SEND ALL UNITHOLDERS ANNUAL AND MONTHLY REPORTS COMPLYING WITH CFTC AND NATIONAL FUTURES ASSOCIATION ("NFA") REQUIREMENTS. THE ANNUAL REPORTS CONTAIN CERTIFIED AND AUDITED, AND THE MONTHLY REPORTS UNAUDITED, FINANCIAL INFORMATION. _______________________ THE DIVISION OF INVESTMENT MANAGEMENT OF THE SECURITIES AND EXCHANGE COMMISSION REQUIRES THAT THE FOLLOWING STATEMENT BE SET FORTH PROMINENTLY HEREIN: "JWH GLOBAL PORTFOLIO TRUST IS NOT A MUTUAL FUND OR ANY OTHER TYPE OF INVESTMENT COMPANY WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND IS NOT SUBJECT TO REGULATION THEREUNDER." _______________________ IT IS RECOMMENDED THAT NO SUBSCRIBER SHOULD INVEST MORE THAN 10% OF SUCH SUBSCRIBER'S "LIQUID" NET WORTH (WHICH EXCLUDES HOME, FURNISHINGS AND AUTOMOBILES IN THE CASE OF INDIVIDUALS AND INCLUDES ONLY READILY MARKETABLE SECURITIES IN THE CASE OF ENTITIES) IN THE TRUST. THE TRUST WILL BE SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934 AND IN ACCORDANCE THEREWITH WILL FILE REPORTS AND OTHER INFORMATION WITH THE COMMISSION. REPORTS, PROXIES (IF ANY), INFORMATION STATEMENTS (IF ANY), AND OTHER INFORMATION FILED BY THE TRUST, CAN BE INSPECTED AND COPIED AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE COMMISSION AT 450 FIFTH STREET, N.W., WASHINGTON, DC 20549 AND AT ITS NORTHEAST REGIONAL OFFICE AT 7 WORLD TRADE CENTER, SUITE 1300, NEW YORK, NY 10048 AND AT ITS MIDWEST REGIONAL OFFICE AT CITICORP CENTER, 500 WEST MADISON STREET, SUITE 1400, CHICAGO, IL 60661. COPIES OF SUCH MATERIAL CAN BE OBTAINED FROM THE PUBLIC REFERENCE SECTION OF THE COMMISSION, 450 FIFTH STREET, N.W., WASHINGTON, DC 20549 AT PRESCRIBED RATES. THE COMMISSION MAINTAINS A WEB SITE AT HTTP://WWW.SEC.GOV THAT CONTAINS REPORTS, PROXY AND INFORMATION STATEMENTS AND OTHER INFORMATION REGARDING REGISTRANTS THAT FILE ELECTRONICALLY WITH THE COMMISSION. -iii- COMMODITY FUTURES TRADING COMMISSION RISK DISCLOSURE STATEMENT YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT FUTURES AND OPTIONS TRADING 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. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL. FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO 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 AT PAGES 59 THROUGH 65 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO "BREAK- EVEN," THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGES 13 TO 14. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGES 16 TO 24. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED. -1- JWH GLOBAL PORTFOLIO TRUST TABLE OF CONTENTS Page ---- INDEX OF DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . 5 SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Diversification . . . . . . . . . . . . . . . . . . . . . . . . . 7 The Trading Advisor . . . . . . . . . . . . . . . . . . . . . . . 8 The Trading Programs. . . . . . . . . . . . . . . . . . . . . . . 9 The Managing Owner. . . . . . . . . . . . . . . . . . . . . . . . 10 The Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Charges 12 Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . 12 "Break-even Table". . . . . . . . . . . . . . . . . . . . . . . . 13 Federal Income Tax Aspects. . . . . . . . . . . . . . . . . . . . 15 RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Futures and Forward Trading . . . . . . . . . . . . . . . . . . . 16 (1) "Exchange of Futures for Physical" Transactions. . . . . . . 16 (2) Trading on Commodity Exchanges Outside the United States . . 16 (3) Bankruptcy of Futures Broker and Bankruptcy or Default of Counterparties . . . . . . . . . . . . . . . . . . . . . . . 16 (4) Markets May be Illiquid. . . . . . . . . . . . . . . . . . . 16 (5) Unregulated Markets. . . . . . . . . . . . . . . . . . . . . 17 (6) Volatile Markets and Highly Leveraged Trading. . . . . . . . 17 (7) "Zero-Sum" Trading . . . . . . . . . . . . . . . . . . . . . 17 The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (8) All or Substantially all of an Investment Could be Lost; Past Performance Is Not Necessarily Indicative of Futures Results . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (9) Specific Risks Associated with a Single-Advisor Portfolio. . 18 (10) Non-Correlated and Not Negatively Correlated Anticipated Performance . . . . . . . . . . . . . . . . . . . . . . . .. 18 (11) Substantial Charges Payable Regardless of Profitability. . . 18 (12) Limited Ability to Liquidate an Investment in the Units. . . 19 (13) The Trust Is Subject to Conflicts of Interest. . . . . . . . 19 (14) The Trust Has No Operating History . . . . . . . . . . . . . 19 (15) Unitholders Have No Role in Management . . . . . . . . . . . 19 The Trading Advisor . . . . . . . . . . . . . . . . . . . . . . . 20 (16) Volatile JWH Trading History . . . . . . . . . . . . . . . . 20 (17) Possible Adverse Effects of Increasing JWH'S Assets Under Management . . . . . . . . . . . . . . . . . . . . . . . . . 20 (18) Limitation of Liability and Indemnification of Trading Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . 20 The Trading Programs. . . . . . . . . . . . . . . . . . . . . . . 20 (19) Positive Correlation Between the Trading Programs. . . . . . 20 (20) Overlap of Markets . . . . . . . . . . . . . . . . . . . . . 21 (21) Technical, Trend-Following Trading Programs. . . . . . . . . 21 (22) Importance of Market Conditions to Profitability . . . . . . 21 (23) Possible Liquidation of Profitable Positions . . . . . . . . 22 (24) Alteration of Trading Systems and Contracts and Markets Traded . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (25) Mandatory Closing Out of Offsetting Positions. . . . . . . . 22 (26) Limited Ability to Describe Proprietary Strategies . . . . . 22 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (27) Unitholders are Taxed on Allocable Trust Income Although Such Income Is Not Distributed . . . . . . . . . . . . . . . 22 (28) Taxation of Interest Income Irrespective of Trading Losses . 23 (29) Limitations on the Deductibility of "Investment Advisory Fees" . . . . . . . . . . . . . . . . . . . . . . . 23 -2- JWH GLOBAL PORTFOLIO TRUST TABLE OF CONTENTS (CONT'D) Page ---- RISK FACTORS (cont'd) (30) Nondeductibility of "Syndication Expenses" . . . . . . . . . 23 (31) Possibility of Tax Audit of Both the Trust and Individual Unitholders . . . . . . . . . . . . . . . . . . . . . . . . 23 Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (32) Absence of Regulation Applicable to Investment Companies and Their Advisers . . . . . . . . . . . . . . . . . . . . . 23 (33) Future Regulatory Changes. . . . . . . . . . . . . . . . . . 23 INVESTMENT FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Access to JWH and the Trading Programs. . . . . . . . . . . . . . 24 Investment Diversification. . . . . . . . . . . . . . . . . . . . 24 Opportunity to Profit in Declining as Well as in Rising Markets . 25 Interest on Trust Assets. . . . . . . . . . . . . . . . . . . . . 25 Small Minimum Investment; Smaller Minimum Additional Investment . 25 Limited Liability . . . . . . . . . . . . . . . . . . . . . . . 25 Administrative Convenience. . . . . . . . . . . . . . . . . . . . 26 THE TRUST AND ITS OBJECTIVES . . . . . . . . . . . . . . . . . . . . . 26 Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 The Managing Owner's Discussion and Analysis of the Trust's Prospective Financial Condition and Results of Operations . . . 27 THE MANAGING OWNER . . . . . . . . . . . . . . . . . . . . . . . . . . 28 JOHN W. HENRY & COMPANY, INC.. . . . . . . . . . . . . . . . . . . . . 29 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 A Disciplined Investment Philosophy . . . . . . . . . . . . . . . 29 Principals. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 The Investment Policy Committee . . . . . . . . . . . . . . . . . 33 Legal and Ethical Concerns. . . . . . . . . . . . . . . . . . . . 33 Trading Techniques. . . . . . . . . . . . . . . . . . . . . . . . 34 Program Modifications . . . . . . . . . . . . . . . . . . . . . . 34 Leverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Additions, Redemption and Reallocation of Capital for Pool Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 The Trading Programs. . . . . . . . . . . . . . . . . . . . . . . 35 Other Programs Developed by JWH . . . . . . . . . . . . . . . . . 36 JWH Programs: Performance Summaries and Monthly Rates of Return . 37 The Trading Advisory Agreement. . . . . . . . . . . . . . . . . . 56 FIDUCIARY OBLIGATIONS OF THE MANAGING OWNER. . . . . . . . . . . . . . 56 Nature of Fiduciary Obligations; Conflicts of Interest. . . . . . 56 Remedies Available to the Unitholders . . . . . . . . . . . . . . 57 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Proceeds of Subscriptions . . . . . . . . . . . . . . . . . . . . 58 Speculative Trading . . . . . . . . . . . . . . . . . . . . . . . 58 Maintenance of Assets; Interest Income. . . . . . . . . . . . . . 58 CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Charges Paid by The Trust . . . . . . . . . . . . . . . . . . . . 59 Organization and Initial Offering Costs . . . . . . . . . . . . . 61 Brokerage Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Ongoing Offering Costs. . . . . . . . . . . . . . . . . . . . . . 63 Management Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 63 Incentive Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Administrative Expenses . . . . . . . . . . . . . . . . . . . . . 65 Extraordinary Expenses. . . . . . . . . . . . . . . . . . . . . . 65 Charges Paid by Others. . . . . . . . . . . . . . . . . . . . . . 65 Brokerage Fee for Currency and Precious Metals Trading. . . . . . 65 Selling Commissions and Ongoing Compensation. . . . . . . . . . . 65 Redemption Charges. . . . . . . . . . . . . . . . . . . . . . . . 65 -3- JWH GLOBAL PORTFOLIO TRUST TABLE OF CONTENTS (CONT'D) Page ---- BROKERAGE ARRANGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 66 The Futures Broker. . . . . . . . . . . . . . . . . . . . . . . . 66 The Foreign Currency Broker . . . . . . . . . . . . . . . . . . . 67 REDEMPTIONS; NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . 67 Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . 68 THE TRUST AND THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . 68 Principal Office; Location of Records . . . . . . . . . . . . . . 68 Certain Aspects of the Trust. . . . . . . . . . . . . . . . . . . 68 The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Management of Trust Affairs; Voting by Unitholders. . . . . . . . 70 Recognition of the Trust in Certain States. . . . . . . . . . . . 70 Possible Repayment of Distributions Received by Unitholders; Indemnification of the Trust by Unitholders . . . . . . . . . 70 Transfers of Units Restricted . . . . . . . . . . . . . . . . . . 70 Reports to Unitholders. . . . . . . . . . . . . . . . . . . . . . 71 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 CONFLICTS OF INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . 71 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Relationship of the Managing Owner, the Futures Broker and the Foreign Currency Broker . . . . . . . . . . . . . . . . 71 Other Commodity Pools and Accounts. . . . . . . . . . . . . . . . 72 Commodity Transactions of Affiliates and Customers of the Futures Broker . . . . . . . . . . . . . . . . . . . . . . . . 72 Other Activities of CIS, the Managing Owner, JWH and Their Officers and Employees. . . . . . . . . . . . . . . . . . . . . 73 The Selling Agents. . . . . . . . . . . . . . . . . . . . . . . . 73 Indemnification and Standard of Liability . . . . . . . . . . . . 73 FEDERAL INCOME TAX ASPECTS . . . . . . . . . . . . . . . . . . . . . . 74 PURCHASES BY EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . 79 THE FUTURES AND FORWARD MARKETS. . . . . . . . . . . . . . . . . . . . 81 PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . 84 Subscription Procedure. . . . . . . . . . . . . . . . . . . . . . 84 Subscribers' Representations and Warranties . . . . . . . . . . . 85 The Selling Agents. . . . . . . . . . . . . . . . . . . . . . . . 85 LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 86 INDEX OF FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . 87 APPENDIX I: PERFORMANCE OF OTHER CISI-SPONSORED FUNDS APPENDIX II: "BLUE SKY" GLOSSARY EXHIBIT A: DECLARATION AND AGREEMENT OF TRUST EXHIBIT B: SUBSCRIPTION REQUIREMENTS EXHIBIT C: SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY (WITH REDEMPTION REQUEST) __________________________________ CIS INVESTMENTS, INC. 233 South Wacker Drive, Suite 2300 Chicago, Illinois 60606 (312) 460-4000 MANAGING OWNER __________________________________ -4- INDEX OF DEFINED TERMS A NUMBER OF DEFINED OR SPECIALIZED TERMS ARE USED IN THIS PROSPECTUS. THE RESPECTIVE DEFINITIONS OR DESCRIPTIONS OF SUCH TERMS MAY BE FOUND ON THE FOLLOWING PAGES OF THIS PROSPECTUS. Page(s) ------- Additional Selling Agents. . . . . . . . . . . . . . . . . . . . . . . -i- Administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . 65 "Break-even" table . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Brokerage Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Brokerage Fee Excess . . . . . . . . . . . . . . . . . . . . . . . . . 62 CEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 CFTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -i- CIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page CISFS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page CISI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page Correspondent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -i- Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Futures Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page Clearinghouse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Daily limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Declaration and Agreement of Trust . . . . . . . . . . . . . . . . . . 68, A-1 "EFPs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Eligible Unitholder. . . . . . . . . . . . . . . . . . . . . . . . . . 62 Employee benefit plan. . . . . . . . . . . . . . . . . . . . . . . . . 79 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . -ii- Financial and Metals Portfolio . . . . . . . . . . . . . . . . . . . . 9, 35 Foreign Currency Broker. . . . . . . . . . . . . . . . . . . . . . . .Cover Page Forward Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Futures Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 81 High Water Mark. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Incentive Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Initial margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Initial Offering Period. . . . . . . . . . . . . . . . . . . . . . . . -i- IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 JWH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page Lead Selling Agent . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Managing Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Margin call. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 NASAA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . -i-, 68 New Trading Profit . . . . . . . . . . . . . . . . . . . . . . . . . . 64 NFA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Ongoing compensation . . . . . . . . . . . . . . . . . . . . . . . . . 65 Ongoing offering costs . . . . . . . . . . . . . . . . . . . . . . . . 63 Ongoing Offering Period. . . . . . . . . . . . . . . . . . . . . . . . -i- Organizational and initial offering cost reimbursement . . . . . . . . -i-, 61 Organizational and initial offering cost amortization. . . . . . . . . -i-, 61 Original Investment Program. . . . . . . . . . . . . . . . . . . . . . 9, 35 Principals' markets. . . . . . . . . . . . . . . . . . . . . . . . . . 81 Redemption charges . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 65 Selling Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . -i- -5- Page(s) ------- Selling commissions. . . . . . . . . . . . . . . . . . . . . . . . . . -i-, 65 Special Brokerage Fee Rate . . . . . . . . . . . . . . . . . . . . . . 62 Speculative position limits. . . . . . . . . . . . . . . . . . . . . . 82 Trading Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page Trading Advisory Agreement . . . . . . . . . . . . . . . . . . . . . . 56 Trading Programs . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page Trend-following. . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page Unitholder(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page Variation margin . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Wholesalers . . . . . . . . . . . . . . . . . . . . . . . . . . . . -i- "Zero-sum" trading . . . . . . . . . . . . . . . . . . . . . . . . . . 17 -6- JWH GLOBAL PORTFOLIO TRUST SUMMARY THE FOLLOWING SUMMARY IS INTENDED TO HIGHLIGHT CERTAIN INFORMATION CONTAINED IN THIS PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS AND CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS." THE TRUST JWH Global Portfolio Trust is a newly-organized Delaware business trust whose objective is to achieve substantial capital appreciation through speculative trading of futures, options on futures, and spot and forward contracts in global markets. It is the primary public vehicle through which U.S. regional brokerage firms market on an open-ended basis investment strategies of John W. Henry & Company, Inc., the Trust's sole trading advisor. The Trust will provide access to multiple JWH programs. The Trust's offices are located at c/o CIS Investments, Inc., 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606; telephone (312) 460-4000. The Trust aims to achieve its objectives using the Financial and Metals Portfolio and the Original Investment Program, two of the longest established proprietary JWH programs, both of which have been trading client funds for more than a decade. OBJECTIVE While the Trust has the primary objective of substantial capital appreciation by identifying and exploiting trends in the markets it trades, it will at the same time strive to reduce volatility and risk of loss by participating in broadly diversified global markets and implementing the Trading Programs' risk control policies. If the Trust is able to preserve capital during periods of unfavorable, non-trending markets, it has the potential to benefit from major price movements in a wide range of global markets when, from time to time, such trends do occur. JWH will take a long-term perspective of the markets in seeking to achieve the Trust's objectives. The Trust will not be managed in a manner likely to produce significant short-term profits. On the contrary, JWH anticipates that the Trust may incur major short-term losses from time to time even if it succeeds in achieving its cumulative performance objective over time. CISI and JWH recommend that only those investors who are prepared to make at least a medium- to long-term (minimum two-year) commitment to the Trust should consider purchasing Units. JWH is typically available to manage individual accounts of substantial size -- $1,000,000 or more. Investors in the Trust will gain access to JWH with a minimum investment of only $5,000, or $2,000 in the case of trustees or custodians of eligible employee benefit plans and individual retirement accounts. In addition to providing access to JWH, the small minimum requirement also means that investors need not commit a significant amount of assets in order to participate in speculative trading of futures interests. DIVERSIFICATION The Trust offers a potentially valuable means of diversification from traditional investments. Investors in the Trust will have the opportunity to participate in markets which are typically not represented in an individual's portfolio and which (because futures and forward contracts can be traded on both the long and short sides) offer profit potential in both rising and falling markets. In addition, the Trading Programs trade in a large number of global markets and sectors, providing broad diversification in the Trust's trading despite its single-advisor structure. This market and geographical diversification means that the Trust's performance is not dependent on any single sector or any single nation's economy or currency. See "John W. Henry & Company, Inc. --The Trading Programs" at page 36 for the markets traded by the Trading Programs. -7- The expected lack of correlation between the performance of the Trust and the performance of the general equity and debt markets suggests that, if the Trust is successful, allocating a portion of one's investment portfolio to the Trust may provide real portfolio diversification that enhances returns while decreasing overall portfolio volatility. HISTORICAL PERFORMANCE CHARACTERISTICS Annualized returns show average compounded annualized rates of return. Figures are calculated using the monthly rates of return on a compound basis for the periods shown, and are not a sum or average of the annualized rates of return. This data is not representative of the performance of any one account. Rather, this information makes use of the data provided in each Trading Program's performance record which is the composite of the actual performance of all the accounts trading in the Trading Program.
3-Year 5-Year 10-Year 5-Year Annualized Annualized Annualized Correlation* Return Return Return to S&P 500 ---------- ---------- ---------- ------------ (Ending 9/30/96) -------------------------------------------------- JWH Programs - ------------ Original Investment Program(a) 19.6% 21.3% 16.7% 0.09 Financial and Metals Portfolio(a) 11.7% 19.7% 38.5% 0.25 Benchmark Comparison - -------------------- LBGBI(b) 4.0% 9.1% 9.1% 0.51 S&P 500 (Total Return)(c) 17.4% 15.2% 15.0% 1.00
* Correlation is measured as the correlation of monthly returns to the S&P 500 over 5 years ending September 1996. (a) Figures based on adjusted rates of return, net of fees. (b) LBGBI is the Lehman Brothers' Long-Term Government Bond Index as published by Lehman Brothers International. (c) S&P 500 is the Standard & Poor's Stock Index (Total Return) as published by S&P Comstock. The Original Investment Program began trading client capital in October 1982 while the Financial and Metals Portfolio began trading client capital in October 1984. Comparison with the S&P 500 Index does not reflect different tax treatment of each investment. Futures trading is speculative and involves substantial risk. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE TRADING ADVISOR JWH is one of the largest advisors in the managed futures industry with more than $1.6 billion of assets under management as of September 30, 1996. It has been continuously managing client funds in the futures and forward markets for over 15 years. JWH has achieved substantial profits under a variety of different market conditions and through a variety of different programs including the Original Investment Program and the Financial and Metals Portfolio, the two programs that will be utilized by the Trust initially. In investing in the Trust, Unitholders will have the opportunity to place assets with one of the world's most experienced global futures and foreign exchange trading managers. -8- JWH manages capital in commodities, interest rate and foreign exchange markets on a 24-hour basis for international banks, brokerage firms, pension funds, institutions, and high-net-worth individuals. JWH trades a wide range of futures and forward contracts in the United States, Europe and Asia, and has grown to have among the largest amount of assets under management in its industry. For information about JWH and JWH programs, see "John W. Henry & Company, Inc." commencing at page 29. THE TRADING ORIGINAL INVESTMENT PROGRAM. The first program offered by PROGRAMS JWH, this program began trading in October 1982 and has an annualized net return of 17% from inception to September 30, 1996. It is a broadly diversified portfolio giving access to a diverse group of financial and non-financial markets on U.S. and non-U.S. exchanges. Based on the results of extensive research, this Trading Program's composition was revised in July 1992 to include additional global markets and an increased weighting in financial sectors. The Trading Program utilizes long-term quantitative reversal models which hold either long or short positions at all times in every market in which it participates. As of September 30, 1996, JWH had approximately $180 million under management in the Original Investment Program. FINANCIAL AND METALS PORTFOLIO. The Financial and Metals Portfolio started trading in October 1984 and has an annualized net return of 40% from inception to September 30, 1996. This Trading Program seeks to capitalize on sustained moves in global financial markets utilizing intermediate- and long-term quantitative trend analysis models, some of which attempt to employ neutral stances during periods of non-trending markets. As of September 30, 1996, JWH had approximately $949 million under management in the Financial and Metals Portfolio. The Trust will initially allocate its assets equally between the Trading Programs. Thereafter, JWH will automatically rebalance Trust assets equally between the Trading Programs at the end of each quarter. For historical performance information concerning the Trading Programs, see "John W. Henry & Company, Inc. -- JWH Programs: Performance Summaries and Monthly Rates of Return" commencing on page 37. From time to time, CISI and JWH may agree to alter the allocation of Trust assets between the Trading Programs, to delete a Trading Program or add other JWH programs. DIVERSIFICATION 50/50 Mix of Original Investment Program and Financial and Metals Portfolio Hypothetical Section Allocation as of September 30, 1996 European Interest Rates 14.94% Pacific Rim Interest Rates 24.02% U.S. Interest Rates 6.54% [Colored Pie Chart] Foreign Exchange 13.98% Stock Indices 5.23% Energy 9.72% Agriculture 11.29% Metals 14.29% Sector allocations for the Original Investment Program and Financial and Metals Portfolio are based on the margin per million dollar invested required, as set by the exchange where the contract is traded, for all open positions as of September 30, 1996. In an account where forward contracts were traded, IMM equivalent positions were used. In cases where there was no IMM equivalent, 2% was used as a representative margin requirement. These numbers will change as the composition of the portfolio is based on exit and entry signals, but will not reflect changes in leverage utilized by JWH. These allocations are shown for illustrative purposes only; allocations can and do change over time and from time to time. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. -9- THE MANAGING OWNER The managing owner and commodity pool operator of the Trust is CIS Investments, Inc. CISI was incorporated in Delaware in 1983 and is an affiliate of Cargill Investor Services, Inc., the Trust's futures broker. CISI is registered with the CFTC under the Commodity Exchange Act, as amended (the "CEA"), as a commodity pool operator and is a member of the National Futures Association ("NFA"). CISI currently operates two public commodity pools jointly with IDS Futures Corporation and one private commodity pool. CISI maintains its principal office at 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606; telephone (312) 460-4000. See "The Managing Owner" commencing at page 28. THE OFFERING Units are offered at $100 per Unit during the three-month Initial Offering Period (which may be terminated earlier or extended for up to three additional months at the discretion of CISI). No Units will be sold unless acceptable subscriptions for at least 100,000 Units ($10,000,000) are received during the Initial Offering Period. There can be no assurance that the minimum number of Units that must be sold for the Trust to begin trading will, in fact, be sold. Units will be sold as of each month-end at their Net Asset Value during the Ongoing Offering Period. Subscriptions must be received by the Managing Owner no later than the 20th day of a month (or, if the 20th is not a business day, the next business day) for Units to be sold as of the end of that month. Initial minimum investment is $5,000; $2,000 for trustees or custodians of eligible employee benefit plans and individual retirement accounts. Incremental initial investments are permitted in multiples of $100. Existing investors subscribing for additional Units may do so in $1,000 minimums, also with $100 increments. Units are sold in fractions calculated to five decimal places. After the Trust has commenced operation, the Trust may register additional Units in 500,000 Unit increments until 2,000,000 Units are registered. Subscribers must complete, execute and deliver to their Selling Agents the Subscription Agreement and Power of Attorney Signature Page which accompanies this Prospectus. THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY REQUIRES INVESTORS TO MAKE CERTAIN SPECIFIED REPRESENTATIONS AND WARRANTIES. SUBSCRIBERS SHOULD CAREFULLY READ (I) EXHIBIT B -- SUBSCRIPTION REQUIREMENTS, (II) EXHIBIT C -- SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY AND (III) THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE WHICH ACCOMPANIES THIS PROSPECTUS IN ADDITION TO REVIEWING THIS ENTIRE PROSPECTUS CAREFULLY BEFORE THEY DECIDE WHETHER TO INVEST IN THE UNITS. See "Plan of Distribution -- Subscription Procedure" at pages 84 to 85. REDEMPTIONS Unitholders have the option to redeem Units at their Net Asset Value as of the end of any calendar month, provided written notice is received by CISI on or before the 20th of such month (or, if the 20th is not a business day, the next business day), subject to early redemption charges of 3% of redemption-date Net Asset Value through the end of the eleventh full calendar month after Units are sold. All such charges are paid to CIS. Units subscribed for are considered sold, for purposes of determining whether redemption charges apply, as of the day subscription funds are released from escrow (which, in the case of Units subscribed for during the Initial Offering Period, will be the day the Trust begins trading and, in the case of Units subscribed for during the Ongoing Offering Period, will be the last day of a calendar month), not the day subscriptions for such Units are accepted or subscription funds are deposited into escrow. See "Redemptions; Net Asset Value -- Redemptions" at page 67. -10- RISK FACTORS An investment in the Trust is speculative and involves a high degree of risk. The following are, in the opinion of the Managing Owner, some of the significant risks associated with investing in the Trust. A more detailed list of the relevant risk factors is set forth under "Risk Factors" at pages 16 through 24 of this Prospectus. - Futures and forward trading is speculative, highly volatile and highly leveraged. Investors may lose all or a substantial part of their investment. Trading on foreign futures and forward contract markets involves additional risks, including the lack of regulatory protection for trading in certain foreign markets, exchange rate risk, risk of expropriation, credit and investment controls and counterparty credit risk. See "Risk Factors -- Futures and Forward Trading" at pages 16 to 17. - The Trust has not commenced trading and has no performance history. Therefore, investors have no information concerning the Trust's actual results of operation on which to base their investment decision. See "Risk Factor (14) -- The Trust Has No Operating History" at page 19. Although both Trading Programs to be utilized initially by the Trust have been in continuous operation for over 10 years, past performance is not necessarily indicative of future results. - The Trust is a single-advisor fund, which is considered by some to involve higher risk than multi-advisor funds. The Trust's profitability depends on JWH's trading performance. There can be no assurance that the Trust will have the continued services of JWH and its key principals. JWH's past performance has exhibited significant volatility. The Trust could incur large losses over short-term periods. See "Risk Factors -- The Trust" at pages 17 to 19 and "-- The Trading Advisor" at page 20. - In addition, the positive correlation between the Trading Programs (because they trade in some of the same markets and are both technical, trend following programs) may further increase the risk of loss because it potentially reduces the benefit of diversification. See "Risk Factors -- The Trading Programs" at pages 20 to 22. - The Trust is subject to substantial charges, payable regardless of profitability. The Managing Owner estimates that based on the $10,000,000 minimum Trust size the Trust will need to achieve trading profits of 7.92% (assuming the Trust will earn interest income at the 91-day Treasury bill rate prevailing on or about the date of this Prospectus) in its first twelve months of trading to offset the Brokerage Fee, Management Fee, organizational and initial offering cost amortization, ongoing offering costs and administrative costs. Furthermore, the quarterly Incentive Fee is calculated on the trading profit of the Trust as a whole, not on the Net Asset Value of Units held by each Unitholder, which, together with possible misallocation of trading profits due to timing of purchase and redemption of Units, could cause an Incentive Fee to be assessed on Units of a Unitholder even though such Units have declined in value. See "Risk Factor (11) -- Substantial Charges Payable Regardless of Profitability" at page 18 and "Charges" at pages 59 through 65. - The Trust is subject to a number of potential and actual conflicts of interest. The Trust's Futures Broker and Foreign Currency Broker are affiliates of the Managing Owner. No formal mechanism is in place to resolve the conflicts of interest that may arise due to the affiliation of these parties. However, the Managing Owner is subject to restrictions imposed on "fiduciaries" under both statutory and common law. See "Risk Factor (13) --The Trust Is Subject to Conflicts of Interest" at page 19. -11- - No market exists for the Units. Units are redeemable only at month-end. Redemption requests must be received by CISI on or before the 20th of a month (or if the 20th is not a business day, the next business day) to effect redemption as of such month-end. Given the volatile nature of the investment, the Net Asset Value could vary significantly between the date on which redemption is requested and the date on which redemption occurs. In addition, a redemption charge of 3% applies to Units redeemed at or prior to the end of the eleventh month after they are issued. See "Risk Factor (12) -- Limited Ability to Liquidate an Investment in the Units" at page 19. DISTRIBUTIONS Distribution of profits, which is currently not contemplated, will be made at the discretion of the Managing Owner. There is no assurance that any distribution will be made. Tax liabilities incurred by a Unitholder as a result of profitable trading by the Trust may exceed distributions, if any, the Unitholder receives from the Trust. See "Risk Factor (27) --Unitholders Are Taxed on Allocable Trust Income Although Such Income Is Not Distributed" at page 22. CHARGES The Trust will pay substantial charges. The Brokerage Fee, Management Fee, Incentive Fee (even in "break-even" or losing years), administrative expenses, organizational and initial offering cost amortization and ongoing offering costs together are estimated to total approximately 12.62% of the Trust's average month-end assets; and a 3% redemption charge will be in effect through the end of the eleventh full month after a Unit is sold. At current interest rates, the charges to which the Trust will be subject will exceed the interest it will earn on its assets. The Trust will pay CIS a monthly flat-rate Brokerage Fee at an annual rate of 6.5% (or approximately 0.542% per month) of the Trust's month-end assets after deduction of the Management Fee. However, eligible Unitholders will be charged a lower Special Brokerage Fee Rate with respect to some or all of their Units as described under "Charges -- Brokerage Fee -- Special Brokerage Fee Rate" at page 62. JWH will receive a monthly Management Fee of 4% per annum (or approximately 0.333% per month) of the Trust's month-end assets after deduction of a portion of the Brokerage Fee at the annual rate of 1.25% (rather than 6.5%) of month-end assets. JWH will also be paid a quarterly Incentive Fee equal to 15% of New Trading Profit after deduction of the Brokerage Fee at the annual rate of 1.25% of month-end assets and the Management Fee. The Trust will amortize organizational and initial offering cost reimbursement over the first 60 months of the Trust's operations, up to a limit at each month-end of 1/60 of 2% of Net Assets as of such month-end. In addition, the Trust will pay its administrative expenses (estimated at 0.6% of average month-end Net Assets based on the $10,000,000 minimum Trust size), ongoing offering costs of up to 0.5% of average month-end Net Assets and, if any, extraordinary costs. For a description of the charges payable by the Trust, see "Charges" commencing at page 59. INTEREST INCOME CIS and CISFS will credit the Trust, as of each month-end, with interest on the Trust's assets deposited with CIS and CISFS at 100% of the 91-day Treasury bill rate for deposits denominated in dollars and at the rates agreed between the Trust and CIS and CISFS for deposits denominated in other currencies. See "Use of Proceeds --Maintenance of Assets; Interest Income" at page 58. The Managing Owner may determine to deposit a portion of the Trust's assets in an account in the name of the Trust at a bank ("Custodian") and engage a cash manager to provide cash management services with respect to such assets. The fees of such cash manager will be paid by the Trust. CIS has agreed to credit the account of the Trust at each month-end the amount, if any, by which returns (net of fees of the cash manager) for such month on Trust assets held by a Custodian are less than the return that would have been realized by the Trust had such assets been deposited with CIS. -12- "BREAK-EVEN TABLE" The following "Break-even Table" is calculated pursuant to applicable CFTC and NFA requirements and reduces the 12-month expense "load" by the interest income estimated to be earned by the Trust (i.e., assuming no offsetting trading losses). The "Break-even Table" as presented is based on the $10,000,000 minimum Trust size. The Trust's capitalization does not directly affect the level of charges based on percentage of assets or Net Assets and percentage of New Trading Profit, which will equal approximately the same percentage of the Trust's equity, whatever its size. Trust size will affect the level (expressed as a percentage of Trust assets) of fixed dollar amount expenses, which include organizational and initial offering cost reimbursement amortization and ongoing offering costs (both of which are assumed in the "Break-even Table" to equal the maximum permissible percentages of the Trust's Net Assets). As further discussed under "Charges," while the Trust's expenses are directly, and its profits and losses generally, related to its month-end assets or Net Assets, neither has (except at the commencement of trading) any connection with the initial Net Asset Value per Unit (or the amount of an initial subscription). In order for Column II in the "Break-even Table" to present absolute dollar amount "break-even" figures, it has been assumed that the average month-end Net Assets attributable to an initial investment during the 12-month "break-even" period equals the amount of such initial investment. This is unlikely to be the case in fact. THERE IS NO ASSURANCE THAT THE ANTICIPATED PERCENTAGES OF EXPENSES WILL IN FACT BE INCURRED BY THE TRUST. INVESTORS SHOULD NOT INTERPRET THESE ESTIMATES AS REPRESENTATIONS BY THE TRUST OF THE ACTUAL AMOUNTS OF OPERATING EXPENSES OF THE TRUST. IN ADDITION, NO ASSURANCE CAN BE GIVEN THAT THE EXPENSES TO BE INCURRED BY THE TRUST WILL NOT EXCEED THE ESTIMATED AMOUNTS OR THAT THERE WILL NOT BE ANY OTHER EXPENSES. The following "Break-even Table" indicates the approximate percentage and dollar returns from trading required for the redemption value of an initial $5,000 investment in the Units to equal, twelve months after issuance, the amount originally invested ("break-even" level). Column I shows the effective rates of return on average month-end assets the Trust is required to earn from trading for a Unitholder to break-even in the first twelve months of investment.
COLUMN I COLUMN II PERCENTAGE RETURN REQUIRED DOLLAR RETURN REQUIRED REQUIRED ($5,000 INITIAL INVESTMENT) FIRST TWELVE MONTHS OF FIRST TWELVE MONTHS OF ROUTINE EXPENSES(1) INVESTMENT INVESTMENT - -------------------- -------------------------- --------------------------- Brokerage Fees (2) 6.24% $ 312.00 Management Fee (3) 3.95 197.50 Incentive Fee (4) 1.11 55.50 Administrative Expenses (5) 0.53 26.50 Organizational and Initial Offering Cost Amortization (6) 0.35 17.50 Ongoing Offering Costs (7) 0.44 22.00 Less Interest Income (8) (4.70) (235.00) RETURN ON $5,000 INITIAL INVESTMENT REQUIRED FOR "BREAK-EVEN" 7.92% $ 396.00
SEE NOTES ON THE FOLLOWING PAGE. -13- NOTES TO "BREAK-EVEN TABLE" (1) See "Charges" at pages 59 through 65 for an explanation of the expenses included in the "Break-even Table." (2) Assumes the standard flat-rate annual Brokerage Fee at 6.5% of the Trust's month-end assets after deduction of the Management Fee at the annual rate of 3.95% of month-end assets but before deduction of administrative expenses, Incentive Fee, ongoing offering costs, and organizational and initial offering cost amortization. Calculation in such manner results in an effective Brokerage Fee rate of 6.24% of the Trust's average month-end assets per annum for purposes of break-even analysis. Certain investors are eligible to pay the lower Special Brokerage Fee Rate as described under "Charges -- Brokerage Fee -- Special Brokerage Fee Rate" at page 62. (3) The Trust will pay JWH a Management Fee at a rate of 4% per annum of the Trust's month-end assets after deduction of a portion of the Brokerage Fee at per annum rate of 1.25% (rather than 6.5%) of month-end assets. Calculating the Management Fee in this manner results in an effective annual Management Fee rate of 3.95% of the Trust's average month-end assets for purposes of break-even analysis. (4) The Incentive Fee is calculated on the basis of the overall profits of the Trust, not the investment experience of any particular Unit. Furthermore, the Incentive Fee is calculated quarterly, not annually. Incentive Fee misallocation may also arise from the fact that all Units are charged the same Incentive Fee regardless of the time of purchase. Substantial quarterly Incentive Fees may be paid to JWH in respect of interim quarters even during a "break-even" (as well as an unprofitable) year. Furthermore, certain Units may pay an allocable Incentive Fee even though such Units have only "broken even" (or declined) in Net Asset Value from their original purchase price. The Incentive Fee is calculated after reduction of any trading profits by the Management Fee and a portion of the Brokerage Fee at the annual rate of 1.25% (rather than 6.5%) of the Trust's month-end assets. This means that in order to "break even," the Trust must earn approximately 1.11% (or $55.50 per $5,000 initial investment) to defray the Incentive Fee which could be payable on the trading profits needed to offset the amortization of organizational and initial offering costs, administrative expenses, ongoing offering costs and the portion of the Brokerage Fee not deducted from trading profits for the purpose of calculating the Incentive Fee. (5) Administrative Expenses are estimated at 0.6% of average month-end Net Assets per annum (an effective rate of 0.53% of average month-end assets per annum for purposes of break-even analysis) based on aggregate Trust assets of $10,000,000. (6) Organizational and initial offering costs, estimated by CISI to be between $500,000 and $600,000, will be advanced by CISI. These costs will be reimbursed by the Trust to CISI at the initial closing and be amortized over five years at a maximum rate of 0.4% of average month-end Net Assets per year (an effective rate of 0.35% of average month-end assets for purposes of break-even analysis). (7) The Trust will pay ongoing offering costs up to 0.5% of month-end Net Assets per annum (an effective rate of 0.44% of average month-end assets for purposes of break-even analysis). (8) Interest income is estimated based on the yields on 91-day Treasury bills on or about the date of this Prospectus, approximately 5%. Since the Trust will receive interest only on assets deposited with CIS, CISFS and any other Custodian and will not receive interest on the amount of its unamortized organizational and initial offering costs (assumed to be no more than $600,000), the effective rate of interest paid to the Trust on its assets will be 4.7% for the first year, increasing as the capitalized organizational and initial offering costs are amortized. When such costs are fully amortized, the interest income on Trust assets will be at the full 91-day Treasury bill rate existing at that time. See "Use of Proceeds -- Maintenance of Assets; Interest Income" at page 58 for a description of interest earned on the Trust's assets. ____________________ -14- FEDERAL INCOME TAX In the opinion of counsel, the Trust is properly ASPECTS classified as a partnership for federal income tax purposes and will not be subject to tax as a corporation under provisions applicable to "publicly-traded partnerships." Assuming such proper classification, the Trust itself will not be subject to federal income tax; instead, investors will report on their individual tax returns their allocable share of the Trust's income, gain, loss or deduction, whether or not they redeem any of their Units and whether or not any distributions are made. However, no assurance can be given that the Trust will not be subject to federal income tax. The Trust's interest income will be taxable to Unitholders irrespective of trading losses, which generally constitute capital losses whereas interest income is taxed as ordinary income. Non-corporate Unitholders' capital losses may only be used to offset interest income to a very limited extent. Non-corporate Unitholders may be required to treat the Trust's expenses as "investment advisory fees" which are subject to substantial restrictions on deductibility for federal income tax purposes. Absent statutory or administrative clarification to the contrary, the Managing Owner will not treat the Trust's expenses as "investment advisory fees" but rather as ordinary and necessary business expenses. See "Federal Income Tax Aspects" commencing on page 74. ____________________ GENERAL FUTURES AND FORWARD TRADING INVOLVES A HIGH DEGREE OF RISK. AN INVESTMENT IN THE TRUST IS SPECULATIVE AND SUITABLE ONLY FOR A LIMITED PORTION OF THE RISK SEGMENT OF AN INVESTOR'S PORTFOLIO. THERE CAN BE NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS OBJECTIVES OR AVOID SUBSTANTIAL LOSSES. NO ONE SHOULD INVEST MORE IN THE TRUST THAN HE OR SHE CAN AFFORD TO LOSE, AND IT IS SUGGESTED THAT THE AMOUNT OF INVESTMENT BE NO MORE THAN 10% OF HIS OR HER "LIQUID" NET WORTH (WHICH EXCLUDES HOME, FURNISHINGS AND AUTOMOBILES IN THE CASE OF INDIVIDUALS AND INCLUDES ONLY READILY MARKETABLE SECURITIES IN THE CASE OF ENTITIES). PROSPECTIVE SUBSCRIBERS SHOULD CONSIDER THE HIGHLY LEVERAGED AND SPECULATIVE NATURE OF AN INVESTMENT IN THE TRUST BEFORE DETERMINING WHETHER SUCH AN INVESTMENT IS CONSISTENT WITH THEIR OVERALL PORTFOLIO OBJECTIVES. THE UNITS ARE SPECULATIVE SECURITIES. INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT IN THE TRUST. -15- RISK FACTORS AN INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. A PURCHASER MAY LOSE ALL OR SUBSTANTIALLY ALL OF HIS OR HER INVESTMENT IN THE TRUST. PROSPECTIVE INVESTORS SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS AND CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE DECIDING WHETHER TO SUBSCRIBE FOR UNITS. NO ONE WHO IS NOT CONFIDENT THAT HE OR SHE CLEARLY APPRECIATES THE IMPACT OF SUCH MATTERS AS (I) THE HIGHLY LEVERAGED AND VOLATILE NATURE OF THE MARKETS IN WHICH THE TRUST WILL TRADE, (II) THE SUBSTANTIAL FEES TO THE TRUST, (III) THE ILLIQUIDITY OF THE UNITS AND (IV) THE NUMEROUS OTHER RISKS DISCUSSED HEREIN SHOULD CONSIDER SUBSCRIBING FOR UNITS. FUTURES AND FORWARD TRADING (1) "EXCHANGE OF FUTURES FOR PHYSICAL" TRANSACTIONS JWH may engage in "exchange of futures for physical" ("EFP") transactions on behalf of the Trust. These transactions permit JWH to execute orders after market hours as well as to obtain a single price for an entire order which otherwise might be filled at a variety of different contract prices, as the different groups of futures contracts making up the order are bought or sold at slightly different times. If JWH were to be prevented from making use of EFPs - -- due to a change in regulatory treatment or other factors -- the performance of the Trust could be adversely affected. THE TRUST COULD BE DENIED CERTAIN PROFIT OPPORTUNITIES, AS WELL AS A POTENTIALLY CONVENIENT MEANS OF LIQUIDATING POSITIONS AGAINST WHICH THE MARKET WAS MOVING, IF THE TRUST WERE PREVENTED FROM PARTICIPATING IN THE EFP MARKET. (2) TRADING ON COMMODITY EXCHANGES OUTSIDE THE UNITED STATES JWH will trade on commodity exchanges outside the United States on behalf of the Trust. Trading on such exchanges is not regulated by any United States governmental agency and may involve certain risks not applicable to trading on United States exchanges, such as currency controls and expropriation. In trading on foreign exchanges, the Trust is also subject to the risk of fluctuation in the exchange rates between the United States dollar and the currencies in which contracts traded on such exchanges are settled and in which the related margin deposits must be maintained. INVESTORS COULD INCUR SUBSTANTIAL LOSSES FROM THE TRUST'S TRADING ON FOREIGN EXCHANGES TO WHICH THEY MIGHT NOT HAVE BEEN SUBJECT HAD JWH LIMITED ITS TRADING ON BEHALF OF THE TRUST TO U.S. MARKETS. (3) BANKRUPTCY OF FUTURES BROKER AND BANKRUPTCY OR DEFAULT OF COUNTERPARTIES If the Trust's Futures Broker or a counterparty of the Trust were to become bankrupt, the Trust would only be able to recover its PRO RATA share of all available customer funds segregated by such Futures Broker or counterparty, even though such Futures Broker or counterparty was holding property, such as United States Treasury bills, specifically traceable to the Trust. In its trading of spot and forward contracts in currencies and precious metals, the Trust will also be exposed to the risk of counterparties' failure to perform their obligations. THE BANKRUPTCY OF THE FUTURES BROKER OR THE BANKRUPTCY OR DEFAULT OF A COUNTERPARTY COULD RESULT IN SUBSTANTIAL LOSSES FOR THE TRUST EVEN IN CIRCUMSTANCES WHERE THE TRUST'S TRADING HAS BEEN PROFITABLE. (4) MARKETS MAY BE ILLIQUID Market conditions may exist such that it is not possible to execute a buy or sell order at the desired price, or to close out an open position. In addition, the CFTC has approved and U.S. and non-U.S. exchanges have imposed limits on open positions and/or daily price fluctuation limits, which limits also may adversely affect market liquidity. Daily price fluctuation limits establish the maximum amount with respect to certain contracts the price of a futures contract may vary in either direction from the previous day's settlement price at the end of the trading session. Once the market price of a futures contract reaches its daily price fluctuation limit, positions in the futures contract can be neither taken nor liquidated except at or within the limit. These limits only govern price movements on a specific trading day; they do not limit losses. It is possible that the daily price fluctuation limits may apply throughout the remaining life of a futures contract so that the holder of the contract who cannot liquidate his or her position by the close of the last trading day for that contract may be required to make or take delivery of the underlying interests. Furthermore, futures, options on futures, and spot and forward markets can experience periods (of extended duration at times) of insufficient trading liquidity as a result of government intervention, weather or other unpredictable factors. ALTHOUGH JWH INTENDS TO PURCHASE AND SELL ACTIVELY TRADED CONTRACTS, NO ASSURANCE CAN BE GIVEN THAT SUCH MARKETS WILL BE OR REMAIN LIQUID, OR THAT TRUST ORDERS WILL BE EXECUTED AT OR NEAR THE DESIRED PRICES. -16- (5) UNREGULATED MARKETS A substantial portion of the Trust's trading -- primarily its trading of spot and forward contracts in currencies and precious metals -- will take place in unregulated markets. It is impossible to determine fair pricing, prevent abuses such as "front-running" or impose other effective forms of control over such markets. The absence of regulation could expose the Trust in certain circumstances to significant losses which it might otherwise have avoided. TRADING IN UNREGULATED MARKETS CAN INVOLVE SIGNIFICANT RISKS, ESPECIALLY DURING PERIODS OF MARKET DISRUPTIONS. (6) VOLATILE MARKETS AND HIGHLY LEVERAGED TRADING Futures and forward markets are volatile. Prices of commodities can fluctuate rapidly and widely. Futures and forward prices are affected by complex and often unpredictable factors such as severe weather, governmental actions and other economic and political events. Futures contracts are traded on margins ranging from 1% to 20% of the value of the relevant contract. The low margin deposits normally required in futures trading permit a very high degree of leverage. Even in stable markets, leveraged trading is risky. In volatile markets, leveraged trading exacerbates the risk of sudden, substantial loss. Even a slight adverse movement in the prices of the futures interests underlying the Trust's open positions could result in significant losses. See "The Futures and Forward Markets" commencing at page 81 for a description of these markets. THE COMBINATION OF MARKET VOLATILITY AND HIGH LEVERAGE MEANS THAT THE TRUST COULD SUFFER SUBSTANTIAL LOSSES IN SHORT PERIODS OF TIME. SUCCESSIVE INCURRENCE OF SUCH LOSSES MAY DEPLETE THE TRUST'S ASSETS AND SEVERELY IMPAIR THE TRUST'S ABILITY TO GENERATE CAPITAL APPRECIATION. THE RESULTS OF THE TRUST'S TRADING ARE ENTIRELY SPECULATIVE AND UNCERTAIN. (7) "ZERO-SUM" TRADING Futures and forward trading is a "zero-sum" economic activity in which for every gain there is an equal and offsetting loss (disregarding transaction costs), as opposed to a typical securities investment, in which there is an expectation of consistent yields (in the case of debt) or participation over time in general economic growth (in the case of equity). It is possible that the Trust could incur major losses while stock and bond prices rise substantially in a prospering economy. THE TRUST (8) ALL OR SUBSTANTIALLY ALL OF AN INVESTMENT COULD BE LOST; PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS The success of the Trust is entirely dependent on the result of speculative trading. There can be no assurance that the Trust will achieve its objective of capital appreciation or limiting risk exposure. Investors may lose all or a substantial part of their investment. The past performance of the Trading Programs may not be representative of how they, considered individually, will perform in the future and cannot be indicative of how the Trust will perform using the Trading Programs in combination. Certain technical traders have in the past incurred significant losses after years of successful performance, and there can be no assurance that the same will not occur in the case of JWH. There has been substantial regulatory concern in recent years over the potentially misleading character of the performance records included in futures fund prospectuses. In fact, several academic studies reached the conclusion that public commodity pools typically significantly underperform the prior performance records included in their prospectuses. The SEC and CFTC releases questioning the relevance and treatment of past performance information in commodity pool disclosure documents are filed as exhibits to the Registration Statement of which this Prospectus is a part. SINCE PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, INVESTORS SHOULD NOT INVEST IN THE TRUST IN RELIANCE ON JWH'S PERFORMANCE TO DATE. RATHER, INVESTORS MUST CAREFULLY CONSIDER WHETHER A SPECULATIVE INVESTMENT SUCH AS THE TRUST IS CONSISTENT WITH THE DESIRED OVERALL RISK PROFILE OF THEIR PORTFOLIO AND THEIR INVESTMENT OBJECTIVES. -17- (9) SPECIFIC RISKS ASSOCIATED WITH A SINGLE-ADVISOR PORTFOLIO Even in the speculative area of managed futures, single-advisor funds are considered by some to be unusually high risk investments. Some observers have the view that the use of a single advisor generally will not have the same risk- spreading potential offered by a multi-advisor approach, which is used by many "commodity pools" and in many cases specifically for risk control purposes. If such view is correct, employing a single-advisor approach in trading in the highly leveraged and volatile futures and forward markets will involve greater risk of loss than a diversified, multi-advisor approach. In addition to the Trust being managed by a single advisor, the Trading Programs may have a tendency to concentrate the Trust's positions in a limited group of markets (see "-- The Trading Programs -- Overlap of Markets"). Such portfolio concentration may further increase the risk of loss. Unlike a multi-advisor fund, the Trust, with its single-advisor structure, will have little recourse in the event of a material, adverse change in the Trust's Trading Advisor. None of the principals of JWH is obligated to continue to provide services to the Trust. The Trust also has no contractual rights to compel any of JWH's principals to continue to perform services for JWH. Were the services of Mr. John W. Henry to become unavailable for any reason, the effect on JWH could be material and adverse and the continued ability of JWH to render services to the Trust would be subject to substantial uncertainty. If the trading advisory services of JWH were to become unavailable for any reason, the Trust may have to dissolve if it could not appoint a successor advisor on satisfactory terms, which may happen at a time with adverse market conditions or before the Trading Programs had a realistic opportunity to achieve the Trust's objectives. NOT ONLY DOES THE TRUST'S SINGLE-ADVISOR STRUCTURE PROVIDE INHERENTLY LESS DIVERSIFICATION AND RISK CONTROL THAN A MULTI-ADVISOR FUND DOES, BUT ALSO THE SUCCESS OF THE TRUST WILL DEPEND UPON THE CONTINUED AVAILABILITY OF CERTAIN KEY JWH PRINCIPALS. THERE CAN BE NO ASSURANCE OF SUCH CONTINUED AVAILABILITY. (10) NON-CORRELATED AND NOT NEGATIVELY CORRELATED ANTICIPATED PERFORMANCE The Trust anticipates that its performance over time will be non-correlated with the general equity and debt markets. NON-CORRELATION, however, is not NEGATIVE CORRELATION. The Trust will by no means necessarily be profitable during downward cycles in stock and bond prices. Non-correlation means only that the performance of the Trust may or may not be similar to that of the general financial markets, not that there should be an inverse relationship between them -- hence stock indices may rise while Unit values fall as well as while Unit values rise. During certain periods, the Trust may perform in a manner very similar to more traditional portfolio holdings, providing little, if any, diversification benefits. THERE CAN BE NO ASSURANCE THAT THE TRUST'S PERFORMANCE WILL BE NON- CORRELATED WITH THE GENERAL FINANCIAL MARKETS. IN ADDITION, BECAUSE THE TRUST IS EXPECTED TO BE NON-CORRELATED, NOT NEGATIVELY CORRELATED, WITH THE GENERAL STOCK AND BOND MARKETS, IT IS POSSIBLE THAT THE TRUST COULD INCUR SUBSTANTIAL LOSSES AT THE SAME TIME THAT THE TRADITIONAL COMPONENTS IN AN INVESTOR'S PORTFOLIO ARE ALSO DECLINING IN VALUE. (11) SUBSTANTIAL CHARGES PAYABLE REGARDLESS OF PROFITABILITY The Trust is subject to substantial charges payable regardless of the result of the Trust's trading, which could deplete the Trust's assets. The Trust must generate trading profits and interest income sufficient to defray the Brokerage Fee, monthly Management Fee, administrative expenses, organizational and initial offering cost amortization and ongoing offering costs and, possibly, the Incentive Fee in order to avoid depletion of assets. Assuming the Trust will earn interest income at the 91-day Treasury bill rate prevailing on or about the date of this Prospectus, the Trust must realize trading profits estimated at approximately 7.92% of average month-end assets (based on the $10,000,000 minimum Trust size) in order for the Net Asset Value per Unit to equal the initial subscription price of $100 as of the end of the first twelve months of trading. Trading profits (if any) recognized by the Trust are subject to the Trading Advisor's 15% quarterly Incentive Fee. Moreover, New Trading Profit is calculated on the basis of the overall profits of the Trust, not increases in the Net Asset Value of each Unit. Certain Units could be allocated substantial Incentive Fee expense despite a decline in their Net Asset Value. In addition, accrued Incentive Fee expense which reduces the Net Asset Value per Unit at the time of purchase will, if reversed due to subsequent losses, be misallocated because such accrued Incentive Fee expense will be allocated equally to all outstanding Units rather than only to those outstanding during the period when such Incentive Fee expense accrued. See "Charges -- Incentive Fee" at page 64. -18- THE TRUST IS SUBJECT TO SUBSTANTIAL COSTS AND MUST GENERATE SUBSTANTIAL PROFITS IN ORDER TO OFFSET THESE COSTS. THE MANAGING OWNER, CIS AND JWH COULD DERIVE SUBSTANTIAL FINANCIAL BENEFITS FROM THEIR ASSOCIATION WITH THE TRUST, WHILE THE TRUST ITSELF INCURS LOSSES. (12) LIMITED ABILITY TO LIQUIDATE AN INVESTMENT IN THE UNITS Unitholders may redeem Units at Net Asset Value only as of the close of business on the last day of a calendar month. Units are subject to early redemption charges, payable to CIS, equal to 3% of the Net Asset Value per Unit as of the date of redemption, through the end of the eleventh full month after such Units are issued by the Trust. Requests for redemption, which are irrevocable, must be received by CISI on or before the 20th of the month (or if the 20th is not a business day, the next business day) to effect redemption as of such month-end. The Net Asset Value per Unit on the date redemption occurs may, particularly given the volatile nature of the markets in which the Trust will trade, vary significantly from the Net Asset Value per Unit at the time the redemption request is tendered. Special Redemptions, which result in a suspension of trading and, consequently, the risk of further losses pending redemption due to the liquidation of positions, are required only if the Net Asset Value per Unit declines to $50 or less, a very substantial decline. See "Section 12. Redemptions" of the Declaration and Agreement of Trust attached hereto as Exhibit A. SINCE THEY HAVE LIMITED ABILITY TO REDEEM UNITS, UNITHOLDERS COULD BE UNABLE TO LIMIT THEIR LOSSES IN THE TRUST, AND THEY MAY BE UNABLE TO WITHDRAW FUNDS COMMITTED TO THE TRUST IN ORDER TO TAKE ADVANTAGE OF OTHER, MORE FAVORABLE INVESTMENT OPPORTUNITIES AT THE RELEVANT TIME. (13) THE TRUST IS SUBJECT TO CONFLICTS OF INTEREST The Trust is subject to a number of actual and potential conflicts of interest. See "Conflicts of Interest" commencing at page 71. The Managing Owner, the Futures Broker, the Foreign Currency Broker and their respective principals and affiliates may trade in the futures and forward markets for the accounts of their clients. JWH and its principals and affiliates may trade in the futures and forward markets for the accounts of their clients and for their own accounts (however, employees and principals of JWH, other than Mr. John W. Henry, are not permitted to trade on a discretionary basis). In doing so, these persons may take positions opposite to, or ahead of, those held by the Trust, or may be competing with the Trust for positions in the market. Records of such trading are not available for inspection by investors. Such trading may create conflicts of interest on behalf of one or more of such persons in respect of their obligations to the Trust. NONE OF THE PARTIES AFFECTED BY SUCH CONFLICTS OF INTEREST HAVE ADOPTED ANY PROCEDURES OR SAFEGUARDS FOR RESOLVING THE FOREGOING CONFLICTS OF INTEREST. INVESTORS MUST RELY ENTIRELY ON SUCH PARTIES' DUTY UNDER APPLICABLE LAW AND GOOD FAITH IN SUCH MATTERS. THESE CONFLICTS OF INTEREST RAISE THE POSSIBILITY THAT THE INVESTORS WILL BE FINANCIALLY DISFAVORED TO THE BENEFIT OF THE MANAGING OWNER, JWH, THE FUTURES BROKER, THE FOREIGN CURRENCY BROKER OR THEIR RESPECTIVE PRINCIPALS AND AFFILIATES. (14) THE TRUST HAS NO OPERATING HISTORY THIS POOL HAS NOT COMMENCED TRADING AND DOES NOT HAVE ANY PERFORMANCE HISTORY. BECAUSE THE TRUST HAS NO OPERATING HISTORY, INVESTORS HAVE NO INFORMATION CONCERNING THE ACTUAL RESULTS OF OPERATION OF THE TRUST ON WHICH TO BASE THEIR INVESTMENT DECISION. MOREOVER, EVEN IF PAST PERFORMANCE INFORMATION CONCERNING THE TRUST WERE AVAILABLE, SUCH INFORMATION MIGHT NOT, IN FACT, BE INSTRUCTIVE IN INVESTORS' ATTEMPTS TO EVALUATE WHETHER THE TRUST IS COMPATIBLE WITH THEIR PORTFOLIO STRATEGY, SINCE PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. (15) UNITHOLDERS HAVE NO ROLE IN MANAGEMENT In investing in the Trust, Unitholders are placing their reliance on the Managing Owner. No Unitholder will have any input in the management of the Trust, and no management elections or other investor votes will be held regularly. Subject to its fiduciary obligations, the Managing Owner will have essentially plenary authority over the operation of the Trust. PROSPECTIVE INVESTORS MUST NOT ANTICIPATE THAT ANY ENTITY OTHER THAN THE MANAGING OWNER WILL HAVE ANY CONTROL OR INFLUENCE OVER THE MANAGEMENT OF THE TRUST, OR THAT UNITHOLDERS WILL HAVE ANY INPUT IN THE TRUST'S OPERATIONS. -19- THE TRADING ADVISOR (16) VOLATILE JWH TRADING HISTORY Over time, a number of individual JWH programs have realized profits. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. JWH's performance, even when successful, has been characterized by significant volatility. The largest "peak-to-valley" drawdown experience by any single program was nearly 60% on a composite basis, and certain individual accounts managed pursuant to such program experienced even greater volatility. Moreover, certain programs have incurred losses of 10% or more in a single trading day. Even if the Trust is successful, it is likely to experience significant losses from time to time. The monthly rates of return set forth in "John W. Henry & Company, Inc. -- JWH Programs: Performance Summary and Monthly Rates of Return" are indicative of the high degree of volatility (a widely accepted measure of risk) exhibited by JWH's performance to date. THE HISTORICALLY VOLATILE PERFORMANCE OF JWH SUGGESTS NOT ONLY THE RISKS INVOLVED IN INVESTING IN THE TRUST, BUT ALSO THAT THE DAY-TO-DAY VALUE OF THE UNITS WILL LIKELY BE VARIABLE AND UNCERTAIN, WHICH, IN TURN, SUGGESTS THAT THE NET ASSET VALUE PER UNIT MAY CHANGE MATERIALLY BETWEEN THE DATE THAT A REDEMPTION IS REQUESTED AND THE MONTH-END REDEMPTION DATE. (17) POSSIBLE ADVERSE EFFECTS OF INCREASING JWH'S ASSETS UNDER MANAGEMENT The rates of return achieved by trading advisors often tend to deteriorate as assets under management increase. On or about the date of this Prospectus, JWH is at or near an all-time high in client funds under management and is actively engaged in ongoing efforts in marketing its services. No assurance can be given that JWH's strategies will not be adversely affected by the additional equity, including the Trust's account, accepted by JWH. With increased equity under management, JWH may be more limited in the amount of assets which it can trade in the non-financial commodities markets than it is in the currency and financial markets, due to the generally greater illiquidity of, and position limits applicable to, the former. Increased equity under management also requires advisors to enter larger orders, which can preclude trading in certain less liquid markets, result in less favorable trading "fills" and make it difficult to close out positions against which the market is moving without incurring significant losses. The possible adverse effect of increased equity under management on performance may arguably be detected from the monthly rates of return of the Trading Programs included in "John W. Henry & Company, Inc. -- JWH Programs: Performance Summary and Monthly Rates of Return." Generally there were smaller amounts of equity under management pursuant to each Trading Program in earlier periods. Comparing earlier and later rates of return can provide some indication of the possible effect of increased equity under management on the rates of return realized; nevertheless, a number of other adjustments, including varying degrees of trading deleveraging, have been made over time to the Trading Programs which also could have affected performance materially. IF JWH'S RETURN DECLINES AS A RESULT OF THE INCREASED EQUITY UNDER ITS MANAGEMENT, THE PROFIT POTENTIAL OF THE TRUST WILL ACCORDINGLY BE REDUCED. (18) LIMITATION OF LIABILITY AND INDEMNIFICATION OF TRADING ADVISOR JWH, its principals and employees will not be liable to the Trust, the Unitholders, any of their successors or assigns or the Managing Owner except by reason of acts or omissions in contravention of the express terms of the Trading Advisory Agreement or due to misconduct or negligence or for not having acted in good faith in the reasonable belief that its actions were taken in, or not opposed to, the best interests of the Trust. The Trust will indemnify JWH, its principals and employees to the full extent permitted by law for any liability incurred in connection with any acts or omissions relating to JWH's management of Trust assets, provided that there has been no judicial determination that such liability was the result of negligence, misconduct or breach of the Trading Advisory Agreement nor any judicial determination that the conduct which was the basis for such liability was not done in good faith belief that it was in, or not opposed to, the best interests of the Trust. Any such indemnification involving a material amount, unless ordered or expressly permitted by a court, will be made by the Trust only upon the opinion of mutually acceptable independent legal counsel that JWH has met the applicable standard of conduct described above. THE TRADING PROGRAMS (19) POSITIVE CORRELATION BETWEEN THE TRADING PROGRAMS The Managing Owner and JWH anticipate greater performance correlation between the Trading Programs than would be the case if a group of independent managers or trading programs were utilized. Historically there has been significant positive correlation among the programs of JWH and a number of JWH programs have incurred major losses at or about the same time. THE POSITIVE CORRELATION BETWEEN THE TRADING PROGRAMS MAY INCREASE THE LIKELIHOOD OF THE TRUST INCURRING SIGNIFICANT LOSSES OVER SHORT PERIODS OF TIME. -20- The historical volatility and positive correlation of the Trading Programs of JWH highlight the need for effective risk management in the Trust's trading. However, JWH's risk control policies are proprietary and confidential. NOT ONLY CAN THERE BE NO ASSURANCE THAT THESE POLICIES WILL BE EFFECTIVE, BUT ALSO, DUE TO THEIR PROPRIETARY NATURE, INVESTORS WILL HAVE NO BASIS TO EVALUATE THE ADEQUACY OF THESE POLICIES (EXCEPT PAST PERFORMANCE, WHICH IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS). (20) OVERLAP OF MARKETS The Trading Programs trade in certain of the same markets. A concentration of the Trust's positions in one or a limited number of markets could result in substantial losses. INVESTORS WILL LOSE THE RISK CONTROL BENEFITS OF MARKET DIVERSIFICATION DURING THOSE PERIODS WHEN THE TRUST'S POSITIONS ARE CONCENTRATED IN A LIMITED NUMBER OF MARKETS. (21) TECHNICAL, TREND-FOLLOWING TRADING PROGRAMS The profitability of trading programs involving technical trend analysis, such as the Trading Programs, depends upon the occurrence of significant sustained price moves in at least some of the markets traded. In the past, sustained periods without such price moves have occurred in the markets traded by JWH from time to time, and such periods are expected to recur because significant price trends can occur only when usually disparate market forces are influencing prices in the same direction, which tends to occur infrequently. Periods without such trends are likely to produce losses. Any factor (such as increased governmental intervention in the markets traded) that may lessen the prospect of sustained price moves in the future may reduce the prospect that any advisor's technical systems will be profitable. A number of the markets to be traded by the Trust, in particular the currency and interest rate markets (which the Trading Programs generally emphasize), may be likely targets for governmental intervention. The Managing Owner believes that in recent years the use of technical trading systems, particularly trend-following systems, has increased substantially. Although different technical and trend-following systems will tend to generate different trading signals, the significant increase in the use of such systems as a proportion of the overall trading volume in the futures markets as a whole as well as in the particular markets traded by the Trust could result in traders attempting to initiate or liquidate substantial positions at or about the same time as the Trust. It could also alter historical trading patterns or affect the execution of trades, in each case to the detriment of the Trust. The adverse effects of technical strategy saturation can currently be detected to a certain extent in a number of less liquid markets. The concentration of the Trading Programs in certain (the currency and interest rate) market sectors may increase the susceptibility of these Trading Programs to the adverse effects of technical strategy saturation. Technical, trend-following systems such as the Trading Programs typically anticipate that more than half of all their trades will be unprofitable (historically, only 30% to 40% of JWH's trades pursuant to JWH's programs have been profitable). The goal is to generate sufficiently large gains on occasional profitable transactions to offset what are hoped to be smaller losses on the more numerous unprofitable positions. Any factor (for example, the imposition of speculative position limits or significantly increased margin requirements) which would restrict the ability of trend-following traders to realize major gains from a limited number of positions could have a materially adverse effect on the Trust's prospects for profitability. BECAUSE THE TRADING PROGRAMS ARE TECHNICAL AND TREND-FOLLOWING, THE PROFIT POTENTIAL OF THESE TRADING PROGRAMS MAY BE DIMINISHED BY THE CHANGING CHARACTER OF THE MARKETS, WHICH MAY MAKE HISTORICAL PRICE DATA (ON WHICH TECHNICAL PROGRAMS ARE BASED) OF LITTLE PREDICTIVE VALUE. THE TRUST COULD INCUR SIGNIFICANT LOSSES UNDER CERTAIN MARKET CONDITIONS IN WHICH DISCRETIONARY OR OTHER TRADING APPROACHES ARE SUCCESSFUL. (22) IMPORTANCE OF MARKET CONDITIONS TO PROFITABILITY Although the Trading Programs appear to be as likely to trade profitably in declining as in rising markets, managed futures advisors appear, in general, to be profitable or unprofitable at approximately the same times. Despite the expected degree of non-correlation between the performance of the Trust and the traditional debt and equity markets, overall market or economic conditions can affect the Trust's performance materially. JWH's strategies are designed to capture major market movements. Consequently, any factors tending to produce static or "churning" markets would reduce the likelihood of either Trading Program being successful. In addition, trendless, "whipsaw" markets characterized by numerous sudden price movements with rapid reversal could be mistakenly identified by a Trading Program as "trends," which could lead to significant losses for the Trust. THE TRADING PROGRAMS TRADE IN SOMEWHAT DIFFERENT MARKETS, BUT THE SIMILARITIES BETWEEN THE TRADING PROGRAMS SUGGEST THAT THEY ARE LIKELY TO BE ADVERSELY AFFECTED BY THE SAME GENERAL MARKET CONDITIONS - E.G., STATIC, NON-TRENDING OR "WHIPSAW" MARKETS. IF THE TYPE OF TRENDING MARKET CONDITIONS WHICH THE TRADING PROGRAMS ARE DESIGNED TO EXPLOIT DO NOT OCCUR, INVESTORS MUST EXPECT TO INCUR SUBSTANTIAL LOSSES. -21- (23) POSSIBLE LIQUIDATION OF PROFITABLE POSITIONS The quarterly rebalancing by JWH of assets equally between the Trading Programs may result in the liquidation of profitable positions, thereby forgoing greater profits which the Trust would otherwise have realized, and the establishment of unprofitable positions, thereby incurring losses which the Trust would otherwise have avoided had rebalancing not have occurred. (24) ALTERATION OF TRADING SYSTEMS AND CONTRACTS AND MARKETS TRADED JWH may, in its discretion, change and adjust the Trading Programs, as well as the contracts and markets which they trade. These adjustments may result in forgoing profits which the Trading Programs would otherwise have captured, as well as incurring losses which they would otherwise have avoided. NEITHER THE MANAGING OWNER NOR THE UNITHOLDERS ARE LIKELY TO BE INFORMED OF ANY NON-MATERIAL CHANGES IN THE TRADING PROGRAMS. (25) MANDATORY CLOSING OUT OF OFFSETTING POSITIONS Applicable CFTC rules require that offsetting positions taken by JWH on behalf of the Trust, even though taken by different programs, be closed out. JWH does not believe that the requirement of liquidating offsetting positions held for the Trust by the Trading Programs will, at this point, impede the operation of the Trust. However, it is possible that under certain circumstances the requirement to close out offsetting positions on an inter- Program basis could adversely affect the performance of the Trust. THE FACT THAT JWH CAN OPERATE BOTH STRATEGIES FOR THE SAME ACCOUNT WITHOUT HAVING ITS OVERALL PERFORMANCE DISRUPTED BY THE CFTC'S "CLOSE OUT" RULE DEMONSTRATES THE EXTENT OF THE SIMILARITIES BETWEEN THE TRADING PROGRAMS (WHICH MUST, IN ORDER TO AVOID REPEATED "CLOSE OUTS," EACH TAKE EITHER LONG OR SHORT POSITIONS, ALBEIT PERHAPS OF DIFFERENT MAGNITUDES, IN THE SAME MARKETS) AND THE LIKELIHOOD OF SIGNIFICANT POSITIVE CORRELATION AMONG THEIR RESPECTIVE TRADING RESULTS (CORRESPONDINGLY INCREASING THE TRUST'S RISK OF LOSS IN TRADING). (26) LIMITED ABILITY TO DESCRIBE PROPRIETARY STRATEGIES Prospective investors must recognize that no attempt has been or could be made to explain in any detail the most important aspect of the Trust's operations, namely the Trading Programs, because these strategies are confidential. An investor who purchases Units is essentially relying on JWH's ability to earn profits in the future applying proprietary programs and strategies concerning which the investor can have no detailed knowledge (and the past performance of which is not necessarily indicative of their future results). It is impossible to predict how the Trust will perform. PROSPECTIVE INVESTORS WHO SUBSCRIBE FOR UNITS MUST DO SO SOLELY AS A SPECULATION. THERE IS NO DATA WHICH THEY CAN ANALYZE WHICH COULD RELIABLY PERMIT THEM TO ASSESS THE "TRUE VALUE" OF AN INVESTMENT IN THE TRUST OR THE LIKELIHOOD OF JWH TRADING SUCCESSFULLY ON THE TRUST'S BEHALF. TAXES (27) UNITHOLDERS ARE TAXED ON ALLOCABLE TRUST INCOME ALTHOUGH SUCH INCOME IS NOT DISTRIBUTED If the Trust recognizes income or gain in a fiscal year, such income or gain will be taxable to Unitholders in accordance with their allocable shares of the Trust's profits, whether or not such profits are distributed to the Unitholders. The tax liability of Unitholders in respect of the profits, if any, of the Trust will exceed any distributions received from it. See "Federal Income Tax Aspects." Because a substantial portion of the Trust's open positions are "marked-to- market" at the end of each year, Unitholders are taxed on unrealized as well as realized gains. Prospective investors should also note that the Trust might sustain losses after the end of a fiscal year offsetting such realized or unrealized gains, so a Unitholder might never receive the gains on which he or she is taxed. In comparing the Trust's performance objectives with the performance of traditional investments such as common stock, prospective investors should note that if an investor purchased common stock, the investor would not be taxed on the appreciation in such stock until it was sold. In the case of the Trust, however, Unitholders must pay taxes for each year a Unit is held based on any appreciation in the Net Asset Value per Unit during such year, resulting in a substantial cumulative reduction in the after-tax return of the Unit. BECAUSE UNITHOLDERS ARE TAXED CURRENTLY ON THEIR ALLOCABLE SHARE OF THE TRUST'S INCOME OR GAINS, WHILE THE TRUST MAY TRADE SUCCESSFULLY, INVESTORS WOULD HAVE RECOGNIZED SIGNIFICANTLY GREATER GAINS ON AN AFTER-TAX BASIS IF THEY HAD INVESTED IN CONVENTIONAL STOCKS AND BONDS WITH COMPARABLE PERFORMANCE. -22- (28) TAXATION OF INTEREST INCOME IRRESPECTIVE OF TRADING LOSSES Losses on the Trust's trading are almost exclusively capital losses, and capital losses are deductible against ordinary income only to the extent of $3,000 per year for non-corporate investors. The limited deductibility of capital losses for non-corporate Unitholders could result in such Unitholders having a tax liability in respect of their investment in the Trust despite incurring a financial loss on their Units. If a non-corporate investor had, for example, an allocable trading (I.E., capital) loss of $10,000 in a given fiscal year and allocable interest (after reduction for allocable ordinary Trust business expenses) of $5,000, the investor would incur a net loss in the Net Asset Value of his or her Units equal to $5,000, but would nevertheless recognize taxable income of $2,000. (29) LIMITATIONS ON THE DEDUCTIBILITY OF "INVESTMENT ADVISORY FEES" In the absence of further clarification by legislation, the promulgation of regulations or judicial or administrative interpretation, the Managing Owner will not treat any ordinary expenses of the Trust as "investment advisory fees" for federal income tax purposes. However, were the ordinary expenses of the Trust characterized as "investment advisory fees," they would be subject to substantial restrictions on deductibility for non-corporate taxpayers, materially increasing the amount of tax payable by Unitholders in respect of their investment in the Trust. In fact, if the ordinary expenses of the Trust were to be so recharacterized, Unitholders could actually recognize taxable income despite having incurred a financial loss. NON-CORPORATE UNITHOLDERS' AFTER-TAX RETURNS WOULD BE SIGNIFICANTLY DECREASED IF THE TRUST'S EXPENSES WERE TREATED AS "INVESTMENT ADVISORY FEES." (30) NONDEDUCTIBILITY OF "SYNDICATION EXPENSES" Neither the Trust nor any Unitholder will be entitled to any deduction for "syndication expenses," including the Trust's initial offering costs and the expenses of the ongoing offering of the Units as well as any redemption charges. The Internal Revenue Service ("IRS") could contend that a portion of the Brokerage Fee paid by the Trust constitutes non-deductible "syndication expenses" in respect of the Unitholders. UNITHOLDERS' AFTER-TAX RETURNS WOULD BE SIGNIFICANTLY DECREASED IF THE SELLING COMMISSIONS AND ONGOING COMPENSATION WERE TREATED AS "SYNDICATION EXPENSES." (31) POSSIBILITY OF TAX AUDIT OF BOTH THE TRUST AND INDIVIDUAL UNITHOLDERS There can be no assurance that the Trust's tax returns will not be audited by the IRS or that adjustments to such returns will not be made as a result of such an audit. IF AN AUDIT RESULTS IN AN ADJUSTMENT, UNITHOLDERS COULD THEMSELVES BE AUDITED, AS WELL AS BE REQUIRED TO PAY ADDITIONAL TAXES, PLUS INTEREST AND PENALTIES. PROSPECTIVE INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISERS AND COUNSEL WITH RESPECT TO THE POSSIBLE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE TRUST; SUCH TAX CONSEQUENCES MAY DIFFER IN RESPECT OF DIFFERENT INVESTORS AND MAY HAVE A MATERIAL EFFECT ON THE NET ECONOMIC CONSEQUENCES OF OWNING UNITS. SEE "FEDERAL INCOME TAX ASPECTS." REGULATION (32) ABSENCE OF REGULATION APPLICABLE TO INVESTMENT COMPANIES AND THEIR ADVISERS The Trust is not registered as a securities investment company or "mutual fund" under the Investment Company Act of 1940. The Trading Advisor is not registered as an investment adviser under the Investment Advisers Act of 1940. Therefore, investors in the Trust do not have the benefit of the protection provided by those Acts. However, under the CEA, the Managing Owner is registered as a commodity pool operator, the Trading Advisor is registered as a commodity trading advisor, the Futures Broker is registered as a futures commission merchant, and the Trust is subject to regulation of the CFTC and NFA. (33) FUTURE REGULATORY CHANGES Considerable international regulatory attention has been focused on, for example: (i) the disruptive effects of speculative pools of capital trading in the currency markets on central banks' attempts to influence the exchange rates of -23- their own countries' currencies; and (ii) the need to regulate the "derivatives" markets in general. In light of this, prospective investors must recognize the possibility of future regulatory change altering, perhaps to a material extent, the nature of an investment in the Trust. INVESTORS COULD MAKE A GOOD INVESTMENT DECISION IN SUBSCRIBING FOR THE UNITS ONLY TO HAVE THAT DECISION RESULT IN SUBSTANTIAL LOSSES DUE TO SUBSEQUENT REGULATORY CHANGES. ____________________ THE FOREGOING LIST OF RISK FACTORS DOES NOT PURPORT TO BE A COMPLETE EXPLANATION OF THE NUMEROUS RISKS INVOLVED IN INVESTING IN THE TRUST. POTENTIAL INVESTORS SHOULD READ THIS ENTIRE PROSPECTUS AND ATTEMPT TO FAMILIARIZE THEMSELVES WITH THE RISKS OF SPECULATIVE, HIGHLY LEVERAGED FUTURES AND FORWARD TRADING BEFORE DETERMINING WHETHER TO INVEST IN THE TRUST. INVESTMENT FACTORS The Managing Owner's objective in sponsoring the Trust with JWH as its sole trading advisor is to offer an investment which has the potential of achieving substantial capital appreciation over time to those investors whose risk tolerance levels can accept significant risk and expected volatility in performance. If substantial losses can be avoided, the Managing Owner and JWH believe that the Trust has a reasonable opportunity to generate significant profits over time, despite exhibiting considerable intra-period volatility, by capitalizing on major price movements when they do occur. If successful, the Trust offers investors the following potential advantages. ACCESS TO JWH AND THE TRADING PROGRAMS JWH is one of the largest advisors in the managed futures industry in terms of assets under management. JWH has been continuously managing client funds in the futures and forward markets for approximately 15 years and, as of September 30, 1996, managed approximately $1.6 billion in futures accounts. JWH has achieved substantial profits under a variety of different market conditions and trading a variety of different programs, including the Original Investment Program and the Financial and Metals Portfolio, which will be utilized initially by the Trust. IN INVESTING IN THE TRUST, SUBSCRIBERS WILL HAVE THE OPPORTUNITY TO PLACE ASSETS WITH ONE OF THE MOST EXPERIENCED OF THE CURRENTLY ACTIVE MANAGED FUTURES ADVISORS. INVESTMENT DIVERSIFICATION The globalization of the world's economy offers potentially valuable trading opportunities, as major political and economic events continue to influence world markets, at times dramatically. Volatility in interest rates, the possibility of significant fluctuations in the value of commodities and currencies, fragility in world banking and credit mechanisms and the growing interdependence among national economies create high risks but also substantial opportunities for profit. These developments may make a diversification into an investment vehicle such as the Trust timely. Unlike a traditional diversified portfolio of stocks, bonds and real estate, the profit potential of the Trust does not depend upon favorable general economic conditions and that the Trust is as likely to be profitable (or unprofitable) during periods of declining stock, bond and real estate markets as at any other time. In addition to the expected non-correlation in its performance with the performance of the general equity and debt markets, the Trust's flexibility to take either long or short positions, as opposed to traditional portfolios which are typically heavily weighted towards the former, can be an important advantage in times of economic uncertainty. An investor who is not prepared to spend substantial time trading in the futures and forward markets may nevertheless participate in the commodities and financial markets through investing in the Trust, thereby obtaining diversification from traditional investments such as a diversified portfolio of stocks, bonds and real estate. By allocating a portion of the risk segment of their portfolios to the Trust, investors have the potential, if the Trust is successful, to enhance their prospects for superior performance of their overall portfolios as well as to reduce the volatility of their portfolios over time and the dependence of such portfolios on any single country's economy. However, prospective investors must recognize that unless the Trust is profitable, while an investment in the Units may serve to reduce overall portfolio volatility, the Units cannot be a successful investment. There can be no assurance whatsoever that the Trust will be able to trade profitably. Furthermore, regardless of the Trust's performance as a stand-alone investment, there can be no assurance that an investment in the Trust will, in fact, increase the risk-adjusted return of an entire portfolio since the performance of any portfolio is dependent on its composition. -24- IF THE TRUST DOES NOT TRADE SUCCESSFULLY, IT CANNOT SERVE AS A BENEFICIAL DIVERSIFICATION FOR A TRADITIONAL PORTFOLIO. THE PERFORMANCE OF THE TRUST IS EXPECTED TO BE NON-CORRELATED, NOT NEGATIVELY CORRELATED, WITH GENERAL STOCK AND BOND PRICE LEVELS. OPPORTUNITY TO PROFIT IN DECLINING AS WELL AS IN RISING MARKETS The futures markets offer the ability to trade either side of any market. Unlike short selling in the securities markets, taking short positions in the futures market (or buying a put option or selling a call option) in anticipation of a drop in price can be accomplished without additional restrictions or special margin requirements. Selling short is no more difficult than establishing a long position. The profit and loss potential of futures trading is not dependent upon economic prosperity or interest rate or currency stability. Positive and negative returns may be realized in both rising and declining markets. IT IS POTENTIALLY ADVANTAGEOUS FOR INVESTORS TO OWN ASSETS WHICH CAN APPRECIATE DURING A PERIOD OF GENERALLY DECLINING PRICES, FINANCIAL DISRUPTION OR ECONOMIC INSTABILITY. THERE CAN BE NO ASSURANCE THAT THE TRUST'S PERFORMANCE WILL, IN FACT, BE NON-CORRELATED WITH THE GENERAL DEBT AND EQUITY MARKETS. THERE ALSO CAN BE NO ASSURANCE THAT THE TRUST WILL NOT UNDERPERFORM THE INDIVIDUAL TRADING PROGRAMS. INTEREST ON TRUST ASSETS The Trust will receive interest income on its assets. Initially all of the Trust's available assets will be deposited with CIS and CISFS. On the fifth business day of each month, CIS and CISFS will credit the Trust's account with interest as if 100% of the Trust's average daily balances on deposit with CIS or CISFS, as the case may be, in the previous month were continuously invested at the average 91-day Treasury bill rate for that previous month for deposits denominated in dollars and at the applicable rate for deposits denominated in currencies other than dollars (which may be zero in certain cases) as described under "Use of Proceeds -- Maintenance of Assets; Interest Income" at page 61. THE INTEREST EARNED ON THE TRUST'S ASSETS CAN OFFSET A SUBSTANTIAL PORTION OF ITS ROUTINE COSTS. THE TRUST'S INTEREST INCOME REPRESENTS A SOURCE OF REVENUE ENTIRELY INDEPENDENT OF THE SUCCESS OR FAILURE OF ITS SPECULATIVE FUTURES AND FORWARD TRADING. THE TRUST'S INTEREST INCOME IS SUBJECT TO THE RISK OF TRADING LOSSES AND, AT CURRENT INTEREST RATES, IS NOT SUFFICIENT TO OFFSET THE TRUST'S BROKERAGE FEES PAYABLE TO CIS. Although currently not contemplated, CISI may place certain of the Trust's assets with a Custodian and engage a third-party cash manager to manage such assets. If Trust assets are deposited with such Custodian, the Trust will receive the interest actually earned by the third-party cash manager on such assets. CIS has agreed to credit the account of the Trust at each month-end the amount, if any, by which returns (net of fees of the cash manager) for such month on Trust assets held by a Custodian are less than the return that would have been realized by the Trust had such assets been deposited with CIS. SMALL MINIMUM INVESTMENT; SMALLER MINIMUM ADDITIONAL INVESTMENT JWH is typically available to manage individual accounts only of substantial size -- $1,000,000 or more. Investors in the Trust are able to gain access to JWH for a minimum investment of only $5,000; $2,000 in the case of trustees or custodians of eligible employee benefit plans and individual retirement accounts. A SMALL MINIMUM INVESTMENT REQUIREMENT MAKES THE TRUST ACCESSIBLE TO A WIDE RANGE OF INVESTORS AND ALSO MEANS THAT NO INVESTOR MUST COMMIT A SIGNIFICANT AMOUNT OF ASSETS IN ORDER TO PARTICIPATE IN THE TRUST. NO INVESTOR SHOULD INVEST MORE IN THE TRUST THAN SUCH INVESTOR CAN COMFORTABLY AFFORD TO LOSE. A COROLLARY OF THE SMALL MINIMUM INVESTMENT IN THE TRUST IS THAT EXISTING AND PROSPECTIVE INVESTORS HAVE NOT BEEN REPRESENTED IN NEGOTIATING THE TERMS OF THE TRUST. LIMITED LIABILITY An investor who opens an individual futures account is generally liable for all losses incurred in such account, and may lose substantially more than such investor committed to the account, particularly in light of the high leverage permitted in futures and forward trading. However, a subscriber to the Trust cannot lose more than his or her investment plus undistributed profits. In fact, in the event the Net Asset Value of a Unit decreases to $50 or less as of the close of business on any day, the Managing Owner is required to cause the Trust to liquidate all open positions, suspend trading and declare a Special Redemption Date in accordance with the provisions in the Declaration and Agreement of Trust. -25- Without limited liability, it could be imprudent for an investor to participate in such highly leveraged strategies as those applied by JWH. ALTHOUGH UNITHOLDERS CANNOT LOSE MORE THAN THEIR INVESTMENT IN THE TRUST PLUS UNDISTRIBUTED PROFITS, THEY MUST BE PREPARED TO LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT. FURTHERMORE, UNDER CERTAIN CIRCUMSTANCES UNITHOLDERS MAY BE REQUIRED TO DISGORGE DISTRIBUTIONS AND REDEMPTION PROCEEDS RECEIVED FROM THE TRUST AS WELL AS TO INDEMNIFY THE TRUST FOR VARIOUS TAX LIABILITIES AND OTHER CLAIMS. ADMINISTRATIVE CONVENIENCE The Trust is structured so as to reduce substantially the administrative burden which would otherwise be involved in Unitholders engaging directly in futures and forward trading. Unitholders will receive monthly unaudited and annual certified financial reports as well as all tax information relating to the Trust necessary for Unitholders to complete their federal income tax returns. The approximate daily Net Asset Value per Unit is available by calling representatives of CISI at (312) 460-4000. THE DIVERSITY AND RANGE OF MARKETS IN WHICH JWH TRADES, ON A 24-HOUR BASIS, MAKE THE ADMINISTRATIVE CONVENIENCE OF AN INVESTMENT IN THE TRUST A HIGHLY ATTRACTIVE FEATURE FOR PROSPECTIVE INVESTORS. ALTHOUGH AN INVESTMENT IN THE TRUST IS ADMINISTRATIVELY CONVENIENT, UNITHOLDERS HAVE ACCESS TO SUBSTANTIALLY LESS INFORMATION THAN THEY WOULD TRADING IN AN INDIVIDUAL ACCOUNT. THE ADMINISTRATIVE CONVENIENCE OF THE TRUST DERIVES FROM INVESTORS' COMPLETE RELIANCE ON THE MANAGING OWNER IN INVESTING IN THE TRUST. AN INVESTMENT IN THE TRUST IS CONVENIENT BECAUSE THE MANAGING OWNER IS RESPONSIBLE FOR ALL ASPECTS OF THE TRUST'S OPERATION. ____________________________ AN INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. THERE CAN BE NO ASSURANCE THAT JWH WILL TRADE SUCCESSFULLY ON BEHALF OF THE TRUST OR THAT THE TRUST WILL AVOID SUBSTANTIAL LOSSES, WHICH COULD INCLUDE THE COMPLETE LOSS OF ONE'S INVESTMENT. THE TRUST CANNOT SERVE AS A SUCCESSFUL MEANS OF REAL DIVERSIFICATION THAT ENHANCES OVERALL PORTFOLIO RETURNS WHILE DECREASING OVERALL PORTFOLIO VOLATILITY UNLESS THE TRUST ITSELF TRADES PROFITABLY. _____________________________ THE TRUST AND ITS OBJECTIVES OBJECTIVES The primary objective of the Trust is substantial capital appreciation. The Trust may be an appropriate investment vehicle for investors seeking capital appreciation who are willing to risk significant losses. At the same time, JWH will attempt to reduce the expected volatility and risk of loss by participating in diversified markets. If the Trust is able to preserve capital during periods of unfavorable, non-trending markets, it has the potential to benefit from major price movements in a wide range of global markets when, from time to time, such trends do occur. Through an investment in the Trust, investors have the opportunity to participate in markets not typically represented in an individual's portfolio, and the potential to profit from rising as well as falling prices. Many "buy and hold" strategies in "alternative asset classes," E.G., real estate, fine art or precious metals, are dependent on rising prices. The Trust's profitability is not. The success of JWH's trading is not dependent upon favorable economic conditions, national or international. Indeed, periods of economic uncertainty can augment the profit potential of the Trust by increasing the likelihood of significant movements in commodity prices, the exchange rates between various countries, world stock prices and interest rates. Initially the Trust will allocate its assets equally between the Trading Programs. Thereafter, at the end of each quarter, JWH will automatically rebalance assets between the Trading Programs so that each Trading Program will again be allocated one half of the Trust's assets. Such quarterly rebalancing may result in the liquidation of profitable positions. See "Risk Factor (23) -- Possible Liquidation of Profitable Positions." However, the Managing Owner has the discretion, subject to JWH's agreement, from time to time, to alter the allocation of the Trust's assets between the Trading Programs, to delete a Trading Program or to add other JWH programs. -26- The Managing Owner and JWH expect that the Trust's performance may exhibit considerable volatility, a widely accepted measure of risk. THERE CAN BE NO ASSURANCE THAT THE TRUST'S PERFORMANCE WILL BE CONSISTENT WITH ITS ANTICIPATED RISK/REWARD PARAMETERS OR THAT THE TRUST WILL ACHIEVE ITS OBJECTIVES. THE TRUST HAS NO OPERATING HISTORY. JWH will take a long-term perspective of the markets in seeking to achieve the Trust's objectives. The Trust will not be managed in a manner likely to produce significant short-term profits. On the contrary, JWH anticipates that the Trust may incur major short-term losses from time to time even if successfully achieving its cumulative performance objective over time. The Managing Owner and JWH recommend that no investor consider purchasing Units who is not prepared to make at least a medium- to long-term commitment to the Trust. THERE CAN BE NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS OBJECTIVES OR AVOID SUBSTANTIAL LOSSES. PROSPECTIVE INVESTORS SHOULD RECOGNIZE THAT THE PERFORMANCE OF THE TRUST IS EXPECTED TO BE MATERIALLY MORE VOLATILE THAN THAT OF A MULTI-ADVISOR FUND. SIGNIFICANT LOSSES ARE LIKELY TO BE INCURRED FROM TIME TO TIME. THE MANAGING OWNER'S DISCUSSION AND ANALYSIS OF THE TRUST'S PROSPECTIVE FINANCIAL CONDITION AND RESULTS OF OPERATIONS PROSPECTIVE RESULTS OF OPERATIONS. The success of the Trust will be dependent on the ability of JWH to generate profits, through speculative trading, sufficient to produce substantial capital appreciation after payment of all fees and expenses. Such success will, in turn, be dependent on the results achieved by the Trading Programs. See "John W. Henry & Company, Inc." LIQUIDITY AND CAPITAL RESOURCES. The Trust intends to raise capital only through the sale of Units. The net proceeds of the ongoing offering of the Units, plus the related general liability interest contributions by the Managing Owner, will be placed under the management of JWH. Liquidity will affect the Trust primarily in that the futures and forward markets in which JWH takes positions may have periods in which illiquidity makes it impossible or economically undesirable to execute trades in accordance with signals generated by the Trading Programs. Other than in respect of the functioning of the markets in which it trades, liquidity will be of little relevance to the operation of the Trust, as substantially all of its assets are expected to be maintained in highly liquid government securities or cash deposits. The Managing Owner does not believe that it is realistic to regard the Trust as having a meaningful chance of achieving its profit objectives in the short term. In fact, the Managing Owner recommends that investors look at the Trust as a "buy and hold" investment which they intend to retain for a medium- to long-term period (not less than 2 years). Although redemptions are available at any month-end, the Managing Owner believes that the Units must be regarded as a comparatively illiquid, long-term investment. The redemption charges which remain in effect for the first eleven full months after each Unit is sold indicate that no one should consider purchasing Units who does not intend to hold them for at least that period of time. RISK CONTROLS. The Trust will be subject to both market and credit risk. The Trust will trade futures contracts on currencies, interest rates, energy and agricultural products, metals and stock indices, options on such futures contracts, and spot and forward contracts on currencies and precious metals. Risk arises from changes in the value of these contracts (market risk) and the potential inability of counterparties or brokers to perform under the terms of the contracts (credit risk). Numerous factors can have a significant influence on the market risk of the Trust's open positions, many of which will be highly interest-rate sensitive. The Trading Programs incorporate risk control policies -- relating, for example, to the maximum permissible commitment to a particular position or the maximum loss on such position which will be tolerated without liquidation -- but there can be no assurance that these policies will prevent substantial market losses. The credit risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange, whereas in over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. The Trust will trade extensively in both exchange- traded and over-the-counter instruments. -27- THE MANAGING OWNER The managing owner and commodity pool operator of the Trust is CIS Investments, Inc., a wholly-owned subsidiary of Cargill Investor Services, Inc., the Trust's Futures Broker. The Managing Owner was incorporated in Delaware in 1983. It has been registered with the CFTC under the CEA as a commodity pool operator since December 13, 1985 and is a member in good standing of NFA in such capacity. CISI maintains its principal office at 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606; telephone (312) 460-4000. The records of the Trust will be kept at CISI's principal office. The officers and directors of CISI do not receive any compensation directly from CISI. CISI currently operates two public commodity pools jointly with IDS Futures Corporation and one private commodity pool and operated one private commodity pool (which has been liquidated). The past performance record of the Managing Owner is set forth in Appendix I. The directors and officers of CISI are as follows: HAL T. HANSEN is President and a director. Mr. Hansen has been President of Cargill Investor Services, Inc. since November 1978. He serves on the Executive Committees of the Board of Directors of NFA and the Futures Industry Association ("FIA") and is the Chairman of NFA. Mr. Hansen graduated from the University of Kansas in 1958. He started work at Cargill, Incorporated in 1958, and was employed by Cargill S.A.C.I. in Argentina from 1965 to 1969. Mr. Hansen has been employed by Cargill Investor Services, Inc. since 1974. L. CARLTON ANDERSON is Vice President and a director. Mr. Anderson is a graduate of Northwestern University, Evanston, Illinois. He started work at Cargill, Incorporated in 1959, in the Commodity Marketing Division. He served as President of Stevens Industries Inc., Cargill's peanut shelling subsidiary, from 1979 to 1981. He has been employed by Cargill Investor Services, Inc. since 1981, and is currently the Director in charge of the Portfolio Diversification Group. Mr. Anderson recently served on the Board of Directors of the Managed Futures Association. RICHARD A. DRIVER is Vice President and a director. Mr. Driver became a Vice President and a director of CISI on June 29, 1993. Mr. Driver graduated from the University of North Carolina in 1969 and he received a Masters Degree from the American Graduate School of International Management in 1973. Mr. Driver began working for Cargill, Incorporated in 1973 and joined Cargill Investor Services, Inc. in 1977 as Vice President of Operations. CHRISTOPHER MALO is Vice President. Mr. Malo graduated from Indiana University in 1976. He started work at Cargill, Incorporated in June 1978 as an internal auditor. He transferred to Cargill Investor Services, Inc. in August 1979, and served as Secretary/Treasurer from November 1983 until July 1991. He was elected Vice President and Secretary in July 1991. He is a member of the FIA Operations Division and has served as Chairman of the FIA Finance Committee. BARBARA A. PFENDLER is Vice President. Ms. Pfendler is a graduate of the University of Colorado, Boulder. She began her career with Cargill, Incorporated in 1975. She held various merchandising and management positions within the organization's Oilseed Processing Division before transferring to CIS in 1986 where she is responsible for all marketing activities of the Portfolio Diversification Group. She was appointed Vice President of CISI in May 1990 and Vice President of CIS in June of 1996. DONALD ZYCK is Secretary and Treasurer. Mr. Zyck graduated from Northern Illinois University, DeKalb, Illinois in 1983. He began working at Cargill Investor Services, Inc. in April 1985 as a Staff Accountant. From January 1988 to October 1994 he was a Manager of Treasury Operations at CIS. He was elected Controller, Secretary and Treasurer of CIS in October 1994. BRUCE H. BARNETT is an Assistant Secretary. Mr. Barnett graduated in 1968 from Southern Connecticut State College. New York University Law School awarded Mr. Barnett a J.D. in 1971 and an L.L.M. in 1973. He started work at Cargill, Incorporated in 1990 as Vice President, Taxes. From 1987 to 1990, Mr. Barnett held various positions at Unilever, a European based multi-national corporation. HENRY W. GJERSDAL, JR. is an Assistant Secretary. Mr. Gjersdal received a bachelor of arts degree from Gustavus Adolphus College in 1976 and a J.D. degree from the University of Michigan in 1979. He is a member of the American Bar Association and the Tax Executives Institute. He joined the Law Department of Cargill, Incorporated in April 1981. He had previously been an associate with Doherty, Rumble and Butler, Minneapolis, Minnesota. In June 1985 he was named European Tax Manager for Cargill International, Geneva, and in 1987 was named Senior Tax Attorney for the -28- Law Department. He became Assistant Tax Director in the Tax Department in December 1990. Mr. Gjersdal was named Assistant Vice President of Cargill, Incorporated's Administrative Division in April 1994 with responsibility for the Audit and international groups in Cargill's Tax Department and became Assistant Secretary on June 25, 1996. PATRICE H. HALBACH is an Assistant Secretary. Ms. Halbach graduated phi beta kappa from the University of Minnesota with a bachelor of arts degree in history. In 1980 she received a J.D. degree cum laude from the University of Minnesota. She is a member of the Tax Executives Institute, the American Bar Association and the Minnesota Bar Association. Ms. Halbach joined the Law Department of Cargill, Incorporated in February 1983. She had previously been an attorney with Fredrikson & Byron, Minneapolis, Minnesota. In December 1990, she was named Senior Tax Manager for Cargill, Incorporated's Tax Department and became Assistant Tax Director in March 1993 and was responsible for the oversight of federal audits and international compliance. She was named Assistant Vice President of Cargill, Incorporated's Administrative Division in April 1994. She became Assistant Secretary on June 25, 1996. JOHN W. HENRY & COMPANY, INC. BACKGROUND John W. Henry & Company, Inc., a California corporation, is a United States-based global investment management firm. JWH is recognized as a leader in managing capital in futures, interest rate, and foreign exchange markets for international banks, brokerage firms, pension funds, institutions, and high-net- worth individuals. JWH trades numerous contracts on a 24-hour basis in the Americas, Europe and Asia, and has grown to be one of the largest advisors in the industry, managing approximately $1.6 billion in client capital as of September 30, 1996. John W. Henry & Company began managing assets in 1981 as a sole proprietorship and was later incorporated in the state of California as John W. Henry & Co., Inc. to conduct business as a commodity trading advisor. The sole shareholder of JWH is the John W. Henry Trust dated July 27, 1990. The trustee and sole beneficiary of the Trust is John W. Henry. JWH is registered as a commodity trading advisor and a commodity pool operator with the CFTC, is a member of NFA and the FIA and a sustaining member of the Managed Futures Association (the "MFA"). A DISCIPLINED INVESTMENT PHILOSOPHY JWH's history of success is based on the following guiding principles: LONG-TERM PERSPECTIVE. JWH's investment strategies rest on a long-term perspective on the world's financial and commodities markets. Historical performance demonstrates that, because trends often last longer than most market participants expect, strong returns can be generated from positions held over the long term. DISCIPLINED INVESTMENT PROCESS. The disciplined investment process utilized by JWH is designed to generate superior, risk-adjusted rates of return throughout a market cycle. By consistently applying investment techniques in financial and commodities markets worldwide, JWH is able to participate in rising and falling markets without bias. JWH's ongoing research has led to the development of analytical models which suggest the appropriate content, weighting, entries and exits for each investment position. Once established, investment positions are monitored around the clock. While many of these positions are closed out within a few days or weeks at a profit or loss, others are retained where JWH's investment guidelines indicate potential opportunity for exceptional returns. TREND IDENTIFICATION. JWH's strategies are nonpredictive. Instead, based on comprehensive research on historic pricing data, JWH seeks to recognize the movements of capital from one market to another after trends have begun. GLOBAL DIVERSIFICATION. For more than a decade, JWH has recognized the importance of global trading. Financial markets around the world are increasingly interrelated, with actions in one country's markets often influencing markets in other parts of the world. JWH investments are positioned to provide access to the performance potential offered by the global marketplace. COMPREHENSIVE RISK MANAGEMENT. JWH's risk management strategies are designed to decrease volatility and improve the risk/reward characteristics of investments in futures and forwards by relying upon carefully formulated risk management algorithms that define controlled loss parameters prior to the establishment of a position. -29- PRINCIPALS MR. JOHN W. HENRY is chairman of the JWH Board of Directors and is trustee and sole beneficiary of the John W. Henry Trust dated July 27, 1990. Mr. Henry is also a member of the Investment Policy Committee of JWH. He currently concentrates his activities at JWH on portfolio management, business issues and frequent dialogue with trading supervisors. Mr. Henry is the exclusive owner of certain trading programs licensed to Elysian Licensing Corporation, a corporation wholly-owned by Mr. Henry, sublicensed by Elysian Licensing Corporation to JWH and utilized by JWH in managing client accounts. Over the last ten years, Mr. Henry has developed many innovative investment programs which have enabled JWH to become one of the most successful money managers in the foreign exchange, futures and fixed income markets. Mr. Henry has served on the Board of Directors of the National Association of Futures Trading Advisors ("NAFTA") and the Managed Futures Trade Association, and has served on the Nominating Committee of NFA. Mr. Henry currently serves on the Board of Directors of the FIA and is chairman of the FIA task force on Derivatives for Investment. He also currently serves on a panel created by the Chicago Board of Trade and Chicago Mercantile Exchange to study cooperative efforts related to electronic trading, common clearing and the issues regarding the possible merger of these two exchanges. In 1989, Mr. Henry established residency in Florida and since that time has performed services from that location as well as at the Connecticut offices of JWH. Mr. Henry is a principal of JWH Risk Management, Inc., Westport Capital Management Corporation, Global Capital Management Limited, JWH Asset Management, Inc. and JWH Investments, Inc., all of which are affiliates of JWH. Since the beginning of 1987, Mr. Henry has devoted and will continue to devote considerable time to business activities unrelated to JWH and its affiliates. MR. MARK H. MITCHELL is vice chairman and a member of the Board of Directors of JWH. He is also vice chairman and a director of JWH Risk Management, Inc., and a director of JWH Asset Management, Inc. Prior to his employment at JWH in January 1994, Mr. Mitchell was a partner of Chapman and Cutler, a Chicago, Illinois law firm, where he had headed its futures law practice since August 1983. From August 1980 to March 1991, he served as general counsel of NAFTA and, from March 1991 to December 1993, he served as general counsel of the MFA. Mr. Mitchell is currently a member of the Commodity Pool Operator/Commodity Trading Advisor Advisory Committee and the Special Committee for the Review of the Multi-Tiered Regulatory Approach to NFA Rules, both of NFA. In addition, he has served as a member of the Government Relations Committee of the MFA and the Executive Committee of the Law and Compliance Division of the FIA. In 1985, he received the Richard P. Donchian Award for Outstanding Contributions to the Field of Commodity Money Management. He was an editor of FUTURES INTERNATIONAL LAW LETTER and of its predecessor publication, COMMODITIES LAW LETTER. He received an A.B. with honors from Dartmouth College and a J.D. from the University of California at Los Angeles, where he was named to the Order of the Coif, the national legal honorary society. MR. DAVID R. BAILIN is an executive vice president and a member of the Operating Committee of JWH. He is also president and a director of Westport Capital Management Corporation, president of JWH Risk Management, Inc., president of JWH Investments, Inc. and president and chairman of the Board of Directors of Global Capital Management Limited. He is responsible for the development, implementation, and management of JWH's sales and marketing infrastructure. He currently serves on the Board of Directors of the Futures Industry Institute. Prior to joining JWH in December 1995, Mr. Bailin was managing director -- development since April 1994 for Global Asset Management (GAM), a Bermuda based management firm with over $7 billion in managed assets. He was responsible for overseeing the international distribution of GAM's funds as well as for establishing new distribution relationships and channels. Prior to his employment with GAM, Mr. Bailin headed the real estate asset management division of Geometry Asset Management beginning in July 1992. Prior to that time, beginning in 1987, he was president of Warner Financial, an investment advisory business in Boston, Massachusetts. Mr. Bailin received a B.A. from Amherst College and an M.B.A. from Harvard Business School. MR. JAMES E. JOHNSON, JR. is chief financial officer, chief administrative officer and a member of the Operating Committee of JWH. In addition, Mr. Johnson is treasurer of Westport Capital Management Corporation and a principal of JWH Investments, Inc., JWH Asset Management, Inc. and JWH Risk Management, Inc. Mr. Johnson joined JWH in May 1995 from Bankers Trust Company where he had been managing director and chief financial officer of the asset management division since January 1983. His areas of responsibility included finance, operations and technology for the $160 billion global asset advisor. Prior to joining Bankers Trust, Mr. Johnson was a product manager at American Express Company responsible for research and market strategies for the Gold Card. He received a B.A. with honors from Columbia University and an M.B.A. in Finance and Marketing from New York University. -30- MS. ELIZABETH A.M. KENTON is a senior vice president, the director of compliance and a member of the Operating Committee of JWH. Since joining JWH in March 1989, Ms. Kenton has held positions of increasing responsibility in research and development, administration and regulatory compliance. Ms. Kenton is also senior vice president of JWH Risk Management, Inc., Executive Vice President of JWH Investments, Inc., vice president of JWH Asset Management, Inc., a director of Westport Capital Management Corporation and a director of Global Capital Management Limited. Prior to her employment at JWH, Ms. Kenton was associate manager of finance and trading operations at Krieger Investments, a currency and commodity trading firm. From July 1987 to September 1988, Ms. Kenton worked for Bankers Trust Company as a product specialist for foreign exchange and Treasury options trading. Ms. Kenton is a member of the MFA's Trading and Markets Committee. She received a B.S. in Finance from Ithaca College. MS. MARY ELIZABETH HARDY is a senior vice president, the director of trading administration and a member of the Operating and Investment Policy Committees of JWH. Since joining JWH in September 1990, Ms. Hardy has held positions of increasing responsibility in research and development and trading. Prior to her employment at JWH, Ms. Hardy held the position of associate editor at Waters Information Services ("Waters"), a publishing company, where she wrote weekly articles covering technological advances in the securities and futures markets. Prior to joining Waters in 1989, Ms. Hardy was at Shearson Lehman Brothers Inc. ("Shearson"), where she held the position of assistant director of the Managed Futures Trading Department. Prior to that, Ms. Hardy was an institutional salesperson for Shearson, in a group specializing in financial futures and options. Previously, Ms. Hardy was an institutional salesperson for Donaldson, Lufkin and Jenrette with a group which also specialized in financial futures and options. Ms. Hardy serves on the Executive Committee of the MFA's Board of Directors and has chaired its Trading and Markets Committee. She received a B.B.A. in Finance from Pace University. MR. DAVID M. KOZAK is counsel to the firm, a vice president and secretary of JWH. In addition, he is assistant secretary of Westport Capital Management Corporation and secretary of JWH Risk Management, Inc. Prior to joining JWH in September 1995, Mr. Kozak was employed at the law firm of Chapman and Cutler, where he was an associate from September 1983 and a partner from 1989. Mr. Kozak has concentrated in commodity futures law since 1981, with emphasis in the area of commodity money management. During the time he was employed at Chapman and Cutler, he served as outside counsel to NAFTA and the MFA. Mr. Kozak is currently a member of the NFA Special Committee on CPO/CTA Disclosure Issues, the Government Relations Committee of the MFA, and the Visiting Committee of The University of Chicago Library. He received a B.A. from Lake Forest College, an M.A. from The University of Chicago, and a J.D. from Loyola University of Chicago. MR. KEVIN S. KOSHI is a senior vice president and chief trader of JWH. He is also a member of the Investment Policy Committee of JWH. Mr. Koshi is responsible for the supervision and administration of all aspects of order execution strategies and the implementation of trading policies and procedures. Mr. Koshi joined JWH in August 1988 as a professional in the Finance Department, and since 1990 has held positions of increasing responsibility in the Trading Department. He received a B.S. in Finance from California State University at Long Beach. MR. BARRY S. FOX is the director of research and development and is a member of the Investment Policy Committee of JWH. Mr. Fox is responsible for the design and testing of existing and new programs. He also supports and maintains the proprietary systems/models used to generate JWH trades. Mr. Fox joined JWH in March 1991 and since that time has held positions of increasing responsibility in the Research and Product Development Department. Prior to his employment at JWH, Mr. Fox provided sales and financial analysis support for Spreadsheet Solutions, a financial software development company. Prior to joining Spreadsheet Solutions in October 1990, Mr. Fox operated a trading company where he traded his own proprietary capital. Before that, he was employed with Bankers Trust as a product specialist for foreign exchange and Treasury options trading. He received a B.S. in Business Administration from the University of Buffalo. MS. GLENDA G. TWIST is a director of JWH and has held that position since August 1993. Ms. Twist joined JWH in September 1991 with responsibilities for corporate liaison, and she continues her duties in that area. Her responsibilities include assistance in the day-to-day administration of the Florida office and review and compilation of financial information for JWH. Ms. Twist was president of J.W. Henry Enterprises Corp., for which she performed financial, consulting and administrative services from January 1991 to August 1991. From 1988 to 1990, Ms. Twist was executive director of Cities in Schools, a program in Arkansas designed to prevent students from leaving school before completing their high school education. She received her B.S. in Education from Arkansas State University. MR. JOHN A. F. FORD is the director of marketing at JWH and is responsible for the development and implementation of strategic marketing and communications programs. He joined JWH in May 1996 from J. P. Morgan where he had been vice president and head of corporate communications for that firm's European operations, responsible -31- for public relations, advertising, and marketing from February 1995 to October 1995. He previously held a similar position with J. P. Morgan at the Euroclear Operations Centre in Brussels from January 1992 to February 1994. From October 1995 to May 1996 he undertook a number of consultancy projects while relocating to the United States. Prior to joining J. P. Morgan, Mr. Ford was managing director of the European headquarters of Gavin Anderson & Co. (UK), an international corporate and investor relations consultancy firm, from February 1987 to December 1991. Mr. Ford was involved in advising the Chicago Mercantile Exchange on marketing its services to European institutions and advising the International Petroleum Exchange in London on similar matters. In addition, he helped market Mercury Asset Management to major institutions and pension funds. MR. MICHAEL D. GOULD is director of investor services at JWH. He is responsible for general business development and oversees investor services support. He joined JWH in April 1994 from Smith Barney Inc. where he served as senior sales manager and vice president futures for the Managed Futures Department. He held the identical position with the predecessor firms of Shearson Lehman Bros. and Lehman Bros. Prior to that time, he was engaged in a proprietary trader development program at Tricon USA from September 1990 to October 1991. He was a registered financial consultant with Merrill Lynch from 1985 through August 1990. His professional career began in 1982 as an owner- operator of a nonferrous metals trading and export business which he ran until September 1985. MR. JACK M. RYNG, C.P.A., joined JWH as the controller in November 1991. Mr. Ryng is also chief financial officer and secretary of JWH Investments, Inc. Prior to that time, he was a senior manager with Deloitte & Touche where he held positions of increasing responsibility since September 1985 for commodities and securities industry clients. His clients included the largest commodity pool operators in the United States, along with broker-dealers, futures commission merchants, and foreign exchange operations in the areas of accounting, regulatory compliance, and consulting. Prior to his employment by the Financial Services Center of Touche Ross & Co. (the predecessor firm of Deloitte & Touche), he was a senior accountant for Leonard Rosen & Co. Mr. Ryng is a member of AICPA and the New York C.P.A. Society, and is a member of the board of the New York Operations Division of the FIA. He received a B.S. in Business Administration from Duquesne University. MR. MICHAEL J. SCOYNI is a managing director of JWH and is secretary and a director of Westport Capital Management Corporation. Mr. Scoyni has been associated with Mr. Henry since 1974 and with JWH since 1982. He was engaged in research and development for John W. Henry & Company (JWH's predecessor) from November 1981 to December 1982 and subsequently has been employed in positions of increasing responsibility. He received a B.A. in Anthropology from California State University in 1974. MR. CHRISTOPHER E. DEAKINS is a vice president of JWH. He is responsible for general business development and investor services support. Prior to joining JWH in August 1995, he was a vice president, national sales, and a member of the Management Team for RXR Capital Management, Inc. His responsibilities consisted of business development, institutional sales, and broker dealer support. Prior to joining RXR in August 1986, he was engaged as an account executive for Prudential-Bache Securities starting in February 1985. Prior to that, Mr. Deakins was an account executive for Merrill Lynch. He received a B.A. in Economics from Hartwick College. MR. CHRIS J. LAUTENSLAGER is a vice president of JWH. He is responsible for general business development and Investor Services support. Prior to joining JWH in April 1996, he was the vice president of institutional sales for I/B/E/S International Inc., a distributor of corporation earnings estimate information. His responsibilities consisted of business development and support of global money managers and investment bankers. Prior to his employment with I/B/E/S, Mr. Lautenslager devoted time to personal activities from April 1994 to March 1995, following the closing of the Stamford, Connecticut office of Gruntal & Co., where he had worked as a proprietary equity trader since November 1993. Before that, he held the same position at S.A.C. Capital Management starting in February 1993. From 1987 to December 1993, Mr. Lautenslager was a partner and managing director of Limitless Option Partners, a registered Chicago Mercantile Exchange trading and brokerage organization, where he traded currency futures and options. He received a B.S. in Accounting from the University of Colorado and a Masters in Management from Northwestern University. MR. EDWIN B. TWIST is a director of JWH and has held that position since August 1993. He is also a director of JWH Risk Management, Inc. Mr. Twist joined JWH as internal projects manager in September 1991. Mr. Twist's responsibilities include assistance in the day-to-day administration of JWH's Florida office and internal projects. Mr. Twist was secretary and treasurer at J.W. Henry Enterprises Corp., a Florida corporation engaged in administrative and financial consulting services, for which he performed financial, consulting and administrative services from January 1991 to August 1991. -32- MS. NANCY O. FOX, C.P.A., is a vice president and the director of investment support of JWH. She is responsible for the day-to-day activities of the Investment Support Department, including all aspects of operations and performance reporting. Prior to joining JWH in January 1992, Ms. Fox was a senior accountant at Deloitte & Touche, where she served commodities and securities industry clients and held positions of increasing responsibility since July 1987. Ms. Fox is a member of the AICPA and the New Jersey Society of C.P.A.s. She received a B.S. in Accounting and Finance from Fairfield University and an M.B.A. from the University of Connecticut. MS. WENDY B. GOODYEAR is a director of the office of the chairman. She is responsible for managing and coordinating projects involving Mr. Henry. Ms. Goodyear joined JWH in October 1995 as director of marketing, responsible for the development and implementation of strategic marketing and communications programs. Prior to her employment at JWH, Ms. Goodyear was a vice president at Citibank where she held several positions, including product development manager for the depository receipt business and marketing manager for the pension business. Prior to joining Citibank in May 1993, Ms. Goodyear was employed at Bankers Trust Company from 1985 where she held positions of increasing responsibility in both the private bank and pension businesses. Ms. Goodyear received a B.A. in History from the University of Virginia and an M.B.A. from the Stern School of Business at New York University. MR. JULIUS A. STANIEWICZ is the senior strategist in JWH's Product Development Department. He is also president of JWH Asset Management, Inc. Prior to joining JWH in March of 1992, Mr. Staniewicz was employed with Shearson Lehman Brothers as a financial consultant since April 1991. Prior to that, beginning in 1990, Mr. Staniewicz was a vice president of Phoenix Asset Management, a commodity pool operator and introducing broker, where he helped develop futures funds for syndication and institutional investors. From 1986 to 1989, Mr. Staniewicz worked in the managed futures department at Prudential- Bache Securities, Inc., lastly as an assistant vice president and co-director of managed futures. In that capacity, he oversaw all aspects of forming and offering futures funds, including the selection and monitoring of commodity trading advisors. Mr. Staniewicz received a B.A. in Economics from Cornell University. THE INVESTMENT POLICY COMMITTEE The Investment Policy Committee is one vehicle for decision-making at JWH about the content and application of JWH trading programs. Composition of the Investment Policy Committee, and participation in its discussion and decisions by non-members, may vary over time. LEGAL AND ETHICAL CONCERNS In September 1996, JWH was named as a co-defendant in class action lawsuits brought in the California Superior Court, Los Angeles County and in the New York Supreme Court, New York County. The actions, which seek unspecified damages, purport to be brought on behalf of investors in certain commodity pools operated by Dean Witter Reynolds Inc. or its affiliates ("Dean Witter"), some of which are advised by JWH, and are primarily directed at Dean Witter's alleged fraudulent selling practices in connection with the marketing of those pools. JWH is essentially alleged to have aided and abetted or directly participated with Dean Witter in those practices. JWH believes the allegations against it are without merit; it intends to contest these allegations vigorously and is convinced that it will be shown to have acted properly and in the best interest of investors. JWH and Mr. Henry may engage in discretionary trading for their own accounts, and may trade for the purpose of testing new investment programs and concepts, as long as such trading does not amount to a breach of fiduciary duty. In the course of such trading, JWH and Mr. Henry may take positions in their own accounts which are the same or opposite from client positions, and on occasion orders may be filled better for their accounts than for client accounts due to testing a new quantitative model or program, a neutral allocation system, and/or trading pursuant to individual discretionary methods. Records for these accounts will normally not be made available to clients. Employees and principals of JWH (other than Mr. Henry) are not permitted to trade on a discretionary basis in futures, options on futures or forward contracts. However, such principals and employees may invest in investment vehicles that trade futures, options on futures, or forward contracts, when an independent trader manages trading in that vehicle, and in the JWH Employee Fund, L.P., which is managed by JWH. The records of these accounts also will not be made available to clients. -33- TRADING TECHNIQUES JWH specializes in managing institutional and individual capital in the global commodities, interest rate and foreign exchange markets. Since 1981, JWH has developed and implemented proprietary trend-following trading techniques that focus on long-term rather than short-term, day-to-day trends. In addition to the Trading Programs, JWH currently operates ten other programs that trade from either a U.S. or a foreign currency perspective, none of which will be employed by the Trust initially. JWH's systematic investment process in designed to generate, over market cycles, excellent risk-adjusted rates of return under favorable and adverse market conditions. The JWH process capitalizes on emerging, long-term, rising and falling price trends and ignores day-to-day price fluctuations. To ensure disciplined implementation of its investment philosophy, JWH uses mathematical models to execute investment decisions in more than 50 global markets encompassing currencies, commodities and financial securities. All JWH investment programs follow the strict money management framework outlined below. The first step in the JWH investment process is the identification of a price trend. While there are many ways to identify trends, JWH uses a methodology which identifies opportunities in order to attempt to capture a majority of the significant price movements in a given market. The process presumes that such price movements will often exceed the expectation of the general marketplace. As such, the JWH discipline is to pare losing positions relatively quickly while allowing profitable positions to mature. Positions held for two to four months are not unusual, and positions have been held for more than one year. Historically, only thirty to forty percent of all trades made pursuant to the investment methods have been profitable. Large profits on a few trades in positions that typically exist for several months have produced favorable results overall. Generally, most losing positions are liquidated within weeks. The maximum equity retracement JWH has experienced in any single program was nearly sixty percent. Clients should understand that similar or greater drawdowns are possible in the future. THERE CAN BE NO ASSURANCE THAT JWH WILL TRADE PROFITABLY FOR THE TRUST OR AVOID SUDDEN AND SEVERE LOSSES. JWH at its sole discretion may override computer-generated signals and may at times use discretion in the application of its quantitative models which may affect performance positively or negatively. Subjective aspects of JWH's quantitative models also include the determination of leverage, commencement of trading an account, contracts and contract months, margin utilization, and effective trade execution. PROGRAM MODIFICATIONS In an effort to maintain and improve performance, JWH has engaged, and continues to engage, in an extensive program of research. While the basic philosophy underlying JWH's investment methodology has remained intact throughout its history, the potential benefits of employing more than one investment methodology, alternatively, or in varying combinations, is a subject of continual testing, review and evaluation. Extensive research may suggest the substitution of alternative investment methodologies with respect to particular contracts in light of relative differences in the hypothetical historical trading performance achieved through testing different methodologies. In addition, risk management research and analysis may suggest modifications regarding the relative weighting among various contracts, the addition or deletion of particular contracts for a program or a change in the degree of leverage employed. As the capital in each program increases, additional emphasis and weighting may be placed on certain markets which have historically demonstrated the greatest liquidity and profitability. The weightings of capital committed to various markets in the trading programs are dynamic, and JWH may vary the weightings at its discretion as market conditions, liquidity, position limit considerations and other factors warrant. The Managing Owner (and, accordingly, the Unitholders) will generally not be informed of any such changes. LEVERAGE Leverage adjustments have been and continue to be an integral part of JWH's investment strategy. At its discretion, JWH may adjust leverage in certain markets or entire programs. Leverage adjustments may be made at certain times for one program but not for others. Factors which may affect the decision to adjust leverage include: ongoing research; program volatility; current market volatility; risk exposure; and subjective judgment and evaluation of these and other general market conditions. Such decisions to change leverage may positively or negatively affect performance, and will alter risk exposure of an account. Leverage adjustments may lead to greater profits or losses, more frequent and larger margin calls, and greater brokerage expense. NO ASSURANCE IS GIVEN THAT SUCH LEVERAGE ADJUSTMENTS WILL BE TO THE -34- FINANCIAL ADVANTAGE OF THE TRUST. JWH RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO ADJUST ITS LEVERAGE POLICY WITHOUT NOTIFICATION TO INVESTORS. ADDITION, REDEMPTION AND REALLOCATION OF CAPITAL FOR POOL ACCOUNTS JWH has developed procedures for pool accounts, such as the Trust, that provide for the addition, redemption and/or reallocation of capital. Investors who purchase or redeem units in a pool are most frequently permitted to do so at a price equal to the net asset value per unit on the close of business on the last business day of the month or quarter. In addition, pools often may reallocate capital among advisors at the close of business on the last business day of the month. In order to provide market exposure commensurate with the equity in the account on the date of these transactions, JWH's general practice is to adjust positions at a time as close as possible to the close of business on the last trading date of the month. The intention is to provide for additions, redemptions and reallocations at a net asset value per unit that will be the same for each of these transactions and to eliminate possible variation in the net asset value per unit that could occur as a result of inter-day price changes when additions are calculated on the first day of the subsequent month. Therefore, JWH may, in its sole discretion, adjust its investment of the assets associated with the addition, redemption or reallocation of capital as near as possible to the close of business on the last trading day of the month to reflect the amount then available for trading. Based on JWH's determination of liquidity or other market conditions, JWH may decide to commence trading earlier in the day on, or before, the last business day of the month. In the case of an addition to a pool account, JWH may also, in its sole discretion, delay the actual start of trading for those new assets. No assurance is given that JWH will be able to achieve the objectives described above in connection with funding level changes. The use of discretion by JWH in the application of its procedures for trading pool accounts may affect performance positively or negatively. In addition to futures contracts, JWH may from time to time trade spot and forward contracts on physical or cash commodities, including specifically gold bullion, when it believes that such markets offer comparable or superior market liquidity or a greater ability to execute transactions at a single price. Such transactions, as opposed to futures transactions, relate to the purchase and sale of specific physical commodities. Whereas futures contracts are generally uniform except for price and delivery time, cash contracts may differ from each other with respect to such terms as quantity, grade, mode of shipment, terms of payment, penalties, risk of loss and the like. There is no limitation on the daily price movements of spot or forward contracts transacted through banks, brokerage firms or dealers, and those entities are not required to continue to make markets in any commodity. In addition, the CFTC does not comprehensively regulate such transactions, which are subject to the risk of the foregoing entities' failure, inability or refusal to perform with respect to such contracts. JWH intends that the Trust will not take physical deliveries of commodities, other than in the case of EFP transactions in currencies. THE TRADING PROGRAMS The Trust will initially allocate its assets equally between the Original Investment Program and the Financial and Metals Portfolio, which are the two longest established, continuously offered JWH programs. Thereafter, JWH will automatically rebalance Trust assets equally between the two Trading Programs at the end of each quarter. The timing of reallocation to rebalance assets between the Trading Programs may result in closing positions other than at times when a Trading Program would dictate, causing the Trust to incur losses or forgo profits that it would otherwise achieve. ORIGINAL INVESTMENT PROGRAM. The first program offered by JWH, this Trading Program is a broadly diversified portfolio providing access to a diverse group of financial and nonfinancial markets on U.S. and non-U.S. exchanges. Based on the results of extensive research, the Trading Program's composition was revised in July 1992 to include new global markets and an increased weighting in financial sectors. The Trading Program utilizes long-term quantitative reversal models which hold either long or short positions at all times in every market in which it participates. As of September 30, 1996, JWH had approximately $180 million under management pursuant to the Original Investment Program. FINANCIAL AND METALS PORTFOLIO. The Financial and Metals Portfolio seeks to capitalize on sustained moves in global financial markets utilizing intermediate- and long-term quantitative trend analysis models, some of which attempt to employ neutral stances during periods of nontrending markets. As of September 30, 1996, JWH had approximately $949 million under management pursuant to the Financial and Metals Portfolio. -35- MARKETS AND SECTORS TRADED The Trust will trade, from time to time, in over 50 markets pursuant to the Trading Programs. Portfolio allocations within each Trading Program are under continuous review, on the basis of both systematic and discretionary analysis, and are adjusted from time to time as JWH deems advisable. The following depicts the market allocations as of September 30, 1996 of the Trading Programs. ORIGINAL INVESTMENT PROGRAM Global Interest Rates 34.4% Energy 18.7% Global Stock Indices 7.0% Fiber, Grain & Softs 21.8% Foreign Exchange 10.6% Precious and Base Metals 7.5% FINANCIAL AND METALS PORTFOLIO Global Interest Rates 57.5% Foreign Exchange 17.7% Global Stock Indices 3.2% Precious Metals 21.6% Each of the above charts reflects each contract group's percentage committed to margin requirements relative to the margin requirement of the entire portfolio as of September 30, 1996. These percentages are shown for illustrative purposes only; allocations can and do change over time and from time to time. These allocations are not meant to indicate that they are "average" or necessarily typical. Margin requirements for any interbank currency trading are calculated as futures contract equivalents. OTHER PROGRAMS DEVELOPED BY JWH In addition to the Original Investment Program and the Financial and Metals Portfolio, JWH currently operates ten other trading programs for U.S. and non- U.S. investors, none of which will be utilized by JWH for the trust initially. Each program is operated separately and independently. These programs are intermediate- and long-term, quantitative trend identification models designed with the objective of achieving speculative rates of return. The Global Diversified Portfolio opened in 1988 and invests in futures and forward contracts traded on domestic and foreign exchanges in over 30 markets. Sectors traded may include foreign exchange, metals, agriculture, global interest rates, stock indices and energy. The program is designed to identify and capitalize on intermediate- and long-term price movements. The World Financial Perspective seeks to capitalize on market opportunities by holding positions from multiple currency perspectives, including the Australian dollar, British pound, Canadian dollar, French franc, German mark, Japanese yen, Swiss franc and U.S. dollar. Sectors traded may include energy, foreign exchange, stock indices, metals and global interest rates. The program began in 1987 and is designed to identify and capitalize on long-term price movements. The Yen Financial Portfolio, active since 1992, offers investors access to profit opportunities in several Japanese capital markets, including the Japanese yen, the 10-Year Japanese Government Bond, Euroyen and Nikkei stock index. The program is designed to identify and capitalize on intermediate- and long-term price movements. Accounts may be denominated in U.S. Dollars or Japanese yen. Performance may be affected by the dollar/yen conversion rate. The International Currency and Bond Portfolio (ICB), which began investing in 1993, is a portfolio of currencies and international long-term bonds of major industrialized nations. Foreign exchange positions are held both as outrights and cross rates. ICB is designed to identify and capitalize on intermediate- and long-term price movements in the markets it trades. The Global Financial Portfolio began trading in 1994. The program offers access to energy and select financial markets, including global currencies, interest rates, and stock indices and is designed to identify and capitalize on long-term price movements. The Worldwide Bond Program (WWB), which began in 1994, invests in the long- term portion of global interest rate markets, including the U.S. 30-Year bond, U.S. 10-Year note, British long gilt, the French, German and Italian bond -36- and Australian 10-Year bond. Although WWB concentrates on one sector, diversification is achieved by trading the interest rate instruments of numerous countries. Unlike most fixed income investments, WWB is not limited to investments that have the potential to profit in a stable or declining interest rate environment. Rather, WWB is designed to capitalize on dominant trends, whether rising or falling, in worldwide bond markets. The International Foreign Exchange Program (Forex), which began in 1986, invests in a broad range of major and minor currencies primarily in the highly liquid interbank market. Positions are taken as outrights or cross rates. Forex is designed to identify and capitalize on intermediate-term price movements in these markets. The G-7 Currency Portfolio began in 1991 and invests in the highly liquid currencies of the major industrialized nations known as the group of seven and Switzerland. Currencies traded are the Japanese yen, British pound, Canadian dollar, German mark, French franc, Italian lira, U.S. dollar and Swiss franc. Not all currencies are traded at all times. Positions are taken as outrights and cross rates. The program is designed to identify and capitalize on intermediate-term price movements in these markets. The Dollar Program began trading client capital in 1996. This program trades four of the world's major currencies -- Japanese yen, German mark, Swiss franc and British pound -- versus the U.S. dollar, a methodology known as "outright" trading, and is designed to identify and capitalize on intermediate- term price movements. The Delevered Yen Denominated Financial and Metals Profile, which began trading in October 1995, seeks to capitalize on sustained moves in global financial markets utilizing intermediate-term and long-term quantitative trend analysis models, some of which attempt to employ neutral stances during periods of nontrending markets. This portfolio is traded at approximately one half of the leverage of the traditional Financial and Metals Portfolio and is traded from the perspective of the Japanese yen. InterRate-TM-, a yield-enhancement strategy, began trading 1987 and closed in July 1996. It was designed to enhance returns available in short-term instruments such as U.S. Treasury bills and money market instruments. Assets were invested in U.S. Treasury bills to provide both secure income and collateral for a portfolio of interbank forward and exchange-traded futures contracts. These transactions are designed to capture the implicit interest rate differentials between countries. The KT Diversified Program began in january 1984 and closed in February 1994. The program participated in eight market sectors on U.S. exchanges only. JWH PROGRAMS: PERFORMANCE SUMMARIES AND MONTHLY RATES OF RETURN PERFORMANCE SUMMARIES The following information summarizes the composite performance of certain proprietary and all client accounts managed by JWH and JWH Investments, Inc. (an affiliate of JWH). As of September 30, 1996, JWH was managing approximately $1.6 billion of client funds in the futures and forward markets. All performance information is current as of September 30, 1996. Performance summaries are set forth, pursuant to applicable cftc regulations, for the most recent five full years for each JWH and JWH Investments, Inc. program or, in the event that a program has been trading for less than five years, from the inception of account trading in such program. The monthly rates of return tables which follow the performance summaries of the trading programs present the performance of the trading programs since their inception. The trust may in the future use other combinations of JWH programs. NOTES ON PERFORMANCE RECORDS An investor should note that in a presentation of past performance data, different accounts, even though traded according to the same program, can have varying investment results. The reasons for this involve numerous material differences among accounts including, but not limited to: (a) the periods during which accounts are active; (b) the investment program used (although all accounts may be traded in accordance with the same approach, such approach may be modified periodically as a result of ongoing research and development by JWH); (c) the leverage employed; (d) the size of the account, which can influence the size of positions taken and restrict the account from participating in all markets available to an investment program; (e) the amount of interest income earned by an account, which will depend -37- on the rates paid by futures commission merchants on equity deposits and/or on the portion of an account invested in interest-bearing obligations such as Treasury bills; (f) the amount of management and incentive fees paid to JWH and the amount of brokerage commissions paid; (g) the timing of orders to open or close positions; (h) market conditions, which in part determine the quality of trade executions; (i) the trading instructions/restrictions of the client; (j) procedures governing the timing for the commencement of trading and the method of moving toward full portfolio commitment for new accounts; (k) variations in fill prices; and (l) the timing of additions and withdrawals. During the respective periods covered by the performance summaries and the monthly rates of return tables, and particularly since 1989, JWH increased and decreased leverage in certain markets as well as in entire programs, and also altered the composition of the markets and contracts for certain programs. In general, before 1993 JWH traded its programs with greater leverage than it does currently. In addition, the subjective aspects of JWH's trading methods described under "-- Trading Techniques" above, have been utilized more often in recent years and therefore may have had a more pronounced effect on performance results during such period. In reviewing the JWH performance information, prospective investors should bear in mind the possible effects of these variations on rates of return and the application of JWH's investment methods. The composite rates of return indicated for the various programs should not be taken as representative of any rate of return actually achieved by any of the individual accounts which are included in the performance summaries or the monthly rates of return tables. THE PERFORMANCE SUMMARIES AND MONTHLY RATES OF RETURN TABLES ARE NOT NECESSARILY INDICATIVE OF ANY TRADING RESULTS WHICH MAY BE ATTAINED BY JWH IN THE FUTURE. CURRENTLY, THE TRUST CONTEMPLATES USING ONLY THE TRADING PROGRAMS AND NO OTHER JWH PROGRAMS. On several occasions, JWH has decreased leverage in certain markets as well as in entire JWH programs. These actions have reduced the volatility of certain programs as compared to the volatility prior to such decreases in leverage. While historical returns represent actual performance achieved, investors should be aware that the degree of leverage currently utilized by JWH may be significantly different from that used from time to time during previous periods. Prior to December 1991 for JWH, and July 1992 for JWH Investments, Inc., the JWH performance information is presented on a cash basis (except as otherwise described herein). The recording of items on a cash basis should not, for most months, be materially different from presenting such rates of return on an accrual basis. Any differences in the monthly rates of return between the two methods would be immaterial to the overall performance presented. In July 1992, JWH began reflecting all items of net performance on an accrual basis for the G-7 Currency Portfolio and in January 1993 for the International Currency and Bond Portfolio. Beginning with the change to accrual basis accounting for incentive fees (in December 1991 for JWH and July 1992 for JWH Investments, Inc.), the net effect on the performance information presented herein of continuing to record interest income, management fees, brokerage commissions and other expenses on a cash basis differs immaterially from the results which would be obtained using accrual basis accounting. Due to the commencement of trading in July 1996 by a new multi-program fund managed by JWH, JWH developed a new method for treating the accrual of incentive fees for the multi-advisor funds and multi-program accounts it manages. For these accounts, JWH agreed that it would earn incentive fees only when overall fund performance for multi-advisor funds, or overall JWH performance for multi- program accounts, as the case may be, is profitable. As applied, this new method presents incentive fees due for each program on a stand-alone basis -- in essence, to reflect the performance results that would have been experienced by an investor in that program, regardless of any external business arrangements (such as a multi-advisor structure or the use of multiple JWH programs) that might have affected actual incentive fees paid. The new method was applied initially in August 1996 performance. In that month, a one-time adjustment to performance rate of return was made to each affected program to show the impact of this adjustment from program inception through August 1996. In the case of certain programs, the adjustment had a material, I.E., greater than 10% impact on the rate of return that otherwise would have been shown. In the case of accounts that closed before JWH received an incentive fee due to the operation of such netting arrangements, a balancing entry was made to offset the effect of incentive fee accrual on ending equity. -38- Advisory fees vary among accounts in the case of all programs. Management fees vary from 0% to 6% of assets under management; incentive fees vary from 0% to 25% of profits. Such variations in advisory fees may have a material impact on the performance of an account from time to time. Performance summaries are included for other JWH programs and JWH Investments, Inc. programs. These programs will not be used initially by the Trust (although they may be in the future upon agreement between the Managing Owner and JWH), but applicable CFTC rules require that these performance summaries be included herein, together with a brief description of these programs. Because these programs will not be utilized initially by the Trust, no monthly rates of return tables are presented for them. JWH AND JWH INVESTMENTS, INC. BELIEVE THAT THE FOLLOWING PERFORMANCE INFORMATION IS ACCURATE AND FAIRLY PRESENTED. INTERRATE-TM- IS QUALITATIVELY DIFFERENT FROM THE OTHER JWH TRADING PROGRAMS WITH RESPECT TO: A) FEES CHARGED; B) LENGTH OF TIME FOR WHICH POSITIONS ARE HELD; C) POSITIONS TAKEN; D) LEVERAGE USED; AND E) RATE OF RETURN OBJECTIVES. THE POTENTIALLY MATERIAL TAX CONSEQUENCES OF A MANAGED FUTURES INVESTMENT IN WHICH PROFITS ARE TAXED EVERY YEAR, AS OPPOSED TO A STOCK OR BOND INVESTMENT IN WHICH GAINS BECOME TAXABLE ONLY WHEN POSITIONS ARE SOLD, ARE NOT REFLECTED IN THE PERFORMANCE DATA IN THIS PROSPECTUS. THE RATES OF RETURN ACHIEVED WHEN A JWH TRADING PROGRAM IS MANAGING A LIMITED AMOUNT OF EQUITY MAY HAVE LITTLE RELATIONSHIP TO THE RATES OF RETURN WHICH SUCH PROGRAM MAY BE ABLE TO ACHIEVE MANAGING LARGER AMOUNTS OF EQUITY. THE FOLLOWING PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE CHARGES TO THE TRUST BECAUSE JWH'S ACCOUNTS HAVE, ON AN OVERALL BASIS, BEEN SUBJECT TO FEES GENERALLY COMPARABLE TO THOSE TO BE CHARGED TO THE TRUST. CONSEQUENTLY, THERE IS NO NEED TO "PRO FORMA" JWH'S HISTORICAL PERFORMANCE IN ORDER THAT SUCH PERFORMANCE REFLECT CHARGES COMPARABLE TO THE FEE STRUCTURE OF THE TRUST. COMMODITY INTEREST TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. THERE CAN BE NO ASSURANCE THAT ANY JWH TRADING PROGRAM WILL TRADE PROFITABLY OR AVOID INCURRING SUBSTANTIAL LOSSES. INVESTORS SHOULD NOTE THAT INTEREST INCOME MAY CONSTITUTE A SIGNIFICANT PORTION OF A COMMODITY TRADING ADVISOR'S TOTAL INCOME AND, IN CERTAIN INSTANCES, MAY GENERATE PROFITS WHERE THERE HAVE BEEN REALIZED OR UNREALIZED LOSSES FROM COMMODITIES TRADING. THE NOTES AND INTRODUCTIONS TO THE PERFORMANCE SUMMARIES AND MONTHLY RATES OF RETURN TABLES ARE AN INTEGRAL PART OF SUCH PERFORMANCE INFORMATION. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. See "Risk Factor (8) -- All or Substantially All of an Investment Could Be Lost; Past Performance Not Necessarily Indicative of Future Results" at page 17. INFORMATION IN THE PERFORMANCE SUMMARIES IS CURRENT AS OF SEPTEMBER 30, 1996. -39- JWH PROGRAMS PERFORMANCE SUMMARIES ---------------------------------------------------------------------- THE TRADING PROGRAMS NAME OF PROGRAM: FINANCIAL AND METALS PORTFOLIO INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: OCTOBER 1984 NUMBER OF OPEN ACCOUNTS: 70 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $949 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $949 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (18.0)% (1/92) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (27.7)% (1/92) LARGEST PEAK-TO-VALLEY DRAWDOWN: (39.5)% (12/91-5/92) 1996 COMPOUND RATE OF RETURN: 4.9% (9 MONTHS) 1995 COMPOUND RATE OF RETURN: 38.5% 1994 COMPOUND RATE OF RETURN: (5.3)% 1993 COMPOUND RATE OF RETURN: 46.8% 1992 COMPOUND RATE OF RETURN: (10.9)% 1991 COMPOUND RATE OF RETURN: 61.9% SEE ADDITIONAL NOTE ON P. 53. SEE MONTHLY RATES OF RETURN ON P. 42. NAME OF PROGRAM: ORIGINAL INVESTMENT PROGRAM INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: OCTOBER 1982 NUMBER OF OPEN ACCOUNTS: 28 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $179 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $179 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (14.1)% (10/94) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (18.1)% (2/92) LARGEST PEAK-TO-VALLEY DRAWDOWN: (26.2)% (6/94-10/94) 1996 COMPOUND RATE OF RETURN: 4.5% (9 MONTHS) 1995 COMPOUND RATE OF RETURN: 53.2% 1994 COMPOUND RATE OF RETURN: (5.7)% 1993 COMPOUND RATE OF RETURN: 40.6% 1992 COMPOUND RATE OF RETURN: 10.9% 1991 COMPOUND RATE OF RETURN: 5.4% SEE ADDITIONAL NOTE ON P. 53. SEE MONTHLY RATES OF RETURN ON P. 43. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52. -40- MONTHLY RATES OF RETURN OF THE TRADING PROGRAMS The following monthly rates of return tables present the performance of the Trading Programs currently proposed to be used by the Trust. Monthly rates of return are included since the inception of each such Program's client trading as well as since January 1, 1991. See "-- Notes to JWH Trading Programs Performance Summaries -- (12) Monthly Rates of Return." In the following tables, Compound Annual ROR (Rate of Return) for any given year is calculated by compounding the monthly rates of return during such year. See "-- Notes to JWH Trading Programs Performance Summaries -- (13) Compound Rate of Return." For periods of less than one year, the results are year-to- date. DUE TO THE SPECULATIVE NATURE OF MANAGED FUTURES STRATEGIES, PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. NO REPRESENTATION IS, OR COULD BE, MADE THAT THE FOLLOWING INFORMATION -- OR THAT INCLUDED IN THE FOREGOING PERFORMANCE SUMMARIES -- IS IN ANY RESPECT INDICATIVE OF HOW THE TRUST ITSELF, OR EITHER OF THE TRADING PROGRAMS USED FOR IT, WILL PERFORM. THE HIGH DEGREE OF POSITIVE CORRELATION BETWEEN THE TRADING PROGRAMS IS INDICATED BY THE NUMBER OF MONTHS IN WHICH THE TRADING PROGRAMS EACH HAVE EITHER POSITIVE OR NEGATIVE RATES OF RETURN, IN SOME CASES OF NEARLY THE SAME MAGNITUDE. POSITIVE CORRELATION BETWEEN THE TRADING PROGRAMS REDUCES DIVERSIFICATION AND INCREASES RISK. SEE "RISK FACTOR (19) -- POSITIVE CORRELATION BETWEEN THE TRADING PROGRAMS." PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. See "Risk Factor (8) -- All or Substantially All of an Investment Could Be Lost; Past Performance Not Necessarily Indicative of Future Results" at page 17. INFORMATION IN THE MONTHLY RATES OF RETURN TABLES IS CURRENT AS OF SEPTEMBER 30, 1996. -41- THE TRADING PROGRAMS MONTHLY RATES OF RETURN FINANCIAL AND METALS PORTFOLIO - ------------------------------------------------------------------------------------------------------------------------------------ MONTHLY RATES OF RETURN (%) - ------------------------------------------------------------------------------------------------------------------------------------ COMPOUND Year January February March April May June July August September October November December ANNUAL ROR - ------------------------------------------------------------------------------------------------------------------------------------ 1984 N/A N/A N/A N/A N/A N/A N/A N/A N/A 1.6 (3.2) 11.7 9.9 (3 MONTHS) - ------------------------------------------------------------------------------------------------------------------------------------ 1985 6.6 17.7 (9.3) (7.8) (7.7) (1.8) 41.3 (10.1) (27.3) 6.4 26.6 1.9 20.7 - ------------------------------------------------------------------------------------------------------------------------------------ 1986 4.8 21.9 (6.3) 3.7 (17.5) 17.6 25.0 9.4 (0.2) 2.6 (3.6) (0.5) 61.5 - ------------------------------------------------------------------------------------------------------------------------------------ 1987 33.0 12.1 34.2 18.2 (7.2) (10.7) 12.2 (14.6) (8.9) 28.0 32.5 21.2 252.4 - ------------------------------------------------------------------------------------------------------------------------------------ 1988 (12.6) 9.8 (2.3) (15.0) 0.3 44.2 5.5 6.9 (8.1) 2.5 5.2 (19.2) 4.0 - ------------------------------------------------------------------------------------------------------------------------------------ 1989 31.7 (8.7) 8.5 3.2 37.0 (6.6) 4.4 (8.2) (14.9) (17.5) 21.6 (4.5) 34.6 - ------------------------------------------------------------------------------------------------------------------------------------ 1990 28.0 19.5 11.4 2.4 (22.7) 6.9 12.2 11.2 8.3 (5.0) 3.1 (3.7) 83.6 - ------------------------------------------------------------------------------------------------------------------------------------ 1991 (2.3) 3.8 4.5 (0.8) (0.3) (1.3) (13.4) 4.8 25.8 (7.7) 6.6 39.4 61.9 - ------------------------------------------------------------------------------------------------------------------------------------ 1992 (18.0) (13.5) 3.0 (12.2) (5.7) 21.9 25.5 10.2 (5.2) (4.5) (0.8) (2.6) (10.9) - ------------------------------------------------------------------------------------------------------------------------------------ 1993 3.3 13.9 (0.3) 9.3 3.3 0.1 9.7 (0.8) 0.2 (1.1) (0.3) 2.9 46.8 - ------------------------------------------------------------------------------------------------------------------------------------ 1994 (2.9) (0.6) 7.2 0.9 1.3 4.5 (6.1) (4.1) 1.5 1.7 (4.4) (3.5) (5.3) - ------------------------------------------------------------------------------------------------------------------------------------ 1995 (3.8) 15.7 15.3 6.1 1.2 (1.7) (2.3) 2.1 (2.1) 0.3 2.6 1.7 38.5 - ------------------------------------------------------------------------------------------------------------------------------------ 1996 6.0 (5.5) 0.7 2.3 (1.7) 2.2 (1.1) (0.8) 3.2 N/A N/A N/A 4.9 (9 MONTHS) - ------------------------------------------------------------------------------------------------------------------------------------
SEE ADDITIONAL NOTE ON P. 53. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. -42- THE TRADING PROGRAMS MONTHLY RATES OF RETURN ORIGINAL INVESTMENT PROGRAM
- ----------------------------------------------------------------------------------------------------------------------------------- MONTHLY RATES OF RETURN (%) - ----------------------------------------------------------------------------------------------------------------------------------- COMPOUND Year January February March April May June July August September October November December ANNUAL ROR - ----------------------------------------------------------------------------------------------------------------------------------- 1982 N/A N/A N/A N/A N/A N/A N/A N/A N/A 7.1 (16.8) 2.7 (8.5) (3 MONTHS) - ----------------------------------------------------------------------------------------------------------------------------------- 1983 14.4 (28.6) 1.6 4.9 8.3 (9.6) 10.9 13.4 (7.3) (3.3) (6.4) (2.5) (12.4) - ----------------------------------------------------------------------------------------------------------------------------------- 1984 5.5 (4.8) (7.5) (2.1) 16.6 (10.3) 28.7 (9.0) 16.0 (5.2) (2.2) 12.5 34.7 - ----------------------------------------------------------------------------------------------------------------------------------- 1985 2.4 0.9 (8.8) (17.1) 11.0 4.4 16.8 1.7 (15.5) 9.6 7.4 18.6 26.8 - ----------------------------------------------------------------------------------------------------------------------------------- 1986 (4.4) 22.2 15.4 (5.8) (2.8) (2.1) 11.5 7.2 (2.9) (10.3) (1.9) (3.0) 19.8 - ----------------------------------------------------------------------------------------------------------------------------------- 1987 9.0 3.7 2.7 21.9 0.8 (3.5) 8.8 (3.1) (10.4) 35.8 16.5 11.9 129.8 - ----------------------------------------------------------------------------------------------------------------------------------- 1988 (6.9) 4.7 (16.1) (5.1) 3.6 13.9 (19.8) (4.3) 6.3 (2.5) 1.6 (12.5) (35.2) - ----------------------------------------------------------------------------------------------------------------------------------- 1989 0.8 (19.9) 11.7 (5.1) 29.0 (3.9) 8.1 (13.7) (13.2) (12.0) 7.4 9.8 (10.8) - ----------------------------------------------------------------------------------------------------------------------------------- 1990 7.1 (2.0) 18.4 12.4 (10.9) 7.2 10.9 19.1 (2.1) (1.9) 1.0 (2.3) 66.8 - ----------------------------------------------------------------------------------------------------------------------------------- 1991 (0.5) 0.3 (2.1) (5.8) 4.4 (0.7) (7.4) (3.6) 10.7 (3.9) (1.3) 17.7 5.4 - ----------------------------------------------------------------------------------------------------------------------------------- 1992 (6.1) (8.8) 0.7 (0.8) (4.5) 8.3 9.1 9.1 (2.7) 2.2 3.6 2.2 10.9 - ----------------------------------------------------------------------------------------------------------------------------------- 1993 (0.8) 9.5 (3.5) 10.4 0.1 (4.1) 14.9 (3.6) 0.6 (1.5) 3.5 11.4 40.6 - ----------------------------------------------------------------------------------------------------------------------------------- 1994 (2.9) 1.5 4.4 0.2 5.5 6.6 (7.1) (4.7) (2.8) (14.1) 10.2 (0.0) (5.7) - ----------------------------------------------------------------------------------------------------------------------------------- 1995 2.2 17.9 16.6 9.1 (4.4) 1.7 (0.0) (3.9) (3.9) 3.3 1.1 6.8 53.2 - ----------------------------------------------------------------------------------------------------------------------------------- 1996 5.3 (7.4) 1.0 3.8 (6.5) 8.0 (4.4) (2.3) 8.2 N/A N/A N/A 4.5 (9 MONTHS) - -----------------------------------------------------------------------------------------------------------------------------------
SEE ADDITIONAL NOTE ON P. 53. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. -43- JWH PROGRAMS PERFORMANCE SUMMARIES OTHER JWH PROGRAMS NAME OF PROGRAM: GLOBAL DIVERSIFIED PORTFOLIO INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JUNE 1988 NUMBER OF OPEN ACCOUNTS: 17 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $145 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $145 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (16.8)% (7/91) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (20.3)% (7/91) LARGEST PEAK-TO-VALLEY DRAWDOWN: (29.1)% (12/91-5/92) 1996 COMPOUND RATE OF RETURN: 2.6% (9 MONTHS) 1995 COMPOUND RATE OF RETURN: 19.6% 1994 COMPOUND RATE OF RETURN: 10.1% 1993 COMPOUND RATE OF RETURN: 59.8% 1992 COMPOUND RATE OF RETURN: (12.6)% 1991 COMPOUND RATE OF RETURN: 40.4% SEE ADDITIONAL NOTES ON PP. 53 & 55. NAME OF PROGRAM: G-7 CURRENCY PORTFOLIO INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: FEBRUARY 1991 NUMBER OF OPEN ACCOUNTS: 9 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $107 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $107 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (10.7)% (1/92) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (12.3)% (1/92) LARGEST PEAK-TO-VALLEY DRAWDOWN: (19.5)% (7/93-1/95) 1996 COMPOUND RATE OF RETURN: (2.6)% (9 MONTHS) 1995 COMPOUND RATE OF RETURN: 32.2% 1994 COMPOUND RATE OF RETURN: (4.9)% 1993 COMPOUND RATE OF RETURN: (6.3)% 1992 COMPOUND RATE OF RETURN: 14.6% 1991 COMPOUND RATE OF RETURN: 48.5% (11 MONTHS) SEE ADDITIONAL NOTE ON P. 54. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52. -44- JWH PROGRAMS PERFORMANCE SUMMARIES NAME OF PROGRAM: INTERNATIONAL FOREIGN EXCHANGE PROGRAM INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: AUGUST 1986 NUMBER OF OPEN ACCOUNTS: 7 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $67 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $67 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (12.0)% (1/92) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (13.6)% (1/92) LARGEST PEAK-TO-VALLEY DRAWDOWN: (24.1)% (12/91-4/92) 1996 COMPOUND RATE OF RETURN: (5.8)% (9 MONTHS) 1995 COMPOUND RATE OF RETURN: 16.9% 1994 COMPOUND RATE OF RETURN: (6.3)% 1993 COMPOUND RATE OF RETURN: (4.5)% 1992 COMPOUND RATE OF RETURN: 4.5% 1991 COMPOUND RATE OF RETURN: 38.7% NAME OF PROGRAM: DELEVERED YEN DENOMINATED FINANCIAL AND METALS PROFILE INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: OCTOBER 1995 NUMBER OF OPEN ACCOUNTS: 1 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: Y963 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: Y963 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (3.2)% (2/96) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (3.2)% (2/96) LARGEST PEAK-TO-VALLEY DRAWDOWN: (5.1)% (1/96-8/96) 1996 COMPOUND RATE OF RETURN: (1.3)% (9 MONTHS) 1995 COMPOUND RATE OF RETURN: 0.2% (3 MONTHS) 1994 COMPOUND RATE OF RETURN: N/A 1993 COMPOUND RATE OF RETURN: N/A 1992 COMPOUND RATE OF RETURN: N/A 1991 COMPOUND RATE OF RETURN: N/A NAME OF PROGRAM: GLOBAL FINANCIAL PORTFOLIO INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JUNE 1994 NUMBER OF OPEN ACCOUNTS: 5 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $66 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $66 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (17.4)% (11/94) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (19.5)% (11/94) LARGEST PEAK-TO-VALLEY DRAWDOWN: (46.0)% (6/94-1/95) 1996 COMPOUND RATE OF RETURN: 13.5% (9 MONTHS) 1995 COMPOUND RATE OF RETURN: 86.2% 1994 COMPOUND RATE OF RETURN: (37.7)% (7 MONTHS) 1993 COMPOUND RATE OF RETURN: N/A 1992 COMPOUND RATE OF RETURN: N/A 1991 COMPOUND RATE OF RETURN: N/A SEE ADDITIONAL NOTE ON P. 54. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52. -45- NAME OF PROGRAM: THE WORLD FINANCIAL PERSPECTIVE INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: APRIL 1987 NUMBER OF OPEN ACCOUNTS: 5 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $19 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $19 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (21.6)% (1/92) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (25.5)% (1/92) LARGEST PEAK-TO-VALLEY DRAWDOWN: (41.1)% (9/90-10/92) 1996 COMPOUND RATE OF RETURN: 18.8% (9 MONTHS) 1995 COMPOUND RATE OF RETURN: 32.2% 1994 COMPOUND RATE OF RETURN: (15.2)% 1993 COMPOUND RATE OF RETURN: 13.7% 1992 COMPOUND RATE OF RETURN: (23.2)% 1991 COMPOUND RATE OF RETURN: 14.6% NAME OF PROGRAM: INTERNATIONAL CURRENCY AND BOND PORTFOLIO INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JANUARY 1993 NUMBER OF OPEN ACCOUNTS: 1 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $2 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $2 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (6.7)% (7/94) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (7.8)% (7/94) LARGEST PEAK-TO-VALLEY DRAWDOWN: (20.1)% (6/94-1/95) 1996 COMPOUND RATE OF RETURN: 0.7% (9 MONTHS) 1995 COMPOUND RATE OF RETURN: 36.5% 1994 COMPOUND RATE OF RETURN: (2.3)% 1993 COMPOUND RATE OF RETURN: 14.8% 1992 COMPOUND RATE OF RETURN: N/A 1991 COMPOUND RATE OF RETURN: N/A BEGINNING IN OCTOBER 1995, THIS PROGRAM IS COMPRISED OF ONE PROPRIETARY ACCOUNT. SEE ADDITIONAL NOTE ON P. 54. NAME OF PROGRAM: DOLLAR PROGRAM INCEPTION OF CLIENT ACCOUNT TRADING: JULY 1994 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JULY 1996 NUMBER OF OPEN ACCOUNTS: 2 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $9 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $9 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (2.3)% (8/96) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (2.3)% (9/96) LARGEST PEAK-TO-VALLEY DRAWDOWN: (3.4)% (7/96-9/96) 1996 COMPOUND RATE OF RETURN: (3.4)% (3 MONTHS) 1995 COMPOUND RATE OF RETURN: N/A 1994 COMPOUND RATE OF RETURN: N/A 1993 COMPOUND RATE OF RETURN: N/A 1992 COMPOUND RATE OF RETURN: N/A 1991 COMPOUND RATE OF RETURN: N/A NAME OF PROGRAM: WORLDWIDE BOND PROGRAM INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1994 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JULY 1996 NUMBER OF OPEN ACCOUNTS: 2 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $10 MILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $10 MILLION LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: N/A LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: N/A LARGEST PEAK-TO-VALLEY DRAWDOWN: N/A 1996 COMPOUND RATE OF RETURN: 6.6 (3 MONTHS) 1995 COMPOUND RATE OF RETURN: N/A 1994 COMPOUND RATE OF RETURN: N/A 1993 COMPOUND RATE OF RETURN: N/A 1992 COMPOUND RATE OF RETURN: N/A 1991 COMPOUND RATE OF RETURN: N/A PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52. -46- JWH PROGRAMS PERFORMANCE SUMMARIES NAME OF PROGRAM: INTERRATE-TM- INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: DECEMBER 1988, CEASED TRADING JULY 1996 NUMBER OF OPEN ACCOUNTS: 0 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (9.7)% (9/92) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (10.2)% (9/92) LARGEST PEAK-TO-VALLEY DRAWDOWN: (17.8)% (8/92-2/94) 1996 COMPOUND RATE OF RETURN: 5.8% (7 MONTHS) 1995 COMPOUND RATE OF RETURN: 5.2% 1994 COMPOUND RATE OF RETURN: 3.4% 1993 COMPOUND RATE OF RETURN: (5.4)% 1992 COMPOUND RATE OF RETURN: (0.7)% 1991 COMPOUND RATE OF RETURN: 8.7% NAME OF PROGRAM: KT DIVERSIFIED PROGRAM INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JANUARY 1984, CEASED TRADING FEBRUARY 1994 NUMBER OF OPEN ACCOUNTS: 0 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (19.2)% (7/91) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (28.6)% (1/92) LARGEST PEAK-TO-VALLEY DRAWDOWN: (46.8)% (9/90-3/92) 1996 COMPOUND RATE OF RETURN: N/A 1995 COMPOUND RATE OF RETURN: N/A 1994 COMPOUND RATE OF RETURN: (14.0)% (2 MONTHS) 1993 COMPOUND RATE OF RETURN: 20.6% 1992 COMPOUND RATE OF RETURN: (11.9)% 1991 COMPOUND RATE OF RETURN: (21.)% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52. -47- JWH INVESTMENTS, INC. PROGRAMS PERFORMANCE SUMMARIES NAME OF PROGRAM: FINANCIAL AND METALS PORTFOLIO* INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: SEPTEMBER 1991; CEASED TRADING JULY 1995 NUMBER OF OPEN ACCOUNTS: 0 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: N/A AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: N/A AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (16.6)% (1/92) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (16.6)% (1/92) LARGEST PEAK-TO-VALLEY DRAWDOWN: (34.4)% (12/91-5/92) 1996 COMPOUND RATE OF RETURN: N/A 1995 COMPOUND RATE OF RETURN: 30.3% (7 MONTHS) 1994 COMPOUND RATE OF RETURN: (0.8)% 1993 COMPOUND RATE OF RETURN: 46.1% 1992 COMPOUND RATE OF RETURN: (4.0)% 1991 COMPOUND RATE OF RETURN: 58.5% (4 MONTHS) SEE ADDITIONAL NOTE ON P. 53. *THIS STRATEGY WAS MANAGED BY JWH'S AFFILIATE, JWH INVESTMENTS, INC. NAME OF PROGRAM: INTERRATE-TM-* INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: FEBRUARY 1992; CEASED TRADING NOVEMBER 1993 NUMBER OF OPEN ACCOUNTS: 0 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: N/A AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: N/A AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (9.30)% (9/92) LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS: (9.3)% (9/92) LARGEST PEAK-TO-VALLEY DRAWDOWN: (20.6)% (8/92-11/93) 1996 COMPOUND RATE OF RETURN: N/A 1995 COMPOUND RATE OF RETURN: N/A 1994 COMPOUND RATE OF RETURN: N/A 1993 COMPOUND RATE OF RETURN: (9.9)% (11 MONTHS) 1992 COMPOUND RATE OF RETURN: 2.8% (11 MONTHS) 1991 COMPOUND RATE OF RETURN: N/A SEE ADDITIONAL NOTE ON P. 55. *THIS STRATEGY WAS MANAGED BY JWH'S AFFILIATE, JWH INVESTMENTS, INC. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52. -48- JWH PROGRAMS PERFORMANCE SUMMARIES YEN FINANCIAL PORTFOLIO (continued on page 50) NAME OF CTA: John W. Henry & Company, Inc. INCEPTION OF CLIENT ACCOUNT TRADING: October 1982 INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: January 1992 NUMBER OF OPEN ACCOUNTS: 7 AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 billion AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 billion AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $38 million AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $38 million LARGEST MONTHLY DRAWDOWN: (14.4)% (2/92) LARGEST PEAK-TO-VALLEY DRAWDOWN: (35.5)% (4/95-7/96) See Additional Note on p. 54.
- ----------------------------------------------------------------------------------------------------------------------- AGGREGATE LARGEST LARGEST ACCOUNT NO. INCEPTION OF ASSETS COMPOUND RATE MONTHLY PEAK-TO-VALLEY TRADING SEPTEMBER 30, 1996 OF RETURN (%) DRAWDOWN % DRAWDOWN % - ----------------------------------------------------------------------------------------------------------------------- 1 1/92 $6 million 1996: (14.8) (9 months) (14.4)-2/92 (30.5) - 4/95-7/95 1995: 20.6 1994: (13.0) 1993: 76.4 1992: 20.1 - ----------------------------------------------------------------------------------------------------------------------- 2 1/93 $1 million 1996: (14.6) (9 months) (6.9)-7/95 (29.0) - 4/95-7/96 1995: 21.0 1994: (8.8) 1993: 71.4 - ----------------------------------------------------------------------------------------------------------------------- 3 1/94 $0.9 million 1996: (14.4) (9 months) (6.0)-8/95 (26.6) - 4/95-7/96 1995: 22.4 1994: (7.5) - ----------------------------------------------------------------------------------------------------------------------- 4 6/94 $22 million 1996: (8.8) (9 months) (6.5)-7/95 (22.3) - 4/95-7/96 1995: 24.2 1994: (1.6) (6 months) - ----------------------------------------------------------------------------------------------------------------------- 5 8/94 $4 million 1996: (12.5) (9 months) (7.1)-7/95 (30.4) - 4/95-7/96 1995: 21.1 1994: (4.3) (5 months) - ----------------------------------------------------------------------------------------------------------------------- 6 1/95 $2 million 1996: (17.9) (9 months) (7.5)-7/95 (35.5) - 5/95-7/96 1995: 13.2 - ----------------------------------------------------------------------------------------------------------------------- 7 3/94 Y182 million 1996: (3.4) (9 months) (6.7)-7/96 (15.9) - 2/96-7/96 1995: 28.1 1994: (11.2) (10 months) - ----------------------------------------------------------------------------------------------------------------------- 8 4/92 closed - 9/93 1993: 62.6 (9 months) (11.7)-5/92 (11.7) - 4/92-5/92 1992: 27.0 (9 months) - ----------------------------------------------------------------------------------------------------------------------- 9 2/92 closed - 12/92 1992: 32.7 (11 months) (11.5)-2/92 (11.5) - 2/92 - ----------------------------------------------------------------------------------------------------------------------- 10 3/94 closed - 12/94 1994: (7.4) (10 months) (5.4)-5/94 (10.5) - 4/94-12/94 - ----------------------------------------------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52. -49- JWH PROGRAMS PERFORMANCE SUMMARIES YEN FINANCIAL PORTFOLIO (cont'd) 11 11/93 closed - 8/95 1995: 20.0 (8 months) (9.0) - 8/95 (18.8) - 4/95-8/95 1994: (13.4) 1993: 5.2 (2 months) - ----------------------------------------------------------------------------------------------------------------------- 12 11/93 closed - 1/95 1995: (0.6) (1 month) (6.3) - 5/94 (16.5) - 4/94-1/95 1994: (15.1) 1993: 4.8 (2 months) - ----------------------------------------------------------------------------------------------------------------------- 13 12/92 closed - 3/96 1996: (4.1) (3 months) (4.9) - 7/95 (15.8) - 12/93-1/95 1995: 31.4 1994: (14.1) 1993: 69.2 1992: 0.1 (1 month) - ----------------------------------------------------------------------------------------------------------------------- 14 1/93 closed - 12/95 1995: 10.9 (6.2) - 6/95 (15.8) - 4/95-12/95 1994: (4.1) 1993: 43.6 - ----------------------------------------------------------------------------------------------------------------------- 15 4/93 closed - 9/94 1994: (19.0) (9 months) (5.8) - 5/94 (19.9) - 11/93-9/94 1993: 25.3 (9 months) - ----------------------------------------------------------------------------------------------------------------------- 16 1/94 closed - 8/94 1994: (6.7) (8 months) (5.5) - 5/94 (11.0) - 4/94-8/94 - ----------------------------------------------------------------------------------------------------------------------- 17 12/92 closed - 1/96 1996: 0.3 (1 month) (6.0) - 7/95 (12.4) - 4/95-10/95 1995: 26.6 1994: (5.1) 1993: 73.9 1992: (1.0) (1 month) - ----------------------------------------------------------------------------------------------------------------------- 18 3/94 closed - 4/96 1996: (6.3) (4 months) (6.2) - 7/95 (18.5) - 4/95-4/96 1995: 18.5 1994: (10.1) (10 months) - ----------------------------------------------------------------------------------------------------------------------- 19 12/94 closed - 4/96 1996: (7.8) (4 months) (6.6) - 7/95 (21.1) - 4/95-4/96 1995: 18.3 1994: 0.2 (1 month) - ----------------------------------------------------------------------------------------------------------------------- 20 6/94 closed - 12/94 1994: (7.9) (7 months) (5.1) - 7/94 (10.4) - 6/94-11/94 - ----------------------------------------------------------------------------------------------------------------------- 21 6/94 closed - 3/95 1995 48.1 (3 months) (3.6) - 7/94 (9.9) - 6/94-1/95 1994: (6.6) (7 months) - ----------------------------------------------------------------------------------------------------------------------- 22 4/94 closed - 9/94 1994: (4.6) (6 months) (4.7) - 5/94 (7.0) - 4/94-9/94 - ----------------------------------------------------------------------------------------------------------------------- 23 3/94 closed - 9/94 1994: (9.7) (7 months) (6.3) - 5/94 (11.0) - 4/94-9/94 - ----------------------------------------------------------------------------------------------------------------------- 24 4/94 closed - 9/94 1994: (9.8) (6 months) (9.1) - 5/94 (12.9) - 4/94-9/94 - ----------------------------------------------------------------------------------------------------------------------- 25 4/93 closed - 12/94 1994: (16.6) (6.1) - 5/94 (17.9) - 11/93-12/94 1993: 26.5 (9 months) - ----------------------------------------------------------------------------------------------------------------------- 26 9/93 closed - 12/94 1994: (12.4) (6.0) - 5/94 (14.1) - 4/94-12/94 1993: 3.2 (4 months)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52. -50- NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES 1. NAME OF PROGRAM is the name of the JWH trading program used in directing the accounts included in the performance summary. 2. INCEPTION OF CLIENT ACCOUNT TRADING is October 1982, the date on which JWH began directing client accounts (pursuant to the Original Investment Program). This date is the same in each performance summary. 3. INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM is the date on which JWH began directing client accounts pursuant to the program shown. 4. NUMBER OF OPEN ACCOUNTS is the number of accounts directed by JWH pursuant to the program shown as of September 30, 1996. 5. AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL is the aggregate amount of actual assets under the management of JWH in all programs as of September 30, 1996. These numbers also include proprietary funds; however, all proprietary funds included in the aggregate amount are traded in the same manner and charged the same fees as client funds, and the proprietary funds are, in any event, not material in terms of the overall assets managed by JWH. 6. AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL is the aggregate amount of total equity, including "notional" equity, under the management of JWH in all programs being operated as of September 30, 1996. These numbers also include proprietary funds; however, all proprietary funds included in the aggregate amount are traded in the same manner and charged the same fees as client funds, and the proprietary funds are, in any event, not material in terms of the overall assets managed by JWH. 7. AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM is the aggregate amount of actual assets under the management of JWH in the program shown as of September 30, 1996. These numbers may also include proprietary funds; however, all proprietary funds included in the aggregate amount are traded in the same manner and charged the same fees as client funds, and the proprietary funds are, in any event, not material in terms of the overall assets managed by JWH pursuant to the program. 8. AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM is the aggregate amount of total equity, including "notional" equity, under the management of JWH in the program shown as of September 30, 1996. These numbers may also include proprietary funds; however, all proprietary funds included in the aggregate amount are traded in the same manner and charged the same fees as client funds, and the proprietary funds are, in any event, not material in terms of the overall assets managed by JWH pursuant to the program. 9. LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS is the largest monthly loss experienced by the program shown on a composite basis in any calendar month covered by the performance summary. "Loss" for these purposes is calculated on the basis of the loss experienced by the program as a composite, expressed as a percentage of the total equity (including "notional" equity) in the program. Individual accounts may have experienced larger monthly drawdowns. Largest monthly drawdown information includes the month and year of such drawdown. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. -51- NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES (Cont'd) 10. LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS is the largest monthly loss within a program shown on an individual account basis. "Loss" for these purposes is calculated on the basis of the loss experienced by the individual account, expressed as a percentage of the total equity in the account. The largest monthly drawdown for an individual account within a program was determined after identification of the three largest monthly drawdowns on a composite basis for each investment program. Within the three months in which the largest composite monthly drawdowns occurred, individual accounts were reviewed for each program. The individual account which experienced the largest loss in those months is the account shown above as having the largest individual monthly drawdown for the investment program. Some individual accounts were excluded from review if they were being phased in or out, opened or closed during the month, or if material mid-month additions or redemptions were made. Largest monthly drawdown on an individual account basis includes the month and year of such drawdown. Differences between the largest monthly drawdown for an individual account and the largest monthly drawdown on a composite basis for a program are due to, among other factors, the reasons noted on pages 37 to 38 and page 54. 11. LARGEST PEAK-TO-VALLEY DRAWDOWN is the largest percentage decline (after eliminating the effect of additions and withdrawals) during the period covered by the performance summaries from any month-end net asset value, without such month-end net asset value being equalled or exceeded as of a subsequent month-end. (In the case of The World Financial Perspective and KT Diversified Program, the largest peak-to-valley drawdown began in October 1990 and continued into the period covered by the performance summaries.) Largest peak-to-valley drawdown is calculated on the basis of the loss experienced by the program as a composite, expressed as a percentage of the total equity (including "notional" equity) in the program. 12. MONTHLY RATES OF RETURN (used in calculating the Compound Rate of Return) are calculated by dividing net performance by the sum of beginning total equity (including "notional" equity) plus additions minus withdrawals. For such purposes, all additions and withdrawals are effectively treated as if they had been made on the first day of the month even if, in fact, they occurred later, unless, beginning in December 1991, they are material to the performance of a program, in which case they are time-weighted. 13. COMPOUND RATE OF RETURN is calculated by compounding the monthly rates of return over the number of months in a given year. Each month's rate of return (positive or negative) in hundredths is added to one (1) and the result is multiplied by the previous month's monthly rate of return similarly expressed. One (1) is then subtracted from the product. For periods of less than one year, the results are year-to-date. For example, if a program recorded monthly rates of return of 5, (3) and 1 for three consecutive months, the compound rate of return for those three months would equal 1.05 x 0.97 x 1.01 = 1.029 or 2.9% (approximately). PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. -52- ADDITIONAL NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES ADDITIONAL NOTE TO THE ORIGINAL INVESTMENT PROGRAM PERFORMANCE SUMMARY AND MONTHLY RATES OF RETURN TABLE The original investment program began trading client capital in October 1982. During certain periods covered in the original investment program performance information, proprietary funds are included. The absence of management and incentive fees and reduced brokerage commissions during these periods may have had a material effect on rates of return. However, this potentially material effect has decreased as client funds comprised the entire performance record from July 1988 through October 1994. Beginning in November 1994, one proprietary account has been traded pursuant to an investment in a fund. This proprietary account is traded in exactly the same manner that client funds would be traded, and has been subject to all of the same fees and expenses that would be charged to a client investment in the fund; therefore, there is no material impact on the rates of return presented. ADDITIONAL NOTE TO THE FINANCIAL AND METALS PORTFOLIO PERFORMANCE SUMMARY AND MONTHLY RATES OF RETURN TABLE The Financial and Metals Portfolio began trading client capital in October 1984. During certain periods covered in the performance information, proprietary funds are included. The absence of management and incentive fees and reduced commissions during these periods may have had a material effect on the rates of return achieved. This potentially material effect, however, has decreased as client funds have comprised the entire performance record since July 1987 (except as described below). The timing of additions and withdrawals materially inflated the 1987 annual rate of return. The three accounts that were open for the entire year of 1987 achieved annual rates of return of 138%, 163% and 259%, respectively. In May 1991 one proprietary account, and in March 1992 a second proprietary account began trading in the Financial and Metals Portfolio. Both accounts are included in the performance information from their inception until August 1995. The maximum percentage of proprietary funds during this time was less than 0.5%. In May 1992, 35% of the assets in the Financial and Metals Portfolio was deleveraged 50% at the request of a client. This deleveraging materially affected the rates of return. The 1992 compound rate of return for these deleveraged accounts was (24.3)%. The 1992 compound rate of return for the Financial and Metals Portfolio was (10.8)%. If these accounts were excluded from the Financial and Metals Portfolio performance information, the 1992 compound rate of return would have been (4)%. The effect of this deleveraging was eliminated in September 1992. Additionally, the Financial and Metals Portfolio performance information includes the performance of several accounts that do not participate in global markets due to their smaller account equities which do not meet the minimums established for this Trading Program. Accounts not meeting such minimums can experience performance materially different from the performance of an account which meets the minimum account size. The performance of such accounts has no material effect on the overall Financial and Metals Portfolio performance information. ADDITIONAL NOTE TO THE GLOBAL DIVERSIFIED PORTFOLIO PERFORMANCE SUMMARY The Global Diversified Portfolio began trading client capital in June 1988. From July 1995 through February 1996, one proprietary account has been traded pursuant to an investment in a fund. This proprietary account is traded in exactly the same manner that client funds would be traded, and has been subject to all of the same fees and expenses that would be charged to a client investment in the fund; therefore, there is no material impact on the rates of return presented. See "Additional Note to the Performance Summaries Which Utilize the Fully-Funded Subset Method -- I.E., the Global Diversified Portfolio and JWH Investments, Inc. InterRate-TM-." PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. -53- ADDITIONAL NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES (CONT'D) ADDITIONAL NOTE TO THE G-7 CURRENCY PORTFOLIO PERFORMANCE SUMMARY The G-7 Currency Portfolio began trading client capital in February 1991. From July 1995 through December 1995, one proprietary account has been traded pursuant to an investment in a fund, and in August 1996 an additional proprietary account began trading pursuant to the same fund. These proprietary accounts have been traded in exactly the same manner that client funds would be traded, and have been subject to all of the same fees and expenses that would be charged to a client investment in the fund; therefore, there is no material impact on the rates of return presented. ADDITIONAL NOTE TO THE GLOBAL FINANCIAL PORTFOLIO PERFORMANCE SUMMARY The Global Financial Portfolio began trading client capital in June 1994. Beginning in July 1995, one proprietary account has been traded pursuant to an investment in a fund. This proprietary account is traded in exactly the same manner that client funds would be traded, and has been subject to all of the same fees and expenses that would be charged to a client investment in the fund; therefore, there is no material impact on the rates of return presented. Since the inception of the Global Financial Portfolio, the timing of individual account openings has had a material impact on rates of return. Based on the account start-up methodology used by JWH, the performance of individual accounts comprising the Global Financial Portfolio performance information has varied. In 1994, the two accounts that were open had rates of return of (44)% and (17)%, respectively. For the period January 1995 through June 1995, the three open accounts achieved rates of return of 101%, 75% and 67%, respectively. Since July 1995, these accounts have maintained mature positions and have been performing consistently with each other. Due to the six-month period in 1995 of differential performance, however, these three accounts had annual rates of return of 122%, 92% and 78%, respectively, for such year. ADDITIONAL NOTE TO THE INTERNATIONAL CURRENCY AND BOND PORTFOLIO PERFORMANCE SUMMARY The International Currency and Bond Portfolio began trading client capital in January 1993. Beginning in October 1995, this program has been comprised of a single proprietary account. This proprietary account has been traded pursuant to an investment in a fund, is traded in exactly the same manner that client funds would be traded, and has been subject to all of the same fees and expenses that would be charged to a client investment in the fund; therefore, there is no material impact on the rates of return presented. ADDITIONAL NOTE TO THE YEN FINANCIAL PORTFOLIO PERFORMANCE SUMMARY The Yen Financial Portfolio is traded from the Japanese yen perspective. Accounts may be opened with either U.S. dollar or Japanese yen deposits. Accounts originally opened with U.S. dollars establish additional interbank positions in Japanese yen in an effort to enable such accounts to generate returns similar to the returns generated by accounts with yen-denominated balances. Over time, as profits and losses are recognized in yen-denominated Japanese markets, accounts may hold varying levels of U.S. dollars and Japanese yen. Additionally, the interbank positions are adjusted periodically to reflect the actual portions of the account balances remaining in U.S. dollars. As the equity mix between U.S. dollars and Japanese yen varies, account performance from the dollar and yen perspective does so also. Such differences arise from exchange-rate movements, percentage of account balances held in yen, and fee arrangements. The performance summary of the Yen Financial Portfolio is presented on an individual account by account basis due to material differences among certain of the Yen Financial Portfolio accounts. Account performance has varied historically due to a number of factors unique to this Program, including whether an account was denominated in U.S. dollars or Japanese yen, the extent of hedging currency exposure, the amounts and frequency of currency conversions, and account size. Several of these factors that have materially influenced performance depend on clients' specific instructions that effectively result in customized client portfolios. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. -54- ADDITIONAL NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES (CONT'D) The Yen Financial Portfolio began trading client capital in January 1992. In June 1996, one proprietary account commenced trading pursuant to an investment in a fund. This proprietary account is traded in exactly the same manner that client funds would be traded, and is subject to all of the same fees and expenses that would be charged to a client investment in the fund; therefore, there is no material impact on the rates of return presented. ADDITIONAL NOTE TO THE PERFORMANCE SUMMARIES WHICH UTILIZE THE FULLY-FUNDED SUBSET METHOD -- I.E., THE GLOBAL DIVERSIFIED PORTFOLIO AND JWH INVESTMENTS, INC. INTERRATE-TM- (THE "FULLY-FUNDED SUBSET DATA") Actual funds are the amount of margin-qualifying assets on deposit. Nominal account size is a dollar amount which clients have agreed to in writing and which determines the level of trading in the account regardless of the amount of actual funds. "Notional" funds are the amounts by which the nominal account size exceeds the amount of actual funds. The amount of "notional" funds in the accounts included in these summaries requires additional disclosure under current CFTC policy. The Fully-Funded Subset Data include "notional" funds in excess of the 10% disclosure threshold established by the CFTC and reflects the adoption of a method of presenting rate-of-return and performance disclosure authorized by the CFTC and referred to as the "Fully-Funded Subset Method." This method permits "notional" and fully-funded accounts to be included in a single performance summary. To qualify for the use of the Fully-Funded Subset Method, the CFTC requires that certain computations be made in order to arrive at the Fully-Funded Subset, and that the accounts for which performance is so reported meet two tests which are designed to provide assurance that the Fully-Funded Subset and the rates of return of the accounts included in such Subset are representative of the performance of the strategy in question. These computations have been performed from January 1, 1992 to July 1996 for the Global Diversified Portfolio and from the inception of JWH Investments, Inc.'s InterRate-TM- to its close in November 1993. These computations were designed to provide assurance that the performance presented in the Fully-Funded Subset Data and calculated using the Fully-Funded Subset Method would be representative of such performance calculated on a basis which includes "notional" funds in beginning equity. The rates of return in the Fully-Funded Subset Data are calculated by dividing net performance by the sum of beginning equity plus additions minus withdrawals. JWH and JWH Investments, Inc. believe that this method yields substantially the same adjusted rates of return as would be the Fully Funded Subset method were there any "fully funded" accounts and that the rates of return in the Fully-Funded Subset Data are representative of the performance of the programs in question for the periods presented. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME. -55- THE TRADING ADVISORY AGREEMENT The Trust has entered into a Trading Advisory Agreement with JWH. The agreement provides that JWH will be the sole trading advisor for the Trust and will have sole responsibility for determining transactions in commodity interests with respect to Trust assets. The Managing Owner currently intends that each Trading Program will be allocated an equal portion of the Trust's assets raised in connection with this offering, and at the end of each quarter after the Trust has commenced trading, the Trading Advisor will automatically rebalance the allocation between the Trading Programs so that the Trading Programs again will be allocated equal portions of Trust assets. However, the Managing Owner, with the agreement of JWH, may reallocate assets between the Trading Programs, delete a Trading Program or add one or more other JWH programs. The Trading Advisory Agreement has an initial term ending on the last day of the twelfth full calendar month after commencement of trading by the Trust, with automatic renewal for three one-year periods on the same terms unless the Managing Owner gives notice of termination to JWH at least 45 days prior to the expiry of the then current term. The Trading Advisory Agreement will terminate automatically if the Trust is terminated. No assurance is given that, after the expiration or termination of the Trading Advisory Agreement, the Trust will be able to retain the advisory services of JWH or that if such services are available they will be on the same terms as those of the initial Trading Advisory Agreement. The Managing Owner may, in its sole discretion, employ additional trading advisors or replace existing trading advisors; provided, however, if JWH ceases to be the Trust's sole trading advisor, the Managing Owner will cause "JWH" to be deleted from the Trust's name. Upon termination or expiration of the Trading Advisory Agreement, the Trust may retain other advisors whose compensation may be determined without regard to the previous performance of the Trust, or it may renew its Trading Advisory Agreement with JWH on the same or different terms. The compensation payable by the Trust to JWH for services provided by JWH under the Trading Advisory Agreement is described under the caption "Charges." JWH, its principals and employees will not be liable to the Managing Owner or its principals and employees, the Trust, the Unitholders, or any of their successors or assigns except by reason of acts or omissions due to bad faith, misconduct, negligence or not having acted in good faith in the reasonable belief that its actions were taken in, or not opposed to, the best interests of the Trust. The Trust and the Managing Owner will, jointly and severally, indemnify JWH, its principals and employees to the full extent permitted by law against any liability incurred or sustained by JWH in connection with any acts or omissions of JWH relating to its management of Trust assets or arising out of or in connection with the Trading Advisory Agreement or arising out of JWH's management of Trust assets, provided that there has been no judicial determination that such liability was the result of negligence, misconduct, bad faith or a breach of the Trading Advisory Agreement nor any judicial determination that the conduct which was the basis for such liability was not done in good faith belief that it was in, or not opposed to, the best interests of the Trust. Any such indemnification involving a material amount, unless ordered or expressly permitted by a court, will be made by the Trust only upon the opinion of mutually acceptable independent legal counsel that JWH has met the applicable standard of conduct described above. The Trading Advisory Agreement prohibits JWH from receiving any commission, compensation, remuneration or payment whatsoever from any broker with whom the Trust carries any account by reason of the Trust's transactions. JWH, its affiliates and Mr. John W. Henry may engage in discretionary trading for their own accounts. Employees and principals of JWH (other than Mr. Henry) are not permitted to trade on a discretionary basis in futures, options on futures or forward contracts, although they may invest in investment vehicles that trade such contracts. In addition, JWH and its affiliates shall be free to manage other commodity accounts during the term of the Trading Advisory Agreement and to use the same information and the Trading Programs (or other JWH programs, if any) utilized in the performance of services for the Trust so long as JWH's ability to carry out its obligations and duties under the Trading Advisory Agreement is not materially impaired thereby. See "Conflicts of Interests -- Other Commodity Pools and Accounts." Unitholders will not be allowed to inspect the record of such accounts in light of the confidential nature of such records. However, the Trading Advisory Agreement provides that the Managing Owner may inspect all the records of JWH related to commodity trading for the purposes of confirming that the Fund has been treated equitably in light of JWH's trading for other accounts during the term of the Trading Advisory Agreement. FIDUCIARY OBLIGATIONS OF THE MANAGING OWNER NATURE OF FIDUCIARY OBLIGATIONS; CONFLICTS OF INTEREST As the Managing Owner of the Trust, CISI is subject to restrictions imposed on "fiduciaries" under both statutory and common law. The Managing Owner has a fiduciary responsibility to the Unitholders to exercise good faith, fairness and loyalty in all dealings affecting the Trust, consistent with the terms of the Trust's Declaration and Agreement of Trust ("Declaration and Agreement of Trust") and the Trading Advisory Agreement between the Trust and JWH. The scope of -56- CISI's fiduciary obligations is defined and established, in large part, by the consent of each Unitholder, in subscribing to the Units, to the business terms of the Trust, as embodied in the Declaration and Agreement of Trust and described in this Prospectus. Certain of the conflicts of interest involved in the operation of the Trust may be impermissible under the fiduciary principles applied in certain other investment contexts. In the case of the Trust, such activities are authorized by disclosure and the informed consent of subscribers. One of the purposes underlying the disclosures contained in this Prospectus is to disclose to all prospective Unitholders these conflicts of interest so that the Managing Owner may have the opportunity to obtain the Unitholders' informed consent to such conflicts. Prospective investors who are not willing to consent to the various conflicts of interest described herein are ineligible to invest in the Trust. See "Conflicts of Interest." The Managing Owner has selected CIS as the Trust's futures broker. JWH is required to clear the Trust's futures trades through CIS, as well as to transact the Trust's spot and forward trades on currencies and cash bullion through CISFS. The Brokerage Fee paid to CIS by the Trust are assessed on a flat-rate, not a per-trade, basis. Nevertheless, prospective investors must recognize that by subscribing to the Trust they have consented to its basic structure, in which affiliates of the Managing Owner, and the Managing Owner itself, will, directly or indirectly receive substantial revenues from the Trust and the Managing Owner does not negotiate on behalf of the Trust to obtain fee or rate concessions from its affiliates which provide services to the Trust. The Trust, as a publicly-offered "commodity pool," is subject to the Statement of Policy of the North American Securities Administrators Association, Inc. ("NASAA") relating to the registration, for public offering, of commodity pool interests (the "Blue Sky Guidelines"). The Blue Sky Guidelines explicitly prohibit a sponsor of a commodity pool from "contracting away the fiduciary obligation owed to [the Unitholders] under the common law." Consequently, once the terms of a given commodity pool, such as the Trust, are established, it is virtually impossible for the Managing Owner to change such terms in a manner which disproportionately benefits the Managing Owner, as any such change could constitute self-dealing under common law fiduciary standards. The Declaration and Agreement of Trust provides that CISI and its affiliates shall have no liability to the Trust or to any Unitholder for any loss suffered by the Trust which arises out of any action or inaction of CISI or any of its affiliates if CISI or such affiliate, in good faith, determined that such course of conduct was in the best interests of the Trust, and such course of conduct did not constitute negligence or misconduct by CISI or such affiliate. The Trust has agreed to indemnify CISI and certain of its affiliates against claims, losses or liabilities based on their conduct relating to the Trust, provided that the conduct resulting in the claims, losses or liabilities for which indemnity is sought did not constitute negligence or misconduct and was done in good faith and in a manner reasonably believed to be in the best interests of the Trust. The Blue Sky Guidelines prescribe the maximum permissible extent to which the Trust can indemnify CISI and its affiliates and prohibit the Trust from purchasing insurance to cover indemnification which the Trust could not give directly. REMEDIES AVAILABLE TO THE UNITHOLDERS Under Delaware law, a beneficial owner of a business trust may, under certain circumstances, institute legal action on behalf of himself or herself and all other similarly situated beneficial owners (a "class action") to recover damages from a managing owner for violations of fiduciary duties, or on behalf of a business trust (a "derivative action") to recover damages from a third party where a managing owner has failed or refused to institute proceedings to recover such damages. In addition, beneficial owners may have the right, subject to applicable procedural, jurisdictional and substantive requirements, to bring class actions in federal court to enforce their rights under the federal securities laws and the rules and regulations promulgated thereunder by the SEC. For example, beneficial owners who have suffered losses in connection with the purchase or sale of their beneficial interests in a trust may be able to recover such losses from a managing owner where the losses result from a violation by the managing owner of the anti-fraud provisions of the federal securities laws. In certain circumstances, Unitholders also have the right to institute a reparations proceeding before the CFTC against CISI (a registered commodity pool operator), CIS (a registered futures commission merchant) and JWH (a registered commodity trading advisor), as well as those of their respective employees who are required to be registered under the CEA, and the rules and regulations promulgated thereunder. There is a private right of action under the CEA. Investors in commodities and in commodity pools may, therefore, invoke the protections provided by such legislation. In the case of most public companies, the management is required to make numerous decisions in the course of the day-to-day operations of the company and is protected in doing so by the so-called "business judgment rule." This rule protects management from liability for decisions made in the course of operating a business if the decisions are made -57- on an informed basis and with the honest belief that the decision is in the best interests of the corporation. The Managing Owner believes that similar principles apply to it in its management of the Trust. THE FOREGOING SUMMARY DESCRIBING IN GENERAL TERMS THE REMEDIES AVAILABLE TO UNITHOLDERS UNDER FEDERAL AND STATE LAW IS BASED ON STATUTES, RULES AND DECISIONS AS OF THE DATE OF THIS PROSPECTUS. THIS IS A DEVELOPING AND CHANGING AREA OF THE LAW. THEREFORE, UNITHOLDERS SHOULD CONSULT THEIR OWN COUNSEL AS TO THEIR EVALUATION OF THE STATUS OF THE APPLICABLE LAW SHOULD ANY ISSUES ARISE. USE OF PROCEEDS PROCEEDS OF SUBSCRIPTIONS CIS will pay from its own funds all selling commissions incurred on the sale of the Units. The organizational and initial offering costs advanced by CISI will be reimbursed by the Trust to CISI on the initial closing date and such reimbursed amount shall be capitalized and amortized over the first 60 months of the Trust's operations. At no month-end will the amount amortized by the Trust exceed 1/60 of 2% of the Net Assets of the Trust as of such month-end. If the Trust is terminated prior to the end of the amortization period or the entire amount of the organizational and initial offering costs is not amortized due to the 2% ceiling, CISI will return to the Trust any unamortized amount. Ongoing offering costs of up to 0.5% of the Trust's average month-end Net Assets during any fiscal year will be paid from the general assets of the Trust, not from the proceeds of subscriptions. The proceeds of the initial sale of the Units (I.E.,a minimum of $10,000,000 plus the Managing Owner's required contribution in a minimum amount of 1% of the Trust's total capitalization, or approximately $10,100,000) less organizational and initial offering cost reimbursement, as well as the proceeds of the additional Units sold during the Ongoing Offering Period (and corresponding additional 1% contribution of the Managing Owner), will be deposited in the Trust's trading account and available for speculative trading. DESPITE THE FACT THAT CIS WILL PAY THE SELLING COMMISSIONS DUE ON ALL UNIT SALES, THE TRUST IS NOT A "NO LOAD" INVESTMENT. THE 3% REDEMPTION CHARGE IN EFFECT THROUGH THE END OF THE ELEVENTH FULL MONTH AFTER UNITS ARE SOLD (I.E., AFTER THE TRUST COMMENCES TRADING IN THE CASE OF UNITS SOLD DURING THE INITIAL OFFERING PERIOD; AFTER THE LAST DAY OF THE MONTH AS OF WHICH UNITS ARE ISSUED DURING THE ONGOING OFFERING PERIOD) PROTECTS CIS FROM PAYING SELLING COMMISSIONS IN RESPECT OF UNITS WHICH DO NOT REMAIN OUTSTANDING LONG ENOUGH FOR CIS TO EARN BROKERAGE FEES CHARGED AGAINST THE CAPITAL ATTRIBUTABLE TO SUCH UNITS. SPECULATIVE TRADING The primary use which the Trust will make of the proceeds of the offering of the Units will be to support, both as actual margin and as funds held in reserve, the speculative trading of JWH pursuant to the Trading Programs. Initially the Trust will allocate Trust assets equally between the Trading Programs. Thereafter at the end of each quarter, automatic rebalancing of assets allocated to the Trading Programs will take place. The Managing Owner intends to allocate the proceeds of sales of Units during the Ongoing Offering Period equally between the two Trading Programs. However, the Managing Owner may, with the agreement of JWH, alter the allocation between the Trading Programs, eliminate a Trading Program or add one or more other JWH programs. The strategies implemented by JWH are described in general terms (these strategies are proprietary and confidential and, accordingly, cannot be described in detail) under "John W. Henry & Company, Inc. -- Trading Techniques." JWH has the flexibility to alter, in its discretion, its trading method (including technical trading systems, risk control overlays and money management principles), as well as to change the futures and forward markets traded for the Trust. JWH may modify the method used for the Trust so as to include new methods of analysis and may utilize non-trend-following systems or market-forecasting strategies. Unitholders will not be notified of changes in the markets traded or modifications, additions or deletions to JWH's methods unless such changes are considered by the Managing Owner to be material. MAINTENANCE OF ASSETS; INTEREST INCOME Initially all of the Trust's assets will be deposited with CIS and CISFS. Although currently not contemplated, CISI may deposit a portion of Trust assets with a Custodian and engage a third-party cash manager to manage such assets. Such assets will be invested on an unleveraged basis in Treasury bills, notes and bonds as well as other securities issued or guaranteed as to principal and/or interest by certain U.S. government agencies or instrumentalities. The fees of such third-party cash manager will be paid by the Trust. CIS has agreed to credit to the account of the Trust at each month-end the amount, if any, by which returns (net of fees of the cash manager) for such month on Trust assets held by a Custodian are less than the return that would have been realized by the Trust had such assets been deposited with CIS. -58- The Trust's assets will be used either as margin to secure the Trust's obligations under the open positions which it holds in the markets or as a reserve to support further trading in the event of market losses. The assets deposited as margin with and held by the Futures Broker will be held in "customer segregated funds accounts" or "foreign futures and foreign options secured amount accounts" (in the case of futures and options traded on non-U.S. exchanges), as prescribed by the CEA and applicable CFTC regulations. Assets deposited as margin with and held by the Foreign Currency Broker will be held in unregulated accounts. In general, approximately 80% to 94% of the Trust's assets will be held in customer segregated funds accounts or with a Custodian, approximately 5% to 15% in foreign futures and options secured amount accounts and approximately 1% to 5% in unregulated accounts. Assets held in "customer segregated funds accounts" may be held in cash or invested in United States Treasury bills or notes. Assets held at a Custodian may be held in cash or invested on an unleveraged basis in Treasury bills, notes and bonds as well as other securities issued or guaranteed as to principal and/or interest by certain U.S. government agencies or instrumentalities. On the 5th business day of each month, CIS and CISFS will credit the Trust with interest on 100% of the Trust's average daily balances on deposit with CIS or CISFS, as the case may be, in the previous month at the average 91-day Treasury bill rate for such previous month in respect of deposits denominated in dollars. CIS has agreed to credit the account of the Trust at each month-end the amount, if any, by which returns (net of fees of the investment adviser) for such month on Trust assets held by a Custodian are less than the return that would have been realized by the Trust had such assets been deposited with CIS. On Trust assets held in a foreign currency (for purposes of making margin deposits with respect to positions on an exchange outside the United States on which JWH currently trades), CIS and CISFS will credit the Trust with interest on the 5th business day of each month on the average daily balance of Trust assets held in such currency during the previous month at a rate equal to 0.75% below the average rate paid with respect to deposits in such currency by the relevant clearing association for such previous month (which is zero in certain cases) except that the rate of interest at which CIS will credit the Trust for deposits in Spanish Pesetas will be 2.75% below the average Madrid interbank offered rate for the month in question. With respect to currencies required for margin on markets not currently traded by JWH, CIS will credit the Trust with interest at the rates paid by CIS to other accounts similar in size and character to that of the Trust. Interest income exceeding the amount credited by CIS and CISFS to the Trust's account will be retained by CIS and CISFS, respectively. To the extent that the Trust participates in the spot and forward currency and precious metals markets, the Trust will be required to deposit margin with CISFS. CIS will satisfy such margin requirements by transferring Trust assets from the Trust's account at CIS to CISFS. Amounts transferred to CISFS as margin on spot and forward currency and precious metals positions will not be held by CISFS as customer segregated funds under the CEA and the rules of the CFTC but will be included in determining the interest to be credited to the Trust as described above. The Declaration and Agreement of Trust strictly prohibits the Trust from lending any of its assets to any person or entity. The Managing Owner will not commingle the property of the Trust with the property of any other person or entity (deposit of Trust assets with the Futures Broker or CISFS does not constitute commingling for these purposes). CHARGES CHARGES PAID BY THE TRUST The Trust will be subject to the following charges and fees. RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT CISI Organizational and CISI will advance these costs, estimated at initial offering costs approximately $500,000-$600,000, which will be reimbursed to CISI by the Trust at the initial closing and amortized over the first 60 months of the Trust's operations, up to a limit at each month-end of 1/60 of 2% of Net Assets as of such month-end. CISI will return any unamortized amount to the trust at the end of the amortization period or earlier termination of the Trust. -59- RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT - --------- ----------------- ----------------- Third Parties Ongoing offering costs Actual; up to the maximum of 0.5% of the Trust's average month-end Net Assets in each fiscal year. CIS Brokerage Fee A flat-rate monthly Brokerage Fee equal to 6.5% (or approximately 0.542% per month) of the Trust's month-end assets (after deduction of the Management Fee payable to JWH) will be paid to CIS. Such Brokerage Fee will cover all brokerage, exchange, clearing and NFA fees incurred in the Trust's trading (including brokerage fees payable to CISFS on spot and forward currency and precious metals trading). Certain large investors are eligible to be charged the Special Brokerage Fee Rate as described under Charges -- Brokerage Fee -- Special Brokerage Fee Rate. CIS and CISFS Interest income earned CIS and CISFS will credit the above amount credited Trust with interest on 100% of to the Trust, if any the Trust's average daily balances on deposit with CIS during each month at the average 91-day Treasury bill rate for that month in respect of deposits denominated in dollars or at the applicable rates in respect of deposits denominated in currencies other than dollars (which may be zero in some cases). See Use of Proceeds -- Maintenance of Assets; Interest Income. Interest income exceeding the amount credited by CIS and CISFS to the Trust's account will be retained by CIS and CISFS, respectively. Third Parties Administrative expenses Actual; currently estimated to be approximately 0.6% of the Trust's average month-end Net Assets annually, based on the $10,000,000 minimum Trust size. JWH Management Fee 4% annually (orapproximately 0.333% per month) of the Trust's month-end assets after deduction of a portion of the Brokerage Fee at a 1.25% annual rate (rather than 6.5% annual rate); payable monthly. JWH Incentive Fee 15% of any New Trading Profit, I.E., the sum of (i) the net of any profits and losses realized on all trades closed out during a period, (ii) the net of any unrealized profits and losses on open positions as of the end of such period less the net of any unrealized profits and losses on open positions as of the end of the immediately preceding period and (iii) the cumulative trading loss since the most recent period for which an Incentive Fee was payable (or, if no Incentive Fee has been paid, $0) (the "High Water Mark"), minus (iv) the Brokerage Fee at the annual rate of 1.25% (rather than 6.5% annual rate) of the Trust's month-end assets, the Management Fee and any execution charges paid by the Trust during such period with respect to trades executed by a futures broker other than CIS. Trading Profit does not include interest income. -60- RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT - --------- ----------------- ----------------- Trading Profit will be calculated on the basis of the overall performance of the Trust, not the performance of each Trading Program considered individually. BECAUSE THE INCENTIVE FEE WILL BE CALCULATED ON THE BASIS OF ANY TRADING PROFIT ACHIEVED BY THE TRUST IN EXCESS OF THE HIGHEST LEVEL OF CUMULATIVE TRADING PROFIT ACHIEVED BY THE TRUST AS OF ANY PREVIOUS CALENDAR QUARTER-END, RATHER THAN ON THE BASIS OF INCREASES IN THE NET ASSET VALUE PER UNIT OVER THE HIGHEST NET ASSET VALUE AS OF ANY PREVIOUS CALENDAR QUARTER-END, THE INCENTIVE FEES PAID TO JWH MAY NOT REFLECT THE INVESTMENT EXPERIENCE OF ANY PARTICULAR UNITHOLDER. IN FACT, JWH MAY BE PAID SUBSTANTIAL INCENTIVE FEES (ALLOCATED EQUALLY AMONG ALL OUTSTANDING UNITS) EVEN THOUGH SOME UNITS HAVE DECLINED SIGNIFICANTLY IN VALUE FROM THEIR INITIAL PURCHASE PRICE. AS INCENTIVE FEES ARE CALCULATED ON THE BASIS OF QUARTER-END HIGHS IN CUMULATIVE TRADING PROFIT, SUBSTANTIAL INCENTIVE FEES MAY (IRRESPECTIVE OF THE FACT THAT UNITS ARE PURCHASED AT DIFFERENT TIMES AND PRICES, AND MAY HAVE MATERIALLY DIFFERENT INVESTMENT EXPERIENCES DURING A YEAR) ACCRUE IN A CALENDAR YEAR EVEN THOUGH THE TRUST HAS AN OVERALL LOSS FOR SUCH YEAR. Third Parties Reimbursement of Actual payments to third delivery, insurance, parties; not subject to storage and any estimate. other extraordinary charges; taxes (if any) ________________________ Organizational and Initial Offering Costs The Trust's organizational and initial offering costs, estimated at approximately $500,000-$600,000, will be advanced by CISI and reimbursed, without interest, to CISI by the Trust at the initial closing and the amount of such organizational and initial offering cost reimbursement shall be amortized over 60 months commencing with the end of the calendar month in which the initial closing occurs (irrespective of whether such month is a full month). At no month-end will the amount amortized by the Trust exceed 1/60 of 2% of the Net Assets of the Trust as of such month-end. The amount amortized each month-end shall be the lesser of (i) the product of (x) one divided by the number of months remaining in the amortization period times (y) the unamortized balance of the capitalized organizational and initial offering costs, or (ii) 1/60 of 2% of Net Assets at that month-end. If (i) the Trust is terminated prior to the end of such 60-month period, or (ii) the entire amount of the organizational and initial offering costs reimbursed to CISI is not amortized at the end of the 60-month period due to the 2% limitation, CISI shall return to the Trust, without interest, an amount equal to the unamortized balance of the capitalized organizational and initial offering costs. Organizational and initial offering costs (not including selling commissions) are currently estimated as follows: printing -- $100,000; filing fees -- $20,652; escrow fees -- $20,000; "Blue Sky" expenses -- $15,470; accounting fees -- $20,000; counsel fees -- $290,000; sales literature -- $60,000; and miscellaneous -- $55,078; a total of $581,200. -61- BROKERAGE FEE BROKERAGE FEE RATE Commodity brokerage commissions are typically paid upon the completion or liquidation of a trade and are referred to as "round-turn commissions," which cover both the initial purchase (or sale) and the subsequent offsetting sale (or purchase) of a commodity futures contract. The Trust will not pay commodity brokerage commissions on a per-trade basis but rather will pay monthly flat-rate Brokerage Fees at the annual rate of 6.5% (or a monthly rate of approximately 0.542%) of the Trust's month-end assets after deduction of the Management Fee. CIS will receive such Brokerage Fee, irrespective of the number of trades executed on the Trust's behalf. SPECIAL BROKERAGE FEE RATE All or a portion of the Units held by certain large investors are eligible to be charged a lower Brokerage Fee rate as described below (such Unitholders are referred to as "Eligible Unitholders"). A Unitholder who purchases at least $5,000,000 of Units as of the initial closing date or any subsequent month-end will effectively be charged the Brokerage Fee at the flat rate of 4.5% per annum (or 0.375% per month) of the Trust's assets (after deduction of the Management Fee) attributable to such Units (such reduced Brokerage Fee rate is referred to as the "Special Brokerage Fee Rate"). So long as such Eligible Unitholder holds Units of an aggregate issue price of at least $5,000,000 through each subsequent month-end, the Eligible Unitholder will be eligible for the Special Brokerage Fee Rate at each such month-end, regardless of the then aggregate Net Asset Value of such Units. If, however, such Eligible Unitholder redeems any Units at any month-end resulting in such Eligible Unitholder's holding Units of an aggregate issue price of less than $5,000,000, then the Eligible Unitholder will no longer be eligible for the Special Brokerage Fee Rate assessed for such month, even if the aggregate Net Asset Value of the unredeemed Units exceeds $5,000,000 at such month-end. If investors acquire Units at more than one time, their Units will be treated on a "first-in, first-out" basis for purposes of determining which of their Units will be charged the Special Brokerage Fee Rate. An investor who makes an incremental purchase of Units on a closing date that causes the aggregate issue price of all of such investor's Units to equal at least $5,000,000 will be charged the Special Brokerage Fee Rate with respect to such incrementally purchased Units as of the next month-end but with respect to earlier purchased Units only after such Units have been outstanding for at least twelve full months. For example, if an investor makes an initial investment of $3,000,000 as of March 31, 1997 ("Initial Purchase Date") and an incremental investment of $3,000,000 as of September 30, 1997 ("Subsequent Purchase Date"), such Eligible Unitholder will be eligible to be charged the Special Brokerage Fee Rate (i) immediately with respect to Units acquired as of the Subsequent Purchase Date and (ii) as of As of April 30, 1998 with respect to Units acquired as of the Initial Purchase Date. If the Eligible Unitholder redeems Units of an aggregate initial issue price of $1,000,000 as of January 31, 1998, the Eligible Unitholder will be deemed to have redeemed Units issued on the Initial Purchase Date and, therefore, will remain eligible to be charged the Special Brokerage Fee Rate with respect to all $3,000,000 of Units acquired as of the Subsequent Purchase Date and, commencing April 30, 1998, will be eligible to be charged the Special Brokerage Fee Rate with respect to the Units of an aggregate initial issue price of $2,000,000 acquired as of the Initial Purchase Date that remain outstanding as of such date. If, however, the Eligible Unitholder redeems Units of an aggregate initial issue price of $4,000,000 as of January 31, 1998, the Eligible Unitholder will no longer be eligible to be charged the Special Brokerage Fee Rate as of the redemption date on any of the investors's unredeemed Units. Moreover, the Eligible Unitholder will be assessed the 3% early redemption charge on the redeemed Units because they have been outstanding for less than eleven full months. If the Eligible Unitholder redeems (for the first time) Units of an aggregate initial issue price of $4,000,000 as of January 31, 1999, the Eligible Unitholder again will no longer be eligible to be charged the Special Brokerage Fee Rate as of the redemption date on any of the investors's unredeemed Units. However, in this case, the Eligible Unitholder will be assessed the 3% early redemption charge only on Units of an aggregate initial issue price of $1,000,000 -- as Units are also treated on a "first-in, first-out" basis for purposes of assessing the 3% redemption charge, the investor will not have to pay any redemption charge on Units of an aggregate initial issue price of $3,000,000 because Units acquired as of the Initial Purchase Date are considered to have been redeemed first. In order to maintain a uniform Net Asset Value per Unit, the Managing Owner will determine the capital account with respect to each Unitholder as of the end of each month as though every Unit outstanding were charged an allocable share of the Brokerage Fee at the standard 6.5% annual rate. The Managing Owner will then calculate the difference between allocable share of the Brokerage Fee at the standard rate and at the Special Brokerage Fee Rate ("Brokerage Fee Excess") for Units held by each Eligible Unitholder that are eligible for the Special Brokerage Fee Rate and will invest such difference in additional Units to be owned by the Eligible Unitholder (deemed to be issued as of such month-end) to the extent Units are available for sale. To the extent Units are not available to be purchased with the Brokerage Fee Excess as of such month-end, the Brokerage Fee Excess will be distributed to the Eligible Unitholder in cash. See -62- "Federal Income Tax Aspects -- Cash Distributions and Redemptions of Units" for federal income tax consequences of such distribution. Eligible Unitholders that receive additional Units in respect of a Brokerage Fee Excess will bear a proportionally greater share of the amortization of organizational and initial offering expenses. GENERAL STATE SECURITIES ADMINISTRATORS REQUIRE THE MANAGING OWNER TO STATE THAT THE BROKERAGE COMMISSIONS PAID BY THE TRUST WILL NOT BE INCREASED DURING ANY PERIOD IN WHICH EARLY REDEMPTION CHARGES ARE IN EFFECT (WHICH PERIOD MIGHT WELL REPRESENT THE ENTIRE LIFE OF THE TRUST, AS REDEMPTION CHARGES CONTINUE TO BE PAYABLE, IN RESPECT OF THE UNITS MOST RECENTLY SOLD, UNTIL THE END OF THE ELEVENTH FULL MONTH AFTER THEIR SALE). CIS will pay from the Brokerage Fees received from the Trust all costs of executing and clearing the Trust's trades, including NFA transaction fees assessed on the Trust's trading on United States exchanges, exchange and clearing fees, and brokerage fees charged by CISFS on spot and forward contracts on currencies and precious metals. NFA transaction fees currently equal $0.14 per round-turn trade of a futures contract and $0.07 for each trade of a commodity option (a $0.07 fee is charged upon the purchase, sale or exercise of an option; if an option is exercised, an additional $0.14 fee will be payable upon the liquidation of the futures position acquired upon such exercise; no fee is assessed upon the expiration of an option). In addition, CIS and CISFS receive and retain as part of their compensation for providing brokerage services to the Trust the interest income earned on the assets of the Trust on deposit with CIS which exceeds the amount of interest credited by CIS and CISFS, respectively, to the Trust's account. See "Use of Proceeds -- Maintenance of Assets; Interest Income." Other brokerage firms may charge less for brokerage services similar to those to be provided by CIS to the Trust. The round-turn equivalent of the Trust's flat-rate Brokerage Fee will vary, perhaps materially, depending on the frequency with which JWH places orders for the Trust. The frequency with which JWH trades will, in turn, be materially affected by market conditions as well as by the programs used from time to time for the Trust. However, as of the date of this Prospectus, the Managing Owner estimates that, based on the recent trading experience of JWH, the Trust's flat-rate Brokerage Fee should be the equivalent to a round-turn brokerage commission of approximately $76.50 per round-turn trade (including the Trust's spot and forward trades on a futures-equivalent basis in the denominator used in calculating the per-trade cost of the 6.5% annual Brokerage Fee). The Managing Owner will report, in the annual reports it distributes to Unitholders, the approximate round-turn equivalent rate paid by the Trust on its futures and spot and forward trading during the previous year. JWH may execute trades through brokers other than CIS, in which case the trades will be given up to be cleared by CIS. Any additional costs involved in such "away" executions will be paid by the Trust. CIS will pay selling commissions and ongoing compensation from its own funds to Selling Agents. See "-- Selling Commissions and Ongoing Compensation." ONGOING OFFERING COSTS The Trust will pay all routine costs incurred in the ongoing offering of the Units. Such costs include the costs of updating this Prospectus and regulatory compliance, escrow fees and registration fees if additional Units are registered. It is difficult to predict the amount of the ongoing offering costs which will be incurred by the Trust as (i) the Managing Owner may suspend or terminate the offering at any time, (ii) registration fees will vary depending upon how many Units are sold, (iii) processing expenses are materially affected by the amount of time and expenses necessary to complete all required regulatory procedures (and there is no certainty, from one filing to the next, as to the amount of time that will be required to obtain regulatory clearance), and (iv) a variety of other factors. The Managing Owner believes that ongoing offering costs could range from approximately $50,000 to approximately $250,000 or more per year. However, the Managing Owner will absorb all such costs to the extent that they exceed 0.5% of the Trust's average month-end Net Assets during any fiscal year. MANAGEMENT FEE Each month, the Trust will pay JWH a Management Fee at the annual rate 4% (or a monthly rate of approximately 0.333%) of the Trust's month-end assets after deduction of a portion of the Brokerage Fee at the annual rate of 1.25% (rather than 6.5%) of month-end Trust assets but before deduction of any Management Fees, distributions, redemptions or Incentive Fee accrued or payable as of the relevant month-end. -63- INCENTIVE FEE CALCULATION OF THE INCENTIVE FEE The Trust will pay to JWH an Incentive Fee equal to 15% of New Trading Profit, I.E., the sum of (i) the net of any profits and losses realized on all trades closed out during a period, (ii) the net of any unrealized profits and losses on open positions as of the end of such period less the net of any unrealized profits and losses on open positions as of the end of the immediately preceding period and (iii) the cumulative trading loss since the most recent period for which an Incentive Fee was payable (or, if no Incentive Fee has been paid, $0) (the "High Water Mark"), minus (iv) the Brokerage Fee at the annual rate of 1.25% (rather than 6.5% annual rate) of the Trust's month-end assets, the Management Fee and any execution charges paid by the Trust during such period with respect to trades executed by a futures broker other than CIS. Trading Profit does not include any interest income. Incentive Fees will accrue monthly but will be paid at the end of each calendar quarter. Accrued but unpaid Incentive Fees will reduce (or, in the event that a previous accrual is reversed, increase) the month-end Net Asset Value of Units. The Incentive Fee is calculated based on the overall performance of the Trust, not individually in respect of the performance of the individual programs utilized by the Trust. If Trust assets under JWH's management are reduced by redemptions, distributions or reallocations at any month-end other than a calendar quarter-end when New Trading Profit exists, the accrued Incentive Fee on the New Trading Profit attributable to the amount so reduced ("Withdrawn Profits") shall be deducted from the redemption proceeds, distributions or reallocations, as the case may be and paid to JWH, and Withdrawn Profits shall not be included in New Trading Profit for the calculation of Incentive Fee payable to JWH at the end of that calendar quarter. In the event there is a cumulative loss when Units are redeemed, the amount of such cumulative loss will be reduced as of the date of redemption in the same proportion that the aggregate number of Units redeemed bears to the total number of Units outstanding immediately prior to such redemption. The Incentive Fee (if any) allocable to Units redeemed on or prior to the end of the first eleven full months after their issuance is not affected by the 3% redemption charge from the redemption proceeds of such Units. For example, assume that the Trust's Net Asset Value at the commencement of trading on March 31, 1997 is $10,000,000. If at the end of the first month of trading, Trading Profit recognized on both open and closed futures positions, less the Management Fee and a portion of the Brokerage Fee at the annual rate of 1.25% (rather than 6.5%) of Trust assets, equalled $100,000, all of such Trading Profit would constitute New Trading Profit. $100,000 of New Trading Profit would result in a $15,000 Incentive Fee. Consequently, while no Incentive Fee would be due from the Trust as a whole because such month-end was not a quarter-end, Unitholders who redeemed their Units as of the end of the first month of trading would receive redemption proceeds (prior to reduction for the redemption charge then due) reflecting a Net Asset Value for the Trust of approximately $10,085,000. Assume that by the end of the next month, subsequent losses have reduced the initial $100,000 gain to a loss of $(80,000). A cumulative trading loss of $(80,000) would exist (irrespective of the fact that $180,000 had been lost since the previous month-end -- as opposed to quarter-end -- high). If Unitholders thereupon withdrew 50% of their interest in the Trust (net of the proceeds of any new Units then sold), such trading loss would, for purposes of future Incentive Fee calculations, itself be reduced by 50% to $40,000. If, during the following month, Trading Profit recognized on both open and closed positions equalled $100,000, New Trading Profit of $60,000 would be accrued as of the end of such quarter, and JWH would be entitled to an Incentive Fee equal to 15% of $60,000, or $9,000. POSSIBLE MISALLOCATION OF THE INCENTIVE FEES AMONG INVESTORS The Incentive Fee payable to JWH is calculated on the basis of the cumulative Trading Profit (if any) achieved by the Trust over the High Water Mark. However, cumulative Trading Profit may be generated even though the Net Asset Value per Unit has declined, perhaps substantially, below the purchase price of many outstanding Units, because Trading Profit is calculated on the basis of the overall gains achieved by the Trust, irrespective of the number of Units among which such gains are distributed. For example, if (i) 100,000 Units are initially sold for $100 per Unit, (ii) the Trust incurs a $1,000,000 loss in the first month of trading, (iii) an additional 100,000 Units are sold as of the end of the first month at the current Net Asset Value per Unit of $90, and (iv) the Trust recognizes a gain (after deduction of the Brokerage Fee at a 1.25% annual rate and the Management Fee) of $1,500,000 through the end of the first quarter of trading, an Incentive Fee would be payable to JWH in respect of the $500,000 of cumulative Trading Profit recorded as of the end of such quarter even though the Net Asset Value per Unit would be less than $100 (in fact, $97.50 per Unit, -64- prior to deduction of a $0.375 per Unit Incentive Fee). IT IS POSSIBLE THAT CERTAIN UNITS WILL PAY SUBSTANTIAL INCENTIVE FEES DESPITE THE NET ASSET VALUE PER UNIT HAVING DECLINED SIGNIFICANTLY BELOW THE PURCHASE PRICE OF SUCH UNITS. If Units are purchased during a calendar quarter at a Net Asset Value reduced by an accrued Incentive Fee and subsequent losses during such quarter result in reversals of such Incentive Fee accruals, such reversals will mitigate the losses incurred by all Units, including the newly purchased Units, whereas such reversals should properly be allocated entirely to the Units outstanding when the new Units were purchased at a Net Asset Value already fully reduced by the subsequently reversed Incentive Fee accruals. ADMINISTRATIVE EXPENSES The Trust will pay actual periodic legal, accounting, auditing, printing, recording and filing fees, postage charges and Trustee's fees, which together are currently estimated at approximately 0.6% of the Trust's average month-end Net Assets annually, based on aggregate Trust assets of $10,000,000. EXTRAORDINARY EXPENSES The Trust will be required to pay any extraordinary charges (such as taxes) incidental to its trading, including delivery, insurance and storage charges. These charges and not susceptible to estimate. Extraordinary expenses, if any, will not reduce Trading Profits for purposes of Incentive Fee calculations. CISI WILL SEND EACH UNITHOLDER A MONTHLY STATEMENT WHICH WILL INCLUDE A DESCRIPTION OF THE TRUST'S PERFORMANCE DURING THE PRIOR MONTH AND SET FORTH, AMONG OTHER THINGS, THE BROKERAGE FEE, MANAGEMENT FEE, ORGANIZATIONAL AND INITIAL OFFERING COST AMORTIZATION, ADMINISTRATIVE EXPENSES, ONGOING OFFERING COSTS AND ANY EXTRAORDINARY EXPENSES PAID, AS WELL AS ANY INCENTIVE FEE ALLOCATED WITH RESPECT TO SUCH MONTH. CHARGES PAID BY OTHERS The following costs relating to the sale of the Units and the operation of the Trust will be paid by the entities indicated below. BROKERAGE FEE FOR CURRENCY AND PRECIOUS METALS TRADING CIS will pay CISFS, from CIS's own funds, brokerage fees on a per trade basis and at a rate equal to a round-turn on a Chicago Mercantile Exchange's International Monetary Market (IMM) equivalent basis for the Trust's trading of spot and forward contracts on currencies and precious metals. SELLING COMMISSIONS AND ONGOING COMPENSATION CIS will pay the Selling Agents, from its own funds, up to 4% selling commissions due in respect of Units sold, up to 2% in respect of Units sold to Eligible Unitholders. Furthermore, CIS will pay the Selling Agents ongoing compensation -- up to 4% per annum of the average month-end Net Asset Value per Unit for all Units which remain outstanding for longer than twelve months (up to 2% per annum in respect of Units owned by Eligible Unitholders), beginning in the thirteenth month after sale and continuing until redemption -- in respect of Units sold by eligible Selling Agents. Selling Agents ineligible to receive ongoing compensation may receive installment selling commissions which, when added to the initial selling commission, may not exceed 9% of the initial subscription price of each Unit sold by any such Selling Agent. Such ongoing compensation may be deemed to constitute underwriting compensation. See "Federal Income Tax Aspects -- Syndication Expenses." Wholesalers who introduce Additional Selling Agents to CIS will share the selling commissions and ongoing compensation (or installment selling commissions) with their respective Additional Selling Agents. Additional Selling Agents who distribute Units through correspondents will also share the selling commissions and ongoing compensation (or installment selling commissions) with their respective correspondents. See "Plan of Distribution - -- Selling Agents." REDEMPTION CHARGES Units redeemed on or prior to the end of the eleventh full month after such Units are sold are subject to redemption charges of 3% of the Net Asset Value at which they are redeemed. Such charges will be deducted from redemption proceeds and paid to CIS. In the event that an investor acquires Units at more than one time, such Units will -65- be treated on a "first-in, first-out" basis for purposes of determining whether redemption charges are applicable. For an example of application of "first-in, first-out" treatment, see "Charges -- Brokerage Fee -- Special Brokerage Fee Rate." Units sold during the Initial Offering Period are deemed to be sold, for purposes of determining whether redemption charges are applicable, as of the date that subscription funds are released from escrow (I.E., on the day the Trust commences trading in the case of Units sold during the Initial Offering Period and on the last day of a calendar month in the case of Units sold during the Ongoing Offering Period) and not the date that investors' subscriptions are accepted or the subscription funds deposited into escrow. See also "Redemptions; Net Asset Value." Redemptions will be made at a Net Asset Value per Unit reduced by any accrued Incentive Fee allocable (equally to all outstanding Units) to Units when redeemed. Any such accrued Incentive Fee will be paid to JWH. BROKERAGE ARRANGEMENT THE FUTURES BROKER Cargill Investor Services, Inc., the Lead Selling Agent, is also the Trust's Futures Broker. CIS will execute and clear the Trust's futures transactions and provide other brokerage-related services. CIS is a Delaware corporation. Its principal office is located at 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606. It has offices and affiliated offices at numerous other locations in the United States as well as in England, France, Switzerland, Australia and the Far East. The clients of CIS include commercial and financial institutions that use the futures markets for risk management purposes as well as private investors. CIS has more than 575 employees. CIS is a wholly-owned, but separately managed, subsidiary of Cargill, Incorporated, a privately-owned international merchant, warehouser, processor and transporter of agricultural and other bulk commodities that was founded in 1865. CIS is a clearing member of all of the principal futures exchanges in the United States and is a clearing broker or has clearing relationships on all major world futures exchanges. It is registered with the CFTC as a futures commission merchant and is a member of NFA in such capacity. Certain employees of CIS are members of U.S. futures exchanges and may serve on the governing bodies and standing committees of those exchanges, their clearing houses and NFA. In that capacity, these employees have a fiduciary duty to the exchanges and would be required to act in the best interests of such exchanges, even if that action might be adverse to the interests of the Trust. Cargill, Incorporated owns and operates grain elevators and soybean processing plants that are designated as regular warehouses for delivery of certain physical commodities in satisfaction of futures contracts under the rules of the Chicago Board of Trade and similar rules of other U.S. futures exchanges. If the Trust makes or accepts delivery of grain or soybean products pursuant to a futures contract, it is possible that, under exchange rules governing settlement of the contract, the Trust may tender or receive negotiable warehouse receipts issued by Cargill, Incorporated. Cargill, Incorporated and its affiliates are substantial users of virtually all futures contracts for hedging purposes. Such hedging transactions are generally implemented by employees of Cargill, Incorporated and CIS generally executes or clears those transactions. The volume of trading by Cargill, Incorporated and its affiliates is likely to result in their competing with the Trust for futures market positions. Thus, in certain instances, CIS may have orders for trades from the Trust and from Cargill, Incorporated or its affiliates, and CIS might be deemed to have a conflict of interest between the sequence in which such orders will be transmitted to the trading floors of futures exchanges. In order to assure impartial treatment for such orders, CIS has an operating policy of transmitting orders to the trading floors in the sequence received regardless of which entity has placed the order. The Trust might enter into trades in which the other party is Cargill, Incorporated or one of its affiliates. It is possible that the hedging and cash operations of Cargill, Incorporated or trading by its affiliates may adversely affect the Trust. Records of such trading will not be made available to Unitholders. It is possible that these entities may compete for similar positions in the futures markets. No officers, directors or employees of CIS or its affiliates will trade futures speculatively for their own accounts. In the ordinary course of its business, CIS is engaged in civil litigation and subject to administrative proceedings which, in the aggregate, are not expected to have a material effect upon its condition, financial or otherwise, or the services it will render to the Trust. The Trust and CIS will enter into a Customer Agreement that provides that, for as long as the Trust maintains an account with CIS, CIS will execute trades for the Trust upon instruction of JWH, and will receive monthly flat-rate Brokerage Fees. The Customer Agreement has an initial term ending on the last day of the twelfth full calendar month following commencement of trading by the Trust and is terminable on 60 days' notice by either party. If for any reason -66- the Trust elects to terminate the Customer Agreement with CIS, no assurance may be given that the Trust will be able to retain the brokerage services of another futures broker at the same commission rate. In addition, under the Declaration and Agreement of Trust, Unitholders owning more than 50% of the outstanding Units may cause the Trust to terminate the Customer Agreement. CIS is responsible for execution and clearance of futures contracts (and options, if traded) as well as for certain administrative duties such as recordkeeping, transmittal of confirmation statements and calculating equity balance and margin requirements for the Trust's account. The agreement provides that CIS will not be liable to the Trust except for bad faith or negligence. The Trust's assets will be deposited with CIS in its capacity as the Trust's Futures Broker. CIS credits monthly to the Trust's account interest on substantially all of the Trust's average daily balances on deposit at CIS, as described under "Use of Proceeds -- Maintenance of Assets; Interest Income." CIS receives and retains any increment of interest earned on the assets of the Trust in excess of the amount credited to the Trust's account. THE FOREIGN CURRENCY BROKER CIS Financial Services, Inc. will act as the Trust's counterparty in the Trust's spot and forward contracts trades. CISFS is a Delaware corporation that is a wholly-owned subsidiary of CIS Holdings, Inc. Under most normal circumstances, CISFS will contact at least two counterparties for a quote on each of the Trust's currency and precious metals trades. CISFS will enter a spot or forward contract with the selected counterparty and will enter into a back-to-back spot or forward contract with the Trust at the same price CISFS buys from (or sells to) the selected counterparty. REDEMPTIONS; NET ASSET VALUE REDEMPTIONS THE TRUST IS INTENDED AS A MEDIUM- TO LONG-TERM, "BUY AND HOLD" INVESTMENT. THE TRUST'S OBJECTIVES ARE TO ACHIEVE SUBSTANTIAL CAPITAL APPRECIATION OVER TIME. THE TRUST IS NOT INTENDED TO ACHIEVE, NOR TO ATTEMPT TO ACHIEVE, SIGNIFICANT APPRECIATION OVER THE SHORT TERM. A Unitholder may cause the Trust to redeem any or all of such Unitholder's Units at Net Asset Value as of the close of business on the last business day of any calendar month. Redemption requests must be received by CISI on or before the 20th of a month (or, if the 20th is not a business day, the next business day) to effect redemption as of such month-end. Redemption proceeds will generally be paid within ten calendar days after redemption. However, in special circumstances, including, but not limited to, default or delay in payments due to the Trust from banks or other persons, the Trust may, in turn, delay payment to persons requesting redemption of Units of the proportionate part of the redemption value of their Units equal to the proportionate part of the Net Assets of the Trust represented by the sums that are the subject of such default or delay. See "Section 12. Redemptions" in Exhibit A -- Declaration and Agreement of Trust. A Unit which is redeemed at or prior to the end of the eleventh full month after its sale will be assessed a redemption charge of 3% of the Net Asset Value per Unit as of the date of redemption. In the case of Units sold during the Initial Offering Period, the date of sale for purposes of determining whether redemption charges apply will be the date subscription funds held in escrow are released to the Trust and the Trust begins trading, not the date that investors subscribe for Units, have their subscriptions accepted or have their customer securities accounts debited into escrow in the amount of their subscriptions. During the Ongoing Offering Period, Units are considered "sold" for purposes of determining whether redemption charges apply as of the last day of the calendar month as of which such Units are issued (not as orders for Units are submitted or accepted). The redemption charge will be subtracted from the redemption price of the Unit and paid to CIS. In the event that an investor acquires Units at more than one time, such investor's Units will be treated on a "first-in, first-out" basis for purposes of determining whether redemption charges apply. Applicable state "Blue Sky" policies require that redemption charges not be assessed on any Unitholder who redeems because the Trust's expenses have increased. The Managing Owner may declare additional redemption dates, including Special Redemption Dates under certain circumstances. If as of the close of business on any day the Net Asset Value of a Unit has decreased to less than 50% of the Net Asset Value per Unit as of the previous month-end or to $50 or less, after adding back all distributions, the Managing Owner shall liquidate all of the Trust's open positions, suspend trading and within ten business days after -67- the suspension of trading declare a Special Redemption Date by notice to Unitholders and otherwise in accordance with the Declaration of Trust. Unitholders may not transfer or assign Units without providing prior written notice to the Managing Owner. No assignee may become a substitute Unitholder except with the consent of the Managing Owner (which may be withheld in the absolute discretion of the Managing Owner). NOTICES OF REDEMPTION ARE IRREVOCABLE ONCE SUBMITTED. THE NET ASSET VALUE PER UNIT AS OF THE DATE OF REDEMPTION MAY DIFFER SUBSTANTIALLY FROM THE NET ASSET VALUE PER UNIT AS OF THE DATE THAT IRREVOCABLE NOTICE OF REDEMPTION MUST BE SUBMITTED. UNITHOLDERS NEED NOT REDEEM ALL THEIR UNITS IN ORDER TO REDEEM ANY SUCH UNITS, PROVIDED THAT AT LEAST $1,000 OF UNITS ARE REDEEMED AND THAT THE MINIMUM INVESTMENT OF $1,000 IS MAINTAINED AFTER ANY PARTIAL REDEMPTION. NET ASSET VALUE The Net Assets of the Trust are its assets less its liabilities determined in accordance with generally accepted accounting principles. The Net Asset Value per Unit is the Net Assets of the Trust divided by the number of Units outstanding. A futures or option contract traded on a United States commodity exchange will be valued at the settlement price on the date of valuation. If an open position cannot be liquidated on the day with respect to which Net Assets are being determined, the settlement price on the first subsequent day on which the position can be liquidated shall be the basis for determining the liquidating value of such position for such day, or such other value as the Managing Owner may deem fair and reasonable. The liquidating value of a commodity futures or option contract not traded on a United States commodity exchange shall mean its liquidating value as determined by the Managing Owner on a basis consistently applied for each different variety of contract. Accrued Incentive Fee liabilities reduce Net Asset Value (subject, however, to possible whole or partial reversal if the Trust incurs subsequent losses) even if such accrued Incentive Fees may never, in fact, be finally paid to JWH. Organizational and initial offering cost reimbursement will not reduce Net Asset Value for any purpose, including calculating the redemption value of Units; however, the amount of organizational and initial offering costs amortized at each month-end during the amortization period will reduce Net Asset Value as of each such month-end. THE TRUST AND THE TRUSTEE THE FOLLOWING SUMMARY DESCRIBES IN BRIEF CERTAIN ASPECTS OF THE OPERATION OF THE TRUST AND THE TRUSTEE'S AND MANAGING OWNER'S RESPECTIVE RESPONSIBILITIES CONCERNING THE TRUST. PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW THE DECLARATION AND AGREEMENT OF TRUST ATTACHED HERETO AS EXHIBIT A AND CONSULT WITH THEIR OWN ADVISERS CONCERNING THE IMPLICATIONS TO SUCH PROSPECTIVE SUBSCRIBERS OF INVESTING IN A DELAWARE BUSINESS TRUST. THE SECTION REFERENCES BELOW ARE TO SECTIONS IN THE DECLARATION AND AGREEMENT OF TRUST. PRINCIPAL OFFICE; LOCATION OF RECORDS The Trust is organized under the Delaware Business Trust Act. The Trust is administered by the Managing Owner, whose office is located at 233 South Wacker Drive, Suite 2300, Chicago, Illinois (telephone: (312) 460-4000). The records of the Trust, including a list of the Unitholders and their addresses but excluding detailed trading records of JWH, is located at the foregoing address, and available for inspection and copying (upon payment of reasonable reproduction costs) by Unitholders or their representatives during regular business hours as provided in the Declaration and Agreement of Trust. (Section 10). There is a limitation to non-commercial purposes. Transfer agent services will be provided by CIS at 233 South Wacker Drive, Suite 2300, Chicago, Illinois at no additional cost to the Trust. The Managing Owner will maintain and preserve the books and records of the Trust for a period of not less than six years. CERTAIN ASPECTS OF THE TRUST THE TRUST IS THE FUNCTIONAL EQUIVALENT OF A LIMITED PARTNERSHIP; PROSPECTIVE INVESTORS SHOULD NOT ANTICIPATE ANY LEGAL OR PRACTICAL PROTECTIONS UNDER THE DELAWARE BUSINESS TRUST ACT GREATER THAN THOSE AVAILABLE TO LIMITED PARTNERS OF A LIMITED PARTNERSHIP. -68- No special custody arrangements are applicable to the Trust which would not be applicable to a limited partnership, and the existence of a trustee should not be taken as an indication of any additional level of management or supervision over the Trust. To the greatest extent permissible under Delaware law, the Trustee acts in an entirely passive role, delegating all authority over the operation of the Trust to the Managing Owner. The Managing Owner is the functional equivalent of the general partner in a limited partnership. (Sections 5(a), 9 and 19). Although units of beneficial interest in a trust need not carry any voting rights, the Declaration and Agreement of Trust gives Unitholders voting rights comparable to those typically extended to limited partners in publicly-offered futures funds. (Section 19). The Delaware Business Trust Act under which the Trust is formed is filed as an exhibit to the Registration Statement of which this Prospectus is a part. THE TRUSTEE Wilmington Trust Company, a Delaware banking corporation, is the sole Trustee of the Trust. The Trustee's principal offices are located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001. The Trustee is unaffiliated with either the Managing Owner or the Selling Agents. The Trustee's duties and liabilities with respect to the offering of the Units and the administration of the Trust are limited to its express obligations under the Declaration and Agreement of Trust. The rights and duties of the Trustee, the Managing Owner and the Unitholders are governed by the provisions of the Delaware Business Trust Act and by the Declaration and Agreement of Trust. The Trustee serves as the Trust's sole trustee in the State of Delaware. The Trustee will accept service of legal process on the Trust in the State of Delaware and will make certain filings under the Delaware Business Trust Act. The Trustee does not owe any other duties to the Trust, the Managing Owner or the Unitholders. The Trustee is permitted to resign upon at least 60 days' notice to the Trust, provided that any such resignation will not be effective until a successor Trustee is appointed by the Managing Owner. The Declaration and Agreement of Trust provides that the Trustee is compensated by the Trust, and is indemnified by the Managing Owner against any expenses it incurs relating to or arising out of the formation, operation or termination of the Trust or the performance of its duties pursuant to the Declaration and Agreement of Trust, except to the extent that such expenses result from the gross negligence or willful misconduct of the Trustee. The Managing Owner has the discretion to replace the Trustee. Only the Managing Owner has signed the Registration Statement of which this Prospectus is a part, and only the assets of the Trust and the Managing Owner are subject to issuer liability under the federal securities laws for the information contained in this Prospectus and under federal and state laws with respect to the issuance and sale of the Units. Under such laws, neither the Trustee, either in its capacity as Trustee or in its individual capacity, nor any director, officer or controlling person of the Trustee is, or has any liability as, the issuer or a director, officer or controlling person of the issuer of the Units. The Trustee's liability in connection with the issuance and sale of the Units is limited solely to the express obligations of the Trustee set forth in the Declaration and Agreement of Trust. Under the Declaration and Agreement of Trust, the Trustee has delegated to the Managing Owner the exclusive management and control of all aspects of the business of the Trust. The Trustee has no duty or liability to supervise or monitor the performance of the Managing Owner, nor shall the Trustee have any liability for the acts or omissions of the Managing Owner. In addition, the Managing Owner has been designated as the "tax matters partner" of the Trust for purposes of the Internal Revenue Code of 1986, as amended (the "Code"). The Unitholders have no voice in the operations of the Trust, other than certain limited voting rights as set forth in the Declaration and Agreement of Trust. In the course of its management, the Managing Owner may, in its sole and absolute discretion, retain such persons (except where the Managing Owner has been notified by the Unitholders that the Managing Owner is to be replaced as the managing owner), including an affiliate or affiliates of the Managing Owner, as the Managing Owner deems necessary for the efficient operation of the Trust. (Sections 2 and 9). Because the Trustee has delegated substantially all of its authority over the operation of the Trust to the Managing Owner, the Trustee itself is not registered in any capacity with the CFTC. -69- MANAGEMENT OF TRUST AFFAIRS; VOTING BY UNITHOLDERS The Unitholders take no part in the management or control, and have no voice in the operations of the Trust or its business. (Section 9(a)). Unitholders may, however, remove and replace the Managing Owner as the managing owner of the Trust, and may amend the Declaration and Agreement of Trust, except in certain limited respects, by the affirmative vote of a majority of the outstanding Units then owned by Unitholders (as opposed to by the Managing Owner and its affiliates). The owners of a majority of the outstanding Units then owned by Unitholders may also compel dissolution of the Trust. (Section 19(b)). The owners of 10% of the outstanding Units then owned by Unitholders have the right to bring a matter before a vote of the Unitholders. (Section 19(c)). The Managing Owner has no power under the Declaration and Agreement of Trust to restrict any of the Unitholders' voting rights. (Section 19(c)). Any Units purchased by the Managing Owner or its affiliates, as well as the Managing Owner's general liability interest in the Trust are non-voting. (Section 7). The Managing Owner has the right unilaterally to amend the Declaration and Agreement of Trust provided that any such amendment is for the benefit of and not adverse to the Unitholders or the Trustee and also in certain unusual circumstances -- for example, if doing so is necessary to effect the intent of the Trust's tax allocations or to comply with certain regulatory requirements. (Section 19(a)). In the event that the Managing Owner or the Unitholders vote to amend the Declaration and Agreement of Trust in any material respect, the amendment will not become effective prior to all Unitholders having an opportunity to redeem their Units. (Section 19(c)). RECOGNITION OF THE TRUST IN CERTAIN STATES A number of states do not have "business trust" statutes such as that under which the Trust has been formed in the State of Delaware. It is possible, although unlikely, that a court in such a state could hold that, due to the absence of any statutory provision to the contrary in such jurisdiction, the Unitholders, although entitled under Delaware law to the same limitation on personal liability as stockholders in a private corporation for profit organized under the laws of the State of Delaware, are not so entitled in such state. In order to protect Unitholders against any loss of limited liability, the Declaration and Agreement of Trust provides that no written obligation may be undertaken by the Trust unless such obligation is explicitly limited so as not to be enforceable against any Unitholder personally. Furthermore, the Trust itself indemnifies all Unitholders against any liability which such Unitholders might incur in addition to that of a limited partner. The Managing Owner is generally liable for all obligations of the Trust and would use its assets to satisfy any such liability before such liability would be enforced against any Unitholder individually. POSSIBLE REPAYMENT OF DISTRIBUTIONS RECEIVED BY UNITHOLDERS; INDEMNIFICATION OF THE TRUST BY UNITHOLDERS The Units are limited liability investments; investors may not lose more than the amount which they invest plus any profits recognized on their investment. (Section 8(d)). However, Unitholders could be required, as a matter of bankruptcy law, to return to the Trust's estate any distribution which they received at a time when the Trust was in fact insolvent or in violation of the Declaration and Agreement of Trust. In addition, although the Managing Owner is not aware of this provision ever having been invoked in the case of any public futures fund, Unitholders agree in the Declaration and Agreement of Trust that they will indemnify the Trust for any harm suffered by it as a result of (i) Unitholders' actions unrelated to the business of the Trust or (ii) transfers of their Units in violation of the Declaration and Agreement of Trust. (Section 18(c)). TRANSFERS OF UNITS RESTRICTED A Unitholder may, subject to compliance with applicable federal and state securities laws, assign his or her Units upon notice to the Trust and the Managing Owner. No assignment will be effective in respect of the Trust or the Managing Owner until the first day of the month succeeding the month in which such notice is received. No assignee may become a substituted Unitholder except with the consent of the Managing Owner (which consent may be withheld in the absolute discretion of the Managing Owner) and upon execution and delivery of an instrument of transfer in form and substance satisfactory to the Managing Owner. (Section 11). There will be no certificates for the Units. (Section 7(a)). Any transfers of Units are reflected on the books and records of the Trust. Transferors and transferees of Units will each receive notification from the Managing Owner to the effect that such transfers have been duly reflected as notified to the Managing Owner. (Section 11). -70- REPORTS TO UNITHOLDERS Each month the Managing Owner will report such information as the CFTC may require to be given to the participants in "commodity pools" such as the Trust and any such other information as the Managing Owner may deem appropriate. There are similarly distributed to Unitholders, not later than March 15 of each year, certified financial statements and the tax information related to the Trust necessary for the preparation of their annual federal income tax returns. (Section 10). The Managing Owner will notify Unitholders within seven business days of any decline in the Net Asset Value per Unit to less than 50% of such Net Asset Value as of the previous month-end valuation date. In addition, the Managing Owner will notify Unitholders of any change in the fees paid by the Trust or of any material changes in the basic investment policies or structure of the Trust. Any such notifications shall include a description of Unitholders' voting rights. The cost of any such notifications to Unitholders will be paid by the Trust. (Section 10). GENERAL In compliance with the Blue Sky Guidelines of the NASAA, the Declaration and Agreement of Trust provides that: (i) the executing and clearing commissions paid by the Trust shall be competitive (Section 9(d)), and the Managing Owner shall include in the annual reports containing the Trust's certified financial statements distributed to Unitholders each year the approximate round-turn equivalent rate paid on the Trust's trades during the preceding year (Section 10); (ii) no rebates or give-ups, among other things, may be received from the Trust by any of the Selling Agents, and such restriction may not be circumvented by any reciprocal business arrangements among any Selling Agents or any of their respective affiliates and the Trust (Section 9(d)); (iii) no trading advisor of the Trust may participate directly or indirectly in any per-trade commodity brokerage commissions generated by the Trust (Section 9(d)); (iv) any agreements between the Trust and the Managing Owner or any of its affiliates must be terminable by the Trust upon no more than 60 days' written notice (Section 9(e)); (v) the Trust may make no loans, and the funds of the Trust will not be commingled with the funds of any other person (deposit of Trust assets with a commodity broker, clearinghouse or currency dealer does not constitute commingling for these purposes) (Section 9(b)); and (vi) the Trust will not employ the trading technique commonly known as "pyramiding." (Section 9(f)). CONFLICTS OF INTEREST GENERAL THE MANAGING OWNER HAS NOT ESTABLISHED ANY FORMAL PROCEDURES TO RESOLVE THE CONFLICTS OF INTEREST DESCRIBED BELOW. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT NO SUCH PROCEDURES HAVE BEEN ESTABLISHED, AND THAT, CONSEQUENTLY, INVESTORS WILL BE DEPENDENT ON THE GOOD FAITH OF THE RESPECTIVE PARTIES SUBJECT TO SUCH CONFLICTS TO RESOLVE SUCH CONFLICTS EQUITABLY. ALTHOUGH THE MANAGING OWNER WILL ATTEMPT TO MONITOR AND RESOLVE THESE CONFLICTS IN GOOD FAITH, IT WILL BE EXTREMELY DIFFICULT, IF NOT IMPOSSIBLE, FOR THE MANAGING OWNER TO ENSURE THAT THESE CONFLICTS WILL NOT, IN FACT, RESULT IN ADVERSE CONSEQUENCES TO THE TRUST. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THE MANAGING OWNER INTENDS TO ASSERT THAT UNITHOLDERS HAVE, BY SUBSCRIBING TO THE TRUST, CONSENTED TO THE FOLLOWING CONFLICTS OF INTEREST IN THE EVENT OF ANY PROCEEDING ALLEGING THAT SUCH CONFLICTS VIOLATED ANY DUTY OWED BY THE MANAGING OWNER TO INVESTORS. RELATIONSHIP OF THE MANAGING OWNER, THE FUTURES BROKER AND THE FOREIGN CURRENCY BROKER The Managing Owner is an affiliate of both the Futures Broker and the Foreign Currency Broker of the Trust. The Managing Owner will, directly or indirectly, benefit financially from the fact that CIS and CISFS will receive compensation from the Trust on an ongoing basis in the form of Brokerage Fees. The affiliation between the Managing Owner and the Futures Broker and the Foreign Currency Broker creates a conflict of interest between the Managing Owner's duty to perform certain services for the Unitholders in their best interests and the Managing Owner's interest in its affiliates continuing to receive ongoing compensation which is dependent on continued participation in the Trust by such Unitholders. The Managing Owner does not intend to negotiate with any other brokerage firms for brokerage services for the Trust so long as the brokerage agreements with CIS and CISFS are in effect. The responsibilities of the Managing Owner include selecting brokers to act on behalf of the Trust and obtaining appropriate commission rates for the Trust. CIS and CISFS act as the futures broker and foreign currency and cash bullion broker, respectively, for the Trust. In such capacities, they receive brokerage fees for commodity and foreign currency and cash bullion transactions effected by the Trust. CISI has a conflict of interest between its duty to select -71- futures and foreign currency and cash bullion brokers for the Trust in the best interests of the Trust and Unitholders and its disinclination to replace CIS and CISFS as the Trust's futures broker and foreign currency and cash bullion broker. CIS may charge other customers, including other commodity accounts, brokerage commissions at rates which are higher or lower than those to be paid by the Trust. Taking into consideration the services to be provided to the Trust by CIS and CISFS, the Managing Owner believes that the brokerage fee arrangements are fair to the Trust. Accordingly, the Managing Owner does not intend to seek lower commission rates for the Trust. The Managing Owner will seek to assure that the Trust's brokerage charges are within the range of those generally charged to public commodity funds of comparable size and structure in view of the nature and quality of the brokerage services to be rendered. CIS may receive more brokerage fee revenue from the Trust if no distributions are made to the Unitholders since such fees are based on the Trust's assets. All decisions as to distributions will be made by the Managing Owner; the Managing Owner has no current intentions to declare distributions to Unitholders. The Managing Owner may, therefore, have a conflict of interest between its obligation to make decisions about distributions in the best interests of the Trust and its Unitholders and its interest in maximizing the assets of the Trust which are available for the generation of Brokerage Fee payable to its affiliate. The Trust receives interest on substantially all of its average daily assets on deposit at CIS each month at a rate of interest equal to the average 91-day Treasury bill rate for that month in respect of deposits denominated in dollars and at the applicable rates in respect of deposits denominated in currencies other than dollars (which may be zero in certain cases) as described in "Use of Proceeds -- Maintenance of Assets; Interest Income." CIS and CISFS receive and retain any interest earned on the assets of the Trust in excess of the amount paid to the Trust. Since CIS and CISFS are affiliated with CISI, CISI's conflict of interest (described immediately above) between making decisions related to distributions in the best interests of the Trust and its Unitholders extends to its interest in maintaining the Trust's assets at higher levels and minimizing the amounts of distributions in order also to maximize the amount of interest income generated by assets of the Trust and payable to CIS and CISFS. In addition, since the Trust does not pay Brokerage Fees on a per trade basis, CISI may have a conflict between its obligation to choose the best trading advisor for the Trust and its interest in selecting a trading advisor with low trading "velocity" thereby enabling CIS to realize cost savings. OTHER COMMODITY POOLS AND ACCOUNTS CIS currently acts as commodity broker for commodity pools other than the Trust, including one private and two other public commodity pools of which CISI is a co-general partner. The Managing Owner may in the future establish and operate additional commodity pools, either jointly or individually, which may vary in structure and in compensation arrangements from the Trust. CISFS trades spot and forward contracts on currencies and precious metals for accounts other than the Trust's. CIS, CISFS and the Managing Owner will not knowingly or deliberately favor any such commodity pool or account over the Trust with respect to the execution of commodity trades or spot and forward trades. In addition, JWH and its affiliates operate commodity pools and will manage accounts other than the Trust's, including commodity pools and proprietary accounts. (However, employees and principals of JWH, other than Mr. John W. Henry, are not permitted to trade on a discretionary basis in futures, options on futures or forward contracts. See "John W. Henry & Company, Inc. -- Legal and Ethical Concerns.") JWH has represented to the Trust that it will treat the Trust equitably and will not knowingly or deliberately favor on an overall basis any other client over the Trust with respect to advice relating to commodity interest transactions. COMMODITY TRANSACTIONS OF AFFILIATES AND CUSTOMERS OF THE FUTURES BROKER Corporate affiliates of CIS, including Cargill, Incorporated, the parent company of CIS, and their affiliates, trade in commodity interests from time to time for their own accounts. In addition, CIS is a substantial futures commission merchant handling transactions in commodities and commodity futures contracts for a large number of customers, including commodity pools, other than the Trust. CIS may effect transactions for the accounts of the Trust in which other parties to the transaction may be affiliates, or other commodity pools operated by affiliates, of CIS. In addition, it is likely that the volume of trading by such other parties will result in the Trust competing with such other parties from time to time in bidding on similar purchases or sales of commodities and commodity futures contracts. Transactions for such other parties might be effected when similar trades for the Trust are not executed or are executed at less favorable prices. The operating policies of CIS require that orders be transmitted to the trading floor of the commodity exchanges in the sequence received, regardless of customer size or identity. Unitholders will not be permitted to inspect the trading records of CIS in light of the proprietary and confidential nature of such trading records. -72- OTHER ACTIVITIES OF CIS, THE MANAGING OWNER, JWH AND THEIR OFFICERS AND EMPLOYEES CIS makes, on a daily basis, both fundamental and technical information available to its account executives and certain customers. However, CIS, its employees and its affiliates will perform no advisory services for the Trust. Since the Trust will be advised by JWH, which is not affiliated with CIS, the Trust may take positions similar to or opposite to the commodity research recommendations of CIS. Certain of the officers and employees of CIS may be members of various exchanges and may from time to time serve on the governing bodies and standing committees of such exchanges and their clearing houses. In addition, certain of the officers and employees of JWH, CIS and the Managing Owner may also be members of the committees of NFA. In such capacities these individuals have a fiduciary duty to the exchanges or organizations in which they serve and they are required to act in the best interests of such exchanges or organizations, even if such actions were to be adverse to the interest of the Trust. In addition, principals of such firms may devote portions of their time to other business activities unrelated to the business of those firms. THE SELLING AGENTS The Selling Agents may receive substantial selling commissions on the sale of Units. Consequently, the Selling Agents have a conflict of interest in advising the clients whether to invest in the Units. The Selling Agents may receive, beginning in the thirteenth month after each month-end sale of Units, ongoing compensation based on the Net Asset Value of Units sold by them which remain outstanding. Consequently, in advising clients whether to redeem their Units the Selling Agents will have a conflict of interest between their interest in maximizing the compensation which they will receive from the Trust and giving their clients the financial advice which the Selling Agents believe to be in such clients' best interests. The same conflict of interest extends to the Wholesalers and correspondents who distribute Units. INDEMNIFICATION AND STANDARD OF LIABILITY The Managing Owner and certain of its affiliates, officers, directors and controlling persons may not be liable to the Trust or any Unitholder for errors in judgment or other acts or omissions not amounting to misconduct or negligence, as a consequence of the indemnification and exculpatory provisions described in the following paragraph. Purchasers of Units may have more limited rights of action than they would absent such provisions. The Managing Owner and its affiliates shall not have any liability to the Trust or to any Unitholder for any loss suffered by the Trust which arises out of any action or inaction of the Managing Owner or any such affiliate if the Managing Owner or its affiliates, in good faith, determined that such course of conduct was in the best interests of the Trust, and such course of conduct did not constitute negligence or misconduct. The Trust has agreed to indemnify the Managing Owner and its affiliates, officers, directors and controlling persons against claims, losses or liabilities based on their conduct relating to the Trust, provided that the conduct resulting in the claims, losses or liabilities for which indemnity is sought did not constitute negligence, misconduct or breach of any fiduciary obligation to the Trust and was done in good faith and in a manner the Managing Owner, in good faith, determined to be in the best interests of the Trust. Affiliates of the Managing Owner are entitled to indemnity only for losses resulting from claims against such affiliates due solely to their relationship with the Managing Owner or for losses incurred by such affiliates in performing the duties of the Managing Owner. The Managing Owner, not the Trust, has agreed to indemnify the Selling Agents, Wholesalers and correspondents against claims, losses or liabilities arising out of the Managing Owner's breach of any representation or warranty contained in the Selling Agreement, or out of any untrue statement of material fact or omission to state a material fact in this Prospectus or any related promotional material. The Declaration and Agreement of Trust provides that the Managing Owner, its affiliates, the Selling Agents, Wholesalers and correspondents shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws unless (1) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee and the court approves indemnification of the litigation costs, or (2) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee and the court approves indemnification of the litigation costs, or (3) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and related costs should be made. -73- The Declaration and Agreement of Trust also provides that in any claim for indemnification for federal or state securities law violations, the party seeking indemnification is required to place before the court the position of the SEC and various state regulatory authorities that indemnification for securities law violations is void as against public policy. THE MANAGING OWNER MAY, DUE TO THE EXCULPATORY AND INDEMNITY PROVISIONS OF THE DECLARATION AND AGREEMENT OF TRUST, HAVE MORE FLEXIBILITY THAN THE MANAGING OWNER OTHERWISE WOULD TO RESOLVE THE FOREGOING CONFLICTS OF INTEREST IN A MANNER MORE FAVORABLE TO THE MANAGING OWNER THAN TO THE TRUST. FEDERAL INCOME TAX ASPECTS IN THE OPINION OF SIDLEY & AUSTIN, THE FOLLOWING SUMMARY CORRECTLY DESCRIBES THE MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES, AS OF THE DATE HEREOF, TO A UNITED STATES INDIVIDUAL TAXPAYER WHO INVESTS IN THE TRUST. THE OPINION OF SIDLEY & AUSTIN IS BASED, IN CERTAIN CASES, ON THE DESCRIPTION OF THE PROPOSED OPERATION OF THE TRUST CONTAINED IN THIS PROSPECTUS AND, IN CERTAIN CASES, IS SUBJECT TO THE UNCERTAINTIES DESCRIBED BELOW. THE TRUST'S TAX STATUS In the opinion of Sidley & Austin, the Trust will be classified as a partnership for federal income tax purposes assuming that, when the Units are sold to the public, the Managing Owner maintains a capitalization no less than that indicated in the audited financial statements included herein and that the Managing Owner makes capital contributions to the Trust in at least the amounts contemplated by this Prospectus -- which the Managing Owner intends to do. Consequently, the Unitholders individually, not the Trust itself, are subject to tax. The Managing Owner believes that all of the income expected to be generated by the Trust will constitute "qualifying income" and has so advised Sidley & Austin. As a result, in the opinion of Sidley & Austin, the Trust will not be subject to tax as a corporation under the provisions applicable to "publicly-traded partnerships." If the Trust were not treated as a partnership or if the Trust were subject to tax as a "publicly-traded partnership," the Trust as an entity would be subject to tax at the same tax rates applicable to corporations, distributions to Unitholders would be taxable to them as dividends to the extent of the current and accumulated earnings and profits of the Trust, and Unitholders would not be entitled to report their share of any deductions or loss of the Trust on their federal income tax returns. The remainder of this summary assumes that the Trust will be treated as a partnership and not as a "publicly-traded partnership." TAXATION OF UNITHOLDERS ON PROFITS AND LOSSES OF THE TRUST The Trust, as an entity, is not subject to federal income tax in the opinion of Sidley & Austin as described above. Consequently, with the exception of Unitholders who are not citizens or residents of the United States, each Unitholder is required for federal income tax purposes to take into account, in his or her taxable year with which or within which a taxable year of the Trust ends, his or her allocable share of all items of the Trust's income, gain (including unrealized gain from open futures and forward contracts and options "marked-to-market"), loss, deduction and other items for such taxable year of the Trust. A Unitholder must take such items into account even if the Trust does not make any distributions of cash or other property to such Unitholder. A Unitholder's share of such items for federal income tax purposes generally is determined by the allocations made pursuant to the Declaration and Agreement of Trust unless such items so allocated do not have "substantial economic effect" or are not in accordance with the Unitholders' interests in the Trust. Under the Declaration and Agreement of Trust, allocations are generally made in proportion to Unitholders' capital accounts (each Unit sharing equally in the Net Assets of the Trust), and therefore such allocations should have substantial economic effect. However, in cases in which a Unitholder redeems part or all of his or her interest in the Trust, the allocations of capital gain or loss specified in the Declaration and Agreement of Trust are not in proportion to capital accounts. Because such allocations are consistent with the economic effect of the Declaration and Agreement of Trust that bases the amount to be paid to a redeeming Unitholder upon his or her share of the realized and unrealized gains and losses at the time his or her Units are redeemed, the Managing Owner intends to file the Trust's tax return based upon the allocations specified in the Declaration and Agreement of Trust. In the opinion of Sidley & Austin, the foregoing allocations should be upheld if audited. Nevertheless, it is not certain that the IRS would agree that such allocations have substantial economic effect or are determined in accordance with the Unitholders' interests in the Trust. If such tax allocations were challenged and not -74- sustained, some or all of a redeeming Unitholder's capital gain or loss could be converted from short-term to long-term and each remaining Unitholder's share of the capital gain or loss that is the subject of such allocations would be increased (solely for tax purposes). LIMITATIONS ON DEDUCTIBILITY OF TRUST LOSSES BY UNITHOLDERS The amount of any loss (including capital loss) incurred by the Trust that a Unitholder is entitled to include in his or her personal income tax return is limited to his or her tax basis for his or her interest in the Trust as of the end of the Trust's taxable year in which such loss occurred. Generally, a Unitholder's tax basis for his or her interest in the Trust is the amount paid for such interest reduced (but not below zero) by his or her share of any distributions by the Trust, losses realized and expenses and increased by his or her share of the Trust's realized income, including gains. Similarly, a Unitholder that is subject to the "at risk" limitations (generally, non-corporate taxpayers and closely-held corporations) may not deduct losses of the Trust (including capital losses) to the extent that they exceed the amount he or she has "at risk" with respect to his or her interest in the Trust at the end of the year. The amount that a Unitholder has at risk will generally be the same as his or her adjusted basis as described above, except that it will not include any amount that he or she has borrowed on a nonrecourse basis or from a person who has an interest in the Trust or a person related to such person. Losses denied under the basis or at risk limitations are suspended and may be deducted in subsequent years, subject to these and other applicable limitations. Because of the limitations imposed upon the deductibility of capital losses (see "-- Tax on Capital Gains and Losses" below), a Unitholder's distributive share of any capital losses of the Trust will not materially reduce the federal income tax payable on his or her ordinary income (including his or her allocable share of the Trust's interest income). TREATMENT OF INCOME AND LOSS UNDER THE "PASSIVE ACTIVITY LOSS RULES" The Code contains rules (the "Passive Activity Loss Rules") designed to prevent the deduction of losses from "passive activities" against income not derived from such activities, including income from investment activities not constituting a trade or business, such as interest and dividends ("Portfolio Income"), and salary. The trading activities of the Trust will not constitute a "passive activity," with the result that income derived from such activities will constitute Portfolio Income or other income not from a passive activity. Thus, losses resulting from a Unitholder's "passive activities" cannot be offset against such income, and net losses from the Trust's operations will be deductible in computing the taxable income of such Unitholder (subject to other limitations on the deductibility of such losses, in particular the annual limitation applicable to non-corporate investors that no more than $3,000 of capital losses can be deducted against ordinary income). CASH DISTRIBUTIONS AND REDEMPTIONS OF UNITS Cash received from the Trust by a Unitholder as a distribution with respect to his or her Units (including distributions of any Brokerage Fee Excess) or in redemption of less than all of his or her Units generally is not reportable as taxable income by such Unitholder, except as described below. Rather, such distribution or redemption reduces (but not below zero) the total tax basis of all of the Units held by the Unitholder after the distribution or redemption. Any cash distribution in excess of a Unitholder's adjusted tax basis for all of his or her Units is taxable to him or her as gain from the sale or exchange of such Units and, assuming that the Unitholder has held his or her Units for more than one year, will be long-term capital gain. Redemption for cash of the entire interest held by a Unitholder will result in the recognition of gain or loss for federal income tax purposes. Such gain or loss will be equal to the difference, if any, between the amount of the cash distribution and the Unitholder's adjusted tax basis for his or her Units. Assuming that the Unitholder has held his or her Units for more than one year, any gain or loss on their redemption will be long-term capital gain or loss. GAIN OR LOSS ON SECTION 1256 CONTRACTS Under the "mark-to-market" system of taxing futures and futures options contracts traded on United States exchanges and certain foreign currency forward contracts ("Section 1256 Contracts"), any unrealized profit or loss on positions in such Section 1256 Contracts which are open as of the end of a taxpayer's fiscal year is treated as if such profit or loss had been realized for tax purposes as of such time. If an open position on which profit or loss has been realized as of the end of a fiscal year declines in value after such year-end and before the position is in fact offset, a loss is -75- recognized for tax purposes at the end of the fiscal year in which the value declines (irrespective of the fact that the taxpayer may actually have realized a gain on the position considered from the time that such position was initiated). The converse is the case with an open position on which a "mark-to-market" loss was recognized for tax purposes as of the end of a fiscal year but which subsequently increases in value prior to being offset. In general, 60% of the net gain or loss which is generated as a result of the "mark-to-market" system is treated as long-term capital gain or loss, and the remaining 40% of such net gain or loss is treated as short-term capital gain or loss. GAIN OR LOSS ON NON-SECTION 1256 CONTRACTS Except as described below with respect to Section 988 transactions entered into by a qualified fund, gain or loss with respect to contracts that are non-Section 1256 Contracts will generally be taken into account for tax purposes only when realized. TAXATION OF FOREIGN CURRENCY TRANSACTIONS Foreign currency transactions ("Section 988 transactions") include entering into or acquiring any forward contract, futures contract or similar instrument if the amount paid or received is denominated in terms of a nonfunctional currency or determined by reference to the value of one or more nonfunctional currencies. In general, foreign currency gain or loss on Section 988 transactions is characterized as ordinary income or loss except that gain or loss on regulated futures contracts or non-equity options on foreign currencies which are Section 1256 Contracts is characterized as capital gain or loss. If the Trust is eligible, the Trust will make a qualified fund election. Pursuant to such qualified fund election, gain or loss with respect to certain Section 988 transactions, other than those described in Section 1256 which would be taxed as described above under "-- Gain or Loss on Section 1256 Contracts," would be short-term capital gain or loss. In addition, all such transactions would be subject to the "mark-to-market" rules (see "-- Gain or Loss on Section 1256 Contracts," above). If the Trust so elects but fails to meet the requirements of electing qualified fund status in a taxable year, (i) net loss recognized by the Trust in such taxable year with respect to certain forward contracts, futures contracts and options with respect to foreign currency trades by the Trust will be characterized as a capital loss, and (ii) net gain recognized by the Trust in such taxable year with respect to certain contracts will be characterized as ordinary income. TAX ON CAPITAL GAINS AND LOSSES Net capital gains (I.E., the excess of net long-term capital gain over net short-term capital loss) will be taxed for non-corporate taxpayers at a maximum rate of 28% and for corporate taxpayers at the same rates as other income. See "-- Limitation on Deductibility of Interest on Investment Indebtedness" below (for a discussion of the reduction in the amount of a non-corporate taxpayer's net capital gain for a taxable year to the extent such gain is taken into account by such taxpayer as investment income). Capital losses are deductible by non-corporate taxpayers only to the extent of capital gains for the taxable year plus $3,000. See "Risk Factor (28) -- Taxation of Interest Income Irrespective of Trading Losses." If a non-corporate taxpayer incurs a net capital loss for a year, the portion thereof, if any, which consists of a net loss on Section 1256 Contracts may, at the election of the taxpayer, be carried back three years. Losses so carried back may be deducted only against net capital gain for such year to the extent that such gain includes gains on Section 1256 Contracts. Losses so carried back will be deemed to consist of 60% long-term capital loss and 40% short-term capital loss (see "-- Gain or Loss on Section 1256 Contracts" above). To the extent that such losses are not used to offset gains on Section 1256 Contracts in a carryback year, they will carry forward indefinitely as losses on Section 1256 Contracts in future years. LIMITED DEDUCTION FOR CERTAIN EXPENSES The Code provides that, for non-corporate taxpayers who itemize deductions when computing taxable income, expenses of producing income, including "investment advisory fees," are aggregated with unreimbursed employee business expenses, other expenses of producing income and certain other deductions (collectively, "Aggregate Investment Expenses"), and that the aggregate amount of such expenses is deductible only to the extent that such amount exceeds 2% of a non-corporate taxpayer's adjusted gross income (the "2% Floor"). In addition, Aggregate Investment Expenses in excess of the 2% Floor, when combined with certain of a taxpayer's other miscellaneous deductions, are subject to a reduction equal to, generally, 3% of the taxpayer's adjusted gross income in excess of a certain threshold amount (the "3% Phase Out"). Moreover, such Aggregate Investment Expenses are miscellaneous itemized deductions which are not deductible by a non-corporate taxpayer in calculating its alternative minimum tax. -76- The Managing Owner intends to treat the ordinary expenses of the Trust as ordinary business deductions not subject to the 2% Floor or the 3% Phase Out. It is the standard practice in the managed futures industry to treat such charges as not being subject to the 2% Floor or the 3% Phase Out, and the Managing Owner will not treat any of such charges as being subject to such Floor or Phase Out. Based on the trading activities of the Trust, in the opinion of Sidley & Austin, the Trust should be treated as engaged in the conduct of a trade or business for federal income tax purposes, and, as a result, the ordinary and necessary business expenses incurred by the Trust in conducting its commodity futures trading business should not be subject to the 2% Floor or the 3% Phase-Out. Investors should be aware that an opinion of counsel is not binding on the IRS or on any court and it is possible that the IRS could contend, or that a court could decide, that the contemplated trading activities of the Trust do not constitute a trade or business for federal income tax purposes. To the extent the characterization of certain of the Trust's expenses as "investment advisory fees" were to be sustained, each non-corporate Unitholder's PRO RATA share of the amounts so characterized would be deductible only to the extent that such non-corporate Unitholder's Aggregate Investment Expenses exceeded the 2% Floor and, when combined with certain other itemized deductions, exceeded the 3% Phase-Out. In addition, each non-corporate Unitholder's distributive share of the Trust's income would be increased (solely for tax purposes) by such Unitholder's PRO RATA share of the amounts so recharacterized. Any such recharacterization could require Unitholders to pay additional taxes, interest and penalties. (See "-- IRS Audits of the Trust and Its Unitholders.") INTEREST INCOME Interest received by the Trust, as well as on subscriptions while held in escrow, will be taxed as ordinary income. The trading by the Trust is expected to generate almost exclusively capital gain or loss. Capital losses can be deducted against ordinary income, in the case of non-corporate taxpayers, only to the extent of $3,000 per year. Accordingly, the Trust could incur significant capital losses but an investor, nevertheless, could be required to pay substantial taxes in respect of such investor's allocable share of the Trust's interest income and other ordinary income. See "Risk Factor (28) -- Taxation of Interest Income Irrespective of Trading Losses." SYNDICATION EXPENSES Neither the Trust nor any Unitholder will be entitled to any deduction for syndication expenses, nor can these expenses be amortized by the Trust or any Unitholder, even though the payment of such expenses will reduce Net Asset Value. All of the initial offering costs for which CISI is being reimbursed by the Trust and the redemption charge of 3% of the Net Asset Value per Unit assessed on Units redeemed at or prior to the end of the eleventh full month after issuance constitute non-deductible, non-amortizable, syndication expenses. The Trust will elect to amortize its organizational costs for tax purposes over a 60-month period. The amount of such costs which are permitted to be amortized for tax purposes is expected to be de minimis. The IRS could take the position that a portion of the Brokerage Fee paid to CIS constitutes non-deductible syndication expenses. LIMITATION ON DEDUCTIBILITY OF INTEREST ON INVESTMENT INDEBTEDNESS Interest paid or accrued on indebtedness properly allocable to property held for investment constitutes "investment interest." Interest expense incurred by a Unitholder to acquire or carry his or her Units (as well as other investments) will constitute "investment interest." Such interest is generally deductible by non-corporate taxpayers only to the extent that it does not exceed net investment income (that is, generally, the excess of (i) gross income from interest, dividends, rents and royalties, which would include a Unitholder's share of the Trust's interest income, and (ii) certain gains from the disposition of investment property, over the expenses directly connected with the production of such investment income). Any investment interest expense disallowed as a deduction in a taxable year solely by reason of the above limitation is treated as investment interest paid or accrued in the succeeding taxable year. A non-corporate taxpayer's net capital gain from the disposition of investment property is included in clause (ii) of the second preceding sentence only to the extent such taxpayer elects to make a corresponding reduction in the amount of net capital gain that is subject to tax at the maximum 28% rate described above. (See "--Tax on Capital Gains and Losses" above.) -77- TAXATION OF FOREIGN INVESTORS A Unitholder who is a non-resident alien individual, foreign corporation, foreign partnership, foreign trust or foreign estate (a "Foreign Unitholder") generally is not subject to taxation by the United States on capital gains from commodity trading, provided that such Foreign Unitholder (in the case of an individual) does not spend more than 182 days in the United States during his or her taxable year, and provided further, that such Foreign Unitholder is not engaged in a trade or business within the United States during a taxable year to which income, gain, or loss is treated as "effectively connected." An investment in the Trust should not, by itself, cause a Foreign Unitholder to be engaged in a trade or business within the United States for the foregoing purposes, assuming that the trading activities of the Trust will be conducted as described in this Prospectus. Pursuant to a "safe harbor" in the Code, an investment fund which trades commodities for its own account should not be treated as engaged in a trade or business within the United States provided that such investment fund is not a dealer in commodities and that the commodities traded are of a kind customarily dealt in on an organized commodity exchange. The Managing Owner has advised Sidley & Austin of the contracts that the Trust will trade. Based on a review of such contracts as of the date of this Prospectus, the Trust has been advised by its counsel, Sidley & Austin, that such contracts should satisfy the safe harbor. If the contracts traded by the Trust in the future were not covered by the safe harbor, there is a risk that the Trust would be treated as engaged in a trade or business within the United States. In the event that the Trust were found to be engaged in a United States trade or business, a Foreign Unitholder would be required to file a United States federal income tax return for such year and pay tax at full United States rates. In the case of a Foreign Unitholder which is a foreign corporation, an additional 30% "branch profits" tax might be imposed. Furthermore, in such event the Trust would be required to withhold taxes from the income or gain allocable to such a Unitholder under Section 1446 of the Code. A Foreign Unitholder is not subject to United States tax on certain interest income, including income attributable to (i) original issue discount on Treasury bills having a maturity of 183 days or less or (ii) commercial bank deposits, provided, in either case, that such Foreign Unitholder is not engaged in a trade or business within the United States during a taxable year. Additionally, a Foreign Unitholder, not engaged in a trade or business within the United States, is not subject to United States tax on interest income (other than certain so-called "contingent interest") attributable to obligations issued after July 18, 1984 that are in registered form if the Foreign Unitholder provides the Trust with a Form W-8. "UNRELATED BUSINESS TAXABLE INCOME" Income earned by the Trust does not constitute "unrelated business taxable income" under Section 511 of the Code to employee benefit plans and other tax-exempt entities which purchase Units, provided that the Units purchased by such plans and entities are not "debt-financed" and provided further that the assets acquired by the Trust are not debt financed. IRS AUDITS OF THE TRUST AND ITS UNITHOLDERS The tax treatment of Trust-related items is determined at the Trust level rather than at the Unitholder level. CISI is the Trust's "tax matters partner" with the authority to determine the Trust's responses to an audit, except that CISI does not have the authority to settle tax controversies on behalf of any Unitholder who files a statement with the IRS stating that CISI has no authority to do so. The limitations period for assessment of deficiencies and claims for refunds with respect to items related to the Trust is three years after the Trust's return for the taxable year in question is filed, and CISI has the authority to, and may, extend such period with respect to all Unitholders. If an audit results in an adjustment, Unitholders may be required to pay additional taxes, plus interest, and possibly tax penalties. There can be no assurance that the Trust's or a Unitholder's tax return will not be audited by the IRS or that no adjustments to such returns will be made as a result of such an audit. STATE AND OTHER TAXES In addition to the federal income tax consequences described above, the Trust and the Unitholders may be subject to various state and other taxes. Certain of such taxes could, if applicable, have a significant effect on the amount of tax payable in respect of an investment in the Trust. For example, the Trust may be subject to a 1.5% Personal Property Replacement Tax in Illinois. Such tax is imposed on the net income of the Trust allocable to Illinois. Unitholders must consult their own advisers regarding the possible applicability of state, local or municipal taxes to an investment in the Trust. _____________________ -78- Except as otherwise set forth, the foregoing statements regarding the federal income tax consequences to Unitholders of an investment in the Trust are based upon the provisions of the Code as currently in effect and the existing administrative and judicial interpretations thereunder. No assurance can be given that administrative, judicial or legislative changes will not occur that would make the foregoing statements incorrect. THE FOREGOING DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING, PARTICULARLY SINCE CERTAIN OF THE INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE TRUST MAY NOT BE THE SAME FOR ALL TAXPAYERS. ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS WITH SPECIFIC REFERENCE TO THEIR OWN TAX SITUATION UNDER FEDERAL LAW AND THE PROVISIONS OF APPLICABLE STATE AND OTHER LAWS BEFORE DETERMINING WHETHER TO SUBSCRIBE FOR UNITS. PURCHASES BY EMPLOYEE BENEFIT PLANS ALTHOUGH THERE CAN BE NO ASSURANCE THAT AN INVESTMENT IN THE TRUST, OR ANY OTHER MANAGED FUTURES PRODUCT, WILL ACHIEVE THE INVESTMENT OBJECTIVES OF AN EMPLOYEE BENEFIT PLAN, SUCH INVESTMENTS HAVE CERTAIN FEATURES WHICH MAY BE OF INTEREST TO SUCH PLANS. AS A MATTER OF POLICY, THE MANAGING OWNER LIMITS SUBSCRIPTIONS TO THE TRUST FROM ANY EMPLOYEE BENEFIT PLAN TO NO MORE THAN 10% OF THE "LIQUID" NET ASSETS OF SUCH PLAN AT THE TIME OF INVESTMENT (IRRESPECTIVE OF THE NET WORTH OF THE BENEFICIARY OR BENEFICIARIES OF SUCH PLAN). GENERAL The following section sets forth certain consequences under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, which a fiduciary of an "employee benefit plan" as defined in and subject to ERISA or of a "plan" as defined in Section 4975 of the Code who has investment discretion should consider before deciding to invest any of the plan's assets in the Trust (such "employee benefit plans" and "plans" being referred to herein as "Plans," and such fiduciaries with investment discretion being referred to herein as "Plan Fiduciaries"). The following summary is not intended to be complete, but only to address certain questions under ERISA and the Code which are likely to be raised by the Plan Fiduciary's own counsel. In general, the terms "employee benefit plan" as defined in ERISA and "plan" as defined in Section 4975 of the Code together refer to any plan or account of various types which provide retirement benefits or welfare benefits to an individual or to an employer's employees and their beneficiaries. Such plans and accounts include, but are not limited to, corporate pension and profit sharing plans, "simplified employee pension plans," KEOGH plans for self-employed individuals (including partners), individual retirement accounts described in Section 408 of the Code and medical benefit plans. Each Plan Fiduciary must give appropriate consideration to the facts and circumstances that are relevant to an investment in the Trust, including the role that an investment in the Trust plays in the Plan's overall investment portfolio. Each Plan Fiduciary, before deciding to invest in the Trust, must be satisfied that investment in the Trust is prudent for the Plan, that the investments of the Plan, including the investment in the Trust, are diversified so as to minimize the risk of large losses and that an investment in the Trust complies with the terms of the Plan and the related trust. EACH PLAN FIDUCIARY CONSIDERING ACQUIRING UNITS MUST CONSULT WITH ITS OWN LEGAL AND TAX ADVISERS BEFORE DOING SO. AN INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. THE TRUST IS NOT INTENDED AS A COMPLETE INVESTMENT PROGRAM. "PLAN ASSETS" A regulation issued under ERISA (the "ERISA Regulation") contains rules for determining when an investment by a Plan in an equity interest of an entity will result in the underlying assets of the entity being assets of the Plan for purposes of ERISA and Section 4975 of the Code (I.E., "plan assets"). Those rules provide that assets of an entity will not be considered assets of a Plan which purchases an equity interest in the entity if certain exceptions apply, including an exception applicable if the equity interest purchased is a "publicly-offered security" (the "Publicly-Offered Security Exception"). -79- The Publicly-Offered Security Exception applies if the equity interest is a security that is (1) "freely transferable," (2) part of a class of securities that is "widely held" and (3) either (a) part of a class of securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, or (b) sold to the Plan as part of a public offering pursuant to an effective registration statement under the Securities Act of 1933 and the class of which such security is a part is registered under the Securities Exchange Act of 1934 within 120 days (or such later time as may be allowed by the Securities and Exchange Commission) after the end of the fiscal year of the issuer in which the offering of such security occurred. The ERISA Regulation states that the determination of whether a security is "freely transferable" is to be made based on all relevant facts and circumstances. The ERISA Regulation specifies that, in the case of a security that is part of an offering in which the minimum investment is $10,000 or less, the following requirements, alone or in combination, ordinarily will not affect a finding that the security is freely transferable: (i) a requirement that no transfer or assignment of the security or rights in respect thereof be made that would violate any federal or state law; (ii) a requirement that no transfer or assignment be made without advance written notice given to the entity that issued the security; and (iii) any restriction on substitution of an assignee as "a limited partner of a partnership, including a general partner consent requirement, provided that the economic benefits of ownership of the assignor may be transferred or assigned without regard to such restriction or consent" (other than compliance with any of the foregoing restrictions). Under the ERISA Regulation, a class of securities is "widely held" only if it is of a class of securities owned by 100 or more investors independent of the issuer and of each other. A class of securities will not fail to be widely held solely because subsequent to the initial offering the number of independent investors falls below 100 as a result of events beyond the issuer's control. The Managing Owner expects that the Publicly Offered Security Exception will apply with respect to the Units. First, the Units are being sold only as part of a public offering pursuant to an effective registration statement under the Securities Act of 1933, and the Units will be timely registered under the Securities Exchange Act of 1934. Second, it appears that the Units are freely transferable because the minimum investment is not more than $5,000 and Unitholders may assign their Units by giving written notice to the Managing Owner, provided such assignment would not violate any federal or state securities laws and would not adversely affect the tax status of the Trust. If the Managing Owner withholds consent, a Unitholder may assign such Unitholder's share of capital and profits and rights of redemption. As described in the preceding paragraph, the ERISA Regulation provides that if a security is part of an offering in which the minimum investment is $10,000 or less, a restriction on substitution of a limited partner in a partnership, including a general partner consent requirement, will not prevent a finding that the security is freely transferable, provided that the economic benefit of ownership can be transferred without such consent. Although this provision, read literally, applies only to partnerships, the Managing Owner believes that because the determination as to whether a security is freely transferable is based on the facts and circumstances, the fact that the Units, which are issued by a trust rather than a partnership, have an identical restriction should not affect a finding that the Units are freely transferable. Third, the Managing Owner expects that immediately after the initial offering, the Units will be owned by at least 100 investors independent of the Trust and of each other. Therefore, the underlying assets of the Trust should not be considered to constitute assets of any Plan which purchases Units. INELIGIBLE PURCHASERS Units may not be purchased with the assets of a Plan if the Managing Owner, the Trustee, JWH, CIS, CISFS, any Selling Agent (including any wholesaler or correspondent), any Futures Broker, The First National Bank of Chicago or any of their respective affiliates or any of their respective agents or employees: (a) has investment discretion with respect to the investment of such Plan assets; (b) has authority or responsibility to give or regularly gives investment advice with respect to such Plan assets, for a fee, and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to such Plan assets and that such advice will be based on the particular investment needs of the Plan; or (c) is an employer maintaining or contributing to such Plan. A party that is described in clause (a) or (b) of the preceding sentence is a fiduciary under ERISA and the Code with respect to the Plan, and any such purchase might result in a "prohibited transaction" under ERISA and the Code. Except as otherwise set forth, the foregoing statements regarding the consequences under ERISA and the Code of an investment in the Trust are based on the provisions of the Code and ERISA as currently in effect, and the existing administrative and judicial interpretations thereunder. No assurance can be given that administrative, judicial or legislative changes will not occur that will not make the foregoing statements incorrect or incomplete. ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF PLANS IS IN NO RESPECT A REPRESENTATION BY THE TRUST, CISI, JWH, CIS, CISFS, ANY SELLING AGENT OR ANY OTHER PARTY THAT THIS INVESTMENT MEETS SOME OR ALL OF THE RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR PLAN OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR PLAN. THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH HIS OR HER ATTORNEY AND FINANCIAL ADVISERS AS TO THE PROPRIETY OF AN -80- INVESTMENT IN THE TRUST IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR PLAN AND CURRENT TAX LAW. THE FUTURES AND FORWARD MARKETS FUTURES AND FORWARD CONTRACTS Commodity futures contracts in the United States are required to be made on approved commodity exchanges and call for the future delivery of various commodities at a specified time and place. These contractual obligations, depending on whether one is a buyer or a seller, may be satisfied either by taking or making physical delivery of an approved grade of the particular commodity (or, in the case of some contracts, by cash settlement) or by making an offsetting sale or purchase of an equivalent commodity futures contract on the same exchange prior to the designated date of delivery. Currencies and cash bullion and other precious metals may be purchased or sold for future delivery through banks or dealers pursuant to what are commonly referred to as "forward contracts." In such instances, the bank or dealer generally acts as principal in the transaction and includes its anticipated profit and the costs of the transaction in the prices it quotes for such contract; such mark-ups are known as "bid-ask" spreads. Brokerage commissions are typically not charged in forward trading. (The level of the Trust's Brokerage Fee is, however, unaffected by the number of forward trades it executes.) HEDGERS AND SPECULATORS The two broad classifications of persons who trade in commodity futures are "hedgers" and "speculators." Commercial interests that market or process commodities use the futures markets to a significant extent for hedging. Hedging is a protective procedure designed to minimize losses that may occur because of price fluctuations, for example, between the time a merchandiser or processor makes a contract to sell a raw or processed commodity and the time he or she must perform the contract. The commodity markets enable the hedger to shift the risk of price fluctuations to the speculator. The speculator, unlike the hedger, generally expects neither to deliver nor receive the physical commodity; rather, the speculator risks his or her capital with the hope of making profits from price fluctuations in commodity futures contracts. Speculators rarely take delivery of physical commodities but rather close out their futures positions by entering into offsetting purchases or sales of futures contracts. COMMODITY EXCHANGES Commodity exchanges provide centralized market facilities for trading in futures contracts relating to specified commodities. Each of the commodity exchanges in the United States has an associated "clearinghouse." Once trades made between members of an exchange have been confirmed, the clearinghouse becomes substituted for the clearing member acting on behalf of each buyer and each seller of contracts traded on the exchange and in effect becomes the other party to the trade. Thereafter, each clearing member firm party to the trade looks only to the clearinghouse for performance. Clearinghouses do not deal with customers, but only with member firms, and the "guarantee" of performance under open positions provided by the clearinghouse does not run to customers. If a customer's commodity broker becomes bankrupt or insolvent, or otherwise defaults on such broker's obligations to such customer, the customer in question may not receive all amounts owing to such customer in respect of his or her trading, despite the clearinghouse fully discharging all of its obligations. The Trust will trade on foreign commodity exchanges. Foreign commodity exchanges differ in certain respects from their United States counterparts and are not subject to regulation by any United States governmental agency. Therefore, the protections afforded by such regulation will not be available to the Trust in its trading on such exchanges. For example, in contrast to United States exchanges, many foreign exchanges are "principals' markets," where trades remain the liability of the traders involved and the exchange or clearinghouse does not become substituted for any party. Certain foreign exchanges also have no position limits, with each dealer, acting individually, establishing the size of the positions it will permit traders to hold. -81- The Trust will engage, to a substantial extent, in transactions on foreign exchanges, and in doing so will be subject to the risks of trading in principals' markets as well as the risk of fluctuations in the exchange rates between the currencies in which the contracts traded on such foreign exchanges are denominated and United States dollars (as well as the possibility that exchange controls could be imposed in the future). SPECULATIVE POSITION AND DAILY LIMITS The CFTC and the United States exchanges have established limits, referred to as "speculative position limits," on the maximum net long or net short position that any person (other than a hedger) may hold or control in futures contracts or options on particular commodities. These limits may restrict JWH's ability to acquire positions which it otherwise would acquire on behalf of the Trust, particularly in certain non-financial commodities, such as energy, metals and agriculture. Most United States exchanges limit by regulations the maximum permissible fluctuation in commodity futures contract prices during a single trading day. These regulations specify what are commonly referred to as "daily limits." Daily limits establish the maximum amount by which the price of a futures contract may vary either up or down from the previous day's settlement price at the end of the trading session. Because daily limits apply only on a day-to-day basis, they do not limit ultimate losses, and may cause illiquidity in certain markets which results in substantial losses to the Trust which JWH is powerless to limit or prevent. MARGIN Margin represents a security deposit to assure futures traders' performance under their open positions. When a position is established, "initial margin" is deposited and at the close of each trading day "variation margin" is either credited or debited from a trader's account, representing the unrealized gain or loss on open positions during the day. If "variation margin" payments cause a trader's "initial margin" to fall below "maintenance margin" levels, a "margin call" will be made requiring the trader to deposit additional margin or have his or her position closed out. FUTURES TRADING METHODS IN GENERAL SYSTEMATIC AND DISCRETIONARY TRADING APPROACHES Speculative futures strategies may generally be classified as either systematic or discretionary. A systematic trader will generally rely to some degree on judgmental decisions concerning, for example, what markets to follow and commodities to trade, when to liquidate a position in a contract which is about to expire and how large a position to take in a particular commodity. However, although these judgmental decisions may have a substantial effect on a systematic trading advisor's performance, his or her primary reliance is on trading programs or models which generate trading signals. The systems utilized to generate trading signals are changed from time to time (although generally infrequently), but the trading instructions generated by the systems being used are followed without significant additional analysis or interpretation. Discretionary traders, on the other hand, while they may utilize market charts, computer programs and compilations of quantifiable fundamental information to assist them in making trading decisions, make such decisions on the basis of their own judgment and "trading instinct," not on the basis of trading signals generated by any program or model. Each approach involves certain inherent risks. For example, systematic traders may incur substantial losses when fundamental or unexpected forces dominate the markets, while discretionary traders may overlook price trends which would have been clearly signaled by a trading system. Any trading system or trader may suffer substantial losses by misjudging the market, whether as a result of systematic or discretionary analysis. Systematic traders tend to rely more on computerized programs than do discretionary traders, and some consider the discipline of systematic trading, which largely removes the emotion of the individual trader from the trading process, advantageous. In addition, due to their use of computers, systematic traders are generally able to incorporate more data into a particular trading decision than can discretionary traders. On the other hand, trading systems may suffer rapid and severe losses due to their inability to respond to actual or anticipated events directly influencing market prices until such events have had a sufficient effect on the market to create a trend of sufficient magnitude to cause their trading systems to generate trading signals, by which time a precipitous price change may already be in progress, resulting in substantial losses or missed profit opportunities. -82- TECHNICAL AND FUNDAMENTAL ANALYSIS In addition to being distinguished from one another by the criterion of whether they trade systematically or on the basis of their discretionary evaluations of the markets, commodity trading advisors are also distinguished as relying on either "technical" or "fundamental" analysis, or on a combination of the two. Technical analysis is not based on anticipated supply and demand factors but instead on the theory that the study of the commodities markets themselves will provide a means of anticipating future prices. Technical analysis operates on the theory that market prices and momentum at any given point in time reflect all known factors affecting the supply and demand for a particular commodity. Consequently, technical analysis focuses not on evaluating those factors directly but on an analysis of price histories, movements and patterns, theorizing that a detailed analysis of, among other things, actual daily, weekly and monthly price fluctuations, volume variations and changes in open interest is the most effective means of attempting to predict the future course of prices. Fundamental analysis, in contrast, focuses on the study of factors external to the trading markets that affect the supply and demand of a particular commodity in an attempt to predict future price levels. Such factors might include weather, the economy of a particular country, government policies, domestic and foreign political and economic events, and changing trade prospects. Fundamental analysis theorizes that by monitoring relevant supply and demand factors for a particular commodity, a state of current or potential disequilibrium of market conditions may be identified that has yet to be reflected in the price level of that commodity. Fundamental analysis assumes that markets are imperfect, that information is not instantaneously assimilated or disseminated and that econometric models can be constructed that generate equilibrium prices that may indicate that current prices are inconsistent with underlying economic conditions and will, accordingly, change in the future. Systematic traders tend to rely on technical analysis, because the data relevant to such analysis is more susceptible to being isolated and quantified to the extent necessary to be successfully incorporated into a program or mathematical model than is most "fundamental" information, but there is no inconsistency in attempting to trade systematically on the basis of fundamental analysis. The fundamental information which can be evaluated by a formalized trading system is, however, limited to some extent in that it generally must be quantifiable in order to be processed by such a system. TREND-FOLLOWING "Trend-following" advisors gear their trading approaches towards positioning themselves to take advantage of major price movements, as opposed to traders who seek to achieve overall profitability by making numerous small profits on short-term trades, or through arbitrage techniques. "Trend-following" traders assume that most of their trades will be unprofitable. Their objective is to make a few large profits, more than offsetting their more numerous but (hopefully) smaller losses, from capitalizing on major trends. Consequently, during periods when no major price trends develop in a market, a "trend-following" trading advisor is likely to incur substantial losses. JWH is a "trend-follower," and historically only approximately 30% to 40% of JWH's trades have been profitable. See "John W. Henry & Company, Inc. -- Trading Techniques." THE TRADING PROGRAMS ARE TECHNICAL, TREND-FOLLOWING SYSTEMS The Trading Programs are each highly systematic and technical and rely on trend-following strategies. Although the markets traded by the two Trading Programs vary somewhat, as do the Trading Programs themselves, the same general principles underlie these trading systems, and there is a significant overlap in the markets traded by such Trading Programs. See "John W. Henry & Company, Inc. -- Trading Techniques." Trading methods are both confidential and continually evolving. Prospective investors as well as existing Unitholders will generally not be informed of any change in a Trading Program, unless the Managing Owner is informed of such change, which will only occur (if at all) if JWH considers such change to be material. In addition to the continually evolving character of trading methods, the commodity markets themselves are continually changing. JWH may, in its sole discretion, elect to trade any available futures, forward or commodity options -- both on United States markets and abroad -- even if JWH has never previously traded in that particular market. -83- PLAN OF DISTRIBUTION SUBSCRIPTION PROCEDURE The Units are offered to the public -- on a "best efforts," minimum/maximum basis -- for an Initial Offering Period ending on or before ______ __, 1997, subject to extension until up to ________ __, 1997 in the discretion of the Managing Owner. If subscriptions for at least 100,000 Units are not accepted during the Initial Offering Period, no Units will be sold, all subscriptions will be promptly returned to investors (or, if applicable, to the appropriate Selling Agent for credit to an investor's customer securities account) with all interest earned thereon while held in escrow and the Trust will dissolve. In a best efforts, minimum/maximum offering there is no assurance that the minimum amount of capital necessary to begin operations will be raised, so that subscribers during the Initial Offering Period may commit their subscriptions to escrow without ultimately having an opportunity to invest. During the Initial Offering Period, Units are offered to subscribers at $100 per Unit. During the Ongoing Offering Period after the Trust commences trading, Units will be sold at Net Asset Value as of the close of business on the last business day of each calendar month. The minimum initial investment is $5,000; $2,000 for trustees or custodians of eligible employee benefit plans and individual retirement accounts. Subscriptions in excess of these minimums are permitted in $100 increments. Additional subscriptions by existing Unitholders are permitted in $1,000 minimums with $100 increments. Units are sold in fractions calculated to five decimal places. In order to purchase Units, an investor must complete, execute and deliver to a Selling Agent an original of the Subscription Agreement and Power of Attorney Signature Page which accompanies this Prospectus, together with a check for the amount of his or her subscription. Checks should be made payable to "FNBC, ESCROW AGENT FOR JWH GLOBAL PORTFOLIO TRUST" Subscription payments by clients of certain Selling Agents may be made by authorizing the Selling Agents to debit a subscriber's customer securities account with the amount of the subscription. When a subscriber authorizes such a debit, the subscriber will be required to have the amount of his or her subscription payment on deposit in his or her account on a settlement date specified by such Selling Agent. The account will be debited, and amounts so debited will be transmitted directly to The First National Bank of Chicago by such Selling Agent via Selling Agent check or wire transfer made payable to "FNBC, ESCROW AGENT FOR JWH GLOBAL PORTFOLIO TRUST" on such settlement date for deposit in the escrow account of the Trust. The Managing Owner will determine, in its sole discretion, whether to accept or reject a subscription in whole or in part. Such determination is made within five business days of the submission of a subscription to the Managing Owner. Settlement of the subscription payments on accepted subscriptions is made within three business days of acceptance of the related subscription. Subscription documents must generally be received at least ten business days before the termination of the Initial Offering Period and, during the Ongoing Offering Period, on or before the 20th of a month (or, if the 20th is not a business day, the next business day) in order to be accepted as of the last day of the month. Subscription funds are invested in short-term United States Treasury bills or comparable authorized instruments while held in escrow pending investment in the Units and will earn interest at the applicable rates paid on these instruments. Escrow interest is allocated PRO RATA among all subscribers during a particular escrow period based on the amount of their respective subscriptions and the length of time on deposit in escrow. Interest actually earned on subscriptions while held in escrow will be invested in the Fund, and investors will be issued additional Units reflecting each investor's allocable share of such interest. No fees are charged on any subscriptions while held in escrow. Subscribers are notified prior to any return of their subscriptions, and the amounts returned to them shall in no event be reduced by any deductions for fees or expenses. Subscriptions, if rejected, will be promptly returned to investors directly or, if applicable, to the appropriate Selling Agent for credit to an investor's customer securities account, together with all interest earned thereon while held in escrow. No subscriptions are final or binding on a subscriber until the close of business on the fifth business day following such subscriber's receipt of a final Prospectus. -84- CISI will advance the Trust's organizational and initial offering costs (estimated at approximately $500,000-$600,000), for which CISI will be reimbursed by the Trust at the initial closing. The Trust will amortize such costs over the first 60 months of its operations, up to a limit at each month-end of 1/60 of 2% of the Trust's Net Assets as of such month-end. CISI will return to the Trust any unamortized amount at the end of the amortization period or earlier termination of the Trust. See "Charges -- Organizational and Initial Offering Costs." SUBSCRIBERS' REPRESENTATIONS AND WARRANTIES By executing a Subscription Agreement and Power of Attorney Signature Page, such subscriber is representing and warranting, among other things, that: (i) the subscriber is of legal age to execute and deliver the Subscription Agreement and Power of Attorney and has full power and authority to do so; (ii) the subscriber has read and understands "Exhibit B -- Subscription Requirements" of this Prospectus and meets or exceeds the applicable suitability criteria of net worth and annual income set forth therein; and (iii) the subscriber has received a copy of this Prospectus. These representations and warranties might be used by the Managing Owner or others against a subscriber in the event that the subscriber were to take a position inconsistent therewith. While the foregoing representations and warranties will be binding on subscribers, the Managing Owner believes that to a large extent such representations and warranties would be implied from the fact that an investor has subscribed for Units. NONETHELESS, NO PROSPECTIVE SUBSCRIBER WHO IS NOT PREPARED TO MAKE SUCH REPRESENTATIONS AND WARRANTIES, AND TO BE BOUND BY THEM, SHOULD CONSIDER INVESTING IN THE UNITS. THE SELLING AGENTS No selling commissions are paid from the proceeds of this offering. The Selling Agents are paid selling commissions by CIS of up to 4% of the subscription price of all Units sold by each Selling Agent. In addition to selling commissions, CIS will also pay ongoing compensation to the Selling Agents which are registered with the CFTC as "futures commission merchants" or "introducing brokers" in the amount of up to 0.333% (a 4.0% annual rate) of the month-end Net Asset Value of all Units sold by them which remain outstanding, beginning with the end of the thirteenth full month after the date such Units were first issued (not the date that the related subscription was deposited into escrow during the Initial Offering Period or the date the subscription was accepted during the Ongoing Offering Period); provided that such ongoing compensation may only be paid on Units sold by Registered Representatives who are registered with the CFTC. Such ongoing compensation may be deemed to constitute underwriting compensation. See "Federal Income Tax Aspects -- Syndication Expenses." In the event that either a Selling Agent or a Selling Agent's Registered Representative is not duly registered with the CFTC, no ongoing compensation may be paid either to such Selling Agent or to such Registered Representative by CIS. Rather, pursuant to applicable rules of the National Association of Securities Dealers, Inc., such Selling Agent and such Registered Representatives are restricted to receiving installment selling commissions. The total amount of installment selling commissions and initial selling commission received by any such Registered Representative on each Unit sold by him or her may not exceed 9% of the initial subscription price of the Unit. Selling Commissions and ongoing compensation payable in respect of Units sold to any Eligible Investor as described under "Charges -- Brokerage Fee -- Special Brokerage Fee Rate" shall be up to 2% of the subscription amount and up to 2% of the average month-end Net Asset Value. The Lead Selling Agent may engage Wholesalers who are registered or exempt broker-dealers and who will introduce Additional Selling Agents to the Lead Selling Agent and assist such Additional Selling Agent in the offering and sale of Units. Each such Wholesaler will share with an Additional Selling introduced by the Wholesaler (i) the up to 4% (in the case of sales to Eligible Unitholders, up to 2%) initial selling commissions and (ii) the up to 4% (in the case of sales to Eligible Unitholders, up to 2%) ongoing compensation payable in respect of Units sold by such Additional Selling Agent. Certain Additional Selling Agents may select certain correspondent "introducing brokers" to distribute Units. On Units sold through each such correspondents, each of whom must be registered as a broker-dealer or exempt from such registration, the relevant Additional Selling Agent will receive (i) up to __% of the 4% (in the case of sales to Eligible Unitholders, up to __% of the 2%) initial selling commissions and (ii) up to __% of the 4% (in the case of sales to Eligible Unitholders, up to __% of the 2%) ongoing compensation to be received by such Additional Selling Agent in respect of Units sold by such correspondents, in each case pass on the remainder initial selling commission and ongoing compensation to the correspondents. -85- Wholesalers and correspondents must meet the same eligibility requirements applicable to Selling Agents in order to receive ongoing compensation. Other than as described above, no commissions or other fees are paid, directly or indirectly, by the Trust, the Managing Owner, any affiliate of the foregoing or any principal or officer of any of the foregoing, to any person in connection with the solicitation of purchasers for Units. Units may be sold in each State only by persons appropriately registered (or exempt from registration) as broker-dealer in such State and such persons' Registered Representatives. See "Conflict of Interests -- Indemnification and Standard of Liability" for information relating to certain indemnification arrangements with respect to the Selling Agents. LEGAL MATTERS Sidley & Austin, Chicago, Illinois, will pass upon legal matters for CISI in connection with the Units being offered hereby. Except with respect to certain issues, Sidley & Austin will rely as to matter of Delaware law upon the opinion of Richards, Layton & Finger, Wilmington, Delaware. In the future, Sidley & Austin may advise CISI (and its affiliates) with respect to its responsibilities as a managing owner of, and with respect to matters relating to, the Trust. Sidley & Austin has also reviewed the statements under "Federal Income Tax Aspects" and given its opinion as to certain matters as described therein. EXPERTS The statement of financial condition of JWH Global Portfolio Trust as of November 21, 1996 and the financial statements of CIS Investments, Inc. as of May 31, 1996 included in this Prospectus have been audited by KPMG Peat Marwick, LLP, independent auditors, as stated in their reports appearing herein and have been so included in reliance upon such reports given upon the authority of that firm as experts in auditing and accounting. REPORTS Pursuant to applicable CFTC regulations, prospective subscribers must (once the Trust has begun operating) receive recent Account Statement or performance information relating to the Trust, current within 60 calendar days, as well as the Trust's most recent Annual Report (unless the information in such Annual Report has been included in this Prospectus by amendment or supplement), together with the Prospectus. PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW THE SUMMARY FINANCIAL INFORMATION RELATING TO THE TRUST WHICH (IF THE TRUST HAS BEGUN OPERATING) MUST ACCOMPANY THIS PROSPECTUS. SUCH SUMMARY FINANCIAL INFORMATION WILL INDICATE THE PERFORMANCE RECOGNIZED AND THE EXPENSES PAID BY THE TRUST DURING A RECENT MONTH. ADDITIONAL INFORMATION This Prospectus constitutes part of the Registration Statement filed by the Trust with the SEC in Washington, D.C. This Prospectus does not contain all of the information set forth in such Registration Statement, certain portions of which have been omitted pursuant to the rules and regulations of the SEC including, without limitation, certain exhibits thereto (for example, the Selling Agreement, the Escrow Agreement and the Customer Agreement). The descriptions contained herein of agreements included as exhibits to the Registration Statement are necessarily summaries, and the exhibits themselves may be inspected without charge at the public reference facilities maintained by the SEC in Washington, D.C., and copies of all or part thereof may be obtained from the SEC upon payment of the prescribed fees. -86- INDEX OF FINANCIAL STATEMENTS Page ---- JWH GLOBAL PORTFOLIO TRUST Report of Independent Accountants . . . . . . . . . . . . . . . . . . . 88 Statements of Financial Condition as of _________, 1996 (unaudited) . . 89 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 90 CIS INVESTMENTS, INC. Unaudited Balance Sheet as of September 30, 1996. . . . . . . . . . . . 91 Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . . 92 Statement of Financial Condition as of May 31, 1996 . . . . . . . . . . 93 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 97 ____________________ Schedules are omitted for the reason that they are not required or are not applicable or that equivalent information has been included in the financial statements or notes thereto. -87- INDEPENDENT AUDITORS' REPORT The Trustees JWH Global Portfolio Trust: We have audited the accompanying statement of financial condition of JWH Global Portfolio Trust as of November 21, 1996. This financial statement is the responsibility of the Trust's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of financial condition is free of material misstatement. An audit of a statement of financial condition includes examining, on a test basis, evidence supporting the amounts and disclosures in that statement of financial condition. An audit of a statement of financial condition also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement of financial condition presentation. We believe that our audit of the statement of financial condition provides a reasonable basis for our opinion. In our opinion, the statement of financial condition referred to above presents fairly, in all material respects, the financial position of JWH Global Portfolio Trust as of November 21, 1996 in conformity with generally accepted accounting principles. November 22, 1996 -88- JWH GLOBAL PORTFOLIO TRUST Statement of Financial Condition November 21, 1996 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------- Assets - cash $ 1,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITHOLDERS' CAPITAL - -------------------------------------------------------------------------------- Unitholders' capital: Initial beneficial owners (8.17 units of beneficial interest outstanding at November 21, 1996) 817 Managing Owner (1.83 units of beneficial interest outstanding at November 21, 1996) 183 - -------------------------------------------------------------------------------- Total unitholders' capital 1,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Net asset value per unit ($1,000 divided by 10 units of beneficial interest outstanding) $ 100 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- See accompanying notes to statement of financial condition. -89- JWH GLOBAL PORTFOLIO TRUST Statement of Financial Corporation Novemeber 21, 1996 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES JWH Global Portfolio Trust (the Trust), a Delaware business trust was organized on November 12, 1996 to engage in the speculative trading of futures contracts on currencies, interest rates, energy and agricultural products, metals and stock indices, options on such futures contracts, and spot and forward contracts on currencies and precious metals. CIS Investments, Inc. (CISI or Managing Owner) will serve as Managing Owner of the Trust. John W. Henry & Company, Inc. (JWH) will serve as the sole trading advisor to the Trust. Cargill Investor Services, Inc., (CIS) an affiliate of CISI will act as the Trust's clearing broker and lead selling agent. CIS Financial Services, Inc., an affiliate of CISI, will act as the Trust's counterparty in the Trust's spot and forward currency and precious metal trades. As of November 21, 1996 the Trust has had no operations other than relating to organizational matters and the issuance of 10 units of beneficial interest for $1,000 to the Managing Owner and the initial beneficial owners. The maximum amount of the initial offering is $50,000,000. Investors purchase units at the current net asset value per unit after the initial closing. Therefore, the total number of units authorized for the Trust is not determinable and therefore is not disclosed in the statement of financial condition. ORGANIZATIONAL AND INITIAL OFFERING COSTS The Managing Owner of the Trust will incur approximately $600,000 of expenses in connection with the offering of units and the organization of the Trust. These expenses will be reimbursed by the Trust to the Managing Owner and be charged against operations of the Trust over a period of 60 months from the commencement of operations at a maximum rate of 0.4% of average month-end net assets per year. If the Trust is terminated prior to the end of such 60-month period or the entire amount of the organizational and initial offering costs reimbursed to CISI is not amortized at the end of the 60-month period, CISI shall return to the Trust, without interest, an amount equal to the umamortized balance of the capitalized organizational and initial offering costs. AGREEMENTS The Trust will pay CIS a monthly flat-rate brokerage fee at an annual rate of 6.5% of the Trust's month-end assets after deduction of the management fee. JWH will receive a monthly management fee of 4% of the Trust's month- end assets after deduction of a portion of the brokerage fee at the annual rate of 1.25% (rather than 6.5%) of month-end assets. JWH will also be paid a quarterly incentive fee equal to 15% of new trading profit after deduction of the brokerage fee at 1.25% of month-end assets and the management fee. USE OF ESTIMATES The preparation of a statement of financial condition in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the statement of financial condition. Actual results could differ from those estimates. -90- CIS Investments, Inc. Unaudited Balance Sheet As Of September 30, 1996 ASSETS Accounts Receivable $ 0 Investment in IDS Managed Futures, L.P. 326,681 Investment in IDS Managed Futures II, L.P. 161,461 Investment in Everest Futures Fund II, L.P. 103,818 Accrued Income 387 ----------- Total Assets $ 592,347 ----------- ----------- LIABILITIES AND EQUITY Unearned Management Fees $ 20,572 Intercompany Payable 170,457 Income Taxes Payable 3,127 ----------- Total Accounts Payable 194,156 Common Stock $100 par value, 30,000 Authorized, 10 issued 1,000 Subscribed Stock 29,990 shares 2,999,000 Paid-in-Capital 250,000 Retained Earnings 147,191 ----------- Total Stockholders Equity 3,397,191 Less - subscriptions receivable (2,999,000) ----------- TOTAL LIABILITIES AND EQUITY $ 592,347 ----------- ----------- UNAUDITED This Balance Sheet, in the opinion of management, reflects all adjustments necessary to fairly state the financial condition of CIS Investments, Inc. at September 30, 1996. -91- KPMG Peat Marwick LLP Peat Marwick Plaza 303 East Wacker Drive Chicago, IL 60601-9973 INDEPENDENT AUDITORS' REPORT The Board of Directors CIS Investments, Inc.: We have audited the accompanying statements of financial condition of CIS Investments, Inc. (a wholly owned subsidiary of Cargill Investor Services, Inc.) (the Company) as of May 31, 1996 and 1995, and the related statements of income, changes in stockholder's equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CIS Investments, Inc. as of May 31, 1996 and 1995, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP July 17, 1996 -92- CIS INVESTMENTS, INC. Statements of Financial Condition May 31, 1996 and 1995 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ ASSETS 1996 1995 - ------------------------------------------------------------------------------ Investments in limited partnerships $ 572,721 409,876 - ------------------------------------------------------------------------------ $ 572,721 409,876 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------------------------------------------------ Liabilities: Deferred management fees 47,665 34,925 Due to Parent 161,955 57,791 Accrued taxes payable 3,347 10,802 - ------------------------------------------------------------------------------ Total liabilities 212,967 103,518 Stockholder's equity: Common stock, $100 par value. Authorized 30,000 shares; issued 10 shares 1,000 1,000 Common stock subscribed, 27,437 and 17,431 shares outstanding at the years ended 1996 and 1995, respectively 2,743,700 1,743,700 Paid-in capital 250,000 250,000 Retained earnings 108,754 55,358 - ------------------------------------------------------------------------------ 3,103,454 2,050,058 Less subscriptions receivable (note 4) (2,743,700) (1,743,700) - ------------------------------------------------------------------------------ Total stockholder's equity 359,754 306,358 - ------------------------------------------------------------------------------ $ 572,721 409,876 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ See accompanying notes to financial statements. -93- CIS INVESTMENTS, INC. Statements of Income Years ended May 31, 1996 and 1995 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- 1996 1995 - --------------------------------------------------------------------------- Revenues: Management fees $74,472 50,148 Unrealized gain on investments in limited partnerships 14,345 44,887 - --------------------------------------------------------------------------- Total revenues 88,817 95,035 Expenses - operating 5,674 2,533 - --------------------------------------------------------------------------- Income before income taxes 83,143 92,502 Income tax expense 29,747 32,100 - --------------------------------------------------------------------------- Net income $53,396 60,402 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- See accompanying notes to financial statements. -94- CIS INVESTMENTS, INC. Statements of Changes in Stockholder's Equity Years ended May 31, 1996 and 1995
- ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- Retained Common earnings Common Paid-in stock (accumulated Subscriptions stock capital subscribed deficit) receivable Total - ---------------------------------------------------------------------------------------------------------------- Balance at May 31, 1994 $1,000 250,000 1,243,700 (5,044) (1,243,700) 245,956 Common stock subscription -- -- 500,000 -- (500,000) -- Net income -- -- -- 60,402 -- 60,402 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- Balance at May 31, 1995 1,000 250,000 1,743,700 55,358 (1,743,700) 306,358 Common stock subscription -- -- 1,000,000 -- (1,000,000) -- Net income -- -- -- 53,396 -- 53,396 - ---------------------------------------------------------------------------------------------------------------- Balance at May 31, 1996 $1,000 250,000 2,743,700 108,754 (2,743,700) 359,754 - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. -95- CIS INVESTMENTS, INC. Statements of Cash Flows Years ended May 31, 1996 and 1995
- ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- 1996 1995 - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 53,396 60,402 Adjustment to reconcile net income to net cash provided by operating activities: Unrealized gain on investments in limited partnerships (14,345) (44,887) Decrease in assets: Accounts receivable from limited partnerships -- 177,484 Increase (decrease) in liabilities: Deferred management fees 12,741 13,143 Due to parent 104,164 (181,026) Accrued taxes payable (7,456) 3,085 - -------------------------------------------------------------------------------------- Net cash provided by operating activities 148,500 28,201 - -------------------------------------------------------------------------------------- Net cash used in investing activities - purchase of limited partnership units (148,500) (28,201) - -------------------------------------------------------------------------------------- Net change in cash -- -- Cash at beginning of year -- -- - -------------------------------------------------------------------------------------- Cash at end of year $ -- -- - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Supplemental disclosures of cash flow information - cash paid during the year for income taxes $ 37,202 29,015 - -------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------
See accompanying notes to financial statements. -96- CIS INVESTMENTS, INC. Notes to Financial Statements May 31, 1996 and 1995 - -------------------------------------------------------------------------------- (1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies which have been followed in preparing the accompanying financial statements is set forth below. NATURE OF BUSINESS CIS Investments, Inc. (the Company), a wholly-owned subsidiary of Cargill Investor Services, Inc., (the Parent) is the general partner in various limited partnerships organized for the purpose of engaging in the speculative trading of commodity interests, including futures contracts, physical commodities. and related options. MANAGEMENT FEES Unearned management fees are amortized over one year using the straight-line method. INVESTMENTS IN LIMITED PARTNERSHIPS Investments in limited partnerships are recorded at a value which approximates the Company's proportionate share of the limited partnership's net asset value. INCOME TAXES The Company is included in the consolidated Federal income tax return of the Parent. The Company follows Statement of Financial Accounting Standards No. 109 (Statement 109). Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. EXPENSES General and administrative overhead costs of the Company are expensed and paid by the Parent. As such, they are not reflected in these financial statements. During fiscal year 1996 the Parent stopped charging interest on amounts due to Parent. (Continued) -97- CIS INVESTMENTS, INC. Notes to Financial Statements - -------------------------------------------------------------------------------- USE OF ESTIMATES The accompanying financial statements have been prepared in accordance with generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from such estimates. (2) INVESTMENTS IN LIMITED PARTNERSHIPS Investments in limited partnerships at May 31, 1996 and 1995 are as follows: - ------------------------------------------------------------------------------- 1996 1995 --------------- -------------- Units Amount Units Amount - ------------------------------------------------------------------------------- IDS Managed Futures, L.P. 1,151 $314,053 960 $254,451 IDS Managed Futures, L.P. 322 157,974 322 155,425 Everest Futures Trust 100 100,694 -- -- - ------------------------------------------------------------------------------- $572,721 $409,876 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- All investments are in general partnership units. (3) NET WORTH REQUIREMENTS The Company is required to maintain net worth, as defined, of not less than (i) the lesser of $250,000 or 15% of the aggregate capital contributions of any limited partnership for which it shall act as a general partner if such contributions are less than $2,500,000; and (ii) 10% of the aggregate capital contributions of any limited partnership for which it shall act as a general partner, if such contributions are equal to or exceed $2,500,000. At May 31, 1996, the Company is in compliance with its net worth requirements. (4) COMMON STOCK SUBSCRIPTIONS The Company and its Parent entered into stock subscription agreements whereby the Parent subscribed to purchase up to 27,437 shares of the Company's stock at $100 per share in order to ensure the Company's continued compliance with its net worth requirements. No subscribed stock was issued, nor is it known when and if any will be issued in the future. As such, the subscribed stock receivable amount is shown as a deduction from stockholder's equity. (Continued) -98- CIS INVESTMENTS, INC. Notes to Financial Statements - -------------------------------------------------------------------------------- (5) INCOME TAXES The Company adopted Statement 109 as of June 1, 1994. There were no significant temporary differences that gave rise to deferred tax assets and/or deferred tax liabilities; therefore, the implementation of Statement 109 had no effect on the financial statements of the Company. (6) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK The Limited Partnerships (the Partnerships) hold futures contracts and options. A futures contract is defined as an agreement to buy or sell a specific amount of a commodity or financial instrument at a particular price on a stipulated future date. If the markets should move against all of the futures positions held by the Partnerships at the same time, and if the Partnerships are unable to offset the futures positions of the Partnerships, the Partnerships could lose all of their assets and the partners would realize a 100% loss of their investment. -99- APPENDIX I PERFORMANCE OF OTHER CISI-SPONSORED FUNDS PERFORMANCE OF OTHER CISI-SPONSORED FUNDS The following performance tables are included herein per CFTC requirements and may make possible certain performance comparisons which may be helpful to prospective investors in determining whether to acquire Units. However, the difference in the performance of these funds indicates that the performance of one CISI-sponsored fund may have very little significance in terms of the performance of other CISI-sponsored funds employing different portfolios. The following performance information has been calculated on the accrual basis of accounting in accordance with generally accepted accounting principles. THE FOLLOWING FUNDS HAVE TRADED PURSUANT TO THE SYSTEMS THAT ARE MATERIALLY DIFFERENT FROM THE TRADING PROGRAMS. THEREFORE, THE PERFORMANCE OF SUCH CISI POOLS IS NOT REPRESENTATIVE OF HOW THE TRUST HAS OR WILL PERFORM. INVESTORS SHOULD NOTE THAT INTEREST INCOME MAY CONSTITUTE A SIGNIFICANT PORTION OF A COMMODITY POOL'S INCOME AND, IN CERTAIN INSTANCES, MAY GENERATE PROFITS WHERE THERE HAVE BEEN REALIZED AND UNREALIZED LOSSES FROM COMMODITY TRADING. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FUTURES TRADING IS SPECULATIVE. INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT. APPI-1 PERFORMANCE OF OTHER CISI-SPONSORED FUNDS IDS MANAGED FUTURES, L.P. TYPE OF POOL: Publicly offered, multi-advisor INCEPTION OF TRADING: June 1987 AGGREGATE SUBSCRIPTIONS: $37.0 million CURRENT CAPITALIZATION: $35.0 million WORST MONTHLY DRAWDOWN: (13.95)% (1/92) WORST PEAK-TO-VALLEY DRAWDOWN: (27.7)% (1/92-5/92) 1996 COMPOUND RATE OF RETURN: 4.54% (9 months) 1995 COMPOUND RATE OF RETURN: 23.03% 1994 COMPOUND RATE OF RETURN: (6.93)% 1993 COMPOUND RATE OF RETURN: 38.32% 1992 COMPOUND RATE OF RETURN: (3.47)% 1991 COMPOUND RATE OF RETURN: 26.22% _____________ SEPTEMBER 30, 1996 VALUE OF INITIAL $1,000 UNIT: $3,642.77 ______________________________ IDS MANAGED FUTURES II, L.P. TYPE OF POOL: Publicly offered, multi-advisor INCEPTION OF TRADING: March 1988 AGGREGATE SUBSCRIPTIONS: $15.6 million CURRENT CAPITALIZATION: $10.8 million WORST MONTHLY DRAWDOWN: (13.53)% (1/92) WORST PEAK-TO-VALLEY DRAWDOWN: (27.07)% (1/92-5/92) 1996 COMPOUND RATE OF RETURN: 4.14% (9 months) 1995 COMPOUND RATE OF RETURN: 29.80% 1994 COMPOUND RATE OF RETURN: (13.96)% 1993 COMPOUND RATE OF RETURN: 37.01% 1992 COMPOUND RATE OF RETURN: (5.77)% 1991 COMPOUND RATE OF RETURN: 30.35% ___________ SEPTEMBER 30, 1996 VALUE OF INITIAL $1,000 UNIT: $2,166.43 PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. APPI-2 PERFORMANCE OF OTHER CISI-SPONSORED FUNDS OYSTER BAY FUTURES FUND LIMITED PARTNERSHIP TYPE OF POOL: Privately offered, multi-advisor INCEPTION OF TRADING: August 1988 AGGREGATE SUBSCRIPTIONS: $0.8 million CURRENT CAPITALIZATION: N/A WORST MONTHLY DRAWDOWN: (13.12)% (10/89) WORST PEAK-TO-VALLEY DRAWDOWN: (35.65)% (6/89-2/90) 1992 COMPOUND RATE OF RETURN: (12.25)% (6 months) 1991 COMPOUND RATE OF RETURN: 8.27% __________ THIS FUND WAS TERMINATED IN JUNE 1992. ______________________________ EVEREST FUTURES FUND II, L.P. TYPE OF POOL: Privately offered, single-advisor INCEPTION OF TRADING: April 1996 AGGREGATE SUBSCRIPTIONS: $8.4 million CURRENT CAPITALIZATION: $8.4 million WORST MONTHLY DRAWDOWN: (1.90)% (7/96) WORST PEAK-TO-VALLEY DRAWDOWN: (2.66)% (7/96-8/96) 1996 COMPOUND RATE OF RETURN: 3.83% (6 months) _________ SEPTEMBER 30, 1996 VALUE OF INITIAL $1,000 UNIT: $1,038.33 PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. APPI-3 NOTES TO PERFORMANCE OF OTHER CISI-SPONSORED FUNDS NOTES TO PERFORMANCE OF OTHER CISI-SPONSORED FUNDS 1. TYPE OF POOL. The CFTC specifies that pools should be categorized as: (i) either publicly or privately offered; (ii) "principal protected" (i.e., generally assuring the return of some or all of an initial investment at a date certain in the future), if applicable; and (iii) either multi-advisor or single-advisor. 2. INCEPTION OF TRADING is the date of inception of trading by the fund. 3. AGGREGATE SUBSCRIPTIONS is the aggregate gross capital subscriptions (without regard to redemptions). 4. CURRENT CAPITALIZATION is the net asset value of the fund at the end of the period indicated. 5. WORST MONTHLY DRAWDOWN is the largest net asset loss experienced in any calendar month expressed as a percentage of net asset value and includes the month and year of such drawdown. 6. WORST PEAK-TO-VALLEY DRAWDOWN is the largest calendar month-end to calendar month-end net asset loss (regardless of whether such loss is continuous) experienced during the period January 1, 1991 (or inception) through September 30, 1996, expressed as a percentage of total equity in the program, and includes the months and years in which it occurred. For example, a Worst Peak-to-Valley Drawdown of (27.7)% (1/92-5/92) (see "IDS Managed Futures, L.P." at page APPI-2) means that the peak-to-valley drawdown lasted from January 1992 through May 1992 and resulted in a (27.7)% drawdown. 7. COMPOUND RATE OF RETURN is calculated on the basis of the actual rate of return recognized by an initial $1,000 investment in the fund. PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. APPI-4 MONTHLY RATES OF RETURN SINCE INCEPTION OF OTHER CISI-SPONSORED FUNDS IDS MANAGED FUTURES, L.P.
- ------------------------------------------------------------------------------------------------------------------------------- MONTHLY RATES OF RETURN (%) COMPOUND Year January February March April May June July August September October November December ANNUAL ROR - ------------------------------------------------------------------------------------------------------------------------------- 1987 N/A N/A N/A N/A N/A (0.08)* 0.84 0.09 (2.35) 15.50 8.53 4.31 28.78* (7 MONTHS) - ------------------------------------------------------------------------------------------------------------------------------- 1988 (4.36) 1.28 (7.93) (3.28) (0.34) 11.61 (9.41) 1.76 3.66 0.20 (0.12) (3.99) (14.96) - ------------------------------------------------------------------------------------------------------------------------------- 1989 3.35 (5.06) 2.98 (3.83) 19.24 (5.20) 6.00 (7.67) (6.55) (5.97) 12.57 (0.70) 5.61 - ------------------------------------------------------------------------------------------------------------------------------- 1990 24.84 12.64 3.61 5.79 (16.81) 2.69 8.95 9.90 5.64 (2.42) 0.49 (1.62) 60.65 - ------------------------------------------------------------------------------------------------------------------------------- 1991 (1.55) 1.76 0.59 (1.85) (2.03) 3.60 (11.27) 4.12 13.37 (3.94) 3.51 20.71 26.22 - ------------------------------------------------------------------------------------------------------------------------------- 1992 (13.95) (9.43) 0.69 (6.30) (1.74) 15.58 18.09 7.92 (3.29) (3.60) (2.02) (0.64) (3.47) - ------------------------------------------------------------------------------------------------------------------------------- 1993 1.19 10.80 (0.82) 6.54 1.34 1.44 8.35 3.09 (0.29) (0.04) (0.03) 2.03 38.32 - ------------------------------------------------------------------------------------------------------------------------------- 1994 (4.48) (3.29) 5.76 (0.67) 3.98 2.72 (2.87) (2.15) (0.45) 0.03 (3.51) (1.68) (6.93) - ------------------------------------------------------------------------------------------------------------------------------- 1995 (3.05) 8.41 7.90 4.71 1.86 (2.84) 0.27 (0.05) (1.14) (0.26) 2.43 3.42 23.03 - ------------------------------------------------------------------------------------------------------------------------------- 1996 4.07 (3.48) (0.16) 3.50 ( 2.44) 0.51 (1.09) 0.47 3.34 N/A N/A N/A 4.54 (9 MONTHS) - -------------------------------------------------------------------------------------------------------------------------------
* This return is not reduced by organizational and offering expenses of $639,102. PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. APPI-5 MONTHLY RATES OF RETURN SINCE INCEPTION OF OTHER CISI-SPONSORED FUNDS IDS MANAGED FUTURES II, L.P. - ------------------------------------------------------------------------------------------------------------------------------- MONTHLY RATES OF RETURN (%) - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Year January February March April May June July August September October November December COMPOUND ANNUAL ROR - ------------------------------------------------------------------------------------------------------------------------------- 1988 N/A N/A (9.51) (9.54) 2.86 7.06 (3.69) (1.37) 2.48 (1.14) 0.31 (2.77) 4.32 (10 MONTHS) - ------------------------------------------------------------------------------------------------------------------------------- 1989 0.57 (7.26) 0.07 (3.20) 5.85 (5.39) 0.83 (4.48) (3.79) (4.54) 6.84 1.54 (13.04) - ------------------------------------------------------------------------------------------------------------------------------- 1990 11.27 4.26 0.86 5.00 (12.01) 2.02 6.82 7.18 3.82 (1.64) (0.73) (1.87) 25.60 - ------------------------------------------------------------------------------------------------------------------------------ 1991 (2.31) (0.45) 0.80 (0.91) (1.22) 2.33 (7.19) 1.72 15.32 (5.14) 7.10 20.03 30.35 - ------------------------------------------------------------------------------------------------------------------------------- 1992 (13.53) (11.22) 0.76 (5.75) 0.04 13.86 14.25 7.24 (1.81) (2.44) (2.49) (0.84) (5.77) - ------------------------------------------------------------------------------------------------------------------------------- 1993 0.33 11.51 (1.27) 6.40 0.93 3.13 8.53 1.57 (0.82) (0.20) (0.44) 3.10 37.01 - ------------------------------------------------------------------------------------------------------------------------------- 1994 (4.48) (4.81) 4.56 (0.61) 3.19 4.25 (3.20) (4.62) (0.76) (0.61) (4.55) (2.62) (13.96) - ------------------------------------------------------------------------------------------------------------------------------- 1995 (3.11) 11.01 11.35 4.98 1.85 (2.20) (0.59) 0.86 (1.63) (0.01) 2.39 2.66 29.80 - ------------------------------------------------------------------------------------------------------------------------------- 1996 4.81 (4.46) (0.20) 2.87 (2.46) 1.43 (1.64) 0.83 3.26 N/A N/A N/A 4.14 (9 MONTHS) - -------------------------------------------------------------------------------------------------------------------------------
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. APPI-6 MONTHLY RATES OF RETURN SINCE INCEPTION OF OTHER CISI-SPONSORED FUNDS OYSTER BAY FUTURES FUND LIMITED PARTNERSHIP - ------------------------------------------------------------------------------------------------------------------------------- MONTHLY RATES OF RETURN (%) - ------------------------------------------------------------------------------------------------------------------------------- Year January February March April May June July August September October November December COMPOUND ANNUAL ROR - ------------------------------------------------------------------------------------------------------------------------------- 1988 N/A N/A N/A N/A N/A N/A N/A (4.71) (3.69) 1.67 0.28 0.10 (6.33) (5 MONTHS) - ------------------------------------------------------------------------------------------------------------------------------- 1989 1.98 (6.31) 1.82 (8.08) 14.08 (7.27) (2.86) (8.07) (8.72) (13.12) (0.40) (0.57) (33.67) - ------------------------------------------------------------------------------------------------------------------------------- 1990 1.34 (2.35) 4.10 5.66 (2.32) (1.80) 6.60 (2.45) (2.06) (0.57) (1.69) (2.62) 1.23 - ------------------------------------------------------------------------------------------------------------------------------- 1991 3.41 (0.38) 1.29 (0.08) (2.15) 0.89 (3.23) 4.70 1.00 (4.07) (2.03) 9.37 8.27 - ------------------------------------------------------------------------------------------------------------------------------- 1992 (5.73) 1.14 (5.23) (4.15) 1.32 0.06 N/A N/A N/A N/A N/A N/A (12.25) (6 MONTHS) - -------------------------------------------------------------------------------------------------------------------------------
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. APPI-7 MONTHLY RATES OF RETURN SINCE INCEPTION OF OTHER CISI-SPONSORED FUNDS EVEREST FUTURES FUND II, L.P. - ------------------------------------------------------------------------------------------------------------------------------- MONTHLY RATES OF RETURN (%) - ------------------------------------------------------------------------------------------------------------------------------- Year January February March April May June July August September October November December COMPOUND ANNUAL ROR - ------------------------------------------------------------------------------------------------------------------------------- 1996 N/A N/A N/A 2.49 (1.75) 2.39 (1.90) (0.78) 3.47 N/A N/A N/A 3.83 (6 MONTHS) - -------------------------------------------------------------------------------------------------------------------------------
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. APPI-8 APPENDIX II "BLUE SKY" GLOSSARY PROSPECTIVE INVESTORS SHOULD BE AWARE OF THE FOLLOWING DEFINITIONS WHICH ARE APPLIED BY THE STATE SECURITIES ADMINISTRATORS WHEN REVIEWING A PUBLIC FUTURES FUND OFFERING FOR COMPLIANCE WITH THE "GUIDELINES FOR THE REGISTRATION OF COMMODITY POOL PROGRAMS" STATEMENT OF POLICY PROMULGATED BY THE NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION, INC. A COPY OF SAID "GUIDELINES" IS FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THE PROSPECTUS IS A PART. THE FOLLOWING DEFINITIONS ARE REPRINTED VERBATIM FROM SAID GUIDELINES AND MAY, ACCORDINGLY, NOT IN ALL CASES BE RELEVANT TO AN INVESTMENT IN THE TRUST. FOR AN INDEX OF DEFINED TERMS THAT APPEAR IN THE PROSPECTUS, SEE "INDEX OF DEFINED TERMS" AT PAGE 5. DEFINITIONS -- As used in the Guidelines, the following terms have the following meanings: ADMINISTRATOR -- The official or agency administering the security laws of a state. ADVISOR -- Any Person who for any consideration engages in the business of advising others, either directly or indirectly, as to the value, purchase, or sale of Commodity Contracts or commodity options. AFFILIATE -- An Affiliate of a Person means: (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities of such Person; (b) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote, by such Person; (c) any Person, directly or indirectly, controlling, controlled by, or under common control of such Person; (d) any officer, director or partner of such Person; or (e) if such Person is an officer, director or partner, any Person for which such Person acts in any such capacity. CAPITAL CONTRIBUTIONS -- The total investment in a Program by a Participant or by all Participants, as the case may be. COMMODITY BROKER -- Any Person who engages in the business of effecting transactions in Commodity Contracts for the account of others or for his or her own account. COMMODITY CONTRACT -- A contract or option thereon providing for the delivery or receipt at a future date of a specified amount and grade of a traded commodity at a specified price and delivery point. CROSS-REFERENCE SHEET -- A compilation of the Guideline sections, referenced to the page of the prospectus, Program agreement, or other exhibits, and justification of any deviation from the Guidelines. NET ASSETS -- The total assets, less total liabilities, of the Program determined on the basis of generally accepted accounting principles. Net Assets shall include any unrealized profits or losses on open positions, and any fee or expense including Net Asset fees accruing to the program. NET ASSET VALUE PER PROGRAM INTEREST -- The Net Assets divided by the number of Program Interests outstanding. NET WORTH -- The excess of total assets over total liabilities as determined by generally accepted accounting principles. Net Worth shall be determined exclusive of home, home furnishings and automobiles. NEW TRADING PROFITS -- The excess, if any, of Net Assets at the end of the period over Net Assets at the end of the highest previous period or Net Assets at the date trading commences, whichever is higher, and as further adjusted to eliminate the effect on Net Assets resulting from new Capital Contributions, redemptions, or capital distributions, if any, made during the period APPII-1 decreased by interest or other income not directly related to trading activity, earned on Program assets during the period, whether the assets are held separately or in a margin account. ORGANIZATIONAL AND OFFERING EXPENSES -- All expenses incurred by the Program in connection with and in preparing a Program for registration and subsequently offering and distributing it to the public, including, but not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriter's attorneys), expenses for printing, engraving, mailing, salaries of employees while engaged in sales activity, charges of transfer agents, registrars, trustees, escrow holders , depositories, experts, expenses of qualification of the sale of its Program interest under federal and state law, including taxes and fees, accountants' and attorneys' fees. PARTICIPANT -- The holder of a Program interest. PERSON -- Any natural Person, partnership, corporation, association or other legal entity. PIT BROKERAGE FEE -- Pit Brokerage Fee shall include floor brokerage, clearing fees, National Futures Association Fees, and exchange fees. PROGRAM -- A limited partnership, joint venture, corporation, trust or other entity formed and operated for the purpose of investing in Commodity Contracts. PROGRAM BROKER -- A Commodity broker that effects trades in Commodity Contracts for the account of a Program. PROGRAM INTEREST -- A limited partnership interest or other security representing ownership in a Program. PYRAMIDING -- A method of using all or a part of an unrealized profit in a Commodity Contract position to provide margin for any additional Commodity Contracts of the same or related commodities. SPONSOR -- Any Person directly or indirectly instrumental in organizing a Program or any Person who will manage or participate in the management of a Program, including a Commodity broker who pays any portion of the Organizational Expenses of the Program, and the general partner(s) and any other Person who regularly performs or selects the Persons who perform services for the Program. Sponsor does not include wholly independent third parties such as attorneys, accountants, and underwriters whose only compensation is for professional services rendered in connection with the offering of the units. The term "Sponsor" shall be deemed to include its Affiliates. VALUATION DATE -- The date as of which the Net Assets of the Program are determined. VALUATION PERIOD -- A regular period of time between Valuation Dates. APPII-2 JWH GLOBAL PORTFOLIO TRUST AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST DATED AS OF _____, 1997 JWH GLOBAL PORTFOLIO TRUST AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST TABLE OF CONTENTS PAGE 1. Declaration of Trust. . . . . . . . . . . . . . . . . . . . . . . . A-1 2. The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2 (a) Term; Resignation. . . . . . . . . . . . . . . . . . . . . . . A-2 (b) Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2 (c) Compensation and Expenses of the Trustee . . . . . . . . . . . A-2 (d) Indemnification. . . . . . . . . . . . . . . . . . . . . . . . A-2 (e) Successor Trustee. . . . . . . . . . . . . . . . . . . . . . . A-3 (f) Liability of the Trustee . . . . . . . . . . . . . . . . . . . A-3 (g) Reliance by the Trustee and the Managing Owner; Advice of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . A-4 (h) Not Part of Trust Estate . . . . . . . . . . . . . . . . . . . A-4 3. Principal Office. . . . . . . . . . . . . . . . . . . . . . . . . . A-4 4. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4 5. Term, Dissolution, Fiscal Year and Net Asset Value. . . . . . . . . A-5 (a) Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5 (b) Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . A-5 (c) Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . A-5 (d) Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . A-5 6. Net Worth of Managing Owner . . . . . . . . . . . . . . . . . . . . A-6 7. Capital Contributions; Units; Managing Owner's Liability . . . . . A-6 (a) Capital Contributions; Units . . . . . . . . . . . . . . . . . A-6 (b) Managing Owner's Liability . . . . . . . . . . . . . . . . . . A-6 8. Allocation of Profits and Losses. . . . . . . . . . . . . . . . . . A-7 (a) Capital Accounts and Allocations . . . . . . . . . . . . . . . A-7 (b) Allocation of Profit and Loss for Federal Income Tax Purposes. . . . . . . . . . . . . . . . . . . . . . . . A-7 (c) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9 (d) Limited Liability of Unitholders . . . . . . . . . . . . . . . A-10 (e) Return of Capital Contributions. . . . . . . . . . . . . . . . A-10 9. Management of the Trust . . . . . . . . . . . . . . . . . . . . . . A-10 (a) Authority of the Managing Owner. . . . . . . . . . . . . . . . A-10 (b) Fiduciary Duties . . . . . . . . . . . . . . . . . . . . . . . A-11 (c) Loans; Investments . . . . . . . . . . . . . . . . . . . . . . A-11 (d) Certain Conflicts of Interest Prohibited . . . . . . . . . . . A-12 (e) Certain Agreements . . . . . . . . . . . . . . . . . . . . . . A-12 (f) Prohibition on "Pyramiding". . . . . . . . . . . . . . . . . . A-12 (g) Freedom of Action. . . . . . . . . . . . . . . . . . . . . . . A-13 10. Audits and Reports to Unitholders . . . . . . . . . . . . . . . . . A-13 11. Assignability of Units. . . . . . . . . . . . . . . . . . . . . . . A-14 12. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14 13. Offering of Units . . . . . . . . . . . . . . . . . . . . . . . . . A-16 14. Additional Offerings. . . . . . . . . . . . . . . . . . . . . . . . A-16 15. Special Power of Attorney . . . . . . . . . . . . . . . . . . . . . A-16 16. Withdrawal of a Unitholder. . . . . . . . . . . . . . . . . . . . . A-17 17. Benefit Plan Investors. . . . . . . . . . . . . . . . . . . . . . . A-17 PAGE 18. Standard of Liability; Indemnification. . . . . . . . . . . . . . . A-18 (a) Standard of Liability for the Managing Owner . . . . . . . . . A-18 (b) Indemnification of the Managing Owner by the Trust . . . . . . A-18 (c) Indemnification by the Unitholders . . . . . . . . . . . . . . A-19 19. Amendments; Meetings. . . . . . . . . . . . . . . . . . . . . . . . A-19 (a) Amendments with Consent of the Managing Owner. . . . . . . . . A-19 (b) Amendments and Actions without Consent of the Managing Owner . A-19 (c) Meetings; Other. . . . . . . . . . . . . . . . . . . . . . . . A-20 (d) Consent by Trustee . . . . . . . . . . . . . . . . . . . . . . A-20 20. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20 21. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20 (a) Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20 (b) Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . A-21 (c) Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21 22. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . A-21 23. No Legal Title to Trust Estate. . . . . . . . . . . . . . . . . . . A-22 24. Legal Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22 25. Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23 Testimonium Signatures JWH GLOBAL PORTFOLIO TRUST AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST This AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST ("Declaration and Agreement of Trust") of JWH GLOBAL PORTFOLIO TRUST (the "Trust") is made and entered into as of this ___ day of _________, 1997 by and among CIS INVESTMENTS, INC., a Delaware corporation, as a managing owner (the "Managing Owner"), WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (the "Trustee"), each other party who shall execute a counterpart of this Declaration and Agreement of Trust as an owner of a unit of beneficial interest of the Trust ("Units") or who becomes a party to this Declaration and Agreement of Trust as a Unitholder by execution of a Subscription Agreement and Power of Attorney Signature Page or otherwise and who is shown in the books and records of the Trust as a Unitholder (individually, a "Unitholder" and, collectively, the "Unitholders") and the Initial Beneficial Owners (as hereinafter defined) (solely to reflect their withdrawal from the Trust). W I T N E S S E T H: WHEREAS, the Managing Owner, the Trustee and the initial beneficial owners whose names are set forth in Exhibit A to the Original Declaration and Agreement of Trust referred to below (each an "Initial Beneficial Owner"), have hereto formed a business trust pursuant to and in accordance with the Delaware Business Trust Act, 12 DEL. C. Section 3801, ET SEQ., as amended from time to time (the "Act"), by filing a Certificate of Trust with the office of the Secretary of State of the State of Delaware on November 12, 1996, and entering into a Declaration and Agreement of Trust, dated as of November 12, 1996 (the "Original Declaration and Agreement of Trust"); and WHEREAS, the parties hereto desire to continue the Trust for the business and purpose of issuing Units, the capital of which shall be used to engage in speculative trading, buying, selling or otherwise acquiring, holding or disposing of futures and forward contracts on currencies, interest rate, energy and agricultural products, metals and stock indices, hybrid instruments, swaps, any rights pertaining thereto and any options thereon or on physical commodities, with the objective of capital appreciation through speculative trading, and to amend and restate the Original Declaration and Agreement of Trust of the Trust in its entirety. NOW THEREFORE, the parties hereto agree as follows: 1. DECLARATION OF TRUST. The Trustee hereby declares that it holds the investments in the Trust in trust upon and subject to the conditions set forth herein for the use and benefit of the Unitholders. It is the intention of the parties hereto that the Trust shall be a business trust under the Act, and that this Declaration and Agreement of Trust shall constitute the governing instrument of the Trust. The Trustee has filed the Certificate of Trust required by Section 3810 of the Act. Nothing in this Declaration and Agreement of Trust shall be construed to make the Unitholders partners or members of a joint stock association except to the extent that such Unitholders, as constituted from time to time, are deemed to be partners under the Internal Revenue Code of 1986, as amended (the "Code"), and applicable state and local tax laws. Notwithstanding the foregoing, it is the intention of the parties hereto that the Trust be treated as a partnership for purposes of taxation under the Code and applicable state and local tax laws. Effective as of the date hereof, the Trustee shall have all of the rights, powers and duties set forth herein and in the Act with respect to accomplishing the purposes of the Trust. A-1 2. THE TRUSTEE. (a) TERM; RESIGNATION. (i) Wilmington Trust Company has been appointed and has agreed to serve as the Trustee of the Trust. The Trust shall have only one trustee unless otherwise determined by the Managing Owner. The Trustee shall serve until such time as the Managing Owner removes the Trustee or the Trustee resigns and a successor Trustee is appointed by the Managing Owner in accordance with the terms of Section 2(e) hereof. (ii) The Trustee may resign at any time upon the giving of at least 60 days' advance written notice to the Trust; provided, that such resignation shall not become effective unless and until a successor Trustee shall have been appointed by the Managing Owner in accordance with Section 2(e) hereof. If the Managing Owner does not act within such 60 day period, the Trustee may apply to the Court of Chancery of the State of Delaware for the appointment of a successor Trustee. (b) POWERS. Except to the extent expressly set forth in this Section 2 and Sections 3 and 24, the duty and authority of the Trustee to manage the business and affairs of the Trust are hereby delegated to the Managing Owner. The Trustee shall have only the rights, obligations or liabilities specifically provided for herein and in the Act and shall have no implied rights, obligations or liabilities with respect to the business or affairs of the Trust. The Trustee shall have the power and authority to execute, deliver, acknowledge and file all necessary documents, including any amendments to or cancellation of the Certificate of Trust, and to maintain all necessary records of the Trust as required by the Act. The Trustee shall provide prompt notice to the Managing Owner of the Trustee's performance of any of the foregoing. The Managing Owner shall keep the Trustee informed of any actions taken by the Managing Owner with respect to the Trust that affect the rights, obligations or liabilities of the Trustee hereunder or under the Act. (c) COMPENSATION AND EXPENSES OF THE TRUSTEE. The Trustee shall be entitled to receive from the Trust or, if the assets of the Trust are insufficient, from the Managing Owner reasonable compensation for its services hereunder in accordance with the Trustee's standard fee schedule, and shall be entitled to be reimbursed by the Trust or, if the assets of the Trust are insufficient, by the Managing Owner for reasonable out-of-pocket expenses incurred by the Trustee in the performance of its duties hereunder, including without limitation, the reasonable compensation, out-of-pocket expenses and disbursements of counsel and such other agents as the Trustee may employ in connection with the exercise and performance of its rights and duties hereunder, to the extent attributable to the Trust. (d) INDEMNIFICATION. The Managing Owner agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and do hereby indemnify, protect, save and keep harmless the Trustee and its successors, assigns, legal representatives, officers, directors, agents and servants (the "Indemnified Parties") from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Trustee on or measured by any compensation received by the Trustee for its services hereunder or as indemnity payments pursuant to this Section 2(d)), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever (collectively, "Expenses"), which may be imposed on, incurred by or asserted against the Indemnified Parties in any way relating to or arising out of the formation, operation or termination of the Trust, the execution, delivery and performance of any other agreements to which the Trust is a party or the action or inaction of the Trustee hereunder or thereunder, except for Expenses resulting from the gross negligence or willful misconduct of the Indemnified Parties. The indemnities contained in this Section 2(d) shall survive the termination of this Declaration and Agreement of Trust or the removal or resignation of the Trustee. In addition, the Indemnified Parties shall be entitled to indemnification from any cash, net equity in any commodity futures, forward and option contracts, all funds on deposit in the accounts of the Trust, any other property held by the Trust, and all proceeds therefrom, including any rights of the Trust pursuant to any agreements to which the Trust is a party (the "Trust Estate") to the extent such expenses are attributable to the formation, operation or termination of the Trust as set forth above, and to secure the same the Trustee shall have a lien against the Trust Estate which shall be prior to the rights of the Managing Owner and the Unitholders to receive distributions from the Trust Estate. The Trustee nevertheless agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any liens on any part of the Trust Estate which result from claims against the Trustee personally that are not related to the ownership or the administration of the Trust Estate or the transactions contemplated by any documents to which the Trust is a party. A-2 (e) SUCCESSOR TRUSTEE. Upon the resignation or removal of the Trustee, the Managing Owner shall appoint a successor Trustee by delivering a written instrument to the outgoing Trustee. Any successor Trustee must satisfy the requirements of Section 3807 of the Act. Any resignation or removal of the Trustee and appointment of a successor Trustee shall not become effective until a written acceptance of appointment is delivered by the successor Trustee to the outgoing Trustee and the Managing Owner and any fees and expenses due to the outgoing Trustee are paid. Following compliance with the preceding sentence, the successor Trustee shall become fully vested with all of the rights, powers, duties and obligations of the outgoing Trustee under this Declaration and Agreement of Trust, with like effect as if originally named as Trustee, and the outgoing Trustee shall be discharged of its duties and obligations under this Declaration and Agreement of Trust. (f) LIABILITY OF THE TRUSTEE. Except as otherwise provided in this Section 2, in accepting the trust created hereby, Wilmington Trust Company acts solely as Trustee hereunder and not in its individual capacity, and all persons having any claim against the Trustee by reason of the transactions contemplated by this Declaration and Agreement of Trust and any other agreement to which the Trust is a party shall look only to the Trust Estate for payment or satisfaction thereof. The Trustee shall not be liable or accountable hereunder or under any other agreement to which the Trust is a party, except for the Trustee's gross negligence or willful misconduct. In particular, but not by way of limitation: (i) the Trustee shall have no liability or responsibility for the validity or sufficiency of this Declaration and Agreement of Trust or for the form, character, genuineness, sufficiency, value or validity of the Trust Estate; (ii) the Trustee shall not be liable for any actions taken or omitted to be taken by it in accordance with the instructions of the Managing Owner; (iii) the Trustee shall not have any liability for the acts or omissions of the Managing Owner; (iv) the Trustee shall not be liable for its failure to supervise the performance of any obligations of the Managing Owner, any commodity broker, any selling agent, any additional selling agent, "wholesaler" selling agent or "correspondent" selling agent; (v) no provision of this Declaration and Agreement of Trust shall require the Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder if the Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it; (vi) under no circumstances shall the Trustee be liable for indebtedness evidenced by or other obligations of the Trust arising under this Declaration and Agreement of Trust or any other agreements to which the Trust is a party; (vii) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration and Agreement of Trust, or to institute, conduct or defend any litigation under this Declaration and Agreement of Trust or any other agreements to which the Trust is a party, at the request, order or direction of the Managing Owner or any Unitholders unless the Managing Owner or such Unitholders have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Trustee (including, without limitation, the reasonable fees and expenses of its counsel) therein or thereby; and (viii) notwithstanding anything contained herein to the contrary, the Trustee shall not be required to take any action in any jurisdiction other than in the State of Delaware if the taking of such action will (a) require the consent or approval or authorization or order of or the giving of notice to, or the registration with or taking of any action in respect of, any state or other governmental authority or agency of any jurisdiction other than the State of Delaware, (b) result in any fee, tax or other governmental charge under the laws of any jurisdiction or any political subdivision thereof in existence as of the date hereof other than the State of Delaware becoming payable by the Trustee or (c) subject A-3 the Trustee to personal jurisdiction other than in the State of Delaware for causes of action arising from personal acts unrelated to the consummation by the Trustee of the transactions contemplated hereby. (g) RELIANCE BY THE TRUSTEE AND THE MANAGING OWNER; ADVICE OF COUNSEL. (i) In the absence of bad faith, the Trustee and the Managing Owner may conclusively rely upon certificates or opinions furnished to the Trustee or the Managing Owner and conforming to the requirements of this Declaration and Agreement of Trust in determining the truth of the statements and the correctness of the opinions contained therein, and shall incur no liability to anyone in acting on any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper which is believed to be genuine and believed to be signed by the proper party or parties, and need not investigate any fact or matter pertaining to or in any such document; provided, however, that the Trustee or the Managing Owner shall have examined any certificates or opinions so as to determine compliance of the same with the requirements of this Declaration and Agreement of Trust. The Trustee or the Managing Owner may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of the determination of which is not specifically prescribed herein, the Trustee or the Managing Owner may for all purposes hereof rely on a certificate, signed by the president or any vice-president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter, and such certificate shall constitute full protection to the Trustee or the Managing Owner for any action taken or omitted to be taken by either of them in good faith in reliance thereon. (ii) In the exercise or administration of the trust hereunder and in the performance of its duties and obligations under this Declaration and Agreement of Trust, the Trustee, at the expense of the Trust, (i) may act directly or through its agents, attorneys, custodians or nominees pursuant to agreements entered into with any of them, and the Trustee shall not be liable for the conduct or misconduct of such agents, attorneys, custodians or nominees if such agents, attorneys, custodians or nominees shall have been selected by the Trustee with reasonable care and (ii) may consult with counsel, accountants and other skilled professionals to be selected with reasonable care by the Trustee; provided that the Trustee shall not allocate any of its internal expenses or overhead to the account of the Trust. The Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the opinion or advice of any such counsel, accountant or other such persons. (h) NOT PART OF TRUST ESTATE. Amounts paid to the Trustee from the Trust Estate, if any, pursuant to this Section 2 shall not be deemed to be part of the Trust Estate immediately after such payment. 3. PRINCIPAL OFFICE. The address of the principal office of the Trust is c/o CIS Investments, Inc., 233 South Wacker Drive, Suite 2300, Chicago, IL 60606. The Trustee is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration. The Trustee shall receive service of process on the Trust in the State of Delaware at the foregoing address. In the event Wilmington Trust Company resigns or is removed as the Trustee, the Trustee of the Trust in the State of Delaware shall be the successor Trustee. 4. BUSINESS. The Trust's business and purpose is to trade, buy, sell or otherwise acquire, hold or dispose of all futures contracts including, but not limited to, those on currencies, interest rates, energy and agricultural products, metals and stock indices; spot and forward contracts in currencies and precious metals; any rights pertaining thereto and any options thereon or on physical commodities; as well as securities and any rights pertaining thereto and any options thereon, and to engage in all activities necessary, convenient or incidental thereto. The Trust may also engage in "hedge," arbitrage and cash trading of any of the foregoing instruments. The Trust may engage in such business and purpose either directly or through joint ventures, entities or partnerships, provided that the Trust's participation in any of the foregoing has no adverse economic or liability consequences for the Unitholders, which consequences would not be present had the Trust engaged in that same business or purpose directly. The objective of the Trust's business is appreciation of its assets through speculative trading. The Trust shall have the power to engage in all activities which are necessary, suitable, desirable, convenient or incidental to the accomplishment to the foregoing business and purpose. The Trust shall do so under the direction of the Managing Owner. A-4 5. TERM, DISSOLUTION, FISCAL YEAR AND NET ASSET VALUE. (a) TERM. The term of the Trust commenced on the day on which the Certificate of Trust was filed with the Secretary of State of the State of Delaware pursuant to the provisions of the Act and shall end upon the first to occur of the following: (1) December 31, 2026; (2) receipt by the Managing Owner of the determination by Unitholders owning more than 50% of the Units then owned by Unitholders to dissolve the Trust, notice of which is sent by certified mail, return receipt requested, to the Managing Owner not less than 90 days prior to the effective date of such dissolution; (3) the bankruptcy, retirement, resignation, expulsion, withdrawal, insolvency or dissolution of the Managing Owner, or any other event that causes the Managing Owner to cease to be managing owner of the Trust unless within 90 days after such event all Unitholders agree in writing to continue the business of the Trust and to the appointment, effective as of the date of such event, of one or more managing owners of the Trust; (4) the insolvency or bankruptcy of the Trust; (5) a decline in the aggregate Net Assets of the Trust to less than $2,500,000 (except as provided in Section 12); (6) a decline in the Net Asset Value per Unit to $50 or less (except as provided in Section 12); (7) dissolution of the Trust pursuant hereto; or (8) any other event which shall make it unlawful for the existence of the Trust to be continued or require dissolution of the Trust. (b) DISSOLUTION. Upon the occurrence of an event causing the dissolution of the Trust, the Trust shall be dissolved and its affairs wound up. Upon the dissolution of the Trust, the Managing Owner or, in the event that dissolution of the Trust pursuant to Section 5(a)(3) has caused the Managing Owner to cease to be managing owner of the Trust, a person or persons approved by the affirmative vote of more than 50% of the Units then owned by Unitholders, shall wind up the Trust's affairs and, in connection therewith, shall distribute the Trust's assets in the following manner and order: (i) FIRST TO payment and discharge of all claims of creditors of the Trust (including, to the extent otherwise permitted by law, creditors who are Unitholders), including by the creation of any reserve that the Managing Owner (or its successor), in its sole discretion, may consider reasonably necessary for any losses, contingencies, liabilities or other matters of or relating to the Trust; provided, however, that if and when the cause for such reserve ceases to exist, the monies, if any, then in such reserve shall be distributed in the manner hereinafter provided; and (ii) SECOND TO distribution in cash of the remaining assets to the Unitholders in proportion to their capital accounts, after giving effect to the allocations pursuant to Section 8 hereof as if the date of distribution were the end of a calendar year. (c) FISCAL YEAR. The fiscal year of the Trust shall begin on January 1 of each year and end on the following December 31; provided, however, that the first fiscal year of the Trust shall commence on the date its Certificate of Trust is filed. (d) NET ASSET VALUE. The Net Assets of the Trust are its assets less its liabilities determined in accordance with generally accepted accounting principles. The Net Asset Value per Unit is the Net Assets of the Trust divided by the number of Units outstanding, subject to the provision of Section 8(a) hereof. A futures or futures option contract traded on a United States commodity exchange shall be valued at the settlement price on the date of valuation. If such a contract held by the Trust cannot be liquidated on the day with respect to which Net Assets are being determined, the settlement price on the first subsequent day on which the contract can be liquidated shall be the basis for determining the liquidating value of such contract for such day, or such other value as the Managing Owner may deem fair and reasonable. The liquidating value of a futures, forward or option contract not traded on a United States commodity exchange shall mean its liquidating value as determined by the Managing Owner on a basis consistently applied for each different variety of such contract. The Managing Owner may only cause the Trust to invest in joint ventures, entities or partnerships which conform to the foregoing valuation principles. A-5 Organizational and initial offering cost reimbursement shall not reduce Net Asset Value for any purpose, including calculating the redemption value of Units; however, the amount of organizational and initial offering costs amortized at each month-end during the amortization period will reduce Net Asset Value as of each such month-end. Net Asset Value may, in the discretion of the Managing Owner, be calculated differently for purposes of determining the redemption value of Units than it is for purposes of determining certain fees and charges due from the Trust. Accrued Incentive Fee (as described in the Prospectus as defined in Section 9(a)) payable to John W. Henry & Company, Inc., the Trust's trading advisor ("JWH") (including the portion paid to JWH upon intra-calendar quarter redemption of certain Units) shall reduce the Net Asset Value of the Trust. 6. NET WORTH OF MANAGING OWNER. The Managing Owner agrees that at all times so long as it remains the managing owner of the Trust, it will maintain a Net Worth at an amount not less than 5% of the total contributions by all Unitholders to the Trust and all entities of which the Managing Owner is general partner or managing owner. In no event shall the Managing Owner be required to maintain a net worth in excess of the greater of (i) $1,000,000 or (ii) the amount which the Managing Owner is advised by counsel as necessary or advisable to ensure that the Trust is taxed as a partnership for federal income tax purposes. The requirements of the first sentence of the preceding paragraph may be modified if the Managing Owner obtains an opinion of counsel for the Trust to the effect that the proposed modification will not adversely affect the classification of the Trust as a partnership for federal income tax purposes, and if such modification will reflect or exceed applicable state securities and Blue Sky law requirements and qualify under any guidelines or statements of policy promulgated by any body or agency constituted by the various state securities administrators having jurisdiction in the premises (including, without limitation, the NASAA Guidelines, as defined in Section 9(a)). 7. CAPITAL CONTRIBUTIONS; UNITS; MANAGING OWNER'S LIABILITY. (a) CAPITAL CONTRIBUTIONS; UNITS. The beneficial interests in the Trust shall consist of two types: a general liability interest and limited liability Units. The Managing Owner shall acquire the general liability interest, and investors shall all acquire limited liability Units. Upon the initial contribution by the Managing Owner to the Trust, the Managing Owner became the holder of the general liability interest of the Trust. Upon his or her contribution to the Trust, each Initial Beneficial Owner became the holder of a limited liability Unit of the Trust. Upon the Initial Closing Date (as herein defined), the Trust shall return the capital contribution of each Initial Beneficial Owner and reacquire and cancel his or her Unit. No certificates or other evidences of beneficial ownership of the Units will be issued. The Unitholders' respective capital contributions to the Trust shall be as shown on the books and records of the Trust. Every Unitholder, by virtue of having purchased or otherwise acquired Units, shall be deemed to have expressly consented and agreed to be bound by the terms of this Declaration and Agreement of Trust. Any Units acquired by the Managing Owner or any of its affiliates will be non-voting, and will not be considered outstanding for purposes of determining whether the majority approval of the outstanding Units has been obtained. The general liability interest in the Trust held by the Managing Owner will be non-voting. (b) MANAGING OWNER'S LIABILITY. The Managing Owner shall have unlimited liability for the repayment, satisfaction and discharge of all debts, liabilities and obligations of the Trust to the full extent, and only to the extent, of the Managing Owner's assets. A-6 The Managing Owner shall be liable for the acts, omissions, obligations and expenses of the Trust, to the extent not paid out of the assets of the Trust, to the same extent that the Managing Owner would be so liable if the Trust were a partnership under the Delaware Revised Uniform Limited Partnership Act and the Managing Owner were the general partner of such partnership. The obligations of the Managing Owner under this paragraph shall be evidenced by its ownership of the general liability interest. The Managing Owner, so long as it is generally liable for the obligations of the Trust, shall invest in the Trust, as a general liability interest, no less than 1% of the total capital contributions to the Trust (including the Managing Owner's contributions). The Managing Owner may (i) withdraw any interest it may have in excess of such requirement as of any month-end or (ii) redeem any Units which it may acquire, in each case on the same terms as any Unitholder (although without early redemption charges). The foregoing requirements of this paragraph may be modified if the Managing Owner obtains an opinion of counsel for the Trust that a proposed modification will not adversely affect the classification of the Trust as a partnership for federal income tax purposes, and if such modification will reflect or exceed applicable state securities and Blue Sky law requirements and qualify under any guidelines or statements of policy promulgated by any body or agency constituted by the various state securities administrators having jurisdiction in the premises (including, without limitation, the NASAA Guidelines, as defined in Section 9(a)). 8. ALLOCATION OF PROFITS AND LOSSES. (a) CAPITAL ACCOUNTS AND ALLOCATIONS. A capital account shall be established for each Unit and for the Managing Owner. The initial balance of each capital account shall be the aggregate amount contributed to the Trust with respect to a Unit, which amount shall be equal to the Net Asset Value per Unit on the date each Unit is purchased after all accrued fees, expenses and Incentive Fee allocations (other than unamortized organizational and initial offering costs). The Net Asset Value per Unit prior to the Trust commencing operations has been arbitrarily established by the Managing Owner as $100 per Unit. As of the close of business (as determined by the Managing Owner) on the last business day of each month, any increase or decrease in the Trust's Net Assets as compared to the last such determination of Net Assets shall be credited or charged equally to the Units of all Unitholders. In making the month-end adjustments to the capital accounts described in the preceding paragraph, capital accounts of all Units shall be adjusted to reflect the Brokerage Fee at the Primary Brokerage Fee Rate, as defined in Section 8(c). Each Unitholder eligible for a Special Brokerage Fee Rate pursuant to Section 8(c) shall, to the extent Units are available for sale, be credited with additional Units at the their applicable Net Asset Value in an amount equal to the difference between the adjustment to the such Unitholder's Units at the Primary Brokerage Fee Rate and the adjustment to the such Unitholder's Units that would have been made under the applicable Special Brokerage Fee Rate (the "Brokerage Fee Excess"). The foregoing allocation of additional Units shall be used solely as a means of efficiently accounting for the Special Brokerage Fee Rate while preserving a uniform Net Asset Value per Unit. To the extent Units are not available to be purchased with the Brokerage Fee Excess as of such date, the Brokerage Fee Excess shall be distributed to the Unitholder no later than 15 days after such month-end. (b) ALLOCATION OF PROFIT AND LOSS FOR FEDERAL INCOME TAX PURPOSES. As of the end of each fiscal year, the Trust's income and expense and capital gain or loss shall be allocated among the Unitholders (including the Managing Owner on a Unit-equivalent basis) pursuant to the following provisions of this Section 8(b) for federal income tax purposes. Allocations of profit and loss shall be PRO RATA from net capital gain or loss and net ordinary income or loss realized by the Trust unless allocation of items of gain or income or loss or expense are necessary to satisfy the requirements in Sections 8(b)(1)(B) and 8(b)(1)(D) that sufficient profit and loss be allocated to tax accounts such that tax accounts attributable to redeemed Units equal distributions in redemption of such Units. Notwithstanding the foregoing requirement that annual allocations of profit and loss be PRO RATA from capital and ordinary income, gain, loss and expense, adjustments to such allocations shall be made to reflect the extent to which income or expense is otherwise determined and periodically allocated to the Unitholders, and such periodic allocations and adjustment shall be determined in a manner that in the judgment of the Managing Owner is consistent with the intent of this Section 8(b). (1) Trust profit and loss shall be allocated as follows: A-7 (A) For the purpose of allocating profit or loss among the Unitholders, there shall be established a tax account with respect to each outstanding Unit and with respect to the Managing Owner. The initial balance of each tax account shall be the amount contributed to the Trust for each Unit and the amount contributed by the Managing Owner. As of the end of each of the first sixty months after the Trust begins operations, the balance of such tax account shall be reduced by each Unit's allocable share of the amount of organizational and initial offering cost reimbursements amortized as of the end of such month by the Trust, as provided in Section 8(c). As of the end of each month after the Trust begins operations, the balance of such tax account shall be further reduced by each Unit's allocable share of any amount payable by the Trust in respect of that month for the costs of the ongoing offering of Units. The adjustment to reflect the amortization of organizational and initial offering cost reimbursements as well as ongoing offering costs shall be made prior to the following allocations of Trust profit and loss (and shall be taken into account in making such allocations). Tax accounts shall be adjusted as of the end of each fiscal year and as of the date a Unitholder redeems any Units as follows: (i) Each tax account shall be increased by the amount of profit allocated to the Unitholder pursuant to Section 8(b)(1)(B) and 8(b)(1)(C) below. (ii) Each tax account shall be decreased by the amount of loss allocated to the Unitholder pursuant to Section 8(b)(1)(D) and 8(b)(1) (E) below and by the amount of any distributions the Unitholder has received with respect to such Unit. (iii) When a Unit is redeemed, the tax account attributable to such Unit (determined after making all allocations set forth in Section 8(b)) shall be eliminated. (B) Profits shall be allocated first to each Unitholder who has redeemed any Units during the fiscal year up to the excess, if any, of the amount received upon redemption of the Units over the amount in the Unitholder's tax account attributable to the redeemed Units. (C) Profit remaining after the allocation thereof pursuant to Section 8(b)(1)(B) shall be allocated next among all Unitholders who hold Units outstanding at the end of the applicable fiscal year whose capital accounts with respect to such Units are in excess of their tax accounts in the ratio that each such Unitholder's excess bears to all such Unitholders' excesses. Profit remaining after the allocation described in the preceding sentence shall be allocated among all Unitholders in proportion to their holdings of outstanding Units. (D) Loss shall be allocated first to each Unitholder who has redeemed any Units during the fiscal year up to the excess, if any, of the amount in such Unitholder's tax account attributable to the redeemed Units over the amount received upon redemption of the Units. (E) Loss remaining after the allocation thereof pursuant to Section 8(b)(1)(D) shall be allocated next among all Unitholders who hold Units outstanding at the end of the applicable fiscal year whose tax accounts with respect to such Units are in excess of their capital accounts in the ratio that each such Unitholder's excess bears to all such Unitholders' excesses. Loss remaining after the allocation pursuant to the preceding sentence shall be allocated among all Unitholders in proportion to their holding of outstanding Units. (2) In the event that a Unit has been assigned, the allocations prescribed by this Section 8(b) shall be made with respect to such Unit without regard to the assignment, except that in the year of assignment the allocations prescribed by this Section 8(b) shall, to the extent permitted for federal income tax purposes, be allocated between the assignor and assignee using the interim closing of the books method. A-8 (3) The allocation for federal income tax purposes of profit and loss, as set forth herein, is intended to allocate taxable profit and loss among Unitholders generally in the ratio and to the extent that net profit and net loss are allocated to such Unitholders under Section 8(a) hereof so as to eliminate, to the extent possible, any disparity between a Unitholder's capital account and his tax account with respect to each Unit then outstanding, consistent with the principles set forth in Section 704(c) of the Code. (4) Notwithstanding anything herein to the contrary, in the event that at the end of any Trust taxable year any Unitholder's capital account is adjusted for, or such Unitholder is allocated, or there is distributed to such Unitholder any item described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) in an amount not reasonably expected at the end of such year, and such treatment creates a deficit balance in such Unitholder's capital account, then such Unitholder shall be allocated all items of income and gain of the Trust for such year and for all subsequent taxable years of the Trust until such deficit balance has been eliminated. In the event that any such unexpected adjustments, allocations or distributions create a deficit balance in the capital accounts of more than one Unitholder in any Trust taxable, all items of income and gain of the Trust for such taxable year and all subsequent taxable years shall be allocated among all such Unitholders in proportion to their respective deficit balances until such deficit balances have been eliminated. (5) The allocations of profit and loss to the Unitholders shall not exceed the allocations permitted under Subchapter K of the Code, as determined by the Managing Owner, whose determination shall be binding. The Managing Owner may adjust the allocations set forth in this Section 8(b), in the Managing Owner's discretion, if the Managing Owner believes that doing so will achieve more equitable allocations or allocations more consistent with the Code. (c) EXPENSES. The Managing Owner shall advance all organizational and initial offering costs incurred in connection with the initial public offering of Units, for which the Managing Owner shall be reimbursed by the Trust on the date closing of the initial public offering of Units (the "Initial Closing Date") and such costs shall be amortized over 60 months beginning with the end of the calendar month in which the Initial Closing Date occurs. At no month-end will the amount amortized by the Trust exceed 1/60 of 2% of the month-end Net Assets of the Trust. The amount amortized each month-end shall be the lesser of (i) the product of (x) one divided by the number of months remaining in the amortization period times (y) the unamortized balance of the capitalized organizational and initial offering costs, or (ii) 1/60 of 2% of such month-end Net Assets at that month-end. The amount of such expenses amortized each month shall be allocated on a pro rata basis to each Unit outstanding at such month- end (determined prior to any redemptions). If (i) the Trust is terminated prior to the end of such 60-month period, or (ii) the entire amount of the organizational and initial offering costs reimbursed to the Managing Owner is not amortized at the end of the 60-month period due to the 2% limitation, the Managing Owner shall return to the Trust, without interest, an amount equal to the unamortized balance of the capitalized organizational and initial offering costs. The Trust shall pay no later than the fifth day of each month to Cargill Investor Services, Inc., the Trust's clearing broker ("CIS"), the monthly Brokerage Fee at an annual rate of 6.5% (or approximately 0.542%per month) of the Trust's assets (after deduction of the Management Fee payable to the Trust's trading advisor) as of the immediately preceding month-end (the "Brokerage Fee Rate"); provided that, with respect to the month-end assets of the Trust attributable to Units held by any Unitholder holding as of such month-end Units originally issued at an aggregate Net Asset Value of at least $5,000,000, CIS shall be paid a Brokerage Fee at an annual rate equal to 4.5% (or a monthly rate of approximately 0.375%) of the assets (after deduction of the Management Fee) attributable to such Units ("Special Brokerage Fee Rate"), as described in the Prospectus. In the event of Unitholders acquiring Units at more than one time, their Units will be treated on a "first-in, first-out" basis, as described in the Prospectus, for purposes of determining whether the Special Brokerage Fee Rate is applicable. Any goods and services provided to the Trust by the Managing Owner shall be provided at rates and terms at least as favorable as those which may be obtained from third parties in arm's-length negotiations. All of the expenses which are for the Trust's account shall be billed directly to the Trust, as appropriate. Appropriate reserves may be A-9 created, accrued and charged against Net Assets for contingent liabilities, if any, as of the date any such contingent liability becomes known to the Managing Owner. The Trust shall bear the costs of the continuous offering of the Units (other than selling commissions and ongoing compensation), as incurred; provided that the Managing Owner shall absorb, without reimbursement from the Trust, all such costs to the extent that such costs exceed 0.5% of the Trust's average month-end Net Assets in any fiscal year. The amount of any such costs borne by the Trust shall be allocated on a pro rata basis to each Unit outstanding at any month-end (determined prior to any redemptions). Net Assets, for purposes of calculating the 2% and 0.5% limitations on organizational and initial offering cost amortization and continuous offering costs set forth in this Section 8(c), shall be calculated in the same manner as calculation of the redemption value of a Unit, i.e., net of all accrued fees and expenses including any accrued Incentive Fee (but prior to redemption charges). (d) LIMITED LIABILITY OF UNITHOLDERS. Each Unit, when purchased in accordance with this Declaration and Agreement of Trust, shall, except as otherwise provided by law, be fully-paid and nonassessable. Any provisions of this Declaration and Agreement of Trust to the contrary notwithstanding, Unitholders (including the Managing Owner, except to the extent otherwise provided herein) shall be entitled to the same limitation on personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. The Trust will indemnify, to the full extent permitted by law, each Unitholder (other than the Managing Owner in the event that the Managing Owner acquires Units) against any claims of liability asserted against such Unitholder solely because such Unitholder is a beneficial owner of the Trust (other than in respect of taxes due from such Unitholder as such a beneficial owner). Every written note, bond, contract, instrument, certificate or undertaking made or issued by the Managing Owner shall give notice to the effect that the same was executed or made by or on behalf of the Trust and that the obligations of any of the foregoing are not binding upon the Unitholders individually but are binding only upon the assets and property of the Trust, and that no resort shall be had to the Unitholders' personal property for the satisfaction of any obligation or claim thereunder, and appropriate references may be made to this Declaration and Agreement of Trust and may contain any further recital which the Managing Owner deems appropriate, but the omission thereof shall not operate to bind the Unitholders individually or otherwise invalidate any such note, bond, contract, instrument, certificate or undertaking. (e) RETURN OF CAPITAL CONTRIBUTIONS. No Unitholder or subsequent assignee shall have any right to demand the return of its capital contribution or any profits added thereto, except through redeeming Units or upon dissolution of the Trust, in each case as provided herein. In no event shall a Unitholder or subsequent assignee be entitled to demand or receive property other than cash. 9. MANAGEMENT OF THE TRUST. (a) AUTHORITY OF THE MANAGING OWNER. Pursuant to Section 3806 of the Act, the Trust shall be managed by the Managing Owner, and the conduct of the Trust's business shall be controlled and conducted solely by the Managing Owner in accordance with this Declaration and Agreement of Trust. The Managing Owner, to the exclusion of all other Unitholders, shall control, conduct and manage the business of the Trust. The Managing Owner shall have sole discretion in determining what distributions of profits and income, if any, shall be made to the Unitholders (subject to the allocation provisions hereof), shall execute various documents on behalf of the Trust and the Unitholders pursuant to powers of attorney and shall supervise the liquidation of the Trust if an event causing dissolution of the Trust occurs. The Managing Owner may, in furtherance of the business of the Trust, cause the Trust to buy, sell, hold or otherwise acquire or dispose of commodities, futures contracts, options on futures contracts, and spot and forward contracts traded on exchanges or otherwise, arbitrage positions, repurchase agreements, interest-bearing securities, deposit accounts and similar instruments and other assets, and cause the trading of the Trust to be limited to only certain of the foregoing instruments. The Managing Owner is specifically authorized to enter into brokerage, custodial and margining A-10 arrangements as described in the prospectus relating to the public offering of the Units, as it may be supplemented or updated from time to time (the "Prospectus"). The Managing Owner may engage, and compensate on behalf of the Trust from funds of the Trust, or agree to share profits and losses with, such persons, firms or corporations, including (except as described in this Declaration and Agreement of Trust) the Managing Owner and any affiliated person or entity, as the Managing Owner in its sole judgment shall deem advisable for the conduct and operation of the business of the Trust; provided, that no such arrangement shall allow brokerage commissions paid by the Trust in excess of such amount as permitted under the North American Securities Administrators Association, Inc. Guidelines for the Registration of Commodity Pool Programs (the "NASAA Guidelines") in effect as of the date of the Prospectus (I.E., 14% annually -- including pit brokerage and service fees -- of the Trust's average Net Assets, excluding the assets, if any, not directly related to trading activity). The Managing Owner shall reimburse the Trust, on an annual basis, to the extent that the Trust's brokerage commissions have exceeded 14% of the Trust's average Net Assets during the preceding year. The Managing Owner may take such other actions on behalf of the Trust as the Managing Owner deems necessary or desirable to manage the business of the Trust. Any material change in the Trust's basic investment policies or structure shall require the approval of Unitholders owning more than 50% of the Units then outstanding. In addition, the Managing Owner shall notify Unitholders of any material changes relating to the Trust as provided in Section 10 hereof. The Managing Owner is hereby authorized to perform all duties imposed by Sections 6221 through 6232 of the Code on the Managing Owner as the "tax matters partner" of the Trust. All Unitholders, by subscribing to the Units, will be deemed to have consented to the Managing Owner's selection of: (i) John W. Henry & Company, Inc. as the Trust's trading advisor; (ii) Cargill Investor Services, Inc. as the Trust's clearing broker, with whom the Trust's trading assets will be maintained (it being understood that CIS may place certain Trust assets with a sub- custodian depository bank and employ the services of a third-party cash manager solely for purposes of cash management and further that the Managing Owner may place certain Trust assets in one or more bank accounts in the name of the Trust and engage a third-party cash manager to manage such assets with the goal of enhancing the net return on such assets), (iii) CIS Financial Services, Inc. as the Trust's foreign currency and precious metals counterparty ("CISFS") and (iv) Cargill Investor Services, Inc. as the Trust's transfer agent. The Managing Owner is hereby specifically authorized to enter into, on behalf of the Trust, the Trading Advisory Agreement, the Customer Agreement, Foreign Exchange Account Agreement, Cash Bullion Account Agreement, the Escrow Agreement, the Selling Agreement and the Transfer Agent Agreement referred to in the Prospectus. (b) FIDUCIARY DUTIES. The Managing Owner shall be under a fiduciary duty to conduct the affairs of the Trust in the best interests of the Trust, provided that the Managing Owner shall not be obligated to engage in any conduct on behalf of the Trust to the detriment of any other commodity pool to which the Managing Owner owes similar fiduciary duties. Except as otherwise provided herein or disclosed in the Prospectus, the Unitholders will under no circumstances be deemed to have contracted away the fiduciary obligations owed them by the Managing Owner under the common law. The Managing Owner's fiduciary duty includes, among other things, the safekeeping of all funds and assets of the Trust and the use thereof for the benefit of the Trust. The funds of the Trust will not be commingled with the funds of any other person or entity (deposit of funds with a commodity or securities broker, clearinghouse or forward dealer shall not be deemed to constitute "commingling" for these purposes). The Managing Owner will take no actions with respect to the property of the Trust which do not benefit the Trust. The Managing Owner shall at all times act with integrity and good faith and exercise due diligence in all activities relating to the conduct of the business of the Trust and in resolving conflicts of interest. (c) LOANS; INVESTMENTS. Except as otherwise provided in Section 8(c), the Trust shall not make loans to any party. The Managing Owner shall make no loans to the Trust unless approved by the Unitholders in accordance with Section 19(a). If the Managing Owner makes a loan to the Trust, the Managing Owner shall not receive interest in excess of its interest costs, nor may the Managing Owner receive interest in excess of the amounts which would be charged to the Trust (without reference to the Managing Owner's financial resources or guarantees) by unrelated banks on comparable loans for the same purpose. The Managing Owner shall not receive "points" or other financing charges or fees regardless of the amount. The Trust shall not invest in any debt instruments other than Government Securities and A-11 other Commodity Futures Trading Commission ("CFTC")-authorized investments, or invest in any equity security without prior notice to Unitholders. (d) CERTAIN CONFLICTS OF INTEREST PROHIBITED. No person or entity may receive, directly or indirectly, any advisory or management fees, profit shares or any profit-sharing allocation, from joint ventures, partnerships or similar arrangements in which the Trust participates, for investment advice or management who shares or participates in any commodity brokerage commissions paid by the Trust; no broker may pay, directly or indirectly, rebates or give-ups to any trading advisor, manager or joint venturer, or to the Managing Owner or any of its affiliates; and such prohibitions may not be circumvented by any reciprocal business arrangements; provided, however, that the foregoing shall not prohibit the payment, from the commodity brokerage commissions paid by the Trust, of fees for investment advisory services provided in respect of assets of the Trust. No trading advisor shall be affiliated with the Trust's commodity broker or any of its affiliates. (e) CERTAIN AGREEMENTS. Any agreements between the Trust and the Managing Owner or any affiliate of the Managing Owner shall be terminable by the Trust on no more than 60 days' written notice. In addition to any specific contract or agreements described herein, the Trust and the Managing Owner on behalf of the Trust may enter into any other contracts or agreements specifically described in or contemplated by the Prospectus without any further act, approval or vote of the Unitholders, notwithstanding any other provisions of this Declaration and Agreement of Trust, the Act or any applicable laws, rules or regulations. The Managing Owner shall not enter into any advisory agreement with any trading advisor that does not satisfy the relevant experience requirements under the NASAA Guidelines (i.e., a minimum of three years' experience in the managed futures industry). The maximum period covered by any contract entered into by the Trust, except for the various provisions of the Selling Agreement which survive the final closing of the sale of the Units, shall not exceed one year. The Managing Owner is hereby specifically authorized (i) to enter into, deliver and perform on behalf of the Trust the Trading Advisory Agreement, Selling Agreement on the terms described in the Prospectus, (ii) to enter into, deliver and perform on behalf of the Trust, as the case may be, the Escrow Agreement, the Customer Agreement, the Foreign Exchange Account Agreement, the Cash Bullion Account Agreement and the Transfer Agent Agreement as referred to in the Prospectus, (iii) to consent, at its sole discretion, to the selection and appointment by CIS, in its capacity as the Trust Lead Selling Agent, of one or more Wholesalers, Additional Selling Agents and Correspondents as described in the Prospects and in accordance with the terms of the Selling Agreement and (iv) in the event that the Managing Owner determines to deposit Trust assets in one or more bank accounts in the name of the Trust at a bank ("Custodian") and engage the services of a third-party cash manager to manage such assets, to enter into and deliver an appropriate cash management agreement and any related agreement. The brokerage commissions paid by the Trust shall be competitive. The Trust shall seek the best price and services available for its commodity transactions. Initially all of the Trust's assets will be deposited in the Trust's account with CIS and CISFS. CIS and CISFS will credit the Trust on the fifth business day of each month with interest income on 100% of the Trust's average daily assets on deposit with CIS and CISFS, respectively, during the previous month at the average 90-day U.S. Treasury bill rate for that month in respect of deposits denominated in dollars and at applicable rates described in the Prospectus in respect of deposits denominated in currencies other than dollars (which may be zero in certain cases). The Trust and the Managing Owner reserve the right to deposit, at any time, a portion of Trust assets with a Custodian and engage the services of a third-party cash manager to manage such assets with the goal of enhancing net return on such assets. (f) PROHIBITION ON "PYRAMIDING." The Trust is prohibited from employing the trading technique commonly known as "pyramiding." A trading manager or advisor of the Trust taking into account the Trust's open-trade equity on existing positions in determining generally whether to acquire additional commodity positions on behalf of the Trust will not be considered to be engaging in "pyramiding." A-12 (g) FREEDOM OF ACTION. The Managing Owner is engaged, and may in the future engage, in other business activities and shall not be required to refrain from any other activity nor forgo any profits from any such activity, whether or not in competition with the Trust. Neither the Trust nor any of the Unitholders shall have any rights by virtue of this Declaration and Agreement of Trust in and to such independent ventures or the income or profits derived therefrom. Unitholders may similarly engage in any such other business activities. The Managing Owner shall devote to the Trust such time as the Managing Owner may deem advisable to conduct the Trust's business and affairs. 10. AUDITS AND REPORTS TO UNITHOLDERS. The Trust's books shall be audited annually by an independent certified public accountant. The Trust will use its best efforts to cause each Unitholder to receive (i) within 90, but in no event later than 120 days, after the close of each fiscal year certified financial statements for the fiscal year then ended, (ii) within 90 days of the end of each fiscal year (but in no event later than March 15 of each year) such tax information as is necessary for a Unitholder to complete its federal income tax return and (iii) such other annual and monthly information as the CFTC may by regulation require. The Managing Owner shall include in the annual reports sent to Unitholders an approximate estimate (calculated as accurately as may be reasonably practicable) of the round-turn equivalent brokerage commission rate paid by the Trust during the preceding year (including forward contracts on a futures-equivalent basis for purposes of such calculation). Unitholders or their duly authorized representatives may inspect the books and records of the Trust, (which do not include records of the Trust's trades) during normal business hours upon reasonable written notice to the Managing Owner and obtain copies of such records upon payment of reasonable reproduction costs; provided, however, that upon request by the Managing Owner, the requesting Unitholder shall represent that the inspection and/or copies of such records will not be used for commercial purposes unrelated to such Unitholder's interest as an investor in the Trust. The Managing Owner shall calculate the Net Asset Value per Unit on a monthly basis and sell and redeem Units at Net Asset Value. The Managing Owner shall notify the Unitholders of (i) changes to the trading method of the Trust's trading advisor which the Managing Owner believes to be material, (ii) changes in Brokerage Fees, Incentive Fee or other fees paid by the Trust or (iii) material changes in the basic investment policies or structure of the Trust. The Managing Owner shall so notify Unitholders, by certified mail or other means of notification providing for evidence of delivery, prior to any such change. Such notification shall set forth the Unitholders' voting and redemption rights. The Managing Owner will send written notice to each Unitholder within seven days of any decline in the Net Asset Value per Unit to 50% or less of such value as of the previous month-end. Any such notice shall contain a description of the Unitholders' voting and redemption rights. The Trust shall pay the cost of any notification delivered pursuant to this paragraph. The Managing Owner shall prepare or cause to be prepared and shall file on or before the due date (or any extension thereof) any federal, state or local tax returns required to be filed by the Trust. The Managing Owner shall cause the Trust to pay any taxes payable by the Trust; provided, however, that such taxes need not be paid if the Managing Owner or the Trust is in good faith and by appropriate legal proceedings contesting the validity, applicability or amount thereof, and such contest does not materially endanger any right or interest of the Trust. The Managing Owner shall maintain and preserve all required records relating to the Trust for a period of not less than six years from the receipt of such records. In particular, and not by way of limitation, the Managing Owner will retain all Subscription Agreement and Power of Attorney Signature Pages submitted by persons admitted as Unitholders, and all other records necessary to substantiate that Units are sold only to purchasers for whom the Units are a suitable investment, for at least six years after Units are sold to such persons. The Managing Owner shall seek the best price and services for the Trust's trading, and will, with the assistance of the Trust's commodity broker(s), make an annual review of the commodity brokerage arrangements applicable to the Trust. In connection with such review, the Managing Owner will ascertain, to the extent practicable, the commodity brokerage rates charged to other major commodity pools whose trading and operations are, in the opinion of the Managing Owner, comparable to those of the Trust, in order to assess whether the rates charged the Trust are reasonable in light A-13 of the services it receives and the terms upon which the Trust was promoted to subscribers. If, as a result of such review, the Managing Owner determines that such rates are unreasonable in light of the services provided to the Trust and the terms upon which the Trust was promoted, the Managing Owner will notify the Unitholders, setting forth the rates charged to the Trust and several funds which are, in the Managing Owner's opinion, comparable to the Trust. The Managing Owner shall also make an annual review of the spot and forward trading arrangements for the Trust in an attempt to determine whether such arrangements are competitive with those of other comparable pools in light of the circumstances. 11. ASSIGNABILITY OF UNITS. Each Unitholder expressly agrees that it will not assign, transfer or dispose of, by gift or otherwise, any of its Units or any part or all of its right, title and interest in the capital or profits of the Trust in violation of any applicable federal or state securities laws or, except by involuntary operation of law, without giving written notice to the Managing Owner. No assignment, transfer or disposition by an assignee of Units or of any part of its right, title and interest in the capital or profits of the Trust shall be effective against the Trust, the Trustee or the Managing Owner until the Managing Owner has received the written notice of the assignment; the Managing Owner shall not be required to give any assignee any rights hereunder prior to receipt of such notice. The Managing Owner may, in its sole discretion, waive any such notice. No such assignee, except with the consent of the Managing Owner (such consent may be withheld in the absolute discretion of the Managing Owner), may become a substituted Unitholder, nor will the estate or any beneficiary of a deceased Unitholder or assignee have any right to redeem Units from the Trust except by redemption as provided in Section 12 hereof. The Managing Owner's consent is required for the admission of a substituted Unitholder, and the Managing Owner intends to so consent; provided, that the Managing Owner and the Trust receive an opinion of counsel to the Managing Owner and of counsel to the Trust that such admission will not adversely affect the classification of the Trust as a partnership for federal income tax purposes; and provided further, that an assignee shall not become a substituted Unitholder without first having executed an instrument reasonably satisfactory to the Managing Owner accepting and adopting the terms and provisions of this Declaration and Agreement of Trust, including a Subscription Agreement and Power of Attorney Signature Page, a counterpart signature page to this Declaration and Agreement of Trust or other comparable document, and without having paid to the Trust a fee sufficient to cover all reasonable expenses of the Trust in connection with its admission as a substituted Unitholder. Each Unitholder agrees that with the consent of the Managing Owner any assignee may become a substituted Unitholder without need of the further act or approval of any Unitholder. If the Managing Owner withholds consent, an assignee shall not become a substituted Unitholder, and shall not have any of the rights of a Unitholder, except that the assignee shall be entitled to receive that share of capital and profits and shall have that right of redemption to which its assignor would otherwise have been entitled. No assignment, transfer or disposition of Units shall be effective against the Trust or the Managing Owner until the last day of the month in which the Managing Owner receives notice of such assignment, transfer or disposition. 12. REDEMPTIONS. A Unitholder (including the Managing Owner except to the extent that its power to redeem is limited by any other provision of this Declaration and Agreement of Trust) to the extent that it owns Units or any assignee of Units of whom the Managing Owner has received written notice as described above, may redeem all or part of its Units, effective as of the close of business (as determined by the Managing Owner) on the last day of any month, provided, that (i) all liabilities, contingent or otherwise, of the Trust, except any liability to Unitholders on account of their capital contributions, have been paid or there remains property of the Trust sufficient to pay them, (ii) the Unitholder redeems at least $1,000 of Units, (iii) in the case of partial redemption, such Unitholder's investment in the Trust after the partial redemption will be at least $1,000, and (iv) the Managing Owner shall have timely received a request for redemption (as provided below). If Units are redeemed by a Unitholder at a time when there is an accrued incentive fee due to the Trust's trading advisor, the amount of such accrual attributable to the Units being redeemed will be deducted from the redemption proceeds payable to the redeeming Unitholder and paid to the Trust's trading advisor. Units redeemed on or before the end of the eleventh full calendar month after such Units are issued by the Trust are subject to early redemption charges of 3% of the Net Asset Value at which they are redeemed. Such charges will be deducted from redemption proceeds due to the Unitholder making the redemption and will be paid to CIS. Units are issued, for purposes of determining whether an early redemption charge is due, as of the date as of which the subscription price of such Units is invested in the Trust, not when subscriptions are submitted by Unitholders or accepted by the Managing Owner or A-14 subscription funds are accepted into escrow. No redemption charges shall be applicable to Unitholders who redeem because the Trust's expenses have been increased. In the event that a Unitholder acquires Units as of the end of more than one month, such Units will be treated on a "first-in, first-out" basis for purposes of identifying which of such Units are being redeemed so as to determine whether early redemption charges apply. Requests for redemption as of any month-end must be received by the Managing Owner on or before the 20th of such month (or, if the 20th is not a business day, the next business day), or such later date as shall be acceptable to the Managing Owner. If as of the close of business (as determined by the Managing Owner) on any day, the Net Asset Value of a Unit has decreased to less than 50% of the Net Asset Value per Unit as of the previous month-end or to $50 or less, after adding back all distributions, the Managing Owner shall cause the Trust to liquidate all open positions as expeditiously as possible and suspend trading. Within ten business days after the suspension of trading, the Managing Owner shall declare a Special Redemption Date. Such Special Redemption Date shall be a business day within 30 business days from the suspension of trading by the Trust, and the Managing Owner shall mail notice of such date to each Unitholder and assignee of Units of whom it has received written notice as described above, by first-class mail, postage prepaid, not later than ten business days prior to such Special Redemption Date, together with instructions as to the procedure such Unitholder or assignee must follow to have its Units redeemed on such Date (only entire, not partial, interests in the Trust may be redeemed on a Special Redemption Date, unless otherwise determined by the Managing Owner). Upon redemption pursuant to a Special Redemption Date, a Unitholder or any other assignee of whom the Managing Owner has received written notice as described above, shall receive from the Trust an amount equal to the Net Asset Value of its Units, determined as of the close of business (as determined by the Managing Owner) on such Special Redemption Date. No redemption charges shall be assessed on any such Special Redemption Date. As in the case of a regular redemption, an assignee shall not be entitled to redemption until the Managing Owner has received written notice as described above of the assignment, transfer or disposition under which the assignee claims an interest in the Units to be redeemed. If, after a Special Redemption Date, the Net Assets of the Trust are at least $1,000,000 and the Net Asset Value per Unit is in excess of $25, the Trust may, in the discretion of the Managing Owner, resume trading. The Managing Owner may at any time and in its discretion declare a Special Redemption Date, should the Managing Owner determine that it is in the best interests of the Trust to do so. If the Managing Owner declares a Special Redemption Date, the Managing Owner shall not be required to again call a Special Redemption Date (whether or not a Special Redemption Date would otherwise be required to be called as described above); and the Managing Owner in its notice of a Special Redemption Date may, at its discretion, establish the conditions, if any, under which other Special Redemption Dates must be called, which conditions may be determined in the sole discretion of the Managing Owner, irrespective of the provisions of the preceding paragraph. The Managing Owner may also, in its discretion, declare additional regular redemption dates for Units, permit certain Unitholders to redeem at other than at month-end and waive the notice period otherwise required to effect redemptions. Redemption payments will be made within ten calendar days after the month-end of redemption, except that under special circumstances, including, but not limited to, inability to liquidate commodity positions as of a redemption date or default or delay in payments due the Trust from commodity brokers, banks or other persons or entities, the Trust may in turn delay payment to Unitholders or assignees requesting redemption of their Units of the proportionate part of the Net Asset Value of such Units equal to the proportionate part of the Trust's aggregate Net Asset Value represented by the sums which are the subject of such default or delay. The Managing Owner may require a Unitholder to redeem all or a portion of such Unitholder's Units if the Managing Owner considers doing so to be desirable for the protection of the Trust, and will use best efforts to do so to the extent necessary to prevent the Trust from being deemed to hold "plan assets" under the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") or the Code, with respect to any "employee benefit plan" subject to ERISA or with respect to any "plan" or "account" subject to Section 4975 of the Code. A-15 13. OFFERING OF UNITS. The Managing Owner, on behalf of the Trust shall (i) cause to be filed a Registration Statement or Registration Statements, and such amendments thereto as the Managing Owner may deem advisable or necessary, with the Securities and Exchange Commission for the registration and continuous public offering of the Units, (ii) use its best efforts to qualify the Units for sale under the securities laws of such States of the United States or other jurisdictions as the Managing Owner may deem advisable and (iii) take such action with respect to the matters described in (i) and (ii) as the Managing Owner may deem advisable or necessary. Fractional Units, calculated to five decimal places, may be sold. All sales of Units in the United States will be conducted by registered (or exempt) brokers. The Managing Owner shall not accept any subscriptions for Units if doing so would cause the Trust to hold "plan assets" under ERISA or the Code with respect to any "employee benefit plan" subject to ERISA or with respect to any "plan" or "account " subject to Section 4975 of the Code. If a subscriber has its subscription reduced for such reason, such subscriber shall be entitled to rescind its subscription in its entirety even though subscriptions are otherwise irrevocable. All subscriptions will be held in escrow by The First National Bank of Chicago (the "Escrow Agent"). The Trust shall not commence trading operations unless and until the Managing Owner has accepted subscriptions for Units representing an aggregate offering price of $10,000,000 pursuant to the Trust's initial public offering of Units. The interest actually earned on subscriptions funds while held in escrow will be invested in the Trust, and each subscriber will be issued additional Units reflecting the subscriber's attributable share of such interest. The Managing Owner may terminate any offering of Units at any time. The aggregate of all capital contributions shall be available to the Trust to carry on its business, and no interest shall be paid by the Trust on any such contributions after such contributions are released by the Escrow Agent. 14. ADDITIONAL OFFERINGS. The Managing Owner may, in its discretion, continue, suspend or discontinue the public offering of the Units, as well as make additional public or private offerings of Units, provided that the net proceeds to the Trust of any such sales shall in no event be less than the Net Asset Value per Unit (as defined in Section 5(d)) at the time of sale (unless the new Unit's participation in the profits and losses of the Trust is appropriately adjusted). No Unitholder shall have any preemptive, preferential or other rights with respect to the issuance or sale of any additional Units, other than as set forth in the preceding sentence. 15. SPECIAL POWER OF ATTORNEY. Each Unitholder by virtue of having purchased or otherwise acquired Units does hereby irrevocably constitute and appoint the Managing Owner and each officer of the Managing Owner, with full power of substitution, as its true and lawful attorney-in-fact, in its name, place and stead, to execute, acknowledge, swear to (and deliver as may be appropriate) on its behalf and file and record in the appropriate public offices and publish (as may in the reasonable judgment of the Managing Owner be required by law): (i) this Declaration and Agreement of Trust, including any amendments and/or restatements hereto duly adopted as provided herein; (ii) certificates in various jurisdictions, and amendments and/or restatements thereto; (iii) all conveyances and other instruments which the Managing Owner deems appropriate to qualify or continue the Trust in the State of Delaware and the jurisdictions in which the Trust may conduct business, or which may be required to be filed by the Trust or the Unitholders under the laws of any jurisdiction or under any amendments or successor statutes to the Act, to reflect the dissolution or termination of the Trust or the Trust being governed by any amendments or successor statutes to the Act or to reorganize or refile the Trust in a different jurisdiction; and (iv) to file, prosecute, defend, settle or compromise litigation, claims or arbitrations on behalf of the Trust. The Power of Attorney granted herein shall be irrevocable and deemed to be a power coupled with an interest (including, without limitation, the interest of the other Unitholders in the Managing Owner being able to rely on its authority to act as contemplated by this Section 15) and shall survive and shall not be affected by the subsequent incapacity, disability or death of a Unitholder. A-16 16. WITHDRAWAL OF A UNITHOLDER. The Trust shall be dissolved upon the death, insanity, bankruptcy, retirement, resignation, expulsion, withdrawal, insolvency or dissolution of the Managing Owner, or any other event that causes the Managing Owner to cease to be the managing owner of the Trust, unless the Trust is continued pursuant to the terms of Section 5(a)(3). In addition, the Managing Owner may withdraw from the Trust, without any breach of this Declaration and Agreement of Trust, at any time upon 120 days' written notice by first class mail, postage prepaid, to the Trustee, each Unitholder and each assignee of whom the Managing Owner has notice. If the Managing Owner withdraws from the Trust and all Unitholders agree in writing to continue the business of the Trust and to the appointment, effective as of the date of withdrawal of the Managing Owner, of one or more managing owners, the Managing Owner shall pay all expenses incurred as a result of its withdrawal. Upon removal or withdrawal, the Managing Owner shall be entitled to redeem its interest in the Trust at its Net Asset Value on the next valuation date following the date of removal or withdrawal. The Managing Owner may not assign its general liability interest or its obligation to manage the Trust without the consent of each Unitholder; provided, however, that the consent of Unitholders is not required if the Managing Owner assigns its general liability interest and its obligation to manage the Trust to an entity controlling, controlled by or under common control with the Managing Owner, provided that such entity (i) expressly assumes all obligations of the Managing Owner under this Declaration and Agreement of Trust and (ii) is entitled to act in the capacity of managing owner for the benefit of the Trust. The Managing Owner shall notify all Unitholders of such assignment. The Managing Owner will notify all Unitholders of any change in the principals of the Managing Owner. The death, incompetency, withdrawal, insolvency or dissolution of a Unitholder or any other event that causes a Unitholder to cease to be a beneficial owner (within the meaning of the Act) in the Trust shall not terminate or dissolve the Trust, and a Unitholder, the Unitholder's estate, custodian or personal representative shall have no right to redeem or value such Unitholder's interest except as provided in Section 12 hereof. Each Unitholder that is a natural person expressly agrees that in the event of his or her death, he or she waives on behalf of himself or herself and his or her estate, and directs the legal representatives of his or her estate and any person interested therein to waive, the furnishing of any inventory, accounting or appraisal of the assets of the Trust and any right to an audit or examination of the books of the Trust. Nothing in this Section 16 shall, however, waive any right given elsewhere in this Declaration and Agreement of Trust for Unitholders to be informed of the Net Asset Value of their Units, to receive periodic reports, audited financial statements and other information from the Managing Owner or the Trust or to redeem or transfer Units. 17. BENEFIT PLAN INVESTORS. Each Unitholder or assignee that is an "employee benefit plan" as defined in and subject to ERISA, or a "plan" as defined in Section 4975 of the Code (each such employee benefit plan and plan, a "Plan"), and each fiduciary thereof who has caused the Plan to become a Unitholder or assignee (a "Plan Fiduciary"), represents and warrants that: (a) the Plan Fiduciary has considered an investment in the Trust by such Plan in light of the risks relating thereto; (b) the Plan Fiduciary has determined that, in view of such considerations, the investment in the Trust by the Plan is consistent with the Plan Fiduciary's responsibilities under ERISA; (c) the investment in the Trust by the Plan does not violate, and is not otherwise inconsistent with, the terms of any legal document constituting the Plan or any trust agreement thereunder; (d) the Plan's investment in the Trust has been duly authorized and approved by all necessary parties; (e) none of the Managing Owner, the Trustee, JWH, CIS, CISFS, any Selling Agent, Wholesaler, Correspondent, the Escrow Agent, any of their respective affiliates or any of their respective agents or employees: (i) has investment discretion with respect to the investment of assets of the Plan used to purchase Units; (ii) has authority or responsibility to or regularly gives investment advice with respect to the assets of the Plan used to purchase Units for a fee and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to the Plan and that such advice will be based on the particular investment needs of the Plan; or (iii) is an employer maintaining or contributing to the Plan; and (f) the Plan Fiduciary: (i) is authorized to make, and is responsible for, the decision of the Plan to invest in the Trust, including the determination that such investment is consistent with the requirement imposed by Section 404 of ERISA that Plan investments be diversified so as to minimize the risks of large losses; (ii) is independent of the Managing Owner, the Trustee, JWH, CIS, CISFS, any Selling Agent, Wholesaler, Correspondent, the Escrow Agent, and any of their respective affiliates; and (iii) is qualified to make such investment decision. A-17 18. STANDARD OF LIABILITY; INDEMNIFICATION. (a) STANDARD OF LIABILITY FOR THE MANAGING OWNER. The Managing Owner and its Affiliates, as defined below, shall have no liability to the Trust or to any Unitholder for any loss suffered by the Trust which arises out of any action or inaction of the Managing Owner or its Affiliates, if the Managing Owner, in good faith, determined that such course of conduct was in the best interests of the Trust, and such course of conduct did not constitute negligence or misconduct of the Managing Owner or its Affiliates. (b) INDEMNIFICATION OF THE MANAGING OWNER BY THE TRUST. To the fullest extent permitted by law, subject to this Section 18, the Managing Owner and its Affiliates shall be indemnified by the Trust against any losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by them in connection with the Trust; provided that such claims were not the result of negligence or misconduct on the part of the Managing Owner or its Affiliates, and the Managing Owner, in good faith, determined that such conduct was in the best interests of the Trust; and provided further that Affiliates of the Managing Owner shall be entitled to indemnification only for losses incurred by such Affiliates in performing the duties of the Managing Owner and acting wholly within the scope of the authority of the Managing Owner. Notwithstanding anything to the contrary contained in the preceding two paragraphs, the Managing Owner and its Affiliates and any persons acting as selling agent for the Units shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws unless (1) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee and the court approves indemnification of the litigation costs, or (2) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee and the court approves indemnification of the litigation costs, or (3) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and related costs should be made. In any claim for indemnification for federal or state securities law violations, the party seeking indemnification shall place before the court the position of the Securities and Exchange Commission, the California Department of Corporations, the Massachusetts Securities Division, the Pennsylvania Securities Commission, the Tennessee Securities Division, the Texas Securities Board and any other state or applicable regulatory authority with respect to the issue of indemnification for securities law violations. The Trust shall not bear the cost of that portion of any insurance which insures any party against any liability the indemnification of which is herein prohibited. For the purposes of this Section 18, the term "Affiliates" shall mean any person acting on behalf of or performing services on behalf of the Trust who: (1) directly or indirectly controls, is controlled by, or is under common control with the Managing Owner; or (2) owns or controls 10% or more of the outstanding voting securities of the Managing Owner; or (3) is an officer or director of the Managing Owner; or (4) if the Managing Owner is an officer, director, partner or trustee, is any entity for which the Managing Owner acts in any such capacity. Advances from the funds of the Trust to the Managing Owner or its Affiliates for legal expenses and other costs incurred as a result of any legal action initiated against the Managing Owner by a Unitholder are prohibited. Advances from the funds of the Trust to the Managing Owner or its Affiliates for legal expenses and other costs incurred as a result of a legal action will be made only if the following three conditions are satisfied: (1) the legal action relates to the performance of duties or services by the Managing Owner or its Affiliates on behalf of the Trust; (2) the legal action is initiated by a third party who is not a Unitholder; and (3) the Managing Owner or its Affiliates undertake to repay the advanced funds, with interest from the initial date of such advance, to the Trust in cases in which they would not be entitled to indemnification under the standard of liability set forth in Section 18(a). In no event shall any indemnity or exculpation provided for herein be more favorable to the Managing Owner or any Affiliate than that contemplated by the NASAA Guidelines as in effect on the date of this Declaration and Agreement of Trust. A-18 In no event shall any indemnification permitted by this subsection (b) of Section 18 be made by the Trust unless all provisions of this Section for the payment of indemnification have been complied with in all respects. Furthermore, it shall be a precondition of any such indemnification that the Trust receive a determination of qualified independent legal counsel in a written opinion that the party which seeks to be indemnified hereunder has met the applicable standard of conduct set forth herein. Receipt of any such opinion shall not, however, in itself, entitle any such party to indemnification unless indemnification is otherwise proper hereunder. Any indemnification payable by the Trust hereunder shall be made only as provided in the specific case. In no event shall any indemnification obligations of the Trust under this subsection (b) of Section 18 subject a Unitholder to any liability in excess of that contemplated by subsection (d) of Section 8 hereof. (c) INDEMNIFICATION BY THE UNITHOLDERS. In the event that the Trust is made a party to any claim, dispute or litigation or otherwise incurs any loss or expense as a result of or in connection with any activities of a Unitholder, obligations or liabilities unrelated to the business of the Trust or as a result of or in connection with a transfer, assignment or other disposition or an attempted transfer, assignment or other disposition by a Unitholder or an assignee of its Units or of any part of its right, title and interest in the capital or profits of the Trust in violation of this Declaration and Agreement of Trust, such Unitholder shall indemnify and reimburse the Trust for all loss and expense incurred, including reasonable attorneys' fees. The Managing Owner shall indemnify and hold the Trust harmless from all loss or expense which the Trust may incur (including, without limitation, any indemnify payments) as a result of the difference between the standard of liability and indemnity under the Trading Advisory Agreement, the Customer Agreement, the Foreign Exchange Account Agreement or the Cash Bullion Account Agreement, on the one hand, and the Managing Owner's standards of liability as set forth herein, on the other hand. 19. AMENDMENTS; MEETINGS. (a) AMENDMENTS WITH CONSENT OF THE MANAGING OWNER. If at any time during the term of the Trust the Managing Owner shall deem it necessary or desirable to amend this Declaration and Agreement of Trust, the Managing Owner may proceed to do so, provided that such amendment shall be effective only if embodied in an instrument approved by the Managing Owner and, pursuant to a vote called by the Managing Owner, by the holders of Units representing a majority of the outstanding Units. Such vote shall be taken at least 30 but not more than 60 days after delivery by the Managing Owner to each Unitholder of record by certified mail of notice of the proposed amendment and voting procedures. Notwithstanding the foregoing, the Managing Owner may amend this Declaration and Agreement of Trust without the consent of the Unitholders in order (i) to clarify any clerical inaccuracy or ambiguity or reconcile any inconsistency (including any inconsistency between this Declaration and Agreement of Trust and the Prospectus), (ii) to effect the intent of the allocations proposed herein to the maximum extent possible in the event of a change in the Code or the interpretations thereof affecting such allocations, (iii) to attempt to ensure that the Trust is not treated as an association taxable as a corporation for federal income tax purposes, (iv) to qualify or maintain the qualification of the Trust as a trust in any jurisdiction, (v) to delete or add any provision of or to this Declaration and Agreement of Trust required to be deleted or added by the Staff of the Securities and Exchange Commission or any other federal agency or any state "Blue Sky" or similar official or in order to opt to be governed by any amendment or successor statute to the Act, (vi) to make any amendment to this Declaration and Agreement of Trust which the Managing Owner deems advisable, provided that such amendment is for the benefit of and not adverse to the Unitholders or the Trustee, or that is required by law, (vii) to make any amendment that is appropriate or necessary, in the opinion of the Managing Owner, to prevent the Trust or the Managing Owner or its directors, officers or controlling persons from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, or to avoid causing the assets of the Trust from being considered for any purpose of ERISA or Section 4975 of the Code to constitute assets of any "employee benefit plan," as defined in and subject to ERISA, or of a "plan," as defined in and subject to Section 4975 of the Code. In the event that JWH shall cease to be the sole trading advisor of the Trust, the Managing Owner shall cause "JWH" to be deleted from the Trust's name and take all such other actions as shall be necessary or appropriate. (b) AMENDMENTS AND ACTIONS WITHOUT CONSENT OF THE MANAGING OWNER. In any vote called by the Managing Owner or pursuant to subsection (c) of this Section 19, upon the affirmative vote (which may be in person or by proxy) A-19 of more than 50% of the Units then owned by Unitholders, the following actions may be taken with respect to the Trust, irrespective of whether the Managing Owner concurs: (i) this Declaration and Agreement of Trust may be amended, provided, however, that approval of all Unitholders shall be required in the case of amendments changing or altering this Section 19, extending the term of the Trust, or materially changing the Trust's basic investment policies or structure; in addition, reduction of the capital account of any Unitholder or assignee or modification of the percentage of profits, losses or distributions to which a Unitholder or an assignee is entitled hereunder shall not be effected by any amendment or supplement to this Declaration and Agreement of Trust without such Unitholder's or assignee's written consent; (ii) the Trust may be dissolved; (iii) the Managing Owner may be removed and replaced; (iv) a new managing owner or managing owners may be elected if the Managing Owner withdraws from the Trust; (v) the sale of all or substantially all of the assets of the Trust may be approved; and (vi) any contract with the Managing Owner or any affiliate thereof may be disapproved and, as a result, terminated upon 60 days' notice. (c) MEETINGS; OTHER. Any Unitholder upon request addressed to the Managing Owner shall be entitled to obtain from the Managing Owner, upon payment in advance of reasonable reproduction and mailing costs, a list of the names and addresses of record of all Unitholders and the number of Units held by each (which shall be mailed by the Managing Owner to the Unitholder within ten days of the receipt of the request); provided, that the Managing Owner may require any Unitholder requesting such information to submit written confirmation that such information will not be used for commercial purposes. Upon receipt of a written proposal, signed by Unitholders owning Units representing at least 10% of all Units then owned by Unitholders, that a meeting of the Trust be called to vote upon any matter upon which the Unitholders may vote pursuant to this Declaration and Agreement of Trust, the Managing Owner shall, by written notice to each Unitholder of record sent by certified mail within 15 days after such receipt, call a meeting of the Trust. Such meeting shall be held at least 30 but not more than 60 days after the mailing of such notice, and such notice shall specify the date of, a reasonable place and time for, and the purpose of such meeting. Such notice shall establish a record date for Units entitled to vote at the meeting, which shall be not more than 15 days prior to the date established for such meeting. The Managing Owner may not restrict the voting rights of Unitholders as set forth herein. In the event that the Managing Owner or the Unitholders vote to amend this Declaration and Agreement of Trust in any material respect, the amendment will not become effective prior to all Unitholders having an opportunity to redeem their Units. (d) CONSENT BY TRUSTEE. The Trustee's written consent to any amendment of this Declaration and Agreement of Trust shall be required, such consent not to be unreasonably withheld; provided, however, that the Trustee may, in its sole discretion, withhold its consent to any such amendment that would adversely affect any right, duty or liability of, or immunity or indemnity in favor of, the Trustee under this Declaration and Agreement of Trust or any of the documents contemplated hereby to which the Trustee is a party, or would cause or result in any conflict with or breach of any terms, conditions or provisions of, or default under, the charter documents or by-laws of the Trustee or any document contemplated hereby to which the Trustee is a party; provided further, that the Trustee may not withhold consent for any action listed in subsections 19(b)(ii)-(vi). Notwithstanding anything to the contrary contained in this Declaration and Agreement of Trust, the Trustee may immediately resign if, in its sole discretion, the Trustee determines that the Unitholders' actions pursuant to subsections 19(b)(i)-(vi) would adversely affect the Trustee in any manner. 20. GOVERNING LAW. The validity and construction of this Declaration and Agreement of Trust shall be determined and governed by the laws of the State of Delaware without regard to principles of conflicts of law; provided, that causes of action for violations of federal or state securities laws shall not be governed by this Section 20. 21. MISCELLANEOUS. (a) NOTICES. All notices under this Declaration and Agreement of Trust shall be in writing and shall be effective upon personal delivery, or if sent by first class mail, postage prepaid, addressed to the last known address of the party to whom such notice is to be given, upon the deposit of such notice in the United States mails. A-20 (b) BINDING EFFECT. This Declaration and Agreement of Trust shall inure to and be binding upon all of the parties, their successors and assigns, custodians, estates, heirs and personal representatives. For purposes of determining the rights of any Unitholder or assignee hereunder, the Trust and the Managing Owner may rely upon the Trust records as to who are Unitholders and assignees, and all Unitholders and assignees agree that their rights shall be determined and they shall be bound thereby. (c) CAPTIONS. Captions in no way define, limit, extend or describe the scope of this Declaration and Agreement of Trust nor the effect of any of its provisions. Any reference to "persons" in this Declaration and Agreement of Trust shall also be deemed to include entities, unless the context otherwise requires. 22. CERTAIN DEFINITIONS. This Declaration and Agreement of Trust contains certain provisions required by the NASAA Guidelines. The terms used in such provisions are defined as follows (the following definitions are included VERBATIM from such Guidelines and, accordingly, may not in all cases be relevant to this Declaration and Agreement of Trust): ADMINISTRATOR. The official or agency administering the securities laws of a state. ADVISOR. Any Person who for any consideration engages in the business of advising others, either directly or indirectly, as to the value, purchase, or sale of Commodity Contracts or commodity options. AFFILIATE. An Affiliate of a Person means: (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities of such Person; (b) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote, by such Person; (c) any Person, directly or indirectly, controlling, controlled by, or under common control of such Person; (d) any officer, director or partner of such Person; or (e) if such Person is an officer, director or partner, any Person for which such Person acts in any such capacity. CAPITAL CONTRIBUTIONS. The total investment in a Program by a Participant or by all Participants, as the case may be. COMMODITY BROKER. Any Person who engages in the business of effecting transactions in Commodity Contracts for the account of others or for his or her own account. COMMODITY CONTRACT. A contract or option thereon providing for the delivery or receipt at a future date of a specified amount and grade of a traded commodity at a specified price and delivery point. CROSS REFERENCE SHEET. A compilation of the NASAA Guidelines sections, referenced to the page of the prospectus, Program agreement, or other exhibits, and justification of any deviation from the NASAA Guidelines. NET ASSETS. The total assets, less total liabilities, of the Program determined on the basis of generally accepted accounting principles. Net Assets shall include any unrealized profits or losses on open positions, and any fee or expense including Net Asset fees accruing to the Program. NET ASSET VALUE PER PROGRAM INTEREST. The Net Assets divided by the number of Program Interests outstanding. NET WORTH. The excess of total assets over total liabilities as determined by generally accepted accounting principles. Net Worth shall be determined exclusive of home, home furnishings and automobiles. NEW TRADING PROFITS. The excess, if any, of Net Assets at the end of the period over Net Assets at the end of the highest previous period or Net Assets at the date trading commences, whichever is A-21 higher, and as further adjusted to eliminate the effect on Net Assets resulting from new Capital Contributions, redemptions, or capital distributions, if any, made during the period decreased by interest or other income, not directly related to trading activity, earned on Program assets during the period, whether the assets are held separately or in a margin account. ORGANIZATIONAL AND OFFERING EXPENSES. All expenses incurred by the Program in connection with and in preparing a Program for registration and subsequently offering and distributing it to the public, including, but not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys), expenses for printing, engraving, mailing, salaries of employees while engaged in sales activity, charges of transfer agents, registrars, trustees, escrow holders, depositories, experts, expenses of qualification of the sale of its Program Interest under federal and state law including taxes and fees, accountants' and attorneys' fees. PARTICIPANT. The holder of a Program Interest. PERSON. Any natural Person, partnership, corporation, association or other legal entity. PIT BROKERAGE FEE. Pit Brokerage Fee shall include floor brokerage, clearing fees, National Futures Association fees, and exchange fees. PROGRAM. A limited partnership, joint venture, corporation, trust or other entity formed and operated for the purpose of investing in Commodity Contracts. PROGRAM BROKER. A Commodity Broker that effects trades in Commodity Contracts for the account of a Program. PROGRAM INTEREST. A limited partnership interest or other security representing ownership in a Program. PYRAMIDING. A method of using all or a part of an unrealized profit in a Commodity Contract position to provide margin for any additional Commodity Contracts of the same or related commodities. SPONSOR. Any Person directly or indirectly instrumental in organizing a Program or any Person who will manage or participate in the management of a Program, including a Commodity Broker who pays any portion of the Organizational and Offering Expenses of the Program, and the general partner(s) and any other Person who regularly performs or selects the Persons who perform services for the Program. Sponsor does not include wholly independent third parties such as attorneys, accountants and underwriters whose only compensation is for professional services rendered in connection with the offering of the units. The term "Sponsor" shall be deemed to include its Affiliates. VALUATION DATE. The date as of which the Net Assets of the Program are determined. VALUATION PERIOD. A regular period of time between Valuation Dates. Certain terms not defined herein are used with the respective meanings set forth in the Prospectus. 23. NO LEGAL TITLE TO TRUST ESTATE. The Unitholders shall not have legal title to any part of the Trust Estate. 24. LEGAL TITLE. Legal title to all the Trust Estate shall be vested in the Trust as a separate legal entity; except where applicable law in any jurisdiction requires any part of the Trust Estate to be vested otherwise, the Managing Owner (or the Trustee, A-22 if required by law) may cause legal title to the Trust Estate of any portion thereof to be held by or in the name of the Managing Owner or any other person as nominee. 25. CREDITORS. No creditors of any Unitholders shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the Trust Estate. IN WITNESS WHEREOF, the undersigned have duly executed this Amended and Restated Declaration and Agreement of Trust and Trust Agreement as of the day and year first above written. WILMINGTON TRUST COMPANY as Trustee By: -------------------------------- Name: ------------------------------ Title: ----------------------------- CIS INVESTMENTS, INC. as Managing Owner By: -------------------------------- L. Carlton Anderson Vice President All Unitholders now and hereafter admitted as Unitholders of the Trust, pursuant to powers of attorney now and hereafter executed in favor of, and granted and delivered to, the Managing Owner. By: CIS INVESTMENTS, IN. as Attorney-in-Fact By: -------------------------------- L. Carlton Anderson Vice President ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner A-23 ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner ----------------------------------------- as withdrawing Initial Beneficial Owner A-24 ----------------------------------------- as withdrawing Initial Beneficial Owner A-25 EXHIBIT B JWH GLOBAL PORTFOLIO TRUST SUBSCRIPTION REQUIREMENTS By executing a Subscription Agreement and Power of Attorney Signature Page for JWH GLOBAL PORTFOLIO TRUST (THE "TRUST"), each PURCHASER ("PURCHASER") of UNITS OF BENEFICIAL INTEREST ("UNITS") in the Trust irrevocably subscribes for Units at the Net Asset Value per Unit ($100 during the Initial Offering Period), as described in the Trust's PROSPECTUS DATED ______ __, 1996 (THE "PROSPECTUS"). The minimum initial subscription is $5,000; $2,000 for trustees or custodians of eligible employee benefit plans and individual retirement accounts. Incremental subscriptions will be accepted in multiples of $100 in excess of such minimums. Existing Unitholders may make additional investments in the Trust in $1,000 minimums, also with $100 increments. Units are sold in fractions calculated to five decimal places. Purchaser is herewith delivering to Purchaser's selling agent (hereinafter, "Selling Agent") an executed Subscription Agreement and Power of Attorney Signature Page and either (i) delivering a check in the full amount of the Purchaser's subscription or (ii) hereby authorizing such Selling Agent to debit Purchaser's customer securities account maintained with such Selling Agent for the full amount of Purchaser's subscription in accordance with the procedures described under "Plan of Distribution -- Subscription Procedure" in the Prospectus. If Purchaser's Subscription Agreement and Power of Attorney is accepted by CIS INVESTMENTS, INC., the managing owner of the Trust (the "Managing Owner"), Purchaser agrees to contribute Purchaser's subscription to the Trust and to be bound by the terms of the Trust's Declaration and Agreement of Trust (Exhibit A to the Prospectus). Purchaser agrees to reimburse the Trust and the Managing Owner for any expense or loss incurred by either as a result of the cancellation of Purchaser's Units due to a failure of the Purchaser to deliver good funds in the amount of the subscription price of any or all of such Units. If the undersigned is acting on behalf of an "employee benefit plan," as defined in and subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any "plan," as defined in Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (each such employee benefit plan and plan, a "Plan"), the individual signing this Subscription Agreement and Power of Attorney on behalf of the undersigned, in addition to the representations and warranties set forth above, hereby further represents and warrants as, or on behalf of the fiduciary of the Plan responsible for purchasing a Unit (the "Plan Fiduciary") that: (a) the Plan Fiduciary has considered an investment in the Trust for such Plan in light of the risks relating thereto; (b) the Plan Fiduciary has determined that, in view of such considerations, the investment in the Trust for such Plan is consistent with the Plan Fiduciary's responsibilities under ERISA; (c) the Plan's investment in the Trust does not violate and is not otherwise inconsistent with the terms of any legal document constituting the Plan or any trust agreement thereunder; (d) the Plan's investment in the Trust has been duly authorized and approved by all necessary parties; (e) none of the Managing Owner, John W. Henry & Company, Inc. ("JWH"), Cargill Investor Services, Inc. ("CIS"), CIS Financial Services, Inc. ("CISFS"), any Selling Agent, wholesaler or correspondent, The First National Bank of Chicago (the "Escrow Agent"), Wilmington Trust Company (the "Trustee"), any of their respective affiliates or any of their respective agents or employees (i) has investment discretion with respect to the investment of assets of the Plan used to purchase Units; (ii) has authority or responsibility to or regularly gives investment advice with respect to the assets of the Plan used to purchase Units for a fee and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to the Plan and that such advice will be based on the particular investment needs of the Plan; or (iii) is an employer maintaining or contributing to the Plan; and (f) the Plan Fiduciary (i) is authorized to make, and is responsible for, the decision to invest in the Trust, including the determination that such investment is consistent with the requirement imposed by Section 404 of ERISA that Plan investments be diversified so as to minimize the risk of large losses, (ii) is independent of the Managing Owner, JWH, CIS, CISFS, any Selling Agent, wholesaler or correspondent, the Escrow Agent, the Trustee, and any of their respective affiliates, and (iii) is qualified to make such investment decision. The undersigned will, at the request of the Managing Owner, furnish the Managing Owner with such information as the Managing Owner may reasonably require to establish that the purchase of Units by the Plan does not violate any provision of ERISA or the Code, including, without limitation, those provisions relating to "prohibited transactions" by "parties in interest" or "disqualified persons" as defined therein. INVESTOR SUITABILITY PURCHASER UNDERSTANDS THAT THE PURCHASE OF UNITS MAY BE MADE ONLY BY PERSONS WHO, AT A MINIMUM, HAVE (I) A NET WORTH OF AT LEAST $150,000 (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES) OR (II) AN ANNUAL GROSS INCOME OF AT LEAST $45,000 AND A NET WORTH (SIMILARLY CALCULATED) OF AT LEAST $45,000. RESIDENTS OF THE FOLLOWING STATES MUST MEET THE SPECIFIC REQUIREMENTS SET FORTH BELOW (NET WORTH IS, IN ALL CASES, TO BE CALCULATED EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES). IT IS RECOMMENDED THAT NO INDIVIDUAL PURCHASER SHOULD INVEST MORE THAN 10% OF HIS B-1 OR HER NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES) IN THE UNITS AND NO ENTITY PURCHASER, INCLUDING ERISA PLANS, SHOULD INVEST MORE THAN 10% OF ITS LIQUID NET WORTH (READILY MARKETABLE SECURITIES) IN THE UNITS. 1. Arizona -- Net worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000. 2. California -- Liquid net worth of at least $100,000 and an annual taxable income of at least $50,000. 3. Iowa -- Net worth of at least $225,000 or a net worth of at least $60,000 and an annual taxable income of at least $60,000. Minimum purchase for individual retirement accounts and employee benefit plans in Iowa is $2,500. 4. Maine -- Minimum subscription per investment, both initial and subsequent, of $5,000; net worth of at least $200,000 or a net worth of at least $50,000 and an annual income of at least $50,000. All Maine resident, including existing Unitholders in the Trust subscribing for additional Units, must execute a Subscription Agreement and Power of Attorney Signature Page. Maine residents must sign a Subscription Agreement and Power of Attorney Signature Page specifically prepared for Maine residents, a copy of which shall accompany this Prospectus and delivered to all Maine residents. 5. Massachusetts -- Net worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000. 6. Michigan -- Net worth of at least $225,000 or a net worth of at least $60,000 and taxable income during the preceding year of at least $60,000. 7. Minnesota -- Net worth of at least $225,000 or a net worth of at least $60,000 and an annual income of at least $60,000. 8. Mississippi -- Net worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000. 9. Missouri -- Net worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000. 10. New Hampshire -- Net worth of at least $250,000 or a net worth of at least $125,000 and an annual taxable income of at least $50,000. 11. North Carolina -- Net worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000. 12. Oklahoma -- Net worth of at least $225,000 or a net worth of %60,000 and an annual income of at least $60,000. 13. Oregon -- Net worth of at least $225,000 or a net worth of at least $60,00 and an annual income of at least $60,000. 14. Pennsylvania -- Net worth of at least $175,000 or a net worth of at least $100,000 and an annual income of at least $50,000. 15. South Carolina -- Net worth of at least $100,000 or a net income in the preceding year some portion of which was subject to maximum federal and state income tax. 16. South Dakota -- Net worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000. 17. Tennessee -- Net worth of at least $250,000 or a net worth of at least $65,000 and annual taxable income of at least $65,000. 18. Texas -- Net worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000. B-2 _________________________ In the case of IRA and SEP plans, the foregoing suitability standards are applicable to the beneficiary of the plan for whose account the Units are being acquired. THE FOREGOING SUITABILITY STANDARDS ARE REGULATORY MINIMUMS ONLY. MERELY BECAUSE PURCHASER MEETS SUCH REQUIREMENTS DOES NOT NECESSARILY MEAN THAT A HIGH RISK, SPECULATIVE AND ILLIQUID INVESTMENT SUCH AS THE TRUST IS, IN FACT, SUITABLE FOR PURCHASER. B-3 ANNEX JWH GLOBAL PORTFOLIO TRUST REQUEST FOR REDEMPTION JWH GLOBAL PORTFOLIO TRUST ________________________________ C/O CIS INVESTMENTS, INC. DATE MANAGING OWNER 233 SOUTH WACKER DRIVE, SUITE 2300 CHICAGO, ILLINOIS 60606 Dear Sirs: The undersigned (account number _________) hereby requests redemption subject to all the terms and conditions of the Amended and Restated Declaration and Agreement of Trust (the "Declaration and Agreement of Trust") of JWH GLOBAL PORTFOLIO TRUST (the "Trust") of _____ Units of Beneficial Interest ("Units"), or $_____, of Units in the Trust. (INSERT NUMBER OF WHOLE UNITS TO BE REDEEMED. UNITHOLDERS NEED NOT REDEEM ALL OF THEIR UNITS IN ORDER TO REDEEM CERTAIN OF THEIR UNITS PROVIDED THEY MUST REDEEM AT LEAST $1,000 OF UNITS AND THEY MUST HOLD MINIMUM INVESTMENT OF $1,000 AFTER ANY PARTIAL REDEMPTION. IF NO NUMBER OR DOLLAR AMOUNT IS INDICATED, ALL UNITS HELD OF RECORD BY THE UNDERSIGNED WILL BE REDEEMED.) Units are redeemed at the Net Asset Value per Unit, as defined in the Declaration and Agreement of Trust, less any applicable redemption charge (see below). Redemption shall be effective as of the end of the current calendar month; provided that this Request for Redemption is received on or before the 20th of such month (or, if the 20th is not a business day, the next business day). Payment of the redemption price of Units will generally be made within ten calendar days of the date of redemption. The undersigned hereby represents and warrants that the undersigned is the true, lawful and beneficial owner of the Units to which this Request for Redemption relates, with full power and authority to request redemption of such Units. Such Units are not subject to any pledge or otherwise encumbered in any fashion. Redemption charges of 3% of the Net Asset Value of Units redeemed on or before the end of the eleventh full calendar months after the undersigned has purchased the Units being redeemed will be deducted from the redemption price of all such Units and paid to Cargill Investor Services, Inc, the Trust's Futures Broker. If the undersigned has purchased Units at more than one closing, such Units will be treated on a first-in/first-out basis for purposes of determining whether redemption charges continue to be applicable to such Units. ___________________ UNITED STATES UNITHOLDERS ONLY: Under the penalties of perjury, the undersigned hereby certifies that the Social Security Number or Taxpayer ID Number indicated on this Request for Redemption is the undersigned's true, correct and complete Social Security Number or Taxpayer ID Number and that the undersigned is not subject to backup withholding under the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code. NON-UNITED STATES UNITHOLDERS ONLY: Under the penalties of perjury, the undersigned hereby certifies that (a) the undersigned is not a citizen or resident of the United States or (b) (in the case of an investor which is not an individual) the undersigned is not a United States corporation, partnership, estate or trust. ANN-1 SIGNATURES MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED / / Credit my customer securities account at: Name of Broker-Dealer:___________________________ Account Name:__________________________________ Account Number:________________________________ / / Send to the address below __________________________________________________________________________ Name Street City, State and Zip Code ENTITY UNITHOLDER (or assignee) ______________________________________________________ (Name of Entity) By:___________________________________________________ (Authorized corporate officer, partner or trustee) Taxpayer ID Number _________________________ INDIVIDUAL UNITHOLDER(S) (or assignee(s)) Name Signature Social Security Number ---- ---------- ---------------------- (Please print) - ------------------------ --------------------- ---------------------- - ------------------------ --------------------- ---------------------- - ------------------------ --------------------- ---------------------- ANN-2 EXHIBIT C THE EXECUTION COPY OF THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY ACCOMPANIES THIS PROSPECTUS AS A SEPARATE DOCUMENT JWH GLOBAL PORTFOLIO TRUST UNITS OF BENEFICIAL INTEREST ------------ BY EXECUTING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SUBSCRIBERS ARE NOT WAIVING ANY RIGHTS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 ------------ SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY JWH GLOBAL PORTFOLIO TRUST C/O CIS INVESTMENTS, INC., MANAGING OWNER 233 SOUTH WACKER DRIVE, SUITE 2300 CHICAGO, ILLINOIS 60606 Dear Sirs: 1. SUBSCRIPTION FOR UNITS. I hereby subscribe for the dollar amount of UNITS OF BENEFICIAL INTEREST ("UNITS") in JWH GLOBAL PORTFOLIO TRUST (the "Trust") set forth in the Subscription Agreement and Power of Attorney Signature Page attached hereto (minimum $5,000; $2,000 for trustees or custodians of eligible employee benefit plans and individual retirement accounts), at a purchase price per Unit of $100 during the Initial Offering Period or Net Asset Value during the Ongoing Offering Period. Incremental subscriptions in excess of the foregoing minimums are permitted in $100 multiples. Existing investors may subscribe for additional Units in $1,000 minimums, also with $100 increments. Fractional Units will be issued to five decimal places. The terms of the offering of the Units are described in the Prospectus of the Trust dated _________, 1996 (the "Prospectus"). I have either (i) authorized my selling agent to debit my customer securities account in the amount of my subscription or (ii) delivered a check to my selling agent made out to "FNBC, ESCROW AGENT FOR JWH GLOBAL PORTFOLIO TRUST." If I have chosen to subscribe by account debit, I acknowledge that I must have my subscription payment in such account on but not before the settlement date for my purchase of Units, which will occur no later than three business days after the acceptance of my subscription. My Registered Representative shall inform me of such settlement date, on which date my account will be debited and the amounts so debited will be transmitted directly to the Escrow Agent. CIS INVESTMENTS, INC. (THE "MANAGING OWNER") may, in its sole and absolute discretion, accept or reject this subscription in whole or in part. SUBSCRIPTIONS ARE REVOCABLE FOR FIVE BUSINESS DAYS AFTER SUBMISSION. ALL UNITS ARE OFFERED SUBJECT TO PRIOR SALE. Subscriptions generally must be received by the Managing Owner no later than the 20th of a month (or the next business day if the 20th is not a business day) in order to be invested in the Units as of the end of the month. 2. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. I have received the Prospectus and, if applicable, an account statement (current within 60 days, relating to the Trust) and the Trust's most current annual report. I understand that certain investor suitability standards must be met as a condition of my investment in the Units. I acknowledge that I satisfy the applicable requirements relating to net worth and annual income as set forth in "Exhibit B -- Subscription Requirements" to the Prospectus. If subscriber is an employee benefit plan, the investment in the Units by such employee benefit plan is in compliance with all federal laws relating to such plans. If the Subscriber is a trust under an employee benefit plan, none of the Trustee, the Managing Owner, the Trading Advisor, the Futures Broker, the Foreign Currency Broker, any Selling Agent, Wholesaler or correspondent, or the Escrow Agent, any of their respective affiliates or any of their respective agents or employees: (i) has investment discretion with respect to the investment of the assets of such trust being used to purchase Units; (ii) has authority or responsibility to give or regularly gives investment advice with respect to such trust assets for a fee and pursuant to an agreement or understanding that such advise will be based on the particular investment needs of the trust; or (iii) is an employer maintaining or contributing to the Trust. If subscriber is not an individual, the person signing the Subscription Agreement and Power of Attorney Signature Page on behalf of the subscriber is duly authorized to execute such Signature Page. 3. POWER OF ATTORNEY. In connection with my purchase of Units, I do hereby irrevocably constitute and appoint the Managing Owner and its successors and assigns, as my true and lawful Attorney-in-Fact, with full power of substitution, in my name, place and stead, to (i) file, prosecute, defend, settle or compromise litigation, claims or arbitrations on behalf of the Trust and (ii) make, execute, sign, acknowledge, swear to, deliver, record and file any documents or instruments which may be considered necessary or desirable by the Managing Owner to carry out fully the provisions of the Declaration and Agreement of Trust of the Trust, including, without limitation, the execution of the said Agreement itself and the execution of all amendments permitted by the terms thereof. The Power of Attorney granted hereby shall be deemed to be coupled with an interest, shall be irrevocable, shall survive, and shall not be affected by, my subsequent death, incapacity, disability, insolvency or dissolution or any delivery by me of an assignment of the whole or any portion of my Units. 4. GOVERNING LAW. Subscriber hereby acknowledges and agrees that this Subscription Agreement and Power of Attorney shall be governed by and be interpreted in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof. 5. RISKS. These securities are speculative and involve a high degree of risk. Risk factors relating to the Units include the following: (I) INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT; PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS; AN INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK; (II) FUTURES AND FORWARD TRADING IS SPECULATIVE, VOLATILE AND LEVERAGED, AND INVOLVES A HIGH DEGREE OF RISK; TRADING ON FOREIGN FUTURES AND INTERBANK FORWARD MARKETS MAY INVOLVE ADDITIONAL RISKS; (III) THE PERFORMANCE OF THE TRUST'S TRADING ADVISOR HAS TO DATE EXHIBITED AND IS EXPECTED TO CONTINUE TO EXHIBIT CONSIDERABLE PERFORMANCE VOLATILITY; THE UNITS ARE SUITABLE ONLY FOR A LIMITED PORTION OF THE RISK SEGMENT OF AN INVESTMENT PORTFOLIO; (IV) SINGLE-ADVISOR FUNDS SUCH AS THE TRUST ARE TYPICALLY CONSIDERED -- EVEN AMONG SPECULATIVE MANAGED FUTURES FUNDS -- UNUSUALLY HIGH RISK AND VOLATILE INVESTMENTS; MOREOVER, THE TRUST IS VULNERABLE TO ADVERSE CHANGES AFFECTING THE TRADING ADVISOR WHICH COULD DIRECTLY IMPACT THE TRUST'S ABILITY TO CONTINUE TRADING; (V) THE TRUST IS SUBJECT TO SUBSTANTIAL CHARGES, PAYABLE IRRESPECTIVE OF PROFITABILITY, AS WELL AS TO QUARTERLY INCENTIVE FEE; THE MANAGING OWNER ESTIMATES THAT, ASSUMING THE TRUST WILL EARN INTEREST INCOME EQUIVALENT TO THE 91-DAY TREASURY BILL RATE PREVAILING ON OR ABOUT THE DATE OF THE PROSPECTUS, THE TRUST WILL NEED TO ACHIEVE TRADING PROFITS OF APPROXIMATELY 7.92% IN ITS FIRST TWELVE MONTHS OF TRADING TO OFFSET EXPENSES; (VI) THE TRUST MAY BE ADVERSELY AFFECTED BY INCREASES IN THE AMOUNT OF FUNDS MANAGED BY THE TRADING ADVISOR; (VII) THE TRADING ADVISOR IS ALMOST EXCLUSIVELY A SYSTEMATIC, TREND-FOLLOWING TRADER; MARKET CONDITIONS IN WHICH STRONG PRICE TRENDS DO NOT DEVELOP TYPICALLY RESULT IN SUBSTANTIAL LOSSES FOR TREND-FOLLOWING TRADERS; THE NUMBER OF SYSTEMATIC TRADERS HAS INCREASED SIGNIFICANTLY IN RECENT YEARS, INCREASING COMPETITION AND LOWERING PROFIT MARGINS. See "Risk Factors" in the Prospectus beginning at page 16 of the Prospectus. PLEASE COMPLETE THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE WHICH ACCOMPANIES THIS PROSPECTUS CAREFULLY AND ENSURE THAT YOUR REGISTERED REPRESENTATIVE KNOWS WHETHER YOU ARE RE SUBSCRIBING BY CHECK OR ACCOUNT DEBIT. JWH GLOBAL PORTFOLIO TRUST UNITS OF BENEFICIAL INTEREST SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE The investor named below, by executing and delivering this Signature Page, by payment of the purchase price for units of beneficial interest ("Units") in JWH GLOBAL PORTFOLIO TRUST (the "Trust") and by either (i) enclosing a check payable to "FNBC, AS ESCROW AGENT FOR JWH GLOBAL PORTFOLIO TRUST" or (ii) authorizing the Selling Agent (or Additional Selling Agent, as the case may be) to debit investor's securities account in the amount set forth below, hereby subscribes for the purchase of Units at a purchase price of $100 per Unit during the Initial Offering Period; 100% of the Net Asset Value per Unit during the Ongoing Offering Period. The named investor acknowledges receipt of the Prospectus of Trust dated _________ __, 1996 (the "Prospectus"), including the Declaration and Agreement of Trust, the Subscription Requirements and the Subscription Agreement and Power of Attorney set forth therein, the terms of which govern the investment in the Units being subscribed for hereby, together with, if applicable, recent Account Statements relating to the Trust (current within 60 calendar days) and the Trust's most recent Annual Report (unless the information in such Annual Report has been included in this Prospectus by amendment or supplement). By my signature below, I represent that I satisfy the requirements relating to new worth and annual income as set forth in Exhibit B to the Prospectus. 1) Investment Amount $|_|_|_|_|_|_|_|_|_|_|_| (minimum of $5,000, except $2,000 minimum for IRAs and other qualified accounts; $1,000 minimum for existing investors making an additional investment; incremental investments of $100 multiples.) 2) Account #_____________________ (must be completed) / / Debit investor' securities account / / Check attached 3) Social Security # |_|_|_|-|_|_|-|_|_|_|_| Taxpayer ID # |_|_|_|-|_|_|-|_|_|_|_| Taxable Investors (check one): / / Individual Investor / / Grantor or Other / / Joint Tenants with Right Revocable Trust of Survivorship / / Estate / / Tenants in Common / / Community Property / / Partnership / / Trust other than Grantor or Revocable Trust / / UGMA/UTMA (Minor) / / Corporation Non-Taxable Investors: Is this a Selling Agent Plan / / Yes / / No (check one): / / IRA / / Pension / / Profit Sharing / / Other ___________________________ / / IRA Rollover / / SEP / / Define Benefit 4) Investor(s) Name(s):|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| 5) |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Additional Information (For Estate, Partnerships, Trust and Corporations) 6) Resident Address |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Of Unitholder Street (P.O. Box numbers are not acceptable for residence address) |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| City State Zip Country Phone 7) Mailing Address |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| (if different) Street |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| City State Zip Country Phone 8) Custodian Information |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Name Tax ID Mailing Address |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Street |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| City State Zip Country Phone 9) INVESTOR(S) MUST SIGN -------------------------------- ---------------------------------- Signature Date Signature of Authorized Date Fiduciary, Trustee, Partner or Corporate Office -------------------------------- ---------------------------------- Signature of Date Print Name of Authorized Date Joint Investor (if any) Fiduciary, Trustee, Partner or Corporate Office (specify title) EXECUTING AND DELIVERING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SHALL IN NO RESPECT BE DEEMED TO CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF 1934. JWH GLOBAL PORTFOLIO TRUST UNITS OF BENEFICIAL INTEREST SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE UNITED STATES INVESTORS ONLY I have checked the following box if I am subject to backup withholding under the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code: / /. Under the penalties of perjury, by signature above I hereby certify that the Social Security Number or Taxpayer ID Number set forth in Item 3 above is my true, correct and complete Social Security Number or Taxpayer ID Number and that the information given in the immediately preceding sentence is true, correct and complete. NON-UNITED STATES INVESTORS ONLY Under the penalties of perjury, by signature above I hereby certify that (a) I am not a citizen or resident of the United States or (b) (in the case of an investor WHICH IS NOT an individual) the investor is not a United States corporation, partnership, estate or trust: / /. See Form W-8 attached. - -------------------------------------------------------------------------------- 10) REGISTERED REPRESENTATIVE MUST SIGN I hereby certify that I have informed the investor of all pertinent facts relating to the : risks; tax consequences; liquidity and marketability; management; and control of the Managing Owner with respect to an investment in the Units, as set forth in the Prospectus. I have also informed the investor of the unlikelihood of a public trading market developing for the Units and the restrictions on the redemption of Units. I do not have discretionary authority over the account of an investor. I have reasonable grounds to believe, based on information obtained from the investor concerning his/her investment objectives, other investments, financial situation and needs and any other information known by me, that an investment in the Trust is suitable for such investor in light of his/her financial position, net worth and other suitable characteristics. The Registered Representative MUST sign below in order to substantiate compliance with Rule 2810 of the NASD (formerly Appendix F of the NASD's Rules of Fair Practice). X X ------------------------------------- -------------------------------------- Registered Representative Date Office Manager Signature Date Signature (if required) 11) Selling Agent/Additional Selling Agent |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Register Representative: Name (Print)|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| First M.I. Last Reg. Rep. Number Address |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Street City State Zip Phone Number|_|_|_|_|_|_|_|_|_|_|_|_| Fax Number|_|_|_|_|_|_|_|_|_|_|_|_| PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution. CIS Investments, Inc., the managing owner of the Trust (the "Managing Owner"), will advance all initial organization and offering costs (estimated to be $500,000-$600,000), as described in the Prospectus, for which it will be reimbursed by the Registrant on the initial closing date up to a maximum of 2% of the Trust's average month-end Net Asset Value for the first 60 months of the Trust's operations. The Trust will amortize such organizational and initial offering cost reimbursement over such 60-month period. The following is an estimate of such costs:
Approximate Amount ----------- Securities and Exchange Commission Registration Fee*. . . . . . $ 15,152 National Association of Securities Dealers, Inc. Filing Fee*. . 5,500 Printing Expenses . . . . . . . . . . . . . . . . . . . . . . . 100,000 Fees of Certified Public Accountants. . . . . . . . . . . . . . 20,000 Blue Sky Expenses (Excluding Legal Fees). . . . . . . . . . . . 15,470 Fees of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 290,000 Escrow Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Advertising and Sales Literature. . . . . . . . . . . . . . . . 60,000 Miscellaneous Offering Costs. . . . . . . . . . . . . . . . . . 55,078 -------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $581,200 -------- --------
________________________ * Exact rather than estimated. Item 14. Indemnification of Directors and Officers. Section 18 of the Amended and Restated Declaration and Agreement of Trust (attached as Exhibit A to the Prospectus which forms a part of this Registration Statement) provides for the indemnification of the Managing Owner, certain of its affiliates and certain of their respective directors, officers and controlling persons by the Registrant in certain circumstances. Such indemnification is limited to claims sustained by such persons in connection with the Registrant; provided that such claims were not the result of negligence or misconduct on the part of the Managing Owner or its affiliates, directors, officers and controlling persons. The Registrant is prohibited from incurring the cost of any insurance covering any broader indemnification than that provided above. Advances of Registrant funds to cover legal expenses and other costs incurred as a result of any legal action initiated against the Managing Owner by a Unitholder are prohibited. Item 15. On November 12, 1996, the Registrant sold one Unit of Beneficial Interest each to certain individuals as initial beneficial owners in order to permit the formation of the Registrant in preparation for the filing of this Registration Statement. This transaction was exempt under Section 4(2) of the Securities Act of the 1933, and no selling compensation was paid. Item 16. Exhibits and Financial Statement Schedules. The following documents are made a part of this Registration Statement: (a) Exhibits. S-1 Exhibit Number Description of Document ------ ----------------------- 1.01 Form of Selling Agreement among the Registrant, the Managing Owner, John W. Henry & Company, Inc. ("JWH") and Cargill Investor Services, Inc. ("CIS" or "Lead Selling Agent") (including forms of Additional Selling Agent Agreement, Wholesaling Agreement and Correspondent Selling Agent). 3.01 Certificate of Trust of the Registrant. 3.02 Declaration and Agreement of Trust. 3.03 Form of Amended and Restated Declaration and Agreement of Trust of the Registrant (included as Exhibit A to the Prospectus). 5.01(a) Opinion of Sidley & Austin relating to the legality of the Units.* 5.01(b) Opinion of Richards, Layton & Finger relating to the legality of the Units* 8.01 Opinion of Sidley & Austin with respect to federal income tax consequences.* 10.01 Form of Trading Advisory Agreement among the Registrant, the Managing Owner, CIS and JWH. 10.02 Form of Customer Agreement between the Registrant and CIS. 10.03 Form of Foreign Exchange Account Agreement between the Registrant and CIS Financial Services, Inc. ("CISFS"). 10.04 Form of Cash Bullion Account Agreement between the Registrant and CISFS. 10.05 Escrow Agreement among the Registrant, The First National Bank of Chicago, the Managing Owner and the Lead Selling Agent. 10.06 Form of Transfer Agent Agreement. 10.07 Form of Subscription Agreement and Power of Attorney (included as Exhibit C to the Prospectus). 23.01(a) Consent of Sidley & Austin (included in Exhibit 5.01(a)). 23.01(b) Consent of Richards, Layton & Finger (included in Exhibit 5.01(b)). 23.02 Consent of KPMG Peat Marwick, LLP. 27 Financial Data Schedule 99.01 Securities and Exchange Commission Release No. 33-6815 -- Interpretation and Request for Public Comment -- Statement of the Commission Regarding Disclosure by Issuers of Interests in Publicly Offered Commodity Pools. (54 Fed. Reg. 5600; February 6, 1989). 99.02 Commodity Futures Trading Commission -- Interpretive Statement and Request for Comments -- Statement of the Commodity Futures Trading Commission Regarding Disclosure by Commodity Pool Operators of Past Performance Records and Pool Expenses and Requests for Comments. (54 Fed. Reg. 5597; February 6, 1989). 99.03 North American Securities Administrators Association, Inc. Guidelines for the Registration of Commodity Pool Programs. 99.04 Delaware Business Trust Act. * To be filed by Amendment. S-2 Item 17. Undertakings. (a)(1) The undersigned registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Insofar as indemnification for liabilities under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 14 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any such action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. S-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago in the State of Illinois on the 26th day of November, 1996. JWH GLOBAL PORTFOLIO TRUST By: CIS Investments, Inc., Managing Owner By: /s/ L. Carlton Anderson ------------------------------------ Name: L. Carlton Anderson ----------------------------- Title: Vice President ---------------------------- Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons on behalf of CIS Investments, Inc., the Managing Owner of the Registrant, in the capacities indicated on November 26, 1996. /s/ Hal T. Hansen President and Director --------------------------- (Principal Executive Officer) Hal T. Hansen /s/ Donald Zyck Secretary and Treasurer --------------------------- (Principal Financial and Accounting Officer) Donald Zyck /s/ L. Carlton Anderson Vice President and Director --------------------------- L. Carlton Anderson (Being the principal executive officer, the principal financial and accounting officer and a majority of the directors of CIS Investments, Inc.) CIS INVESTMENTS, INC., the Managing Owner of Registrant By: /s/ Hal T. Hansen --------------------------- Hal T. Hansen President S-4 JWH GLOBAL PORTFOLIO TRUST EXHIBIT INDEX Exhibit Number Description of Document - ------- ----------------------- 1.01 Form of Selling Agreement among the Registrant, the Managing Owner, John W. Henry & Company, Inc. ("JWH") and Cargill Investor Services, Inc. ("CIS" or "Lead Selling Agent") (including forms of Additional Selling Agent Agreement, Wholesaling Agreement and Correspondent Selling Agent). 3.01 Certificate of Trust of the Registrant. 3.02 Declaration and Agreement of Trust. 3.03 Form of Amended and Restated Declaration and Agreement of Trust of the Registrant (included as Exhibit A to the Prospectus). 5.01(a) Opinion of Sidley & Austin relating to the legality of the Units.* 5.01(b) Opinion of Richards, Layton & Finger relating to the legality of the Units* 8.01 Opinion of Sidley & Austin with respect to federal income tax consequences.* 10.01 Form of Trading Advisory Agreement among the Registrant, the Managing Owner, CIS and JWH. 10.02 Form of Customer Agreement between the Registrant and CIS. 10.03 Form of Foreign Exchange Account Agreement between the Registrant and CIS Financial Services, Inc. ("CISFS"). 10.04 Form of Cash Bullion Account Agreement between the Registrant and CISFS. 10.05 Escrow Agreement among the Registrant, The First National Bank of Chicago, the Managing Owner and the Lead Selling Agent. 10.06 Form of Transfer Agent Agreement. 10.07 Form of Subscription Agreement and Power of Attorney (included as Exhibit C to the Prospectus). 23.01(a) Consent of Sidley & Austin (included in Exhibit 5.01(a)). 23.01(b) Consent of Richards, Layton & Finger (included in Exhibit 5.01(b)). 23.02 Consent of KPMG Peat Marwick, LLP. 27 Financial Data Schedule 99.01 Securities and Exchange Commission Release No. 33-6815 -- Interpretation and Request for Public Comment -- Statement of the Commission Regarding Disclosure by Issuers of Interests in Publicly Offered Commodity Pools. (54 Fed. Reg. 5600; February 6, 1989). 99.02 Commodity Futures Trading Commission -- Interpretive Statement and Request for Comments -- Statement of the Commodity Futures Trading Commission Regarding Disclosure by Commodity Pool Operators of Past Performance Records and Pool Expenses and Requests for Comments. (54 Fed. Reg. 5597; February 6, 1989). 99.03 North American Securities Administrators Association, Inc. Guidelines for the Registration of Commodity Pool Programs. 99.04 Delaware Business Trust Act. * To be filed by Amendment. EX-1.01 2 FORM OF SELLING AGREEMENT EXHIBIT 1.01 SELLING AGREEMENT JWH GLOBAL PORTFOLIO TRUST (A DELAWARE BUSINESS TRUST) $50,000,000 OF UNITS OF BENEFICIAL INTEREST Dated as of __________, 1996 [The Effective Date of Reg. No. 33-_____] JWH GLOBAL PORTFOLIO TRUST SELLING AGREEMENT TABLE OF CONTENTS
PAGE ---- Section 1. Representations and Warranties of the Managing Owner . . . . . . 2 Section 2. Representations and Warranties of the Selling Agent . . . . . . 6 Section 3. Representations and Warranties of JWH. . . . . . . . . . . . . . 7 Section 4. Offering and Sale of Units . . . . . . . . . . . . . . . . . . . 9 Section 5. Covenants of the Managing Owner. . . . . . . . . . . . . . . . . 14 Section 6. Covenants of JWH . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 7. Payment of Expenses and Fees . . . . . . . . . . . . . . . . . . 16 Section 8. Conditions of Closing. . . . . . . . . . . . . . . . . . . . . . 17 Section 9. Indemnification and Exculpation. . . . . . . . . . . . . . . . . 27 Section 10. Status of Parties . . . . . . . . . . . . . . . . . . . . . . . 30 Section 11. Representations, Warranties and Agreements to Survive Delivery. 30 Section 12. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 13. Notices and Authority to Act. . . . . . . . . . . . . . . . . . 31 Section 14. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 15. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 16. Requirements of Law . . . . . . . . . . . . . . . . . . . . . . 31
-i- JWH GLOBAL PORTFOLIO TRUST (A DELAWARE BUSINESS TRUST) $50,000,000 OF UNITS OF BENEFICIAL INTEREST (SUBSCRIPTION PRICE: $100 PER UNIT DURING THE INITIAL OFFERING PERIOD; NET ASSET VALUE PER UNIT DURING THE ONGOING OFFERING PERIOD) SELLING AGREEMENT _______ __, 1996 CARGILL INVESTOR SERVICES, INC. 233 S. Wacker Dr., Suite 2300 Chicago, Illinois 60606 Dear Sirs: Your affiliate, CIS Investments, Inc., a Delaware corporation (referred to herein in its individual corporate capacity and as managing owner as "CISI" or the "Managing Owner"), and certain initial beneficial owners have caused the formation of a business trust pursuant to Business Trust Act (12 DEL.C. Section 3801 ET SEQ.) of the State of Delaware (the "Trust Act") under the name JWH Global Portfolio Trust (the "Trust"), for the purpose of engaging in speculative trading of futures and forward contracts and commodity options. As described in the Prospectus referred to below, the Trust will enter into a Trading Advisory Agreement (the "Trading Advisory Agreement") with John W. Henry & Company, Inc., a California corporation ("JWH"), pursuant to which the Trust will engage in speculative trading in the commodities markets under the direction of JWH pursuant to JWH's Financial and Metals Portfolio and Original Program and, possibly in the future, other programs selected by the Managing Owner with the agreement of JWH (the "JWH Trading Programs"). You (the "Selling Agent" or "Futures Broker") shall be the principal selling agent for the Trust. Other selling agents (the "Additional Selling Agents") may be selected by the Selling Agent (including those introduced by wholesalers ("Wholesalers")), with the consent of the Managing Owner, in accordance with the terms of this Agreement, the Additional Selling Agent Agreement attached as Exhibit A hereto and, in the case of Wholesalers introducing Additional Selling Agents, the Wholesaling Agreement attached as Exhibit B hereto. In addition, the Additional Selling Agents may also, with the consent of the Selling Agent and Managing Owner, distribute Units through the use of "introducing broker" correspondents ("Correspondents"), pursuant to the terms of the Correspondent Selling Agent Agreement attached as Exhibit C hereto. In addition, you have agreed to act as broker for the Trust (in such capacity, the "Futures Broker") pursuant to a customer agreement (the "Customer Agreement") between yourself and the Trust and as principal with respect to certain "exchange of futures for physical" transactions, and CIS Financial Services, Inc. ("CISFS") has agreed to act as principal with respect to the Trust's forward and spot currency trades and precious metals transactions pursuant to a Foreign Exchange Account Agreement and Cash Bullion Account Agreement (collectively, the "FX Agreement") between CISFS and the Trust. Capitalized terms used herein, unless otherwise indicated, shall have the meanings attributed to them in the Prospectus referred to below. Section 1. REPRESENTATIONS AND WARRANTIES OF THE MANAGING OWNER. Each of the Managing Owner and the Trust severally as applicable to itself (and in the case of CISI as applicable to the Trust) represents and warrants to JWH and the Selling Agent, as follows: (a) The Trust has provided to JWH and to the Selling Agent and filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-1 (Registration No. 33-_____), as initially filed with the SEC on __________, 1996 for the registration of Units of Beneficial Interests (the "Units") in the Trust under the Securities Act of 1933, as amended (the "1933 Act"), has filed two copies thereof with the Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange Act (the "Commodity Act") and one copy with National Futures Association ("NFA") in accordance with NFA Compliance Rule 2-13. The Registration Statement, as amended by Amendment No. 1 thereto, became effective with the SEC as of the date hereof. (The Registration Statement, in the form in which it became effective, and the Prospectus included therein as first filed pursuant to Rule 424(b) of the rules and regulations of the SEC under the 1933 Act (the "SEC Regulations") are hereinafter referred to as the "Registration Statement" and the "Prospectus," respectively.) If the Trust files a subsequent post-effective amendment to the Registration Statement, then the term Registration Statement shall, from and after the declaration of the effectiveness of such post-effective amendment, refer to the Registration Statement as amended by such post-effective amendment thereto, and the term Prospectus shall refer to the amended prospectus then on file with the SEC as part of the Registration Statement, or if a subsequent prospectus is filed by the Trust pursuant to Rule 424 of the SEC Regulations, the term Prospectus shall refer to the prospectus most recently filed pursuant to such Rule from and after the date on which it shall have been first used. Except as required by law, the Trust will not file any amendment to the Registration Statement or any amendment or supplement to the Prospectus which shall be reasonably objected to in writing by JWH or by counsel to JWH, upon reasonable prior notice. (b) The Trust will not utilize any promotional brochure or other marketing materials (collectively, "Promotional Material"), including "Tombstone Ads" or other communications qualifying under Rule 134 of the SEC Regulations, which are reasonably objected to by the Selling Agent. No reference to the Selling Agent may be made in the Registration Statement, Prospectus or in any Promotional Material which has not been approved in writing by the Selling Agent, which approval the -2- Selling Agent may withhold in its sole and absolute discretion. The Trust will file all Promotional Material with the National Association of Securities Dealers, Inc. (the "NASD"), and will not use any such Promotional Material to which the NASD has not stated in writing that it has no objections. The Trust will file all Promotional Material in all state jurisdictions where such filing is required, and will not use any such Promotional Material in any state which has expressed any objection thereto (except pursuant to agreed- upon modifications to the Promotional Material). (c) The Certificate of Trust pursuant to which the Trust has been formed (the "Certificate of Trust") and the Declaration and Agreement of Trust of the Trust (the "Declaration and Agreement of Trust") each provides for the subscription for and sale of the Units; all action required to be taken by the Managing Owner and the Trust as a condition to the sale of the Units to qualified subscribers therefor has been, or prior to the Initial Closing Time and Subsequent Closing Times, as defined in Section 4 hereof, will have been taken; and, upon payment of the consideration therefor specified in all accepted Subscription Agreements and Powers of Attorney, the Units will constitute valid beneficial interests in the Trust. (d) The Trust is a business trust duly organized pursuant to the Certificate of Trust, the Declaration and Agreement of Trust and the Trust Act and validly existing under the laws of the State of Delaware with full power and authority to engage in the trading of futures, options on futures, and spot/forward contracts, as described in the Prospectus; the Trust has filed (or will receive prior to the Initial Closing Time, as defined in Section 4(c)) a certificate of assumed name in the State of Illinois as provided by 805 I.L.C.S. 405/1. (e) CISI is duly organized and validly existing and in good standing as a corporation under the laws of the State of Delaware and in good standing as a foreign corporation under the laws of the State of Illinois, and in each other jurisdiction in which the nature or conduct of its businesses requires such qualification and the failure to so qualify would materially adversely affect the Trust's or the Managing Owner's ability to perform its obligations hereunder. (f) The Trust and the Managing Owner have proper power and authority under applicable law to perform their respective obligations under the Declaration and Agreement of Trust, the Escrow Agreement relating to the offering of the Units (the "Escrow Agreement"), the Customer Agreement, the FX Agreement, the Trading Advisory Agreement and this Agreement, as described in the Registration Statement and Prospectus. (g) The Registration Statement and Prospectus contain all statements and information required to be included therein by the Commodity Act and the rules and regulations thereunder. When the Registration Statement became effective under the 1933 Act and at all times subsequent thereto up to and including the Initial Closing Time, the Registration Statement and Prospectus did and will comply in all material -3- respects with the requirements of the 1933 Act, the Commodity Act and the rules and regulations under such Acts. The Registration Statement as of its effective date did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus as of its date of issue and at the Initial Closing Time did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading. This representation and warranty shall not, however, apply to any statement or omission in the Registration Statement or Prospectus made in reliance upon and in conformity with information relating to JWH and furnished or approved in writing by JWH. (h) KPMG Peat Marwick, LLP, the accountants who certified the financial statements filed with the SEC as part of the Registration Statement, are, with respect to CISI and the Trust, independent public accountants with respect to the Managing Owner and the Trust as required by the 1933 Act and the SEC Regulations. (i) The financial statements filed as part of the Registration Statement and those included in the Prospectus present fairly the financial position of the Trust and of the Managing Owner as of the dates indicated; and said financial statements have been prepared in conformity with generally accepted accounting principles (as described therein), or, in the case of unaudited financial statements, in substantial conformity with generally accepted accounting principles, applied on a basis which is consistent in all material respects for each balance sheet date presented. (j) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material adverse change in the condition, financial or otherwise, business or prospects of the Managing Owner or the Trust, whether or not arising in the ordinary course of business. (k) The Managing Owner at the Initial Closing Time and each Subsequent Closing Time will have a net worth sufficient in amount and satisfactory in form, as set forth in the opinion of Sidley & Austin, counsel for CISI, for classification of the Trust as a partnership for Federal income tax purposes under current interpretations of the Internal Revenue Code of 1954 and the Internal Revenue Code of 1986, as amended (collectively, the "Code"), and the regulations thereunder. (l) The Trading Advisory Agreement, the Declaration and Agreement of Trust, the Escrow Agreement and this Agreement have each been duly and validly authorized, executed and delivered by the Managing Owner signatory thereto for itself and on behalf of the Trust, and each constitutes a legal, valid and binding agreement of the Trust and the Managing Owner signatory thereto enforceable in accordance with its terms. The Customer Agreement and the FX Agreement have each been duly and validly authorized, executed and delivered by CISI on behalf of the Trust. -4- (m) The execution and delivery of the Declaration and Agreement of Trust, the Escrow Agreement, the Customer Agreement, the FX Agreement, the Trading Advisory Agreement and this Agreement, the incurrence of the obligations set forth in each of such agreements and the consummation of the transactions contemplated therein and in the Prospectus will not constitute a breach of, or default under, any instrument by which either the Managing Owner or the Trust, as the case may be, is bound or any order, rule or regulation applicable to the Managing Owner or the Trust of any court or any governmental body or administrative agency having jurisdiction over the Managing Owner or the Trust. (n) There is not pending, or, to the Managing Owner's knowledge threatened, any action, suit or proceeding before or by any court or other governmental body to which the Managing Owner or the Trust is a party, or to which any of the assets of the Managing Owner or the Trust is subject, which is not referred to in the Prospectus and which might reasonably be expected to result in any material adverse change in the condition (financial or otherwise), business or prospects of the Managing Owner or the Trust or is required to be disclosed in the Prospectus pursuant to applicable CFTC regulations. The Managing Owner has not received any notice of an investigation or warning letter from NFA or the CFTC regarding non-compliance by the Managing Owner with the Commodity Act or the regulations thereunder. (o) The Managing Owner has all Federal and state governmental, regulatory and commodity exchange approvals and licenses, and have effected all filings and registrations with Federal and state governmental agencies required to conduct its businesses and to act as described in the Registration Statement and Prospectus or required to perform its obligations as described under the Declaration and Agreement of Trust and this Agreement (including, without limitation, registration as a commodity pool operator under the Commodity Act and membership in NFA as a commodity pool operator), and the performance of such obligations will not contravene or result in a breach of any provision of its certificate of incorporation, by-laws or any agreement, order, law or regulation binding upon it. The principals of the Managing Owner identified in the Registration Statement are all of the principals of the Managing Owner, as "principals" is defined by the CFTC regulations. Such principals are duly listed as such on the Managing Owner's commodity pool operator Form 7-R registration. (p) The Trust does not require any Federal or state governmental, regulatory or commodity exchange approvals or licenses, or need to effect any filings or registrations with any Federal or state governmental agencies in order to conduct its businesses and to act as contemplated by the Registration Statement and Prospectus and to issue and sell the Units (other than filings relating solely to the offering of the Units), and to trade in the commodity markets. (q) Neither the Managing Owner nor any of its principal or affiliate has "operated," since January 1, 1991, any commodity pool, within the meaning of the -5- CFTC's Part 4 Regulations, the performance of which is not included in Appendix I to the Registration Statement and Prospectus. Section 2. REPRESENTATIONS AND WARRANTIES OF THE SELLING AGENT. The Selling Agent represents and warrants (in its capacities as both Selling Agent and Futures Broker) to the Trust, the Managing Owner and JWH, as follows: (a) The Selling Agent is a corporation duly organized and validly existing and in good standing under the laws of the State of Delaware and in good standing and qualified to do business in the State of Illinois and in each other jurisdiction in which the nature or conduct of its business requires such qualification and the failure to be duly qualified would materially adversely affect the Futures Broker's ability to perform its obligations hereunder or under the Customer Agreement. The Selling Agent has full corporate power and authority to perform its obligations under the Customer Agreement and this Agreement and as described in the Registration Statement and Prospectus. (b) All references to the Selling Agent and its principals in the Registration Statement and Prospectus are accurate and complete in all material respects, and set forth in all material respects the information required to be disclosed therein under the Commodity Act and the rules and regulations thereunder. As to the Selling Agent and its principals (i) the Registration Statement and Prospectus contain all statements and information required to be included therein under the Commodity Act and the rules and regulations thereunder, (ii) the Registration Statement (with respect to the information relating to the Selling Agent furnished to the Managing Owner) as of its effective date did not contain any misleading or untrue statement of a material fact or omit to state a material fact which is required to be stated therein or necessary to make the statements therein not misleading and (iii) the Prospectus (as approved in pertinent part by the Selling Agent) at its date of issue and as of the Initial Closing Time, as supplemented, did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading, in light of the circumstances under which such statements were made. (c) The Selling Agent has all Federal and state governmental, regulatory and commodity exchange licenses and approvals, and has effected all filings and registrations with Federal and state governmental and regulatory agencies required to conduct its business and to act as described in the Registration Statement and Prospectus or required to perform its obligations under the Customer Agreement, the Trading Advisory Agreement and this Agreement (including, without limitation, membership of the Selling Agent as a dealer in NASD and registration of the Selling Agent as a futures commission merchant under the Commodity Act and membership of the Selling Agent as a futures commission merchant in NFA), and the performance of such obligations will not violate or result in a breach of any provision of the Futures Broker's certificate of incorporation, by-laws or any agreement, instrument, order, law or regulation binding upon the Selling Agent. -6- (d) Each of the Customer Agreement and this Agreement has been duly authorized, executed and delivered by the Selling Agent, and this Agreement constitutes a valid, binding and enforceable agreement of the Selling Agent in accordance with its terms. (e) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as may otherwise be stated in or contemplated by the Registration Statement and the Prospectus, there has not been any material adverse change in the condition, financial or otherwise, business or prospects of the Selling Agent, whether or not arising in the ordinary course of business. (f) In the ordinary course of its business, the Selling Agent is engaged in civil litigation and subject to administrative proceedings. Neither the Selling Agent nor any of its principals have been the subject of any administrative, civil, or criminal actions within the five years preceding the date hereof that would be material to an investor's decision to purchase the Units which are not disclosed in the Prospectus. (g) The execution and delivery of the Customer Agreement and this Agreement, the incurrence of the obligations set forth herein and therein and the consummation of the transactions contemplated herein and therein and in the Prospectus will not constitute a breach of, or default under, any instrument by which the Selling Agent is bound or any order, rule or regulation applicable to the Selling Agent of any court or any governmental body or administrative agency having jurisdiction over the Selling Agent. Section 3. REPRESENTATIONS AND WARRANTIES OF JWH. JWH represents and warrants to the Trust, the Selling Agent, and the Managing Owner as follows: (a) JWH is a corporation duly organized and validly existing and in good standing under the laws of the State of California and in good standing as a foreign corporation in each other jurisdiction in which the nature or conduct of its business requires such qualification and the failure to be duly qualified would materially affect JWH's ability to perform its obligations under this Agreement and the Trading Advisory Agreement. JWH has full corporate power and authority to perform its obligations under this Agreement, and the Trading Advisory Agreement as described in the Registration Statement and Prospectus. (b) All references to JWH and its principals, and its trading systems, methods and performance in the Registration Statement and the Prospectus are accurate and complete in all material respects. As to JWH, each of the principals of JWH, the JWH trading programs, and JWH's trading systems, strategies and performance, (i) the Registration Statement and Prospectus contain all statements and information required to be included therein under the Commodity Act and the rules and regulations thereunder, (ii) the Registration Statement (with respect to the information -7- relating to JWH furnished to the Managing Owner) as of its effective date did not contain any misleading or untrue statement of a material fact or omit to state a material fact which is required to be stated therein or necessary to make the statements therein not misleading and (iii) the Prospectus (as approved in pertinent part by JWH) at its date of issue and as of the Initial Closing Time, as supplemented, did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading, in light of the circumstances under which such statements were made. Except as otherwise disclosed in the Prospectus or identified in writing to the Managing Owner on or prior to the date hereof, the actual performance of each discretionary account directed by JWH or any principal or affiliate of JWH for the periods covered by the Performance Summaries or Tables set forth in the Prospectus is disclosed in accordance with the requirements of the Commodity Act and the rules and regulations thereunder (or as otherwise permitted by the Staff of the Division of Trading and Markets of the CFTC). The information, Performance Summaries and Monthly Rates of Return relating to the performance of JWH comply in all material respects with the disclosure requirements of the rules and regulations of the CFTC under the Commodity Act. The performance records in the Prospectus (as applicable to JWH) have been calculated in the manner set forth in the notes thereto. (c) The Trading Advisory Agreement and this Agreement have each been duly and validly authorized, executed and delivered on behalf of JWH and each constitutes a valid, binding and enforceable agreement of JWH in accordance with its terms. (d) JWH has all Federal and state governmental, regulatory and commodity exchange licenses and approvals and has effected all filings and registrations with Federal and state governmental and regulatory agencies required to conduct its business and to act as described in the Registration Statement and Prospectus or required to perform its obligations under this Agreement and the Trading Advisory Agreement (including, without limitation, registration of JWH as a commodity trading advisor under the Commodity Act and membership of JWH as a commodity trading advisor in NFA), and the performance of such obligations will not violate or result in a breach of any provision of JWH's Certificate of Incorporation, By-laws or any agreement, instrument, order, law or regulation binding on JWH. The principals of JWH are duly listed as such on JWH's commodity trading advisor Form 7-R registration. (e) Management by JWH of an account for the Trust in accordance with the terms hereof and of the Trading Advisory Agreement, and as described in the Prospectus, will not require any registration under, or violate any of the provisions of, the Investment Advisers Act of 1940. (f) Neither JWH nor any principal of JWH will use or distribute any preliminary prospectus, Prospectus, amended or supplemented Prospectus or selling literature nor engage in any selling activities whatsoever in connection with the -8- offering of the Units, except as may be requested by the Managing Owner pursuant to Section 6(c) of this Agreement. (g) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as may otherwise be stated in or contemplated by the Registration Statement and the Prospectus, there has not been any material adverse change in the condition, financial or otherwise, business or prospects of JWH, whether or not arising in the ordinary course of business. (h) The execution and delivery of this Agreement and the Trading Advisory Agreement, the incurrence of the obligations herein and therein set forth and the consummation of the transactions contemplated herein and therein and in the Prospectus will not constitute a breach of, or default under, any instrument by which JWH is bound or any order, rule or regulation applicable to JWH of any court or any governmental body or administrative agency having jurisdiction over JWH. (i) Except as disclosed in the Registration Statement and Prospectus, there is not pending, or to the best of JWH's knowledge threatened, any action, suit or proceeding before or by any court or other governmental body to which JWH is a party, or to which any of the assets of JWH is subject, which might reasonably be expected to result in any material adverse change in the condition, financial or otherwise, business or prospects of JWH. JWH has not received any notice of an investigation or warning letter from NFA or the CFTC regarding non-compliance by JWH with the Commodity Act or the regulations thereunder. (j) JWH has not received, and is not entitled to receive, directly or indirectly, any commission, finder's fee, similar fee or rebate from any person in connection with the organization or operation of the Trust. Section 4. OFFERING AND SALE OF UNITS. (a) The Selling Agent is hereby appointed the principal selling agent of the Trust (although as described herein it is contemplated that certain Additional Selling Agents, including those introduced to the Selling Agent by Wholesalers, Wholesalers and Correspondents may also market Units, provided each of such Additional Selling Agents, Wholesalers and Correspondents is duly registered as a broker-dealer or exempt from the requirement of being so registered in each jurisdiction in which such person markets Units) during the term herein specified for the purpose of finding acceptable subscribers for up to the number of Units set forth on page 1 hereof through a public offering. The Initial Offering Period shall continue through _________, 1997 or such other date not more than three months thereafter as may be determined by the Managing Owner (the "Initial Offering Period"; such date being hereafter referred to as the "Initial Offering Termination Date"). Thereafter, Units may be sold as of the close of business on the last day of each month, as determined by the Managing Owner (the "Ongoing Offering Period"; such subsequent sale dates -9- being hereinafter referred to as "Subsequent Closing Times"). The Initial Offering Period and the Ongoing Offering Period shall be referred to herein as the "Offering Period." Subject to the performance by the Managing Owner of all its obligations to be performed hereunder, and to the completeness and accuracy in all material respects of all the representations and warranties of the Managing Owner and JWH contained herein, the Selling Agent hereby accepts such agency and agrees on the terms and conditions herein set forth to use its best efforts during the Offering Period to find acceptable subscribers for the Units at a public offering price of $100 per Unit during the Initial Offering Period, and at Net Asset Value per Unit during the Ongoing Offering Period, each subscriber being required to subscribe for at least $5,000 of Units, $2000 of Units in the case of trustees or custodians of eligible employee benefit plans and individual retirement accounts and $1,000 of Units in the case of Unitholders subscribing for additional Units. It is understood that the Selling Agent's agreement to use its best efforts to find acceptable subscribers for the Units shall not prevent it from acting as a selling agent or underwriter for the securities of other issuers which may be offered or sold during the Offering Period. The agency of the Selling Agent hereunder shall continue at least until the close of business on ___________, 199_, as the Selling Agent and the Managing Owner shall agree upon. (b) In the event the offering is commenced and acceptable subscriptions for at least the minimum number of Units specified on the cover of the Prospectus (the "Minimum Units") shall not have been received by the Initial Offering Termination Date, all funds received from subscribers shall be returned in full, with any interest payable thereon (irrespective of amount) and without deduction for any escrow or other fee or expense; and thereupon the Selling Agent's duties as agent and this Agreement shall terminate without further obligation hereunder on the part of the Selling Agent, the Managing Owner, the Trust or JWH. (c) At the Initial Offering Termination Date, or at such earlier time as subscriptions for all the Units shall have been received, or at such earlier time the Managing Owner may determine to terminate the offering, the Managing Owner shall notify the Selling Agent of the aggregate number of Units for which the Managing Owner has received acceptable subscriptions and, if at least the Minimum Units shall have been so subscribed for, then payment of the purchase price for the Units may, if the Managing Owner so elects, be made at the office of CISI, Sears Tower, 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606, or at such other place as shall be agreed upon between the Selling Agent and CISI, at 10:00 A.M., Chicago time, on the fifth full business day after the day on which the Managing notifies the Selling Agent of the number of Units for which subscriptions have been accepted or such other day and time as shall be agreed upon between the Selling Agent and the Managing Owner (the "Initial Closing Time"). (d) No selling commissions will be paid from the proceeds of sales of Units. The Selling Agent will compensate its own Registered Representatives pursuant to the Selling Agent's standard compensation procedures. The Selling Agent will pay -10- Additional Selling Agents selling commissions of up to 4% of the Net Asset Value of each Unit sold by the Registered Representative of each such Additional Selling Agent. In the case of an Additional Selling Agent introduced by a Wholesaler, the Lead Selling Agent will pay such Wholesaler a portion of the up to 4% per Unit selling commissions depending upon the Wholesaler's arrangement with the Additional Selling Agent. Ongoing compensation, of up to 1/3 of 1% (a 4% annual rate) of the month-start Net Asset Value of the Units attributable to Units sold by a Registered Representative of the Additional Selling Agent which remain outstanding for more than twelve months (including the month as of the end of which such Unit is redeemed) will also be paid to each such Registered Representative who agrees to provide the additional services described below, who is registered with the CFTC and who has satisfied all applicable proficiency requirements (including those imposed by the NASD as a condition of receiving "trailing commissions") by either passing the Series 3 National Commodity Futures Exam or the Series 31 exam or being "grandfathered" from having to do so. In the case of an Additional Selling Agent introduced by a Wholesaler who meets the eligibility requirements for receipt of ongoing compensation, the Lead Selling Agent will pay a portion of the up to 1/3 of 1% monthly ongoing compensation to the Wholesaler depending upon the Wholesaler's arrangement with the Additional Selling Agent. For purposes of determining when "trailing commissions" should begin to accrue, Units sold during the Initial Offering Period shall not be deemed to be outstanding until the Initial Closing Time. The ongoing compensation described in the foregoing paragraph shall only be paid to any otherwise eligible Registered Representatives, provided that the Additional Selling Agent with which such Registered Representative is associated continues to be registered with the CFTC as a futures commission merchant or introducing broker and continues to be a member in good standing of NFA in such capacity, and is contingent upon the provision by a Registered Representative (duly registered and qualified as to proficiency with the CFTC and NFA as described above) who sold outstanding Units in his capacity as a registered representative of an Additional Selling Agent of additional services in connection with such Units, including: (i) inquiring of the Managing Owner from time to time, at the request of an owner of such Units, as to the Net Asset Value of a Unit; (ii) inquiring of the Managing Owner from time to time, at the request of an owner of such Units, regarding the commodities markets and the Trust; (iii) assisting, at the request of the Managing Owner, in the redemption of Units sold by such Registered Representative; and (iv) providing such other services to the owners of such Units as the Managing Owner may, from time to time, reasonably request. Ongoing compensation shall be credited and paid only in respect of Units sold by Registered Representatives who are eligible to receive such ongoing compensation as described above. No ongoing compensation whatsoever shall be credited, paid or accrued on any Units sold by Registered Representatives not then eligible to receive such ongoing compensation. Such ongoing compensation shall be paid monthly. -11- In the event that the payment of ongoing compensation is restricted by the NASD, the Selling Agent's payments of such ongoing compensation shall be limited to the maximum amount permissible pursuant to such restrictions. In the case of Units sold by Registered Representatives who are not qualified to receive ongoing compensation as set forth above, the Selling Agent will pay such Registered Representatives installment selling commissions at the same rate as in the case of ongoing compensation, but the sum of such installment selling commissions and the initial selling commission payable to each such Registered Representative is limited in amount, pursuant to applicable NASD policy, to 9.5% of the initial subscription price of the Units sold by such Registered Representatives. In respect of Correspondents selected by an Additional Selling Agent (with the consent of the Managing Owner and the Selling Agent), the Selling Agent shall pay such Additional Selling Agent selling commissions and ongoing compensation or installment sales commissions as set forth above, a portion (as agreed between such Additional Selling Agent and each such Correspondent) of which shall be passed on by the Additional Selling Agent to such Correspondents. Ongoing compensation which cannot be paid because an Additional Selling Agent or a Correspondent (or a Registered Representative of either) has not met the eligibility requirements shall be retained by the Selling Agent. Selling Commissions and ongoing compensation payable in respect of Units sold to any investor eligible to be charged a Special Brokerage Fee Rate as described in the Registration Statement and Prospectus shall be reduced by the difference between the standard rate Brokerage Fee and the applicable Special Brokerage Fee Rate. (e) The Selling Agent will use its best efforts to find eligible persons to purchase the Units on the terms stated herein and in the Registration Statement and Prospectus. It is understood that the Selling Agent has no commitment with regard to the sale of the Units other than to use its best efforts. In connection with the offer and sale of the Units, the Selling Agent represents that it will comply fully with all applicable laws, and the rules of the NASD, the SEC, the CFTC, state securities administrators and any other regulatory body. In particular, and not by way of limitation, the Selling Agent represents and warrants that it is aware of Rule 2810 of the NASD (formerly Appendix F of the NASD Rules of Fair Practice) and that it will comply fully with all the terms thereof in connection with the offering and sale of the Units. The Selling Agent shall not execute any sales of Units from a discretionary account over which it has control without prior written approval of the customer in whose name such discretionary account is maintained. The Selling Agent agrees not to recommend the purchase of Units to any subscriber unless the Selling Agent shall have reasonable grounds to believe, on the -12- basis of information obtained from the subscriber concerning, among other things, the subscriber's investment objectives, other investments, financial situation and needs, that the subscriber is or will be in a financial position appropriate to enable the subscriber to realize to a significant extent the benefits of the Trust, including tax benefits described in the Prospectus; the subscriber has a fair market net worth sufficient to sustain the risks inherent in participating in the Trust, including loss of investment and lack of liquidity; and the Units are otherwise a suitable investment for the subscriber. The Selling Agent agrees to maintain files of information disclosing the basis upon which the Selling Agent determined that the suitability requirements of Section (b)(2) of Rule 2810 of the NASD were met as to each subscriber (the basis for determining suitability may include the Subscription Agreements and Powers of Attorney and other certificates submitted by subscribers). The Selling Agent represents and warrants that it has reasonable grounds to believe, based on information in the Prospectus and information to which the Selling Agent has had access due to its affiliation with CISI, that all material facts relating to an investment in the Units are adequately and accurately disclosed in the Prospectus. In connection with making the foregoing representations and warranties, the Selling Agent further represents and warrants that it has, among other things, examined the following sections in the Prospectus and obtained such additional information from CISI regarding the information set forth thereunder as the Selling Agent has deemed necessary or appropriate to determine whether the Prospectus adequately and accurately discloses all material facts relating to an investment in the Trust and provides an adequate basis to subscribers for evaluating an investment in the Units: "Summary" "Risk Factors" "Investment Factors" "The Trust and Its Objectives" "John W. Henry & Company, Inc." "The Managing Owner" "Fiduciary Obligations of the Managing Owner" "Use of Proceeds" "Charges" "Conflicts of Interest" "Redemptions; Net Asset Value" "The Trust and the Trustee" "Federal Income Tax Aspects" In connection with making the representations and warranties set forth in this paragraph, the Selling Agent has not relied on inquiries made by or on behalf of any other parties. The Selling Agent agrees to inform all prospective purchasers of Units of all pertinent facts relating to the liquidity and marketability of the Units as set forth in the Prospectus. -13- (f) None of the Selling Agent, the Trust or the Managing Owner shall, directly or indirectly, pay or award any finder's fees, commissions or other compensation to any person engaged by a potential investor for investment advice as an inducement to such advisor to advise the purchase of Units; provided, however, the normal sales commissions payable to a registered broker-dealer or other properly licensed person for selling Units shall not be prohibited hereby. (g) As contemplated by Section 7 hereof, CISI will advance the Trust's organization and initial offering costs. (h) All payments for subscriptions shall be made by transfer of funds to the escrow account of the Trust as described in the Prospectus. (i) CISI agrees to cause its counsel to prepare and deliver to the Selling Agent a Blue Sky Survey which shall set forth, for the guidance of the Selling Agent, in which United States jurisdictions the Units may be offered and sold (both before and after the Trust commences operations). It is understood and agreed that the Selling Agent may rely, in connection with the offering and sale of Units in any jurisdiction, on advice given by such counsel as to the legality of the offer or sale of the Units in such jurisdiction; provided, however, that the Selling Agent and each Wholesaler, Additional Selling Agent or Correspondent shall be responsible for compliance with all applicable laws, rules and regulations with respect to the actions of its employees, acting as such, in connection with sales of Units in any jurisdiction. Section 5. COVENANTS OF THE MANAGING OWNER. (a) The Managing Owner will notify the Selling Agent and JWH immediately and confirm such notification in writing (i) when any amendment to the Registration Statement shall have become effective, (ii) of the receipt of any comments from the SEC, CFTC or any other Federal or state regulatory body with respect to the Registration Statement, (iii) of any request by the SEC, CFTC or any other Federal or state regulatory body for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information relating thereto and (iv) of the issuance by the SEC, CFTC or any other Federal or state regulatory body of any order suspending the effectiveness of the Registration Statement under the 1933 Act, the CFTC registration or NFA membership of the Managing Owner as a commodity pool operator, or the registration of Units under the Blue Sky or securities laws of any state or other jurisdiction or any order or decree enjoining the offering or the use of the then current Prospectus or of the institution, or notice of the intended institution, of any action or proceeding for that purpose. (b) The Managing Owner will deliver to the Selling Agent, as soon as available, two signed copies of each amendment to the Registration Statement as originally filed and two sets of exhibits thereto, and will also deliver to the Selling Agent such number of conformed copies of the Registration Statement as originally -14- filed and of each amendment thereto (without exhibits) as the Selling Agent shall reasonably require. (c) The Managing Owner will deliver to the Selling Agent as promptly as practicable from time to time during the period when the Prospectus is required to be delivered under the 1933 Act, such number of copies of the Prospectus (as amended or supplemented) as the Selling Agent, Wholesalers, Additional Selling Agents and Correspondents may reasonably request for the purposes contemplated by the 1933 Act or the SEC Regulations. (d) During the period when the Prospectus is required to be delivered pursuant to the 1933 Act, the Managing Owner and the Trust will use best efforts to comply with all requirements imposed upon them by the 1933 Act and the Commodity Act, each as now and hereafter amended, and by the SEC Regulations and rules and regulations of the CFTC, as from time to time in force, so far as necessary to permit the continuance of sales of, or dealings in, the Units during such period in accordance with the provisions hereof and as set forth in the Prospectus. (e) If any event relating to or affecting the Managing Owner or the Trust shall occur as a result of which it is necessary, in the reasonable opinion of the Managing Owner or the Selling Agent, to amend or supplement the Prospectus in order to make the Prospectus not materially misleading in light of the circumstances existing at the time it is delivered to a subscriber, the Managing Owner and the Trust will forthwith prepare and furnish to the Selling Agent, at the expense of the Managing Owner, a reasonable number of copies of an amendment or amendments of, or a supplement or supplements to, the Prospectus which will amend or supplement the Prospectus so that as amended or supplemented it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at the time the Prospectus is delivered to a subscriber, not misleading. No such amendment or supplement shall be filed without the approval of the Selling Agent and JWH and their counsel. (f) The Managing Owner will use best efforts to qualify the Units for offer and sale under applicable securities or "Blue Sky" laws and continue such qualification throughout the Offering Period, provided that in no event shall the Managing Owner or the Trust be obligated to (i) take any action which would subject it to service of process in suits other than those arising out of the offering or sale of the Units, or taxes, in any jurisdiction where any of them is not now so subject, (ii) change any material term in the Registration Statement, or (iii) expend a sum of money considered unreasonable by CISI. -15 Section 6. COVENANTS OF JWH. (a) JWH agrees to cooperate, to the extent reasonably requested by the Managing Owner, in the preparation of any amendments or supplements relating to itself to the Registration Statement and the Prospectus. (b) During the period when the Prospectus is required to be delivered under the 1933 Act, JWH agrees to notify the Managing Owner immediately upon discovery of any untrue or misleading statement regarding it, its operations or any of its principals or of the occurrence of any event or change in circumstances which would result in there being any untrue or misleading statement or an omission in the Prospectus or Registration Statement regarding it, its operations or any of its principals or result in the Prospectus not including all information relating to JWH and its principals required pursuant to CFTC regulations. During such period, JWH shall promptly inform the Managing Owner if it is necessary to amend or supplement the Prospectus in order to make the Prospectus not materially misleading in light of the circumstances existing at the time the Prospectus is delivered to a subscriber. (c) JWH agrees to assist, and cause its principals or agents to assist, at its own expense in "road show" presentations relating to the initial and ongoing offering of the Units at the reasonable request of the Selling Agent and at the expense of JWH, provided that no such assistance shall result in any action which any such principal or agent reasonably believes may require registration of JWH or any such principal or agent as a broker-dealer or salesman. Section 7. PAYMENT OF EXPENSES AND FEES. CISI will advance expenses incident to the performance of the obligations of the Managing Owner and the Trust hereunder, including: (i) the printing and delivery to the Selling Agent in quantities as hereinabove stated of copies of the Registration Statement and all amendments thereto, of the Prospectus and any supplements or amendments thereto, and of any supplemental sales materials; (ii) the reproduction of this Agreement and the printing and filing of the Registration Statement and the Prospectus (and, in certain cases, the exhibits thereto) with the SEC, CFTC and NFA; (iii) the qualification of the Units under the securities or "Blue Sky" laws in the various jurisdictions, including filing fees and the fees and disbursements of CISI's counsel incurred in connection therewith; (iv) the services of counsel and accountants for CISI and the Trust, including certain services of KPMG Peat Marwick, LLP in connection with their review of the performance records in the Prospectus; (v) the printing or reproduction and delivery to the Selling Agent of such number of copies as it may reasonably request of the Blue Sky Survey; and (vi) "road show" presentations (not including the expenses of JWH and its personnel which shall be borne by JWH). The Managing Owner and the Selling Agent are each aware of the limitations imposed by Rule 2810 of the NASD on the aggregate compensation which may be received by the Selling Agent in connection with the offering and sale of the Units. The Selling Agent will in no event make any payments to its own Registered Representatives or any Additional Agent as described above, which, when added to the up to 4% selling commissions which the Selling Agent may pay with -16- respect to the sales of Units, would exceed 10% of the gross proceeds of the Units sold to the public. CISI shall not reimburse the Selling Agent for any due diligence expenses in connection with the offering. Section 8. CONDITIONS OF CLOSING. The obligations of each of the parties hereunder are subject to the accuracy of the representations and warranties of the other parties hereto, to the performance by such other parties of their respective obligations hereunder and to the following further conditions: (a) At the Initial Closing Time and each Subsequent Closing Time no order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceeding therefor initiated or threatened by the SEC and no objection to the content thereof shall have been expressed or threatened by the CFTC or NFA. (b) At the Initial Closing Time, Sidley & Austin, counsel to CISI and the Trust, shall deliver to all the parties hereto its opinion, in form and substance satisfactory to each of the parties hereto, to the effect that: (i) The Certificate of Trust pursuant to which the Trust has been formed and the Declaration and Agreement of Trust each provides for the subscription for and sale of the Units; all action required to be taken by the Managing Owner and the Trust as a condition to the subscription for and sale of the Units to qualified subscribers therefor has been taken; and, upon payment of the consideration therefor specified in the accepted Subscription Agreements and Powers of Attorney, the Units will constitute valid beneficial interests in the Trust and each subscriber who purchases Units will become a Unitholder, subject to the requirements (x) that each such purchaser shall have duly completed, executed and delivered to the Trust a Subscription Agreement and Power of Attorney relating to the Units purchased by such party, (y) that such purchaser meets all applicable suitability standards as set forth in the Prospectus and (z) that the representations and warranties of such purchaser in the Subscription Agreement and Power of Attorney are true and correct. (ii) The Trust is a business trust duly organized pursuant to the Certificate of Trust, the Declaration and Agreement of Trust and the Trust Act and validly existing under the laws of the State of Delaware with proper power and authority to conduct the business in which it proposes to engage as described in the Prospectus; the Trust has filed a certificate of assumed name in the State of Illinois pursuant to 805 I.L.C.S. 405/1 and need not effect any other filings or qualifications under the laws of the United States in order to preserve the -17- status of the Trust as a business trust or to enable the Trust to perform its obligations under the Trading Advisory Agreement and this Agreement and to conduct the business in which it proposes to be engaged as described in the Prospectus. (iii) CISI is duly organized and validly existing and in good standing as a corporation under the laws of the State of Delaware with corporate power and authority to act as managing owner of the Trust, and is qualified to do business and is in good standing as a foreign corporation in the State of Illinois and in each other jurisdiction in which the failure to so qualify might, in its opinion, reasonably be expected to result in material adverse consequences to the Trust. CISI has full corporate power and authority to perform its obligations as described in the Registration Statement and Prospectus. (iv) Each of CISI (including the principals, as defined in the Commodity Act, of CISI) and the Trust has all Federal and state governmental and regulatory licenses and approvals and has received or made all filings and registrations with Federal and state governmental and regulatory agencies necessary in order for each of CISI and the Trust to conduct its business as described in the Registration Statement and Prospectus, and, to the best of their knowledge, none of such approvals, licenses or registrations have been rescinded or revoked. (v) Each of the Declaration and Agreement of Trust, the Escrow Agreement, the FX Agreement, the Trading Advisory Agreement, the Customer Agreement and this Agreement has been duly and validly authorized, executed and delivered by or on behalf of CISI or the Trust, as the case may be, and assuming that such agreements are legal, valid and binding on the other parties hereto and thereto, each of the Declaration and Agreement of Trust, the Escrow Agreement, the Trading Advisory Agreement, and this Agreement constitutes a legal, valid and binding agreement of CISI or the Trust (as the case may be) enforceable in accordance with its terms, except to the extent enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability relating to or affecting the enforcement of creditors' rights and by the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (vi) The execution and delivery of this Agreement, the Declaration and Agreement of Trust, the Escrow Agreement, the FX Agreement, and the Trading Advisory Agreement and the incurrence of the obligations herein and therein set forth and the consummation -18- of the transactions contemplated herein and therein and in the Prospectus will not be in contravention of any of the provisions of CISI's certificate of incorporation or by-laws, or the Declaration and Agreement of Trust, and, to their knowledge, will not constitute a breach of, or default under, any instrument by which CISI or the Trust is bound or any order, rule or regulation applicable to CISI or the Trust of any court or any governmental body or administrative agency having jurisdiction over CISI or the Trust. (vii) To their knowledge, there are no actions, claims or proceedings pending or threatened in any court or before or by any governmental or administrative body, nor have there been any such suits, claims or proceeding within the last five years, to which CISI (or any principal of CISI) or the Trust is or was a party, or to which any of their assets is or was subject, which are required to be, but are not disclosed in, the Registration Statement or Prospectus or which might reasonably be expected to materially adversely affect the condition (financial or otherwise), business or prospects of CISI or the Trust. (viii) No authorization, approval or consent of any governmental authority or agency is necessary in connection with the subscription for and sale of the Units, except such as may be required under the 1933 Act, the Commodity Act, NFA compliance rules or applicable securities or "Blue Sky" laws. (ix) The terms and provisions of the Declaration and Agreement of Trust, the Customer Agreement, the FX Agreement, the Customer Agreement, the Trading Advisory Agreement and this Agreement conforms in all material respects to descriptions thereof contained in the Prospectus. (x) The Registration Statement is effective under the 1933 Act and, to the best of their knowledge, no proceedings for a stop order are pending or threatened under Section 8(d) of the 1933 Act. (xi) At the time the Registration Statement initially became effective and at the time any post-effective amendment thereto became effective, the Registration Statement, and at the time the Prospectus and any amendments or supplements thereto were first issued, the Prospectus, complied as to form in all material respects with the requirements of the 1933 Act, the SEC Regulations under the 1933 Act and CFTC regulations. Nothing has come to their attention that would lead them to believe that with respect to CISI, the Selling Agent or CISFS (a) at the time the Registration Statement initially became effective and at the time any post-effective amendment thereto -19- became effective, the Registration Statement contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (b) the Prospectus as first issued or as subsequently issued or at the Initial Closing Time contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that such counsel need express no opinion (A) as to the financial statements, notes thereto and other financial or statistical data set forth in the Registration Statement and Prospectus or (B) as to any performance data set forth in the Registration Statement, and Prospectus, including Appendix I (and the notes thereto) in the Registration Statement and Prospectus, except that such counsel shall opine, without rendering any opinion as to the accuracy of the information in Appendix I, that such Appendix I complies as to form in all material respects with applicable CFTC rules. (xii) Such counsel confirm their opinion, a form of which appears as Exhibit 8.01 to the Registration Statement, that the summary of Federal income tax consequences to Unitholders set forth under the caption "Federal Income Tax Consequences" in the Prospectus accurately describes the material tax consequences set forth therein and that such counsel further confirm their advice to CISI explicitly set forth therein and in such Exhibit 8.01. (xiii) To their knowledge, (a) there are no contracts, indentures, mortgages, loan agreements, leases or other documents of a character required to be described or referred to in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement other than those described or referred to therein or filed as exhibits thereto, and with respect to the existing contracts, indentures, mortgages, loan agreements, leases and other documents so described, referred to or filed, the descriptions thereof, references thereto or copies so filed are correct in all material respects, and (b) no material default on the part of CISI or the Trust exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract or lease so described or filed. (xiv) Assuming operation in accordance with the Prospectus, the Trust, at Closing Time, is not an "investment company" as that term is defined in the Investment Company Act of 1940, as amended. In rendering the opinions set forth above, Sidley & Austin may rely, as to matters of Delaware law, upon the opinion of Messrs. Richards, Layton & Finger, Wilmington, -20- Delaware, and as to matters relating to CISI, the Selling Agent and CISFS on internal counsel to Cargill, Incorporated. (c) Ms. Linda Cutler, counsel to the Selling Agent, shall deliver to all the parties hereto, an opinion to the effect that: (i) The Selling Agent is duly organized and validly existing and in good standing as a corporation under the laws of the State of Delaware and is qualified to do business and in good standing as a foreign corporation in the State of Illinois and in each other jurisdiction in which such qualification is required and in which the failure to so qualify might, in her opinion, reasonably be expected to result in material adverse consequences to the Trust. The Selling Agent has full corporate power and authority to perform its obligations as described in the Registration Statement and Prospectus. (ii) Each of the Customer Agreement and this Agreement has been duly authorized, executed and delivered by the Selling Agent, and this Agreement constitutes a legal, valid and binding agreement of the Selling Agent enforceable in accordance with its terms, except to the extent enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability relating to or affecting the enforcement of creditors' rights and by the effect of general principles of equity (regardless of whether enforceability is considered). (iii) The Selling Agent has all Federal and state governmental and regulatory licenses and approvals and has received or made all filings and registrations with Federal and state governmental and regulatory agencies necessary in order for the Selling Agent to conduct its business as described in the Registration Statement and Prospectus, and, to her knowledge, none of such approvals, licenses or registrations has been rescinded or revoked. (iv) The execution and delivery of the Customer Agreement and this Agreement, the incurrence of the obligations herein and therein set forth and the consummation of the transactions contemplated herein and therein and in the Prospectus will not, to the best of her knowledge, constitute a breach of, or default under, any instrument known to her by which the Selling Agent is bound or, any order, rule or regulation applicable to the Selling Agent, of any court or any governmental body or administrative agency having jurisdiction over the Selling Agent. -21- (v) To her knowledge, there are no actions, claims or proceedings pending or threatened in any court or before or by a governmental or administrative body, nor have there been any suits, claims or proceedings within the last five years, to which the Selling Agent (or any principal of the Selling Agent) is or was a party or to which any of its assets is or was subject, which are required to be disclosed in the Registration Statement or Prospectus or which might reasonably be expected to materially adversely affect the business of the Selling Agent. (vi) Nothing has come to her attention that would lead her to believe that (a) at the time the Registration Statement initially became effective and at the time any post- effective amendment thereto became effective, insofar as the Selling Agent and its principals are concerned, the Registration Statement contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (b) the Prospectus as first filed pursuant to Rule 424(b) or as subsequently filed pursuant to Rule 424 or at the Initial Closing Time contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein relating to the Selling Agent or its principals, in light of the circumstances under which they were made, not misleading. (d) Ms. Linda Cutler, counsel to CISFS, shall deliver to all the parties hereto, an opinion to the effect that: (i) CISFS is duly organized and validly existing and in good standing as a corporation under the laws of the State of Delaware and is qualified to do business and in good standing as a foreign corporation in the State of Illinois and in each other jurisdiction in which such qualification is required and in which the failure to so qualify might, in her opinion, reasonably be expected to result in material adverse consequences to the Trust. CISFS has full corporate power and authority to perform its obligations as described in the Registration Statement and Prospectus. (ii) Each of the FX Agreement and this Agreement has been duly authorized, executed and delivered by CISFS, and this Agreement constitutes a legal, valid and binding agreement of CISFS enforceable in accordance with its terms, except to the extent enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability relating to or affecting the enforcement of creditors' rights and by the -22- effect of general principles of equity (regardless of whether enforceability is considered). (iii) CISFS has all Federal and state governmental and regulatory licenses and approvals and has received or made all filings and registrations with Federal and state governmental and regulatory agencies necessary in order for CISFS to conduct its business as described in the Registration Statement and Prospectus, and, to her knowledge, none of such approvals, licenses or registrations has been rescinded or revoked. (iv) The execution and delivery of the FX Agreement and this Agreement, the incurrence of the obligations herein and therein set forth and the consummation of the transactions contemplated herein and therein and in the Prospectus will not, to the best of her knowledge, constitute a breach of, or default under, any instrument known to her by which CISFS is bound or, any order, rule or regulation applicable to CISFS, of any court or any governmental body or administrative agency having jurisdiction over CISFS. (v) To her knowledge, there are no actions, claims or proceedings pending or threatened in any court or before or by a governmental or administrative body, nor have there been any suits, claims or proceedings within the last five years, to which CISFS (or any principal of CISFS) is or was a party or to which any of its assets is or was subject, which are required to be disclosed in the Registration Statement or Prospectus or which might reasonably be expected to materially adversely affect the business of CISFS. (vi) Nothing has come to her attention that would lead her to believe that (a) at the time the Registration Statement initially became effective and at the time any post-effective amendment thereto became effective, insofar as CISFS and its principals are concerned, the Registration Statement contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (b) the Prospectus as first filed pursuant to Rule 424(b) or as subsequently filed pursuant to Rule 424 or at the Initial Closing Time contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein relating to CISFS or its principals, in light of the circumstances under which they were made, not misleading. (e) David M. Kozak, counsel to JWH, shall deliver to all the parties hereto an opinion as of the Initial Closing Time to the effect that: -23- (i) JWH is a corporation duly organized, validly existing and in good standing under the laws of the State of California and is in good standing in each jurisdiction in which the nature or conduct of its business requires such qualification and in which the failure to so qualify might reasonably be expected to materially adversely affect the Trust, as described in the Registration Statement and Prospectus, and its ability to discharge its obligations under the Trading Advisory Agreement and this Agreement. (ii) Each of the Trading Advisory Agreement and this Agreement has been duly authorized, executed and delivered by JWH and constitutes a valid, binding and enforceable agreement of JWH in accordance with its terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability generally of rights of creditors and except as enforceability of the indemnification provisions contained in such Agreements may be limited by applicable law and the enforcement of specific terms or remedies may be unavailable. (iii) JWH (including the principals of JWH) has all material Federal and state governmental and regulatory licenses and approvals and has received or made all filings and registrations with Federal and state governmental and regulatory authorities necessary in order for JWH to conduct its business as described in the Registration Statement and Prospectus (including, without limitation, performance of this Agreement and the Trading Advisory Agreement) and, to the best of such counsel's knowledge, none of such approvals, licenses or registrations has been rescinded or revoked. (iv) There is not pending or, to such counsel's knowledge, threatened any actions, suits or proceedings before or by any court or other governmental or administrative body, nor have there been any such suits, claims or proceedings within the last five years to which JWH, or any of its principals, is or was a party, or to which any of their assets is or was subject, which are required to be, but are not disclosed in the Registration Statement or Prospectus or which might reasonably be expected to result in any material adverse change in the condition (financial or otherwise), business or prospects of JWH. (v) The execution and delivery of this Agreement and the Trading Advisory Agreement, the incurrence of the obligations herein and therein set forth and the consummation of the transactions contemplated herein, therein and in the Prospectus will not be in contravention of any of the provisions of the certificate of incorporation or by-laws of JWH, or, to the best of such counsel's knowledge, -24- constitute a breach of, or default under, any instrument by which JWH is bound or any order, rule or regulation applicable to JWH of any court or any governmental body or administrative agency having jurisdiction over JWH. (vi) Based upon reliance on certain SEC No-Action Letters, the performance by JWH of the transactions contemplated by the Trading Advisory Agreement and described in the Prospectus will not subject JWH or any principal of JWH to the registration requirements, prohibitions or other terms of the Investment Advisers Act of 1940, as amended. (vii) Nothing has come to such counsel's attention that would lead such counsel to believe that, (a) at the time the Registration Statement initially became effective and at the time any post-effective amendment thereto became effective, insofar as JWH and its principals are concerned, the Registration Statement contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (b) the Prospectus as first filed pursuant to Rule 424(b) or as subsequently filed pursuant to Rule 424 or at the Initial Closing Time contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein relating to JWH or its principals, in light of the circumstances under which they were made, not misleading; provided, however, that no counsel for JWH need express an opinion or belief (A) as to the financial statements, notes thereto and other financial or statistical data and notes or descriptions thereto set forth in the Registration Statement and Prospectus or (B) as to the performance data and notes or descriptions thereto set forth in the Registration Statement, except that such counsel shall opine, without rendering any opinion as to the accuracy of the information in such tables, that the performance records relating to JWH set forth in the Prospectus comply as to form in all material respects with CFTC rules except to the extent departures therefrom have been permitted by CFTC staff. (f) At the Initial Closing Time, the Managing Owner shall deliver a certificate to the effect that: (i) no order suspending the effectiveness of the Registration Statement has been issued and to the best of its knowledge no proceedings therefor have been instituted or threatened by the SEC, the CFTC or other regulatory body; (ii) the representations and warranties of the Managing Owner contained herein are true and correct with the same effect as though expressly made at the Initial Closing Time and in respect of the Registration Statement as in effect at the Initial Closing Time; and (iii) the Managing Owner has performed all covenants and agreements herein contained to be performed on its part at or prior to the Initial Closing Time. Such -25- certificate may state that the Managing Owner has relied upon JWH to provide certain information relating to JWH for use in the Registration Statement. (g) JWH shall deliver a report dated as of the Initial Closing Time which shall present, for the period from the date after the last day covered by the performance records in the Prospectus to the latest practicable day before the Initial Closing Time, figures which shall be a continuation of such performance records and which shall certify that such figures are accurate in all material respects. JWH shall also certify that such performance records have been calculated in accordance with the notes to the applicable performance records in the Prospectus. (h) At the time the Registration Statement initially becomes effective, KPMG Peat Marwick, LLP shall have delivered a letter, substantially in the form previously agreed upon by the Selling Agent and the Managing Owner. (i) At the Initial Closing Time, KPMG Peat Marwick, LLP shall deliver a letter in a form satisfactory to the Selling Agent and the Managing Owner, substantially the same in scope and substance as the letter described in paragraph (h) of this Section 8, dated as of the Initial Closing Time. (j) At the Initial Closing Time, JWH shall deliver a certificate to the effect that (i) the representations and warranties of JWH contained herein are true and correct with the same effect as though expressly made at the Initial Closing Time, (ii) JWH has performed all covenants and agreements herein contained to be performed on its part at or prior to the Initial Closing Time and (iii) since the date of the most recent financial information relating to JWH prior to the date of this Agreement there has been no material adverse change, or development involving a prospective material adverse change, in the financial condition, business or business prospects of JWH. (k) At the Initial Closing Time, the Selling Agent shall deliver a certificate to the effect that the representations and warranties of the Selling Agent and Futures Broker contained herein are true and correct with the same effect as though expressly made at the Initial Closing Time and in respect of the Registration Statement as in effect at the Initial Closing Time. (l) At the Initial Closing Time, CISFS shall deliver a certificate to the effect that the representations and warranties of CISFS contained herein are true and correct with the same effect as though expressly made at the Initial Closing Time and in respect of the Registration Statement as in effect at the Initial Closing Time. (m) The Trust shall have received a capital contribution of the Managing Owner in the amount required by the Declaration and Agreement of Trust and as described in the Prospectus. -26- (n) The parties hereto shall have been furnished with such additional information, opinions and documents, including supporting documents relating to parties described in the Prospectus and certificates signed by such parties with regard to information relating to them and included in the Prospectus as they may reasonably require for the purpose of enabling them to pass upon the sale of the Units as herein contemplated and related proceedings, in order to evidence the accuracy or completeness of any of the representations or warranties or the fulfillment of any of the conditions herein contained; and all actions taken by the parties hereto in connection with the sale of the Units as herein contemplated shall be reasonably satisfactory in form and substance to Sidley & Austin, Mr. Kozak and Ms. Cutler. (o) The representations and warranties set forth herein shall be restated as of each Subsequent Closing Time as if made as of the date thereof. The conditions of closing set forth in this Section 8 shall, at the option of any party hereto, apply at each Subsequent Closing Time. If any of the conditions specified in this Section 8 shall not have been fulfilled when and as required by this Agreement to be fulfilled, this Agreement and all obligations hereunder may be canceled by any party hereto by notifying the other parties hereto of such cancellation in writing or by telegram at any time at or prior to the Initial Closing Time, and any such cancellation or termination shall be without liability of any party to any other party except as otherwise provided in Section 7. Section 9. INDEMNIFICATION AND EXCULPATION. (a) INDEMNIFICATION BY THE MANAGING OWNER. The Managing Owner agrees to indemnify and hold harmless the Selling Agent, JWH, any Wholesaler, Additional Selling Agent or Correspondent, and each person, if any, who controls any of the foregoing within the meaning of Section 15 of the 1933 Act, and the Trust agrees to indemnify and hold harmless JWH and each person, if any, who controls JWH within the meaning of Section 15 of the 1933 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto) or any omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, unless (a) in the case of JWH, such untrue statement or omission or alleged untrue statement or omission was made in reliance upon -27- and in conformity with information relating to JWH and furnished or approved in writing by JWH, (b) in the case of the Selling Agent, such untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with information relating to the Selling Agent and furnished or approved by the Selling Agent or (c) in the case of any Wholesaler, Additional Selling Agent or Correspondent, such untrue statement or alleged untrue statement was made in reliance upon and in conformity with information (including any material omission from such information), if any, relating to, such Wholesaler, Additional Selling Agent or Correspondent and furnished or approved by such party; (ii) against any and all loss, liability, claim, damage and expense whatsoever to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission or any such alleged untrue statement or omission (any settlement to be subject to indemnity hereunder only if effected with the written consent of the Managing Owner); and (iii) against any and all expense whatsoever (including the fees and disbursements of counsel and, in the case of the Selling Agent, any indemnification of a Wholesaler, Additional Selling Agent or Correspondent made pursuant to a Wholesaling Agreement, Additional Selling Agent Agreement or Correspondent Selling Agreement, as the case may be) reasonably incurred in investigating, preparing or defending against litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under clauses (i) or (ii) above. In no case shall the Managing Owner or the Trust be liable under this indemnity agreement with respect to any claim made against any indemnified party unless the Managing Owner or the Trust shall be notified in writing of the nature of the claim within a reasonable time after the assertion thereof, but failure to so notify the Managing Owner or the Trust shall not relieve the Managing Owner or the Trust from any liability which they may have on account of this indemnity agreement unless such failure to notify shall materially prejudice the Managing Owner or the Trust. The Managing Owner and the Trust shall be entitled to participate at their own expense in the defense or, if they so elect within a reasonable time after receipt of such notice, to assume the defense of that portion of any suit so brought relating to the Managing Owner's or the Trust's indemnification obligations hereunder, which defense shall be -28- conducted by counsel chosen by them and satisfactory to the indemnified party or parties, defendant or defendants therein. In the event that the Managing Owner or the Trust elects to assume the defense of any such suit and retain such counsel, the indemnified party or parties, defendant or defendants in the suit, shall, in the absence of conflicting claims, bear the fees and expenses of any additional counsel thereafter retained by it or them. In no event, however, shall the Managing Owner be obligated to indemnify the Selling Agent hereunder, and the Selling Agent agrees not to attempt to obtain any indemnity from the Managing Owner hereunder, to the extent that the Managing Owner and the Selling Agent are advised by counsel reasonably satisfactory to the Managing Owner and the Selling Agent that payment of such indemnity could adversely affect the classification of the Trust as a partnership for Federal income tax purposes. The Managing Owner agrees to notify JWH and the Selling Agent within a reasonable time of the assertion of any claim in connection with the sale of the Units against it or any of its officers or directors or any person who controls the Managing Owner within the meaning of Section 15 of the 1933 Act. (b) INDEMNIFICATION BY JWH. JWH agrees to indemnify and hold harmless the Selling Agent, the Managing Owner, the Trust, and each person, if any, who controls any of the foregoing within the meaning of Section 15 of the 1933 Act (and, in the case of the Managing Owner and the Trust, each person who signed the Registration Statement or is a director of the Managing Owner), to the same extent as the indemnity from the Managing Owner set forth in Section 9(a) hereof, but only insofar as the losses, claims, damages, liabilities or expenses indemnified against arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission relating or with respect to JWH or any principal of JWH, or their operations, trading systems, methods or performance, which was made in any preliminary prospectus, the Registration Statement or the Prospectus or any amendment or supplement thereto and furnished by or approved by JWH for inclusion therein. (c) INDEMNIFICATION BY THE SELLING AGENT. The Selling Agent agrees to indemnify and hold harmless the Trust, the Managing Owner, JWH and each person, if any, who controls the Trust, the Managing Owner or JWH within the meaning of Section 15 of the 1933 Act (and in the case of the Managing Owner and the Trust, each person who signed the Registration Statement or is a director of the Managing Owner), (i) to the same extent as the same extent as the indemnity from the Managing Owner set forth in Section 9(a) hereof, but only insofar as the losses, claims, damages, liabilities or expenses indemnified against arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission relating or with respect to the Selling Agent or any of its principals, or their operations, which was made in any preliminary prospectus, the Registration Statement or the Prospectus or any amendment or supplement thereto and furnished by or approved by the Selling Agent -29- for inclusion therein and (ii) against any and all loss, liability, claim, damage and expense whatsoever resulting from a demand, claim, lawsuit, action or proceeding relating to the actions or capacities of the Selling Agent and any Wholesaler, Additional Selling Agent or Correspondent relating to the offering of Units under this Agreement or any Wholesaling Agreement, Additional Selling Agent Agreement or Correspondent Selling Agent Agreement as the case may be. (d) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by JWH, on the one hand, and, the Selling Agent, CISFS and the Managing Owner, on the other, from the offering of the Units. (e) LIMITATION ON CERTAIN INDEMNIFICATIONS AND EXCULPATIONS. The exculpation provisions in the Trading Advisory Agreement shall not relieve JWH from any liability it may have or incur to the Trust, the Managing Owner or the Selling Agent under this Agreement (including, without limitation, pursuant to the provisions of Section 9(b) hereof). Nor shall JWH be entitled to be indemnified by the Managing Owner, pursuant to the indemnification provisions contained in the Trading Advisory Agreement, against any loss, liability, damage, cost or expense it may incur under this Agreement. The Managing Owner shall not be entitled to be indemnified by the Trust, pursuant to the indemnification provisions contained in the Declaration and Agreement of Trust against any loss, liability, damage, cost or expense it may incur under this Agreement. Section 10. STATUS OF PARTIES. In selling the Units for the Trust, the Selling Agent is acting solely as an agent for the Trust and not as a principal. The Selling Agent will use its best efforts to assist the Trust in obtaining performance by each purchaser whose offer to purchase Units from the Trust has been accepted on behalf of the Trust, but the Selling Agent shall not have any liability to the Trust in the event that Subscription Agreements and Powers of Attorney are improperly completed or any such purchase is not consummated for any reason. Except as specifically provided herein, the Selling Agent shall in no respect be deemed to be an agent of the Trust. Section 11. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties and agreements contained in this Agreement or contained in certificates of any party hereto submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by, or on behalf of, the Selling Agent, the Managing Owner, the Trust, the Futures Broker, CISFS, JWH or any person who controls any of the foregoing and shall survive the Initial Closing Time. -30- Section 12. TERMINATION. The Managing Owner shall have the right to terminate this Agreement at any time prior to the Initial Closing Time by giving written notice of such termination to JWH, the Selling Agent, the Futures Broker and CISFS. Section 13. NOTICES AND AUTHORITY TO ACT. All communications hereunder shall be in writing and, if sent to the Selling Agent, CISI, CISFS or the Trust, shall be mailed, delivered or telegraphed and confirmed to it at Portfolio Diversification Group, Sears Tower, 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606, Attention: L. Carlton Anderson; if sent to JWH, shall be mailed, delivered or telegraphed and confirmed at One Glendinning Place, Westport, Connecticut 06880, Attention: David M. Kozak. Notices shall be effective when actually received. Section 14. PARTIES. This Agreement shall inure to the benefit of and be binding upon the Selling Agent, the Trust, the Managing Owner, CISFS, JWH and such parties' respective successors to the extent provided herein. This Agreement and the conditions and provisions hereof are intended to be and are for the sole and exclusive benefit of the parties hereto and their respective successors, assigns and controlling persons and parties indemnified hereunder, and for the benefit of no other person, firm or corporation. No purchaser of a Unit shall be considered to be a successor or assign solely on the basis of such purchase. The parties acknowledge that the obligations of this Agreement are not binding against the Unitholders individually but are binding only upon the assets and property of the Trust and, in the event of any obligation or claim arising hereunder against the Trust, no resort shall be had to the Unitholder's personal property for the satisfaction of such obligation or claim. Section 15. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES CREATED HEREBY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO THE PRINCIPLES OF CHOICE OF LAW THEREOF. Section 16. REQUIREMENTS OF LAW. Whenever in this Agreement it is stated that a party will take or refrain from taking a particular action, such party may nevertheless refrain from taking or take such action if advised by counsel that doing so is required by law or advisable to ensure compliance with law, and shall not be subject to any liability hereunder for doing so, although such action shall permit termination of the Agreement by the other parties hereto. -31- If the foregoing is in accordance with each party's understanding of its agreement, each party is requested to sign and return to CISI as Managing Owner a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement among them in accordance with its terms. Very truly yours, JWH GLOBAL PORTFOLIO TRUST BY: CIS INVESTMENTS INC., Managing Owner By:________________________________ Name: Title: CIS INVESTMENTS, INC. By:________________________________ Name: Title: JOHN W. HENRY & COMPANY, INC. By:________________________________ Name: Title: CARGILL INVESTOR SERVICES, INC. By:_______________________________ Name: Title: CIS FINANCIAL SERVICES, INC. By:________________________________ Name: Title: -32- EXHIBIT A JWH GLOBAL PORTFOLIO TRUST (A DELAWARE BUSINESS TRUST) $50,000,000 OF UNITS OF BENEFICIAL INTEREST (SUBSCRIPTION PRICE: $100 PER UNIT DURING THE INITIAL OFFERING PERIOD; NET ASSET VALUE PER UNIT DURING THE ONGOING OFFERING PERIOD) ADDITIONAL SELLING AGENT AGREEMENT _______ __, 1996 [Additional Selling Agent] Dear Sirs: CIS Investments, Inc., a Delaware corporation (the "Managing Owner"), has caused the formation of a business trust pursuant to the Delaware Business Trust Act (the "Delaware Act") under the name, JWH GLOBAL PORTFOLIO TRUST (the "Trust"), for the purpose of engaging in speculative trading of futures and forward contracts and commodity options. As described in the Prospectus referred to below, the Trust will engage in speculative trading in the commodities markets under the direction of John W. Henry & Company, Inc. ("JWH"). The Trust proposes to make a public offering of units of beneficial interest in the Trust (the "Units") through us, Cargill Investor Services, Inc. (the "Lead Selling Agent"), on a best-efforts basis pursuant to the Selling Agreement dated as of ______ __, 1996 among us, the Trust and others (the "Selling Agreement"), a copy of which has been furnished to you. In connection with the proposed public offering, the Trust has filed with the United States Securities and Exchange Commission (the "SEC"), pursuant to the United States Securities Act of 1933, as amended (the "1933 Act"), a registration statement on Form S-1 to register the Units, and as part thereof a prospectus (Registration No. 33-____) (which registration statement, together with all amendments thereto, shall be referred to herein as the "Registration Statement" and which prospectus together with all amendments and supplements thereto in the forms filed with the SEC pursuant to Rule 424 under the Act shall be referred to herein as the "Prospectus"). Other selling agents, including those introduced by wholesalers ("Wholesalers") to us (the "Additional Selling Agents" and together with the Lead Selling Agent, the "Selling Agents"), may be selected by us with the consent of the Managing Owner. We have so selected you as an Additional Selling Agent. We confirm our agreement with you as follows. Capitalized terms used but otherwise not defined herein shall have the meanings ascribed to them in the Selling Agreement unless the context indicates otherwise. 1. APPOINTMENT AND UNDERTAKINGS OF THE ADDITIONAL SELLING AGENT (a) Subject to the terms and conditions set forth in this Agreement, the Selling Agreement and the Registration Statement, the Additional Selling Agent is hereby appointed, and hereby accepts such appointment, as one of the Trust's non-exclusive selling agents to offer and sell the Units on a best-efforts basis without any commitment on the Additional Selling Agent's part to purchase any Units. It is understood and agreed that the Lead Selling Agent, with the consent of the Managing Owner, may retain other selling agents (including those introduced by Wholesalers) and that the Additional Selling Agent or any other Additional Selling Agent, with the consent of the Lead Selling Agent and Managing Owner in their sole discretion, may retain correspondent selling agents ("Correspondents"). The Additional Selling Agent agrees to comply with the terms and conditions of this Agreement and any terms and conditions of the Selling Agreement applicable to Additional Selling Agents. (b) The Additional Selling Agent agrees to use its best efforts to procure subscriptions for the Units as long as this Agreement and the Selling Agreement remain in effect and to make the offering of Units at the offering price and minimum amounts and on the other terms and conditions set forth in the Prospectus and the Selling Agreement. (c) The Additional Selling Agent shall offer and sell Units only to persons and entities who satisfy the suitability and/or investment requirements set forth in the Prospectus and the subscription agreements attached thereto and who, to the Managing Owner's satisfaction, complete the subscription agreements and related subscription documents used in connection with the offering of the Units (the "Subscription Documents") and remit good funds for the full subscription price. The Additional Selling Agent shall conduct a thorough review of the suitability of each subscriber for Units that it solicits and of the Subscription Documents. The Additional Selling Agent shall not forward to the Managing Owner any Subscription Documents that are not in conformity with the requirements specified in the Prospectus and in the Subscription Documents appropriate for the particular subscriber, or that is illegible in any respect or is not fully completed, dated, or signed, or that represents the subscription of a person or entity not satisfying the suitability and/or investment requirements applicable to such person or entity. The Additional Selling Agent shall not execute any transactions in Units in a discretionary account over which it has control without prior written approval of the customer in whose name such discretionary account is maintained. The Additional Selling Agent agrees not to recommend the purchase of Units to any subscriber unless the Additional Selling Agent shall have reasonable grounds to believe, on the basis of information obtained from the subscriber concerning, among other things, the subscriber's investment objectives, other investments, financial situation and needs, that the subscriber is or will be in a financial position appropriate to enable the subscriber to realize to a significant extent the benefits of the Trust, including the tax benefits (if any) described in the Prospectus; the subscriber has a fair market net worth sufficient to sustain the risks inherent in participating in the Trust, including loss of investment and lack of liquidity; and the Units are otherwise a suitable investment for the subscriber. In addition to submitting such information to the Managing Owner, the Additional Selling Agent agrees to maintain files of information disclosing the basis upon which the Additional Selling Agent determined that the suitability requirements of Section (b)(2) of Rule 2810 of the National 2 Association of Securities Dealers, Inc. ("NASD") (formerly Section 3 of Appendix F of the NASD's Rules of Fair Practice) were met as to each subscriber (the basis for determining suitability may include the Subscription Documents and other certificates submitted by subscribers). In connection with making the foregoing representations and warranties, the Additional Selling Agent further represents and warrants that it has received copies of the Registration Statement, as amended to the date hereof, and the Prospectus and has, among other things, examined the following sections in the Prospectus and obtained such additional information from the Managing Owner regarding the information set forth thereunder as the Additional Selling Agent has deemed necessary appropriate to determine whether the Prospectus adequately and accurately discloses all material facts relating to an investment in the Trust and provides an adequate basis to subscribers for evaluating an investment in the Units: "Summary" "Risk Factors" "Investment Factors" "The Trust and Its Objectives" "John W. Henry & Company, Inc." "The Managing Owner" "Fiduciary Obligations of the Managing Owner" "Use of Proceeds" "Charges" "Conflicts of Interest" "Redemptions; Net Asset Value" "The Trust and the Trustee" "Federal Income Tax Aspects" In connection with making the representations and warranties set forth in this paragraph, the Additional Selling Agent has not relied on inquiries made by or on behalf of any other parties. The Additional Selling Agent agrees to inform all prospective purchasers of Units of all pertinent facts relating to the liquidity and marketability of the Units as set forth in the Prospectus. The Additional Selling Agent shall offer and sell Units in compliance with the requirements set forth in the Registration Statement (particularly the "Subscription Requirements" attached as Exhibit B thereto), this Agreement and the Blue Sky Survey delivered to the Lead Selling Agent by the Managing Owner's counsel, a copy of which has been provided to the Additional Selling Agent. The Additional Selling Agent represents and warrants that it shall comply fully at all times with all applicable federal and state securities and commodities laws (including without limitation the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Commodity Exchange Act, as amended (the "CEA"), and the securities and Blue Sky laws of the jurisdictions in which the Additional Selling Agent solicits subscriptions, all applicable rules and regulations under such laws, and all applicable requirements, rules, policy statements and interpretations of the NASD, and the securities and commodities exchanges and other governmental and self-regulatory authorities and organizations having jurisdiction over it or the offering of Units). The Additional Selling Agent shall under no circumstances engage in any activities hereunder in any jurisdiction (i) in which the 3 Managing Owner has not informed the Additional Selling Agent that counsel's advice has been received that the Units are qualified for sale or are exempt under the applicable securities or Blue Sky laws thereof or (ii) in which the Additional Selling Agent may not lawfully engage. The Additional Selling Agent further agrees to comply with the requirement under applicable federal and state securities laws to deliver to each offeree a Prospectus and any amendments or supplements thereto (including summary financial information, if available, after the Trust has commenced operations). Neither the Additional Selling Agent nor any of its employees, agents or representatives will use or distribute any marketing material or information other than that prepared by the Trust and the Managing Owner. (d) The additional services that the Additional Selling Agent will provide on an ongoing basis to Unitholders at no charge will include but not be limited to: (i) inquiring of the Managing Owner from time to time, at the request of Unitholders, as to the Net Asset Value of a Unit, (ii) inquiring of the Managing Owner from time to time at the request of the Unitholders, as to the commodities markets and the activities of the Fund, (iii) assisting, at the request of the Managing Owner, in the redemption of Units sold by the Additional Selling Agent, (iv) responding to question of Unitholders from time to time with respect to monthly account statements, annual reports, financial statements, and annual tax information furnished to Unitholders, and (v) providing such other services to the owners of Units as the Managing Owner may, from time to time, reasonably request. All payments for subscriptions shall be made by transfer of funds to the escrow account of the Trust as described in the Prospectus. (e) The Additional Selling Agent (i) acknowledges that, other than as set forth herein, it is not authorized to act as the agent of the Lead Selling Agent in any connection or transaction and (ii) agrees not to so act or to purport to so act. 2. COMPENSATION (a) In consideration for the Additional Selling Agent performing the obligations under this Agreement, the Lead Selling Agent shall pay the Additional Selling Agent a selling commission of __% of the subscription value of the Unit(s) sold by the Additional Selling Agent. The selling commission payable in respect of Units sold to any investor eligible to be charged a Special Brokerage Fee Rate as described in the Prospectus shall be reduced by the difference between the standard brokerage fee rate and the applicable Special Brokerage Fee Rate (or, in the event that the Additional Selling Agent shares the selling commission with a Wholesaler, the Additional Selling Agent's proportionate share of such difference). Such commissions will be paid in respect of each subscription as promptly as practicable after the initial closing or each subsequent month-end closing. (b) The Additional Selling Agent shall receive ongoing compensation, payable monthly by the Lead Selling Agent, of __% (a __% annual rate) of the month-end Net Asset Value of the Units sold by a Registered Representative of the Additional Selling Agent which remain outstanding for more than twelve months (including the month as of the end of which such Unit is redeemed) assuming (i) the Additional Selling Agent's continued registration with the Commodity Futures 4 Trading Commission (the "CFTC") as a futures commission merchant or introducing broker and continued membership with the National Futures Association ("NFA") in such capacity and (i) the Registered Representative's compliance with the additional requirements described in subsection 1(d), registration with the CFTC and compliance with all applicable proficiency requirements (including those imposed by the NASD as a condition of receiving "trailing commissions") by either passing the Series 3 National Commodity Futures Exam or the Series 31 exam or being "grandfathered" from having to do so. Such ongoing compensation shall begin to accrue with respect to each Unit only after the end of the twelfth full month after the sale of such Unit. Such ongoing compensation will be paid by the Lead Selling Agent from brokerage fees paid to it in its capacity as the Trust's futures broker by the Trust. Ongoing compensation payable in respect of Units sold to any investor eligible to be charged a Special Brokerage Fee Rate as described in the Prospectus shall be reduced by the difference between the standard brokerage fee rate and the applicable Special Brokerage Fee Rate (or, in the event that the Additional Selling Agent shares ongoing compensation with an eligible Wholesaler, the Additional Selling Agent's proportionate share of such difference). [ In the event the Additional Selling Agent's Wholesaler, if any, is not eligible to receive ongoing compensation, the Additional Selling Agent shall receive the amount that would have been due to the Wholesaler in the absence of ineligibility.] For purposes of determining when ongoing compensation should begin to accrue, Units sold during the Initial Offering Period (as defined in the Prospectus) shall not be deemed to be sold until the initial closing time and Units sold during the Ongoing Offering Period (as defined in the Prospectus) shall not be deemed to be sold until the day Units are issued, and in either case not the day when subscriptions are accepted by the Managing Owner or subscriptions funds are deposited in escrow. Furthermore, the Lead Selling Agent shall not compensate the Additional Selling Agent, and the Additional Selling Agent shall not compensate its employees or other persons, unless the recipient thereof is legally qualified and permitted to receive such compensation. Also, such ongoing compensation may be paid by the Lead Selling Agent to the Additional Selling Agent and by the Additional Selling Agent to its employees or other persons, only in respect of outstanding Units sold by such persons to Unitholders and only so long as the additional services described in Section 1(d) above are provided by such person to Unitholders. In case of Units sold by Registered Representatives who are not qualified to receive ongoing compensation as set forth above, the Lead Selling Agent will pay each such Registered Representative installment selling commissions at the same rate as in the case of ongoing compensation, but the sum of such installment selling commissions and the initial selling commission paid to the Additional Selling Agent and its Wholesaler, if any, is limited in amount, pursuant to applicable NASD policy, to 9.5% of the initial subscription price of the Units sold by such Registered Representative; provided, that no such installment selling commissions shall be payable until the Managing Owner and the Lead Selling Agent determine that the payment of such installment selling commission is in compliance with Rule 2810 of the NASD (formerly Appendix F of the NASD's Rules of Fair Practice) on aggregate compensation which may be received by the Selling Agents. In respect of Correspondents, if any, selected by the Additional Selling Agent (with the consent of the Lead Selling Agent and the Managing Owner), the Lead Selling Agent shall pay to the Additional Selling Agent selling commissions and ongoing compensation or installment sales 5 commissions as set forth above, a portion (as agreed between the Additional Selling Agent and each such Correspondent) of which shall be passed on by the Additional Selling Agent to such Correspondents. The Additional Selling Agent agrees that it will promptly pass on to its Registered Representatives and Correspondents the applicable portions of the selling commissions received from the Lead Selling Agent to which such Registered Representatives and Correspondents are entitled pursuant to, respectively, the Additional Selling Agent's standard compensation procedures and the Additional Selling Agent's agreement with each such Correspondent. The Additional Selling Agent, although otherwise entitled to ongoing compensation, will not be entitled to receipt thereof (but may continue to receive installment selling commissions) for any month during any portion of which the Registered Representative who is receiving such ongoing compensation is at any time not properly registered with the CFTC or does not provide the ongoing services described above. Ongoing compensation which cannot be paid because the Additional Selling Agent or its Correspondent (or a Registered Representative of either) has not met the eligibility requirements shall be retained by the Lead Selling Agent. The Additional Selling Agent shall not, directly or indirectly, pay or award any finder's fees, commissions or other compensation to any person engaged by a potential investor for investment advice as an inducement to such advisor to advise the purchase of Units; provided, however, the normal sales commissions payable to a registered broker-dealer or other properly licensed person for selling Units shall not be prohibited hereby. (c) Notwithstanding any other provision of this Agreement to the contrary, the Managing Owner shall have sole discretion to accept or reject any subscription for the Units in whole or in part. (d) The Lead Selling Agent agrees to make all payments to the Additional Selling Agent pursuant to this Section 2 within 15 days following the end of a monthly period in which compensation is earned. Notwithstanding anything above to the contrary, the Lead Selling Agent shall be liable to make ongoing compensation payments to the Additional Selling Agent only after the Lead Selling Agent, in its capacity of futures broker for the Trust, has actually received its brokerage fee from the Trust. 3. REPRESENTATIONS AND WARRANTIES OF THE LEAD SELLING AGENT The Lead Selling Agent hereby represents and warrants as follows: (a) The Lead Selling Agent is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has power and authority to enter into and carry out its obligations under this Agreement. 6 (b) The Lead Selling Agent has all governmental and regulatory registrations, qualifications, approvals and licenses required to perform its obligations under this Agreement (including, but not limited to, registration as a broker-dealer with the SEC, membership in such capacity in the NASD, and registration or qualification under the laws of each state in which Lead Selling Agent will offer and sell Units); the performance by the Lead Selling Agent of its obligations under this Agreement will not violate or result in a breach of any provision of its certificate of incorporation or by-laws or any agreement, order, law, or regulation binding upon it. (c) This Agreement has been duly and validly authorized, executed, and delivered on behalf of the Lead Selling Agent and is a valid and binding agreement of the Lead Selling Agent enforceable against the Lead Selling Agent in accordance with its terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability generally of rights of creditors except as enforceability of the indemnification provisions contained in this Agreement may be limited by applicable law and the enforcement of specific terms or remedies may be unavailable. 4. REPRESENTATIONS AND WARRANTIES OF THE ADDITIONAL SELLING AGENT The Additional Selling Agent hereby represents and warrants as follows: (a) The Additional Selling Agent is a _____________ duly organized, validly existing, and in good standing under the laws of the state of its incorporation and has power and authority to enter into and carry out its obligations under this Agreement. (b) The Additional Selling Agent has all governmental and regulatory registrations, qualifications, approvals and licenses required to perform its obligations under this Agreement (including, but not limited to, registration as a broker-dealer with the SEC, membership in such capacity in the NASD, registration as a futures commission merchant or introducing broker under the CEA and membership with NFA, and registration or qualification under the laws of each state in which Additional Selling Agent will offer and sell Units); the performance by the Additional Selling Agent of its obligations under this Agreement will not violate or result in a breach of any provision of its certificate of incorporation or by-laws or any agreement, order, law, or regulation binding upon it. (c) This Agreement has been duly and validly authorized, executed, and delivered on behalf of the Additional Selling Agent and is a valid and binding agreement of the Additional Selling Agent enforceable against the Additional Selling Agent in accordance with its terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability generally of rights of creditors except as enforceability of the indemnification provisions contained in this Agreement may be limited by applicable law and the enforcement of specific terms or remedies may be unavailable. (d) Neither the Additional Selling Agent nor any of its principals have been the subject of any administrative, civil, or criminal actions within the five years preceding the date hereof that 7 would be material for an investor's decision to purchase the Units which are not disclosed to the Trust, the Managing Owner or the Lead Selling Agent. (e) The information, if any, relating to the Additional Selling Agent which the Additional Selling Agent has furnished to the Trust and the Managing Owner for use in the Registration Statement is correct. 5. AUTHORIZATION UNDER THE SELLING AGREEMENT The Additional Selling Agent agrees to be bound by any action taken by the Lead Selling Agent or the Managing Owner, in accordance with the provisions of the Selling Agreement, to terminate the Selling Agreement or the offering of the Units, to consent to changes in the Selling Agreement or to approve of or object to further amendments to the Registration Statement or amendments or supplements to the Prospectus, if, in the judgment of the Lead Selling Agent or the Managing Owner, such action would be advisable. The Lead Selling Agent agrees that, at the Additional Selling Agent's request, the Lead Selling Agent will require any documents required to be delivered to or by the Lead Selling Agent pursuant to Section 8 of the Selling Agreement to be addressed and delivered to the Additional Selling Agent. 6. COVENANTS OF THE LEAD SELLING AGENT (a) The Lead Selling Agent will notify the Additional Selling Agent immediately (i) when any amendment to the Registration Statement shall have become effective and (ii) of the issuance by the SEC, CFTC or any other Federal or state regulatory body of any order suspending the effectiveness of the Registration Statement under the 1933 Act, the CFTC registration or NFA membership of the Managing Owner as a commodity pool operator, the CFTC registration or NFA membership of the Lead Selling Agent as a futures commission merchant, or the registration of Units under the Blue Sky or securities laws of any state or other jurisdiction or any order or decree enjoining the offering or the use of the then current Prospectus or of the institution, or notice of the intended institution, of any action or proceeding for that purpose. (b) The Lead Selling Agent will cause the Managing Owner to deliver to the Additional Selling Agent as promptly as practicable from time to time during the period when the Prospectus is required to be delivered under the 1933 Act, such number of copies of the Prospectus (as amended or supplemented) as the Additional Selling Agent may reasonably request for the purposes contemplated by the 1933 Act or the SEC Regulations. (c) The Lead Selling Agent will cause the Managing Owner to furnish to the Additional Selling Agent a reasonable number of copies of any amendment or amendments of, or supplement or supplements to, the Prospectus which will amend or supplement the Prospectus. 8 7. INDEMNIFICATION (a) The Lead Selling Agent shall indemnify, hold harmless, and defend the Additional Selling Agent and any person who controls the Additional Selling Agent within the meaning of Section 15 of the 1933 Act, to the same extent, and subject to the same conditions and procedural requirements, that the Managing Owner agrees to indemnify the Lead Selling Agent pursuant to Section 9 of the Selling Agreement. The Additional Selling Agent agrees that in no event shall the Trust, the Managing Owner or JWH be liable for any loss, liability, claim, damage or expense whatsoever suffered by the Additional Selling Agent in connection with the offering of Units or this Agreement. (b) The Additional Selling Agent shall indemnify, hold harmless, and defend the Trust, the Managing Owner, the Lead Selling Agent, JWH and any person who controls any of the foregoing within the meaning of Section 15 of the 1933 Act against any and all loss, liability, claim, damage and expense whatsoever incurred by any such party arising from any material breach by the Additional Selling Agent of its representations, warranties, obligations and undertakings set forth in this Agreement. The Trust, the Managing Owner and JWH are expressly made third party beneficiaries of this Agreement. 8. RELATIONSHIP OF SELLING AGENTS, WHOLESALERS AND THE LEAD SELLING AGENT The obligations of each of the Additional Selling Agents, Wholesalers, Correspondents and the Lead Selling Agent are several and not joint. Nothing herein contained shall constitute the Additional Selling Agents, Wholesalers and Correspondents, or any of them, and the Lead Selling Agent as an association, partnership, unincorporated business or other separate entity, but the Additional Selling Agent shall be liable for its proportionate share of any tax, liability or expense based on any claim to the contrary. The Lead Selling Agent shall be under no liability to the Additional Selling Agent except for lack of good faith and for obligations expressly assumed by the Lead Selling Agent in this Agreement. 9. TERMINATION (a) This Agreement shall terminate on the earlier of (i) such date as the Lead Selling Agent may determine by giving 30 days' prior written notice to the Additional Selling Agent, (ii) the termination of the Selling Agreement or the offering of the Units or (iii) by the Lead Selling Agent, without notice, upon breach by the Additional Selling Agent of, or non-compliance by the Additional Selling Agent with, any material term of this Agreement. (b) The termination of this Agreement for any reason set forth in Sections 9(a)(i) or 9(a)(ii) shall not affect (i) the ongoing obligations of the Lead Selling Agent to pay selling commissions, ongoing compensation or installment selling commissions accrued prior to the termination hereof, (ii) the Additional Selling Agent's obligations under the second sentence of Section 8 hereof or (iii) the indemnification obligations under Section 7 hereof. In the event 9 this Agreement is terminated pursuant to Section 9(a)(iii), the Lead Selling Agent may withhold accrued but unpaid selling commissions and ongoing compensation or installment selling commissions due the Additional Selling Agent until the Lead Selling Agent has been put in the same financial position as it would have been in absent such breach or non-compliance. 10. CONFIDENTIALITY (a) The Lead Selling Agent hereby covenants and agrees that under no circumstances will it solicit any of the Additional Selling Agent's customers whose names become known to the Lead Selling Agent in connection with the offering of the Units. The Lead Selling Agent agrees that it will take such steps to ensure the confidentiality of the Additional Selling Agent's client list as the Additional Selling Agent may reasonably request. (b) The Additional Selling Agent hereby covenants and agrees that under no circumstances will it solicit any customer of the Lead Selling Agent or any other Additional Selling Agent for the Trust whose name becomes known to the Additional Selling Agent in connection with the offering of the Units. The Additional Selling Agent agrees that it will take such steps to ensure the confidentiality of the Lead Selling Agent's or any other Additional Selling Agent's client list as the owner of such list may reasonably request. The Additional Selling Agent further covenants and agrees not to solicit any selling agent which has been introduced to the Lead Selling Agent by any Wholesaler or any other Additional Selling Agent. 11. MISCELLANEOUS (a) This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties hereto; provided, however, that a party hereto may not assign any rights, obligations, or liabilities hereunder without the prior written consent of the other parties. (b) All notices required or desired to be delivered under this Agreement shall be in writing and shall be effective when delivered personally on the day delivered or, when given by registered mail, postage prepaid, return receipt requested, on the day of receipt, addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof): if to the Lead Selling Agent: Cargill Investor Services, Inc. 233 South Wacker Drive, Suite 2300 Chicago, Illinois 60606 if to the Additional Selling Agent: ________________________ ________________________ ________________________ 10 (c) This Agreement shall be governed by, and construed in accordance with, the law of the State of Illinois without regard to the principles of choice of law thereof. (d) All captions used in this Agreement are for convenience only, are not a part hereof, and are not to be used in construing or interpreting any aspect hereof. (e) This Agreement may be executed in counterparts, each such counterpart to be deemed an original, but which all together shall constitute one and the same instrument. (f) This Agreement may not be amended except by the express written consent of the parties hereto. No waiver of any provision of this Agreement may be implied from any course of dealing between or among any of the parties hereto or from any failure by any party hereto to assert its rights under this Agreement on any occasion or series of occasions. (g) The provisions of this Agreement shall survive the termination of this Agreement with respect to any matter arising while this Agreement was in effect. 11 If the foregoing is in accordance with your understanding of our agreement, please sign and return a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement between us in accordance with its terms. Very truly yours, CARGILL INVESTOR SERVICES, INC. By: ------------------------------- Its -------------------------- CONFIRMED AND ACCEPTED [Additional Selling Agent] By: ------------------------------ Its --------------------------- 12 EXHIBIT B JWH GLOBAL PORTFOLIO TRUST (A DELAWARE BUSINESS TRUST) $50,000,000 OF UNITS OF BENEFICIAL INTEREST (SUBSCRIPTION PRICE: $100 PER UNIT DURING THE INITIAL OFFERING PERIOD; NET ASSET VALUE PER UNIT DURING THE ONGOING OFFERING PERIOD) WHOLESALING AGREEMENT _______ __, 1996 [Wholesaler] Dear Sirs: CIS Investments, Inc., a Delaware corporation (the "Managing Owner"), has caused the formation of a business trust pursuant to the Delaware Business Trust Act (the "Delaware Act") under the name, JWH GLOBAL PORTFOLIO TRUST (the "Trust"), for the purpose of engaging in speculative trading of futures and forward contracts and commodity options. As described in the Prospectus referred to below, the Trust will engage in speculative trading in the commodities markets under the direction of John W. Henry & Company, Inc. ("JWH"). The Trust proposes to make a public offering of units of beneficial interest in the Trust (the "Units") through us, Cargill Investor Services, Inc. (the "Lead Selling Agent"), on a best-efforts basis pursuant to the Selling Agreement dated as of ______ __, 1996 among us, the Trust and others (the "Selling Agreement"), a copy of which has been furnished to you. In connection with the proposed public offering, the Trust has filed with the United States Securities and Exchange Commission (the "SEC"), pursuant to the United States Securities Act of 1933, as amended (the "1933 Act"), a registration statement on Form S-1 to register the Units, and as part thereof a prospectus (Registration No. 33-____) (which registration statement, together with all amendments thereto, shall be referred to herein as the "Registration Statement" and which prospectus together with all amendments and supplements thereto in the forms filed with the SEC pursuant to Rule 424 under the Act shall be referred to herein as the "Prospectus"). Other selling agents, including those introduced by wholesalers ("Wholesalers") to us (the "Additional Selling Agents" and together with the Lead Selling Agent, the "Selling Agents"), may be selected by us with the consent of the Managing Owner. You have agreed to act as a wholesaler. We confirm our agreement with you as follows. Capitalized terms used but otherwise not defined herein shall have the meanings ascribed to them in the Selling Agreement unless the context indicates otherwise. 1. APPOINTMENT AND UNDERTAKINGS OF THE WHOLESALER (a) Subject to the terms and conditions set forth in this Agreement, the Selling Agreement and the Registration Statement, the Wholesaler is hereby appointed, and hereby accepts such appointment, as one of the Trust's non- exclusive wholesalers to identify and introduce to the Lead Selling Agent one or more Additional Selling Agents. It is understood and agreed that the Lead Selling Agent, with the consent of the Managing Owner, may retain other wholesalers and selling agents (including those introduced by the Wholesaler or other Wholesalers) and that the Additional Selling Agent or any other Additional Selling Agent, with the consent of the Lead Selling Agent and Managing Owner in their sole discretion, may retain correspondent selling agents ("Correspondents"). The Wholesaler agrees to comply with the terms and conditions of this Agreement and any terms and conditions of the Selling Agreement applicable to Wholesalers. (b) The Wholesaler agrees to use diligent efforts, so long as this Agreement and the Selling Agreement remain in effect, to identify and introduce to the Lead Selling Agent one or more Additional Selling Agents, each of which shall agree to offer and sell the Units on a best-efforts basis without any commitment on the Additional Selling Agent's part to purchase any Units pursuant to an Additional Selling Agent Agreement (the form of which is attached as Exhibit A to the Selling Agreement) with the Lead Selling Agent. (c) The Wholesaler covenants and agrees to wholesale Units through registered or exempt broker-dealers which are member of the National Association of Securities Dealers, Inc. ("NASD") and which have signed Additional Selling Agent Agreements with the Lead Selling Agent. The Wholesaler's wholesaling activities will consist primarily of providing sales literature and other information, all of which shall have been prepared or approved by the Trust and the Managing Owner, concerning the Trust to qualified broker-dealers and their principals and Registered Representatives who will be participating in the offering of Units and assisting such person in marketing Units and in providing additional services on an ongoing basis to Unitholders. The Wholesaler may participate in presentations to prospective investors, receive or handle any part of the purchase price paid for Units or effect any transactions in Units. (d) The Wholesaler shall offer and sell Units in compliance with the requirements set forth in the Registration Statement (particularly the "Subscription Requirements" attached as Exhibit B thereto), this Agreement and the Blue Sky Survey delivered to the Lead Selling Agent by the Managing Owner's counsel, a copy of which has been provided to the Wholesaler and each Additional Selling Agent introduced by the Wholesaler. An Wholesaler shall represent and warrant that it shall comply fully at all times with all applicable federal and state securities and commodities laws (including without limitation the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Commodity Exchange Act, as amended (the "CEA"), and the securities and Blue Sky laws of the jurisdictions in which the Wholesaler solicits subscriptions, all applicable rules and regulations under such laws, and all applicable requirements, rules, policy statements and interpretations of the NASD, and the securities and commodities exchanges and other governmental and self-regulatory authorities and organizations having jurisdiction over it or the offering of Units). The Wholesaler shall under no circumstances engage in any activities hereunder in any jurisdiction (i) in which the Managing Owner has not informed the Wholesaler that counsel's advice has been 2 received that the Units are qualified for sale or are exempt under the applicable securities or Blue Sky laws thereof or (ii) in which the Wholesaler may not lawfully engage. (e) The Wholesaler further covenants and agrees to comply with any terms and conditions of the Selling Agreement applicable to Additional Selling Agents and the provisions of Sections 2(f)(i) to (iii) hereof applicable to Additional Selling Agents. (f) The Wholesaler has received copies of the Registration Statement, as amended to the date hereof, and the Prospectus. The Wholesaler further acknowledges, and agrees to assist each Additional Selling introduced by it (references hereafter in this Agreement, except Sections 8 and 10, to Additional Selling Agent(s) shall mean only those Additional Selling Agent(s) introduced to the Lead Selling Agent by the Wholesaler) in compliance with, the following: (i) Units shall be offered at the offering price and minimum amounts and on the other terms and conditions set forth in the Prospectus and the Selling Agreement. The Additional Selling Agents shall offer and sell Units only to persons and entities who satisfy the suitability and/or investment requirements set forth in the Prospectus and the subscription agreements attached thereto and who, to the Managing Owner's satisfaction, complete the subscription agreements and related subscription documents used in connection with the offering of the Units (the "Subscription Documents") and remit good funds for the full subscription price. An Additional Selling Agent shall conduct a thorough review of the suitability of each subscriber for Units that it solicits and of the Subscription Documents. The Additional Selling Agent shall not forward to the Managing Owner any Subscription Documents that are not in conformity with the requirements specified in the Prospectus and in the Subscription Documents appropriate for the particular subscriber, or that are illegible in any respect or are not fully completed, dated, or signed, or that represents the subscription of a person or entity not satisfying the suitability and/or investment requirements applicable to such person or entity. No Additional Selling Agent shall execute any transactions in Units in a discretionary account over which it has control without prior written approval of the customer in whose name such discretionary account is maintained. An Additional Selling Agent shall not recommend the purchase of Units to any subscriber unless the Additional Selling Agent shall have reasonable grounds to believe, on the basis of information obtained from the subscriber concerning, among other things, the subscriber's investment objectives, other investments, financial situation and needs, that the subscriber is or will be in a financial position appropriate to enable the subscriber to realize to a significant extent the benefits of the Trust, including the tax benefits (if any) described in the Prospectus; the subscriber has a fair market net worth sufficient to sustain the risks inherent in participating in the Trust, including loss of investment and lack of liquidity; and the Units are otherwise a suitable investment for the subscriber. In addition to submitting such information to the Managing Owner, the Additional Selling Agent shall agree to maintain files of information disclosing the basis upon which the Additional Selling Agent determined that the suitability requirements of Section (b)(2) of Rule 2810 of the NASD (formerly Section 3 of Appendix F of the NASD's Rules of Fair Practice) were met as to each subscriber (the basis for determining suitability may include the Subscription Documents 3 and other certificates submitted by subscribers). In connection with making the foregoing representations and warranties, the Additional Selling Agent shall further represent and warrant that it has, among other things, examined the following sections in the Prospectus and obtained such additional information from the Managing Owner regarding the information set forth thereunder as the Additional Selling Agent has deemed necessary appropriate to determine whether the Prospectus adequately and accurately discloses all material facts relating to an investment in the Trust and provides an adequate basis to subscribers for evaluating an investment in the Units: "Summary" "Risk Factors" "Investment Factors" "The Trust and Its Objectives" "John W. Henry & Company, Inc." "The Managing Owner" "Fiduciary Obligations of the Managing Owner" "Use of Proceeds" "Charges" "Conflicts of Interest" "Redemptions; Net Asset Value" "The Trust and the Trustee" "Federal Income Tax Aspects" In connection with making the representations and warranties set forth in this paragraph, the Additional Selling Agent shall not rely on inquiries made by or on behalf of any other parties. The Additional Selling Agents shall inform all prospective purchasers of Units of all pertinent facts relating to the liquidity and marketability of the Units as set forth in the Prospectus. The Additional Selling Agent shall offer and sell Units in compliance with the requirements set forth in the Registration Statement (particularly the "Subscription Requirements" attached as Exhibit B thereto), this Agreement and the Blue Sky Survey delivered to the Lead Selling Agent by the Managing Owner's counsel, a copy of which has been provided to each Additional Selling Agent. An Additional Selling Agent shall represent and warrant that it shall comply fully at all times with all applicable federal and state securities and commodities laws (including without limitation the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Commodity Exchange Act, as amended (the "CEA"), and the securities and Blue Sky laws of the jurisdictions in which the Additional Selling Agent solicits subscriptions, all applicable rules and regulations under such laws, and all applicable requirements, rules, policy statements and interpretations of the NASD, and the securities and commodities exchanges and other governmental and self-regulatory authorities and organizations having jurisdiction over it or the offering of Units). The Additional Selling Agent shall under no circumstances engage in any activities hereunder in any jurisdiction (i) 4 in which the Managing Owner has not informed the Additional Selling Agent that counsel's advice has been received that the Units are qualified for sale or are exempt under the applicable securities or Blue Sky laws thereof or (ii) in which the Additional Selling Agent may not lawfully engage. Each Additional Selling Agent shall further agree to comply with the requirement under applicable federal and state securities laws to deliver to each offeree a Prospectus and any amendments or supplements thereto (including summary financial information, if available, after the Trust has commenced operations). Neither the Additional Selling Agent nor any of its employees, agents or representatives will use or distribute any marketing material or information other than that prepared by the Trust and the Managing Owner. (ii) The additional services that an Additional Selling Agent will provide on an ongoing basis to Unitholders at no charge will include but not be limited to: (i) inquiring of the Managing Owner from time to time, at the request of Unitholders, as to the Net Asset Value of a Unit, (ii) inquiring of the Managing Owner from time to time at the request of the Unitholders, as to the commodities markets and the activities of the Fund, (iii) assisting, at the request of the Managing Owner, in the redemption of Units sold by the Additional Selling Agent, (iv) responding to question of Unitholders from time to time with respect to monthly account statements, annual reports, financial statements, and annual tax information furnished to Unitholders, and (v) providing such other services to the owners of Units as the Managing Owner may, from time to time, reasonably request. All payments for subscriptions shall be made by transfer of funds to the escrow account of the Trust as described in the Prospectus. (f) The Wholesaler (i) acknowledges that, other than as set forth herein, it is not authorized to act as the agent of the Lead Selling Agent in any connection or transaction and (ii) agrees not to so act or to purport to so act. 2. COMPENSATION (a) In consideration for the Wholesaler performing the obligations under this Agreement, the Lead Selling Agent shall pay the Wholesaler a selling commission of __% of the subscription value of the Unit(s) sold by each Additional Selling Agent (it being understood that the Lead Selling Agent shall pay each Additional Selling Agent's share of selling commission, ongoing compensation or installment selling commissions directly to such Additional Selling Agent in accordance with the applicable Additional Selling Agent Agreement). The selling commission payable in respect of Units sold to any investor eligible to be charged a Special Brokerage Fee Rate as described in the Prospectus shall be reduced by the Wholesaler's proportionate share of the difference between the standard brokerage fee rate and the applicable Special Brokerage Fee Rate. Such commissions will be paid in respect of each subscription as promptly as practicable after the initial closing or each subsequent month-end closing. 5 (b) The Wholesaler shall receive ongoing compensation, payable monthly by the Lead Selling Agent, of __% (a __% annual rate) of the month-end Net Asset Value of the Units sold by a Registered Representative of an Additional Selling Agent which remain outstanding for more than twelve months (including the month as of the end of which such Unit is redeemed) assuming (i) the continued registration of the Wholesaler (or the firm with which the Wholesaler is associated) and the Additional Selling Agent with the Commodity Futures Trading Commission (the "CFTC") as futures commission merchants or introducing brokers and continued membership with the National Futures Association ("NFA") in such capacity and (i) the Wholesaler's and the Registered Representative's compliance with the additional requirements described in subsection 1(d), registration with the CFTC and compliance with all applicable proficiency requirements (including those imposed by the NASD as a condition of receiving "trailing commissions") by either passing the Series 3 National Commodity Futures Exam or the Series 31 exam or being "grandfathered" from having to do so. Such ongoing compensation shall begin to accrue with respect to each Unit only after the end of the twelfth full month after the sale of such Unit. Such ongoing compensation will be paid by the Lead Selling Agent from brokerage fees paid to it in its capacity as the Trust's futures broker by the Trust. Ongoing compensation payable in respect of Units sold to any investor eligible to be charged a Special Brokerage Fee Rate as described in the Prospectus shall be reduced by the wholesaler's proportionate share of the difference between the standard brokerage fee rate and the applicable Special Brokerage Fee Rate. For purposes of determining when ongoing compensation should begin to accrue, Units sold during the Initial Offering Period (as defined in the Prospectus) shall not be deemed to be sold until the initial closing time and Units sold during the Ongoing Offering Period (as defined in the Prospectus) shall not be deemed to be sold until the day Units are issued, and in either case not the day when subscriptions are accepted by the Managing Owner or subscriptions funds are deposited in escrow. Furthermore, the Lead Selling Agent shall not compensate the Wholesaler unless the Wholesaler is legally qualified and permitted to receive such compensation. Also, such ongoing compensation may be paid by the Lead Selling Agent to the Wholesaler only in respect of outstanding Units sold by an Additional Selling Agent or any of its Registered Representatives to Unitholders and only so long as the additional services described in Section 1(f)(ii) above are provided by the Wholesaler and such person to Unitholders. If the Wholesaler is not qualified to receive ongoing compensation as set forth above, the Lead Selling Agent will pay the Wholesaler installment selling commissions at the same rate as in the case of ongoing compensation, but the sum of such installment selling commissions and the initial selling commission paid to the Wholesaler and each Additional Selling Agent is limited in amount, pursuant to applicable NASD policy, to 9.5% of the initial subscription price of the Units sold by each Registered Representative of such Additional Selling Agent; provided, that no such installment selling commissions shall be payable until the Managing Owner and the Lead Selling Agent determine that the payment of such installment selling commission is in compliance with Rule 2810 of the NASD (formerly Appendix F of the NASD's Rules of Fair Practice) on aggregate compensation which may be received by the Selling Agents. [In respect of Units sold by its Registered Representatives who are eligible to receive ongoing compensation, each Additional Selling Agent shall receive the amount of ongoing compensation that is not paid to the Wholesaler because the Wholesaler is not eligible to 6 receive ongoing compensation but that would have been due on such Units to the Wholesaler in the absence of ineligibility.] The Wholesaler, although otherwise entitled to ongoing compensation, will not be entitled to receipt thereof (but may continue to receive installment selling commissions) for any month during any portion of which the Registered Representative of an Additional Selling Agent who is receiving such ongoing compensation is at any time not properly registered with the CFTC or does not provide the ongoing services described above. Ongoing compensation which cannot be paid because an Additional Selling Agent or its Correspondent (or a Registered Representative of either) has not met the eligibility requirements shall be retained by the Lead Selling Agent. The Wholesaler shall not, directly or indirectly, pay or award any finder's fees, commissions or other compensation to any person engaged by a potential investor for investment advice as an inducement to such advisor to advise the purchase of Units; provided, however, the normal sales commissions payable to a registered broker-dealer or other properly licensed person for selling Units shall not be prohibited hereby. (c) Notwithstanding any other provision of this Agreement to the contrary, the Managing Owner shall have sole discretion to accept or reject any subscription for the Units in whole or in part. (d) The Lead Selling Agent agrees to make all payments to the Wholesaler pursuant to this Section 2 within 15 days following the end of a monthly period in which compensation is earned. Notwithstanding anything above to the contrary, the Lead Selling Agent shall be liable to make ongoing compensation payments to the Wholesaler only after the Lead Selling Agent, in its capacity of futures broker for the Trust, has actually received its brokerage fee from the Trust. 3. REPRESENTATIONS AND WARRANTIES OF THE LEAD SELLING AGENT The Lead Selling Agent hereby represents and warrants as follows: (a) The Lead Selling Agent is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has power and authority to enter into and carry out its obligations under this Agreement. (b) The Lead Selling Agent has all governmental and regulatory registrations, qualifications, approvals and licenses required to perform its obligations under this Agreement (including, but not limited to, registration as a broker-dealer with the SEC, membership in such capacity in the NASD, and registration or qualification under the laws of each state in which Lead Selling Agent will offer and sell Units); the performance by the Lead Selling Agent of its obligations under this Agreement will not violate or result in a breach of any provision of its certificate of incorporation or by-laws or any agreement, order, law, or regulation binding upon it. 7 (c) This Agreement has been duly and validly authorized, executed, and delivered on behalf of the Lead Selling Agent and is a valid and binding agreement of the Lead Selling Agent enforceable against the Lead Selling Agent in accordance with its terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability generally of rights of creditors except as enforceability of the indemnification provisions contained in this Agreement may be limited by applicable law and the enforcement of specific terms or remedies may be unavailable. 4. REPRESENTATIONS AND WARRANTIES OF THE WHOLESALER The Wholesaler hereby represents and warrants as follows: (a) The Wholesaler is a ____________ duly organized, validly existing, and in good standing under the laws of the state of its incorporation and has power and authority to enter into and carry out its obligations under this Agreement. (b) The Wholesaler has all governmental and regulatory registrations, qualifications, approvals and licenses required to perform its obligations under this Agreement (including, but not limited to, registration as broker-dealer with the SEC, membership in such capacity in the NASD, and registration and qualification under the laws of each state in which the Wholesaler will offer and sell Units); the performance by the Wholesaler of its obligations under this Agreement will not violate or result in a breach of any provision of its certificate of incorporation or by-laws or any agreement, order, law, or regulation binding upon it. (c) This Agreement has been duly and validly authorized, executed, and delivered on behalf of the Wholesaler and is a valid and binding agreement of the Wholesaler enforceable against the Wholesaler in accordance with its terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability generally of rights of creditors except as enforceability of the indemnification provisions contained in this Agreement may be limited by applicable law and the enforcement of specific terms or remedies may be unavailable. (d) Neither the Wholesaler nor any of its principals have been the subject of any administrative, civil, or criminal actions within the five years preceding the date hereof that would be material for an investor's decision to purchase the Units which are not disclosed to the Trust, the Managing Owner or the Lead Selling Agent. (e) The information, if any, relating to the Wholesaler which it has furnished to the Trust and the Managing Owner for use in the Registration Statement is correct. 5. AUTHORIZATION UNDER THE SELLING AGREEMENT The Wholesaler agrees to be bound by any action taken by the Lead Selling Agent or the Managing Owner, in accordance with the provisions of the Selling Agreement, to terminate the Selling Agreement or the offering of the Units, to consent to changes in the Selling Agreement or to approve of or object to further amendments to the Registration Statement or amendments or 8 supplements to the Prospectus, if, in the judgment of the Lead Selling Agent or the Managing Owner, such action would be advisable. [The Lead Selling Agent agrees that, at the Wholesaler's request, the Lead Selling Agent will require any documents required to be delivered to or by the Lead Selling Agent pursuant to Section 8 of the Selling Agreement to be addressed and delivered to the Wholesaler.] 6. COVENANTS OF THE LEAD SELLING AGENT (a) The Lead Selling Agent will notify the Wholesaler immediately (i) when any amendment to the Registration Statement shall have become effective and (ii) of the issuance by the SEC, CFTC or any other Federal or state regulatory body of any order suspending the effectiveness of the Registration Statement under the 1933 Act, the CFTC registration or NFA membership of the Managing Owner as a commodity pool operator, the CFTC registration or NFA membership of the Lead Selling Agent as a futures commission merchant, or the registration of Units under the Blue Sky or securities laws of any state or other jurisdiction or any order or decree enjoining the offering or the use of the then current Prospectus or of the institution, or notice of the intended institution, of any action or proceeding for that purpose. (b) The Lead Selling Agent will cause the Managing Owner to deliver to the Wholesaler as promptly as practicable from time to time during the period when the Prospectus is required to be delivered under the 1933 Act, such number of copies of the Prospectus (as amended or supplemented) as the Wholesaler may reasonably request for the purposes contemplated by the 1933 Act or the SEC Regulations. (c) The Lead Selling Agent will cause the Managing Owner to furnish to the Wholesaler a reasonable number of copies of any amendment or amendments of, or supplement or supplements to, the Prospectus which will amend or supplement the Prospectus. 7. INDEMNIFICATION (a) The Lead Selling Agent shall indemnify, hold harmless, and defend the Wholesaler and any person who controls the Wholesaler within the meaning of Section 15 of the 1933 Act, to the same extent, and subject to the same conditions and procedural requirements, that the Managing Owner agrees to indemnify the Lead Selling Agent pursuant to Section 9 of the Selling Agreement. The Wholesaler agrees that in no event shall the Trust, the Managing Owner or JWH be liable for any loss, liability, claim, damage or expense whatsoever suffered by the Wholesaler in connection with the offering of Units or this Agreement. (b) The Wholesaler shall indemnify, hold harmless, and defend the Trust, the Managing Owner, the Lead Selling Agent, JWH and any person who controls any of the foregoing within the meaning of Section 15 of the 1933 Act against any and all loss, liability, claim, damage and expense whatsoever incurred by any such party arising from any material breach by the Wholesaler of its representations, warranties, obligations and undertakings set forth in this Agreement. The Trust, the Managing Owner and JWH are expressly made third party beneficiaries of this Agreement. 9 8. RELATIONSHIP OF WHOLESALERS, SELLING AGENTS AND THE LEAD SELLING AGENT The obligations of each of the Wholesalers, Additional Selling Agents, Correspondents and the Lead Selling Agent are several and not joint. Nothing herein contained shall constitute the Wholesalers, Additional Selling Agents and Correspondents, or any of them, and the Lead Selling Agent as an association, partnership, unincorporated business or other separate entity, but the Wholesaler shall be liable for its proportionate share of any tax, liability or expense based on any claim to the contrary. The Lead Selling Agent shall be under no liability to the Wholesaler except for lack of good faith and for obligations expressly assumed by the Lead Selling Agent in this Agreement. 9. TERMINATION (a) This Agreement shall terminate on the earlier of (i) such date as the Lead Selling Agent may determine by giving 30 days' prior written notice to the Wholesaler, (ii) the termination of the Selling Agreement or the offering of the Units or (iii) by the Lead Selling Agent, without notice, upon breach by the Wholesaler of, or non-compliance by the Wholesaler with, any material term of this Agreement. (b) The termination of this Agreement for any reason set forth in Sections 9(a)(i) or 9(a)(ii) shall not affect (i) the ongoing obligations of the Lead Selling Agent to pay selling commissions, ongoing compensation or installment selling commissions accrued prior to the termination hereof, (ii) the Wholesaler's obligations under the second sentence of Section 8 hereof or (iii) the indemnification obligations under Section 7 hereof. In the event this Agreement is terminated pursuant to Section 9(a)(iii), the Lead Selling Agent may withhold accrued but unpaid selling commissions and ongoing compensation or installment selling commissions due the Wholesaler until the Lead Selling Agent has been put in the same financial position as it would have been in absent such breach or non-compliance. 10. CONFIDENTIALITY (a) The Lead Selling Agent hereby covenants and agrees that under no circumstances will it solicit any of the Wholesaler's customers whose names become known to the Lead Selling Agent in connection with the offering of the Units. The Lead Selling Agent agrees that it will take such steps to ensure the confidentiality of the Wholesaler's client list as the Wholesaler may reasonably request. (b) The Wholesaler hereby covenants and agrees that under no circumstances will it solicit any customer of the Lead Selling Agent, any other Wholesaler or any Additional Selling Agent for the Trust whose name becomes known to the Wholesaler in connection with the offering of the Units. The Wholesaler agrees that it will take such steps to ensure the confidentiality of the Lead Selling Agent's, any other Wholesaler's or any Additional Selling Agent's client list as the owner of such list may reasonably request. The Wholesaler further covenants and agrees not to solicit any selling agent which has been introduced to the Lead Selling Agent by any other Wholesaler or any Additional Selling Agent. 10 11. MISCELLANEOUS (a) This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties hereto; provided, however, that a party hereto may not assign any rights, obligations, or liabilities hereunder without the prior written consent of the other parties. (b) All notices required or desired to be delivered under this Agreement shall be in writing and shall be effective when delivered personally on the day delivered or, when given by registered mail, postage prepaid, return receipt requested, on the day of receipt, addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof): if to the Lead Selling Agent: Cargill Investor Services, Inc. 233 South Wacker Drive, Suite 2300 Chicago, Illinois 60606 if to the Wholesaler: ________________________ ________________________ ________________________ (c) This Agreement shall be governed by, and construed in accordance with, the law of the State of Illinois without regard to the principles of choice of law thereof. (d) All captions used in this Agreement are for convenience only, are not a part hereof, and are not to be used in construing or interpreting any aspect hereof. (e) This Agreement may be executed in counterparts, each such counterpart to be deemed an original, but which all together shall constitute one and the same instrument. (f) This Agreement may not be amended except by the express written consent of the parties hereto. No waiver of any provision of this Agreement may be implied from any course of dealing between or among any of the parties hereto or from any failure by any party hereto to assert its rights under this Agreement on any occasion or series of occasions. (g) The provisions of this Agreement shall survive the termination of this Agreement with respect to any matter arising while this Agreement was in effect. 11 If the foregoing is in accordance with your understanding of our agreement, please sign and return a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement between us in accordance with its terms. Very truly yours, CARGILL INVESTOR SERVICES, INC. By: ------------------------------- Its -------------------------- CONFIRMED AND ACCEPTED [Wholesaler] By: ------------------------------ Its --------------------------- 12 EXHIBIT C JWH GLOBAL PORTFOLIO TRUST (A DELAWARE BUSINESS TRUST) $50,000,000 OF UNITS OF BENEFICIAL INTEREST (SUBSCRIPTION PRICE: $100 PER UNIT DURING THE INITIAL OFFERING PERIOD; NET ASSET VALUE PER UNIT DURING THE ONGOING OFFERING PERIOD) CORRESPONDENT SELLING AGENT AGREEMENT _______ __, 1996 [Correspondent Selling Agent] Dear Sirs: CIS Investments, Inc., a Delaware corporation (the "Managing Owner"), has caused the formation of a business trust pursuant to the Delaware Business Trust Act (the "Delaware Act") under the name, JWH GLOBAL PORTFOLIO TRUST (the "Trust"), for the purpose of engaging in trading commodity futures contracts and other commodity interests. As described in the Prospectus referred to below, the Trust will engage in speculative trading in the commodities markets under the direction of John W. Henry & Company, Inc. ("JWH"). The Trust proposes to make a public offering of units of beneficial interest in the Trust (the "Units") through Cargill Investor Services, Inc. (the "Lead Selling Agent") on a best-efforts basis pursuant to the Selling Agreement dated as of _______ __, 1996 among the Lead Selling Agent, the Trust and others (the "Selling Agreement"), a coy of which has been furnished to you. In connection with the proposed public offering, the Trust has filed with the United States Securities and Exchange Commission (the "SEC"), pursuant to the United States Securities Act of 1933, as amended (the "1933 Act"), a registration statement on Form S-1 to register the Units, and as part thereof a prospectus (Registration No. 33- ____) (which registration statement, together with all amendments thereto, shall be referred to herein as the "Registration Statement" and which prospectus together with all amendments and supplements thereto in the forms filed with the SEC pursuant to Rule 424 under the Act shall be referred to herein as the "Prospectus"). The Lead Selling Agent has, with the consent of the Managing Owner, selected _______________ as an Additional Selling Agent. Other selling agents (each a "Correspondent Selling Agent") may be selected by the Additional Selling Agent, with the consent of the Managing Owner and the Lead Selling Agent. You have been so selected by the Additional Selling Agent. We understand that you are willing to use your best efforts to market the Units. We confirm our agreement with your as follows. Capitalized terms used but otherwise not defined herein shall have the meaning ascribed to them in the Selling Agreement unless the context indicates otherwise. 1. APPOINTMENT AND UNDERTAKINGS OF THE CORRESPONDENT SELLING AGENT (a) Subject to the terms and conditions set forth in this Agreement, the Selling Agreement and the Registration Statement, the Correspondent Selling Agent is hereby appointed, and hereby accepts such appointment, as one of the Trust's non-exclusive selling agents to offer and sell the Units on a best- efforts basis without any commitment on the Correspondent Selling Agent's part to purchase any Units. It is understood and agreed that the Lead Selling Agent, with the consent of the Managing Owner, may retain other selling agents and that the Additional Selling Agent, with the consent of the Lead Selling Agent and Managing Owner in their sole discretion, may retain other selling agents. The Correspondent Selling Agent agrees to comply with the terms and conditions of this Agreement and any terms and conditions of the Selling Agreement applicable to selling agents. (b) The Correspondent Selling Agent agrees to use its best efforts to procure subscriptions for the Units as long as this Agreement and the Selling Agreement remain in effect. The Correspondent Selling Agent agrees to make the offering of Units at the offering price and minimum amounts and on the other terms and conditions set forth in the Prospectus and the Selling Agreement. (c) The Correspondent Selling Agent shall offer and sell Units only to persons and entities who satisfy the suitability and/or investment requirements set forth in the Prospectus and the subscription agreements attached thereto and who, to the Managing Owner's satisfaction, complete the subscription agreements and related subscription documents used in connection with the offering of the Units (the "Subscription Documents") and remit good funds for the full subscription price. The Correspondent Selling Agent shall conduct a thorough review of the suitability of each subscriber for Units that it solicits and of the Subscription Documents. The Correspondent Selling Agent shall not forward to the Managing Owner any Subscription Documents that are not in conformity with the requirements specified in the Prospectus and in the Subscription Documents appropriate for the particular subscriber, or that is illegible in any respect or is not fully completed, dated, or signed, or that represents the subscription of a person or entity not satisfying the suitability and/or investment requirements applicable to such person or entity. The Correspondent Selling Agent shall not execute any transactions in Units in a discretionary account over which it has control without prior written approval of the customer in whose name such discretionary account is maintained. The Correspondent Selling Agent agrees not to recommend the purchase of Units to any subscriber unless the Correspondent Selling Agent shall have reasonable grounds to believe, on the basis of information obtained from the subscriber concerning, among other things, the subscriber's investment objectives, other investments, financial situation and needs, that the subscriber is or will be in a financial position appropriate to enable the subscriber to realize to a significant extent the benefits of the Trust, including the tax benefits (if any) described in the 2 Prospectus; the subscriber has a fair market net worth sufficient to sustain the risks inherent in participating in the Trust, including loss of investment and lack of liquidity; and the Units are otherwise a suitable investment for the subscriber. In addition to submitting such information to the Managing Owner, the Correspondent Selling Agent agrees to maintain files of information disclosing the basis upon which the Correspondent Selling Agent determined that the suitability requirements of Section (b)(2) of Rule 2810 of the National Association of Securities Dealers, Inc. ("NASD") were met as to each subscriber (the basis for determining suitability may include the Subscription Documents and other certificates submitted by subscribers). In connection with making the foregoing representations and warranties, the Correspondent Selling Agent further represents and warrants that it has received copies of the Registration Statement, as amended to the date hereof, and the Prospectus and has, among other things, examined the following sections in the Prospectus and obtained such additional information from the Managing Owner regarding the information set forth thereunder as the Correspondent Selling Agent has deemed necessary appropriate to determine whether the Prospectus adequately and accurately discloses all material facts relating to an investment in the Trust and provides an adequate basis to subscribers for evaluating an investment in the Units: "Summary" "Risk Factors" "Investment Factors" "The Trust and Its Objectives" "John W. Henry & Company, Inc." "The Managing Owner" "Fiduciary Obligations of the Managing Owner" "Use of Proceeds" "Charges" "Conflicts of Interest" "Redemptions; Net Asset Value" "The Trust and the Trustee" "Federal Income Tax Aspects" In connection with making the representations and warranties set forth in this paragraph, the Correspondent Selling Agent has not relied on inquiries made by or on behalf of any other parties. The Correspondent Selling Agent agrees to inform all prospective purchasers of Units of all pertinent facts relating to the liquidity and marketability of the Units as set forth in the Prospectus. The Correspondent Selling Agent shall offer and sell Units in compliance with the requirements set forth in the Registration Statement and Prospectus (particularly the "Subscription Requirements" attached as Exhibit B thereto), this Agreement and the Blue Sky Survey delivered to the Lead Selling Agent by the Managing Owner's counsel, a copy of which has been provided to the Correspondent Selling Agent. The Correspondent Selling Agent represents and warrants that it shall comply fully at all times with all applicable federal and state securities and commodities laws (including without limitation the 1933 Act, the Securities Exchange Act of 3 1934, as amended (the "1934 Act"), the Commodity Exchange Act, as amended (the "CEA"), and the securities and Blue Sky laws of the jurisdictions in which the Correspondent Selling Agent solicits subscriptions, all applicable rules and regulations under such laws, and all applicable requirements, rules, policy statements and interpretations of the NASD, and the securities and commodities exchanges and other governmental and self-regulatory authorities and organizations having jurisdiction over it or the offering of Units). The Correspondent Selling Agent shall under no circumstances engage in any activities hereunder in any jurisdiction (i) in which the Managing Owner has not informed the Correspondent Selling Agent that counsel's advice has been received that the Units are qualified for sale or are exempt under the applicable securities or Blue Sky laws thereof or (ii) in which the Correspondent Selling Agent may not lawfully engage. The Correspondent Selling Agent further agrees to comply with the requirement under applicable federal and state securities laws to deliver to each offeree a Prospectus and any amendments or supplements thereto (including summary financial information, if available, after the Trust has commenced operations). Neither the Correspondent Selling Agent nor any of its employees, agents or representatives will use or distribute any marketing material or information other than that prepared by the Trust and the Managing Owner. (d) The additional services that the Correspondent Selling Agent will provide on an ongoing basis to Unitholders at no charge will include but not be limited to: (i) inquiring of the Managing Owner from time to time, at the request of Unitholders, as to the Net Asset Value of a Unit, (ii) inquiring of the Managing Owner from time to time at the request of the Unitholders, as to the commodities markets and the activities of the Fund, (iii) assisting, at the request of the Managing Owner, in the redemption of Units sold by the Correspondent Selling Agent, (iv) responding to question of Unitholders from time to time with respect to monthly account statements, annual reports, financial statements, and annual tax information furnished to Unitholders, and (v) providing such other services to the owners of Units as the Managing Owner may, from time to time, reasonably request. All payments for subscriptions shall be made by transfer of funds to the escrow account of the Trust as described in the Prospectus. (e) The Correspondent Selling Agent (i) acknowledges that, other than as set forth herein, it is not authorized to act as the agent of the Lead Selling Agent or the Additional Selling Agent in any connection or transaction and (ii) agrees not to so act or to purport to so act. 2. COMPENSATION (a) The Lead Selling Agent agrees to pay to the Additional Selling Agent a selling commission of up to 4% of the subscription value of the Unit(s) sold by the Correspondent Selling Agent. Such commissions will be paid in respect of each subscription as promptly as practicable after the initial closing or each subsequent month-end closing. The Additional Selling Agent agrees that it will pass on promptly to the Correspondent Selling Agent __% of the 4% initial selling commission received by the Additional Selling Agent from the Lead Selling Agent. The selling commission payable in respect of Units sold to any investor eligible to be charged a Special 4 Brokerage Fee Rate as described in the Registration Statement and Prospectus shall be reduced by the difference between the standard brokerage fee rate and the applicable Special Brokerage Fee Rate and the Additional Selling Agent's and Correspondent Selling Agent's respective shares of the selling commission on such Units accordingly shall be reduced proportionately. (b) The Additional Selling Agent shall receive ongoing compensation, payable monthly by the Lead Selling Agent, of up to 1/3 of 1% (a 4% annual rate) of the month-end Net Asset Value of the Units sold by a Registered Representative of the Correspondent Selling Agent which remain outstanding for more than twelve months (including the month as of the end of which such Unit is redeemed) assuming (i) the Additional Selling Agent's and Correspondent Selling Agent's continued registration with the Commodity Futures Trading Commission (the "CFTC") as a futures commission merchant or introducing broker and continued membership with the National Futures Association ("NFA") in such capacity and (i) the Registered Representative's compliance with the additional requirements described in subsection 1(d), registration with the CFTC and compliance with all applicable proficiency requirements (including those imposed by the NASD as a condition of receiving "trailing commissions") by either passing the Series 3 National Commodity Futures Exam or the Series 31 exam or being "grandfathered" from having to do so. The Additional Selling Agent agrees that it will pass on promptly to the Correspondent Selling Agent __% of the initial 1/3 of 4% ongoing compensation received by the Additional Selling Agent from the Lead Selling Agent. Such ongoing compensation shall begin to accrue with respect to each Unit only after the end of the twelfth full month after the sale of such Unit. Such ongoing compensation will be paid by the Lead Selling Agent from brokerage fees paid to it in its capacity as the Trust's futures broker by the Trust. Ongoing compensation payable in respect of Units sold to any investor eligible to be charged a Special Brokerage Fee Rate as described in the Registration Statement and Prospectus shall be reduced by the difference between the standard brokerage fee rate and the applicable Special Brokerage Fee Rate and the Additional Selling Agent's and Correspondent Selling Agent's respective shares of ongoing compensation on such Units accordingly shall be reduced proportionately. [In the event the Additional Selling Agent is not eligible to receive ongoing compensation, the Correspondent Selling Agent shall receive the amount that would have been due to the Additional Selling Agent in the absence of ineligibility and the Additional Selling Agent agrees to promptly pass on such amount to the Correspondent Selling Agent.] For purposes of determining when ongoing compensation should begin to accrue, Units sold during the Initial Offering Period (as defined in the Registration Statement and Prospectus) shall not be deemed to be sold until the initial closing time and Units sold during the Ongoing Offering Period (as defined in the Registration Statement and Prospectus) shall not be deemed to be sold until the day Units are issued, and in either case not the day when subscriptions are accepted by the Managing Owner or subscriptions funds are deposited in escrow. Furthermore, the Additional Selling Agent shall not compensate the Correspondent Selling Agent, and the Correspondent Selling Agent shall not compensate its employees or other persons, unless the recipient thereof is legally qualified and permitted to receive such compensation. Also, such ongoing compensation may be paid by the Additional Selling Agent to the Correspondent Selling Agent and by the Correspondent Selling Agent to its employees or other persons, only in 5 respect of outstanding Units sold by such persons to Unitholders and only so long as the additional services described in Section 1(d) above are provided by such person to Unitholders. In case of Units sold by Registered Representatives who are not qualified to receive ongoing compensation as set forth above, the Additional Selling Agent will pay each such Registered Representative installment selling commissions at the same rate as in the case of ongoing compensation, but the sum of such installment selling commissions and the initial selling commission paid to the Additional Selling Agent and the Correspondent is limited in amount, pursuant to applicable NASD policy, to 9.5% of the initial subscription price of the Units sold by such Registered Representative; provided, that no such installment selling commissions shall be payable until the Managing Owner and the Lead Selling Agent determine that the payment of such installment selling commission is in compliance with Rule 2810 of the NASD (formerly Appendix F of NASD's Rules of Fair Practice) on aggregate compensation which may be received by the selling agents. The Correspondent Selling Agent agrees that it will promptly pass on to its Registered Representatives the applicable portions of the selling commission and ongoing compensation or installment selling commissions received from the Additional Selling Agent to which such Registered Representatives are entitled pursuant to the Correspondent Selling Agent's standard compensation procedures. The Correspondent Selling Agent, although otherwise entitled to ongoing compensation, will not be entitled to receipt thereof (but may continue to receive installment selling commissions) for any month during any portion of which the Registered Representative who is receiving such ongoing compensation is at any time not properly registered with the CFTC or does not provide the ongoing services described above. Ongoing compensation which cannot be paid because the Correspondent Selling Agent or its Registered Representative has not met the eligibility requirements shall be retained by the Lead Selling Agent. The Correspondent Selling Agent shall not, directly or indirectly, pay or award any finder's fees, commissions or other compensation to any person engaged by a potential investor for investment advice as an inducement to such advisor to advise the purchase of Units; provided, however, the normal sales commissions payable to a registered broker-dealer or other properly licensed person for selling Units shall not be prohibited hereby. (c) Notwithstanding any other provision of this Agreement to the contrary, the Managing Owner shall have sole discretion to accept or reject any subscription for the Units in whole or in part. (d) The Additional Selling Agent agrees to make all payments to the Correspondent Selling Agent pursuant to this Section 2 within __ days following the receipt of payment of selling 6 commission, ongoing compensation and installment selling commissions from the Lead Selling Agent. 3. REPRESENTATIONS AND WARRANTIES OF THE LEAD SELLING AGENT The Lead Selling Agent hereby represents and warrants as follows: (a) The Lead Selling Agent is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has power and authority to enter into and carry out its obligations under this Agreement. (b) The Lead Selling Agent has all governmental and regulatory registrations, qualifications, approvals and licenses required to perform its obligations under this Agreement (including, but not limited to, registration as a broker-dealer with the SEC, membership in such capacity in the NASD, and registration or qualification under the laws of each state in which Lead Selling Agent will offer and sell Units); the performance by the Lead Selling Agent of its obligations under this Agreement will not violate or result in a breach of any provision of its certificate of incorporation or by-laws or any agreement, order, law, or regulation binding upon it. (c) This Agreement has been duly and validly authorized, executed, and delivered on behalf of the Lead Selling Agent and is a valid and binding agreement of the Lead Selling Agent enforceable against the Lead Selling Agent in accordance with its terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability generally of rights of creditors except as enforceability of the indemnification provisions contained in this Agreement may be limited by applicable law and the enforcement of specific terms or remedies may be unavailable. 4. REPRESENTATIONS AND WARRANTIES OF THE ADDITIONAL SELLING AGENT The Additional Selling Agent hereby represents and warrants as follows: (a) The Additional Selling Agent is a ______________ duly organized, validly existing, and in good standing under the laws of its state of organization and has power and authority to enter into and carry out its obligations under this Agreement. (b) The Additional Selling Agent has all governmental and regulatory registrations, qualifications, approvals and licenses required to perform its obligations under this Agreement (including, but not limited to, registration as a broker-dealer with the SEC, membership in such capacity in the NASD, and registration or qualification under the laws of each state in which Additional Selling Agent will offer and sell Units); the performance by the Additional Selling Agent of its obligations under this Agreement will not violate or result in a breach of any provision of its certificate of incorporation or by-laws or any agreement, order, law, or regulation binding upon it. 7 (c) This Agreement has been duly and validly authorized, executed, and delivered on behalf of the Additional Selling Agent and is a valid and binding agreement of the Additional Selling Agent enforceable against the Additional Selling Agent in accordance with its terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability generally of rights of creditors except as enforceability of the indemnification provisions contained in this Agreement may be limited by applicable law and the enforcement of specific terms or remedies may be unavailable. 5. REPRESENTATIONS AND WARRANTIES OF THE CORRESPONDENT SELLING AGENT The Correspondent Selling Agent hereby represents and warrants as follows: (a) The Correspondent Selling Agent is a __________ duly organized, validly existing, and in good standing under the laws of the state of its organization and has power and authority to enter into and carry out its obligations under this Agreement. (b) The Correspondent Selling Agent has all governmental and regulatory registrations, qualifications, approvals and licenses required to perform its obligations under this Agreement (including, but not limited to, registration as a broker-dealer with the SEC, membership in such capacity in the NASD, registration as a futures commission merchant or introducing broker under the CEA and membership with NFA, and registration or qualification under the laws of each state in which Correspondent Selling Agent will offer and sell Units); the performance by the Correspondent Selling Agent of its obligations under this Agreement will not violate or result in a breach of any provision of its certificate of incorporation or by-laws or any agreement, order, law, or regulation binding upon it. (c) This Agreement has been duly and validly authorized, executed, and delivered on behalf of the Correspondent Selling Agent and is a valid and binding agreement of the Correspondent Selling Agent enforceable against the Correspondent Selling Agent in accordance with its terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws at the time in effect affecting the enforceability generally of rights of creditors except as enforceability of the indemnification provisions contained in this Agreement may be limited by applicable law and the enforcement of specific terms or remedies may be unavailable. (d) Neither the Correspondent Selling Agent nor any of its principals have been the subject of any administrative, civil, or criminal actions within the five years preceding the date hereof that would be material for an investor's decision to purchase the Units which are not disclosed to the Trust, the Managing Owner, the Lead Selling Agent and the Additional Selling Agent. (e) The information, if any, relating to the Correspondent Selling Agent which the Correspondent Selling Agent has furnished to the Trust and the Managing Owner for use in the Registration Statement is correct. 8 6. AUTHORIZATION UNDER THE SELLING AGREEMENT The Correspondent Selling Agent agrees to be bound by any action taken by the Lead Selling Agent or the Managing Owner, in accordance with the provisions of the Selling Agreement, to terminate the Selling Agreement or the offering of the Units, to consent to changes in the Selling Agreement or to approve of or object to further amendments to the Registration Statement or amendments or supplements to the Prospectus, if, in the judgment of the Lead Selling Agent or the Managing Owner, such action would be advisable. [The Lead Selling Agent agrees that, at the Correspondent Selling Agent's request, the Lead Selling Agent will require any documents required to be delivered to or by the Lead Selling Agent pursuant to Section 8 of the Selling Agreement to be addressed and delivered to the Correspondent Selling Agent.] 7 COVENANTS OF THE ADDITIONAL SELLING AGENT (a) The Additional Selling Agent will notify the Correspondent Selling Agent immediately (i) when any amendment to the Registration Statement shall have become effective and (ii) of the issuance by the SEC, CFTC or any other Federal or state regulatory body of any order suspending the effectiveness of the Registration Statement under the 1933 Act, the CFTC registration or NFA membership of the Managing Owner as a commodity pool operator, the CFTC registration or NFA membership of the Lead Selling Agent as a futures commission merchant, or the registration of Units under the Blue Sky or securities laws of any state or other jurisdiction or any order or decree enjoining the offering or the use of the then current Prospectus or of the institution, or notice of the intended institution, of any action or proceeding for that purpose. (b) The Additional Selling Agent will deliver to the Correspondent Selling Agent as promptly as practicable from time to time during the period when the Prospectus is required to be delivered under the 1933 Act, such number of copies of the Prospectus (as amended or supplemented) as the Correspondent Selling Agent may reasonably request for the purposes contemplated by the 1933 Act or the SEC Regulations. (c) The Additional Selling Agent will furnish to the Correspondent Selling Agent a reasonable number of copies of any amendment or amendments of, or supplement or supplements to, the Prospectus which will amend or supplement the Prospectus. 8. INDEMNIFICATION (a) The Lead Selling Agent shall indemnify, hold harmless, and defend the Correspondent Selling Agent and any person who controls the Correspondent Selling Agent within the meaning of Section 15 of the 1933 Act, to the same extent, and subject to the same conditions and procedural requirements, that the Managing Owner agrees to indemnify the Lead Selling Agent pursuant to Section 9 of the Selling Agreement. The Correspondent Selling Agent agrees that in no event shall the Trust, the Managing Owner or JWH be liable for any loss, liability, claim, damage or expense whatsoever suffered by the Correspondent Selling Agent in connection with the offering of Units or this Agreement. 9 (b) The Additional Selling Agent shall indemnify, hold harmless, and defend the Correspondent Selling Agent and any person who controls the Correspondent Selling Agent within the meaning of Section 15 of the 1933 Act against any and all loss, liability, claim, damage and expense whatsoever incurred by any such party arising from any material breach by the Additional Selling Agent of its representations, warranties, obligations and undertakings set forth in this Agreement. (c) The Correspondent Selling Agent shall indemnify, hold harmless, and defend the Trust, the Managing Owner, the Lead Selling Agent, JWH, the Additional Selling Agent and any person who controls any of the foregoing within the meaning of Section 15 of the 1933 Act against any and all loss, liability, claim, damage and expense whatsoever incurred by any such party arising from any material breach by the Correspondent Selling Agent of its representations, warranties, obligations and undertakings set forth in this Agreement. The Trust, the Managing Owner and JWH are expressly made third party beneficiaries of this Agreement. 9. RELATIONSHIP OF SELLING AGENTS, WHOLESALERS AND THE LEAD SELLING AGENT The obligations of each of the Additional Selling Agents, Wholesalers, Correspondents and the Lead Selling Agent are several and not joint. Nothing herein contained shall constitute the Additional Selling Agents, Wholesalers and Correspondents, or any of them, and the Lead Selling Agent as an association, partnership, unincorporated business or other separate entity, but the Additional Selling Agent shall be liable for its proportionate share of any tax, liability or expense based on any claim to the contrary. The Lead Selling Agent shall be under no liability to the Correspondent Selling Agent except for lack of good faith and for obligations expressly assumed by the Lead Selling Agent in this Agreement. 10. TERMINATION (a) This Agreement shall terminate on the earlier of (i) such date as the Lead Selling Agent may determine by giving 30 days' prior written notice to the other parties, (ii) such date as the Additional Selling Agent may determine by giving 30 days' prior written notice to the other parties, (iii) the termination of the Selling Agreement or the offering of the Units or (iv) by the Lead Selling Agent, without notice, upon breach by the Correspondent Selling Agent of, or non-compliance by the Correspondent Selling Agent with, any material term of this Agreement. (b) The termination of this Agreement for any reason set forth in Sections 10(a)(i), 10(a)(ii) or 10(a)(iii) shall not affect (i) the ongoing obligations of the Lead Selling Agent to pay selling commissions, ongoing compensation or installment selling commissions accrued prior to the termination hereof, (ii) the Additional Selling Agent's obligations under the second sentence of Section 9 hereof or (iii) the indemnification obligations under Section 7 hereof. In the event this Agreement is terminated pursuant to Section 10(a)(iv), the Lead Selling Agent may withhold accrued but unpaid selling commissions and ongoing compensation or installment selling commissions due the Correspondent Selling Agent until the Lead Selling Agent has been put in the same financial position as it would have been in absent such breach or non-compliance. 10 11. CONFIDENTIALITY (a) The Lead Selling Agent hereby covenants and agrees that under no circumstances will it solicit any of the Correspondent Selling Agent's customers whose names become known to the Lead Selling Agent in connection with the offering of the Units. The Lead Selling Agent agrees that it will take such steps to ensure the confidentiality of the Correspondent Selling Agent's client list as the Correspondent Selling Agent may reasonably request. (b) The Additional Selling Agent hereby covenants and agrees that under no circumstances will it solicit any of the Correspondent Selling Agent's customers whose names become known to the Additional Selling Agent in connection with the offering of the Units. The Additional Selling Agent agrees that it will take such steps to ensure the confidentiality of the Correspondent Selling Agent's client list as the Correspondent Selling Agent may reasonably request. (b) The Correspondent Selling Agent hereby covenants and agrees that under no circumstances will it solicit any customer of the Lead Selling Agent or any other selling agent for the Trust whose name becomes known to the Correspondent Selling Agent in connection with the offering of the Units. The Correspondent Selling Agent agrees that it will take such steps to ensure the confidentiality of the Lead Selling Agent's or any other selling agent's client list as the owner of such list may reasonably request. The Correspondent Selling Agent further covenants and agrees not to solicit any selling agent which has been introduced to the Lead Selling Agent by any wholesaler or any other selling agent. 12. MISCELLANEOUS (a) This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties hereto; provided, however, that a party hereto may not assign any rights, obligations, or liabilities hereunder without the prior written consent of the other parties. (b) All notices required or desired to be delivered under this Agreement shall be in writing and shall be effective when delivered personally on the day delivered or, when given by registered mail, postage prepaid, return receipt requested, on the day of receipt, addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof): if to the Lead Selling Agent: Cargill Investor Services, Inc. 233 South Wacker Drive, Suite 2300 Chicago, Illinois 60606 11 if to the Additional Selling Agent: ________________________ ________________________ ________________________ if to the Correspondent Selling Agent: ________________________ ________________________ ________________________ (c) This Agreement shall be governed by, and construed in accordance with, the law of the State of Illinois without regard to the principles of choice of law thereof. (d) All captions used in this Agreement are for convenience only, are not a part hereof, and are not to be used in construing or interpreting any aspect hereof. (e) This Agreement may be executed in counterparts, each such counterpart to be deemed an original, but which all together shall constitute one and the same instrument. (f) This Agreement may not be amended except by the express written consent of the parties hereto. No waiver of any provision of this Agreement may be implied from any course of dealing between or among any of the parties hereto or from any failure by any party hereto to assert its rights under this Agreement on any occasion or series of occasions. (g) The provisions of this Agreement shall survive the termination of this Agreement with respect to any matter arising while this Agreement was in effect. 12 If the foregoing is in accordance with your understanding of our agreement, please sign and return a counterpart hereof to the Lead Selling Agent, whereupon this instrument along with all counterparts will become a binding agreement among them in accordance with its terms. Very truly yours, CARGILL INVESTOR SERVICES, INC. By: -------------------------------- Its --------------------------- [Additional Selling Agent] By: -------------------------------- Its --------------------------- CONFIRMED AND ACCEPTED [Correspondent Selling Agent] By: ------------------------------ Its --------------------------- 13 EX-3.01 3 CERTIFICATE OF TRUST EXHIBIT 3.01 CERTIFICATE OF TRUST OF JWH GLOBAL PORTFOLIO TRUST THIS Certificate of Trust of JWH GLOBAL PORTFOLIO TRUST (the "Trust"), dated November 12, 1996, is being duly executed and filed by Wilmington Trust Company, a Delaware banking corporation, as trustee, to form a business trust under the Delaware Business Trust Act (12 Del.C. Section 3801 et seq.). 1. NAME. The name of the business trust formed hereby is JWH Global Portfolio Trust. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration. IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust, has executed this Certificate of Trust as of the date first above written. WILMINGTON TRUST COMPANY, as Trustee By: /s/ John M. Beeson, Jr. ----------------------------------- John M. Beeson, Jr. Vice President EX-3.02 4 DECLARATION AND AGREEMENT EXHIBIT 3.02 DECLARATION AND AGREEMENT OF TRUST OF JWH GLOBAL PORTFOLIO TRUST THIS Declaration and Agreement of Trust of JWH Global Portfolio Trust, dated as of November 12, 1996 (this "Agreement"), is entered into by and among CIS Investments, Inc, a Delaware corporation, as managing owner (the "Managing Owner"), Wilmington Trust Company, a Delaware banking corporation, as trustee (the "Trustee") and the persons named and whose signatures appear in Exhibit A hereto, each as an initial beneficial owner of the Trust (the "Initial Beneficial Owners"). The Managing Owner, the Trustee and the Initial Beneficial Owners hereby agree as follows: 1. NAME. The name of the trust formed hereby is JWH Global Portfolio Trust (the "Trust"). 2. CREATION OF TRUST. The Trustee hereby acknowledges that the Trust has received the sum of $183 in an account in the name of the Trust from the Managing Owner as a grantor of the Trust, and $43 from each Initial Beneficial Owner, as a grantor of the Trust, all of which amounts shall constitute the initial trust estate. The Trustee hereby declares that the trust estate will be held in trust for the Managing Owner and the Initial Beneficial Owners. 18.3 percent of the initial trust estate shall be held in trust for the Managing Owner. 81.7 percent of the initial trust estate shall be held in trust for the Initial Beneficial Owners. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 DEL. C. Section 3801, ET SEQ., as amended from time to time (the "Act"), and that this document constitute the governing instrument of the Trust. The Trustee is hereby authorized and directed to file a certificate of trust with the Delaware Secretary of State. 3. WITHDRAWAL OF INITIAL BENEFICIAL OWNER. Upon the admission of additional beneficial owners, the Initial Beneficial Owners will withdraw. 4. POWERS OF THE MANAGING OWNERS AND THE TRUSTEE. The duty and authority of the Trustee to manage the business and affairs of the Trust is hereby delegated to the Managing Owner. The Trustee shall have only the rights, obligations and liabilities specifically provided for herein and in the Act and shall have no implied rights, obligations and liabilities with respect to the business or affairs of the Trust. The Trustee shall not have any duty or obligation hereunder or with respect to the activities of the Trust or the trust estate, except as otherwise required by applicable law. 5. POWER TO RESIGN. The Trustee may resign at any time by 15 days' notice in writing delivered to the Trust. 6. INDEMNIFICATION. The Managing Owner shall indemnify and hold harmless the Trustee, its affiliates and all officers, directors, stockholders, employees, representatives and agents of the Trustee (each, a "Covered Person"), from and against any loss, damage or claim imposed on, incurred by or asserted at any time against such Covered Person in any way relating to or arising out of this Agreement, the administration of the trust estate or the action or inaction of such Covered Person hereunder, except that no such Covered Person shall be entitled to indemnification for losses, damages, or claims arising or resulting from its own bad faith, willful misconduct, gross negligence or reckless disregard of its duties and obligations hereunder. 7. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all which shall constitute one in the same instrument. 8. GOVERNING LAW. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of Delaware, all rights and remedies being governed by such laws. [SIGNATURE PAGES TO FOLLOW] -2- IN WITNESS WHEREOF, the parties hereto have executed this Declaration and Agreement of Trust as of the date and year first above written. CIS INVESTMENTS, INC., as Managing Owner By: /s/ L. Carlton Anderson ----------------------------------- L. Carlton Anderson Vice President WILMINGTON TRUST COMPANY, as Trustee By: /s/ John M. Beeson, Jr. ----------------------------------- John M. Beeson, Jr. Vice President -3- EXHIBIT A NAMES AND SIGNATURES OF INITIAL BENEFICIAL OWNERS Name Signature - ---- --------- Hal T. Hansen /s/ Hal T. Hansen - ----------------------- ----------------------------- Name Signature - ---- --------- L. Carlton Anderson /s/ L. Carlton Anderson - ----------------------- ----------------------------- Name Signature - ---- --------- Donald J. Zyck /s/ Donald J. Zyck - ----------------------- ----------------------------- Name Signature - ---- --------- Jan Waye /s/ Jan Waye - ----------------------- ----------------------------- Name Signature - ---- --------- Richard A. Driver /s/ Richard A. Driver - ----------------------- ----------------------------- Name Signature - ---- --------- Brian B. Duff, Jr. /s/ Brian B. Duff, Jr. - ----------------------- ----------------------------- Name Signature - ---- --------- Ronald L. Davis /s/ Ronald L. Davis - ----------------------- ----------------------------- Name Signature - ---- --------- Robert T. Conrardy /s/ Robert T. Conrardy - ----------------------- ----------------------------- Name Signature - ---- --------- Jean Faris /s/ Jean Faris - ----------------------- ----------------------------- Name Signature - ---- --------- Steven G. Assimos /s/ Steven G. Assimos - ----------------------- ----------------------------- -4- Name Signature - ---- --------- Michelle W. Reynolds /s/ Michelle W. Reynolds - ----------------------- ----------------------------- Name Signature - ---- --------- Barbara A. Pfendler /s/ Barbara A. Pfendler - ----------------------- ----------------------------- Name Signature - ---- --------- Thomas V. Mauro /s/ Thomas V. Mauro - ----------------------- ----------------------------- Name Signature - ---- --------- R. Randall Kelsey /s/ R. Randall Kelsey - ----------------------- ----------------------------- Name Signature - ---- --------- Charles F. Farra /s/ Charles F. Farra - ----------------------- ----------------------------- Name Signature - ---- --------- John D. Carlin /s/ John D. Carlin - ----------------------- ----------------------------- Name Signature - ---- --------- Kal Hachem /s/ Kal Hachem - ----------------------- ----------------------------- Name Signature - ---- --------- Peter C. Wind /s/ Peter C. Wind - ----------------------- ----------------------------- Name Signature - ---- --------- J. M. Cone /s/ J. M. Cone - ----------------------- ----------------------------- -5- EX-10.01 5 FORM OF TRADING AGREEMENT EXHIBIT 10.01 TRADING ADVISORY AGREEMENT TRADING ADVISORY AGREEMENT (the "Agreement") dated as of the ____ day of _________, 1996, by and among JWH Global Portfolio Trust, a Delaware business trust (the "Trust"); CIS Investments, Inc., a Delaware corporation ("CISI" or "Managing Owner"), and John W. Henry & Company, Inc., a California corporation ("JWH" or "Advisor"), and agreed to as to Section 4 by Cargill Investor Services, Inc., a Delaware corporation. WITNESSETH: WHEREAS, the Trust has been organized primarily for the purpose of trading, buying, selling, spreading or otherwise acquiring, holding or disposing of futures contracts on currencies, interest rates, energy and agricultural products, metals and stock indices, options on such futures contracts, and spot and forward contracts on currencies and precious metals (collectively "Commodity Interests"); and WHEREAS, the Managing Owner desires to utilize the services of professional commodity trading advisors in connection with the commodity trading activities of the Trust; and WHEREAS, the Trust proposes to make an initial public offering ("Offering") of units of beneficial interest in the Trust (the "Units") through Cargill Investor Services, Inc., an affiliate of CISI, and in connection therewith, the Trust has filed with the United States Securities and Exchange Commission (the "SEC"), pursuant to the United States Securities Act of 1933, as amended (the "1933 Act"), a registration statement on Form S-1 to register the Units, and as part thereof a prospectus (which registration statement, together with all amendments and supplements thereto, shall be referred to herein as the "Registration Statement" and which prospectus together with all amendments and supplements thereto in the forms filed with the SEC pursuant to Rule 424 under the Act shall be referred to herein as the "Prospectus"); and WHEREAS, the Trust will prepare and file applications for registration of the Units under the securities or Blue Sky laws of such jurisdictions as the Managing Owner deems appropriate; and WHEREAS, the Advisor's present business includes the management of Commodity Interests trading accounts for its clients; and WHEREAS, the Advisor is registered as a commodity trading advisor under the Commodity Exchange Act, as amended ("CE Act"), and is a member of the National Futures Association ("NFA") as a commodity trading advisor and will maintain such registration and membership for the term of this Agreement; and WHEREAS, the Trust and the Advisor desire to enter into this Agreement in order to set forth the terms and conditions upon which the Advisor will render and implement advisory services in connection with the conduct by the Trust of its Commodity Interest trading activities during the term of this Agreement; NOW, THEREFORE, the parties agree as follows: 1. DUTIES OF THE ADVISOR. The Trust hereby appoints the Advisor as its exclusive attorney-in-fact to invest and reinvest in Commodity Interests the assets of the Trust which the Managing Owner allocates to the Advisor on the terms and conditions set forth herein. This limited power-of-attorney is a continuing power and shall continue in effect until terminated hereunder. To this end, the Advisor (i) agrees to act as the trading advisor employed by the Managing Owner on behalf of the Trust, and specifically, to exercise discretion with respect to the assets of the Trust under the Advisor's management upon the terms and conditions, and for the purposes, set forth in this Agreement and in the latest final Prospectus of the Trust relating to the offering of Units ("Prospectus"), and (ii) shall have sole authority and responsibility for directing the investment and reinvestment of the Trust's assets in Commodity Interests for the term of this Agreement pursuant to the Advisor's trading systems, methods and strategies, as set forth in the Prospectus. The Advisor shall initially employ its Financial and Metals Portfolio and Original Investment Program (together the "Trading Programs") for the Trust, with allocations being made equally between the Trading Programs at the commencement of trading by the Trust and at each monthly closing and with automatic rebalancing between the Trading Programs by the Advisor at each calendar quarter-end, as described in the Prospectus. At all times each Trading Program shall have an allocation of at least $2 million to meet the Advisor's minimum account sizes. The Managing Owner shall not have authority to reallocate assets without the advance written consent of the Advisor. To the extent that assets of the Trust are invested in United States Treasury bills or other investments approved by the Commodity Futures Trading Commission ("CFTC") for the investment of "customer" funds or are held in cash, the Managing Owner will have the responsibility for the management thereof in investments other than Commodity Interests. The Advisor will use its good faith best efforts in determining the investment and reinvestment of the Trust's assets in compliance with the Trust's trading policies and limitations, and in accordance with the Trading Programs, in each case as set forth in the Prospectus and, to the extent the Advisor is notified thereof and agrees thereto, in accordance with revisions to such trading policies and limitations made by the Managing Owner (using its good faith business judgment) in accordance with the terms of this Agreement and the Prospectus. In the event that the Managing Owner shall, in its sole discretion, determine that any trading instruction issued by the Advisor violates the Trust's trading policies or limitations, or for any other reason, is not in the best interests of the Trust, then the Managing Owner may override such trading instruction. Nothing herein shall be construed to prevent the Managing Owner from imposing any limitations on the trading activities of the Trust beyond those enumerated in the Prospectus if the Managing Owner determines (using its good faith business judgment) that such limitation(s) are necessary in the best interests of the Trust and the Advisor agrees to adhere to such limitations, following written notification thereof. -2- Should the Managing Owner, in its sole discretion, override any trading instructions issued by the Advisor for any reason other than a determination that the trading instructions issued by the Advisor violate the Trust's trading policies or limitations, the Managing Owner agrees that any trading profits or losses incurred on behalf of the Trust as a result of the actions of the Managing Owner to override the Advisor's trading instructions shall be for the account of the Trust and the Advisor shall incur no liability for such profits and losses. The Advisor agrees that in the event the Advisor determines to use a trading program other than or in addition to the Trading Programs set forth in the Prospectus in connection with its trading for the Trust, either in whole or in part, it may not do so unless it gives the Managing Owner prior written notice of its intention to utilize such different trading program and the Managing Owner consents thereto in writing. Similarly, no change in trading programs proposed by the Managing Owner may be implemented without the Advisor's prior written consent. The Advisor also agrees to give the Trust prior written notice of any proposed material change in the Trading Programs as set forth in the Prospectus, and agrees not to make any material change in a Trading Program (as applied to the Trust) without the prior express written approval of the Managing Owner, it being understood that the Advisor shall be free to institute non-material changes in a Trading Program (as applied to the Trust) without such prior written approval. Without limiting the generality of the foregoing, neither refinements to a Trading Program, nor the addition or deletion of Commodity Interests to or from a Trading Program, nor a change in the leverage of such Trading Program, shall be deemed a material change in the Trading Program, and prior approval of the Managing Owner shall not be required therefor, except as set forth in the next paragraph. The Advisor agrees that in the event it determines to trade speculatively or is now trading another commodity interest account pursuant to a trading program materially different from that utilized by the Advisor in its trading on behalf of the Trust other than those disclosed in the Advisor's current Disclosure Document, the Advisor will notify the Managing Owner and disclose such trading program to the Managing Owner upon reasonable request, subject to reasonable assurances of confidentiality, provided that in no event shall the Advisor hereby be required to disclose any trading approach on behalf of the Trust used solely in trading experimental accounts, and provided further that nothing contained in this Agreement shall require the Advisor to disclose what it deems to be proprietary or confidential information concerning any such trading program, or trading approach or technique. The Advisor shall provide the Trust and the Managing Owner with a complete list of Commodity Interests which it intends to trade on the Trust's behalf. All Commodity Interests other than regulated futures contracts and options on regulated futures contracts traded on a qualified board or exchange in the United States shall be listed on Appendix A to this Agreement. The addition of Commodity Interests (other than spot and forward contracts on foreign currencies) to the Trust's portfolio shall require prior written notice to the Trust and the Managing Owner and an amendment to Appendix A. All purchases and sales of Commodity Interests shall be for the account and risk of the Trust. The Managing Owner shall be responsible for informing the Advisor of the estimated dollar amounts of additions and redemptions at least three days before each month-end and the -3- Advisor shall not have any liability for trading losses or lost profits arising out of any errors or delays related thereto. Neither the Advisor, nor its principals, employees, directors, officers, shareholders, or any person who controls or who is controlled by the Advisor, shall be liable to the Managing Owner, its officers, directors, shareholders or employees, or the Trust, its beneficial owners (the "Unitholders") or any of their successors or assigns under this Agreement, except by reason of acts or omissions in contravention of the express terms of this Agreement due to their bad faith, misconduct or negligence or by reason of not having acted in good faith in the reasonable belief that such actions or omissions were in, or not opposed to, the best interests of the Trust, it being understood that, without limiting the Advisor's liability hereunder, trading profits or losses incurred on behalf of the Trust shall be for the account of the Trust and the Advisor shall not incur any liability for such profits or losses provided the Advisor would not otherwise be liable to the Trust under the terms hereof. Mr. John W. Henry shall have no liability to the Trust or the Managing Owner under this Agreement or in connection with the transactions contemplated in this Agreement except for fraud or misconduct by Mr. John W. Henry. The Advisor, each of its principals, employees, directors, officers, shareholders, and any person who controls and who is controlled by the Advisor, shall be indemnified by the Trust and the Managing Owner, jointly and severally, to the full extent permitted by law, against any losses, judgments, liabilities, expenses (including reasonable attorneys' fees) and claims, including settlements, incurred or sustained by the Advisor in connection with any acts or omissions of the Advisor relating to its management of Trust assets pursuant to this Agreement or arising out of or in connection with this Agreement or the Advisor's management of the Trust's assets, provided that there has been (i) no judicial determination that such liability was the result of negligence, misconduct, bad faith or a breach of this Agreement on the part of the Advisor and (ii) no judicial determination that the Advisor, its principals, employees, directors, officers, shareholders and each person controlling or controlled by the Advisor, did not act (or took no action) in good faith and in a manner reasonably believed by it and them to be in, or not opposed to, the best interests of the Trust. Any such indemnification involving a material amount, unless ordered or expressly permitted by a court, shall be made by the Trust only upon the opinion of independent counsel acceptable to the Trust and to the Advisor that the Advisor has met the applicable standard of conduct described above. Expenses incurred in defending a threatened or pending civil, administrative or criminal action, suit or proceeding against the foregoing indemnitees may be paid by the Trust or the Managing Owner in advance of the final disposition of such action, suit or proceeding if (i) the legal action, suit or proceeding, if not sustained, would entitle the indemnitees to indemnification pursuant to the preceding paragraph, and (ii) the Advisor undertakes to repay the advanced funds to the Trust and the Managing Owner in cases in which the foregoing indemnitees are not entitled to indemnification pursuant to the preceding paragraph. Expenses incurred in defending a threatened or pending civil, administrative or criminal action, suit or proceeding against the Advisor and the Managing Owner shall be paid initially by the Managing Owner, subject to subsequent proportionate reimbursement by the Advisor in the event of an unfavorable determination with respect to the Advisor (e.g. if the Advisor is found to be x% liable, the Advisor shall reimburse the Trust or the Managing Owner x% of the expenses advanced by the Trust or the Managing Owner); provided, that -4- such initial payment of expenses shall not be made by the Managing Owner on behalf of the Advisor if the Advisor elects to be represented by counsel of its own choice (except where the Advisor so elects because it has interest adverse -- a claim for indemnification shall not be considered adverse interest for this purpose -- to the Managing Owner and/or the Trust) or distinct issues of law or fact are involved and, provided further, that in the event of the initial payment of such expenses by the Managing Owner, the Managing Owner shall have the exclusive right to select counsel reasonably acceptable to the Advisor. 2. OBLIGATIONS OF THE TRUST AND THE ADVISOR. The Trust, the Managing Owner and the Advisor (only with respect to making the disclosures regarding itself set forth in the immediately following sentence) respectively agree to cooperate and use their good faith best efforts in connection with (a) the preparation of the Registration Statement and the Prospectus; (b) the filing of the Registration Statement and the Prospectus with such governmental and self- regulatory authorities as the Managing Owner deems appropriate for the registration and sale of the Units and the taking of such other actions not inconsistent with this Agreement as the Managing Owner may determine to be necessary or advisable in order to make the proposed offer and sale of Units lawful in any jurisdiction; and (c) causing the Registration Statement to become effective under the 1933 Act and the securities or Blue Sky laws of such jurisdictions as the Managing Owner may deem appropriate. The Advisor agrees to make all necessary disclosures regarding itself, its officers and principals, trading techniques, trading programs (including the Trading Programs), trading performance, customer accounts (other than the names of customers, unless such disclosure is required by law or regulation) and otherwise as may be required, in the reasonable judgment of the Managing Owner, to be made in the Registration Statement and Prospectus and in such filings subject to the confidentiality provisions in the third paragraph of Section 3. No description of the Advisor may be distributed by the Managing Owner without the prior consent of the Advisor. The Advisor agrees to participate, at its own cost and expense, in "road show" and similar presentations in connection with the offering of the Units to the extent reasonably requested by the Managing Owner, on the following conditions: (i) the Advisor shall not be obligated to take any action which might require registration as a broker-dealer or investment adviser under any applicable federal or state law and (ii) the Advisor shall not be required to assist in "road show" or similar presentations to the extent that the Advisor reasonably believes that doing so would interfere with the Advisor's trading activities or be unlawful. The parties acknowledge that the Advisor has not been, either alone or in conjunction with the Managing Owner or its affiliates, an organizer or promoter of the Trust. The Trust may at any time withdraw the Registration Statement from the SEC or any other governmental or self-regulatory authority with which it is filed or otherwise terminate the Registration Statement or the offering of Units. Upon any such withdrawal or termination, or if the minimum number of Units required to be sold pursuant to the Prospectus is not sold, this Agreement shall terminate and, except for the payment of expenses as set forth in the immediately preceding paragraph and the indemnification provisions set forth in Section 1 of this Agreement, neither the Trust nor the Managing Owner shall have any obligations to the Advisor with respect to this Agreement; nor shall the Advisor have any obligations to the Trust or the Managing Owner with respect to this Agreement. -5- 3. ADVISOR INDEPENDENCE. The Advisor is and shall for all purposes herein be deemed to be an independent contractor with respect to the Trust and the Managing Owner, and shall, unless otherwise expressly authorized, have no authority to act for or to represent the Trust or the Managing Owner in any way or otherwise be deemed to be a general agent of the Trust or the Managing Owner. The Advisor may, in its discretion, purchase Units in the Trust. The Trust and the Managing Owner acknowledge that the Trading Programs, including the trading instructions, method and systems, of the Advisor are the confidential property of the Advisor. Nothing in this Agreement shall require the Advisor to disclose the confidential or proprietary details of the Trading Programs. The Trust and the Managing Owner further agree that they will keep confidential and will not disseminate the Advisor's trading advice to the Trust to any Unitholder or to any of the customers, employees, agents, officers or directors of the Trust's broker or any other party, except as, and to the extent, reasonably determined by the Managing Owner to be (i) necessary for the conduct of the business of the Trust, including the performance of brokerage services by the Trust's commodity broker(s), or (ii) required by law or regulation. All such information related to trading advice acquired by the Trust or the Managing Owner shall be used solely to monitor the Advisor's trading on behalf of the Trust. 4. COMMODITY BROKER. All Commodity Interests trades for the account of the Trust shall be made through such commodity broker or brokers as the Managing Owner directs. The Advisors shall have authority to communicate all orders directly to such broker(s). The Advisor shall not have any authority or responsibility in selecting or supervising any broker for execution of Commodity Interests trades of the Trust or for negotiating commission rates to be charged therefor. At the present time it is contemplated that the Trust will execute all Commodity Interests trades through Cargill Investor Services, Inc. and that brokerage commissions payable by the Trust each month will equal 1/12 of 6.5% of the Trust's month-end assets (after deduction of the Advisor's Management Fee as of the end of each month except with respect to Units owned by Unitholders eligible for Special Brokerage Fee Rates as described in the Prospectus. The Advisor shall be notified in writing by the Managing Owner if any Commodity Interests trades for the account of the Trust are to be made through any futures commission merchant other than Cargill Investor Services, Inc. Notwithstanding the foregoing, the Advisor may place trading orders for the Trust with floor brokers selected by the Advisor; any trades so executed for the benefit of the Trust shall be "given-up" to such broker or brokers as the Managing Owner shall approve. Expenses of "give-ups" shall be borne by the Trust up to a maximum of $___ per round-turn on average or a reasonable amount mutually agreed to. The Advisor agrees that it shall not receive any commission, compensation, remuneration or payment whatsoever from any broker with whom the Trust carries any account by reason of the Trust's Commodity Interests transactions. 5. FEES. In consideration of and in compensation for the performance of the Advisor's services under this Agreement, the Trust agrees that it will pay to the Advisor the following: (i) a monthly management fee (the "Management Fee") equal to 1/3 of 1% of the Trust's month-end Net Assets (as hereinafter defined, except that the calculation of Net Assets for the -6- purpose of determining the Advisor's Management Fee shall be before deduction of any Management Fees, distributions, redemptions or Incentive Fee accrued or payable as of such month-end), and (ii) a quarterly incentive fee (the "Incentive Fee") of 15% of Trading Profits (as hereinafter defined). Incentive Fee on Trading Profits shall accrue as of the close of trading on the last day of each calendar month but shall become payable on the last day of each calendar quarter (March 31, June 30, September 30 and December 31). The first Incentive Fee which may be due and owing to the Advisor in respect of any Trading Profits shall be computed as of the end of the first calendar quarter during which the Advisor managed the Trust's assets allocated to it for at least 60 days. Payment of the Management Fee shall be made within 10 business days following the end of the month to which they relate. Management fees shall be deducted prior to the calculation of the quarterly Incentive Fees. "Net Assets" means the Fund's total assets less (i) total liabilities except any liability for organization and initial offering cost amortization, ongoing offering costs and administrative expenses and (ii) brokerage commissions at the annual rate of 1.25% (rather than the full 6.5% annual rate) of the Trust's month-end assets, to be determined on the basis of generally accepted accounting principles, consistently applied, except as set forth below. For purposes of this calculation: (a) Net Assets shall include any unrealized profit or loss on securities and open commodity positions and any other credit or debit accruing to the Fund but unpaid or not received by the Fund. (b) All securities and open commodity positions shall be valued at their then market value which means, with respect to open commodity positions, the settlement price as determined by the exchange on which the transaction is effected or the most recent appropriate quotation as supplied by the clearing broker or banks through which the transaction is effected. If there are no trades on the date of the calculation due to operation of the daily price fluctuation limits or due to a closing of the exchange on which the transaction is executed, the contract will be valued at fair value as determined by the Managing Owner. Interest, if any, shall accrue monthly. Trading Profits (for purposes of calculating the Advisor's Incentive Fee only) is defined as the sum of (A) the net of any profits and losses realized on all trades closed out during a period, (B) the net of any unrealized profits and losses on open positions as of the end of such period less the net of any unrealized profits and losses on open positions as of the end of the immediately preceding period and (C) the cumulative trading loss since the most recent period for which an Incentive Fee was payable , minus (D) brokerage commissions at the annual rate of 1.25% (rather than the full 6.5% annual rate) of the Trust's month-end assets and the Advisor's Management Fee. Trading Profits shall not include any interest income attributed to the Trust's assets under the Advisor's management. Any trading losses from prior periods must be recouped before Trading Profits can again be generated. Trading Profits includes open trade equity which may, in fact, never be realized. -7- If Trust assets allocated to the Advisor are reduced due to redemptions during a period where a cumulative trading loss exists, the amount of cumulative trading loss for the calculation of Trading Profits as of the date of redemption shall be reduced in the same proportion that the aggregate number of Units redeemed bears to the total number of Units outstanding immediately prior to such redemption. Similarly, if Trust assets allocated to the Advisor are reduced due to distributions or reallocations during a period where a cumulative loss exists, the amount of trading loss for the calculation of Trading Profits as of the end of that quarter shall be reduced in the same proportion that the amount of net reduction bears to the amount of assets immediately prior to such reduction. If Trust assets allocated to the Advisor are reduced by redemptions, distributions or reallocations at any month-end other than a calendar quarter end when Trading Profits exists, the Incentive Fee accrued on the Trading Profits attributable to the amount so reduced ("Withdrawn Profits") shall be paid to the Advisor within 10 business days after such reduction in assets and the Withdrawn Profits shall not be included in Trading Profits for the calculation of Incentive Fee payable to the Advisor at the end of that calendar quarter. In the event of the termination of this Agreement as of any date which shall not be the end of a calendar quarter or month, the quarterly Incentive Fee will be computed as if the effective date of termination were the last day of the then current quarter and paid to the Advisor and the monthly Management Fee shall be pro-rated to the effective date of termination. Incentive Fees shall be paid within 10 business days after the end of the quarter for which they are earned. For purposes of determining whether an Incentive Fee is payable by Units which are redeemed other than at quarter end, the dates of such redemptions shall be considered as if they were the last day of the quarter. If an Incentive Fee shall have been paid by the Trust to the Advisor in respect of any calendar quarter and the Advisor shall incur subsequent losses on the Trust's assets subject to its management, the Advisor shall nevertheless be entitled to retain amounts previously paid to it in respect of Trading Profits. 6. TERMS AND TERMINATION. This Agreement shall commence on the date hereof, and unless sooner terminated, shall continue in effect until the close of business on the last day of the 12th full calendar month following the commencement of trading activities by the Trust. This Agreement shall automatically renew on the same terms as set forth herein for three additional 12-month terms unless the Managing Owner shall give to the Advisor written notice at least 45 days prior to the expiry of the then current 12-month period. This Agreement shall terminate automatically in the event that the Trust is terminated. This Agreement may be terminated by the Trust at any time, upon 60 days' prior written notice to the Advisor. In addition, this Agreement may be terminated at the election of the Trust at any time, upon written notice to the Advisor in the event that: (A) the Net Asset Value of Trust funds allocated to the Advisor's management decreases as of the close of trading on any business day by more than 30% from the sum of the Net Asset Value of the Trust's funds allocated to the Advisor on the date the Trust commenced trading plus the Net Asset Value of any funds which -8- may be allocated to the Advisor thereafter (after adding back all redemptions, distributions and reallocations made to any additional trading advisors in respect of such assets); (B) the Advisor is unable, to any material extent, to use the Trading Programs, as the Trading Programs may be refined or modified in the future in accordance with the terms of this Agreement for the benefit of the Trust; (C) the Advisor's registration as a commodity trading advisor under the CE Act, or membership as a commodity trading advisor with NFA is revoked, suspended, terminated or not renewed; (D) the Managing Owner determines in good faith that the Advisor has failed to conform to (i) the Trust's trading policies or limitations, as they may be revised or modified, or (ii) a Trading Program; (E) there is an unauthorized assignment of this Agreement by the Advisor; (F) the Advisor dissolves, merges or consolidates with another entity or sells a substantial portion of its assets, any portion of the Trading Programs utilized by the Trust or its business goodwill to any person or entity other than one controlled, directly or indirectly, by John W. Henry, in each instance without the consent of the Managing Owner; (G) the Advisor becomes bankrupt or insolvent; (H) John W. Henry ceases to be a principal of the Advisor; or (I) the Managing Owner determines in good faith that such termination is necessary for the protection of the Trust. In addition, the Advisor has the right to terminate this Agreement at any time, upon written notice to the Trust in the event (i) of the receipt by the Advisor of an opinion of independent counsel that solely by reason of the Advisor's activities with respect to the Trust, the Advisor is required to register as an investment adviser under the Investment Advisers Act of 1940; (ii) that the registration of the Managing Owner as a commodity pool operator under the CE Act, or its NFA membership as a commodity pool operator is revoked, suspended, terminated or not renewed; (iii) that the Managing Owner elects (pursuant to Section 1 of this Agreement) to have the Advisor use a different trading program in the Advisor's management of Trust assets from that which the Advisor is then using to manage such assets and the Advisor objects to using such different trading program; (iv) that the Managing Owner overrides a trading instruction of the Advisor pursuant to Section 1 of this Agreement for reasons unrelated to a determination by the Managing Owner that the Advisor has violated the Trust's trading policies or limitations; (v) that the Managing Owner imposes additional trading limitation(s) pursuant to Section 1 of this Agreement which the Advisor does not agree to follow in the Advisor's management of its allocable share of Trust assets; (vi) there is an unauthorized assignment of this Agreement by the Managing Owner of the Trust; or (vii) other good cause is shown to which the written consent of the Managing Owner is obtained. The Advisor may also terminate this Agreement on 60 days written notice to the Managing Owner during any renewal term. In the event that this Agreement is terminated pursuant to this Section 6, the Advisor shall be entitled to the Incentive Fee, if any, which shall be computed as if the effective date of termination was the last day of the then current calendar quarter. If this Agreement is terminated on a day other than the last day of a calendar month, the Management Fee described herein shall be determined as if such date were the end of a month and such fee shall be pro-rated based on the ratio of the number of trading days in the month through the date of termination to the total number of trading days in the month. The rights of the Advisor to fees earned through the date of expiration or termination shall survive this Agreement until satisfied. -9- In the event that JWH ceases to be the Trust's sole trading advisor, the Managing Owner agrees that it shall cause the Trust to delete "JWH" from the name of the Trust. 7. OTHER ACCOUNTS OF THE ADVISOR. The Advisor shall be free to manage and trade accounts for other investors (including other public and private commodity pools) during the term of this Agreement and to use the same or other information and the Trading Programs utilized in the performance of services for the Trust for such other accounts so long as the Advisor's ability to carry out its obligations and duties to the Trust pursuant to this Agreement is not materially impaired thereby. Furthermore, neither the Advisor nor any principal, shareholder, director, officer, employee or agent of the Advisor shall cause or permit the Advisor to engage in any business enterprise not presently engaged in which is unrelated to the giving of commodity advice or the operation of commodity pools if such other business might reasonably be expected to have a material adverse effect on the Advisor's ability to perform its obligations and duties to the Trust under this Agreement, unless it obtains the prior written consent from the Managing Owner, which consent shall not be unreasonably withheld. In addition, the Advisor, and its principals, shareholders, partners, directors, officers, employees and agents, as applicable, also will be permitted to trade in Commodity Interests for their own accounts so long as the Advisor's ability to carry out its obligations and duties to the Trust is not materially impaired thereby. So long as the Advisor is performing services for the Trust, it agrees that it will not accept additional capital for management in the Commodity Interests markets if doing so would have a reasonable likelihood of resulting in the Advisor having to modify materially the Trading Programs being used by the Advisor for the Trust in a manner which might reasonably be expected to have a material adverse effect on the Trust (without limiting the generality of the foregoing, it is understood that this paragraph shall not prohibit the acceptance of additional capital, which acceptance requires only routine adjustments to trading patterns in order to comply with speculative position limits or daily trading limits). The Advisor agrees that, in the Advisor's management of accounts other than the account of the Trust, the Advisor will not knowingly or deliberately favor any other account managed or controlled by it or any of its principals or affiliates (in whole or in part) over the Trust on an overall basis. The preceding sentence shall not be interpreted to preclude (i) the Advisor from charging another client fees which differ from the fees to be paid to the Advisor hereunder, or (ii) an adjustment by the Advisor in the implementation of any agreed upon trading program in accordance with the procedures set forth in Section 1 hereof, which is undertaken by the Advisor in good faith in order to accommodate additional accounts or adjustments deemed, in good faith, by the Advisor to be appropriate to the management of a larger account. The Advisor, upon request, shall provide the Managing Owner with an explanation of the material differences, if any, in performance between the Trust and any other comparable account for which the Advisor or any of its principals or affiliates acts as a commodity trading advisor (in whole or in part). Upon the reasonable request of the Managing Owner, the Advisor shall provide the Managing Owner with such information as it reasonably may request for the purpose of confirming that the Trust has been treated equitably with respect to advice rendered during the term of this Agreement by the Advisor for other accounts (including accounts of the Advisor or its principals, -10- shareholders, directors, officers, employees, and agents) managed by the Advisor, which the parties acknowledge to mean that the Managing Owner may inspect all records of the Advisor related to such other accounts during normal business hours upon its prior written request. The Advisor may, in its discretion, withhold from any such report or inspection the name of the client for whom any such account is maintained and, in any event, the Trust and the Managing Owner shall keep all such information obtained by it from the Advisor confidential. 8. SPECULATIVE POSITION LIMITS. The Advisor agrees that if its trading recommendations are altered because of the potential application of speculative position limits, the Advisor will modify its trading instructions to the Trust and its other accounts in a good faith effort to achieve an equitable treatment of all accounts; the Advisor will liquidate Commodity Interests positions and/or limit the taking of new positions in all accounts it manages, including the Trust, as nearly as possible in proportion to the assets available for trading of the respective accounts to the extent necessary to comply with applicable speculative position limits. The Advisor presently believes and represents that its Trading Programs for the management of the Trust's account can be implemented for the benefit of the Trust notwithstanding the possibility that, from time to time, speculative position limits may become applicable. 9. BROKERAGE CONFIRMATIONS AND REPORTS. The Managing Owner will instruct the Trust's commodity broker or brokers to furnish the Advisor with copies of all trade confirmations and monthly trading statements relating to the Trust's assets under the management of the Advisor. The Advisor will maintain records and will monitor all open positions relating thereto. The Managing Owner also will furnish the Advisor with a copy of all reports, including but not limited to, monthly, quarterly and annual reports, sent to Unitholders, the SEC, the CFTC and NFA. 10. THE ADVISOR'S REPRESENTATIONS AND WARRANTIES. The Advisor represents and warrants that: (a) it has full capacity and authority to enter into this Agreement, and to provide the services required of it hereunder; (b) it will not, by entering into this Agreement and by acting as a commodity trading advisor to the Trust, (i) be required to take any action contrary to its incorporation or partnership document (as applicable), or any applicable statute, law or regulation of any jurisdiction or (ii) breach or cause to be breached any undertaking, agreement, contract, statute, rule or regulation to which it is a party or by which it is bound which, in the case of (i) or (ii), would materially limit or materially adversely affect the performance of its duties under this Agreement; (c) it is duly registered as a commodity trading advisor under the CE Act and is a member of NFA as a commodity trading advisor, and it will maintain and renew such registration and membership during the term of this Agreement; and -11- (d) it has provided the Trust with a copy of its most recent Disclosure Document as required by Part 4 of the CFTC's regulations, receipt of which is hereby acknowledged by the Trust and the Managing Owner. The within representations and warranties shall be continuing during the term of this Agreement, and, if at any time, any event has occurred which would make or tend to make any of the foregoing not true, the Advisor promptly will notify the Trust in writing thereof. 11. THE MANAGING OWNER'S REPRESENTATIONS AND WARRANTIES. The Managing Owner represents and warrants on behalf of the Trust and itself that: (a) it has the capacity and authority to enter into this Agreement; (b) it will not, by acting as managing owner of the Trust, (i) be required to take any action contrary to its incorporating documents or any applicable statute, law or regulation of any jurisdiction, or (ii) breach or cause to be breached any undertaking, agreement, contract, statute, rule or regulation to which it or the Trust is a party or by which it or the Trust is bound, which in the case of (i) or (ii), would limit or materially affect the performance of its or the Trust's duties under this Agreement; and (c) it is duly registered as a commodity pool operator under the CE Act and is a commodity pool operator member of NFA, and it will maintain and renew such registration and membership during the term of this Agreement. The within representations and warranties shall be continuing during the term of this Agreement, and, if at any time, any event has occurred which would make or tend to make any of the foregoing not true, the Managing Owner with respect to which such representation or warranty is no longer true promptly will notify the Advisor in writing. 12. ACKNOWLEDGMENT. The parties acknowledge that the obligations of this Agreement are not binding against the Unitholders individually but are binding only upon the assets and property of the Trust and, in the event of any obligation or claim arising hereunder against the Trust, no resort shall be had to the Unitholder's personal property for the satisfaction of such obligation or claim. 13. ASSIGNMENT. This Agreement may not be assigned by any party without the express prior written consent of the other parties. 14. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and the successors and permitted assigns of each of them, and no other person (except as otherwise provided herein) shall have any right or obligation under this Agreement. The terms "successors" and "assigns" shall not include any purchasers, as such, of Units. -12- 15. AMENDMENT OR MODIFICATION. This Agreement may not be amended or modified except by the written consent of the parties. The Advisor shall receive a copy of all proposed and final amendments and modifications to this Agreement so long as it is an advisor to the Trust. 16. NOTICES. Except as otherwise provided herein, all notices required to be delivered under this Agreement shall be in writing and shall be deemed given by the party required to provide notice when received by the party to whom notice is required to be given and shall be delivered personally or by registered mail, postage prepaid, return receipt requested, as follows (or to such other address as the party entitled to notice shall hereafter designate by written notice to the other parties): If to the Trust: JWH Global Portfolio Trust c/o CIS Investments, Inc. 233 South Wacker Drive, Suite 2300 Chicago, Illinois 60606 Attention: L. Carlton Anderson If to CISI: CIS Investments, Inc. 233 South Wacker Drive Suite 2300 Chicago, Illinois 60606 Attention: L. Carlton Anderson with a copy to: Linda Cutler, Esq. Cargill Incorporated Cargill Office Center 15407 McGinty Road West Minnetonka, Minnesota 55391 If to JWH: John W. Henry & Company, Inc. One Glendinning Place Westport, Connecticut 06880 Attention: David M. Kozak, Esq. 17. GOVERNING LAW. The parties agree that this Agreement shall be governed by and construed in accordance with the laws of the State of Illinois without regard to principles of conflicts of laws thereof. -13- 18. SURVIVAL. The provisions of this Agreement shall survive the termination of this Agreement with respect to any matter arising while this Agreement was in effect. 19. PROMOTIONAL MATERIAL. The Advisor agrees that prior to using any promotional literature in which reference to the Trust is made (other than a simple statement to the effect that the Advisor is the trading advisor to the Trust or solely in the context of the preparation of required performance tables and notes thereto and descriptions thereof), it shall furnish a copy of such information to the Managing Owner and will not make use of any literature containing references to the Trust to which the Managing Owner reasonably objects, except as otherwise required by law or regulation. The Trust and the Managing Owner shall make no use of any promotional or other literature referring to the Advisor without obtaining the prior written approval of the Advisor. 20. NO WAIVER. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver granted hereunder must be in writing and shall be valid only in the specific instance in which given. 21. HEADINGS. Heading to Sections herein are for the convenience of the parties only, and are not intended to be or to affect the meaning or interpretation of this Agreement. 22. COMPLETE AGREEMENT. Except as otherwise provided herein, this Agreement constitutes the entire agreement between the parties with respect to the matters referred to herein, and no other agreement, verbal or otherwise, shall be binding upon the parties hereto. 23. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one original instrument. 24. ACKNOWLEDGMENTS OF THE TRUST AND MANAGING OWNER. The Trust and the Managing Owner acknowledge that they have received the commodity trading advisor Disclosure Document of the Advisor. The Managing Owner further acknowledges that the Advisor uses different proprietary trading programs and that these different trading programs may achieve different trading results. -14- IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the undersigned as of the day and year first above written. JWH GLOBAL PORTFOLIO TRUST By: CIS Investments, Inc., Managing Owner By: -------------------------------- L. Carlton Anderson Vice President CIS INVESTMENTS, INC. By: -------------------------------- L. Carlton Anderson Vice President JOHN W. HENRY & COMPANY, INC. By: -------------------------------- Name: --------------------------- Title: -------------------------- AGREED TO AND ACKNOWLEDGED AS TO SECTION 4: CARGILL INVESTOR SERVICES, INC. By: ------------------------------- L. Carlton Anderson Vice President -15- EX-10.02 6 FORM OF CUSTOMER AGREEMENT EXHIBIT 10.02 FUTURES ACCOUNT AGREEMENT U.S. JWH Global Portfolio Trust - -------------------------- ------------------------- Customer Name Customer Account Number In consideration of the agreement of Cargill Investor Services, Inc. ("CIS") to act as broker for the Customer in the purchase or sale of futures (which term shall include contracts relating to immediate or future delivery of commodities, financial futures, and options) Customer agrees, in respect to all futures accounts which the Customer now has or may at any future time have with CIS, or its successors, including accounts from time to time closed and then reopened, as follows: 1. AUTHORIZATION. Orders for the purchase or sale of futures shall be received and executed with the express intent that actual delivery is contemplated. All transactions shall be subject to the constitution, by-laws, rules, regulations, customs and usages of the exchange or market where executed (and of its clearing house if any) and to any applicable law, rule and regulation, including but not limited to, the provisions of the Commodity Exchange Act, as amended, and the rules and regulations thereunder. CIS shall have no liability to the Customer as a result of any action taken by CIS to comply with the foregoing. The foregoing provision is intended solely for the protection and benefit of CIS and any failure by CIS to comply with exchange rules, regulations, customs and usages shall not relieve the Customer of any obligations under this agreement nor be construed to create rights hereunder in favor of the Customer. CIS reserves the right to refuse to accept any order. 2. BROKER'S LIEN. To secure any indebtedness or other obligation owed by the Customer to CIS, CIS is hereby granted a lien on all of the Customer's property at any time held by CIS. 3. TRANSFER OF FUNDS. CIS may without notice transfer any money or other property interchangeably between any accounts of the Customer. In the event that at any time the Customer has an account in futures or options which comes under the regulation of the Commodity Futures Trading Commission ("CFTC") and also an account in non-CFTC-regulated futures or options, the Customer hereby authorizes CIS, without prior notice to the Customer to transfer from the Customer's regulated Futures Account to its non-regulated account such amount of excess funds as in CIS' judgment may be reasonably required to avoid the calling of margins for such other account. 4. MARGINS. The Customer recognizes that margin deposits are due and must be paid immediately upon entering into positions on futures exchanges and from time to time as market conditions dictate and agrees to make such deposits immediately on demand. CIS shall have the right to set and revise margin requirements. Customer acknowledges CIS' right to limit, without notice to Customer, the number of open positions which Customer may maintain or acquire through CIS. 5. CUSTOMER OBLIGATIONS. The Customer agrees to pay promptly on demand any and all sums due to CIS for monies advanced, with interest thereon at 1% over the prime rate. The Customer agrees to pay when due, CIS' charges for commissions at rates established between CIS and the Customer. 6. LIQUIDATION OF POSITIONS. CIS shall have the right, whenever in its discretion it considers it necessary for its protection, in the event the Customer fails to timely discharge its obligations to CIS, or in the event that a petition in bankruptcy or for the appointment of a receiver is filed by or against the Customer, or in the event of death of the Customer, or in the event the Customer is adjudged incompetent, to sell any or all futures, or other property in any account of the Customer and to buy any or all futures which may be short in any account of the Customer, and to close out and liquidate any and all outstanding contracts of the Customer, and any such sales or purchases may be made at CIS' discretion on any exchange or other market where such business is then usually transacted; it being understood that a prior demand, or call, or prior notice of the time and place of such sale or purchase, if any be given, shall not be considered a waiver of CIS' right to sell or to buy without demand or notice as herein provided. The Customer shall at all times be liable to CIS for the payment of any debit balance owing in the accounts of the Customer with CIS, and shall be liable for any deficiency remaining in any such account in the event of the liquidation thereof in whole or in part, and shall be liable for any reasonable costs of collection including attorneys' fees. 7. NOTICES. Any notices and other communications may be transmitted to the Customer at the address, or telephone number given herein, or at such other address or telephone number as the Customer hereafter shall notify CIS in writing. All notices or communications shall be deemed transmitted when telephoned or deposited in the mail, sent via facsimile or computer by CIS. Confirmations, purchase and sale statements and account statements shall be deemed accurate unless written objection is delivered within 10 business days from the date of such notice to CIS, Sears Tower, Suite 2300, 233 S. Wacker Drive, Chicago, Illinois 60606, Facsimile No. (312) 460-4015, Attention: Compliance Officer. 8. COMMUNICATION DELAYS. CIS will not be responsible for delays or failure in the transmission of orders caused by a breakdown of communication facilities or by any other cause beyond CIS' reasonable control. 9. GOVERNING LAW. This agreement is made under and shall be governed by the laws of the State of Illinois in all respects, including construction and performance. 10. ACKNOWLEDGMENT. The Customer acknowledges that CIS is a wholly-owned subsidiary of Cargill, Incorporated and that the market recommendations of CIS may or may not be consistent with the market position or intentions of Cargill, Incorporated, its subsidiaries and affiliates. The market recommendations of CIS are based upon information believed to be reliable, but CIS cannot and does not guarantee the accuracy or completeness thereof or represent that following such recommendations will eliminate or reduce the risks inherent in trading futures. 11. NOTIFICATION OF RECORDING. CIS is hereby granted permission to record telephone conversations between its employees and the Customer. 12. INDEPENDENT AGENTS. If Customer's account is carried by CIS only as the clearing broker, Customer acknowledges that CIS has no responsibility for the actions of the introducing broker or executing broker. Customer agrees to indemnify and hold CIS harmless, for any actions or omissions of such introducing broker or executing broker. 13. LIMITATION OF ACTIONS. Any action against CIS must be instituted within two years of the action/or inaction giving rise to the alleged claim. 14. BINDING EFFECT. This agreement shall be irrevocable as long as the Customer shall have any account with CIS; it shall be binding upon the Customer and upon the Customer's administrators, and assigns; it can be amended only in writing duly signed by the Customer and an officer of CIS. 15. CUSTOMER REPRESENTATIONS. Customer represents and warrants that Customer is under no legal disability which would prevent it from trading in commodities, futures and options contracts or entering into this Agreement and that all of the information contained in the New Account Customer Fact Sheet is true, complete, and correct as of the date hereof. Customer will promptly notify CIS in writing of any changes in such information or any change in circumstances which would affect the representations and information given CIS or which would in any way affect Customer's ability to make any transactions contemplated by this Agreement. The Customer represents that he or she is 18 years of age or over and that he or she is not an employee of any exchange nor of any corporation of which any exchange owns a majority of the capital stock. The Customer further represents that he or she is not an employee or a member of any exchange nor of a firm registered on any exchange or if he or she is so employed that a written consent of his or her employer is attached herewith. 16. EXPIRATION PROCEDURES. At least two business days prior to the first notice day in the case of long positions in futures or forward contracts, and at least two business days prior to the last trading day in the case of short positions in futures or forward contracts or long and short positions in options, Customer agrees to either give CIS instructions to liquidate or make or take delivery under such futures or forward contracts, or to liquidate, exercise or allow the expirations of such options. Customer will deliver to CIS sufficient funds and/or documents required in connection with exercise or delivery. If such instructions or such funds and/or documents, with regard to option transactions, are not received by CIS prior to the expiration of the option, CIS may allow such option to expire. 2 17. SECURITIES. THIS STATEMENT IS FURNISHED TO YOU BECAUSE RULE 190.10(c) OF THE COMMODITY FUTURES TRADING COMMISSION REQUIRES IT FOR REASONS OF FAIR NOTICE UNRELATED TO THIS COMPANY'S CURRENT FINANCIAL CONDITION: (1) YOU SHOULD KNOW THAT IN THE UNLIKELY EVENT OF THIS COMPANY'S BANKRUPTCY, PROPERTY, INCLUDING PROPERTY SPECIFICALLY TRACEABLE TO YOU, WILL BE RETURNED, TRANSFERRED OR DISTRIBUTED TO YOU, OR ON YOUR BEHALF, ONLY TO THE EXTENT OF YOUR PRO RATA SHARE OF ALL PROPERTY AVAILABLE FOR DISTRIBUTION TO CUSTOMERS. (2) NOTICE CONCERNING THE TERMS FOR THE RETURN OF SPECIFICALLY IDENTIFIABLE PROPERTY WILL BE BY PUBLICATION IN A NEWSPAPER OF GENERAL CIRCULATION. (3) THE COMMISSION'S REGULATIONS CONCERNING BANKRUPTCY OF COMMODITY BROKERS CAN BE FOUND AT 17 CODE OF FEDERAL REGULATIONS PART 190. 18. DEATH OR INCOMPETENCY OF CUSTOMER. If the Customer should die or become incompetent, any pending order shall be validly executed by CIS, up to the time it receives written notice of the death or incompetence of the Customer, and CIS is hereby indemnified against loss arising therefrom. CIS requires proof of the authority of the estate executor prior to releasing funds from Customer's account. 19. GIVE-UP PROCEDURES. The executing brokers shown on the list delivered to CIS will execute orders for Customer as transmitted by Customer or its Agent to the executing broker, and will report a fill to Customer in a timely fashion. CIS, if it has given prior written notice to the executing broker, may place limits on the positions it will accept for give-up for the Customer's account. Executing broker will bill commissions for executing trades to CIS, in the amount agreed from time to time, on a monthly basis. CIS shall be responsible for verifying billing and making payment. CIS shall charge the commissions to Customer's Account. 20. LONDON METALS EXCHANGE TRADING. The London Metal s Exchange Limited ("LME") is a principal-to-principal market. Cargill Investor Services Limited ("CISL"), is a dealing member of the LME and has appointed CIS as its agent for the purpose of issuing LME Client Contracts and for buying, selling and trading, and all actions consequent to trading in LME contracts on CISL's behalf. The Customer's contractual counterparty is CISL. Any issues or questions relating to LME Client Contracts should be addressed to CIS who will forward them to CISL. 21. INTERPRETATION. The section headings are for convenience of reference only and shall not affect the meaning or construction of any provision of this agreement. 3 ACKNOWLEDGMENT OF RECEIPT OF DISCLOSURES AND FUTURES AGREEMENT CUSTOMER DISCLOSURE ACKNOWLEDGMENT Customer hereby acknowledges that it has received and understands the following disclosure statement(s) prescribed by the Commodity Futures Trading Commission (CFTC) by INITIALING IN THE SPACE BELOW: PLEASE INITIAL ______ ______ Risk Disclosure Statement (CFTC Rule 1.55) PLEASE INITIAL ______ ______ Options Disclosure Statement (CFTC Rule 33.7) FUTURES ACCOUNT AGREEMENT ACKNOWLEDGMENT The undersigned, CIS INVESTMENTS, INC. ("MANAGING OWNER") (print), hereby represents to CIS that it is the managing owner of a Delaware business trust known as JWH Global Portfolio Trust (the "Trust"). In consideration of CIS opening one or more futures accounts for and in the name of the Trust, the undersigned further represents that as the managing owner of the Trust, it has proper authority to sign this Agreement and all related documents on behalf of the Trust, and, for the account and risk of the Trust, to buy, sell and trade in futures and options thereon of every kind whatsoever, and to borrow money for such purposes in said account in accordance with your terms and conditions. Managing Owner has reviewed the registration requirements pertinent to commodity pool operators of the Commodity Futures Trading Commission and the National Futures Association in accordance with the requirements of the Commodity Exchange Act and the Regulations of the Commodity Futures Trading Commission and has determined that Managing Owner is in compliance with such requirements. ( ) I am exempt from CFTC registration as a commodity pool operator for the following reason: ______________________________________________________________________________ (x) I am registered with the CFTC as a commodity pool operator. CIS INVESTMENTS, INC., Managing Owner By: _______________________________________ ____________________________ L. Carlton Anderson Date Vice President 4 POWER OF ATTORNEY LIMITED TO PURCHASES AND SALES OF FUTURES CONTRACTS The Customer hereby authorizes JOHN W. HENRY & COMPANY, INC., whose address is ONE GLENDINNING PLACE, WESTPORT, CONNECTICUT 60880, as Customer's agent and attorney to buy, sell and trade in futures in accordance with CIS terms and conditions for the Customer's account and risk and in the Customer's name through CIS as broker. The Customer hereby agrees to indemnify and hold CIS harmless from and to pay CIS promptly on demand any and all losses arising therefrom or debit balance due thereon. In all such purchases, sales or trades, CIS is authorized to follow the instructions of the aforesaid agent in every respect concerning the Customer's account with CIS; and the aforesaid agent is authorized to act for the Customer and in the Customer's behalf in the same manner and with the same force and effect as the Customer might or could do with respect to such purchases, sales or trades as well as with respect to all other things necessary or incidental to the furtherance or conduct of such purchases, sales or trades. The Customer hereby ratifies and confirms any and all transactions with CIS heretofore or hereafter made by the aforesaid agent for the Customer's account. This authorization and indemnity is in addition to (and in no way limits or restricts) any rights which CIS may have under any other agreement or agreements between the Customer and CIS. This authorization and indemnity is a continuing one and shall remain in full force and effect until revoked by the Customer by a written notice addressed to CIS and delivered to CIS' office at Sears Tower, 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606, but such revocation shall not affect any liability in any way resulting from transactions initiated prior to such revocation. This authorization and indemnity shall inure to the benefit of CIS and any successors or assigns. Customer understands fully the obligations which Customer has assumed by executing this document. Customer understands that CIS is in no way responsible for any loss occasioned by the actions of the individual or organization named above and that CIS does not, by implication or otherwise, endorse the operating methods of such individual or organization. Customer further understands that exchanges have no jurisdiction over a non-member who is not employed by an exchange member and that if Customer gives to such individual or organization authority to exercise any of its rights over its account it does so at its own risk. Customer: JWH GLOBAL PORTFOLIO TRUST By: CIS Investments, Inc., Managing Owner By: ______________________________________ ___________________________ L. Carlton Anderson Date Vice President 5 CUSTOMER AGREEMENT SUPPLEMENT THIS CUSTOMER AGREEMENT SUPPLEMENT, made as of the ____ day of _____, 1996 by and between JWH Global Portfolio Trust (the "Trust") and Cargill Investor Services, Inc., a Delaware corporation (the "Broker"). W I T N E S S E T H : WHEREAS, the Trust has been organized to engage in the speculative trading of all commodity interests, including futures contracts, options on futures contracts or on physical commodities, and spot and forward contracts in currencies and precious metals ("Commodity Interests"); WHEREAS, the Trust will deposit substantially all of its assets in an account in the name of the Trust carried by the Broker; WHEREAS, the Trust will maintain one or more customer segregated accounts carried in the name of the Trust by the Broker pursuant to Section 4d of the Commodity Exchange Act, as amended, and applicable rules of the Commodity Futures Trading Commission ("CFTC"), including but not limited to CFTC Rules 1.20 - 1.30 (the "Company Accounts"); WHEREAS, the Trust will trade spot and forward contracts in currencies and precious metals with CIS Financial Services, Inc. ("CISFS") as counterparty and pursuant to agreements with CISFS has established one or more accounts with CISFS (the "CISFS Accounts"); WHEREAS, the Trust and the Broker have entered into a Futures Account Agreement -- U.S. (which, together with this Customer Agreement Supplement shall be referred to as the "Customer Agreement") setting forth certain terms and conditions upon which the Broker shall provide brokerage and related services to the Trust; and WHEREAS, the Trust and the Broker wish to enter into this Customer Agreement Supplement which sets forth certain additional terms and conditions upon which the Broker will serve as the broker for the trading of Commodity Interests on behalf of the Trust for the term of the Customer Agreement. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. TRANSFERS TO AND FROM CISFS ACCOUNTS. The Broker shall from time to time transmit Trust assets to CISFS Accounts as required by CISFS to margin positions in the CISFS Accounts. The Broker shall withdraw Trust assets from the CISFS Accounts to the extent not necessary for margin therein whenever such excess exceeds U.S. $10,000. 2. COMPENSATION TO THE BROKER. The Trust shall pay on the __ business day of each month to Broker a monthly Brokerage Fee equal to 0.542% of the Trust's assets as of the end of the previous month (the "Primary Brokerage Fee Rate"); provided that, with respect to the month-end assets of the Trust attributable to Units held by any Unitholder holding as of such month-end Units originally issued in an aggregate Net Asset Value in excess of $5,000,000, the Broker shall be paid a Brokerage Fee at a rate equal to 0.375% of the Trust's month-end assets attributable to such Units (the "Special Brokerage Fee Rate") provided the Units have been held by such Unitholder for at least a full calendar month or, if less, since the Trust commences operations. 3. INTEREST ON TRUST ASSETS. For purposes of this Section, the term Trust Assets shall mean the total equity, from time to time, held in all of the one or more accounts of the Trust carried by the Broker and in all of the one or more CISFS Accounts carried by CISFS consisting of all cash and cash equivalents, valued at cost (including any amounts deposited as original margin) plus or minus the net profit or loss accruing on open commodity interest positions. On the 5th business day of each month, the Broker shall credit the Trust with interest income, with respect to asset denominated in dollars, on 100% of the Trust's average daily Trust Assets on deposit with the Broker during the previous month at a rate equal to the average yield on 90-day U.S. Treasury bills auctioned during such previous month and, with respect to Trust Assets denominated in currencies other than dollars, on the average daily assets at the applicable rates as set forth in the Prospectus. In computing Trust Assets for purposes of computing interest income, Trust Assets shall exclude monies due the Trust with respect to unrealized gain on forward contracts. Trust Assets shall also exclude accrued but unpaid interest income and interest income, therefore, is not compounded within each month. The Trust will not receive any other interest income on its assets held by the Broker. 4. TERM. The Customer Agreement shall have an initial term ending on the last day of the 12th full calendar month following the commencement of trading by the Trust unless terminated earlier by the Trust upon 60 days' prior written notice. 5. INCORPORATION BY REFERENCE. The Futures Account Agreement - U.S. annexed hereto is hereby incorporated by reference herein and made a part hereof to the same extent as if such document were set forth in full herein. If any provision of this Customer Agreement Supplement is or at any time becomes inconsistent with the annexed document, the terms of this Customer Agreement Supplement shall control. 6. ACKNOWLEDGMENT. The Broker acknowledges that the obligations of this Agreement are not binding against the 2 Unitholders individually but are binding only upon the assets and property of the Trust, and that, in the event of any obligation or claim arising hereunder against the Trust, no resort shall be had to any Unitholder's personal property for the satisfaction of such obligation or claim. 7. COMPLETE AGREEMENT. The Customer Agreement constitutes the entire agreement between the parties with respect to the matters referred to herein, and no other agreement, oral or otherwise, shall be binding as between the parties unless in writing and signed by the party against whom enforcement is sought. 8. ASSIGNMENT. This Customer Agreement may not be assigned by a party without the express written consent of the other party. 9. AMENDMENT. This Customer Agreement may not be amended except by the written consent of the parties hereto. 10. SURVIVAL. The provisions of this Customer Agreement shall survive the termination of this Customer Agreement with respect to any matter arising while this Customer Agreement is in effect. 11. HEADINGS. Headings of sections herein are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation of this Customer Agreement. 12. NO WAIVER. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver granted hereunder must be in writing and shall be valid only in the specific instance in which given. 3 IN WITNESS WHEREOF, the parties hereto have executed this Customer Agreement Supplement as of the day and year first above written. JWH GLOBAL PORTFOLIO TRUST By: CIS Investments, Inc., a Managing Owner By: _______________________________ L. Carlton Anderson Vice President CARGILL INVESTOR SERVICES, INC. By:________________________________ Name:______________________________ Title:_____________________________ 4 EX-10.03 7 FORM OF FOREIGN EXCHANGE EXHIBIT 10.03 JWH Global Portfolio Trust - -------------------------------------- -------------------------- Customer Name Account Number - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- FOREIGN EXCHANGE ACCOUNT AGREEMENT - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CIS FINANCIAL SERVICES, INC. Suite 2300 233 S. Wacker Drive Chicago, Illinois 60606 FOREIGN EXCHANGE ACCOUNT AGREEMENT JWH Global Portfolio Trust - -------------------------------------- -------------------------- Customer Name Account Number TO: CIS Financial Services, Inc. 233 S. Wacker Drive, Suite 2300 Chicago, Illinois 60606 In consideration of the Agreement of CIS Financial Services, Inc. ("CISFS") to act as broker for the undersigned (hereinafter referred to as the "Customer") in any over-the-counter ("O.T.C.") Foreign Exchange transactions, the Customer agrees, in respect to all such O.T.C. Foreign Exchange accounts which the Customer now has or may at any time have with CISFS or its successors, including accounts from time to time closed and then reopened (each an "Account"), as follows: ================================================================================ 1. SCOPE OF THIS AGREEMENT; RISKS. All transactions, and all Contracts entered into between CISFS and the Customer, shall be governed by the terms of this Agreement except to the extent (if any) that CISFS shall agree in writing or notify the Customer in writing or by telex or telecopy that other or additional terms apply. Any proposals for, additions to, or modifications of this Agreement, absent written agreement by CISFS to the contrary, are hereby void. The terms of each Contract (as defined below) shall be as set forth in the confirmation relating thereto sent by CISFS to the Customer. The Customer understands and recognizes that transactions in Foreign Exchange are unregulated by any governmental entity or self-regulatory organization and that the activities of CISFS with respect to such transactions are therefore not supervised or subject to oversight. Bearing this in mind, the Customer represents that it is aware of the risks inherent in the trading of Foreign Exchange and is financially able to bear such risks and withstand any losses incurred. 2. DEFINITIONS. For the purposes of this Agreement the following definitions apply: (a) BUSINESS DAY means, with respect to the United States, any day on which banks are open for business (other than a Saturday or Sunday) in New York City, and with respect to any country other than the United States, any day on which banks are open for business (other than a Saturday or Sunday) in the principal financial center of the relevant country. (b) CONTRACT means an agreement between CISFS and the Customer for the delivery of a specified amount of a specified currency in return for a specified amount of a different specified currency for settlement on a specified Value Date. The amounts of the two currencies are related by a specified price or rate. Furthermore, "Contract" means a Spot Contract or a Forward Contract (as defined below), or both, as the context of this Agreement requires. (c) DAILY CUTOFF means the point in time selected each Business Day by CISFS after which any Contract entered into will be considered to have as its Trade Date the next Business Day. The Daily Cutoff will occur at a time selected solely by CISFS and may vary from day to day. (d) FEDERAL BANKRUPTCY CODE means The Bankruptcy Code of 1978, 11 U.S.C. Section 101, et seq. (e) FOREIGN CURRENCY means the lawful currencies of the applicable countries as specified in Schedule 1 attached to this Agreement, which schedule may be amended from time to time by mutual agreement of CISFS and the Customer. (f) A FORWARD CONTRACT means a Contract where the Value Date is at least one Business Day later than the Business Day that would be the Value Date if the Contract were a Spot Contract. No Forward Contract shall have a Value Date later than the Business Day which is six months after the spot Value Date. (g) MARKET VALUE means the U.S. Dollar Value, determined by CISFS in its sole discretion, that CISFS determines it would receive if it sold the relevant collateral for immediate delivery in the relevant market. (h) OPEN POSITION means any Contract that has not settled. (i) A SPOT CONTRACT means a Contract where the Value Date is the second Business Day following the Trade Date; provided, however, that with respect to any Spot Contract involving the European Currency Unit (ECU), the Value Date is the third Business Day following the Trade Date; provided further, however, that with respect to any Spot Contract involving only U.S. Dollars and Canadian Dollars, the Value Date is the next Business Day following the Trade Date. (j) TRADE DATE with respect to any Contract means the date on which the Contract is entered into between CISFS and the Customer, except in the case of any Contract entered into after the Daily Cutoff, but before the next U.S. Business Day, which shall have as its Trade Date the next U.S. Business Day. (k) U.S. DOLLAR VALUE means the amount of U.S. Dollars at any moment in time which would result from the conversion of the relevant Foreign Currency into U.S. Dollars at CISFS' then prevailing exchange rates for buying or selling, as applicable, such Foreign Currency. (l) VALUE DATE means, with respect to any Contract, the applicable settlement date specified in the confirmation relating to the particular Contract. A Value Date must be a Business Day in the United States and, for each Foreign Currency specified in the Contract, the country in which the Foreign Currency is the lawful currency. Other capitalized terms in this Agreement shall have those meanings provided for herein. 2 3. HYPOTHECATION; COLLATERAL; ADDITIONAL COLLATERAL. (a) The Customer agrees that securities, including Collateral securities, and other property in the Customer's Account(s) may be carried in CISFS' general loans and may be pledged, repledged, hypothecated or rehypothecated separately or in common with other securities and property for the sum due to CISFS thereon or for a greater sum and without regard to whether or not such securities or property remain in the possession and control of CISFS. (b) As security for the Customer's obligations to CISFS hereunder, the Customer agrees to deposit and maintain collateral with CISFS at its head office in Chicago, Illinois, or other location or account as CISFS may direct ("the Collateral Account") as follows: (i) Only instruments in such form as specified in Schedule 2 of this Agreement shall be acceptable to CISFS as Collateral for the purposes of this Agreement. CISFS may change said schedule by notifying the Customer in writing. Any change shall be effective immediately upon receipt of such notice by the Customer. The value of any Collateral provided by the Customer shall be subject to the haircuts listed in Schedule 2 of this Agreement. CISFS' acceptance of any Collateral may be subject to other limitations and/or qualifications specified in Schedule 2 of this Agreement. The Customer shall execute and deliver such separate pledge or deposit agreements including without limitation, security agreements or financing statements, as may be requested by CISFS. Such Collateral, together with the Contracts and all other monies, securities, treasury bills and other property of the Customer now or any time hereafter delivered, conveyed, transferred, assigned or paid to CISFS or coming into CISFS' possession in any manner whatsoever are hereby pledged to CISFS and shall be subject to a security interest in CISFS' favor for the discharge of the Customer's obligations to CISFS under this Agreement and the Contracts. The Customer hereby represents and warrants to CISFS that the Customer holds good and marketable title to all Collateral and that the Collateral delivered to CISFS is free and clear of any and all liens, claims, pledges or encumbrances of any kind. (ii) The Customer agrees to maintain at all times with CISFS Collateral in such form and in such amount as CISFS may from time to time request orally or in writing. The Customer acknowledges that any changes regarding the amount and form of Collateral may also result in a request for additional Collateral. The Customer shall respond to such requests by immediately supplying sufficient additional Collateral. (iii) In all cases, Collateral shall be deemed received by CISFS when such Collateral shall be actually received in the Collateral Account and CISFS shall be notified of such receipt as determined by CISFS in its sole discretion. (c) CISFS will monitor on a daily basis, or more frequently as CISFS solely determines, the Customer's Collateral Account in the following manner: (i) CISFS will compute the Customer's "Total U.S. Dollar Market Value of Collateral" by aggregating (a) the U.S. Dollars in the Collateral Account, (b) the U.S. Dollar Value of any Foreign Currencies in the Collateral Account, and (c) the U.S. Dollar Value of the Market Value, as determined solely by CISFS, of other Collateral in the Collateral Account, subject to any and all haircuts, limitations, and qualifications listed in Schedule 2 of this Agreement. (ii) CISFS will compute the Customer's "Net U.S. Dollar Value of Gains and Losses on Open Positions" as follows: For each Open Position, the gain or loss, if any, is computed by assuming that the relevant Contract is offset in the market at the relevant foreign exchange rate then prevailing for the Value Date of the Contract, as determined solely by CISFS. The U.S. Dollar Value of these computed gains and/or losses, if any, is computed by assuming that the gain or loss is converted into U.S. Dollars in the market at the relevant foreign exchange rate then prevailing for the Value Date of the Contract, as determined solely by CISFS. The U.S. Dollar Value of the gain or loss of each Open Position will be aggregated together to determine the "Net U.S. Dollar Value of Gains and Losses on Open Positions." (iii) CISFS will compute the Customer's "Net Collateral" by netting together the "Net U.S. Dollar Value of Gains and Losses on Open Positions" and the "Total U.S. Dollar Market Value of Collateral." (iv) CISFS will compute the Customer's "Total Required Initial Collateral" and "Total Required Maintenance Collateral" amounts in the following manner: (1) For each Open Position that involves a particular set of two currencies, (e.g. all Contracts involving only British Pounds and German Marks) the quantity of that currency specified as the "Defined Currency" in Schedule 3 of this Agreement shall be divided by the quantity specified as the "Defined Quantity" in Schedule 3 of this Agreement. The result, which will be negative in instances when the Customer is short the first currency of the currency pair, and positive otherwise, will be called the "Unit-Equivalent." (2) The "Unit-Equivalent" of each Open Position will be multiplied by the amount specified in Schedule 3 of this Agreement as the "Required Initial Collateral per Unit- Equivalent" to determine the "Required Initial Collateral" for the particular Open Position. (3) The "Total Required Initial Collateral" is determined by aggregating the "Required Initial Collateral" for all Open Positions. (4) The "Unit-Equivalent" of each Open Position will be multiplied by the amount specified in Schedule 3 of this Agreement as the "Required Maintenance Collateral per Unit- Equivalent" to determine the "Required Maintenance Collateral" for the particular Open Position. (5) The "Total Required Maintenance Collateral" is determined by aggregating the "Required Maintenance Collateral" for all Open Positions. (6) CISFS may change Schedule 3 of this Agreement at any time by notifying the Customer verbally or in writing. Any change shall be effective immediately upon such notification. The Customer acknowledges that any changes regarding Schedule 3 of this Agreement may result in a request for additional Collateral. The Customer shall respond to such requests by immediately supplying sufficient additional Collateral. (d) The Customer agrees to maintain the Collateral Account at all times so that the following three conditions are met: (i) the "Total U.S. Dollar Market Value of Collateral" is greater than or equal to (USD) 250,000.00 (Two hundred fifty thousand), AND (ii) the "Total U.S. Dollar Market Value of Collateral" is greater than or equal to the "Total Required Initial Collateral," AND (iii) The "Net Collateral" is greater than or equal to the "Total Required Maintenance Collateral." (e) If at any time one or more of the conditions listed in part (d) of section 3 of this Agreement are not met, the Customer shall be deemed to have a "Collateral Deficiency" and shall be obligated to immediately deliver sufficient additional Collateral to CISFS, and/or offset open positions so as to meet all of the said conditions. (i) When the Customer has a "Collateral Deficiency," it shall not create any new positions, and may trade only to offset existing 3 positions. (ii) If CISFS determines, in its sole discretion, that the Customer has a Collateral Deficiency, CISFS shall have the right to offset, close out, and/or liquidate any open positions in the Customer's Account, and any such offsetting, closing out, and/or liquidating transactions may be made in a manner solely determined by CISFS. (iii) The Customer agrees that additions to Collateral are due and must be paid immediately upon determination by CISFS, in its sole discretion, that there is a need for additional Collateral in any of the Customer's Accounts. The Customer hereby represents that it is able to effect same-day payment of U.S. Dollar funds to CISFS. (f) The Customer shall not make a request for the withdrawal of Collateral if the requested withdrawal will cause any of the conditions listed in part (d) of section 3 of this Agreement to not be met. 4. TRADING. (a) The Customer acknowledges CISFS' right to limit, without notice to the Customer, the number and/or size of Open Positions which the Customer may maintain or acquire through CISFS. (b) CISFS reserves the right to refuse to accept any order. (c) With respect to any Open Position which has as its Value Date the same date as the Value Date which would apply for Spot Contracts involving the same two currencies and entered into on the current day, CISFS reserves the right to require the Customer to offset the Open Position in the market or roll it in the market to a later Value Date. (d) If for any reason CISFS is unable to execute a Contract with its counterparty at the price quoted to the Customer, CISFS will have no obligation to the Customer to enter into the Contract with the Customer at the quoted price. (e) The Customer recognizes that exchange rates it may view on electronic market information screens (e.g. Reuters, Telerate, etc.) are only indications of exchange rates, and may or may not reflect actual exchange rates available to CISFS or the Customer. 5. OFFSETTING CONTRACTS. Whenever there may exist in any of or between any of the Customer's foreign exchange accounts two or more open and opposite Contracts providing for the purchase and sale of the same foreign currency on the same Value Date, CISFS may, in its sole discretion, elect to treat the Contracts as a single transaction, and upon the Value Date of the Contracts, the net difference between the amounts payable under the contracts, and/or the net difference between the quantities of currency deliverable thereunder, shall be paid and/or delivered, as the case may be. 6. DELIVERY OF FOREIGN CURRENCY. Delivery of foreign currency shall be made to the bank specified by the purchaser in a major city in the country in which the foreign currency is the legal tender. Unless otherwise agreed to by CISFS and the Customer in writing, the foreign currency shall be deliverable by cable or wire transfer. All payments to be made in U.S. Dollars shall be made by wire transfer of immediately available funds to a bank in a major U.S. city specified by the purchaser. CISFS may require payment of amounts due to it on any day simultaneously with or prior to payment of amounts due from it on that day. CISFS and the Customer shall both exchange, make use of, and periodically update and confirm standing payment instructions. 7. EVENTS OF DEFAULT. The occurrence of one or more of the following events shall constitute a "Default" under this Agreement: (a) The Customer shall fail to pay any amount hereunder or under any Contract when due; (b) The Customer shall (i) have an order for relief entered with respect to it under the Federal Bankruptcy Code, (ii) not pay, or admit in writing its inability to pay its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property, (v) institute any proceedings seeking an order for relief under the Federal Bankruptcy Code or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any corporate action to authorize or affect any of the foregoing actions set forth in this subparagraph, or (vii) fail to contest in good faith any appointment or proceeding described in (c) below; (c) Without the application, approval or consent of the Customer, a receiver, trustee, examiner, liquidator, or similar official shall be appointed for the Customer or any substantial part of its property, or a proceeding described in (b) above shall be instituted against the Customer and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 30 consecutive days; (d) Any court, government or governmental agency shall condemn, seize or otherwise appropriate or take custody or control of all or any substantial portion of the property of the Customer; (e) Any representation or warranty made by the Customer in this Agreement or the Contracts shall be materially false as of the date on which it was made, or Customer shall fail or omit to state any fact which is necessary to make the representations and warranties herein not misleading; (f) The Customer shall fail to comply with any of the terms or provisions of this Agreement or of any Contract; (g) The Customer fails to deliver sufficient additional Collateral upon request from CISFS; (h) The Customer shall fail to perform any term or provision of any Agreement to which it is a party, including but not limited to any foreign exchange contract, the effect of which is to cause an event of default or termination or similar event howsoever defined pursuant to any such agreement or (i) CISFS, in its sole discretion, considers it necessary for its protection to terminate this Agreement and exercises its remedies as provided below. 8. REMEDIES. In the event any Default occurs, CISFS is authorized to offset and to sell or purchase for the Customer's account any Contract in any manner which CISFS shall deem necessary in its sole discretion and to dispose of, as CISFS deems appropriate, any or all of the Collateral held by CISFS and any of the Customer's other property or assets at any time held by CISFS or Cargill Investor Services, Inc. It is understood and agreed that any prior tender, demand or call of any kind from CISFS, or prior notice from CISFS, of the time and place of such sale or purchase shall not be considered a waiver of CISFS' right to sell or purchase any Collateral or to offset at any time as herein provided, nor shall CISFS' failure to make such a demand or call waive CISFS' right to take such action without such tender, demand, call or notice in the future. After deducting costs and expenses incurred in connection with any such actions, CISFS may apply any remaining proceeds to the payment of any other obligations the Customer may owe to CISFS pursuant to this Agreement or any Contract, and in the event such proceeds are insufficient for payment of all such obligations, the Customer shall, within 24 hours of CISFS giving notice orally or in writing, pay to CISFS the amount of such deficit, together with interest thereon for each day such deficit is outstanding and remains unpaid until paid at a rate per annum, on a 365 day year/actual number of days elapsed basis, equal to an overdraft 4 rate determined by CISFS in its sole discretion for the relevant Foreign Currency, or the Prime Rate (as quoted by Chase Manhattan Bank, New York) plus two percent for U.S. Dollars, plus all costs of collection, including reasonable attorneys' fees. Without limiting anything in the foregoing, if any Default as described in Section 8(b) or 8(c) occurs, then all amounts due or to become due by the Customer under this Agreement and under all Contracts shall immediately become due and payable, the Collateral Account shall be deemed closed, all Contracts shall be deemed Offset and all Collateral shall be deemed to have been applied to the obligations for the Customer under this Agreement and any Contracts all without any election, notice or action by CISFS and all without any liability on CISFS' part to the Customer or any third party. If any other Default shall occur, CISFS may, by notice either orally or in writing to the Customer, declare any or all amounts due or to become due by the Customer under this Agreement or under any Contracts to be due and payable, whereupon all of such amounts as CISFS shall designate and such notice shall become immediately due and payable and CISFS may take any and all of the following actions, all without any liability on CISFS' part to the Customer or any third party; (i) close the Cash and Collateral Account; (ii) offset, sell or assign any or all Contracts; and (iii) apply the Collateral as provided above. Nothing in the foregoing shall be deemed to waive, limit, terminate, modify, or otherwise change any rights or remedies available to CISFS of law or in equity, or the Customer's liability to CISFS for the payment of any debit balance owing in the accounts of the Customer with CISFS. The Customer is liable for any deficiency remaining in any such account or on any Contracts in the event of the offset or liquidation thereof, in whole or in part. 9. AUTHORIZATION TO TRANSFER BETWEEN ACCOUNTS. CISFS may, without notice, transfer any money or other property interchangeably between any accounts of the Customer with CISFS or any of its affiliates, including Cargill Investor Services, Inc., except that any transfer from a commodity or securities account which is subject to regulations under the Commodity Exchange Act, Securities Act of 1933 or Securities Exchange Act of 1934, to a non-regulated account and/or a Foreign Exchange Account shall have such other authorization by the Customer as is required by such laws and their regulations. The Customer authorizes CISFS to debit immediately any margin or collateral payment called for to any of its accounts including Foreign Exchange Accounts showing a balance in its favor. 10. MATTERS PRECEDENTS; CORPORATE RESOLUTION. CISFS shall not be required to enter into any Contracts with the Customer unless and until all legal matters incident to such Contracts shall be satisfactory to CISFS and its counsel, the provisions of paragraph 3(b) are met to the satisfaction of CISFS and its counsel, a duly executed copy of this Agreement is furnished to CISFS by the Customer, the Customer establishes the Collateral Account, and the Customer's standing payment instructions are furnished to CISFS. In addition, within 10 days of the date of this Agreement, the Customer (if a partnership or corporation) shall deliver to CISFS a certified copy of (i) an authorizing resolution of the Customer Board of Directors substantially in the form attached hereto or otherwise as acceptable to CISFS; and (ii) the names, titles, signatures, and phone numbers, including home phone numbers where applicable, of the persons duly authorized by the Customer to execute and deliver this Agreement and to initiate transactions in O.T.C. foreign exchange for the Customer's account. CISFS shall be entitled to rely on any such evidence until informed in writing by the Customer of any change. 11. DEATH; INCOMPETENCY. If the Customer should die or become incompetent, any pending order shall be validly executed by CISFS, up to the time it receives written notice of the death or incompetence of the Customer, and CISFS is hereby indemnified against any loss arising therefrom. 12. SEPARATE CONTRACTS. Each Contract for the purchase and sale of Foreign Currency hereunder is a separate Contract even though more than one such Contract may be included on a single confirmation. 13. JOINT ACCOUNTS; TRUST ACCOUNTS. If this Agreement is extended to more than one natural person as the Customer, all such natural persons agree to be jointly and severally liable for the obligations assumed in this Agreement. If this Facility is extended to a trust, joint ownership, or partnership, the Customer hereby agrees to indemnify, defend, save and hold free and harmless CISFS for any losses, costs and expenses resulting from breach of any fiduciary duty or allegation thereof. 14. LIMITATION OF LIABILITY. CISFS will not be responsible for delays or failures in the delivery of any Foreign Currency within the time specified for the delivery thereof to the extent the failure is caused by a breakdown of communication facilities or by any other cause beyond CISFS' reasonable control. 15. COLLECTION EXPENSES. The Customer agrees to pay any and all losses, costs, expenses, internal charges and fees, including attorneys' fees, which attorneys may be employees of CISFS or its affiliates, paid or incurred by CISFS in connection with the collection and enforcement of this Agreement, the Collateral and the Contract. 16. ARBITRATION. Any controversy arising out of or relating to transactions in this Account, this Agreement or the breach hereof or thereof shall be settled by arbitration pursuant to the commercial arbitration rules of the American Arbitration Association. Judgment upon any award entered by the arbitrators may be entered in any court of competent jurisdiction. Any such action must be brought within two years after the date of cause of action accrued. 17. FULL DISCLOSURE. The Customer additionally represents to CISFS that the information provided by the customer in connection with this agreement is full, complete and accurate and CISFS is entitled to rely on this information until CISFS receives written notice from the customer of any change in such information. 18. NOTIFICATION. Any notices and other communications may be transmitted to the Customer at the address, telephone or telefax number given herein, or at such other address, telephone or telefax number as the Customer hereafter shall notify CISFS in writing, and all notices or communications shall be deemed transmitted when telephoned, faxed or deposited in the mail by CISFS or CISFS' representative, whether actually received by the Customer or not. Confirmations, and account statements shall be deemed accurate unless objected to in writing within ONE business day from the date of such notice and such objection(s) delivered to CISFS at 233 South Wacker Drive, Suite 2300, Chicago, Illinois, 60604, Attention: Treasurer, telefax number (312) 460-4739, telephone number (312) 460-4000. In the event the Customer fails to receive a faxed confirmation within ONE Business Day of the date of the transaction, the Customer agrees to notify CISFS at the above address via fax immediately. 19. GOVERNING LAW. This Agreement is made under and shall be governed by laws of the State of New York in all respects, including construction and performance. This Agreement shall be binding upon you and/or your estate, executors, administrators, successors and/or assigns. 20. DISCLAIMER. The Customer acknowledges that CISFS is ultimately owned by Cargill, Incorporated and is under the common control of Cargill, Incorporated with Cargill Investor Services, Inc. The Customer further acknowledges that the 5 market recommendations of CISFS, if any, may or may not be consistent with the market position or intentions of Cargill, Incorporated, Cargill Investors Services, Inc. or their subsidiaries and/or affiliates. The market recommendations of CISFS, if any, are based upon information believed to be reliable, but CISFS cannot and does not guarantee the accuracy or completeness thereof or represent that following such recommendations will eliminate or reduce the risks inherent in transactions in foreign currency. 21. TELEPHONE RECORDINGS. CISFS is hereby granted permission to record telephone conversations between its employees and the Customer. The Customer agrees that such recordings may be used as evidence by either party in any disputes between CISFS and the Customer. 6 The undersigned, CIS Investments, Inc. (Print), hereby represents to CISFS that it is the managing owner of a Delaware business trust known as JWH Global Portfolio Trust (the "Trust"). In consideration of the opening of one or more foreign exchange accounts with CISFS for and in the name of the Trust, the undersigned further represents that as the managing owner of the Trust, it has proper authority to sign this Agreement and all related documents on behalf of the Trust and, for the account and risk of the Trust, to buy, sell, and trade in foreign currencies in said account in accordance with CISFS' terms and conditions. CIS INVESTMENTS, INC., Managing Owner By:_____________________________________ _____________________________ L. Carlton Anderson Date Vice President POWER OF ATTORNEY: Power of Attorney Limited to Purchases and Sales of Foreign Exchange The undersigned hereby authorizes John W. Henry & Company, INC. as the undersigned's agent and attorney in fact to buy, sell and trade in foreign currencies in accordance with CISFS' terms and conditions for the undersigned's account and risk and in the undersigned's name on CISFS' books. The undersigned hereby agrees to indemnify and hold CISFS harmless from and to pay CISFS promptly on demand any and all losses arising therefrom or debit balance due thereon. In all such purchases, sales or trades CISFS is authorized to follow the instructions of the aforesaid agent in every respect concerning the undersigned's account with CISFS; and the aforesaid agent is authorized to act for the undersigned and in the undersigned's behalf in the same manner and with the same force and effect as the undersigned might or could do with respect to such purchases, sales or trades as well as with respect to all other things necessary or incidental to the furtherance or conduct of such purchases, sales or trades. The undersigned hereby ratifies and confirms any and all transactions with CISFS heretofore or hereafter made by the aforesaid agent for the undersigned's account. This authorization and indemnity is in addition to (and in no way limits or restricts) any rights which CISFS may have under any other agreement or agreements between the undersigned and CISFS. This authorization and indemnity is a continuing one and shall remain in full force and effect until revoked by the undersigned by a written notice addressed to CISFS and delivered to its office at 233 S. Wacker Drive, Suite 2300, Chicago, Illinois 60606, but such revocation shall not affect any liability in any way resulting from transactions initiated prior to such revocation. This authorization and indemnity shall enure to the benefit of CISFS and of any successors or assigns. Customer: JWH GLOBAL PORTFOLIO TRUST By: CIS Investments, Inc. By:_____________________________________ __________________________ L. Carlton Anderson Date Vice President 8 Schedule 1 The Foreign Currencies under this Agreement are: Australian Dollar Belgian Franc British Pound Canadian Dollar Danish Kroner Dutch Guilder European Currency Unit (ECU) Finnish Markka French Franc German Mark Greek Drachma Hong Kong Dollar Indian Rupee Italian Lira Japanese Yen Malaysian Ringgit New Zealand Dollar Norwegian Krona Saudi Riyal Singapore Dollar Spanish Peseta Swedish Kroner Swiss Franc Thai Baht 9 Schedule 2 CISFS considers as acceptable collateral the following: 1. Immediately-available U.S. Dollar funds. 2. Immediately available Foreign Currency deposits (only those currencies listed in Schedule 1). 10 SCHEDULE 3 11/1/95
REQUIRED REQUIRED REQUIRED REQUIRED INITIAL MAINTENANCE INITIAL MAINTENANCE COLLATERAL COLLATERAL COLLATERAL COLLATERAL CURRENCY DEFINED DEFINED PER UNIT- PER UNIT- CURRENCY DEFINED DEFINED PER UNIT- PER UNIT- PAIR CURRENCY QUANTITY EQUIVALENT EQUIVALENT PAIR CURRENCY QUANTITYY EQUIVALENT EQUIVALENT - ----------------------------------------------------------------------------------------------------------------------------------- AUD-CAD CAD 100,000 1,215 911 GBP-AUD AUD 100,000 1,485 1,114 AUD-CHF AUD 100,000 4,590 3,443 GBP-BEF BEF 2,500,000 2,800 2,100 AUD-DEM AUD 100,000 2,700 2,025 GBP-CAD CAD 100,000 2,565 1,924 AUD-ESP ESP 8,000,000 1,900 1,425 GBP-CHP GBP 62,500 1,755 1,316 AUD-FRF AUD 100,000 2,700 2,025 GBP-DEM DEM 125,000 1,755 1,316 AUD-JPY AUD 100,000 4,050 3,038 GBP-ECU ECU 62,500 1,500 1,125 AUD-NZD AUD 100,000 1,300 975 GBP-ESP ESP 8,000,000 1,300 925 AUD-USD AUD 100,000 1,148 861 GBP-FIM FIM 450,000 1,700 1,275 CAD-CHF CAD 100,000 3,915 2,936 GBP-FRF FRF 500,000 1,350 1,013 CAD-FRF CAD 100,000 2,025 1,519 GBP-ITL ITL 100,000,000 1,800 1,350 CAD-JPY CAD 100,000 3,915 2,936 GBP-JPY GBP 62,500 3,780 2,835 CHF-BEF BEF 2,500,000 1,900 1,425 GBP-NLG NLG 150,000 2,200 1,650 CHF-DKK DKK 500,000 2,200 1,650 GBP-NOK NOK 500,000 1,200 900 CHF-ESP ESP 8,000,000 2,400 1,800 GBP-NZD NZD 125,000 2,100 1,575 CHF-FIM FIM 450,000 2,200 1,650 GBP-SEK SEK 500,000 1,600 1,200 CHF-FRF FRF 500,000 1,350 1,013 GBP-USD GBP 62,500 2,093 1,570 CHF-ITL ITL 100,000,000 2,800 2,100 NLG-BEF BEF 2,500,000 2,800 2,100 CHF-JPY CHF 125,000 2,565 1,924 NLG-DKK DKK 500,000 2,300 1,725 CHF-NLG NLG 150,000 3,100 2,325 NLG-FRF NLG 150,000 2,700 2,025 DEM-BEF BEF 2,500,000 1,600 1,200 NZD-BEF NZD 125,000 2,200 1,650 DEM-CAD CAD 100,000 2,160 1,620 NZD-CAD CAD 100,000 1,100 825 DEM-CHF DEM 125,000 1,215 911 NZD-CHF NZD 125,000 2,500 1,875 DEM-DKK DEM 125,000 1,400 1,050 NZD-DEM NZD 125,000 2,100 1,575 DEM-ESP ESP 8,000,000 1,800 1,350 NZD-ESP ESP 8,000,000 1,600 1,200 DEM-FIM DEM 125,000 1,300 975 NZD-FIM NZD 125,000 2,000 1,500 DEM-FRF DEM 125,000 945 709 NZD-FRF NZD 125,000 2,100 1,575 DEM-ITL ITL 100,000,000 2,500 1,875 NZD-ITL ITL 100,000,000 1,800 1,350 DEM-JPY DEM 125,000 2,430 1,823 NZD-JPY NZD 125,000 2,200 1,650 DEM-NLG DEM 125,000 2,400 1,800 NZD-SEK SEK 500,000 1,800 1,350 DEM-NOK NOK 500,000 800 600 NZD-USD NZD 125,000 900 675 DEM-SEK SEK 500,000 1,600 1,200 SEK-DKK SEK 500,000 1,400 1,050 DKK-BEF BEF 2,500,000 1,500 1,125 SEK-ESP ESP 8,000,000 1,400 1,050 ECU-AUD AUD 100,000 2,100 1,575 SEK-FIM SEK 500,000 1,300 975 ECU-BEF ECU 62,500 1,600 1,200 SEK-JPY SEK 500,000 2,000 1,500 ECU-CAD CAD 100,000 2,300 1,725 SEK-NOK SEK 500,000 1,300 975 ECU-CHF ECU 62,500 1,800 1,350 USD-BEF BEF 2,500,000 2,700 2,025 ECU-DEM ECU 62,500 1,600 1,200 USD-CAD CAD 100,000 912 684 ECU-DKK ECU 62,500 1,400 1,050 USD-CHF CHF 125,000 3,915 2,936 ECU-ESP ESP 8,000,000 1,400 1,050 USD-DEM DEM 125,000 2,565 1,924 ECU-FIM ECU 62,500 1,900 1,425 USD-DKK DKK 500,000 2,400 1,800 ECU-FRE ECU 62,500 1,500 1,125 USD-ESP ESP 8,000,000 1,900 1,425 ECU-ITL ITL 100,000,000 1,700 1,275 USD-FIM FIM 450,000 3,100 2,325 ECU-JPY ECU 62,500 1,800 1,350 USD-FRF FRF 500,000 2,025 1,519 ECU-KLG ECU 62,500 2,000 1,500 USD-GRD GRD 17,500,000 2,300 1,725 ECU-NZD NZD 125,000 1,600 1,200 USD-HKD HKD 600,000 200 150 ECU-SEK SEK 500,000 1,500 1,125 USD-INR INR 2,500,000 1,200 900 ECU-USD ECU 62,500 2,200 1,650 USD-ITL ITL 100,000,000 1,900 1,425 ESP-ITL ITL 100,000,000 1,800 1,350 USD-JPY JPY 12,500,000 4,725 3,544 ESP-JPY ESP 8,000,000 1,700 1,275 USD-MYR MYR 200,000 900 675 FIM-NOK NOK 500,000 900 675 USD-NLG NLG 150,000 1,000 750 FRF-BEF BEF 2,500,000 1,500 1,125 USD-NOK NOK 500,000 2,200 1,650 FRF-ESP ESP 8,000,000 1,500 1,125 USD-SAR SAR 300,000 2,700 2,025 FRF-ITL ITL 100,000,000 2,300 1,725 USD-SEK SEK 500,000 1,900 1,425 FRF-JPY FRF 500,000 2,363 1,772 USD-SGD SGD 125,000 1,100 825 FRF-SEK SEK 500,000 1,700 1,275 USD-THB THB 2,000,000 1,700 1,275
11 FOREIGN EXCHANGE ACCOUNT AGREEMENT SUPPLEMENT THIS FOREIGN EXCHANGE ACCOUNT AGREEMENT SUPPLEMENT, made as of the ____ day of ________, 1996, by and between JWH Global Portfolio Trust (the "Trust") and CIS Financial Services, Inc., a Delaware Corporation (the "Dealer"). W I T N E S S E T H : WHEREAS, the Trust has been organized to engage in the speculative trading of all commodity interests, including futures contracts, options on futures contracts, and spot and forward contracts in currencies and precious metals ("Commodity Interests"); WHEREAS, the Trust will allocate a portion of its total assets (the "Trading Assets") to trading spot and forward contracts in currencies (the "Forex Contracts"); WHEREAS, the Trust and Cargill Investor Services, Inc. ("CIS"), an affiliate of the Dealer, have entered into a customer agreement (the "Customer Agreement") of even date herewith under which CIS will act as Commodity Interest broker for the Trust, will hold the Trust's assets in brokerage accounts, and from time to time either transmit or transfer a portion of such assets to or from the Dealer; WHEREAS, the Trust and the Dealer have, as of the date hereof, entered into a Foreign Exchange Account Agreement (which, together with this Foreign Exchange Account Agreement Supplement shall be referred to as the "Forex Agreement") setting forth certain terms and conditions upon which the Dealer shall provide services to the Trust related to the Trust's trading of Forex Contracts; and WHEREAS, the Trust and the Dealer wish to enter into this Foreign Exchange Account Agreement Supplement which sets forth certain terms and conditions upon which the Dealer will serve as a dealer for the trading of Forex Contracts on behalf of the Trust for the term of the Forex Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Initially capitalized terms used herein and not otherwise defined shall have the meanings assigned them in the Foreign Exchange Account Agreement annexed hereto. 2. DUTIES OF THE DEALER WITH RESPECT TO FOREX CONTRACT TRADING. With respect to trading by the Trust in Forex Contracts, the Dealer shall at the request of the Trust's trading advisor obtain competitive quotes for Forex Contracts from Forex Contract dealers with whom the Dealer has a Forex Contract trading relationship ("Counterparties") and relay those quotes to the trading advisor. If requested by the trading advisor, the Dealer shall in its own name enter into a Forex Contract with the Counterparty selected by the Dealer and shall simultaneously enter into an identical Forex Contract with the Trust at the same price. 3. COMPENSATION TO THE DEALER. Dealer shall be compensated for its services hereunder by CIS and not by the Trust. 4. NET-OUT ON BANKRUPTCY a. Notwithstanding any other provisions hereof, of any Forex Contract or any other agreement between the parties, in the event either party (the "Defaulting Party") shall: (a) become bankrupt or insolvent, however evidenced, or be unable to pay its debts as they fall due, (b) file a petition or otherwise commence a proceeding under any bankruptcy, insolvency or similar law or have any such petition filed or proceeding commenced against it, or have a liquidator, administrator, receiver or trustee appointed with respect to it or any substantial portion of its assets, or (c) default in the payment or performance of any obligation to the other party (the "Non-Defaulting Party") hereunder, under a Forex Contract or otherwise; then in any such event, the Non-Defaulting Party shall have the right immediately and at any time(s) thereafter to liquidate any or all outstanding Forex Contracts from time to time by: (i) closing out each Forex Contract being liquidated at its Market Value at such time (so that a settlement payment in an amount equal to the difference between such Market Value and the Contract Value of such Forex Contract shall be due to the purchaser of Currency under that Forex Contract if such Market Value is greater than such Contract Value and with such settlement payment being due to the seller of Currency under that Forex Contract if the opposite is the case) and (ii) setting off (A) all settlement payments which Dealer owes to the Trust as a result of such close-out, plus (at the Non-Defaulting party's election) any other amounts which Dealer owes the Trust hereunder or under a Forex Contract, plus any Collateral Dealer then holds, against (B) all settlement payments which the Trust owes to Dealer as a result of such close-out hereunder or under a Forex Contract, so that all such payments shall be netted to a single liquidated amount payable by one party to the other. The net amount due after such liquidation shall be paid by the close of business on the next business day. -2- b. The Non-Defaulting Party's rights under this Section 4 shall be in addition to, and not in limitation of, any other rights which the Non-Defaulting Party may have (whether by agreement, operation of law or otherwise). 5. TERM. The Forex Agreement shall continue in effect for the term of the Customer Agreement between the Trust and CIS and will terminate simultaneously with the Customer Agreement. In addition the Forex Agreement may be terminated by the Trust at any time on 60 days' written notice to the Dealer, provided that any open Forex Contract which the Dealer held prior to the notice of termination shall be held by the Dealer and this Forex Agreement shall continue to be in effect with respect to such Forex Contracts until the applicable settlement date of such Forex Contracts. 6. INCORPORATION BY REFERENCE. The Foreign Exchange Account Agreement annexed hereto is hereby incorporated by reference herein and made a part hereof to the same extent as if such document were set forth in full herein. If any provision of this Foreign Exchange Account Agreement Supplement is or at any time becomes inconsistent with the annexed document, the terms of this Foreign Exchange Account Agreement Supplement shall control. 7. ACKNOWLEDGMENT. The Dealer acknowledges that the obligations of this Agreement are not binding against the Unitholders individually but are binding only upon the assets and property of the Trust, and that, in the event of any obligation or claim arising hereunder against the Trust, no resort shall be had to any Unitholder's personal property for the satisfaction of such obligation or claim. 8. COMPLETE AGREEMENT. The Forex Agreement constitutes the entire agreement between the parties with respect to the matters referred to herein, and no other agreement, oral or otherwise, shall be binding as between the parties unless in writing and signed by the party against whom enforcement is sought. 9. ASSIGNMENT. This Forex Agreement may not be assigned by a party without the express written consent of the other party. 10. AMENDMENT. This Forex Agreement may not be amended except by the written consent of the parties hereto. 11. SURVIVAL. The provisions of this Forex Agreement shall survive the termination of this Forex Agreement with respect to any matter arising while this Forex Agreement is in effect. 12. HEADINGS. Headings of sections herein are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation of this Forex Agreement. -3- 13. NO WAIVER. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver granted hereunder must be in writing and shall be valid only in the specific instance in which given. IN WITNESS WHEREOF, the parties hereto have executed this Foreign Exchange Account Agreement Supplement as of the day and year first above written. JWH GLOBAL PORTFOLIO TRUST By: CIS INVESTMENTS, INC., a Managing Owner By: -------------------------- L. Carlton Anderson Vice President CIS FINANCIAL SERVICES, INC. By: -------------------------- Name: -------------------------- Title: -------------------------- -4- EX-10.04 8 FORM OF CASH BULLION EXHIBIT 10.04 JWH Global Portfolio Trust - ----------------------------------- ------------------------- Customer Name Account Number - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ CASH BULLION ACCOUNT AGREEMENT - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ CIS FINANCIAL SERVICES, INC. Suite 2300 233 S. Wacker Drive Chicago, Illinois 60606 CASH BULLION ACCOUNT AGREEMENT JWH Global Portfolio Trust - -------------------------------- -------------------------- Customer Name Account Number TO: CIS Financial Services, Inc. 233 S. Wacker Drive, Suite 2300 Chicago, Illinois 60606 In consideration of the Agreement of CIS Financial Services, Inc. ("CISFS") to act as broker for the undersigned (hereinafter referred to as the "Customer") in any over-the-counter ("O.T.C.") Cash Bullion transactions, the Customer agrees, in respect to all such O.T.C. Cash Bullion accounts which the Customer now has or may at any time have with CISFS or its successors, including accounts from time to time closed and then reopened (each an "Account"), as follows: - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ 1. SCOPE OF THIS AGREEMENT; RISKS. All transactions, and all Contracts entered into between CISFS and the Customer, shall be governed by the terms of this Agreement except to the extent (if any) that CISFS shall agree in writing or notify the Customer in writing or by telex or facsimile that other or additional terms apply. Any proposals for, additions to, or modifications of this Agreement, absent written agreement by CISFS to the contrary, are hereby void. The terms of each Contract (as defined below) shall be as set forth in the confirmation relating thereto sent by CISFS to the Customer. The Customer understands and recognizes that transactions in Cash Bullion are unregulated by any governmental entity or self-regulatory organization and that the activities of CISFS with respect to such transactions are therefore not supervised or subject to oversight. Bearing this in mind, the Customer represents that it is aware of the risks inherent in the trading of Cash Bullion and is financially able to bear such risks and withstand any losses incurred. 2. DEFINITIONS. For the purposes of this Agreement the following definitions apply: (a) BUSINESS DAY means, with respect to the United States, any day on which banks are open for business (other than a Saturday or Sunday) in New York City, and with respect to any country other than the United States, any day on which banks are open for business (other than a Saturday or Sunday) in the principal financial center of the relevant country. (b) CONTRACT means an agreement between CISFS and the Customer for the delivery of a specified number of troy ounces of bullion of a specified precious metal in return for a specified amount of U.S. dollars on a specified Value Date. Furthermore, "Contract" means a Spot Contract or a Forward Contract (as defined below), or both, as the context of this Agreement requires. (c) DAILY CUTOFF means the point in time selected each Business Day by CISFS after which any Contract entered into will be considered to have as its Trade Date the next Business Day. The Daily Cutoff will occur at a time selected solely by CISFS and may vary from day to day. (d) FEDERAL BANKRUPTCY CODE means The Bankruptcy Code of 1978, 11 U.S.C. Section 101, et seq. (e) A FORWARD CONTRACT means a Contract where the Value Date is at least one Business Day later than the Business Day that would be the Value Date if the Contract were a Spot Contract. No Forward Contract shall have a Value Date later than the Business Day which is nine months after the spot Value Date. (f) MARKET VALUE means the U.S. Dollar Value, determined by CISFS in its sole discretion, that CISFS determines it would receive if it sold the relevant collateral for immediate delivery in the relevant market. (g) OPEN POSITION means any Contract that has not settled. (h) A SPOT CONTRACT means a Contract where the Value Date is the second Business Day following the Trade Date.; (i) TRADE DATE with respect to any Contract means the date on which the Contract is entered into between CISFS and the Customer, except in the case of any Contract entered into after the Daily Cutoff. (j) U.S. DOLLAR VALUE means the amount of U.S. Dollars at any moment in time which would result from the conversion of the relevant number of troy ounces of bullion into U.S. Dollars at CISFS' then prevailing bullion rates for buying or selling bullion. (k) VALUE DATE means, with respect to any Contract, the applicable settlement date specified in the confirmation relating to the particular Contract. A Value Date must be a Business Day in the United Kingdom. Other capitalized terms in this Agreement shall have those meanings provided for herein. 3. HYPOTHECATION; COLLATERAL; ADDITIONAL COLLATERAL. (a) The Customer agrees that securities, including Collateral securities, and other property in the Customer's Account(s) may be carried in CISFS' general loans and may be pledged, repledged, hypothecated or rehypothecated separately or in common with other securities and property for the sum due to CISFS thereon or for a greater sum and without regard to whether or not such securities or property remain in the possession and control of CISFS. (b) As security for the Customer's obligations to CISFS hereunder, the Customer agrees to deposit and maintain collateral with CISFS at its head office in Chicago, Illinois, or other location or account as CISFS may direct ("the Collateral Account") as follows: (i) Only instruments in such form as specified in Schedule 2 of this Agreement shall be acceptable to CISFS as Collateral for the purposes of this Agreement. CISFS may change said schedule by notifying the Customer in writing. Any change shall be effective immediately upon receipt of such notice by the Customer. The value of any Collateral provided by the Customer shall be subject to the haircuts listed in Schedule 2 of this Agreement. CISFS' acceptance of any Collateral may be subject to other limitations and/or qualifications specified in Schedule 2 of this Agreement. The Customer shall execute and deliver such separate pledge or deposit agreements including without limitation, security agreements or financing statements, as may be requested by CISFS. Such Collateral, together with the Contracts and all other monies, securities, treasury bills and other property of the Customer now or any time hereafter delivered, conveyed, transferred, assigned or paid to CISFS or coming into CISFS' possession in any manner whatsoever are hereby pledged to CISFS and shall be subject to a security interest in CISFS' favor for the discharge of the Customer's obligations to CISFS under this Agreement and the Contracts. The Customer hereby represents and warrants to CISFS that the Customer holds good and marketable title to all Collateral and that the Collateral delivered to CISFS is free and clear of any and all liens, claims, pledges or encumbrances of any kind. (ii) The Customer agrees to maintain at all times with CISFS Collateral in such form and in such amount as CISFS may from time to time request orally or in writing. The Customer acknowledges that any changes regarding the amount and form of Collateral may also result in a request for additional Collateral. The Customer shall respond to such requests by immediately supplying sufficient additional Collateral. iii) In all cases, Collateral shall be deemed received by CISFS when such Collateral shall be actually received in the Collateral Account and CISFS shall be notified of such receipt as determined by CISFS in its sole discretion. (c) CISFS will monitor on a daily basis, or more frequently as CISFS solely determines, the Customer's Collateral Account in the following manner: (i) CISFS will compute the Customer's "Total U.S. Dollar Market Value of Collateral" by aggregating (a) the U.S. Dollars in the Collateral Account, (b) the U.S. Dollar Value of any Foreign Currencies in the Collateral Account, and (c) the U.S. Dollar Value of the Market Value, as determined solely by CISFS, of other Collateral in the Collateral Account, subject to any and all haircuts, limitations, and qualifications listed in Schedule 2 of this Agreement, and (d) the U.S. dollar value of any specified bullion in the collateral account (ii) CISFS will compute the Customer's "Net U.S. Dollar Value of Gains and Losses on Open Positions" as follows: For each Open Position, the gain or loss, if any, is computed by assuming that the relevant Contract is offset in the market at the relevant bullion rate then prevailing for the Value Date of the Contract, as determined solely by CISFS. The U.S. Dollar Value of the gain or loss of each Open Position will be aggregated together to determine the "Net U.S. Dollar Value of Gains and Losses on Open Positions." (iii) CISFS will compute the Customer's "Net Collateral" by netting together the "Net U.S. Dollar Value of Gains and Losses on Open Positions" and the "Total U.S. Dollar Market Value of Collateral." (iv) CISFS will compute the Customer's "Total Required Initial Collateral" and "Total Required Maintenance Collateral" amounts in the following manner: (1) The "Total Required Initial Collateral" is determined by aggregating the "Required Initial Collateral" for all Open Positions. (2) The "Unit-Equivalent" of each Open Position will be multiplied by the amount specified in Schedule 3 of this Agreement as the "Required Maintenance Collateral per Unit-Equivalent" to determine the "Required Maintenance Collateral" for the particular Open Position. (3) The "Total Required Maintenance Collateral" is determined by aggregating the "Required Maintenance Collateral" for all Open Positions. (4) CISFS may change Schedule 3 of this Agreement at any time by notifying the Customer verbally or in writing. Any change shall be effective immediately upon such notification. The Customer acknowledges that any changes regarding Schedule 3 of this Agreement may result in a request for additional Collateral. The Customer shall respond to such requests by immediately supplying sufficient additional Collateral. (d) The Customer agrees to maintain the Collateral Account at all times so that the "Total U.S. Dollar Market Value of Collateral" is greater than or equal to the "Total Required Initial Collateral. CISFS reserves the right to retain gains on open positions. (e) If at any time the condition listed in part (d) of section 3 of this Agreement is not met, the Customer shall be deemed to have a "Collateral Deficiency" and shall be obligated to immediately deliver sufficient additional Collateral to CISFS, and/or offset open positions so as to meet all of the said conditions. (i) When the Customer has a "Collateral Deficiency," it shall not create any new positions, and may trade only to offset existing positions. (ii) If CISFS determines, in its sole discretion, that the Customer has a Collateral Deficiency, CISFS shall have the right to offset, close out, and/or liquidate any open positions in the Customer's Account, and any such offsetting, closing out, and/or liquidating transactions may be made in a manner solely determined by CISFS. (iii) The Customer agrees that additions to Collateral are due and must be paid immediately upon determination by CISFS, in its sole discretion, that there is a need for additional Collateral in any of the Customer's Accounts. The Customer hereby represents that it is able to effect same-day payment of U.S. Dollar funds to CISFS. (f) The Customer shall not make a request for the withdrawal of Collateral if the requested withdrawal will cause the condition listed in part (d) of section 3 of this Agreement to not be met. 4. TRADING. (a) The Customer acknowledges CISFS' right to limit, without notice to the Customer, the number and/or size of Open Positions which the Customer may maintain or acquire through CISFS. (b) CISFS reserves the right to refuse to accept any order. (c) With respect to any Open Position which has as its Value Date the same date as the Value Date which would apply for Spot Contracts involving spot bullion and entered into on the current day, CISFS reserves the right to require the Customer to offset the Open Position in the market or roll it in the market to a later Value Date. (d) If for any reason CISFS is unable to execute a Contract with its counterparty at the price quoted to the Customer, CISFS will have no obligation to the Customer to enter into the Contract with the Customer at the quoted price. (e) The Customer recognizes that bullion rates it may view on electronic market information screens (e.g. Reuters, Telerate, etc.) are only indications of bullion rates, and may or may not reflect actual bullion rates available to CISFS or the Customer. 5. OFFSETTING CONTRACTS. Whenever there may exist in any of or between any of the Customer's bullion accounts two or more open and opposite Contracts providing for the purchase and sale of the same bullion on the same Value Date, CISFS may, in its sole discretion, elect to treat the Contracts as a single transaction, and upon the Value Date of the Contracts, the net difference between the amounts payable under the contracts, and/or the net difference between the quantities of bullion deliverable thereunder, shall be paid and/or delivered, as the case may be. 6. DELIVERY OF BULLION . Delivery of bullion shall be made to an approved London vault specified by the purchaser. All payments to be made in U.S. Dollars shall be made by wire transfer of immediately available funds to a bank in London specified by the purchaser. CISFS will require payment of amounts due to it on any day simultaneously with or prior to payment of amounts due from it on that day. CISFS and the Customer shall both exchange, make use of, and periodically update and confirm standing payment instructions. 7. EVENTS OF DEFAULT. The occurrence of one or more of the following events shall constitute a "Default" under this agreement: (a) The Customer shall fail to pay any amount hereunder or under any Contract when due; (b) The Customer shall (i) have an order for relief entered with respect to it under the Federal Bankruptcy Code, (ii) not pay, or admit in writing its inability to pay its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property, (v) institute any proceedings seeking an order for relief under the Federal Bankruptcy Code or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any corporate action to authorize or affect any of the foregoing actions set forth in this subparagraph, or (vii) fail to contest in good faith any appointment or proceeding described in (c) below; (c) Without the application, approval or consent of the Customer, a receiver, trustee, examiner, liquidator, or similar official shall be appointed for the Customer or any substantial part of its property, or a proceeding described in (b) above shall be instituted against the Customer and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 30 consecutive days; (d) Any court, government or governmental agency shall condemn, seize or otherwise appropriate or take custody or control of all or any substantial portion of the property of the Customer; (e) Any representation or warranty made by the Customer in this Agreement or the Contracts shall be materially false as of the date on which it was made, or Customer shall fail or omit to state any fact which is necessary to make the representations and warranties herein not misleading; (f) The Customer shall fail to comply with any of the terms or provisions of this Agreement or of any Contract; (g) The Customer fails to deliver sufficient additional Collateral upon request from CISFS; (h) The Customer shall fail to perform any term or provision of any Agreement to which it is a party, including but not limited to any bullion contract, the effect of which is to cause an event of default or termination or similar event howsoever defined pursuant to any such agreement or (i) CISFS, in its sole discretion, considers it necessary for its protection to terminate this Agreement and exercises its remedies as provided below. 8. REMEDIES. In the event any Default occurs, CISFS is authorized to offset and to sell or purchase for the Customer's account any Contract in any manner which CISFS shall deem necessary in its sole discretion and to dispose of, as CISFS deems appropriate, any or all of the Collateral held by CISFS and any of the Customer's other property or assets at any time held by CISFS or Cargill Investor Services, Inc. It is understood and agreed that any prior tender, demand or call of any kind from CISFS, or prior notice from CISFS, of the time and place of such sale or purchase shall not be considered a waiver of CISFS' right to sell or purchase any Collateral or to offset at any time as herein provided, nor shall CISFS' failure to make such a demand or call waive CISFS' right to take such action without such tender, demand, call or notice in the future. After deducting costs and expenses incurred in connection with any such actions, CISFS may apply any remaining proceeds to the payment of any other obligations the Customer may owe to CISFS pursuant to this Agreement or any Contract, and in the event such proceeds are insufficient for payment of all such obligations, the Customer shall, within 24 hours of CISFS giving notice orally or in writing, pay to CISFS the amount of such deficit, together with interest thereon for each day such deficit is outstanding and remains unpaid until paid at a rate per annum, on a 365 day year/actual number of days elapsed basis, equal to an overdraft rate determined by CISFS in its sole discretion for the relevant Foreign Currency, or the Prime Rate (as quoted by Chase Manhattan Bank, New York) plus two percent for U.S. Dollars, plus all costs of collection, including reasonable attorneys' fees. Without limiting anything in the foregoing, if any Default as described in Section 8(b) or 8(c) occurs, then all amounts due or to become due by the Customer under this Agreement and under all Contracts shall immediately become due and payable, the Collateral Account shall be deemed closed, all Contracts shall be deemed Offset and all Collateral shall be deemed to have been applied to the obligations for the Customer under this Agreement and any Contracts all without any election, notice or action by CISFS and all without any liability on CISFS' part to the Customer or any third party. If any other Default shall occur, CISFS may, by notice either orally or in writing to the Customer, declare any or all amounts due or to become due by the Customer under this Agreement or under any Contracts to be due and payable, whereupon all of such amounts as CISFS shall designate shall become immediately due and payable and CISFS may take any and all of the following actions, all without any liability on CISFS' part to the Customer or any third party: (i) close the Cash and Collateral Account; (ii) offset, sell or assign any or all Contracts; and (iii) apply the Collateral as provided above. Nothing in the foregoing shall be deemed to waive, limit, terminate, modify, or otherwise change any rights or remedies available to CISFS of law or in equity, or the Customer's liability to CISFS for the payment of any debit balance owing in the accounts of the Customer with CISFS. The Customer is liable for any deficiency remaining in any such account or on any Contracts in the event of the offset or liquidation thereof, in whole or in part. 9. AUTHORIZATION TO TRANSFER BETWEEN ACCOUNTS. CISFS may, without notice, transfer any money or other property interchangeably between any accounts of the Customer with CISFS or any of its affiliates, including Cargill Investor Services, Inc., except that any transfer from a futuresor securities account which is subject to regulations under the Commodity Exchange Act, Securities Act of 1933 or Securities Exchange Act of 1934, to a non-regulated account and/or a Foreign Exchange Account shall have such other authorization by the Customer as is required by such laws and their regulations. The Customer authorizes CISFS to debit immediately any margin or collateral payment called for to any of its accounts including Cash Bullion Accounts showing a balance in its favor. 10. MATTERS PRECEDENTS; CORPORATE RESOLUTION. CISFS shall not be required to enter into any Contracts with the Customer unless and until all legal matters incident to such Contracts shall be satisfactory to CISFS and its counsel, the provisions of paragraph 3(b) are met to the satisfaction of CISFS and its counsel, a duly executed copy of this Agreement is furnished to CISFS by the Customer, the Customer establishes the Collateral Account, and the Customer's standing payment instructions are furnished to CISFS. In addition, within 10 days of the date of this Agreement, the Customer (if a partnership or corporation) shall deliver to CISFS a certified copy of (i) an authorizing resolution of the Customer Board of Directors substantially in the form attached hereto or otherwise as acceptable to CISFS; and (ii) the names, titles, signatures, and phone numbers, including home phone numbers where applicable, of the persons duly authorized by the Customer to execute and deliver this Agreement and to initiate transactions in O.T.C. cash bullion for the Customer's account. CISFS shall be entitled to rely on any such evidence until informed in writing by the Customer of any change. 11. SEPARATE CONTRACTS. Each Contract for the purchase and sale of Bullion hereunder is a separate Contract even though more than one such Contract may be included on a single confirmation. 12. TRUST ACCOUNTS. If this Agreement is extended to a trust, joint ownership, or partnership, the Customer hereby agrees to indemnify, defend, save and hold free and harmless CISFS for any losses, costs and expenses resulting from breach of any fiduciary duty or allegation thereof. 13. LIMITATION OF LIABILITY. CISFS will not be responsible for delays or failures in the delivery of any Bullion or relevant currency within the time specified for the delivery thereof to the extent the failure is caused by a breakdown of communication facilities or by any other cause beyond CISFS' reasonable control. 14. COLLECTION EXPENSES. The Customer agrees to pay any and all losses, costs, expenses, internal charges and fees, including attorneys' fees, which attorneys may be employees of CISFS or its affiliates, paid or incurred by CISFS in connection with the collection and enforcement of this Agreement, the Collateral and the Contracts. 15. ARBITRATION. Any controversy arising out of or relating to transactions in this Account, this Agreement or the breach hereof or thereof shall be settled by arbitration pursuant to the commercial arbitration rules of the American Arbitration Association. Judgment upon any award entered by the arbitrators may be entered in any court of competent jurisdiction. Any such action must be brought within two years after the date of cause the action accrued. 16. FULL DISCLOSURE. The Customer additionally represents to CISFS that the information provided by the customer in connection with this agreement is full, complete and accurate and CISFS is entitled to rely on this information until CISFS receives written notice from the customer of any change in such information. 17. NOTIFICATION. Any notices and other communications may be transmitted to the Customer at the address, telephone or facsimile number given herein, or at such other address, telephone or facsimile number as the Customer hereafter shall notify CISFS in writing, and all notices or communications shall be deemed transmitted when telephoned, faxed or deposited in the mail by CISFS or CISFS' representative, whether actually received by the Customer or not. Confirmations, and account statements shall be deemed accurate unless objected to in writing within ONE business day from the date of such notice and such objection(s) delivered to CISFS at 233 South Wacker Drive, Suite 2300, Chicago, Illinois, 60604, Attention: Treasurer, facsimile number (312) 460-4739, telephone number (312) 460-4000. In the event the Customer fails to receive a faxed confirmation within ONE Business Day of the date of the transaction, the Customer agrees to notify CISFS at the above address via fax immediately. 18. GOVERNING LAW. This Agreement is made under and shall be governed by laws of the State of New York in all respects, including construction and performance. This Agreement shall be binding upon you and/or your estate, executors, administrators, successors and/or assigns. 19. DISCLAIMER. The Customer acknowledges that CISFS is ultimately owned by Cargill, Incorporated and is under the common control of Cargill, Incorporated with Cargill Investor Services, Inc. The Customer further acknowledges that the market recommendations of CISFS, if any, may or may not be consistent with the market position or intentions of Cargill, Incorporated or their subsidiaries and/or affiliates. The market recommendations of CISFS, if any, are based upon information believed to be reliable, but CISFS cannot and does not guarantee the accuracy or completeness thereof or represent that following such recommendations will eliminate or reduce the risks inherent in transactions in cash bullion . 20. TELEPHONE RECORDINGS. CISFS is hereby granted permission to record telephone conversations between its employees and the Customer. The Customer agrees that such recordings may be used as evidence by either party in any disputes between CISFS and the Customer. The undersigned, CIS INVESTMENTS, INC. (Print), hereby represents to CISFS that it is the managing owner of a Delaware business trust known as JWH GLOBAL PORTFOLIO TRUST (the "Trust"). In consideration of the opening of one or more cash bullion accounts with CISFS for and in the name of the Trust, the undersigned further represents that as the managing owner in the Trust, it has proper authority to sign this Agreement and all related documents on behalf of the Trust and, for the account and risk of the Trust, to buy, sell, and trade in cash bullion in said account in accordance with CISFS' terms and conditions. CIS INVESTMENTS, INC., Managing Owner By: ---------------------------------- - ---------------------------- L. Carlton Anderson Date Vice President POWER OF ATTORNEY: Power of Attorney Limited to Purchases and Sales of Cash Bullion The undersigned hereby authorizes JOHN W. HENRY & COMPANY, INC. as the undersigned's agent and attorney in fact to buy, sell and trade in cash bullion in accordance with CISFS' terms and conditions for the undersigned's account and risk and in the undersigned's name on CISFS' books. The undersigned hereby agrees to indemnify and hold CISFS harmless from and to pay CISFS promptly on demand any and all losses arising therefrom or debit balance due thereon. In all such purchases, sales or trades CISFS is authorized to follow the instructions of the aforesaid agent in every respect concerning the undersigned's account with CISFS; and the aforesaid agent is authorized to act for the undersigned and in the undersigned's behalf in the same manner and with the same force and effect as the undersigned might or could do with respect to such purchases, sales or trades as well as with respect to all other things necessary or incidental to the furtherance or conduct of such purchases, sales or trades. The undersigned hereby ratifies and confirms any and all transactions with CISFS heretofore or hereafter made by the aforesaid agent for the undersigned's account. This authorization and indemnity is in addition to (and in no way limits or restricts) any rights which CISFS may have under any other agreement or agreements between the undersigned and CISFS. This authorization and indemnity is a continuing one and shall remain in full force and effect until revoked by the undersigned by a written notice addressed to CISFS and delivered to its office at 233 S. Wacker Drive, Suite 2300, Chicago, Illinois 60606, but such revocation shall not affect any liability in any way resulting from transactions initiated prior to such revocation. This authorization and indemnity shall endure to the benefit of CISFS and of any successors or assigns. Customer: JWH GLOBAL PORTFOLIO TRUST By: CIS Investments, Inc., Managing Owner By: ---------------------------------- - ---------------------------- L. Carlton Anderson Date Vice President SCHEDULE 1 The precious metals under this agreement are: Gold Silver Platinum Palladium SCHEDULE 2 CISFS considers as acceptable collateral the following: 1. Immediately-available U.S. Dollar funds for variation losses. 2. Immediately available U.S. dollar funds for Total Required Initial Collateral. 3. U.S. government securities for Total Required Initial Collateral. SCHEDULE 3 Greater than or equal to the prevailing futures equivalent initial margin requirements for Gold, Silver and Platinum as defined by the COMEX Division of NYMEX and by the NYMEX. Initial and Maintenance margins on open positions will be determined by creating an exchange-equivalent "unit" contract and charging a per-unit margin on the basis of current COMEX and NYMEX margin requirements. For Gold and Palladium, each 100 troy ounces equals one "unit"; in Platinum each 50 troy ounces equals one "unit"; and in Silver each 5,000 troy ounces equals on e"unit". For example: If the Customer trades 20,000 ounces of Gold against the U.S. Dollar and a "unit" is defined as 100 troy ounces of Gold, and the initial and maintenance margin requirements on 1 "unit" of Gold are $1,100.00 and $825.00 respectively, the required margin for the trade is: 200 units x $1,100.00 Initial Requirement = $220,000.00 200 units x $825.00 Maintenance Requirement = $165,000.00 CASH BULLION ACCOUNT AGREEMENT SUPPLEMENT THIS CASH BULLION ACCOUNT AGREEMENT SUPPLEMENT, made as of the ____ day of ________, 1996, by and between JWH Global Portfolio Trust (the "Trust") and CIS Financial Services, Inc., a Delaware Corporation (the "Dealer"). W I T N E S S E T H : WHEREAS, the Trust has been organized to engage in the speculative trading of all commodity interests, including futures contracts, options on futures contracts, and spot and forward contracts in currencies and precious metals ("Commodity Interests"); WHEREAS, the Trust will allocate a portion of its total assets (the "Trading Assets") to trading forward contracts in precious metals (the "Cash Bullion Contracts"); WHEREAS, the Trust and Cargill Investor Services, Inc. ("CIS"), an affiliate of the Dealer, have entered into a customer agreement (the "Customer Agreement") of even date herewith under which CIS will act as Commodity Interest broker for the Trust, will hold the Trust's assets in brokerage accounts, and from time to time either transmit or transfer a portion of such assets to or from the Dealer; WHEREAS, the Trust and the Dealer have, as of the date hereof, entered into a Cash Bullion Account Agreement (which, together with this Cash Bullion Account Agreement Supplement shall be referred to as the "Cash Bullion Agreement") setting forth certain terms and conditions upon which the Dealer shall provide services to the Trust related to its trading of Cash Bullion Contracts; and WHEREAS, the Trust and the Dealer wish to enter into this Cash Bullion Account Agreement Supplement which sets forth certain terms and conditions upon which the Dealer will serve as a dealer for the trading of Cash Bullion Contracts on behalf of the Trust for the term of the Cash Bullion Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Initially capitalized terms used herein and not otherwise defined shall have the meanings assigned them in the Cash Bullion Account Agreement annexed hereto. 2. DUTIES OF THE DEALER WITH RESPECT TO CASH BULLION CONTRACT TRADING. With respect to trading by the Trust in Cash Bullion Contracts, the Dealer shall at the request of the Trust's trading advisor obtain competitive quotes for Cash Bullion Contracts from Cash Bullion Contract dealers with whom the Dealer has a Cash Bullion Contract trading relationship ("Counterparties") and relay those quotes to the trading advisor. If requested by the trading advisor, the Dealer shall in its own name enter into a Cash Bullion Contract with the Counterparty selected by the Dealer and shall simultaneously enter into an identical Cash Bullion Contract with the Trust at the same price. 3. COMPENSATION TO THE DEALER. Dealer shall be compensated for its services hereunder by CIS and not by the Trust. 4. NET-OUT ON BANKRUPTCY a. Notwithstanding any other provisions hereof, of any Cash Bullion Contract or any other agreement between the parties, in the event either party (the "Defaulting Party") shall: (a) become bankrupt or insolvent, however evidenced, or be unable to pay its debts as they fall due, (b) file a petition or otherwise commence a proceeding under any bankruptcy, insolvency or similar law or have any such petition filed or proceeding commenced against it, or have a liquidator, administrator, receiver or trustee appointed with respect to it or any substantial portion of its assets, or (c) default in the payment or performance of any obligation to the other party (the "Non-Defaulting Party") hereunder, under a Cash Bullion Contract or otherwise; then in any such event, the Non-Defaulting Party shall have the right immediately and at any time(s) thereafter to liquidate any or all outstanding Cash Bullion Contracts from time to time by: (i) closing out each Cash Bullion Contract being liquidated at its Market Value at such time (so that a settlement payment in an amount equal to the difference between such Market Value and the Contract Value of such Cash Bullion Contract shall be due to the purchaser of Currency under that Cash Bullion Contract if such Market Value is greater than such Contract Value and with such settlement payment being due to the seller of Currency under that Cash Bullion Contract if the opposite is the case) and (ii) setting off (A) all settlement payments which Dealer owes to the Trust as a result of such close-out, plus (at the Non-Defaulting party's election) any other amounts which Dealer owes the Trust hereunder or under a Cash Bullion Contract, plus any Collateral Dealer then holds, against (B) all settlement payments which the Trust owes to Dealer as a result of such close-out hereunder or under a Cash Bullion Contract, so that all such payments shall be netted to a single liquidated amount payable by one party to the other. The net amount due after such liquidation shall be paid by the close of business on the next business day. -2- b. The Non-Defaulting Party's rights under this Section 4 shall be in addition to, and not in limitation of, any other rights which the Non-Defaulting Party may have (whether by agreement, operation of law or otherwise). 5. TERM. The Cash Bullion Agreement shall continue in effect for the term of the Customer Agreement between the Trust and CIS and will terminate simultaneously with the Customer Agreement. In addition the Cash Bullion Agreement may be terminated by the Trust at any time on 60 days' written notice to the Dealer, provided that any open Cash Bullion Contract which the Dealer held prior to the notice of termination shall be held by the Dealer and this Cash Bullion Agreement shall continue to be in effect with respect to such Cash Bullion Contracts until the applicable settlement date of such Cash Bullion Contracts. 6. INCORPORATION BY REFERENCE. The Cash Bullion Account Agreement annexed hereto is hereby incorporated by reference herein and made a part hereof to the same extent as if such document were set forth in full herein. If any provision of this Cash Bullion Account Agreement Supplement is or at any time becomes inconsistent with the annexed document, the terms of this Cash Bullion Account Agreement Supplement shall control. 7. ACKNOWLEDGMENT. The Dealer acknowledges that the obligations of this Agreement are not binding against the Unitholders individually but are binding only upon the assets and property of the Trust, and that, in the event of any obligation or claim arising hereunder against the Trust, no resort shall be had to any Unitholder's personal property for the satisfaction of such obligation or claim. 8. COMPLETE AGREEMENT. The Cash Bullion Agreement constitutes the entire agreement between the parties with respect to the matters referred to herein, and no other agreement, oral or otherwise, shall be binding as between the parties unless in writing and signed by the party against whom enforcement is sought. 9. ASSIGNMENT. This Cash Bullion Agreement may not be assigned by a party without the express written consent of the other party. 10. AMENDMENT. This Cash Bullion Agreement may not be amended except by the written consent of the parties hereto. 11. SURVIVAL. The provisions of this Cash Bullion Agreement shall survive the termination of this Cash Bullion Agreement with respect to any matter arising while this Cash Bullion Agreement is in effect. 12. HEADINGS. Headings of sections herein are for the convenience of the parties only and are not intended to be part of -3- or to affect the meaning or interpretation of this Cash Bullion Agreement. 13. NO WAIVER. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver granted hereunder must be in writing and shall be valid only in the specific instance in which given. IN WITNESS WHEREOF, the parties hereto have executed this Cash Bullion Account Agreement Supplement as of the day and year first above written. JWH GLOBAL PORTFOLIO TRUST By: CIS INVESTMENTS, INC., a Managing Owner By: ------------------------------------- L. Carlton Anderson Vice President CIS FINANCIAL SERVICES, INC. By: ------------------------------------ Name: ---------------------------------- Title: ---------------------------------- -4- EX-10.05 9 ESCROW AGREEMENT EXHIBIT 10.05 JWH GLOBAL PORTFOLIO TRUST ESCROW AGREEMENT This Escrow Agreement is made and entered into as of ____ __, 1996 by and among The First National Bank of Chicago, a national banking association, as escrow agent (the "Escrow Agent"), JWH Global Portfolio Trust, a Delaware business trust (the "Trust"), CIS Investments, Inc., a Delaware corporation ("CISI" or "Managing Owner"), the managing owner of the Trust, and Cargill Investor Services, Inc., a Delaware corporation ("CIS" or "Lead Selling Agent"). RECITALS The Trust proposes to offer for sale to investors through one or more registered broker-dealers up to 500,000 units of beneficial interest ("Units") in the Trust at a price of $100 per Unit during the Initial Offering Period (as defined in the Prospectus referred to below) and at the Net Asset Value during the Ongoing Offering Period (as defined in the Prospectus referred to below); In connection with the proposed public offering of Units, the Trust and the Managing Owner have entered into a selling agreement with the Lead Selling Agent and the Lead Selling Agent may, with the consent of the Managing Owner, enter into additional selling agent agreements with certain additional and correspondent selling agents (the Lead Selling Agent and such additional and correspondent selling agents are collectively referred to herein as "Selling Agents"), for the offer and sale of Units on a "best efforts" basis. The Trust proposes to establish an escrow account with the Escrow Agent in which proceeds received from subscribers will be deposited and the Escrow Agent agrees to serve as escrow agent, all in accordance with the terms and conditions set forth herein. AGREEMENTS In consideration of the foregoing and the mutual covenants contained herein, the parties agree as follows: 1. Commencing upon the execution of this Agreement, the Escrow Agent shall act as escrow agent and agrees to receive, hold, deal with and disburse the proceeds from the sale ("Proceeds") of Units and any other property at any time held by the Escrow Agent hereunder in accordance with this Agreement. The Managing Owner agrees to notify the Escrow Agent promptly (a) if the proposed offering of Units is extended by the Managing Owner as provided in the Trust's Prospectus dated ___________, 1996 (the "Prospectus") and (b) of the date of the Initial Closing Date (hereinafter defined) and each subsequent closing date. 2. CIS shall deposit all Proceeds received from the Selling Agents together with the name, address, federal tax identification number and amount of the subscription of each subscriber. All Proceeds shall be denominated in dollars and deposited in this escrow by check or wire transfer, duly made out to the Escrow Agent in the following form: "THE FIRST NATIONAL BANK OF CHICAGO, AS ESCROW AGENT FOR JWH GLOBAL PORTFOLIO TRUST, ESCROW ACCOUNT NO. ___________." The Escrow Agent shall promptly notify CIS of any discrepancy between the amounts set forth on any statement delivered by CIS and the sum or sums delivered therewith to the Escrow Agent. Any checks received that are made payable to a party other than the Escrow Agent shall be returned to CIS for prompt return to the appropriate subscribers. In the event that any checks or other instruments deposited in the escrow prove uncollectible, the Escrow Agent shall promptly notify CIS and forward such checks or other instruments to CIS. 3. The Escrow Agent is required to separately record on its books the name, address, federal tax identification number and amount of each subscription as received, and shall keep documents necessary to evidence the name, address and federal tax identification of each subscriber, the aggregate amount of his subscriptions, and the date such subscription was received. 4. The Escrow Agent shall cause all Proceeds deposited with it pursuant to Section 2 hereof to be maintained and invested no later than the second business day following receipt of such Proceeds as the Managing Owner shall direct from time to time by written instructions delivered to the Escrow Agent, in (a) an interest bearing bank account; (b) bank money-market accounts; (c) short-term certificates of deposit issued by a bank; or (d) short-term securities issued or guaranteed by the United States Government, as permitted by law (and in particular Rule 15c2-4 under the Securities Exchange Act of 1934), which can be readily liquidated so that 100% of the Proceeds and interest thereon can, if necessary, be returned to the subscribers in accordance with this Agreement and that the interest on such securities shall not subject foreign subscribers to the United States taxation or tax reporting requirements. The Escrow Agent will incur no liability for any loss suffered so long as the Escrow Agents follows such instructions, except for losses due to its lack of good faith, negligence or willful misconduct. Interest earned on funds attributable to accepted subscriptions while held in this escrow shall be allocated among subscribers in proportion to the amounts of their respective subscriptions and the lengths of time their subscriptions were held in escrow. 5 (a) The initial offering of Units will terminate as of ___________, 1997, subject to extension until _________, 1997 and to prior sale of all available Units (the "Initial Closing Date"). The Managing Owner may limit, suspend or terminate the offering at any time upon verbal notice promptly confirmed in writing to the Escrow Agent. On the Initial Closing Date the Escrow Agent shall, upon (i) written instructions from the Managing Owner, (ii) receipt of an affidavit signed by the Managing Owner that acceptable subscriptions for at least 100,000 Units have been received and (iii) possession in the escrow account of at least $10,000,000 in collected funds in payment of such subscriptions, (as specified in such instructions) pay to, credit to the account of, or otherwise transfer to commodity trading account maintained by the Trust with Cargill Investor Services, Inc. (the "Customer Account"), the commodity broker for the Trust, or as otherwise directed by the Managing Owner, the collected Proceeds then held in escrow and interest earned on such Proceeds accrued from the date of deposit until the Initial Closing Date. 2 (b) After the Initial Closing Date and during the Ongoing Offering Period, the Escrow Agreement shall segregate Proceeds received according to the dates the Selling Agents receive the funds. Proceeds shall be grouped in Monthly Groups. Proceeds received after the 20th (or, if the 20th is not a business day, the next business day) of a calendar month through and including the 19th of the next succeeding calendar month ("End Date") shall comprise one Monthly Group. For each Monthly Group containing subscriptions which have been accepted by the Managing Owner, the Escrow Agent shall pay to, credit to the account of, or otherwise transfer to the Customer Account, or as otherwise directed by the Managing Owner, Proceeds comprising the Monthly Group pertaining to accepted subscriptions and interest earned on such Proceeds, on the last business day of the calendar month of the applicable End Date. (c) Prior to the delivery to it as described above, the Trust shall have neither title to nor interest in the funds on deposit, and such funds shall under no circumstances be subject to the liabilities or indebtedness of the Trust. (d) Interest earned on an accepted subscription will be paid to the Trust's Customer Account, or as otherwise directed by CISI, and invested in the Trust, and subscribers will be issued additional Units reflecting each subscriber's attributable share of such interest. To enable CISI to determine the number of additional Units issuable to each subscriber whose subscription has been accepted, the Escrow Agent shall, within 5 business days before the Initial Closing Date and each subsequent closing date, notify CISI the amount of interest that will be earned as of the Initial Closing Date or such subsequent closing date, as the case may be, on each subscriber's subscription funds while held in escrow. 6. If at least 100,000 Units have not been subscribed for by the Initial Closing Date or if any other closing conditions are not satisfied, then the Managing Owner shall promptly so advise the Escrow Agent. The Escrow Agent shall return to each subscriber his or her subscription funds, together with the PRO RATA share of interest earned on such funds, within 5 business days after it has received from the Managing Owner the advice described above. 7. At any time prior to the release of a subscriber's funds from this escrow, the Managing Owner may notify the Escrow Agent that a subscription, or a part thereof, has not been accepted and the Managing Owner may direct the Escrow Agent to return as soon thereafter as may be practicable (in no event later than 5 business days) any such funds, or the appropriate portion thereof, held in this escrow for the benefit of such subscriber, with interest, directly to such subscriber. If subscriptions funds (and interest earned thereon, if any) shall be returned to subscribers, whether due to rejection of subscriptions or the non- occurrence of the Initial Closing Date, the Escrow Agent shall do so in the same manner through which (I.E., by check or wire) and to the same source from which (I.E., a subscriber or an applicable Selling Agent for credit to the account of a subscriber) subscription funds were received. 8. The Escrow Agent shall not be liable for any action taken or omitted in good faith in accordance with the advice of its counsel except for its own negligence or willful misconduct. The 3 Escrow Agent shall not be responsible for any loss of subscriptions funds resulting from the investment thereof in accordance with this Agreement. 9. CISI agrees to pay the Escrow Agent reasonable compensation for the services to be rendered hereunder, as described in the Schedule I attached hereto, and pay or reimburse the Escrow Agent upon request for reasonable attorney's fees, incurred by it as a result of events not contemplated by this Agreement but otherwise in connection with this Agreement. CISI hereby agrees to indemnify and save harmless the Escrow Agent from all losses, costs and expenses, including attorney fees which may be incurred by it as a result of its acceptance of its appointment as Escrow Agent or arising from the performance of its duties hereunder, unless the Escrow Agent shall have been adjudged to have acted in bad faith or to have been negligent, and such indemnification shall survive its resignation or removal, or the termination of this Agreement until extinguished by any applicable statute of limitation. 10. The Managing Owner may remove the Escrow Agent at any time (with or without cause) by giving at least 15 days written notice thereof. Within 10 days after receiving such notice, the Managing Owner shall appoint a successor escrow agent at which time the Escrow Agent shall either distribute the funds held in the Escrow Account, its fees, costs and expenses or other obligations owed to the Escrow Agent having been paid by CISI, as directed by the instructions of the Managing Owner or hold such funds, pending distribution, until all such fees, costs and expenses or other obligations are paid by the CISI. If a successor escrow agent has not been appointed or has not accepted such appointment by the end of the 10-day period, the Escrow Agent may appeal to a court of competent jurisdiction for the appointment of a successor escrow agent, or for other appropriate relief and the costs, expenses and reasonable attorneys fees which the Escrow Agent incurs in connection with such a proceeding shall be paid by the Trust. 11. The Trust and the Managing Owner warrant and agree to the Escrow Agent that, unless otherwise expressly set forth in this Agreement: there is no security interest in the subscription funds or any part thereof; no financing statement under the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the subscription funds or any part thereof; and you shall have no responsibility at any time to ascertain whether or not any security interest exists in the subscription funds or any part thereof or to file any financing statement under the Uniform Commercial Code with respect to the subscription funds or any part thereof. 12. The Escrow Agent's duties and responsibilities shall be limited to those expressly set forth in this Agreement, and the Escrow Agent shall not be subject to, nor obliged to recognize, any other agreement between, or direction or instruction of, any and all of the parties hereto; provided, however, this Agreement may be amended at any time by an instrument in writing signed by all the parties. 13. If any property subject hereto is at any time attached, subject to garnishment or levied upon, under any court order, or in case the payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in case any order, judgment or decree shall be made or entered by any court affecting such property, or any part thereof, then in any 4 of such events, the Escrow Agent is authorized to rely upon and comply with any such order, writ, judgment or decree, which it is advised by legal counsel of its own choosing is binding upon it, and if it complies with any such order, writ, judgment or decree, it shall not be liable to any of the parties hereto or any other person, firm, or corporation by reason of such compliance, even though such order, writ, judgment or decree may be subsequently reversed, modified, annulled, set aside or vacated. 14. This Agreement shall be construed, enforced, and administered in accordance with the laws of the State of Illinois, without regard to the principles of conflicts of laws thereof. 15. The Escrow Agent may resign by giving 30 days' prior written notice delivered to the Managing Owner, and thereafter shall deliver all remaining deposits in this escrow to a successor escrow agent acceptable to the Managing Owner which acceptance shall be evidenced by their joint written and signed order. If no such order is received by the Escrow Agent within 30 days after delivery of such notice, it is unconditionally and irrevocably authorized and empowered to send any and all funds deposited hereunder by registered mail to the respective subscribers thereof. 16. In the event funds transfer instructions are given (other than in writing at the time of execution of this Agreement), whether in writing, by telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of such instructions by telephone call-back to the person or persons designated on Schedule II hereto, and the Escrow Agent may rely upon the confirmations of anyone purporting to be the person or persons so designated. The persons and telephone numbers for call-backs may be changed only in a writing actually received and acknowledged by the Escrow Agent. The parties acknowledge that such security procedure is commercially reasonable. 17. This Agreement shall not become effective (and the Escrow Agent shall have no responsibility hereunder except to return the property deposited in escrow to the subscribers) until the Escrow Agent shall have received the following and shall have advised each of the Trust and the Managing Owner in writing that the same are in form and substance satisfactory to the Escrow Agent: (1) a certified resolution of the Managing Owner's board of directors authorizing the making and performance of this Agreement and (2) a certificate as to the names and specimen signatures of its officers or representatives authorized to sign this Agreement and notices, instructions and other communications. 18. Any notice which a party is required or desires to give hereunder shall be in writing and may be given by mailing or delivering the same to the address of the party to receive notice: if the Escrow Agent, addressed to: The First National Bank of Chicago Escrow Services, Suite 0673 One First National Plaza Chicago, Illinois 60670-0673 Attention: Leland Hansen 5 if to the Trust, addressed to: c/o CIS Investments, Inc. 233 South Wacker Drive, Suite 2300 Chicago, Illinois 60606 Attention: L. Carlton Anderson if to CISI, addressed to: 233 South Wacker Drive, Suite 2300 Chicago, Illinois 60606 Attention: L. Carlton Anderson if to CIS, addressed to: 233 South Wacker Drive, Suite 2300 Chicago, Illinois 60606 Attention: L. Carlton Anderson or to such other address as said party may substitute therefor by written notification to the other parties. For all purposes hereof, any notice shall be effective only when actually received. 19. This Agreement shall terminate upon completion of this offering or as otherwise provided by written instruction from the Managing Owner to the Escrow Agent. 6 IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of _______________, 1996. THE FIRST NATIONAL BANK OF CHICAGO, as Escrow Agent By: ---------------------------------- John R. Prendiville Vice President JWH GLOBAL PORTFOLIO TRUST By:CIS Investments, Inc., Managing Owner By: ---------------------------------- L. Carlton Anderson Vice President CIS INVESTMENTS, INC. By: ---------------------------------- L. Carlton Anderson Vice President CARGILL INVESTOR SERVICE, INC. By: ---------------------------------- L. Carlton Anderson Vice President 7 SCHEDULE I FEE SCHEDULE ACCEPTANCE FEE: $1,750.00 Fee for services in connection with the initial set-up of the subscription escrow account. This fee covers examination and execution of an escrow agreement and all required documentation, and all initial account set-up including the Escrow Agent's legal fees. ANNUAL ADMINISTRATION FEE: Per subscription participant account $6.40 Fee for ongoing administration of the subscription escrow account. Participants are defined on a monthly basis with each monthly subscription period being unique. An individual subscribing in more than one month will be counted in each month. Should an individual add to a subscription amount in a given month, there will be no additional charge. This fee includes all investments specified in the Escrow Agreement , required participant recordkeeping, remittance of checks, production of 1099s, and postage. WIRE TRANSFERS: $20.00 Wire transfers to the fund participants will be charged additionally at $20.00 each transfer. Wire transfers to the Trust, the Managing Owner or Lead Selling Agent will be at no charge. ADDITIONAL SERVICES AND EXPENSES: Any out-of-pocket expenses incurred by the Escrow Agent (E.G., responding to unusual audit request) will be assessed in amounts commensurate with the services rendered, itemized and billed in addition to the foregoing fees. No charge will be incurred for termination of account. The fees above are subject to equitable adjustments as reasonably warranted by changes in laws, procedures, or cost of doing business upon prior written notice to the parties. SCHEDULE II TELEPHONE NUMBER(S) FOR CALL-BACKS AND PERSON(S) DESIGNATED TO CONFIRM FUNDS TRANSFER INSTRUCTIONS JWH GLOBAL PORTFOLIO TRUST: CIS Investments, Inc. as Managing Owner NAME TELEPHONE NUMBER 1. Michelle Reynolds (312) 460-4931 2. Ron Davis (312) 460-4927 3. Carlton Anderson (312) 460-4925 CARGILL INVESTOR SERVICES, INC.: NAME TELEPHONE NUMBER 1. Michelle Reynolds (312) 460-4931 2. Ron Davis (312) 460-4927 3. Carlton Anderson (312) 460-4925 THE FIRST NATIONAL BANK OF CHICAGO, N.A.: NAME TELEPHONE NUMBER 1. Leland Hansen (312) 407-2086 2. Amy Movitz (312) 407-8857 EX-10.06 10 FORM OF TRANSFER AGENT EXHIBIT 10.06 TRANSFER AGENT AGREEMENT THIS AGREEMENT is made as of _____________, 1996, by and between JWH Global Portfolio, a Delaware business trust (the "Trust"), CIS Investments, Inc., a Delaware Corporation (the "Managing Owner"), and Cargill Investor Services, Inc., a Delaware Corporation (the "Transfer Agent"). W I T N E S S E T H: WHEREAS, the Trust is a commodity pool whose units of beneficial interest ("Units") are offered to the public pursuant to a registration statement filed under the Securities Act of 1933; and WHEREAS, the Transfer Agent is, among other things, registered with the Securities and Exchange Commission as a transfer agent under the Securities Exchange Act of 1934. NOW, THEREFORE, the Trust, the Managing Owner and the Transfer Agent do mutually promise and agree as follows: 1. TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT Subject to the terms and conditions set forth in this Agreement, the Trust hereby appoints the Transfer Agent to act as transfer agent for the Trust. The Transfer Agent shall perform all of the customary services of a transfer agent, including but not limited to: A. Receive subscriptions for the purchase of Units, with prompt delivery of supporting documentation to Managing Owner and Trust's escrow agent (the "Escrow Agent") and, where appropriate, of payment to the Escrow Agent; B. At the instructions of the Managing Owner, issue uncertificated Units in the account of each investor whose subscription has been accepted by the Trust ("Unitholder") on the appropriate closing date; C. Process redemption requests received in good order; D. Pay monies (upon transfer of funds from the Trust's customer account maintained by the Transfer Agent in its capacity as futures clearing broker for the Trust) in accordance with the instructions of redeeming Unitholders; E. Process transfers of Units in accordance with the Managing Owner's instructions; F. Prepare and transmit or credit payments for distributions declared by the Trust; G. Make changes to Unitholder records; H. Record the issuance of Units of the Trust and maintain a record of the total number of Units issued and outstanding; I. Create and maintain records showing for each Unitholder's account the following: i. Names, addresses, and tax identification numbers; ii. Number of Units held; and iii. Historical information regarding the account of each Unitholder, including date and price for each transactions. 2. COMPENSATION The Transfer Agent acknowledges and agrees that the only compensation it shall receive for services provided to the Trust shall be the Brokerage Fee it receives the Trust pursuant to its Customer Agreement with the Trust. The Trust agrees to reimburse the Transfer Agent for telephone, fax, copying and postage charges and other reasonable expenses incurred by the Transfer Agent in performing its duties hereunder. 3. INDEMNIFICATION; REMEDIES UPON BREACH The Transfer Agent agrees to use reasonable care and act in good faith in performing its duties hereunder. Provided that the Transfer Agent has used reasonable care and acted in good faith, the Transfer Agent shall not be liable or responsible for delays or errors occurring by reason of circumstances beyond its control, including acts of civil or military authority, national or state emergencies, fire, mechanical or equipment failure, flood or catastrophe, acts of God, insurrection or war. The Trust will indemnify and hold the Transfer Agent harmless against any and all losses, claims, damages, liabilities or expenses (including reasonable counsel fees and expenses) resulting from any claim, demand, action or suit not resulting from the Transfer Agent's bad faith or negligence, and arising out of or in connection with the Transfer Agent's duties on behalf of the Trust hereunder, including as a result of the Transfer Agent acting upon any instructions of the Managing Owner or as a result of acting in reliance upon any genuine instrument signed, countersigned or executed by an person or persons authorized to sign, countersign or execute the same. If in any case the Trust may be requested to indemnify or hold harmless the Transfer Agent, the Transfer Agent shall advise the Trust of all pertinent facts concerning the situation in question. The Trust shall have the option to defend the Transfer Agent against any claim which may be the subject of this indemnification and, in the event that the Trust so elects, the Trust shall notify the -2- Transfer Agent, and thereupon the Trust shall take over complete defense of the claim and the Transfer Agent shall sustain no further legal or other expenses in such situation for which the Transfer Agent has sought indemnification under this Section. The Transfer Agent shall in no case confess any claim or make any compromise in any case in which the Trust will be asked to indemnify the Transfer Agent, except with the Trust prior written consent. 4. CONFIDENTIALITY The Transfer Agent agrees to treat confidentially all records and other information relative to the Trust and its Unitholders and shall not disclose any such information to any other party, except with the prior written approval of the Trust, which approval shall not be unreasonably withheld and may not be withheld where the Transfer Agent may be exposed to civil or criminal contempt proceedings for failure to comply after being requested to divulge such information by duly constituted authorities. 5. ILLINOIS LAW This Agreement shall be construed under and in accordance with the laws of the State of Illinois without regard to the principles of conflicts of laws thereof. 6. AMENDMENT, ASSIGNMENT AND TERMINATION A. This Agreement may be amended by the mutual consent of the parties. B. This Agreement and any right or obligation hereunder may not be assigned by either party without the written consent of the other party. C. This Agreement may be terminated by a party upon 60 days' written notice to the other party. D. In the event the Trust notifies the Transfer Agent of the Trust's intention to terminate and appoint a successor transfer agent, the Transfer Agent agrees to cooperate in the transfer of its duties and responsibilities to the successor, including any and all relevant books, records and other data established or maintained by the Transfer Agent hereunder. In such event, the Trust shall be responsible for all reasonable out-of-pocket expenses associated with the transfer of records and materials. -3- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. JWH GLOBAL PORTFOLIO By: CIS Investments, Inc. Managing Owner By:_____________________________ L. Carlton Anderson Vice President CIS INVESTMENTS, INC. By: _____________________________ L. Carlton Anderson Vice President CARGILL INVESTOR SERVICES, INC. By: _____________________________ L. Carlton Anderson Vice President -4- EX-23.02 11 CONSENT OF CERTIFIED PUBLIC ACCOUNTS EXHIBIT 23.02 CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS We consent to the reference to our firm under the caption "EXPERTS" and the use of our report dated November 22, 1996 with respect to the statement of financial condition of JWH Global Portfolio Trust as of November 21, 1996 and to the use of our report dated July 17, 1996 with respect to the financial statements of CIS Investments, Inc. as May 31, 1996 and 1995 included in Form S-1 Registration Statement and related Prospectus of JWH Global Portfolio Trust for the registration of $50,000,000 of units of beneficial interest. KPMG Peat Marwick LLP November 22, 1996 Chicago, Illinois EX-27 12 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF FINANCIAL CONDITION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. OTHER DEC-31-1996 NOV-21-1996 NOV-21-1996 1,000 0 0 0 0 1,000 0 0 1,000 0 0 0 0 0 1,000 1,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-99.01 13 SEC RELEASE EXHIBIT 99.01 STATEMENT OF THE COMMISSION REGARDING DISCLOSURE BY ISSUERS OF INTERESTS IN PUBLICLY OFFERED COMMODITY POOLS SECURITIES AND EXCHANGE COMMISSION Release Nos. 33-6815; 34-26508 [S7-1-89]; 17 CFR Parts 231 AND 241 February 1, 1989 TEXT: ACTION: Interpretation and Request for Comment SUMMARY: The Securities and Exchange Commission ("Commission") is publishing this release and request for comments regarding disclosure by issuers of interests in publicly offered commodity pools simultaneously with an interpretive statement and request for comments by the Commodity Futures Trading Commission ("CFTC"). In this statement, the Commission, to the extent applicable, incorporates by reference the views expressed by the CFTC in its interpretive statement, and reminds issuers of interests in publicly offered pools of their disclosure obligations under the federal securities laws. In addition, the Commission is requesting comment on several matters related to the presentation of prior performance by commodity pool operators and commodity trading advisors, and the presentation of fees, commissions and expenses to be incurred by the typical professionally managed commodity pool. The companion statements reflect a continuing effort on behalf of the CFTC and the Commission to maintain consistent coordinated requirements for publicly offered commodity pools. DATE: Comments should be received on or before [60 days after publication in FR] ADDRESS: Comments should be submitted in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Comment letters should refer to File No. S7-1-89. All comment letters will be available for public inspection and copying in the Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. FOR FURTHER INFORMATION CONTACT: John C. Roycroft, Assistant Director, or Daniel W. Rumsey, Attorney, at (202) 272-7628, Division of Corporation Finance, Securities and Exchange Commission, 450 Fifth Street, Washington, D.C. 20549 SUPPLEMENTARY INFORMATION: The Commission today is reminding issuers of interests in publicly offered commodity pools registered under the Securities Act of 1933 ("Securities Act") n1 or the Securities Exchange Act of 1934 ("Exchange Act") n2 of their disclosure obligations under those Acts. In connection herewith, and to the extent applicable, the Commission incorporates by reference the views expressed by the CFTC regarding the disclosure requirements under the Commodity Exchange Act ("CEA") n3 and CFTC regulations. n4 The CFTC's views are set forth in an interpretive statement and request for comments being published simultaneously herewith. n1 15 U.S.C. @ 77a et seq. n2 15 U.S.C. @ 78a et seq. n3 7 U.S.C. @ 1 et seq. n4 E.g., 17 CFR Part 4. The views expressed in this interpretive statement should be considered in connection with a registrant's obligation to disclose, in registration statements and other filings with the Commission, material information to investors that is necessary to make the required disclosure not misleading. n5 In addition, the Commission is requesting comment on several matters related to the presentation of prior performance by commodity pool operators and commodity trading advisors, and the presentation of fees, commissions and expenses to be incurred by the typical professionally managed commodity pool. n5 See Securities Act Section 17(a), 15 U.S.C. @ 77q(a); Securities Act Rule 408, 17 CFR @ 230.408; Exchange Act Section 10(b), 15 U.S.C. @ 78j(b); Exchange Act Rule 10b-5, 17 CFR @ 240.10b-5; Exchange Act Rule 12b-20, 17 CFR @ 240.12b-20. See also Basic Inc. v. Levinson, 108 S. Ct. 978 (1988). Registrants also are reminded of their obligation to present information in a clear, concise and understandable manner. Securities Act Rule 421(b), 17 CFR @ 230.421(b). Cf. Gould v. American-Hawaiian Steamship Co., 535 F. 2d 761 (3d Cir. 1976); Kohn v. American Metal Climax, Inc., 322 F. Supp. 1331 (E.D. Pa. 1970). I. BACKGROUND Issuers of interests in commodity pools must comply with applicable registration, disclosure, antifraud and other requirements of the federal securities laws. n6 In view of the CFTC's jurisdiction over commodity interest trading, commodity pool offerings also must comply with the regulations promulgated by the CFTC regarding commodity pool operators and commodity trading advisors and their associated persons as particularly set forth in the CFTC's interpretive statement. Accordingly, where interests in a commodity pool are registered with the Commission, the disclosure document provided to investors must comply with the disclosure and other requirements of both the federal commodity and securities laws. n7 n6 See Securities Act Section 2(1), 15 U.S.C. @ 77b(1); Exchange Act Section 3(a)(10), 15 U.S.C. @ 78c(a)(10). 2 n7 See, e.g., Securities Act Section 10(a)(3), 15 U.S.C. 77j(a)(3), which specifies the information required to be in a prospectus used in connection with a registered offering of securities. The Commission's staff has historically referred to the CFTC's requirements as a starting place in formulating its own disclosure standards applicable to offerings of commodity pools registered with the Commission. The companion statements reflect a continuing effort on behalf of the CFTC and the Commission to maintain consistent coordinated requirements for publicly offered commodity pools. Registrants should nevertheless independently review their disclosure responsibilities and potential liabilities under both the federal commodity and securities laws in the offer and sale of these securities. Certain recently published studies suggest that the actual performance of publicly held commodity pools was significantly lower than the performance disclosed in the prior performance tables included in commodity pool disclosure documents. n8 While the findings and issues raised in these studies are currently being reviewed by the staff of the CFTC, the Commission believes that it should provide guidance to issuers of publicly offered commodity pools at this time. Although the positions expressed in this release and the CFTC's interpretive statement currently reflect the respective agencies' views regarding appropriate disclosure in commodity pool disclosure documents, the Commission is interested in receiving views on the interpretive positions expressed in those statements. Commentators may wish to make the same submission to both agencies. The Commission expects to consult with the CFTC concerning the comments received in response to their respective statements with a view towards determining whether further action is necessary or appropriate. n8 See Elton, Gruber & Rentzler, New Public Offerings, Information and Investor Rationality: The Case of Publicly Offered Funds, 62 J. Bus. 1-15 (January, 1989). The authors hypothesized that the findings of the study were at least in part due to the following factors: 1) public commodity pools have larger transaction costs and management fees than private commodity accounts; 2) only trading advisers with recent successful track records are likely to go public; and 3) trading advisers can select the period of time for disclosing their prior performance, resulting in an upward bias in performance results. See also Edwards & Ma, Commodity Pool Performance: Is the Information Contained in Pool Prospectuses Useful? Working Paper Series No. 16, Center for the Study of Futures Markets, Columbia Business School (January, 1988). II. DISCLOSURE OF PRIOR PERFORMANCE TABLES Section 4.21 of the CFTC's regulations requires that the disclosure document provided to prospective investors include, among other things, information with respect to the actual performance of previously operated commodity pools and trading accounts of the commodity pool operator, the commodity trading advisor, and their respective principals (the "performance history"). n9 In this connection, the CFTC's rules require that the disclosure document include performance history for at least the lesser of three years or the life of the commodity pool or 3 trading account. n10 Beyond the required three years, registrants have discretion, subject to the risk of liability under the antifraud provisions of the federal commodity n11 and securities laws, n12 to present performance history for any additional time periods. Where performance history is provided in excess of three years, however, the additional performance data should not be selected in such a way so as to misrepresent the overall performance history of the commodity pool operator or commodity trading advisor. Thus, where performance history for periods greater than the required three years is presented, the additional performance history should not differ materially from the commodity pool operator's or commodity trading advisor's overall historical performance. n13 n9 CFTC Regulation @ 4.21, 17 CFR @ 4.21. n10 CFTC Regulation @@ 4.21(a)(4) and (a)(5), 17 CFR @@ 4.21(a)(4), (a)(5). n11 Section 4o of the Commodity Exchange Act, 7 U.S.C. @ 6o. n12 See, e.g., Securities Act Section 17(a), 15 U.S.C. @ 77q(a); Exchange Act Section 10(b), 15 U.S.C. @ 78j(b), and Exchange Act Rule 10b-5, 17 CFR @ 240.10b-5. n13 Registrants should be prepared to provide the Commission or its staff with information concerning the presentation of additional performance history. See Securities Act Rule 418, 17 CFR @ 230.418. Comment is requested as to whether the presentation of prior performance data beyond the required three years is useful to investors in making their investment decision. If so, further comment is requested as to whether registrants should be required to present the entire performance history of the commodity pool operator and commodity trading advisor, or alternatively, whether registrants should be required to present performance history for some period greater than three years, such as five, seven or ten years where such performance data is available. n14 In addressing these issues, commentators should discuss specifically those factors that would cause a presentation covering more than three years to be useful or relevant to an investment decision in the currently offered commodity pool. The Commission also requests comment as to whether any presentation of prior performance is useful to investors in view of the general nonpredictability of trading results. n14 The Commission notes that the CFTC currently requires that registrants maintain all commodity pool and trading account records for at least five years. CFTC Regulation @@ 4.23 and 1.31, 17 CFR @@ 4.23 and 1.31. The CFTC's regulations require that the prior performance of the commodity pool operator and trading advisor be presented on at least a quarterly basis. n15 In the Commission's view, performance disclosure on a monthly basis is generally more appropriate, particularly when such monthly performance is volatile. Moreover, to facilitate investor review and analysis of the prior 4 performance presentations, a registrant, to the extent practicable, should present the prior performance tables for the commodity pool operator and the commodity trading advisor on a consistent periodic basis. n15 CFTC Regulation @@ 4.21(a)(4)(ii) and (5)(ii), 17 CFR @@ 4.21(a)(4)(ii) and (5)(ii). The CFTC's regulations permit prior performance disclosure on an individual or composite basis. n16 Where a composite presentation is elected, separately captioned composites of previously traded public pools of the commodity pool operator and commodity trading advisor may be necessary to prevent the prospectus from being misleading, where the differences between the prior public pools' and private accounts' performance are material and are not otherwise clearly and concisely disclosed and explained in the text. Comment is requested as to whether there should be a separate presentation of prior public pools of the commodity pool operator and commodity trading advisor under all circumstances or whether an explanation of such differences in the text would be sufficient. n16 CFTC Regulation @@ 4.21(a)(4)(iv) and (5)(iii), 17 CFR @@ 4.21(a)(4)(iv) and (5)(iii). To enable an investor to evaluate prior performance presentations, the prior performance tables should be accompanied by appropriate textual disclosure regarding any material differences in investment objectives or structures between the commodity pools or trading accounts displayed in the prior performance tables and the commodity pool being registered. For example, specific disclosure should be considered where the margin-to-equity ratio of historical commodity pools or trading accounts is materially different from the margin-to-equity ratio permitted in the currently offered commodity pool, or where there are material differences in money management strategies. Similarly, to the extent an investor's understanding of the performance history would be enhanced by an explanation of significant factors that may have contributed to a materially favorable or unfavorable result during any quarterly or monthly measuring period, registrants should consider appropriate narrative disclosure. Such discussion could address, by way of example, the extent to which such prior performance was attributable to: 1) a particular successful or unsuccessful position or series of positions in one or a limited number of commodities, or was broadly based; 2) the movements of the commodity markets generally as measured by a broad based commonly used industry index; or 3) any material change in investment strategy or objectives. Commentators are requested to discuss any other factors that may be relevant to an understanding of the information contained in the prior performance tables. III. DISCLOSURE OF FEES, COMMISSION AND EXPENSES Consistent with the Commission's view, the practice is to supplement the prior performance disclosure for publicly offered commodity pools with a pro forma presentation of the performance history reflecting the brokerage commissions, incentive and management fees that 5 would have been incurred if the commodity pools and trading accounts presented in the prior performance tables were subject to the same fees, and expenses as the commodity pool being registered instead of those fees and expenses actually paid by the commodity pools and trading accounts presented. When included, the pro forma presentation should disclose the actual and pro forma net return achieved by the commodity pool operator and commodity trading advisor for the last three years. Comment is requested as to whether this presentation and any other pro forma presentation based on the actual prior results may cause investors to place undue reliance on prior performance results as an accurate indicator of future performance. Registrants also should include, in addition to a narrative description, a tabular presentation located in the forepart of the prospectus that details the brokerage commissions, incentive, management and transactional fees, as well as any other expenses attributable to the commodity pool that will be paid directly or indirectly by investors. n17 If any affiliate of the commodity pool operator will receive compensation in connection with the operation of the commodity pool, such affiliation and the amount of compensation should be clearly disclosed. n17 See also Regulation S-K, Item 501, 17 CFR @ 229.501, which requires the disclosure of the net proceeds to the issuer after deducting selling commissions; and Instruction 5 thereto, which requires footnote disclosure regarding other expenses of issuance and distribution, including organizational costs. 17 CFR @ 229.501, Instruction 5. In order to facilitate analysis of the fees, brokerage commissions and other expenses to be charged to the commodity pool, registrants should consider additional disclosure regarding how much each unit's net asset value would have to increase in the first year, for the redemption value per unit, net of expenses attributable to the commodity pool, to equal the purchase price paid by investors for such unit, as well as a calculation of the redemption value per unit estimated prior to the commencement of operations. Comments are requested as to whether alternative disclosures would better enable prospective investors to assess the impact on their investment of the expenses to be charged to the commodity pool. IV. CONCLUSION While this release and the interpretive statement published simultaneously herewith by the CFTC represent the views of the respective agencies as to the preparation and disclosure of material information concerning commodity pools, nothing in the statements should be construed to alleviate the requirement of registrants to comply with all applicable disclosure requirements under the Securities Act, the Exchange Act, and the CEA. n18 Attention also is directed to the antifraud provisions under both the Securities Act and the Exchange Act, which apply not only to statements made in filings with the Commission, but also to those made outside Commission filings. n19 Registrants also are reminded of the disclosure obligations promulgated by the CFTC. 6 n18 Registrants are specifically reminded of their obligation to include, in annual and quarterly reports filed under the Exchange Act, an analysis of the financial condition and results of operation for the commodity pool. See Item 303 of Regulation S-K, 17 CFR @ 229.303. n19 See supra note 12. List of Subjects in Parts 231 and 241 Reporting and Record Keeping Requirements, Securities. Parts 231 and 241 of Title 17, Chapter II of the Code of Federal Regulations are amended by adding this Release No. 33-6815, and 34-26508 (February 1, 1989) to the list of interpretive releases By the Commission. 7 EX-99.02 14 COMMODITY FUTURES EXHIBIT 99.02 COMMODITY FUTURES TRADING COMMISSION AGENCY: Commodity Futures Trading Commission. 17 CFR Part 4 Statement of the Commodity Futures Trading Commission Regarding Disclosure by Commodity Pool Operators of Past Performance Records and Pool Expenses and Request for Comments 54 FR 5597 February 6, 1989 ACTION: Interpretive Statement and Request for Comments. SUMMARY: The Commodity Futures Trading Commission is publishing this interpretive statement and request for comments in order to assist commodity pool operators in complying with requirements concerning the disclosure of past performance records and pool expenses. DATE: Comments should be received on or before April 7, 1989. ADDRESS: Please submit written comments to the Office of the Secretariat, Commodity Futures Trading Commission, 2033 K Street NW., Washington, DC 20581. FOR FURTHER INFORMATION CONTACT: Tobey W. Kaczensky, Associate Director, Division of Trading and Markets, Commodity Futures Trading Commission, 2033 K Street NW., Washington, DC 20581. Telephone: (202) 254-8955. TEXT: SUPPLEMENTARY INFORMATION: The Commodity Futures Trading Commission ("CFTC" or "Commission") is today reminding commodity pool operators ("CPOs") who solicit participations, or accept or receive funds, securities or other property in respect of participations, in publicly offered commodity pools registered under the Securities Act of 1933 (the "Securities Act") n1 or the Securities Exchange Act of 1934 ("Exchange Act") n2 of certain disclosure obligations under the Commodity Exchange Act (the "CEA"), n3 as more particularly set forth in Part 4 of the CFTC's regulations. n4 This interpretive statement and request for comments is being issued simultaneously with a companion release of the Securities and Exchange Commission ("SEC") generally addressing the same issues. n5 The CFTC, to the extent applicable, incorporates by reference the views expressed by the SEC in its interpretive statement. Commenters may wish to make the same submission to both agencies. The companion statements reflect a continuing effort on behalf of the CFTC and the SEC to maintain consistent, coordinated requirements for publicly offered commodity pools. n 1 15 U.S.C. 77a. n 2 15 U.S.C. 78a. n 3 7 U.S.C. 1. n 4 17 CFR Part 4 (hereinafter, all references to CFTC regulations will use the appropriate CFR citation). n 5 This release principally addresses issues raised in the context of public pools. However, given the fact that the CEA and CFTC regulations thereunder generally apply equally to private pools and to public pools, the views expressed herein, unless otherwise specified, also apply to private pools. I. Background Part 4 of the CFTC's regulations contains comprehensive disclosure requirements for CPOs. n6 Among other things, Part 4 requires that a current "Disclosure Document" be delivered to each prospective pool participant prior to the solicitation of the participant or the participant's commitment of funds to a pool. n7 This Disclosure Document also must be filed with the CFTC twenty-one days prior to its first use. n8 Under Commission rules, pool disclosure documents must address specifically the management policies of the pool and how the pool will be traded and operated including, without limitation: the five-year business background of its CPOs, CTAs and their respective principals; the financial interests of such persons in the specific pool being offered; and any actual or potential conflict of interest involving, or any material civil, criminal or administrative action against, any CPO, CTA or the principals of either within the preceding five years. Additionally, the document must indicate: the minimum aggregate amount of funds that must be received before the pool will commence trading; the responsibility, if any, of participants to contribute additional capital; and the pool's policies concerning distributions from profits or capital. n9 n 6 The CEA defines a "commodity pool operator" as "any person engaged in a business which is of the nature of an investment trust, syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others, funds, securities, or property, either directly or through capital contributions, the sale of stock or other forms of securities, or otherwise, for the purpose of trading in any commodity for future delivery on or subject to the rules of a contract market . . ." 7 U.S.C. 2. The CEA defines a "commodity trading advisor" ("CTA") as "any person who, for compensation or profit, engages in the business of advising others . . . as to the value of or the advisability of trading in any contract of sale of a commodity for future delivery made or to be made on or subject to the rule of a contract market . . ." 7 U.S.C. 2. n 7 17 CFR 4.21(a). A "pool" is defined as "any investment trust, syndicate, or similar form of enterprise operated for the purpose of trading commodity interests." 17 CFR 4.10(d). n 8 17 CFR 4.21(g). n 9 17 CFR 4.21(a)(8) and 4.21(a)(12). 2 Part 4 of the CFTC's regulations also specifically requires disclosure of the actual performance record (i.e., the past performance history) of the pool's CPO, CTAs and their respective principals. n10 Such disclosures must include the past performance history of all pools, public or private, as well as that of individual accounts operated or traded by the CPO and its CTAs. Part 4 separately requires a complete description of each kind of expense that may be charged to a pool or its participants which specifies whether such expenses are actual or estimated. n11 n 1 0 17 CFR 4.21(a)(4) and 4.21(a)(5). n 1 1 17 CFR 4.21(a)(7). This requirement includes, without limitation, an itemization of fees for management, trading advice, brokerage commissions, legal advice, accounting services and organizational services. That Regulation also requires the disclosure of any expense which has been or is to be paid by a person other than the CPO. 17 CFR 4.21(a)(17)(iv). When any expense is determined by reference to "net assets," "gross profits," "net profits" or "net gains", the CPO must define that term. 17 CFR 4.21(a)(7)(ii). Part 4 also contains a specified risk disclosure statement which warns that a pool participant may lose his or her entire interest in the pool and that pools may be subject to significant charges so that substantial trading profits may be required to avoid the depletion or exhaustion of pool assets. n12 n 1 2 17 CFR 4.21(a)(17). The Risk Disclosure Statement must appear as the only language on the page immediately following the cover page and must contain specified language including, in part, the following statements: YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. YOU MAY LOSE A SUBSTANTIAL PORTION OR EVEN ALL OF THE MONEY YOU PLACE IN THE POOL. IN CONSIDERING WHETHER TO PARTICIPATE IN A COMMODITY POOL, YOU SHOULD BE AWARE THAT TRADING COMMODITIES CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. ALSO, MARKET CONDITIONS MAY MAKE IT DIFFICULT OR IMPOSSIBLE FOR THE POOL TO LIQUIDATE A POSITION. The National Futures Association ("NFA"), which is the self-regulatory organization ("SRO") responsible, under CFTC oversight, for CPO and CTA compliance with the CFTC's disclosure requirements, has adopted additional rules approved by the CFTC that pertain to pool disclosures. For example, NFA rules prohibit the use of promotional material which includes any reference to actual past trading profits without a statement that "past results are not necessarily indicative of future results * * * ." n13 NFA generally requires that this statement be included in the disclosure document 3 adjacent to the performance table and the Commission believes that it should appear in bold face print and in a prominent place immediately preceding the past performance tables required by Part 4. n 1 3 NFA Compliance Rule 2-29(b)(5). Further, NFA Compliance Rule 2-29(g) includes disclosure documents within the definition of promotional material. Moreover, NFA Compliance Rule 2-13 adopts the CFTC's Part 4 regulations by reference. In any event, CFTC regulations expressly require that a CPO make all material disclosures when offering pool participations. n14 As a consequence, to assist CPOs, the CFTC is publishing these views on certain types of disclosures which should be considered material in connection with past performance and pool expense information required to be disclosed to pool participants in order that such required disclosures are not misleading. Additionally, the CFTC is requesting comment on matters related to the presentation of prior performance data by CPOs and CTAs and the presentation of the fees, commissions and expenses incurred by pools. Although the positions expressed in this release reflect the CFTC's views regarding appropriate disclosure in pool disclosure documents, the CFTC is interested in receiving comments on the interpretive positions and other issues set forth herein. The CFTC, in consultation with the SEC, will review the comments received in response to this release with a view toward determining whether further action in addition to this statement is appropriate. n 1 4 A CPO is required to disclose all material information to existing or prospective pool participants even if such information is not otherwise specifically required by Part 4. 17 CFR 4.21(h). II. Commodity Pool Participation and Performance In recent years, the futures markets have grown both in volume and in the diversity of products traded thereon, especially the financial, foreign currency and equity-related products. The commodity pool is an increasingly popular means of participation in these markets by the individual customer. In a typical commodity pool, the promoter or CPO pools particpants' funds and uses a portion thereof to margin futures positions held by the pool. n15 Trading decisions for the commodity pool generally are made by one or more CTAs selected by the CPO. n 15 See 1 P. Johnson, Commodities Regulation @ 1.15, at 52 (1982). The disclosure document provided to pool participants must meet applicable registration, disclosure, antifraud and other requirements of the federal securities laws as well as comply with the CEA and all applicable CFTC regulations. n16 Persons who propose to offer participations in public commodity pools should carefully review the requirement that, in addition to the specific disclosures required by Part 4 of the CFTC's regulations, CPOs must disclose all material information to existing and prospective pool participants. n 1 7 n 1 6 See 7 U.S.C. 6m(2), 15 U.S.C. 77b(1) and 15 U.S.C. 78c(a)(10). 4 n 1 7 See n.14, supra. Certain recently published studies suggest that the actual performance of CTAs employed by publicly held commodity pools was significantly poorer than their previous performance as disclosed in the prior performance tables included in those pools' disclosure documents. n 1 8 CFTC staff is currently reviewing the study results and will investigate possible reasons for the differences in performance reported by the authors if available data permits. To the extent that significant differences exist between the past performance records required to be disclosed in a particular pool disclosure document and the actual subsequent performance of that pool, such differences may be the result of differences between the trading and money management strategies of the current pool and those of the pool or pools previously offered by the relevant CPO or CTAs. For example, it would not be uncommon for significant differences to exist in the proportion of funds committed to margin futures positions and, thus, in the ratio of trading margin to overall equity. n 1 9 n 1 8 See Elton, Gruber and Rentzler, New Public Offerings, Information and Investor Rationality: The Case of Publicly Offered Funds, 62 J. Bus. L. 1-15 (January 1988); see also Edwards, Commodity Pool Performance: Is the Information Contained in Pool Prospectuses Useful?, Working Paper Series No. 16, Center for the Study of Futures Markets, Columbia Business School (January 1988). n 1 9 Id. Pending completion of its review of the recently published studies, the CFTC recommends that special attention be given to disclosures in the following areas. III. Performance Reporting A. Length of Period Covered by Performance Tables As mentioned above, CFTC Regulation 4.21 requires that the disclosure document provided to prospective pool participants include, among other things, information with respect to the actual performance of previously operated commodity pools and trading accounts of the CPO, the CTA, and their respective principals. Such prior performance tables must be provided for at least the lesser of three years or the life of the commodity pool or individual trading account for which the performance data are provided. n 2 0 Beyond the required three years, CPOs have discretion to elect to provide historical performance data for additional time periods subject to the obligation to disclose all material information and to the antifraud provisions of the CEA. n 2 1 Where performance history in excess of the required three years is provided for either the CPO or CTA, the CPO must ensure that the additional performance data is not selected in such a way as to misrepresent the overall performance history of the CPO or CTA. n22 In addition, where performance history for periods greater than three years is shown, the CFTC staff generally has advised that at least five years' performance or the entire performance history, if it is available, should be presented. In this 5 connection, the CFTC notes that a CPO is required to maintain all pool records for at least five years. n 2 3 n 2 0 17 CFR 4.21(a)(4)(i) and 4.21(a)(5)(i). n 2 1 See 17 CFR 4.21(a)(4), 17 CFR 4.21(h) and 7 U.S.C. 6o. n 2 2 17 CFR 4.21(a)(4), 4.21(a)(5) and 4.21(h). n 2 3 17 CFR 4.23 and 1.31. Comment is requested as to whether the presentation of prior performance data in excess of the currently required three years is useful to participants in making the decision to purchase a pool participation. If so, further comment is requested as to whether the CPO should be required to present the performance history of the CPO and CTA for a longer period such as five years or more, if such performance history is available. In addressing this issue, commenters should discuss specifically those factors that would cause a presentation covering more than three years to be relevant to potential participants in a currently offered pool. The CFTC also requests comment generally on the extent to which the presentation of prior performance may be useful to persons in deciding whether to purchase an interest in a given pool offering in view of the general nonpredictability of trading results. B. Periodic Reporting CFTC regulations require that the prior performance of a pool's CPO and CTA be presented on at least a quarterly basis. n24 However, in the CFTC's view, performance disclosure on a monthly basis may be more appropriate, particularly when such monthly performance is volatile. n 24 17 CFR 4.21(a)(4)(ii) and 4.21(a)(5)(ii). The CFTC believes that a majority of CPOs and CTAs affiliated with publicly offered commodity pools currently maintain records and present performance history in their disclosure documents on a monthly basis. The CFTC recommends that all CPOs and CTAs affiliated with, or contemplating an affiliation with, a publicly offered commodity pool should, if not currently doing so, consider maintaining records of past performance and presenting such performance on a monthly basis. Moreover, to facilitate a pool participant's review and analysis of prior performance presentations, all prior performance tables for the CPO and its CTAs should be shown, to the extent possible, in a consistent format. Comment is requested as to whether monthly performance reporting should be required in all cases. C. Composite Performance 6 CFTC regulations permit prior performance disclosure to be made on either an individual or a composite basis. n25 If a composite presentation is elected, separately captioned composites of previously traded public pools of the CPO and its CTAs may be appropriate when differences between the performance of such public pools and any private accounts are material. n26 Comment is requested as to whether there should be a separate presentation of prior public pool performance of the CPO and its CTAs in all cases or whether a textual explanation of the differences in such account performance may be sufficient in some circumstances. Specifically, the CFTC requests comment on whether performance disclosure in public pool disclosure documents should be limited to the prior performance of publicly offered pools or whether the performance of publicly offered pools should be highlighted. n 25 17 CFR 4.21(a)(4)(iv) and 4.21(a)(5)(iii). n 26 The CFTC has been advised that such differences are likely if the private account performance reflected proprietary trading. See also 17 CFR 4.21(a)(4)(iv)(B). To enable a participant better to evaluate prior performance presentations, prior performance tables in a public pool disclosure document should be accompanied by textual disclosure regarding any material differences in trading objectives for the pools or trading accounts displayed in the prior performance tables and those objectives for the pool for which the disclosure document is being distributed. n27 For example, specific disclosure should be considered where the margin-to-equity ratio of the commodity pools of trading accounts on which historical performance data are based is materially different from that which will be permitted in the currently offered commodity pool or where there are other material differences in how the current pool will be traded. n 27 17 CFR 4.21(a)(4)(iii) and 4.21(a)(5)(iii)(A). Comments are requested concerning what other factors may be relevant to properly interpreting the information contained in the prior performance tables. Comments are also requested as to whether requiring monthly performance disclosure and improving the rate of return calculations as discussed below would be sufficient to address the issues raised above. D. Additions and Withdrawals and the Rate-of-Return Calculation The CFTC's regulations require that CPOs and CTAs also present performance in terms of the rate of return for the period contained in the performance table by dividing net performance for the period by the beginning net asset value ("BNAV") for that period. n28 The CFTC chose this formula over more complex measures in order to minimize computational and reporting burdens upon CPOs. This approach assumes that additions or withdrawals are ordinarily made at the beginning of a reporting period. However, as that may not be the case in practice, this method may result in unjustifiably high or low rates of return. If average daily equity ("ADE") were used as a divisor, or adjustments were made to BNAV to achieve a closely equivalent result, the rate of return may be affected less by the timing of additions and withdrawals. The CFTC staff has accepted such alternate presentations where it has 7 been demonstrated that timing differences with respect to additions and withdrawals would materially distort performance. n 28 17 CFR 4.21(a)(4)(ii) and 4.21(a)(5)(ii). The CFTC requests comment on the feasibility of requiring that rates of return be computed by dividing net performance by ADE. The CFTC also requests comment as to whether the use of BNAV still should be permitted when the effects of using one measure in preference to the other would not materially affect the rate of return. In this connection, comment is sought specifically on the feasibility of establishing a standard which would provide guidance as to when the use of BNAV would be permitted. IV. Disclosure of Fees, Commissions and Expenses CFTC regulations require a complete description on all expenses to be charged to or incurred by a pool, including any interest paid with respect to pool assets to a person other than the pool itself. n29 In order to facilitate analysis of the fees and other expenses to be charged to a publicly offered commodity pool, the CFTC believes that in addition to a narrative description, CPOs should include a tabular presentation prior to the performance tables that details the brokerage commissions, incentive, management and transaction fees, as well as any other expenses attributable to the commodity pool that will be paid directly or indirectly by participants. n 29 17 CFR 4.21(a)(7) and 4.21(a)(9). See also 17 CFR 4.22(a). The CFTC requests comment on whether it should require that this discussion of expenses be supplemented with a pro forma presentation of prior performance history which reflects the brokerage commissions and incentive and management fees that would have been incurred if the fees and expenses charged by commodity pools and trading accounts presented in the prior performance tables were the same as those to be charged to the current pool. Such a pro forma presentation should disclose the actual and pro forma net return achieved for the last three years. Notwithstanding the foregoing, comment is also requested as to whether this type of presentation, or other pro forma presentations based on actual prior results, may cause participants to rely unduly upon prior performance as an indicator of future performance. Further, comments are solicited as to whether additional disclosure would assist prospective participants in assessing the extent to which expenses charged to a pool could influence the pool's prospective performance. For example, it may be useful to include in the disclosure document the amount by which each unit of participant's net asset value must increase in the first year of trading for the redemption value of that unit to equal the gross purchase price paid to purchase it. Alternatively, the disclosure statement could include a calculation of the net asset value per unit, net of sales commissions and other expenses which will be deducted prior to the funds generated by the sale of such participation unit being pooled for futures trading. In this connection, commenters should address the problem of assessing prospectively the effect of incentive fees. 8 Commenters also are invited to address whether other disclosure modifications are needed to make uniform the presentation of fees and expenses, particularly because the rate of return formula is especially sensitive to the timing of the deduction of such expenses. V. Conclusion Although this interpretive statement and the interpretive statement published simultaneously herewith by the SEC represent the views of the respective agencies with respect to certain information which may be material in connection with disclosure documents filed with the CFTC for the offering of participations in commodity pools, nothing in the statements should be construed to diminish the obligation of CPOs and other CFTC registrants to comply with all applicable disclosure requirements of the CEA and the CFTC's regulations thereunder. Attention particularly is directed to the antifraud provisions of the CEA which apply not only to statements made in documents filed with the CFTC, but also to all statements or omissions made in connection with any pool offering. n30 The CFTC expects to provide further guidance following review of the comments received in response to this release and completion of the CFTC's staff study. In this regard, the agency expects to consult with the SEC concerning the comments to its companion release. n 30 CPOs are specifically reminded of the quarterly and annual reporting obligations set forth in 17 CFR 4.22. * * * * * List of Subjects in 17 Part 4 General Provisions, Definitions and Exemption, Commodity Pool Operators, Commodity Trading Advisors, Advertising. Issued this 1st day of February 1989. Jean A. Webb, Secretary to the Commission. [FR Doc. 89-2681 Filed 2-3-89; 8:45 am] BILLING CODE 6351-01-M 9 EX-99.03 15 REGISTRATION OF COMMODITY POOL PROGRAMS EXHIBIT 99.03 REGISTRATION OF COMMODITY POOL PROGRAMS Adopted on September 21, 1983, effective January 1, 1984; amended and adopted August 30, 1990 I. INTRODUCTION A. APPLICATION 1. The standards contained in these Guidelines pertain to the offer and sale of securities by commodity pool limited partnerships or analogous corporate entities and are designed to establish uniform and consistent standards to be applied by the various state securities ADMINISTRATORS. The primary focus of the Guidelines is on the securities related aspects of commodity pool limited partnerships or analogous corporate entities rather than the technical aspects of futures trading. The Guidelines do not purport to supplant existing or future rules and regulations promulgated by the Commodity Futures Trading Commission or the National Futures Association. 2. The ADMINISTRATOR may modify or waive such Guidelines if the object sought to be achieved thereby is accomplished by other means. Where the individual characteristics of specific PROGRAMS warrant modification from these standards, they will be accommodated, insofar as possible, while still being consistent with the spirit of these Guidelines. COMMENT: In granting modifications or waivers from these Guidelines, the ADMINISTRATOR may take into consideration such factors as: (i) the experience and prior performance of the SPONSOR and/or ADVISOR: (ii) reduction of ORGANIZATIONAL AND OFFERING EXPENSES, management, advisory or incentive fees, brokerage commissions, other fees, costs and expenses below the limits set forth in Section IV: and (iii) more favorable redemption rights. 3. Where applicable, the ADMINISTRATOR may require compliance with the jurisdiction's guidelines for corporate securities and may not allow a security with different rights and privileges to be issued unless there is justification therefor. 4. When required by the ADMINISTRATOR, a CROSS REFERENCE SHEET shall be furnished with the application. B. DEFINITIONS. As used in these Guidelines, the following terms shall mean: 1. ADMINISTRATOR-The official or agency administering the securities laws of a state. 2. ADVISOR-Any PERSON who for any consideration engages in the business of advising others, either directly or indirectly, as to the value, purchase, or sale of COMMODITY CONTRACTS or commodity options. 3. AFFILIATE-An AFFILIATE of a PERSON means (a) any PERSON directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities of such PERSON; (b) any PERSON 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote, by such PERSON; (c) any PERSON, directly or indirectly, controlling, controlled by, or under common control of such PERSON; (d) any officer, director or partner of such PERSON; or (e) if such PERSON is an officer, director or partner, any PERSON for which such PERSON acts in any such capacity. 4. CAPITAL CONTRIBUTIONS-The total investment in a PROGRAM by a PARTICIPANT or by all PARTICIPANTS, as the case may be. 5. COMMODITY BROKER-Any PERSON who engages in the business of effecting transactions in COMMODITY CONTRACTS for the account of others or for his own account. 6. COMMODITY CONTRACT-A contract or option thereon providing for the delivery or receipt at a future date of a specified amount and grade of a traded commodity at a specified price and delivery point. 7. CROSS REFERENCE SHEET-A compilation of the Guideline sections, referenced to the page of the prospectus, PROGRAM agreement, or other exhibits, and justification of any deviation from the Guidelines. 8. NET ASSETS-The total assets, less total liabilities, of the PROGRAM determined on the basis of generally accepted accounting principles. NET ASSETS shall include any unrealized profits or losses on open positions, and any fee or expense including NET ASSET fees accruing to the PROGRAM. 9. NET ASSET VALUE PER PROGRAM INTEREST-The NET ASSETS divided by the number of PROGRAM INTERESTS outstanding. -2- 10. NET WORTH-The excess of total assets over total liabilities as determined by generally accepted accounting principles. NET WORTH shall be determined exclusive of home, home furnishings and automobiles. 11. NEW TRADING PROFITS-The excess, if any, of NET ASSETS at the end of the period over NET ASSETS at the end of the highest previous period or NET ASSETS at the date trading commences, whichever is higher, and as further adjusted to eliminate the effect on NET ASSETS resulting from new CAPITAL CONTRIBUTIONS, redemptions, or capital distributions, if any, made during the period decreased by interest or other income, not directly related to trading activity, earned on PROGRAM assets during the period, whether the assets are held separately or in margin account. 12. ORGANIZATIONAL AND OFFERING EXPENSES-All expenses incurred by the PROGRAM in connection with and in preparing a PROGRAM for registration and subsequently offering and distributing it to the public, including, but not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriter's attorneys), expenses for printing, engraving, mailing, salaries of employees while engaged in sales activity, charges of transfer agents, registrars, trustees, escrow holders, depositories, experts, expenses of qualification of the sale of its PROGRAM INTEREST under federal and state law, including taxes and fees, accountants' and attorneys' fees. 13. PARTICIPANT-The holder of a PROGRAM INTEREST. 14. PERSON-Any natural PERSON, partnership, corporation, association or other legal entity. 15. PIT BROKERAGE FEE. PIT BROKERAGE FEE shall include floor brokerage, clearing fees, National Futures Association fees, and exchange fees. 16. PROGRAM-A Limited partnership, joint venture, corporation, trust or other entity formed and operated for the purpose of investing in COMMODITY CONTRACTS. 17. PROGRAM BROKER-A COMMODITY BROKER that effects trades in COMMODITY CONTRACTS for the account of a PROGRAM. 18. PROGRAM INTEREST-A limited partnership interest or other security representing ownership in a PROGRAM. -3- 19. PYRAMIDING-A method of using all or a part of an unrealized profit in a COMMODITY CONTRACT position to provide margin for any additional COMMODITY CONTRACTS of the same or related commodities. 20. SPONSOR-Any PERSON directly or indirectly instrumental in organizing a PROGRAM or any PERSON who will manage or participate in the management of a PROGRAM, including a COMMODITY BROKER who pays any portion of the ORGANIZATIONAL EXPENSES of the PROGRAM, and the general partner(s) and any other PERSON who regularly performs or selects the PERSONS who perform services for the PROGRAM. SPONSOR does not include wholly independent third parties such as attorneys, accountants, and underwriters whose only compensation is for professional services rendered in connection with the offering of the units. The term "SPONSOR" shall be deemed to include its AFFILIATES. 21. VALUATION DATE-The date as of which the NET ASSETS of the PROGRAM are determined. 22. VALUATION PERIOD-A regular period of time between VALUATION DATES. II. REQUIREMENTS OF THE SPONSOR. A. EXPERIENCE. Both the SPONSOR and the ADVISOR must be able to demonstrate sufficient knowledge and experience to carry out the PROGRAM policies and objectives and to manage PROGRAM operations. Ordinarily a minimum of three years of relevant experience will be deemed sufficient. B. FINANCIAL CONDITION. The financial condition of the Sponsor must be commensurate with any financial obligations assumed in the operation of the PROGRAM. At a minimum, the NET WORTH of the general partner shall be: 1. An amount equal to 5% of CAPITAL CONTRIBUTIONS in all existing PROGRAMS in which the SPONSOR has potential liability as a general partner plus 5% of the PROGRAM INTERESTS being offered. 2. For this section, the minimum required NET WORTH shall in no case be less than $50,000 nor shall NET WORTH in excess of $1,000,000 be required. -4- 3. Evaluation will be made of contingent liabilities and the use of promissory notes to determine the appropriateness of their treatment in the computation of NET WORTH. If stock subscriptions or promissory notes are used, the ADMINISTRATOR may request that the SPONSOR demonstrate that the prospective subscriber or maker have sufficient NET WORTH to fund its obligation for the maximum amount of PROGRAM INTERESTS being offered. A currently enforceable contract shall exist that will require the prospective subscriber or maker to honor its obligation upon CAPITAL CONTRIBUTION to the PROGRAM. COMMENT: See Section VI.C.4.(b). for specific requirements relating to the balance sheet of the SPONSOR. C. INVESTMENT IN THE PROGRAM. The SPONSOR must make a permanent investment in the PROGRAM equal to the greater of 1% of CAPITAL CONTRIBUTIONS or $25,000. The SPONSOR'S investment should be made prior to the commencement of trading and shall be maintained throughout the existence of the PROGRAM. In appropriate cases, the ADMINISTRATOR may require the SPONSOR to purchase for cash additional interests in the PROGRAM. D. REPORTS. The SPONSOR shall submit to the ADMINISTRATOR any information required to be filed with the ADMINISTRATOR, including, but not limited to, reports and statements required to be distributed to PARTICIPANTS. E. TAX RULING OR OPINION. If the PROGRAM is organized as a limited partnership, the SPONSOR must obtain a favorable tax ruling from the Internal Revenue Service or an opinion of qualified tax counsel in a form acceptable to the ADMINISTRATOR concerning the tax status of a limited partnership. F. LIABILITY AND INDEMNIFICATION. 1. The PROGRAM shall not provide for indemnification of the SPONSOR (which shall include AFFILIATES only if such AFFILIATES are performing services on behalf of the PROGRAM) for any liability or loss suffered by the SPONSOR, nor shall it provide that the SPONSOR be held harmless for any loss or liability suffered by the PROGRAM, unless all of the following conditions are met: (a) The SPONSOR has determined, in good faith, that the course of conduct which caused the loss or liability was in the best interests of the PROGRAM, and -5- (b) The SPONSOR was acting on behalf of or performing services for the PROGRAM, and (c) such liability or loss was not the result of negligence or misconduct by the SPONSOR, and (d) such indemnification or agreement to hold harmless is recoverable only out of the assets of the PROGRAM and not from the PARTICIPANTS. 2. Notwithstanding anything to the contrary contained in Section II.F.1., the SPONSOR and any PERSON acting as a broker-dealer shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws unless the following conditions are met: (a) There has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee, or (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee, or (c) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and related costs should be made, and (d) in the case of subparagraph (c), the court of law considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and the position of any state securities regulatory authority where PROGRAM INTERESTS were offered or sold as to indemnification for violations of securities laws; provided that the court need only be advised and consider the positions of the securities regulatory authorities of those states (i) which are specifically set forth in the PROGRAM agreement and (ii) in which plaintiffs claim they were offered or sold PROGRAM INTERESTS. 3. The PROGRAM may not incur the cost of that portion of liability insurance which insures the SPONSOR for any liability as to which the SPONSOR is prohibited from being indemnified under this section. -6- 4. The provision of advancement from PROGRAM funds to a SPONSOR or its AFFILIATES for legal expenses and other costs incurred as a result of any legal action is permissible if the following conditions are satisfied: (a) the legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the PROGRAM; (b) the legal action is initiated by a third party who is not a PARTICIPANT, or the legal action is initiated by a PARTICIPANT and a court of competent jurisdiction specifically approves such advancement; and (c) the SPONSOR or its AFFILIATES undertake to repay the advanced funds to the PROGRAM, together with the applicable legal rate of interest thereon, in cases in which such PERSON is not entitled to indemnification under Section II.F.1. G. REMOVAL OR WITHDRAWAL OF GENERAL PARTNER(S). In PROGRAMS organized as limited partnerships, the general partner(s) may not voluntarily withdraw from the partnership without 120 days prior written notice thereof to the limited partners. If a general partner withdraws as general partner and the limited partners or remaining general partners elect to continue the partnership, the withdrawing general partner shall pay all expenses incurred as a result of its withdrawal. In the event of removal or withdrawal, the general partner shall be entitled to a redemption of its interest in the partnership at its NET ASSET value on the next VALUATION DATE following the date of removal or withdrawal. H. PROPER REGISTRATION. A SPONSOR and ADVISOR must be in compliance with applicable registration requirements under the COMMODITY EXCHANGE ACT as amended. III. SUITABILITY OF PARTICIPANTS A. GENERAL POLICY. 1. The SPONSOR shall establish minimum income and net worth standards for PERSONS who purchase PROGRAM INTERESTS. 2. The SPONSOR shall propose minimum income and net worth standards which are reasonable given the type of PROGRAM and the risks associated with the purchase of PROGRAM INTERESTS. PROGRAMS with greater investor risk shall have minimum standards with a substantial NET WORTH requirement. The ADMINISTRATOR shall evaluate the -7- standards proposed by the SPONSOR when the PROGRAM'S application for registration is reviewed. In evaluating the proposed standards, the ADMINISTRATOR may consider the following: (a) potential volatility in net asset value; (b) potential PARTICIPANTS; (c) relationships among potential PARTICIPANTS, SPONSOR, and ADVISOR; (d) liquidity of PROGRAM INTERESTS; (e) prior performance of SPONSOR, ADVISOR, and, if applicable, PROGRAM; (f) financial condition of the SPONSOR; (g) potential transactions between the PROGRAM and the SPONSOR; and (h) any other relevant factors. B. INCOME AND NET WORTH STANDARDS. 1. Unless the ADMINISTRATOR determines that the risks associated with the PROGRAM would require lower or higher standards, each PARTICIPANT shall have: (a) a minimum annual gross income of $45,000 and a minimum NET WORTH of $45,000; or (b) A minimum NET WORTH of $150,000. 2. NET WORTH shall be determined exclusive of home, home furnishings, and automobiles. 3. In the case of sales to fiduciary accounts, these minimum standards shall be met by the beneficiary, the fiduciary account, or by the donor or grantor who directly or indirectly supplies the funds to purchase the PROGRAM INTERESTS if the donor or grantor is the fiduciary. 4. The SPONSOR shall set forth in the final prospectus: -8- (a) the investment objectives of the PROGRAM; (b) a description of the type of PERSON who might benefit from an investment in the PROGRAM; and (c) the minimum standards imposed on each PARTICIPANT in the PROGRAM. C. DETERMINATION THAT SALE TO PARTICIPANT IS SUITABLE AND APPROPRIATE. 1. The SPONSOR and each PERSON selling PROGRAM INTERESTS on behalf of the SPONSOR or PROGRAM shall make every reasonable effort to determine that the purchase of PROGRAM INTERESTS is a suitable and appropriate investment for each PARTICIPANT. 2. In making this determination, the SPONSOR and each PERSON selling PROGRAM INTERESTS on behalf of the SPONSOR or PROGRAM shall ascertain that the prospective PARTICIPANT: (a) meets the minimum income and net worth standards established for the PROGRAM; (b) can reasonably benefit from the PROGRAM based on the prospective PARTICIPANT'S overall investment objectives and portfolio structure; (c) is able to bear the economic risk of the investment based on the prospective PARTICIPANT'S overall financial situation; and (d) has apparent understanding of: (1) the fundamental risks of the investment; (2) the risk that the PARTICIPANT may lose the entire investment; (3) the restrictions on the liquidity of PROGRAM INTERESTS; (4) the restrictions on transferability of PROGRAM INTERESTS; -9- (5) the background and qualifications of the SPONSOR and ADVISOR; and (6) the tax consequences of the investment. 3. The SPONSOR or each PERSON selling PROGRAM INTERESTS on behalf of the SPONSOR or PROGRAM will make this determination on the basis of information it has obtained from a prospective PARTICIPANT. Relevant information for this purpose will include at least the age, investment objectives, investment experience, income, NET WORTH, financial situation, and other investments of the prospective PARTICIPANT, as well as any other pertinent factors. 4. The SPONSOR or each PERSON selling PROGRAM INTERESTS on behalf of the SPONSOR or PROGRAM shall maintain records of the information used to determine that an investment in PROGRAM INTERESTS is suitable and appropriate for each PARTICIPANT. The SPONSOR or each PERSON selling PROGRAM INTERESTS on behalf of the SPONSOR or PROGRAM shall maintain these records for at least six years. 5. The SPONSOR shall disclose in the final prospectus the responsibility of the SPONSOR and each PERSON selling PROGRAM INTERESTS on behalf of the SPONSOR or PROGRAM to make every reasonable effort to determine that the purchase of PROGRAM INTERESTS is a suitable and appropriate investment for each PARTICIPANT, based on information provided by the PARTICIPANT regarding the PARTICIPANT'S financial situation and investment objectives. D. SUBSCRIPTION AGREEMENTS. 1. The ADMINISTRATOR may require that each PARTICIPANT complete and sign a written subscription agreement. 2. The SPONSOR may require that each PARTICIPANT make certain factual representations in the subscription agreement, including the following: (a) The PARTICIPANT meets the minimum income and net worth standards established for the PROGRAM. (b) The PARTICIPANT is purchasing the PROGRAM INTERESTS for his or her own account. -10- (c) The PARTICIPANT has received a copy of the prospectus. (d) The PARTICIPANT acknowledges that the investment is not liquid except for limited redemption provisions. 3. The PARTICIPANT must separately sign or initial each representation made in the subscription agreement. Except in the case of fiduciary accounts, the PARTICIPANT may not grant any PERSON a power of attorney to make such representations on his or her behalf. 4. The SPONSOR and each PERSON selling PROGRAM INTERESTS on behalf of the SPONSOR or PROGRAM shall not require a PARTICIPANT to make representations in the subscription agreement which are subjective or unreasonable and which: (a) might cause the PARTICIPANT to believe that he or she has surrendered rights to which he or she is entitled under federal or state law; or (b) would have the effect of shifting the duties regarding suitability, imposed by law on broker-dealers, to the PARTICIPANT. 5. Prohibited representations include, but are not limited to the following: (a) The PARTICIPANT understands or comprehends the risks associated with an investment in the PROGRAM. (b) The investment is a suitable one for the PARTICIPANT. (c) The PARTICIPANT has read the prospectus. (d) In deciding to invest in the PROGRAM, the PARTICIPANT has relied solely on the prospectus, and not on any other information or representations from other PERSONS or sources. 6. The SPONSOR may place the content of the prohibited representations in the subscription agreement in the form of disclosures to the PARTICIPANT. The SPONSOR may not place these disclosures in the PARTICIPANT representation section of the subscription agreement. E. COMPLETION OF SALE. -11- 1. The SPONSOR or any person selling PROGRAM INTERESTS ON behalf of the SPONSOR or PROGRAM may not complete a sale of PROGRAM INTERESTS to a PARTICIPANT until at least five business days after the date the PARTICIPANT receives a final prospectus. 2. The SPONSOR or the PERSON designated by the SPONSOR shall send each PARTICIPANT a confirmation of his or her purchase. F. MINIMUM INVESTMENT. The ADMINISTRATOR may require a minimum initial and subsequent cash investment amount. IV. FEES, COMPENSATION AND EXPENSES. A. ORGANIZATIONAL AND OFFERING EXPENSES. 1. All ORGANIZATIONAL AND OFFERING EXPENSES, including commissions, and any other compensation for sales of PROGRAM INTERESTS shall be reasonable. In no event shall these expenses exceed 15% of the CAPITAL CONTRIBUTIONS of the offering, regardless of the source of payment. Any interest paid by the PROGRAM on deferred ORGANIZATIONAL AND OFFERING EXPENSES shall comply with Section VI.C.2.(e). Included in ORGANIZATIONAL AND OFFERING EXPENSES shall be the redemption fees as set forth in Section VII.B. 2. No SPONSOR shall directly or indirectly pay or award any commissions or other compensation to any PERSON engaged to sell PROGRAM INTERESTS or give investment advice to a potential PARTICIPANT; provided, however, that this clause shall not prohibit the payment to a registered broker-dealer or other properly licensed PERSON of normal sales commissions for selling PROGRAM INTERESTS. COMMENT: Compensation paid to sales agents from a percentage of commodity brokerage commissions (trail commissions) will not be considered objectionable offering expenses under Section IV.A. B. (Formerly Section IV.B.5) EXPENSES OF THE PROGRAM. All expenses of the PROGRAM shall be billed directly to and paid by the PROGRAM. The SPONSOR shall not be allowed (other than for ORGANIZATIONAL AND OFFERING EXPENSES) to allocate to the PROGRAM any portion of its indirect expenses incurred in connection with the administration of the PROGRAM, including but not limited to salaries, rent, travel expenses and such other items generally falling under the category of SPONSOR overhead expense. All customary and routine administrative expenses of the PROGRAM, except for the -12- actual cost of legal and audit services provided by third parties, shall be subject to the limitations imposed by Section IV.C.1. of these Guidelines. The prospectus shall contain a separate estimate of the amount of legal and audit fees to be charged to the PROGRAM during the first full year of its operations based on minimum and maximum offering sizes. C. COMPENSATION. 1. NET ASSET Fee-Management fees, advisory fees and all other fees, except for incentive fees and commodity brokerage commissions, when added to the customary and routine administrative expenses of the PROGRAM shall not exceed 1/2 of 1% of NET ASSETS per month (not to exceed 6% annually). For the purpose of this limitation, customary and routine administrative expenses shall include all expenses of the PROGRAM other than commodity brokerage commissions, incentive fees, the actual cost of legal and audit services and extraordinary expenses. The SPONSOR shall not receive a NET ASSET fee if it receives, directly or indirectly, any portion of the brokerage commissions under Section IV.C.3 If necessary, the SPONSOR shall reimburse the PROGRAM, no less frequently than quarterly, for the amount by which such aggregate fees and expenses exceed the limitations herein provided during the period for which reimbursement is made up to an amount not exceeding the aggregate compensation received by the SPONSOR, including direct or indirect participations in commodity brokerage commissions charged to the PROGRAM. If reimbursement is required or extraordinary expenses are incurred, the SPONSOR shall include in the PROGRAM'S next regular report to the PARTICIPANTS a discussion of the circumstances or events which resulted in the reimbursement or extraordinary expenses. 2. Incentive Fees. (a) The aggregate incentive fee paid by the PROGRAM shall not exceed 15% of the NEW TRADING PROFITS of the PROGRAM, calculated not more often than quarterly on the VALUATION DATE, over the highest previous VALUATION DATE. For purposes of this calculation, PROGRAM losses shall be carried forward but shall not be carried back. In no event may a modification of ADVISOR compensation result in such compensation exceeding the limitations provided herein. Furthermore, any new contract with an existing ADVISOR must carry forward all losses attributable to that ADVISOR. -13- (b) The SPONSOR or ADVISOR will be entitled to an additional 2% incentive fee for each 1% by which the PROGRAM'S NET ASSET fee as set forth in IV.C.1. is reduced below 6% annually. (c) Multi-ADVISOR PROGRAMS. The prospectus must clearly disclose, in both the prospectus summary and text of the prospectus, that incentive fees may be paid to an ADVISOR for a given period despite aggregate PROGRAM losses for such period. (d) The prospectus shall contain a sample calculation of how incentive fees will be determined. 3. Brokerage Commissions: (a) The round turn commission to be initially charged to the PROGRAM for each commodity on each exchange on which the PROGRAM is expected to trade shall be disclosed immediately following the compensation table in the prospectus. An estimated range of such round turn commission shall be included in the prospectus summary section. Such round turn commission shall include all fees charged for each brokerage transaction; including, but not limited to, PIT BROKERAGE FEES. An estimate of the round turn commission should be included where a flat rate or asset based commission will be utilized. (b) The prospectus must clearly disclose, in both the prospectus summary and the text of the prospectus, an estimate of what the brokerage rate will equal as a percentage of average NET ASSETS annually. (c) The PROGRAM shall seek the best price and services available in its commodity futures brokerage transactions. A SPONSOR shall not effect any transactions in COMMODITY CONTRACTS with any COMMODITY BROKER affiliated directly or indirectly with the SPONSOR or with any ADVISOR providing the SPONSOR with research information, recommendations or other services which might be of value to the SPONSOR, unless such transactions are effected at competitive rates. In no event will the PROGRAM be allowed to enter into any exclusive brokerage contract. Brokerage commission charges will be presumptively reasonable if they satisfy one of the following maximum rates: -14- i. 80% of the published retail rate plus PIT BROKERAGE FEEs, or ii. 14% annually of the average NET ASSETS excluding the PROGRAM assets not directly related to trading activity. This 14% limitation shall include PIT BROKERAGE FEEs. The prospectus must state that the brokerage commissions to be charged will not exceed the limitations set forth herein. The ADMINISTRATOR may require the PROGRAM to file periodic reports concerning all brokerage transactions. 4. Other income. a. Any interest or other income derived from any portion of the PROGRAM assets whether held in the PROGRAM'S margin account or otherwise shall accrue solely to the benefit of the PROGRAM except as set forth below: (1) Interest income may be used to reimburse the SPONSOR for "deferred" ORGANIZATIONAL AND OFFERING EXPENSES. Such compensation must be within the overall limits set by Section IV.A.1. (2) Not more than 20% of interest income derived from PROGRAM assets may be allocated to the PROGRAM BROKER. However, any interest income allocated to the PROGRAM BROKER must be included in determining whether the limitations imposed by Section IV.C.3.(c) have been satisfied. Any interest or other income derived from any portion of the PROGRAM assets accruing to the benefit of the SPONSOR or PROGRAM BROKER pursuant to Sections (1) or (2) herein, must be clearly disclosed as compensation. The prospectus must include a statement regarding the disposition of any interest or other income earned by any portion of the PROGRAM assets. b. A SPONSOR shall not take any action with respect to the assets or property of the PROGRAM which does not benefit the PROGRAM. Such a prohibited action, among others would be the utilization of PROGRAM funds as compensating balances for the SPONSOR'S exclusive benefit. -15- 5. Only those items of compensation permitted herein will be allowed. Any variance must be adequately justified to the ADMINISTRATOR. V. RIGHTS AND OBLIGATIONS OF PARTICIPANTS. A. MEETINGS. Meetings of the PARTICIPANTS may be called by the general partner or by PARTICIPANTS holding more than 10% of the then outstanding PROGRAM INTERESTS for any matters for which the PARTICIPANTS may vote as set forth in a limited partnership agreement or charter document. Such call for a meeting shall be deemed to have been made upon receipt by the general partner of a written request, either in PERSON or by certified mail, from holders of the requisite percentage of PROGRAM INTERESTS stating the purpose of the meeting. The general partner shall, within 15 days after receipt of said request, provide written notice, either in PERSON or by certified mail, to all PARTICIPANTS of the meeting and the purpose of such meeting, which shall be held on a date not less than 30 or more than 60 days after the date of receipt of said notice at a reasonable time and place. B. VOTING RIGHTS OF LIMITED PARTNERS. To the extent permitted by the law of the state of formation, the PROGRAM agreement shall provide that a majority of the outstanding PROGRAM INTERESTS may, without necessity for concurrence by the general partner, vote to (1) amend the PROGRAM agreement, (2) remove the general partner(s), (3) elect a new general partner(s), (4) cancel any contract for services with the SPONSOR without penalty upon 60 days written notice, and (5) dissolve the PROGRAM. Without concurrence of a majority of the outstanding PROGRAM INTERESTS, the general partner(s) may not (i) amend the PROGRAM agreement except for amendments which do not adversely affect the rights of PARTICIPANTS, (ii) appoint a new general partner(s), or (iii) dissolve the PROGRAM. Any amendment to the PROGRAM agreement which modifies the compensation or distributions to which a general partner is entitled or which affects the duties of a general partner may be conditioned upon the consent of the general partner. If the law of the state of formation provides that the PROGRAM will dissolve upon termination of a general partner(s) unless the remaining general partner(s) continues the existence of the PROGRAM, the PROGRAM agreement shall obligate the remaining general partner(s) to continue the PROGRAM'S existence; and if there will be no remaining general partner(s), the termination of the last general partner shall not be effective for a period of at least 120 days during which time a majority of the outstanding PROGRAM INTERESTS shall have the right to elect a general partner who shall agree to continue the existence of the PROGRAM. The PROGRAM agreement shall provide for a successor general partner where the only general partner of the PROGRAM is an individual. -16- C. (Formerly Section VI.C.4.) MATERIAL CHANGES. Any material changes in the PROGRAM'S basic investment policies or structure shall require prior written approval by a majority of PROGRAM INTERESTS held by PARTICIPANTS. D. ACCESS TO PROGRAM RECORDS. 1. The SPONSOR shall maintain at the principal office of the PROGRAM a list of the names and addresses of an PROGRAM INTERESTS owned by all PARTICIPANTS. Such list shall be made available for the review by any PARTICIPANT or his representative at reasonable times, and upon request, either in PERSON or by mail the SPONSOR shall furnish a copy of such list to any PARTICIPANT or his representative upon payment, in advance, of the reasonable cost of reproduction and mailing. 2. The PARTICIPANTS and their representatives shall be permitted access to all records of the PROGRAM, after adequate notice, at any reasonable time. The SPONSOR shall maintain and preserve such records for a period of not less than five years. E. ANNUAL AND PERIODIC REPORTS. [Compliance with the provisions of CFTC regulations for Reporting to Pool PARTICIPANTS, 17 C.F.R. Section 4.22 will be considered sufficient to comply with this Section E.] 1. The partnership agreement shall provide for the transmittal to each PARTICIPANT of an annual report within 120 days after the close of the fiscal year containing at least the following information: (a) A balance sheet as of the end of the PROGRAM'S fiscal year and statements of income, partners' equity, and cash flows for the year then ended, all of which shall be prepared in accordance with generally accepted accounting principles and accompanied by an auditor's report containing an opinion of an independent certified public accountant or independent public accountant. (b) A statement showing the total fees, compensation, brokerage commissions and expenses paid by the PROGRAM, segregated as to type, and stated both in aggregate dollar terms and as a percentage of NET ASSETS. (c) The average round turn rate for the fiscal year shall be computed within the scope of the annual audit. Such rate shall be disclosed in the annual report. -17- 2. A SPONSOR shall be required to furnish PARTICIPANTS with quarterly reports, which may be unaudited, containing the same information as in (a) and (b) above within 60 days after the end of the quarter. 3. A SPONSOR shall provide to all PARTICIPANTS, not later than March 15th of each year, all information necessary for the preparation of the PARTICIPANT'S income tax returns. 4. The SPONSOR shall calculate the NET ASSETS of the fund daily and shall make available upon the request of a PARTICIPANT, the NET ASSET VALUE PER PROGRAM INTEREST. F. TRANSFERABILITY OF PROGRAM INTERESTS. 1. Restrictions on assignment of PROGRAM INTERESTS or on the substitution of a limited partner are generally disfavored and such restrictions will be allowed only if (1) they are necessary to comply with the safe harbor provisions of Internal Revenue Service Notice 88-75 (or other safe harbors adopted by the Internal Revenue Service that protect against treatment as a publicly traded partnership) or (2) they are necessary to preserve the tax status of the partnership or the characterization or treatment of income or loss. In the case of (2), any restriction must be affirmatively supported by an opinion of counsel. The PROGRAM agreement shall require the SPONSOR to eliminate or modify any restriction on substitution or assignment at such time as the restriction is no longer necessary. 2. No transfers may be made where, after the transfer, either the transferee or the transferor would hold less than the minimum number of PROGRAM INTERESTS equivalent to an initial minimum purchase, except for transfers by gift, inheritance, intrafamily transfers, family dissolutions, and transfers to AFFILIATES. G. PARTICIPANT LIABILITY. A PROGRAM shall be structured so that a public investor cannot be exposed to liability in excess of the amount of the remaining balance of his capital account excluding partial redemptions, distributions consisting of a return of capital and accumulated profits. H. ASSESSMENTS. Assessments of any kind shall be prohibited. -18- VI. DISCLOSURE AND MARKETING REQUIREMENTS. A. MINIMUM PROGRAM CAPITAL. The minimum amount of funds to activate a PROGRAM shall be sufficient to accomplish the objectives of the PROGRAM, including "spreading the risk." Any minimum less than $500,000, after deduction of all front end charges, will be presumed to be inadequate to spread the risk of the public investors. Provision must be made for the return of 100% of paid subscriptions in the event that the established minimum to activate the PROGRAM is not reached. All funds received prior to activation of the PROGRAM must be deposited with an independent custodian, trustee or escrow agent whose name and address shall be disclosed in the prospectus. COMMENT: The purpose of this requirement is to assure the adequate diversification of the investments of the PROGRAM. B. SALES LITERATURE. Sales literature, sales presentation (including prepared presentations to prospective investors at group meetings) and advertising used in the offer or sale of PROGRAM INTERESTS shall conform in all applicable respects to requirements of filing, disclosure and adequacy currently imposed on sales literature, sales presentations and advertising used in the sale of corporate securities. C. CONTENTS OF THE PROSPECTUS. 1. Prospectus. A prospectus which is not part of a registration statement declared effective by the Securities and Exchange Commission pursuant to the Securities Act of 1933 shall generally conform to the disclosure requirements which would apply if the offering were so registered. 2. Conflicts of Interest and Transactions with AFFILIATES. (a) Any conflicts of interest between the PROGRAM and any SPONSOR, ADVISOR, COMMODITY BROKER or any AFFILIATE thereof, must be fully disclosed. (b) Unless specifically provided by these Guidelines the SPONSOR shall not receive compensation or reimbursements for providing goods and services to the PROGRAM. (c) The SPONSOR shall also be required to disclose the steps that will be taken to alleviate any real or potential conflict of interest. -19- (d) Prohibitions. Certain conflicts of interest are presumed to be materially sufficient to render the proposed PROGRAM incapable of accomplishing its stated objectives in the best interest of the PARTICIPANTS and shall be controlled as follows: (1) It shall be presumptively unreasonable for the ADVISOR to be affiliated with the PROGRAM BROKER. (2) It shall be presumptively unreasonable for the ADVISOR to be affiliated with the SPONSOR if the SPONSOR receives, directly or indirectly, any portion of the brokerage commissions, including trail commissions, from PROGRAM operations. (3) Unless the issuer can overcome the presumptions outlined in (1) and (2) above, the prospectus shall state that at no time will the above affiliations exist. (4) No loans may be made by the PROGRAM to the SPONSOR or any other person. (5) The funds of a PROGRAM shall not be commingled with the funds of any other PERSON. Funds used to satisfy margin requirements will not be considered commingled. (6) No rebates or giveups may be received by the SPONSOR nor may the SPONSOR participate in any reciprocal business arrangements which could circumvent these guidelines. Furthermore, the prospectus and PROGRAM charter documents shall contain language prohibiting the above as well as language prohibiting reciprocal business arrangements which would circumvent the restrictions against dealing with AFFILIATES or other interested parties. (7) A PROGRAM'S charter document shall prohibit the commodity trading ADVISOR or any other PERSON acting in such capacity from receiving a NET ASSET fee under Section IV.C.1. if he shares or participates, directly or indirectly, in any commodity brokerage commissions generated by the program. -20- (8) The maximum period covered by any contract of the partnership with the ADVISOR or SPONSOR shall not exceed one year. The agreement must be terminable without penalty upon 60 days' written notice by the PROGRAM. (9) Any other agreement, arrangement or transactions, proposed or contemplated, may be restricted in the discretion of the ADMINISTRATOR if it would be considered unfair to the PARTICIPANTS in the PROGRAM. (10) A PROGRAM shall not engage in PYRAMIDING. (11) All of the foregoing restrictions shall be disclosed in the prospectus and contained in the partnership agreement or charter document. (e) On loans made available to the PROGRAM by the SPONSOR, the SPONSOR may not receive interest in excess of its interest costs, nor may the SPONSOR receive interest in excess of the amounts which would be charged the PROGRAM (without reference to the SPONSOR'S financial abilities or guarantees) by unrelated banks on comparable loans for the same purpose and the SPONSOR shall not receive points or other financing charges or fees regardless of the amount. 3. Notification (a) Notice shall be sent to each PARTICIPANT within seven business days from the date of: i) any decline in the NET ASSET VALUE PER UNIT to less than 50% of the NET ASSET VALUE on the last VALUATION DATE; ii) any material change in contracts with ADVISORS, including any change in ADVISORS or any modification in connection with the method of calculating the incentive fee; iii) any other material change affecting the compensation of any party. -21- (b) No material change related to brokerage commissions shall be made until notice is given and PARTICIPANTS, based on such notice, have the opportunity to redeem pursuant to Section VII.B. (c) Included in the required notification shall be a description of the PARTICIPANT'S redemption rights pursuant to VII.B. and C. and voting rights pursuant to V.B. and a description of any material effect such changes may have on the interests of PARTICIPANTS. 4. FINANCIAL INFORMATION REQUIRED ON APPLICATION. The SPONSOR or the PROGRAM shall provide as an exhibit to the application or where indicated below shall provide as part of the prospectus, the following financial statements: (a) Balance Sheet of the PROGRAM. A balance sheet of the PROGRAM as of the end of its most recent fiscal year, prepared in accordance with generally accepted accounting principles and accompanied by an independent auditor's report containing no material qualification or explanatory paragraph relating to material uncertainties or going concern issues, and an unaudited balance sheet as of a date not more than 135 days prior to the date of filing. Such balance sheets shall be included in the prospectus. (b) Balance Sheet of the SPONSOR. (1) Corporate SPONSOR. A balance sheet of any corporate SPONSOR as of the end of its most recent fiscal year, prepared in accordance with generally accepted accounting principles and accompanied by an independent auditor's report containing no material qualification or explanatory paragraph relating to material uncertainties or going concern issues, and an unaudited balance sheet as of a date not more than 135 days prior to the date of filing. Such balance sheets shall be included in the prospectus. (2) Individual SPONSOR. A statement of financial condition as of a time not more than 135 days prior to the date of filing an application. Such statement of financial condition shall be prepared in accordance with generally accepted accounting principles and reviewed and reported upon by an independent certified public accountant or independent public accountant under the review standards as set forth by -22- the American Institute of Certified Public Accountants. A representation of the amount of such NET WORTH must be included in the prospectus. (c) Filing of Other Statements. The ADMINISTRATOR may, where consistent with the protection of investors, request additional financial statements of the SPONSOR, ADVISOR, PROGRAM BROKER or any AFFILIATE thereof, or permit the omission of one or more of the statements required under this section and the filing, and substitution thereof, of appropriate statements verifying financial information having comparable relevance to an investor in determining whether he should invest in the PROGRAM. VII. MISCELLANEOUS PROVISIONS A. FIDUCIARY DUTY. The PROGRAM agreement shall provide that the SPONSOR shall have fiduciary responsibility for the safekeeping and use of all funds and assets of the PROGRAM, whether or not in his immediate possession or control, and that he shall not employ, or permit another to employ such funds or assets in any manner except for the exclusive benefit of the PROGRAM. In addition, the PROGRAM shall not permit the PARTICIPANT to contract away the fiduciary obligation owed to the PARTICIPANT by the SPONSOR under common law. B. REDEMPTIONS. The PROGRAM shall provide for the redemption of PROGRAM interests at least quarterly except that redemption need not be offered until six months after the commencement of trading. Redemption charges for units redeemed during the first, second, third, and fourth, six month periods following the commencement of trading, shall not exceed 4%, 3%, 2%, and 1% of the NET ASSET OF VALUE PER PROGRAM INTEREST respectively. The SPONSOR shall state the VALUATION DATE in the prospectus. A PARTICIPANT must notify the SPONSOR in writing at least 10 days prior to the VALUATION DATE of his wish to redeem his PROGRAM INTERESTS. The SPONSOR must redeem such PROGRAM INTERESTS at the NET ASSET value on the VALUATION DATE unless the number of redemptions would be detrimental to the tax status of the PROGRAM; in which case, the SPONSOR shall select by lot so many redemptions as will, in its judgment, not impair the PROGRAM'S status. PARTICIPANTS shall be notified in writing within 10 days after the VALUATION DATE whether or not their PROGRAM INTERESTS have been redeemed. Payment for the redeemed PROGRAM INTERESTS shall be made within 30 days after the VALUATION DATE. The SPONSOR may provide that redemptions -23- may be temporarily suspended if, in the SPONSOR'S judgment, additional redemptions would impair the ability of the PROGRAM to meet its objectives. C. SPECIAL REDEMPTION. A Special Redemption period shall be established whenever a PROGRAM experiences a decline in the NET ASSET VALUE PER PROGRAM INTEREST as of the close of business on any business day to less than 50% of the NET ASSET VALUE PER PROGRAM INTEREST on the last VALUATION DATE. PROGRAM trading shall be temporarily suspended during such special redemption period. -24- EX-99.04 16 DELEWARE BUSINESS ACT EXHIBIT 99.04 DELAWARE CODE ANNOTATED TITLE 12. DECEDENTS' ESTATES AND FIDUCIARY RELATIONS PART V. FIDUCIARY RELATIONS CHAPTER 38. TREATMENT OF DELAWARE BUSINESS TRUSTS s 3801 Definitions. (a) "Business trust" means an unincorporated association which (i) is created by a trust instrument under which property is or will be held, managed, administered, controlled, invested, reinvested and/or operated, or business or professional activities for profit are carried on or will be carried on, by a trustee or trustees for the benefit of such person or persons as are or may become entitled to a beneficial interest in the trust property, including but not limited to a trust of the type known at common law as a "business trust," or "Massachusetts trust," or a trust qualifying as a real estate investment trust under s 856 et seq., of the United States Internal Revenue Code of 1986 [26 U.S.C. s 856 et seq.], as amended, or under any successor provision, or a trust qualifying as a real estate mortgage investment conduit under s 860D of the United States Internal Revenue Code of 1986 [26 U.S.C. s 860D], as amended, or under any successor provision, and (ii) files a certificate of trust pursuant to s 3810 of this title. Any such association heretofore or hereafter organized shall be a business trust and a separate legal entity. A business trust may be organized to carry on any lawful business or activity, whether or not conducted for profit, and/or for any of the purposes referred to in clause (i) of this subsection (including, without limitation, for the purpose of holding or otherwise taking title to property, whether in an active or custodial capacity). (b) "Beneficial owner" means any owner of a beneficial interest in a business trust, the fact of ownership to be determined and evidenced (whether by means of registration, the issuance of certificates or otherwise) in conformity to the applicable provisions of the governing instrument of the business trust. (c) "Trustee" means the person or persons appointed as a trustee in accordance with the governing instrument of a business trust, and may include the beneficial owners or any of them. (d) "Person" means a natural person, partnership, limited partnership, trust, estate, association, corporation, custodian, nominee or any other individual or entity in its own or any representative capacity. (e) "Other business entity" means a corporation, a partnership (whether general or limited), a common-law trust or any other unincorporated business, excluding a business trust. (f) "Governing instrument" means a trust instrument which creates a business trust and provides for the governance of the affairs of the business trust and the conduct of its business. A governing instrument: (1) May provide that a person shall become a beneficial owner and shall become bound by the governing instrument if such person (or a representative authorized by such person orally, in writing or by other action such as payment for a beneficial interest) complies with the conditions for becoming a beneficial owner set forth in the governing instrument or any other writing and acquires a beneficial interest; and (2) May consist of 1 or more agreements, instruments or other writings and may include or incorporate bylaws containing provisions relating to the business of the business trust, the conduct of its affairs and its rights or powers or the rights or powers of its trustees, beneficial owners, agents or employees. s 3802 Contributions by beneficial owners. (a) A contribution of a beneficial owner to the business trust may be in cash, property or services rendered, or a promissory note or other obligation to contribute cash or property or to perform services; provided however, that a person may become a beneficial owner of a business trust and may receive a beneficial interest in a business trust without making a contribution or being obligated to make a contribution to the business trust. (b) Except as provided in the governing instrument, a beneficial owner is obligated to the business trust to perform any promise to contribute cash, property or to perform services, even if the beneficial owner is unable to perform because of death, disability or any other reason. If a beneficial owner does not make the required contribution of property or services, the beneficial owner is obligated at the option of the business trust to contribute cash equal to that portion of the agreed value (as stated in the records of the business trust) of the contribution that has not been made. The foregoing option shall be in addition to, and not in lieu of, any other rights, including the right to specific performance, that the business trust may have against such beneficial owner under the governing instrument of applicable law. (c) A governing instrument may provide that the interest of any beneficial owner who fails to make any contribution that the beneficial owner is obligated to make shall be subject to specific penalties for, or specified consequences of, such failure. Such penalty or consequence may take the form of reducing or eliminating the defaulting beneficial owner's proportionate interest in the business trust, subordinating the beneficial interest to that of nondefaulting beneficial owners, a forced sale of the beneficial interest, forfeiture of the beneficial interest, the lending by other beneficial owners of the amount necessary to meet the beneficiary's commitment, a fixing of the value of the defaulting beneficial owner's beneficial interest by appraisal or by formula and redemption or sale of the beneficial interest at such value, or any other penalty or consequence. s 3803 Liability of beneficial owners and trustees. (a) Except to the extent otherwise provided in the governing instrument of the business trust, the beneficial owners shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the general corporation law of the State. (b) Except to the extent otherwise provided in the governing instrument of a business trust, a trustee, when acting in such capacity, shall not be personally liable to any person other than the business trust or a beneficial owner for any act, omission or obligation of the business trust or any trustee thereof. (c) Except to the extent otherwise provided in the governing instrument of a business trust, an officer, employee, manager or other person acting pursuant to s 3806(b)(7) of this title, when acting in such capacity, shall not be personally liable to any person other than the business trust or a beneficial owner for any act, omission or obligation of the business trust or any trustee thereof. s 3804 Legal proceedings. (a) A business trust may sue and be sued, and service of process upon 1 of the trustees shall be sufficient. In furtherance of the foregoing, a business trust may be sued for debts and other obligations or liabilities contracted or incurred by the trustees, or by the duly authorized agents of such trustees, in the performance of their respective duties under the governing instrument of the business trust, and for any damages to persons or property resulting from the negligence of such trustees or agents acting in the performance of such respective duties. The property of a business trust shall be subject to attachment and execution as if it were a corporation, subject to s 3502 of Title 10. Notwithstanding the foregoing provisions of this section, in the event that the governing instrument of a business trust, including a business trust which is a registered investment company under the Investment Company Act of 1940, as amended (15 U.S.C. s 80a-1 et seq.), creates 1 or more series as provided in s 3806(b)(2) of this title, and if separate and distinct records are maintained for any such series and the assets associated with any such series are held and accounted for separately from the other assets of the business trust, or any other series thereof, and if the governing instrument so provides, and notice of the limitation on liabilities of a series as referenced in this sentence is set forth in the certificate of trust of the business trust, then the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable against the assets of such series only, and not against the assets of the business trust generally. (b) A trustee of a business trust may be served with process in the manner prescribed in subsection (c) of this section in all civil actions or proceedings brought in the State involving or relating to the activities of the business trust or a violation by a trustee of a duty to the business trust, or any beneficial owner, whether or not the trustee is a trustee at the time suit is commenced. Every resident or nonresident of the State who accepts election or appointment or serves as a trustee of a business trust shall, by such acceptance or service, be deemed thereby to have consented to the appointment of the Delaware trustee or registered agent of such business trust required by s 3807 of this title (or, if there is none, the Secretary of State) as such person's agent upon whom service of process may be made as provided in this section. Such acceptance or service shall signify the consent of such trustee that any process when so served shall be of the same legal force and validity as if served upon such trustee within the State and such appointment of such Delaware trustee or registered agent (or, if there is none, the Secretary of State) shall be irrevocable. (c) Service of process shall be effected by serving the Delaware trustee or registered agent of such business trust required by s 3807 of this title (or, if there is none, the Secretary of State) with 1 copy of such process in the 2 manner provided by law for service of writs of summons. In the event service is made under this subsection upon the Secretary of State, the plaintiff shall pay to the Secretary of State the sum of $50 for the use of the State, which sum shall be taxed as part of the costs of the proceeding if the plaintiff shall prevail therein. In addition, the Prothonotary or the Register in Chancery of the court in which the civil action or proceeding is pending shall, within 7 days of such service, deposit in the United States mails, by registered mail, postage prepaid, true and attested copies of the process, together with a statement that service is being made pursuant to this section, addressed to the defendant at the defendant's address last known to and furnished by the party desiring to make such service. (d) In any action in which any such trustee has been served with process as hereinafter provided, the time in which a defendant shall be required to appear and file a responsive pleading shall be computed from the date of mailing by the Prothonotary or the Register in Chancery as provided in subsection (c) of this section; provided however, the court in which such action has been commenced may order such continuance or continuances as may be necessary to afford such trustee reasonable opportunity to defend the action. (e) In the governing instrument of the business trust or other writing, a trustee may consent to be subject to the nonexclusive jurisdiction of the courts of, or arbitration in, a specified jurisdiction, or the exclusive jurisdiction of the courts of, or the exclusivity of arbitration in, the State, and to be served with legal process in the manner prescribed in such governing instrument of the business trust or other writing. (f) Nothing herein contained limits or affects the right to serve process in any other manner now or hereafter provided by law. This section is an extension of and not a limitation upon the right otherwise existing of service of legal process upon nonresidents. (g) The Court of Chancery and the Superior Court may make all necessary rules respecting the form of process, the manner of issuance and return thereof and such other rules which may be necessary to implement this section and are not inconsistent with this section. (h) A partnership (whether general or limited), corporation or other nonnatural person formed or organized under the laws of any foreign country or other foreign jurisdiction or the laws of any state other than the State of Delaware shall not be deemed to be doing business in the State solely by reason of its being a trustee of a business trust. s 3805 Rights of beneficial owners in trust property. (a) Except to the extent otherwise provided in the governing instrument of the business trust, a beneficial owner shall have an undivided beneficial interest in the property of the business trust and shall share in the profits and losses of the business trust in the proportion (expressed as a percentage) of the entire undivided beneficial interest in the business trust owned by such beneficial owner. The governing instrument of a business trust may provide that the business trust or the trustees, acting for and on behalf of the business trust, shall be deemed to hold beneficial ownership of any income earned on securities of the business trust issued by any business entities formed, organized, or existing under the laws of any jurisdiction, including the laws of any foreign country. (b) No creditor of the beneficial owner shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the business trust. (c) A beneficial owner's beneficial interest in the business trust is personal property notwithstanding the nature of the property of the trust. Except to the extent otherwise provided in the governing instrument of a business trust, a beneficial owner has no interest in specific business trust property. (d) A beneficial owner's beneficial interest in the business trust is freely transferable except to the extent otherwise provided in the governing instrument of the business trust. (e) Except to the extent otherwise provided in the governing instrument of a business trust, at the time a beneficial owner becomes entitled to receive a distribution, the beneficial owner has the status of, and is entitled to all remedies available to, a creditor of the business trust with respect to the distribution. A governing instrument may provide for the establishment of record dates with respect to allocations and distributions by a business trust. s 3806 Management of business trust. (a) Except to the extent otherwise provided in the governing instrument of a business trust, the business and affairs of a business trust shall be managed by or under the direction of its trustees. To the extent provided in the governing instrument of a business trust, any person (including a beneficial owner) shall be entitled to direct the trustees or other persons in the management of the business trust. Except to the extent otherwise provided in the governing 3 instrument of a business trust, neither the power to give direction to a trustee or other persons nor the exercise thereof by any person (including a beneficial owner) shall cause such person to be a trustee. (b) A governing instrument may contain any provision relating to the management of the business and affairs of the business trust, and the rights, duties and obligations of the trustees, beneficial owners and other persons, which is not contrary to any provision or requirement of this chapter and, without limitation: (1) May provide for classes, groups or series of trustees or beneficial owners, or classes, groups or series of beneficial interests, having such relative rights, powers and duties as the governing instrument may provide, and may make provision for the future creation in the manner provided in the governing instrument of additional classes, groups or series of trustees, beneficial owners or beneficial interests, having such relative rights, powers and duties as may from time to time be established, including rights, powers and duties senior or subordinate to existing classes, groups or series of trustees, beneficial owners or beneficial interests; (2) May establish or provide for the establishment of designated series of trustees, beneficial owners or beneficial interests having separate rights, powers or duties with respect to specified property or obligations of the business trust or profits and losses associated with specified property or obligations, and, to the extent provided in the governing instrument, any such series may have a separate business purpose or investment objective; (3) May provide for the taking of any action, including the amendment of the governing instrument, the accomplishment of a merger or consolidation, the appointment of one or more trustees, the sale, lease, exchange, transfer, pledge or other disposition of all or any part of the assets of the business trust or the assets of any series, or the dissolution of the business trust, or may provide for the taking of any action to create under the provisions of the governing instrument a class, group or series of beneficial interests that was not previously outstanding, in any such case without the vote or approval of any particular trustee or beneficial owner, or class, group or series of trustees or beneficial owners; (4) May grant to (or withhold from) all or certain trustees or beneficial owners, or a specified class, group or series of trustees or beneficial owners, the right to vote, separately or with any or all other classes, groups or series of the trustees or beneficial owners, on any matter, such voting being on a per capita, number, financial interest, class, group, series or any other basis; (5) May, if and to the extent that voting rights are granted under the governing instrument, set forth provisions relating to notice of the time, place or purpose of any meeting at which any matter is to be voted on, waiver of any such notice, action by consent without a meeting, the establishment of record dates, quorum requirements, voting in person, by proxy or in any other manner, or any other matter with respect to the exercise of any such right to vote; (6) May provide for the present or future creation of more than 1 business trust, including the creation of a future business trust to which all or any part of the assets, liabilities, profits or losses of any existing business trust will be transferred, and for the conversion of beneficial interests in an existing business trust, or series thereof, into beneficial interests in the separate business trust, or series thereof; or (7) May provide for the appointment, election or engagement, either as agents or independent contractors of the business trust or as delegatees of the trustees, of officers, employees, managers or other persons who may manage the business and affairs of the business trust and may have such titles and such relative rights, powers and duties as the governing instrument shall provide. Except to the extent otherwise provided in the governing instrument of a business trust, the trustees shall choose and supervise such officers, managers, employees and other persons. (c) To the extent that, at law or in equity, a trustee has duties (including fiduciary duties) and liabilities relating thereto to a business trust or to a beneficial owner: (1) Any such trustee acting under a governing instrument shall not be liable to the business trust or to any such beneficial owner for the trustee's good faith reliance on the provisions of such governing instrument; and (2) The trustee's duties and liabilities may be expanded or restricted by provisions in a governing instrument. (d) To the extent that, at law or in equity, an officer, employee, manager or other person designated pursuant to subsection (b)(7) of this section has duties (including fiduciary duties) and liabilities relating thereto to a business trust, a beneficial owner or a trustee: (1) Any such officer, employee, manager or other person acting under a governing instrument shall not be liable to the business trust, any beneficial owner or any trustee for such person's good faith reliance on the provisions of such governing instrument; and (2) The duties and liabilities of an officer, employee, manager or other person acting pursuant to subsection (b)(7) of this section may be expanded or restricted by provisions in a governing instrument. 4 s 3807 Trustee in State. (a) Every business trust shall at all times have at least 1 trustee which, in the case of a natural person, shall be a person who is a resident of this State or which, in all other cases, has its principal place of business in this State. (b) Notwithstanding the provisions of subsection (a) of this section, if a business trust is, becomes, or will become prior to or within 180 days following the first issuance of beneficial interests, a registered investment company under the Investment Company Act of 1940, as amended (15 U.S.C. ss 80a- 1 et seq.), such business trust shall not be required to have a trustee who is a resident of this State or who has a principal place of business in this State if and for so long as such business trust shall have and maintain in this State: (1) A registered office, which may but need not be a place of business in this State; and (2) A registered agent for service of process on the business trust, which agent may be either an individual resident in this State whose business office is identical with such business trust's registered office, or a domestic corporation, or a foreign corporation authorized to transact business in this State, having a business office identical with such registered office. (c) Any business trust maintaining a registered office and registered agent in this State under subsection (b) of this section may change the location of its registered office in this State to any other place in this State, or may change the registered agent to any other person or corporation (meeting the requirements contained in subsection (b) of this section), by filing an amendment to its certificate of trust in accordance with the applicable provisions of this chapter. If a business trust which is an investment company registered as aforesaid maintains a registered office and registered agent in this State as herein provided, then the reference in s 3810(a)(1)b. of this title to the "name and the business address of at least 1 of the trustees meeting the requirements of s 3807 of this title" shall be deemed a reference to the name and the business address of the registered agent and registered office maintained under this section, and the certificate of trust filed under s 3810 of this title shall reflect such information in lieu of the information otherwise required by s 3810(a)(1)b. of this title. (d) Service of process upon a registered agent maintained by a business trust pursuant to subsection (b) of this section shall be as effective as if served upon one of the trustees of the business trust pursuant to s 3804 of this title. s 3808 Existence of business trust. (a) Except to the extent otherwise provided in the governing instrument of the business trust, a business trust shall have perpetual existence, and a business trust may not be terminated or revoked by a beneficial owner or other person except in accordance with the terms of its governing instrument. (b) Except to the extent otherwise provided in the governing instrument of a business trust, the death, incapacity, dissolution, termination or bankruptcy of a beneficial owner shall not result in the termination or dissolution of a business trust. s 3809 Applicability of trust law. Except to the extent otherwise provided in the governing instrument of a business trust or in this chapter, the laws of this State pertaining to trusts are hereby made applicable to business trusts; provided however, that for purposes of taxation under Title 30 a business trust shall be classified as a corporation, an association, a partnership, a trust or otherwise, as shall be determined under the United States Internal Revenue Code of 1986, as amended, or under any successor provision. s 3810 Certificate of trust; amendment; restatement; cancellation. (a)(1) Every business trust shall file a certificate of trust in the office of the Secretary of State. The certificate of trust shall set forth: a. The name of the business trust; b. The name and the business address of at least 1 of the trustees meeting the requirements of s 3807 of this title; c. The future effective date or time (which shall be a date or time certain) of effectiveness of the certificate if it is not to be effective upon the filing of the certificate; and 5 d. Any other information the trustees determine to include therein. (2) The filing of a certificate of trust in the office of the Secretary of State shall make it unnecessary to file any other documents under Chapter 31 of Title 6. (b)(1) A certificate of trust may be amended by filing a certificate of amendment thereto in the office of the Secretary of State. The certificate of amendment shall set forth: a. The name of the business trust; b. The amendment to the certificate; and c. The future effective date or time (which shall be a date or time certain) of effectiveness of the certificate if it is not to be effective upon the filing of the certificate. (2) A certificate of trust may be amended at any time for any purpose as the trustees may determine. A trustee who becomes aware that any statement in a certificate of trust was false when made or that any matter described has changed making the certificate false in any material respect shall promptly file a certificate of amendment. (c)(1) A certificate of trust may be restated by integrating into a single instrument all of the provisions of the certificate of trust which are then in effect and operative as a result of there having been theretofore filed 1 or more certificates of amendment pursuant to subsection (b) of this section, and the certificate of trust may be amended or further amended by the filing of a restated certificate of trust. The restated certificate of trust shall be specifically designated as such in its heading and shall set forth: a. The present name of the business trust, and if it has been changed, the name under which the business trust was originally formed; b. The date of filing of the original certificate of trust with the Secretary of State; c. The information required to be included pursuant to subsection (a) of this section; and d. Any other information the trustees determine to include therein. (2) A certificate of trust may be restated at any time for any purpose as the trustees may determine. A trustee who becomes aware that any statement in a restated certificate of trust was false when made or that any matter described has changed making the restated certificate false in any material respect shall promptly file a certificate of amendment or a restated certificate of trust. (d) A certificate of trust shall be cancelled upon the completion of winding up of the business trust and its termination. A certificate of cancellation shall be filed in the office of the Secretary of State and set forth: (1) The name of the business trust; (2) The date of filing of its certificate of trust; (3) The future effective date or time (which shall be a date or time certain) of cancellation if it is not to be effective upon the filing of the certificate; and (4) Any other information the trustee determines to include therein. s 3811 Execution of certificate. (a) Each certificate required by this chapter to be filed in the office of the Secretary of State shall be executed in the following manner: (1) A certificate of trust must be signed by all of the trustees; (2) A certificate of amendment must be signed by at least one of the trustees; (3) A certificate of cancellation must be signed by all of the trustees or as otherwise provided in the governing instrument of the business trust; and (4) If a business trust is filing a certificate of merger or consolidation, the certificate of merger or consolidation must be signed by all of the trustees or as otherwise provided in the governing instrument of the business trust, or if the certificate of merger or consolidation is being filed by another business entity, the certificate of merger or consolidation must be signed by a person authorized to execute such instrument on behalf of such other business entity. (b) The execution of a certificate by a trustee constitutes an oath or affirmation, under the penalties of perjury in the third degree, that, to the best of the trustee's knowledge and belief, the facts stated therein are true. s 3812 Filing of certificate. (a) The original signed copy, together with a duplicate copy, which may be either a signed or conformed copy, of the certificate of trust and any certificates of amendment or cancellation or any certificate of merger or consolidation 6 shall be delivered to the Office of the Secretary of State. Unless the Secretary of State finds that any certificate does not conform to law, upon receipt of all filing fees required by law the Secretary shall: (1) Certify that the certificate of trust, the certificate of amendment, the certificate of cancellation or the certificate of merger or consolidation has been filed in the Secretary's office by endorsing upon the original certificate the word "Filed", and the date and hour of the filing. This endorsement is conclusive of the date and time of its filing in the absence of actual fraud; (2) File and index the endorsed certificate; and (3) Return the duplicate copy, similarly endorsed, to the person who filed it or person's representative. (b) Upon the filing of a certificate of trust in the Office of the Secretary of State, or upon the future effective date or time of a certificate of trust as provided for therein, the certificate of trust shall be effective. Upon the filing of a certificate of amendment in the office of the Secretary of State, or upon the future effective date or time of a certificate of amendment as provided for therein, the certificate of trust shall be amended as set forth therein. Upon the filing of a certificate of cancellation or a certificate of merger or consolidation which acts as a certificate of cancellation in the office of the Secretary of State or upon the future effective date or time of a certificate of cancellation or a certificate of merger or consolidation which acts as a certificate of cancellation, as provided for therein, the certificate of trust shall be cancelled. (c) A fee as set forth in s 3813(a)(2) of this title shall be paid at the time of the filing of a certificate of trust, a certificate of amendment, a certificate of cancellation or a certificate of merger or consolidation. (d) A fee as set forth in s 3813(a)(3) of this title shall be paid for a certified copy of any paper on file as provided for by this chapter, and a fee as set forth in s 3813(a)(4) of this title shall be paid for each page copied. (e) Any signature on any certificate authorized to be filed with the Secretary of State under any provision of this chapter may be a facsimile. Any such certificate may be filed by telecopy, fax or similar electronic transmission; provided however, that the Secretary of State shall have no obligation to accept such filing if such certificate is illegible or otherwise unsuitable for processing. s 3813 Fees. (a) No documents required to be filed under this chapter shall be effective until the applicable fee required by this section is paid. The following fees shall be paid to and collected by the Secretary of State for the use of this State: (1) Upon the receipt for filing of an application for reservation of name, and application for renewal of reservation, or notice of transfer or cancellation of reservation pursuant to s 3814 of this title, a fee in the amount of $50. (2) Upon the receipt for filing of a certificate of trust, a certificate of amendment, a certificate of cancellation or a certificate of merger or consolidation, a fee in the amount of $100. (3) For certifying copies of any paper on file as provided for by this chapter, a fee in the amount of $10 for each copy certified. (4) For issuing further copies of instruments on file, whether certified or not, a fee in the amount of $1 per page. (b) In addition to those fees charged under subsection (a) of this section, there shall be collected by and paid to the Secretary of State the following: (1) For all services described in subsection (a) of this section that are requested to be completed within the same day as the day of the request, an additional sum of up to $200; and (2) For all services described in subsection (a) of this section that are requested to be completed within a 24-hour period from the time of the request, an additional sum of up to $100. The Secretary of State shall establish (and may from time to time alter or amend) a schedule of specific fees payable pursuant to this subsection. (c) Except as provided by this section, all other fees for the Secretary of State shall be as provided for in s 2315 of Title 29. s 3814 Use of names regulated. (a) The name of each business trust as set forth in its certificate of trust must be such as to distinguish it upon the records of the office of the Secretary of State from the name of any corporation, limited partnership, business trust or limited liability company reserved, registered, formed or organized under the laws of this State or qualified to do 7 business or registered as a foreign corporation, foreign limited partnership or foreign limited liability company in this State; provided however, that a business trust may register under any name which is not such as to distinguish it upon the records of the office of the Secretary of State from the name of any domestic or foreign corporation, limited partnership, business trust or limited liability company reserved, registered, formed or organized under the laws of this State with the written consent of the other corporation, limited partnership, business trust or limited liability company, which written consent shall be filed with the Secretary of State. (b) The name of each business trust as set forth in its certificate of trust may contain the name of a beneficial owner, a trustee or any other person. (c) The name of each business trust, as set forth in its certificate of trust, may contain the following words: "company," "association," "club," "foundation," "fund," "institute," "society," "union," "syndicate," "limited" or "trust" (or abbreviations of like import). (d) The exclusive right to the use of a name may be reserved by: (1) Any person intending to form a business trust and to adopt that name; and (2) Any business trust registered in this State which proposes to change its name. (e) The reservation of a specified name shall be made by filing with the Secretary of State an application, executed by the applicant, together with a duplicate copy, which may either be a signed or conformed copy, specifying the name to be reserved and the name and address of the applicant. If the Secretary of State finds that the name is available for use by a business trust, the Secretary shall reserve the name for the exclusive use of the applicant for a period of 120 days. Once having so reserved a name, the same applicant may again reserve the same name for successive 120-day periods. The right to the exclusive use of a reserved name may be transferred to any other person by filing in the office of the Secretary of State a notice of the transfer, executed by the applicant for whom the name was reserved, together with a duplicate copy, which may be either a signed or conformed copy, specifying the name to be transferred and the name and address of the transferee. The reservation of a specified name may be cancelled by filing with the Secretary of State a notice of cancellation, executed by the applicant or transferee, together with a duplicate copy, which may be either a signed or conformed copy, specifying the name reservation to be cancelled and the name and address of the applicant or transferee. Any duplicate copy filed with the Secretary of State, as required by this subsection, shall be returned by the Secretary of State to the person who filed it or that person's representative with a notation thereon of the action taken with respect to the original copy thereof by the Secretary of State. (f) Fees as set forth in s 3813 of this title shall be paid at the time of the initial reservation of any name, at the time of the renewal of any such reservation and at the time of the filing of a notice of the transfer or cancellation of any such reservation. s 3815 Merger and consolidation. (a) Pursuant to an agreement of merger or consolidation, a business trust may merge or consolidate with or into 1 or more business trusts or other business entities formed or organized or existing under the laws of the State or any other state or the United States or any foreign country or other foreign jurisdiction, with such business trust or other business entity as the agreement shall provide being the surviving or resulting business trust or other business entity. Unless otherwise provided in the governing instrument of a business trust, a merger or consolidation shall be approved by each business trust which is to merge or consolidate by all of the trustees and the beneficial owners of such business trust. In connection with a merger or consolidation hereunder, rights or securities of, or interests in, a business trust or other business entity which is a constituent party to the merger or consolidation may be exchanged for or converted into cash, property, rights or securities of, or interests in, the surviving or resulting business trust or other business entity or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights or securities of, or interests in, a business trust or other business entity which is not the surviving or resulting business trust or other business entity in the merger or consolidation. Notwithstanding prior approval, an agreement of merger or consolidation may be terminated or amended pursuant to a provision for such termination or amendment contained in the agreement of merger or consolidation. (b) If a business trust is merging or consolidating under this section, the business trust or other business entity surviving or resulting in or from the merger or consolidation shall file a certificate of merger or consolidation in the office of the Secretary of State. The certificate of merger or consolidation shall state: (1) The name and jurisdiction of formation or organization of each of the business trust or other business entities which is to merge or consolidate; 8 (2) That an agreement of merger or consolidation has been approved and executed by each of the business trusts or other business entities which is to merge or consolidate; (3) The name of the surviving or resulting business trust or other business entity; (4) The future effective date or time (which shall be a date or time certain) of the merger or consolidation if it is not to be effective upon the filing of the certificate of merger or consolidation; (5) That the executed agreement of merger or consolidation is on file at the principal place of business of the surviving or resulting business trust or other business entity, and shall state the address thereof; (6) That a copy of the agreement of merger or consolidation will be furnished by the surviving or resulting business trust or other business entity, on request and without cost, to any beneficial owner of any business trust or any person holding an interest in any other business entity which is to merge or consolidate; and (7) If the surviving or resulting entity is not a business trust or other business entity formed or organized or existing under the laws of the State of Delaware, a statement that such surviving or resulting other business entity agrees that it may be served with process in the State in any action, suit or proceeding for the enforcement of any obligation of any business trust which is to merge or consolidate, irrevocably appointing the Secretary of State as its agent to accept service of process in any such action, suit or proceeding and specifying the address to which a copy of such process shall be mailed to it by the Secretary of State. In the event of service hereunder upon the Secretary of State, the plaintiff in any such action, suit or proceeding shall furnish the Secretary of State with the address specified in the certificate of merger or consolidation provided for in this section and any other address which the plaintiff may elect to furnish, together with copies of such process as required by the Secretary of State, and the Secretary of State shall notify such surviving or resulting other business entity thereof at all such addresses furnished by the plaintiff by letter, certified mail, return receipt requested. Such letter shall enclose a copy of the process and any other papers served upon the Secretary of State. It shall be the duty of the plaintiff in the event of such service to serve process and any other papers in duplicate, to notify the Secretary of State that service is being made pursuant to this subsection, and to pay the Secretary of State the sum of $50 for use of the State, which sum shall be taxed as part of the costs in the proceeding, if the plaintiff shall prevail therein. The Secretary of State shall maintain an alphabetical record of any such process setting forth the name of the plaintiff and defendant, the title, docket number and nature of the proceedings in which process has been served upon the Secretary, the return date thereof, and the day and hour when the service was made. The Secretary of State shall not be required to retain such information for a period longer than 5 years from the Secretary's receipt of the service of process. (c) Any failure to file a certificate of merger or consolidation in connection with a merger or consolidation which was effective prior to July 5, 1990 shall not affect the validity or effectiveness of any such merger or consolidation. (d) Unless a future effective date or time is provided in a certificate of merger or consolidation, in which event a merger or consolidation shall be effective at any such future effective date or time, a merger or consolidation shall be effective upon the filing in the office of the Secretary of State of a certificate of merger or consolidation. (e) A certificate of merger or consolidation shall act as a certificate of cancellation for a business trust which is not the surviving or resulting entity in the merger or consolidation. (f) Notwithstanding anything to the contrary contained in the governing instrument of a business trust, a governing instrument of a business trust containing a specific reference to this subsection may provide that an agreement of merger or consolidation approved in accordance with subsection (a) of this section may: (1) Effect any amendment to the governing instrument of the business trust; or (2) Effect the adoption of a new governing instrument of the business trust if it is the surviving or resulting business trust in the merger or consolidation. Any amendment to the governing instrument of a business trust or adoption of a new governing instrument of the business trust made pursuant to the foregoing sentence shall be effective at the effective time or date of the merger or consolidation. The provisions of this subsection shall not be construed to limit the accomplishment of a merger or consolidation or of any of the matters referred to herein by any other means provided for in the governing instrument of a business trust or other agreement or as otherwise permitted by law, including that the governing instrument of any constituent business trust to the merger or consolidation (including a business trust formed for the purpose of consummating a merger or consolidation) shall be the governing instrument of the surviving or resulting business trust. (g) When any merger or consolidation shall have become effective under this section, for all purposes of the laws of the State, all of the rights, privileges and powers of each of the business trusts and other business entities that have merged or consolidated, and all property, real, personal and mixed, and all debts due to any of said business trusts 9 and other business entities, as well as all other things and causes of action belonging to each of such business trusts and other business entities, shall be vested in the surviving or resulting business trust or other business entity, and shall thereafter be the property of the surviving or resulting business trust or other business entity as they were of each of the business trusts and other business entities that have merged or consolidated, and the title to any real property vested by deed or otherwise, under the laws of the State, in any of such business trusts and other business entities, shall not revert or be in any way impaired by reason of this chapter; but all rights of creditors and all liens upon any property of any of said business trusts and other business entities shall be preserved unimpaired, and all debts, liabilities and duties of each of the said business trusts and other business entities that have merged or consolidated shall thenceforth attach to the surviving or resulting business trust or other business entity, and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it. s 3816 Derivative actions. (a) A beneficial owner may bring an action in the Court of Chancery in the right of a business trust to recover a judgment in its favor if trustees with authority to do so have refused to bring the action or if an effort to cause those trustees to bring the action is not likely to succeed. (b) In a derivative action, the plaintiff must be a beneficial owner at the time of bringing the action and: (1) At the time of the transaction of which the plaintiff complains; or (2) Plaintiff's status as a beneficial owner had devolved upon plaintiff by operation of law or pursuant to the terms of the governing instrument of the business trust from a person who was a beneficial owner at the time of the transaction. (c) In a derivative action, the complaint shall set forth with particularity the effort, if any, of the plaintiff to secure initiation of the action by the trustees, or the reasons for not making the effort. (d) If a derivative action is successful, in whole or in part, or if anything is received by a business trust as a result of a judgment, compromise or settlement of any such action, the Court may award the plaintiff reasonable expenses, including reasonable attorney's fees. If anything is so received by the plaintiff, the Court shall make such award of plaintiff's expenses payable out of those proceeds and direct plaintiff to remit to the business trust the remainder thereof, and if those proceeds are insufficient to reimburse plaintiff's reasonable expenses, the Court may direct that any such award of plaintiff's expenses or a portion thereof be paid by the business trust. (e) A beneficial owner's right to bring a derivative action may be subject to such additional standards and restrictions, if any, as are set forth in the governing instrument of the business trust, including, without limitation, the requirement that beneficial owners owning a specified beneficial interest in the business trust join in the bringing of the derivative action. s 3817 Indemnification. (a) Subject to such standards and restrictions, if any, as are set forth in the governing instrument of a business trust, a business trust shall have the power to indemnify and hold harmless any trustee or beneficial owner or other person from and against any and all claims and demands whatsoever. (b) The absence of a provision for indemnity in the governing instrument of a business trust shall not be construed to deprive any trustee or beneficial owner or other person of any right to indemnity which is otherwise available to such person under the laws of this State. s 3818 Reserved power of State to amend or repeal chapter. All provisions of this chapter may be altered from time to time or repealed and all rights of business trusts, trustees, beneficial owners and other persons are subject to this reservation. s 3819 Construction and application of chapter and governing instrument. (a) The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this chapter. 10 (b) It is the policy of this chapter to give maximum effect to the principle of freedom of contract and to the enforceability of governing instruments. s 3820 Short title. This chapter may be cited as the "Delaware Business Trust Act." 11 DELAWARE 1996 SESSION LAWS SECOND REGULAR SESSION OF THE 138TH GENERAL ASSEMBLY Ch. 548 S.B. No. 332 BUSINESS TRUSTS--GENERAL AMENDMENTS AN ACT TO AMEND CHAPTER 38, TITLE 12 OF THE DELAWARE CODE RELATING TO BUSINESS TRUSTS. BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE: -- DE ST TI 12 s 3801 -- Section 1. Amend s 3801(a), Title 12 of the Delaware Code by deleting the words "trust instrument" in clause (i) thereof and substituting in lieu thereof the words "governing instrument". Section 2. Amend s 3801(f), Title 12 of the Delaware Code by deleting the word "and" as it appears at the end of paragraph (1) thereof; by deleting the "." as it appears at the end of paragraph (2) thereof and substituting in lieu thereof "; and"; and by adding a new paragraph (3) to read as follows: -- DE ST TI 12 s 3801 -- "(3) may contain any provision that is not inconsistent with law or with the information contained in the certificate of trust." Section 3. Amend s 3803, Title 12 of the Delaware Code by adding a new subsection (d) thereto to read as follows: -- DE ST TI 12 s 3803 -- "(d) No obligation of a beneficial owner or trustee of a business trust to the business trust arising under the governing instrument or a separate agreement in writing, and no note, instrument or other writing evidencing any such obligation of a beneficial owner or trustee, shall be subject to the defense of usury, and no beneficial owner or trustee shall interpose the defense of usury with respect to any such obligation in any action." Section 4. Amend s 3804(g), Title 12 of the Delaware Code by adding a new sentence thereto to read as follows: -- DE ST TI 12 s 3804 -- "The Court of Chancery shall have jurisdiction over business trusts to the same extent as it has jurisdiction over common law trusts formed under the laws of the State of Delaware." Section 5. Amend s 3808, Title 12 of the Delaware Code by adding new subsections (c) through (e) thereto to read as follows: -- DE ST TI 12 s 3808 -- "(c) In the event that a business trust does not have perpetual existence, a business trust is dissolved and its affairs shall be wound up at the time or upon the happening of events specified in the governing instrument. (d) Upon dissolution of a business trust and until the filing of a certificate of cancellation as provided in s 3810 of this Chapter, the persons who under the governing instrument of the business trust are responsible for winding up the business trust's affairs may, in the name of, and for and on behalf of, the business trust, prosecute and defend suits, whether civil, criminal or administrative, gradually settle and close the business trust business, dispose of and convey the 12 business trust property, discharge or make reasonable provision for the business trust liabilities, and distribute to the beneficial owners any remaining assets of the business trust. (e) A business trust which has dissolved shall pay or make reasonable provision to pay all claims and obligations, including all contingent, conditional or unmatured claims and obligations, known to the business trust and all claims and obligations which are known to the business trust but for which the identity of the claimant is unknown. If there are sufficient assets, such claims and obligations shall be paid in full and any such provision for payment shall be made in full. If there are insufficient assets, such claims and obligations shall be paid or provided for according to their priority and, among claims and obligations of equal priority, ratably to the extent of assets available therefor. Unless otherwise provided in the governing instrument of a business trust, any remaining assets shall be distributed to the beneficial owners. Any person, including any trustee, who under the governing instrument of the business trust is responsible for winding up a business trust's affairs who has complied with this subsection shall not be personally liable to the claimants of the dissolved business trust by reason of such person's actions in winding up the business trust." Section 6. Amend s 3810(a), Title 12 of the Delaware Code by redesignating paragraph "(2)" thereof as paragraph "(3)" thereof and by adding a new paragraph (2) to read as follows: -- DE ST TI 12 s 3810 -- "(2) A business trust is formed at the time of the filing of the initial certificate of trust in the Office of the Secretary of State or at any later date or time specified in the certificate of trust if, in either case, there has been substantial compliance with the requirements of this section." -- DE ST TI 12 s 3809 -- Section 7. Amend s 3809, Title 12 of the Delaware Code by deleting the words "for purposes of taxation under Title 30 of this Code" and substituting in lieu thereof the words "for purposes of any tax imposed by this State or any instrumentality, agency or political subdivision of this State." Section 8. Amend s 3810(b)(2), Title 12 of the Delaware Code by striking the first sentence of said subsection in its entirety and substituting in lieu thereof a new sentence to read as follows: -- DE ST TI 12 s 3810 -- "Except to the extent otherwise provided in the certificate of trust or in the governing instrument of a business trust, a certificate of trust may be amended at any time for any purpose as the trustees may determine." Section 9. Amend s 3810, Title 12 of the Delaware Code by adding new subsections (e) and (f) thereto to read as follows: -- DE ST TI 12 s 3810 -- "(e) Whenever any certificate authorized to be filed with the Office of the Secretary of State under any provision of this Chapter has been so filed and is an inaccurate record of the action therein referred to, or was defectively or erroneously executed, such certificate may be corrected by filing with the Office of the Secretary of State a certificate of correction of such certificate. The certificate of correction shall specify the inaccuracy or defect to be corrected, shall set forth the portion of the certificate in corrected form and shall be executed and filed as required by this Chapter. In lieu of filing a certificate of correction the certificate may be corrected by filing with the Office of the Secretary of State a corrected certificate which shall be executed and filed in accordance with this Chapter. The corrected certificate shall be specifically designated as such in its heading, shall specify the inaccuracy or defect to be corrected, and shall set forth the entire certificate in corrected form. The corrected certificate shall be effective as of the date the original certificate was filed, except as to those persons who are substantially and adversely affected by the corrections, and as to those persons the corrected certificate shall be effective from the filing date. (f) If any certificate filed in accordance with this Chapter provides for a future effective date or time and if the transaction is terminated or amended to change the future effective date or time prior to the future effective date or time, the certificate shall be terminated or amended by the filing, prior to the future effective date or time set forth in such original certificate, of a certificate of termination or amendment of the original certificate, executed and filed in 13 accordance with this Chapter, which shall identify the original certificate which has been terminated or amended and shall state that the original certificate has been terminated or amended." -- DE ST TI 12 s 3811 -- Section 10. Amend s 3811(a)(2), Title 12 of the Delaware Code by adding after the words "A certificate of amendment" the words ", a certificate of correction, a certificate of termination or amendment, and a restated certificate of trust". -- DE ST TI 12 s 3811 -- Section 11. Amend s 3811(a)(4), Title 12 of the Delaware Code by adding at four places in said subsection immediately following the words "certificate of merger or consolidation", the words "or certificate of termination or amendment of a merger or consolidation". Section 12. Amend s 3811, Title 12 of the Delaware Code by redesignating subsection "(b)" thereof as subsection "(c)" thereof and by adding new subsection (b) thereto, to read as follows: -- DE ST TI 12 s 3811 -- "(b) Unless otherwise provided in the governing instrument, any person may sign any certificate or amendment thereof or enter into a governing instrument or amendment thereof by any agent, including any attorney-in-fact. An authorization, including a power of attorney, to sign any certificate or amendment thereof or to enter into a governing instrument or amendment thereof need not be in writing, need not be sworn to, verified or acknowledged, and need not be filed in the Office of the Secretary of State, but if in writing, must be retained by the business trust or a trustee or other person authorized to manage the business and affairs of the business trust." Section 13. Amend s 3812, Title 12 of the Delaware Code by striking said section in its entirety and substituting in lieu thereof a new section to read as follows: -- DE ST TI 12 s 3812 -- "s 3812. Filing of certificate (a) Any certificate authorized to be filed with the Office of the Secretary of State under any provision of this Chapter (or any judicial decree of amendment or cancellation) shall be delivered to the Office of the Secretary of State for filing. A person who executes a certificate as an agent or fiduciary need not exhibit evidence of his authority as a prerequisite to filing. Unless the Secretary of State finds that any certificate does not conform to law, upon receipt of all filing fees required by law he shall: (1) Certify that the certificate (or any judicial decree of amendment or cancellation) has been filed in his office by endorsing upon the filed certificate (or judicial decree) the word "Filed", and the date and hour of the filing. This endorsement is conclusive of the date and time of its filing in the absence of actual fraud; (2) File and index the endorsed certificate (or judicial decree); and (3) Prepare and return to the person who filed it or his representative a copy of the filed certificate (or judicial decree), similarly endorsed, and shall certify such copy as a true copy of the filed certificate (or judicial decree). (b) Upon the filing of a certificate of trust in the Office of the Secretary of State, or upon the future effective date or time of a certificate of trust as provided for therein, the certificate of trust shall be effective. Upon the filing of a certificate of amendment (or judicial decree of amendment), certificate of correction, corrected certificate, or restated certificate in the Office of the Secretary of State, or upon the future effective date or time of a certificate of amendment (or judicial decree of amendment) or restated certificate as provided for therein, the certificate of trust shall be amended or restated as set forth therein. Upon the filing of a certificate of cancellation (or a judicial decree thereof) or a certificate of merger or consolidation which acts as a certificate of cancellation in the Office of the Secretary of State, or upon the future effective date or time of a certificate of cancellation (or a judicial decree thereof) or a certificate of merger or consolidation which acts as a certificate of cancellation, as provided for therein, the certificate of trust shall be canceled. 14 Upon the filing of a certificate of termination or amendment, the original certificate identified in the certificate of termination or amendment shall be terminated or amended, as the case may be. (c) A fee as set forth in s 3813(a)(2) of this Title shall be paid at the time of the filing of a certificate of trust, a certificate of amendment, a certificate of correction, a corrected certificate, a certificate of termination or amendment, a certificate of cancellation, a certificate of merger or consolidation or a restated certificate. (d) A fee as set forth in s 3813(a)(3) of this Title shall be paid for a certified copy of any certificate on file as provided for by this Chapter, and a fee as set forth in s 3813(a)(4) of this Title shall be paid for each page copied. (e) Any signature on any certificate authorized to be filed with the Secretary of State under any provision of this Chapter may be a facsimile, a conformed signature or an electronically transmitted signature. Any such certificate may be filed by telecopy, fax or similar electronic transmission; provided, however, that the Secretary of State shall have no obligation to accept such filing if such certificate is illegible or otherwise unsuitable for processing. (f) The fact that a certificate of trust is on file in the Office of the Secretary of State is notice that the entity formed in connection with the filing of the certificate of trust is a business trust formed under the laws of the State of Delaware and is notice of all other facts set forth therein which are required to be set forth in a certificate of trust by s 3810(a)(1) and (2) of this Title and is notice of the limitation on liability of a series of a business trust which is permitted to be set forth in a certificate of trust by s 3804(a) of this Title." -- DE ST TI 12 s 3813 -- Section 14. Amend s 3813(a)(2), title 12 of the Delaware Code by adding after the word "consolidation", the words "a certificate of correction, a corrected certificate, a certificate of termination or amendment or a restated certificate". Section 15. Amend s 3815, Title 12 of the Delaware Code by adding a new subsection (h) thereto to read as follows: -- DE ST TI 12 s 3815 -- "(h) A governing instrument or an agreement of merger or consolidation may provide that contractual appraisal rights with respect to a beneficial interest or another interest in a business trust shall be available for any class or group of beneficial owners or beneficial interests in connection with any amendment of a governing instrument, any merger or consolidation in which the business trust is a constituent party to the merger or consolidation, or the sale of all or substantially all of the business trust's assets. The Court of Chancery shall have jurisdiction to hear and determine any matter relating to any such appraisal rights." Section 16. Amend ss 3818, 3819 and 3820, Title 12 of the Delaware Code by redesignating said sections as ss 3820, 3821 and 3822 and by adding new ss 3818 and 3819 to read as follows: -- DE ST TI 12 s 3818, 3819, 3820 -- -- DE ST TI 12 s 3820, 3821, 3822 -- -- DE ST TI 12 s 3818 -- "s 3818. Treasury interests Except to the extent otherwise provided in the governing instrument of a business trust, a business trust may acquire, by purchase, redemption, or otherwise, any beneficial interest in the business trust held by a beneficial owner of the business trust. Except to the extent otherwise provided in the governing instrument of a business trust, any such interest so acquired by a business trust shall be deemed canceled. -- DE ST TI 12 s 3819 -- s 3819. Access to and confidentiality of information; records 15 (a) Except to the extent otherwise provided in the governing instrument of a business trust, each beneficial owner of a business trust has the right, subject to such reasonable standards (including standards governing what information and documents are to be furnished at what time and location and at whose expense) as may be established by the trustees, to obtain from the business trust from time to time upon reasonable demand for any purpose reasonably related to the beneficial owner's interest as a beneficial owner of the business trust: (1) A copy of the governing instrument and certificate of trust and all amendments thereto, together with copies of any written powers of attorney pursuant to which the governing instrument and any certificate and any amendments thereto have been executed; (2) A current list of the name and last known business, residence or mailing address of each beneficial owner and trustee; (3) Information regarding the business and financial condition of the business trust; and (4) Other information regarding the affairs of the business trust as is just and reasonable. (b) Except to the extent otherwise provided in the governing instrument of a business trust, each trustee shall have the right to examine all the information described in subsection (a) of this section for any purpose reasonably related to his position as a trustee. (c) Except to the extent otherwise provided in the governing instrument of a business trust, the trustees of a business trust shall have the right to keep confidential from the beneficial owners, for such period of time as the trustees deem reasonable, any information that the trustees reasonably believe to be in the nature of trade secrets or other information the disclosure of which the trustees in good faith believe is not in the best interest of the business trust or could damage the business trust or its business or which the business trust is required by law or by agreement with a third party to keep confidential. (d) A business trust may maintain its records in other than a written form if such form is capable of conversion into a written form within a reasonable time. (e) Any demand by a beneficial owner or trustee under this section shall be in writing and shall state the purpose of such demand." SYNOPSIS Section 1. The purpose of this section is to clarify that the agreement pursuant to which a business trust is created is its governing instrument, as that term is defined in the Act. Section 2. The purpose of this section is to allow a certain degree of predictability for third parties dealing with a business trust, if the trustees and the beneficial owners so desire. This section is consistent with the common law principle that third parties' dealings with a business trust may be based on contractual consent as to matters stated in its governing instrument. See e.g. Pennsylvania Co. for Insurance on Lives and Granting Annuities v. Wallace, 31 A.2d 71, 80 (Pa.Supr.1943). Section 3. The purpose of this section is to provide that the defense of usury is not available with respect to an obligation of a beneficial owner or trustee of a business trust to the business trust. Section 4. This section confirms that the Court of Chancery has jurisdiction over business trusts and any contested matters relating to the internal affairs of a business trust, the rights, duties and liabilities of its trustees and beneficial owners or the interpretation of its governing instrument. Section 5. This section clarifies the procedures for the dissolution and termination of a business trust, including the discharge of claims. Section 6. This section clarifies the time upon which a business trust is formed. Section 7. This section eliminates an ambiguity in existing law by making it clear that the classification of a Delaware business trust for federal income tax purposes will govern its classification for not only any tax imposed by this State but also any tax imposed by any instrumentality, agency or political subdivision of this State. Section 8. The purpose of this section is to avoid circumvention by trustees of limitations on their powers contained in the certificate of trust or in the governing instrument. Section 9. This section provides for the use of a certificate of correction and corresponds to similar provisions found in the laws governing other Delaware entities. Section 10 through 14. These sections make various technical corrections to the filing and execution provisions of the Act and correspond to similar provisions found in the laws governing other Delaware entities. 16 Section 15. This section clarifies that the beneficial owners are permitted to be granted contractual appraisal rights with respect to their beneficial interests in a business trust upon a merger or consolidation and other similar transactions. Section 16. This section adds new provisions to the Act dealing with treasury interests and access to information by beneficial owners of a business trust. Approved July 18, 1996. 17 -----END PRIVACY-ENHANCED MESSAGE-----