QuickLinks
-- Click here to rapidly navigate through this document
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-33937
JWH GLOBAL TRUST
$68,300,000
Units of Beneficial Interest
The Trust
The Trust trades in the U.S. and international futures and forward markets in currencies, interest rates, energy and agricultural products, metals and stock
indices.
The
primary objective of the Trust is substantial capital appreciation over time by applying trend-following strategies.
It
seeks to reduce volatility and risk of loss by participating in broadly diversified global markets and implementing risk control policies.
An
investment in the Trust offers a potentially valuable means of diversifying a traditional portfolio.
Investors
have the opportunity to participate in markets which are typically not represented in most investors' portfolios and which offer the potential to be profitable in both rising
and falling markets. It is as easy for the Trust to take long as short positions, and in a wide range of U.S. and non-U.S. markets.
The Trading Advisor
John W. Henry & Company, Inc. (JWH®) is one of the largest professional managed futures advisors in terms of assets under management in
the managed futures industry. As of October 31, 2002, JWH was managing approximately $1.3 billion of client assets.
The
Trust utilizes the Trading Advisor's Financial and Metals Portfolio, G-7 Currency Portfolio and JWH GlobalAnalytics® Family of Programs.
Managing Owner
CIS Investments, Inc. (CISI) is the Managing Owner and sponsor of the Trust.
The
Managing Owner is a subsidiary of Cargill Investor Services, Inc. (CIS). CIS is a subsidiary of Cargill, Incorporated, one of the largest private companies in the United
States.
As
of November 30, 2002, there was approximately $90.6 million invested in managed futures funds sponsored (alone or jointly) by CISI. The Trust is CISI's largest fund.
The Units
The Units are available for subscription on the last day of each month at Net Asset Value per Unit.
As
of November 30, 2002, the Net Asset Value per Unit had increased from $100 as of June 2, 1997, when the Trust began trading, to $124.60. Past
performance is not necessarily indicative of future results.
Subscriptions
as received will be deposited in escrow at Bank One, NA until being invested in the Units as of the last day of the month. All interest actually earned on an investor's
subscription while held in escrow will be used to purchase additional Units for such investor.
The
Units are offered on a best efforts basis. There is no minimum number of Units which must be sold as of the beginning of any particular month.
The Risks
Before you decide whether to invest, read this entire prospectus carefully and consider "The Risks You Face" beginning on page 11.
-
- You
could lose all or substantially all of your investment in the Trust.
-
- The
Trust is speculative and it takes positions with total values that are bigger than the total amount of the Trust's assets. The face value of the Trust's
positions typically range from three to fifteen times its aggregate Net Assets.
-
- Performance
has been volatile. The Net Asset Value per Unit has fluctuated over 21% in a single month.
-
- The
use of a single advisor applying a limited number of generally similar trading programs decreases diversification relative to a fund using multiple
advisors and increases risk.
-
- Substantial
expenses, totaling about 10.1% per annum, must be offset by trading profits and interest income.
-
- The
Trust trades to a substantial degree on non-U.S. markets which are not subject to the same degree of regulation as U.S. markets.
-
- There
is no market for the Units. Units may only be redeemed as of the end of a calendar month subject to a 3% redemption charge through the end of the
eleventh month after issuance.
-
- Investors
are required to make representations and warranties in connection with their investment.
-
- Each
prospective investor is encouraged to discuss the investment with his/her individual financial, legal and tax adviser.
Minimum Investments |
|
|
First-time investors: $5,000 |
IRAs, other tax-exempt accounts: $2,000 |
Existing investors: $1,000 |
This prospectus is in two parts: a disclosure document and a statement of additional
information. These parts are bound together, and both contain important information.
Neither the Securities and Exchange Commission nor any state securities commission has approved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
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.
CIS INVESTMENTS, INC.
Managing Owner
January 3, 2003
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, 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 55 TO 58 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAKEVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 9.
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 11 TO 15.
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.
See Important Privacy Policy Statement on the Following Page.
This prospectus does not include all of the information or exhibits in the Trust's Registration Statement. You can read and copy the
entire Registration Statement at the public reference facilities maintained by the SEC in Washington, D.C.
The Trust files quarterly and annual reports with the SEC. You can read and copy these reports at the SEC public reference facilities in
Washington D.C. at 450 Fifth Street, N.W. Room 1200, Washington D.C. 20549. Please call the SEC at 1-202-942-8090 for further information.
The Trust's filings are posted at the SEC website at http://www.sec.gov.
CIS INVESTMENTS, INC.
Managing Owner
233 South Wacker Drive
Suite 2300
Chicago, Illinois 60606
(312) 460-4000
1
CIS INVESTMENTS, INC.
PRIVACY POLICY
If you are an individual customer of CIS Investments, Inc. ("CISI"), the following applies to you. Under rules issued by the
Commodity Futures Trading Commission, financial institutions like CISI are required to provide privacy policy notices to their clients who are individuals. We believe that protecting the privacy of
your nonpublic personal information ("Personal Information") is of the utmost importance. Personal Information is nonpublic information about you that is personally identifiable and that we obtain in
connection with providing a financial product or service to you. For example, Personal Information includes information regarding the value of your investment in commodity pool(s) or hedge fund(s).
This notice describes the Personal Information that we collect about you, and our treatment of that information.
-
- We collect Personal Information about you from the following sources:
- (i)
- Information we receive from you in subscription agreements and related forms (for example, name, address, Social Security number, birth date, assets, income, and investment
experience);
- (ii)
- Information about your transactions with us, our affiliates, or others (for example, account activity and balances); and
- (iii)
- Information we receive from a consumer reporting agency, such as your credit history.
-
- We may disclose all of the Personal Information we collect about our customers or former customers, as described above, as permitted by law. In addition, we
may disclose all of the Personal Information we collect to companies that perform services on our behalf, including selling agents. Otherwise, we do not disclose any Personal Information we collect
about our customers or former customers to unaffiliated third parties (i.e., parties not within our corporate family).
-
- We may disclose the name, address, or other identifying information relating solely to our transactions or experiences with our customers or former
customers, as well as other information we are permitted by law to share, among companies within our corporate family, such as CIS Securities, Inc. and Cargill Investor Services, Inc.
-
- We restrict access to Personal Information we collect about you to our personnel who need to know that information in order to provide products or
services
to you. We maintain physical, electronic and procedural controls in keeping with federal standards to safeguard your Personal Information.
-
- We reserve the right to change this Notice, and to apply changes to information previously collected, as permitted by law. We will inform you of any
changes
as required by law.
2
JWH GLOBAL TRUST
Organizational Chart
Other
than JWH and the Trustee, all of the entities indicated in the Organizational Chart are Cargill, Incorporated affiliates.
See
"Conflicts of Interest" beginning at page 61 and "Transactions Between the CIS Group and the Trust" at page 63.
For convenience, CISI and entities affiliated with it are sometimes collectively referred to as the "CIS Group."
3
Contents
PART ONE
DISCLOSURE DOCUMENT
Summary |
|
4 |
The Risks You Face |
|
11 |
How the Trust Works |
|
15 |
Performance of the Trust |
|
17 |
Selected and Supplementary Financial Information |
|
18 |
Management's Analysis of Operations |
|
19 |
Quantitative and Qualitative Disclosures About the Trust's Market Risk |
|
23 |
Managed Futures Funds in General |
|
28 |
The Role of Managed Futures in Your Portfolio |
|
30 |
The Managing Owner |
|
37 |
John W. Henry & Company, Inc. |
|
38 |
JWH Principals |
|
43 |
Performance of the JWH Programs |
|
45 |
Interest Income |
|
53 |
Charges |
|
55 |
Brokerage Arrangements |
|
58 |
Redemptions; Net Asset Value |
|
60 |
Conflicts of Interest |
|
61 |
Transactions Between the CIS Group and the Trust |
|
63 |
The Trust and the Trustee |
|
64 |
Tax Consequences |
|
66 |
Plan of Distribution |
|
69 |
Lawyers; Accountants |
|
71 |
Financial Statements |
|
72 |
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
Futures Markets and Trading Methods |
|
97 |
Blue Sky Glossary |
|
99 |
Exhibit AFourth Amended and Restated Declaration of Agreement of Trust |
|
A-1 |
Exhibit BSubscription Requirements |
|
B-1 |
Exhibit CSubscription Agreement andPower of Attorney |
|
C-1 |
Summary
General
JWH Global Trust is a Delaware statutory trust which trades in a wide range of U.S. and international futures and forward markets. CIS Investments, Inc.
("CISI") is the Trust's Managing Owner. John W. Henry & Company, Inc. ("JWH®") is its Trading Advisor.
The
Trust began trading on June 2, 1997 with an initial capitalization of $13,027,103 and a Net Asset Value per Unit of $100. As of November 30, 2002, the Trust's
capitalization was approximately $56.0 million, the Net Asset Value per Unit was $124.60, and the Trust had a total of 2,174 Unitholders.
The Trust and Its Objectives
The primary objective of the Trust is substantial capital appreciation through trading directed by JWH. At the same time, JWH will attempt to reduce volatility
and risk of loss by participating in diversified markets and applying risk control policies.
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. 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.
The
Trust allocates 40% of its assets to JWH's Financial and Metals Portfolio, 30% to its G-7 Currency Portfolio and 30% to the JWH GlobalAnalytics® Family of
Programs. JWH rebalances the Trust's assets at the end of each quarter among these three trading programs in accordance with the preceding percentages.
4
The Managing Owner has the discretion, subject to JWH's agreement, from time to time, to alter the allocation of the Trust's assets among the JWH trading programs, to delete a trading
program or to add other JWH programs. In deciding whether to delete or add a JWH program, the Managing Owner will consider, among other things, recent and/or expected economic and market conditions,
the performance of each trading program and the trading programs combined, the performance of other JWH programs, and the market sector concentration of the trading programs currently being used by
the Trust as well as the other JWH programs. If the Trust's trading programs become concentrated in the same market sectors, or if the recent performance of a trading program appears incompatible with
the Trust's objectives, the Managing Owner and JWH might agree to terminate the use of that program and possibly replace it with another.
JWH and Its Programs
JWH
JWH has been the sole Trading Advisor for the Trust since inception. JWH manages capital in commodities, financial futures and foreign exchange markets for
international banks, brokerage firms, pension funds, institutions and high net worth individuals. JWH trades on a 24-hour basis in a wide range of futures and forward
contractsmore than seventy markets as of the date of this prospectusin the United States, Europe and Asia. JWH is one of the largest managed futures advisors in terms of
assets under management, trading approximately $1.3 billion in client capital as of October 31, 2002.
JWH
currently offers four types of investment programs: Broadly Diversified; Financial; Foreign Exchange; and Multiple Style. Broadly Diversified programs invest in a broad spectrum of
worldwide financial and nonfinancial futures and forward markets including currencies, interest rates, non-U.S. stock indices, metals, energies and agricultural commodities. Financial
programs invest in worldwide financial futures and forward markets including currencies, interest rates and stock indices in addition to the metals and energies markets. Foreign Exchange programs
invest in a wide range of world currencies primarily traded in the interbank market. Multiple Style programs involve the selection and allocation of assets among the other types of JWH investment
programs on a discretionary basis.
JWH's Programs Used for the Trust
Since January 1, 2000, the Trust has been allocating its assets among JWH's Financial and Metals Portfolio, G-7 Currency Portfolio and JWH
GlobalAnalytics® Family of Programs. The Financial and Metals Portfolio, which began trading client funds in October 1984, is one of the longest established JWH programs. The
G-7 Currency Portfolio has been trading
client funds since February 1991. JWH GlobalAnalytics® Family of Programs is JWH's newest program and has been trading client capital since June 1997.
The JWH programs used by the Trust may change materially over time. The Trust has employed other JWH programs in the past and may do so in the future without
notice to investors.
Past performance is not necessarily indicative of future results.
Financial and Metals Portfolio
Market Sectors Traded:
The Financial and Metals Portfolio began trading client capital in October 1984 and has an estimated compounded annualized rate of return of 30.3% from
inception through October 31, 2002. The Financial and Metals Portfolio seeks to identify and capitalize on intermediate-term price movements in four worldwide market sectors:
interest rates, currencies, non-U.S. stock indices and precious and base metals. This program takes a market position when trends are identified but may take a neutral stance or liquidate
open positions in non-trending markets. As of October 31, 2002, JWH had approximately $271.5 million under management pursuant to the Financial and Metals Portfolio.
5
G-7 Currency Portfolio
Market Sectors Traded:
The G-7 Currency Portfolio began trading client capital in February 1991 and has a compounded annualized rate of return of 11.5% from inception
through October 31, 2002. The G-7 Currency Portfolio seeks to identify and capitalize on intermediate-term price movements in the highly liquid currencies of major
industrialized nations and, in the case of the Euro, supranational organizations. These currencies allow for trading outrights against the U.S. dollar or non-dollar cross rates. This
program takes a market position when trends are identified, but may take a neutral stance or liquidate open positions in non-trending markets. It also incorporates specialized
intra-day volatility filters. As of October 31, 2002, JWH had approximately $24.9 million under management in the G-7 Currency Portfolio.
JWH GlobalAnalytics® Family of Programs
Market Sectors Traded:
JWH GlobalAnalytics® Family of Programs, which is JWH's most broadly diversified program, is the result of extensive research and testing by JWH. The
program invests in a broad spectrum of worldwide financial and non-financial futures markets, including interest rate, non-U.S. stock index, currency, metal, energy and
agricultural contracts. Unlike other JWH programs, which invest in intermediate or long-term price movements, JWH GlobalAnalytics® Family of Programs invests in both
long- and short-term price movements. JWH GlobalAnalytics® Family of Programs uses a combination of two investment styles, one of which always maintains a market
positionlong or shortand the other of which takes a market position when trends are identified but may take a neutral stance or liquidate open positions in
non-trending markets. As of October 31, 2002, JWH had approximately $39.9 million under management in the JWH GlobalAnalytics® Family of Programs and
approximately $14 million under management in the account referred to as JWH GlobalAnalytics® 99. Please see page 48 for additional information about the JWH
GlobalAnalytics® 99 account.
Past performance is not necessarily indicative of future results.
Please see the capsule performance summaries beginning on page 46 and the notes accompanying those performance summaries beginning
on page 51.
The JWH Programs Are Technical and Trend-Following, Computerized Systems
The mathematical models used by the JWH programs are technical systems, generating trading signals on the basis of statistical research into past market prices.
JWH does not attempt to analyze underlying economic factors, identify mispricings in the market or predict future prices. Its analysis focuses exclusively on past price movements.
As
a trend-following advisor, JWH's objective is to participate in major price trendssustained price movements either up or down. Such price trends may be relatively
infrequent. Trend-following advisors anticipate that over half of their positions will be unprofitable. Their strategy is based on making sufficiently large profits from the trends which they identify
and follow to generate overall profits despite the more numerous but, hopefully, smaller losses incurred on the majority of their positions.
See
"The Risks You Face" beginning at page 11.
Markets Traded
The Financial and Metals Portfolio, the G-7 Currency Portfolio and the JWH GlobalAnalytics® Family of Programs emphasize trading in
currencies and financial instruments, but participate in most major sectors of the global economy, which may include:
6
Currencies
|
Australian Dollar |
|
*Mexican Peso |
British Pound |
|
*New Zealand Dollar |
Canadian Dollar |
|
*Norwegian Krone |
*Czech Koruna |
|
*Polish Zloty |
*Danish Krone |
|
*Singapore Dollar |
Euro |
|
*South African Rand |
*Hong Kong Dollar |
|
*Swedish Krona |
Japanese Yen |
|
Swiss Franc |
|
|
*Thai Baht |
Indices
|
Australian All
Ordinaries Index |
|
*Goldman Sachs
Commodity Index |
DAX (German) |
|
FTSE 100 (UK) |
EuroStoxx Index |
|
*Nasdaq 100 |
|
|
Nikkei 225 Index |
|
|
S&P 500® Stock Index |
Energies
|
Brent Crude Oil |
|
No. 2 Heating Oil |
Crude Oil |
|
*Unleaded Gasoline |
Natural Gas |
|
London Gasoil |
Metals
|
Aluminum |
|
*Palladium |
Copper |
|
*Platinum |
Gold |
|
Silver |
*Lead |
|
*Tin |
Nickel |
|
Zinc |
Agricultural Products
|
*Live Cattle |
|
*Orange Juice |
*Cocoa |
|
Soybeans |
*Coffee |
|
*Soybean Meal |
*Corn |
|
Soybean Oil |
Cotton |
|
Sugar |
|
|
Wheat |
Financial Instruments
|
Australian |
|
*Euroyen |
(90-day) Bank Bills |
|
Euro BOBL (5 year) |
Australian |
|
Euro Shatz (2 year) |
(3-year and 10-year) |
|
Japanese Government |
Treasury Bonds |
|
Bond |
*Canadian Bank Bills |
|
U.K. Long "Gilt" |
*Canadian |
|
U.K. Short Sterling |
Government Bonds |
|
U.S. 5- and 10-year |
Euribor |
|
Treasury Note |
Eurobund |
|
U.S. 30-year Bond |
Eurodollar |
|
*U.S. 2-year Note |
Euroswiss |
|
*U.S. Agency 10-year |
- *
- These
markets are traded if and when contract liquidity, legal constraints, market conditions and data reliability standards meet JWH's specifications.
As
of October 31, 2002, the Trust had the approximate market sector commitments as shown in the pie chart below. Also shown on the following page are the approximate market sector
weightings of each JWH program used by the Trust as of October 31, 2002. The market sector weightings of the Trust and the JWH programs may vary significantly over time.
7
Average Sector Allocations as of October 31, 2002
Allocation to
JWH Program
|
|
JWH Program
|
|
Commodities
|
|
Currencies
|
|
Energies
|
|
Stock Indices
|
|
Interest Rates
|
|
Metals
|
|
30% |
|
G-7 Currency Portfolio |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
40% |
|
Financial & Metals Portfolio |
|
|
|
31.2 |
% |
|
|
9.5 |
% |
47.5 |
% |
11.7 |
% |
40% |
|
JWH GlobalAnalytics Family of Programs |
|
10.2 |
% |
19.5 |
% |
16.6 |
% |
9.6 |
% |
36.1 |
% |
8.0 |
% |
There is no way to predict which markets the Trust will trade or what its relative commitments to the different markets will be.
Varying the Size of the Trust's Market Positions
JWH attempts to adjust the Trust's position sizes and market exposure to meet its profit and risk-control objectives. Generally, only between 2% and
15% of the face value of a futures or forward position is required as margin to put on the position. Consequently, JWH has considerable flexibility to make significant changes in the size of the
Trust's open positions. For example, the margin requirement for the Treasury bond futures contract is only approximately 2% of the face value of each contract. This means that JWH could acquire, for
each $100,000 of Trust capital, positions ranging from a single Treasury bond contract with a face value of $100,000 up to fifty such contracts with a face value of $5,000,000. The greater the market
exposure of the Trust, the more profit or loss it will recognize as a result of the same price movement, and the greater its risk, profit potential and expected performance volatility.
The Managing Owner
The Managing Owner and Commodity Pool Operator of the Trust is CISI. CISI was incorporated in Delaware in 1983 and is an affiliate of CIS, the Trust's futures
broker. In addition to the Trust, CISI currently operates two public commodity pools jointly with IDS Futures Corporation. As of November 30, 2002, the aggregate capitalization of the funds
managed by CISI was approximately $90.6 million. CISI maintains its principal office at 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606; telephone (312) 460-4000.
See the organizational chart of the Trust at page 3 and "Transactions Between the CIS Group and the Trust" at page 63.
Major Risks of the Trust
The Trust is a speculative investment. It is not possible to predict how the Trust will perform over either the long or short term.
Investors
must be prepared to lose all or substantially all of their investment in the Units.
There
can be no assurance that the past performance of either the Trust or JWH is indicative of how they will perform in the future.
The
Trust is a single-advisor fund, which is likely to involve higher risk than multi-advisor funds.
To
date, the performance of the Trust has been volatile. The Net Asset Value per Unit has varied by more than 21% in a single month.
The
Trust could incur large losses over short periods.
The
Trust typically takes positions with a face value of three to fifteen times its total Net Assets.
Positive
correlation among the trading programs (because they trade in some of the same markets and are all technical, trend-following programs) reduces diversification and increases the
risk of loss.
8
The
performance of the JWH trading programs is dependent upon market trends of the type that JWH's models are designed to identify. Trendless periods are frequent, and during such
periods the Trust is unlikely to be profitable.
Trading
on foreign contract markets involves additional risks, including the risks of inadequate or lack of regulation, exchange-rate fluctuations, expropriation, credit and
investment controls and counterparty insolvency.
There
can be no assurance of the continued availability of JWH or its key principals.
Because
its performance is entirely unpredictable, there is no way of telling when is a good time to invest in the Trust. Investors have no means of knowing whether they are buying Units
at a time when profitable periods are ending, beginning, or not in progress.
The
Units are not transferable and may only be redeemed once a month. Because investors must submit irrevocable subscriptions as well as redemption notices by the fifth business day
prior to month-end, they cannot know the Net Asset Value at which they will acquire or redeem Units. Investors cannot control the maximum losses on their Units because they cannot be sure
of the redemption value of their Units.
As
Unitholders, investors have no voice in the operation of the Trust; they are entirely dependent on the management of CISI and JWH for the success of their investment.
Fees and Expenses
The Incentive Fee payable to JWH is calculated on a quarterly basis and could be substantial even in a breakeven or losing year. The Trust's other significant
expenses are its Brokerage and Management Fees. If the Trust's Net Asset Value increases, the absolute dollar amount of these percentage-of-assets fees will also, but they will
have the same effect on the Trust's rate of return. The following breakeven table indicates the approximate amount of trading profit the Trust must earn during the first twelve months after a Unit is
purchased to offset the costs of the Trust.
Breakeven Table
Expenses
|
|
Twelve-Month
Percentage
Breakeven
|
|
Twelve-Month
Dollar
Breakeven
($5,000 Initial
Investment)
|
|
Brokerage Fees |
|
6.50 |
% |
$ |
325.00 |
|
Management Fee |
|
2.00 |
% |
$ |
100.00 |
|
Incentive Fee* |
|
1.00 |
% |
$ |
50.00 |
|
Administrative Expenses* |
|
0.10 |
% |
$ |
5.00 |
|
Ongoing Offering Costs |
|
0.50 |
% |
$ |
25.00 |
|
Less Interest Income* |
|
(1.50 |
)% |
$ |
(75.00 |
) |
|
|
|
|
|
|
Return on $5,000 Initial Investment Required For "Breakeven"
If Units Held At Least Twelve Months** |
|
8.60 |
% |
$ |
430.00 |
|
|
|
|
|
|
|
- *
- Estimated.
The Incentive Fee is 20% of New Trading Profits and is paid quarterly; consequently, an Incentive Fee could be paid in a breakeven or losing year. Interest Income is
estimated based upon October 2002 interest rates.
-
- Assumes
a constant $5,000 Net Asset Value.
- **
- A
redeeming Unitholder pays redemption charges equal to 3% of the redemption proceeds to CIS through the end of the eleventh month after the redeemed Unit was purchased. Redemption
charges, if applicable, reduce the redemption proceeds otherwise payable to investors.
See "Charges" at page 55.
Principal Tax Aspects of Owning Units
Investors are taxed each year on any gains recognized by the Trust whether or not they redeem any Units or receive any distributions from the Trust.
40%
of any trading profits on U.S. exchange-traded contracts are taxed as short-term capital gains at the individual investor's ordinary income tax rate, while 60% of such
gains are taxed as long-term capital gain at a 20% maximum rate for individuals. The Trust's trading gains from other contracts will be primarily short-term capital gain. This
tax treatment applies regardless of how long an investor holds Units. If, on the other hand, an investor held a stock or bond for twelve months or longer, all the gain realized on its sale would
generally be taxed at a 20% maximum rate.
9
Losses
on the Units may be deducted against capital gains. Any losses in excess of capital gains may only be deducted against ordinary income to the extent of $3,000 per year.
Consequently, investors could pay tax on the Trust's interest income even though they have lost money on their Units. See "Tax Consequences" beginning at page 66.
An Investment in the Units Should be Considered as a Three to Five Year Commitment
The market conditions in which the Trust is likely to recognize significant profits occur infrequently. An investor should plan to hold Units for long enough to
have a realistic opportunity for a number of such trends to develop.
CISI
believes that investors should consider the Units at least a three to five year commitment.
Is the Trust a Suitable Investment for You?
You should consider investing in the Trust if you are interested in its potential to produce enhanced returns over the long-term that are generally
unrelated to the returns of the traditional debt and equity markets and you are prepared to risk significant losses. CISI offers the Trust only as a diversification opportunity for an investor's
entire investment portfolio, not as a complete investment program. No one should invest more than 10% of his or her readily marketable assets in the Trust.
10
The Risks You Face
Possible Total Loss of an Investment in the Trust
You could lose all or substantially all of your investment in the Trust.
Specific Risks Associated with a Single-Advisor Fund
Even in the speculative area of managed futures, single-advisor funds are considered by some to be unusually high risk investments. Multi-advisor strategies are
used by many "commodity pools" specifically for risk control purposes.
Investing in the Units Might Not Diversify an Overall Portfolio
One of the objectives of the Trust is to add an element of diversification to a traditional securities portfolio. While the Trust may perform in a manner largely
independent from the general stock and bond markets, there is no assurance it will do so. An investment in the Trust could increase rather than reduce overall portfolio losses during periods when the
Trust as well as stocks and bonds decline in value. There is no way of predicting whether the Trust will lose more or less than stocks and bonds in declining markets. Investors must not rely on the
Trust as any form of hedge against losses in their core securities portfolios.
Prospective
investors should consider whether diversification in itself is worthwhile even if the Trust is unprofitable.
Investors Must Not Rely on the Past Performance of Either JWH or the Trust in Deciding Whether to Buy Units
The performance of the Trust is entirely unpredictable, and the past performance of the Trust as well as of JWH is not necessarily indicative of their future
results.
The
price data which JWH has researched in developing its programs may not reflect the changing dynamics of future markets. If not, the JWH programs would have little chance of being
profitable. An influx of new market participants, changes in market regulation, international political developments, demographic changes and numerous other factors can contribute to
once-successful strategies becoming outdated. Not all of these factors can be identified, much less quantified. There can be no assurance that JWH will trade profitably.
Volatile JWH Trading History
JWH's performance, even when successful, has been characterized by significant volatility. Since the inception of trading of the JWH programs, the largest
"peak-to-valley" drawdown experienced 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
performance of the Trust to date has been volatile.
The Similarities Among the JWH Programs Reduce Diversification, Increasing the Risk of Loss
The similarities among the programs reduce the Trust's diversification. The less diversification, the higher the risk that the market will move against a large
number of positions held by different programs at the same time, increasing losses.
Overlap of the Markets Traded by JWH Also Reduces Diversification, Increasing the Risk of Loss
The trading programs used by the Trust emphasize trading in the financial instrument and currency markets. The degree of market overlap changes with the program
mix. However, in general, CISI expects the Trust will maintain a substantial concentration in these two sectors while the current programs continue to be used for the Trust. For example, the Trust may
allocate more than 50% of its trading assets to a single market sector such as currencies. Market concentration increases the risk of major losses and unstable Unit values, as the same price movements
adversely affect many of the Trust's concentrated positions at or about the same time.
11
As
it is impossible to predict where price trends will occur, certain trend-following managers attempt to maximize the chance of exploiting such trends by taking positions in as many
different markets and market sectors as feasible. The Trust does not follow this approach and, as a result, may not capture trends which would have been highly profitable.
Its Substantial Expenses Will Cause Losses for the Trust Unless Offset by Profits and Interest Income
The Trust pays fixed annual expenses of approximately 9.1% of its average month-end assets. In addition to this 9.1% annual expense level, the Trust
is subject to 20% quarterly Incentive Fees on any New Trading Profits. Because these Incentive Fees are calculated quarterly, they could represent a substantial expense to the Trust even in a
breakeven or losing year. Based on CISI's experience with its other funds, CISI expects that approximately 1% of the Trust's average month-end assets might be paid out in Incentive Fees
even during a losing year. Overall, investors must expect that the Trust will pay about 10.1% per year in expenses, 13.1% including the 3% redemption charge in effect for the first eleven months after
a Unit is issued.
The
Trust's expenses could, over time, result in significant losses. Except for the Incentive Fee, these expenses are not contingent and are payable whether or not the Trust is
profitable.
JWH Analyzes Only Technical Market Data, Not Any Economic Factors External to Market Prices
The JWH programs focus exclusively on statistical analysis of market prices. Consequently, any factor external to the market itself which dominates prices is
likely to cause major losses. For example, a pending political or economic event may be very likely to cause a major price movement, but JWH would continue to maintain positions that would incur major
losses as a result of such movement, if its programs indicated that it should do so.
The
likelihood of the Units being profitable could be materially diminished during periods when events external to the markets themselves have an important impact on prices. During such
periods, JWH's historical price analysis could establish positions on the wrong side of the price movements caused by such events.
Lack of Price Trends or of the Types of Price Trends Which JWH Programs Can Identify Will Cause Major Losses
The Trust cannot trade profitably unless major price trends occur in at least certain markets that it trades. Many markets are trendless most of the time, and in
static markets the JWH programs are likely to incur losses. In fact, JWH expects more than half of its trades to be unprofitable; it depends on significant gains from a few major trends to offset
these losses. It is not just any price trend, but price trends of the type which JWH's systems have been designed to identify, which are necessary for the Trust to be profitable.
The Danger to the Trust of "Whipsaw" Markets
Often, the most unprofitable market conditions for the Trust are those in which prices "whipsaw," moving quickly upward, then reversing, then moving upward again,
then reversing again. In such conditions, the JWH programs may establish losing positions based on incorrectly identifying both the brief upward or downward price movements as trends.
The Large Size of the Trust's Trading Positions Increases the Risk of Sudden, Major Losses
The Trust takes positions with face values up to as much as approximately fifteen times its total equity. Consequently, even small price movements can cause major
losses.
Unit Values Are Unpredictable and Vary Significantly Month-to-Month
The Net Asset Value per Unit can vary significantly month-to-month. In June 2002, there was more than a 21% change in the value of
a Unit. Investors cannot know at the time they submit a subscription or a redemption request what the subscription price or redemption value of their Units will be.
The
only way to take money out of the Trust is to redeem Units. You can only redeem Units at month-end on five business days' advance notice and
12
subject
to possible redemption charges. The restrictions imposed on redemptions limit your ability to protect yourself against major losses by redeeming Units.
Transfers
of Units are subject to limitations as well, such as advance written notice of any intent to transfer and the consent of CISI to such transfer.
In
addition, investors are unable to know whether they are subscribing for Units after a significant upswing in the Net Asset Value per Unitoften a time when the Trust has
an increased probability of entering into a losing period.
The Opportunity Costs of Rebalancing the JWH Programs
The quarterly rebalancing of the Trust's assets among its JWH trading programs may result in the liquidation of profitable positions, thereby foregoing 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
occurred.
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
foregoing 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.
Increased Competition from Other Trend-Following Traders Could Reduce JWH's Profitability
There has been a dramatic increase over the past twenty-one years in the amount of assets managed by trend-following trading systems like the JWH
programs. In 1980, the amount of assets in the managed futures industry were estimated at approximately $300 million; by September 30, 2002, this estimate had risen to approximately
$48.6 billion. It is also estimated that over half of all managed futures trading advisors rely primarily on trend-following systems. Although the amount of trading in the futures industry as a
whole has increased significantly during the same period of time, the increase in managed money increases trading competition. The more competition there is for the same positions, the more costly and
harder they are to acquire.
JWH's High Level of Equity Under Management Could Lead to Diminished Returns
JWH has a significant amount of assets under management. As of January 1, 1990, JWH had approximately $197 million under management; as of
October 31, 2002, this figure had risen to approximately $1.3 billion. The more money JWH manages, the more difficult it may be for JWH to trade profitably because of the difficulty of
trading larger positions without adversely affecting prices and performance. Large trades result in more price slippage than do smaller orders.
Illiquid Markets Could Make It Impossible for JWH to Realize Profits or Limit Losses
In illiquid markets, JWH could be unable to capitalize on the opportunities identified by it or to close out positions against which the market is moving. There
are numerous factors which can contribute to market illiquidity, far too many for JWH to predict when or where illiquid markets may occur. JWH attempts to limit its trading to highly liquid markets,
but there can be no assurance that a market which has been highly liquid in the past will not experience periods of unexpected illiquidity.
Unexpected
market illiquidity has caused major losses in recent years in such sectors as emerging markets, fixed income relative value strategies and mortgage-backed securities. There
can be no assurance that the same will not happen to the Trust at any time or from time to time. The large size of the positions which JWH acquires for the Trust increases the risk of illiquidity by
both making its positions more difficult to liquidate and increasing the losses incurred while trying to do so.
13
JWH Trades Extensively in Foreign Markets; These Markets Are Less Regulated Than U.S. Markets and Are Subject to Exchange Rate, Market Practices and Political Risks
The trading programs used for the Trust trade a great deal outside the U.S. From time to time, as much as 30%-50% of the Trust's overall market
exposure could involve positions taken on foreign markets. Foreign trading involves risksincluding exchange-rate exposure, possible governmental intervention and lack of
regulationwhich U.S. trading does not. In addition, the Trust may not have the same access to certain positions on foreign exchanges as do local traders, and the historical market data on
which JWH bases its strategies may not be as reliable or accessible as it is in the United States. Certain foreign exchanges may also be in a more or less developmental stage so that prior price
histories may not be indicative of current price dynamics. The rights of clients in the event of the insolvency or bankruptcy of a non-U.S. market or broker are also likely to be more
limited than in the case of U.S. markets or brokers.
Unregulated Markets Lack Regulatory Protections of Exchanges
A substantial portion of the Trust's tradingprimarily its trading of spot and forward contracts in currenciestakes 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.
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 operates three 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 and the likelihood of
significant positive correlation among their respective trading results.
Regulatory Changes Could Restrict the Trust's Operations
The Trust implements a speculative, highly leveraged strategy. From time to time there is governmental scrutiny of these types of strategies and political
pressure to regulate their activities. For example, in 1998 the Malaysian government blamed the collapse of its currency on speculative funds and called for international restrictions on their
operations.
Regulatory
changes could adversely affect the Trust by restricting its markets, limiting its trading and/or increasing the taxes to which Unitholders are subject. As an example, the
legality of EFP transactions come under periodic CFTC review. EFPs are a mechanism for converting a foreign currency forward into a futures contract. If JWH could not trade EFPs for the Trust, the
effect on the Trust could be material and adverse. CISI is not aware of any pending or threatened regulatory developments which might adversely affect the Trust. However, adverse regulatory
initiatives could develop suddenly and without notice.
The Trust Could Lose Assets and Have Its Trading Disrupted Due to the Bankruptcy of CIS or Others
The Trust is subject to the risk of CIS, exchange or clearinghouse insolvency. Trust assets could be lost or impounded in such an insolvency during lengthy
bankruptcy proceedings. Were a substantial portion of the Trust's capital tied up in a bankruptcy, CISI might suspend or limit trading, perhaps causing the Trust to miss significant profit
opportunities. No CISI fund has ever lost any assets due to the bankruptcy or default of a broker, exchange or clearinghouse, but there can be no assurance that this will not happen in the future.
14
Possibility of Termination of the Trust before Expiration of Its Stated Term
As Managing Owner, CISI may withdraw from the Trust upon 120 days' notice, which would cause the Trust to terminate unless a substitute managing owner were
obtained. Other events, such as a long-term substantial loss suffered by the Trust, could also cause the Trust to terminate before the expiration of its stated term. This could cause you
to liquidate your investments and upset the overall maturity and timing of your investment portfolio. If the registrations with the CFTC or memberships in NFA of JWH, CISI or CIS were revoked or
suspended, such entity would no longer be able to provide services to the Trust.
The following are not risks but rather important tax features of investing in the Trust which all prospective investors should carefully consider before deciding
whether to purchase Units.
Investors Are Taxed Every Year on Their Share of the Trust's ProfitsNot Only When They Redeem as Would Be the Case if They Held Stocks or Bonds
Investors are taxed each year on their investment in the Trust, irrespective of whether they redeem any Units.
All
performance information included in this prospectus is presented on a pre-tax basis; the investors who experienced such performance had to pay the related taxes from
other sources.
Over
time, the compounding effects of the annual taxation of the Trust's income are material to the economic consequences of investing in the Trust. For example, a 10% compound annual
rate of return over five years would result in an initial $10,000 investment compounding to $16,105. However, if one factors in a 30% tax rate each year, the result would be $14,025.
The Trust's Trading Gains Are Taxed at Higher Short-Term Capital Gains Rate
Investors are taxed on their share of any trading profits of the Trust at both short- and long-term capital gain rates depending on the mix of U.S.
exchange-traded contracts and non-U.S. exchange-traded contracts traded. These tax rates are determined irrespective of how long an investor holds Units. Consequently, the tax rate on the
Trust's trading gains may be higher than those applicable to other investments held by an investor for a comparable period.
Tax Could Be Due From Investors on Their Share of the Trust's Interest Income Despite Overall Losses
Investors may be required to pay tax on their allocable share of the Trust's interest income, even though the Trust incurs overall losses. Trading losses can only
be used by individuals to offset trading gains and $3,000 of interest income each year. Consequently, if an investor were allocated $5,000 of interest income and $10,000 of net trading losses, the
investor would owe tax on $2,000 of interest income even though the investor would have a $5,000 economic loss for the year.
The $7,000 capital loss would carry forward, but subject to the same limitation on its deductibility against interest income.
How the Trust Works
Buying Units
You buy Units as of the last business day of any month at Net Asset Value. Your subscription must be submitted by the fifth business day prior to the
month-end of investment. Late subscriptions will be applied to Unit sales as of the end of the second month after receipt, unless revoked.
CISI
has no present intention to terminate the offering, but may do so at any time.
Units
are offered at Net Asset Value.
Investors
need to submit Subscription Agreements with each purchase of Units.
The
minimum purchase for first-time investors is $5,000; $2,000 for IRAs and other tax-exempt accounts. Existing investors may make additional investments in
$1,000 minimums.
15
Use of Proceeds
100% of all subscription proceeds are invested directly into the Trust. Neither the Trust nor any subscriber pays any selling commissions. CISI pays all such
commissions as part of the ongoing syndication costs of the Trust. In return, CISI receives substantial revenues from the Trust over time.
The
Trust uses subscription proceeds to margin its speculative futures trading, as well as to pay trading losses and expenses. At the same time that the Trust's assets are being used as
margin, they are also available for active or passive cash management. To date, the Trust's cash has been passively managed by placing it on deposit with CIS. Substantially all the cash management
return earned on the Trust's assets is paid to the Trust, although the CIS Group does retain certain economic benefits from possession of the Trust's assets, as described in more detail under
"Interest Income" beginning at page 53.
Redeeming Units
You can redeem Units monthly. To redeem at month-end, contact your financial advisor or CISI. Redemption requests must be received by CISI no later
than the fifth business day prior to the month-end of redemption.
The
proceeds of Units redeemed through the eleventh month from the date of issuance are reduced by a charge of 3% of their redemption date Net Asset Value. This charge is paid to CIS. If
a Unitholder acquires Units at more than one closing, the Units purchased first by such investor and, accordingly, least likely to be subject to redemption charges, are assumed to be those first
redeemed.
Uncertain Subscription and Redemption Value of Units
The Trust sells and redeems Units at subscription or redemption date Net Asset Value, not at the Net Asset Value as of the date that subscriptions or redemption
requests are submitted. Investors must submit irrevocable subscriptions and redemption requests no later than the fifth business day prior to the effective date of subscription or redemption. Because
of the volatility of Unit values, this delay means that investors cannot know the value at which they will purchase or redeem their Units.
Materially
adverse changes in the Trust's financial position could occur between the time an investor irrevocably commits to acquire or redeem Units and the time the purchase or
redemption is made.
No Distributions Intended
The Trust does not anticipate making any distributions to investors. No distributions have been made to date.
16
Performance of the Trust
The following are the monthly rates of return from the inception of the Trust through November 30, 2002. Through September 30, 2000, the Trust paid
JWH a 4% Management Fee and a 15% Incentive Fee. As of October 1, 2000, the Trust began paying JWH a 2% Management Fee and a 20% Incentive Fee.
JWH GLOBAL TRUST
June 2, 1997November 30, 2002
Aggregate Subscriptions: $136.4 million
Current Capitalization: $56.0 million
Worst Monthly Decline (Month/Year): (13.27)% (11/01)
Worst Peak-to-Valley Decline (Month/Year): (28.77)% (7/99 - 9/00)
Net Asset Value per Unit, November 30, 2002: $124.60
Number of Unitholders, November 30, 2002: 2,174
|
|
Monthly Rates of Return
|
|
|
|
2002
|
|
2001
|
|
2000
|
|
1999
|
|
1998
|
|
1997
|
|
January |
|
(1.60 |
)% |
1.70 |
% |
(2.81 |
)% |
(4.08 |
)% |
(2.83 |
)% |
|
|
February |
|
(5.58 |
) |
0.09 |
|
(3.24 |
) |
2.78 |
|
(1.14 |
) |
|
|
March |
|
(5.97 |
) |
8.25 |
|
(3.47 |
) |
(0.78 |
) |
(3.03 |
) |
|
|
April |
|
(0.30 |
) |
(6.96 |
) |
2.43 |
|
3.89 |
|
(4.59 |
) |
|
|
May |
|
8.81 |
|
3.15 |
|
(1.21 |
) |
(0.20 |
) |
3.44 |
|
|
|
June |
|
21.15 |
|
(4.15 |
) |
(5.15 |
) |
2.58 |
|
(1.63 |
) |
0.16 |
% |
July |
|
5.72 |
|
(4.26 |
) |
(2.28 |
) |
(3.42 |
) |
(3.05 |
) |
6.64 |
|
August |
|
1.07 |
|
4.24 |
|
0.88 |
|
(0.25 |
) |
10.84 |
|
(2.26 |
) |
September |
|
4.41 |
|
1.33 |
|
(4.54 |
) |
(3.67 |
) |
8.02 |
|
(1.46 |
) |
October |
|
(6.66 |
) |
1.93 |
|
6.61 |
|
(7.16 |
) |
2.73 |
|
2.46 |
|
November |
|
(6.64 |
) |
(13.27 |
) |
5.80 |
|
2.86 |
|
(9.97 |
) |
0.83 |
|
December |
|
7.50 |
|
18.58 |
|
(1.77 |
) |
8.35 |
|
3.22 |
|
|
|
Compound Annual Rate of Return |
|
11.62
(11 months |
) |
(2.58 |
)% |
9.65 |
% |
(9.44 |
)% |
5.20 |
% |
9.70
(7 months |
% ) |
Until October 5, 1998, when the G-7 Currency Program was added to the Trust's portfolio, the Trust used only two JWH
programs, the Original Investment Program and the Financial and Metals Portfolio. Effective January 1, 2000, the Trust substituted the JWH GlobalAnalytics® Family of Programs for
the Original Investment Program and changed the allocation of Trust assets among the three programs.
Monthly Rate of Return is the net performance of the Trust during a month (including interest income) divided by the total equity of the
Trust as of the beginning of the month. Performance information is calculated on an accrual basis in accordance with generally accepted accounting principles.
Worst Peak-to-Valley Decline is the largest decline in the Net Asset Value per Unit without such Net Asset Value
per Unit being subsequently equalled or exceeded.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
17
Selected and Supplementary Financial Information
The following Selected Financial Information for the period ended September 30, 2002 is derived from the unaudited financial statements of the Trust for
the period from January 1, 2002 to September 30, 2002. The Selected Financial Information for the years ended December 31, 2001, 2000, 1999 and 1998 and the period ended
December 31, 1997 is derived from the financial statements for the years ended December 31, 2001, 2000, 1999 and 1998 and the period from June 2, 1997 (commencement of trading
operations) to December 31, 1997, which have been audited by KPMG LLP. See "Financial Statements" at page 72.
Income Statement Data
|
|
Jan. 1, 2002
to
Sept. 30, 2002
(unaudited)
|
|
Jan. 1, 2001
to
Dec. 31, 2001
|
|
Jan. 1, 2000
to
Dec. 31, 2000
|
|
Jan. 1, 1999
to
Dec. 31, 1999
|
|
Jan. 1, 1998
to
Dec. 31, 1998
|
|
June 2, 1997
(commencement
of trading
operations)
to
Dec. 31, 1997
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss) on closed positions |
|
$ |
17,295,791 |
|
$ |
8,079,390 |
|
$ |
740 |
|
$ |
2,105,322 |
|
$ |
10,418,484 |
|
$ |
1,761,637 |
|
|
Change in unrealized gain (loss) on open positions |
|
|
1,620,073 |
|
|
(5,446,646 |
) |
|
4,664,653 |
|
|
(4,219,845 |
) |
|
3,078,002 |
|
|
4,481,153 |
|
|
Interest income |
|
|
608,836 |
|
|
1,657,888 |
|
|
3,265,169 |
|
|
4,299,669 |
|
|
3,669,771 |
|
|
1,042,648 |
|
|
Foreign currency transaction gain (loss) |
|
|
93,428 |
|
|
139,504 |
|
|
(483,085 |
) |
|
153,831 |
|
|
(296,969 |
) |
|
(297,458 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
$ |
19,618,129 |
|
$ |
4,430,136 |
|
$ |
7,447,477 |
|
$ |
2,338,977 |
|
$ |
16,869,288 |
|
$ |
6,987,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions paid to CIS |
|
|
2,506,721 |
|
|
3,215,618 |
|
|
3,737,532 |
|
|
6,136,926 |
|
|
5,195,089 |
|
|
1,441,635 |
|
|
Exchange, clearing, and NFA fees |
|
|
12,212 |
|
|
32,547 |
|
|
38,489 |
|
|
83,215 |
|
|
59,724 |
|
|
12,426 |
|
|
Management fees |
|
|
776,304 |
|
|
1,001,094 |
|
|
2,088,954 |
|
|
3,833,530 |
|
|
3,239,007 |
|
|
896,312 |
|
|
Incentive fees |
|
|
2,741,520 |
|
|
990,171 |
|
|
|
|
|
853,599 |
|
|
1,383,562 |
|
|
715,477 |
|
|
Amortization of prepaid initial organization and offering expenses* |
|
|
55,072 |
|
|
132,172 |
|
|
132,173 |
|
|
132,172 |
|
|
132,173 |
|
|
66,238 |
|
|
Ongoing organization and offering expenses |
|
|
190,811 |
|
|
248,048 |
|
|
288,770 |
|
|
474,221 |
|
|
400,616 |
|
|
110,352 |
|
|
Operating expenses |
|
|
44,882 |
|
|
64,643 |
|
|
35,740 |
|
|
47,406 |
|
|
58,596 |
|
|
94,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses |
|
|
6,327,522 |
|
|
5,684,293 |
|
|
6,321,658 |
|
|
11,561,069 |
|
|
10,468,767 |
|
|
3,336,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) |
|
$ |
13,290,607 |
|
$ |
(1,254,157 |
) |
$ |
1,125,819 |
|
$ |
(9,222,092 |
) |
$ |
6,400,521 |
|
$ |
3,651,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
|
|
Sept. 30, 2002
Net
Asset Value
(unaudited)
|
|
Dec. 31, 2001
Net
Asset Value
|
|
Dec. 31, 2000
Net
Asset Value
|
|
Dec. 31, 1999
Net
Asset Value
|
|
Dec. 31, 1998
Net
Asset Value
|
|
Dec. 31, 1997
Net
Asset Value
|
Aggregate Net Asset Value |
|
$ |
61,194,698 |
|
$ |
49,535,093 |
|
$ |
50,129,734 |
|
$ |
85,169,866 |
|
$ |
95,472,546 |
|
$ |
64,351,524 |
Net Asset Value per Unit |
|
$ |
142.98 |
|
$ |
111.63 |
|
$ |
114.59 |
|
$ |
104.51 |
|
$ |
115.40 |
|
$ |
109.70 |
- *
- The $650,000 of organizational and initial offering costs reimbursed to the Managing Owner by the Trust as of the commencement of trading were amortized over a sixty-month period, which
ended on May 31, 2002.
18
The following Supplementary Financial Information presents the results of operations and other data for three-month periods ended March 31,
June 30 and September 30, 2002 and March 31, June 30, September 30 and December 31, 2001 and 2000. This information has not been audited.
|
|
Period ending
March 31, 2002
|
|
Period ending
June 30, 2002
|
|
Period ending
Sept. 30, 2002
|
Total Revenues |
|
$ |
(5,149,058 |
) |
$ |
15,420,129 |
|
$ |
9,347,058 |
Total Expenses |
|
$ |
1,086,917 |
|
$ |
2,151,685 |
|
$ |
3,088,920 |
Gross Profit (Loss) |
|
$ |
(6,235,975 |
) |
$ |
13,268,444 |
|
$ |
6,258,138 |
Net Profit (Loss) |
|
$ |
(6,235,975 |
) |
$ |
13,268,444 |
|
$ |
6,258,138 |
Net Profit per Unit |
|
$ |
(14.11 |
) |
$ |
30.64 |
|
$ |
14.82 |
|
|
Period ending
March 31, 2001
|
|
Period ending
June 30, 2001
|
|
Period ending
Sept. 30, 2001
|
|
Period ending
Dec. 31, 2001
|
|
Total Revenues |
|
$ |
7,094,125 |
|
$ |
(3,079,378 |
) |
$ |
1,724,129 |
|
$ |
(1,308,740 |
) |
Total Expenses |
|
$ |
2,194,062 |
|
$ |
1,173,172 |
|
$ |
1,163,736 |
|
$ |
1,153,323 |
|
Gross Profit (Loss) |
|
$ |
4,900,063 |
|
$ |
(4,252,550 |
) |
$ |
560,393 |
|
$ |
(2,462,063 |
) |
Net Profit (Loss) |
|
$ |
4,900,063 |
|
$ |
(4,252,550 |
) |
$ |
560,393 |
|
$ |
(2,462,063 |
) |
Net Profit per Unit |
|
$ |
11.68 |
|
$ |
(10.11 |
) |
$ |
1.30 |
|
$ |
(5.83 |
) |
|
|
Period ending
March 31, 2000
|
|
Period ending
June 30, 2000
|
|
Period ending
Sept. 30, 2000
|
|
Period ending
Dec. 31, 2000
|
Total Revenues |
|
$ |
(5,283,832 |
) |
$ |
(419,161 |
) |
$ |
(1,446,773 |
) |
$ |
14,597,242 |
Total Expenses |
|
$ |
2,159,870 |
|
$ |
1,700,682 |
|
$ |
1,354,603 |
|
$ |
1,106,503 |
Gross Profit (Loss) |
|
$ |
(7,443,702 |
) |
$ |
(2,119,843 |
) |
$ |
(2,801,376 |
) |
$ |
13,490,739 |
Net Profit (Loss) |
|
$ |
(7,443,702 |
) |
$ |
(2,119,843 |
) |
$ |
(2,801,376 |
) |
$ |
13,490,739 |
Net Profit per Unit |
|
$ |
(9.64 |
) |
$ |
(3.82 |
) |
$ |
(5.38 |
) |
$ |
28.92 |
There
were no extraordinary, unusual or infrequently occurring items recognized in each full calendar quarter within the two most recent fiscal years, and the Trust has not disposed of
any segments of its business. There have been no year-end adjustments that are material to the results of any fiscal quarter reported above.
Management's Analysis of Operations
Results of Operations
General
JWH programs do not predict price movements. No fundamental economic supply or demand analysis is used in attempting to identify mispricings in the market, and no
macroeconomic assessments of the relative strengths of different national economies or economic sectors is made. Instead, the programs apply proprietary computer models to analyze past market data,
and from this data alone attempt to determine whether market prices are trending. Technical traders such as JWH base their strategies on the theory that market prices reflect the collective judgment
of numerous different traders and are, accordingly, the best and most efficient indication of market movements. However, there are frequent periods during which fundamental factors external to the
market dominate prices.
If
JWH's models identify a trend, they signal positions which follow it. When these models identify the trend as having ended or reversed, these positions are either closed out or
reversed. Due to their trend-following character, the JWH programs do not predict either the commencement or the end of a price movement. Rather, their objective is to identify a trend early enough to
profit from it and to detect its
19
end
or reversal in time to close out the Trust's positions while retaining most of the profits made from following the trend.
In
analyzing the performance of JWH's trend-following programs, economic conditions, political events, weather factors, etc., are not directly relevant because only market data has any
input into JWH's trading results. There is no direct connection between particular market conditions and price trends. There are so many influences on the markets that the same general type of
economic event may lead to a price trend in some cases but not in others. The analysis is further complicated by the fact that the programs are designed to recognize only certain types of trends and
to apply only certain criteria of when a trend has begun. Consequently, even though significant price trends may occur, if these trends are not comprised of the type of intra-period price movements
which the programs are designed to identify, the Trust may miss the trend altogether.
The
Trust's success depends on JWH's ability to recognize and capitalize on major price movements and other profit opportunities in different sectors of the world economy. Because of the
speculative nature of its trading, operational or
economic trends have little relevance to the Trust's results, and its past performance is not necessarily indicative of its future results. The Managing Owner believes, however, that there are certain
market conditionsfor example, markets with major price movementsin which the Trust has a better opportunity of being profitable than in others.
The
following performance summary outlines certain major price trends which the JWH programs have identified for the Trust during the last three fiscal years as well as the first three
fiscal quarters of 2002. The fact that certain trends were captured does not imply that others, perhaps larger and potentially more profitable trends, were not missed or that JWH will be able to
capture similar trends in the future. Moreover, the fact that the programs were profitable in certain market sectors in the past does not mean that they will be so in the future.
The
performance summary is an outline description of how the Trust performed in the past, not necessarily any indication of how it will perform in the future. Furthermore, the general
causes to which certain trends are attributed may or may not in fact have caused such trends, as opposed to simply having occurred at about the same time.
While
there can be no assurance that JWH will be profitable even in trending markets, markets in which substantial and sustained price movements occur offer the best profit potential for
the Trust.
Performance Summary
2002
The Trust posted an overall profit for the first three quarters of 2002. Despite negative performance in the first quarter, the Trust rebounded with strong
returns during the second and third quarters. As of September 30, 2002, the Net Asset Value per Unit was $142.98, representing an increase of $31.35 per Unit for the calendar year.
All
three months of the first quarter were unprofitable for the Trust. Although performance was positive in the currency sector early in the quarter, pronounced trend reversals in the
Japanese financial markets caused substantial losses for the Trust's positions in Japanese Yen and Japanese government bonds. The negative news surrounding Enron and fear of additional accounting
scandals created a "flight to quality" and caused losses in the Trust's long interest rate positions.
In
the second quarter, the Trust was up substantially. June proved to be the Trust's most profitable month since inception of trading. The strong performance for the quarter was driven
by the Trust's currency and interest rate positions. Short positions in the U.S. dollar, which steadily weakened against most major currencies throughout the quarter, were profitable for the Trust as
were short positions in stock indices, which saw a decline as a result of additional accounting scandals.
The
third quarter was also profitable for the Trust, primarily due to strong performance in the interest rate sector. Actual and potential accounting scandals continued to erode consumer
confidence in the U.S. which contributed to a U.S. led global economic slowdown. The foregoing events accelerated a downward trend in global interest rates,
20
which
proved very profitable for the Trust. Throughout the quarter interest rates denominated in Euros, British pounds, Australian dollars and Japanese yen fell providing positive returns for the
Trust. Additionally, the Trust's positions in the U.S. 5, 10 and 30 year bonds, Japanese government bonds and Euro denominated bonds prospered. The energy markets were also profitable for the
quarter. The currency sector, which was the standout performer of the second quarter, suffered throughout the third quarter chiefly due to losses sustained in U.S. dollar and British Pound trading.
2001
The Trust experienced a challenging year in 2001. The year-end Net Asset Value was $111.63 per Unit, representing a loss of 2.58% for the calendar
year. After a strong first quarter, the Trust suffered negative performance in the second and fourth quarters. Pronounced price reversals in the interest rate and currency sectors were the most
difficult markets for JWH.
In
the first quarter of 2001, the world's financial markets continued the price patterns that had allowed for positive performance in the last quarter of 2000. Short positions in the
Japanese yen versus the U.S. dollar and the Euro accrued profits throughout this period. The Trust's long global bond position was the cornerstone of the portfolio and benefited from the first of
several interest rate cuts made by the U.S. Federal Reserve. The Trust was positive all three months in the first quarter.
The
much anticipated cut in European interest rates never materialized in the second quarter. This caused trend reversals in both Euro and U.S. dollar denominated bond markets. The
Trust's positions in these markets were large and had been held for several months prior to being closed out. Various newsworthy events, including the re-election of British Prime Minister
Tony Blair, and inconsistent corporate earnings reports created excessive volatility in the interest rate and currency markets. As had been the case for several months, the Trust maintained extremely
small positions in the metal and commodity markets.
The
third quarter was laden with markets lacking direction. During this time, the Trust's portfolio was dominated by currency and interest rate positions. These sectors were unable to
sustain long term price moves. Despite several cuts by the U.S. Federal Reserve, bond prices at quarter-end were trading well below the highs made previously in March. Lack of a dominant
currency led to flat performance in the currency sector.
The
last quarter of 2001 began positively due to strong performance in the interest rate sector. The Trust's long positions in global bond markets benefited from interest rate cuts as
well as a "flight to quality" as a result of the September 11 tragedy. However, in November, after economic data indicated a strengthening of the economy, trends in the interest rate and
currency sectors reversed. The U.S. 30-year bond lost approximately 10% in value. The currency sector moved in concert with interest rates, which also caused portfolio losses. The Trust
was down approximately 5% for the quarter.
2000
The Trust had a profitable year in 2000 and produced a gain of 9.65% for the calendar year. This represented an increase in the Net Asset Value per Unit equal to
$10.08. After experiencing difficult trading environments during the
first three quarters of the year, the Trust exploited trading opportunities in the financial markets during the fourth quarter and closed the year strongly.
In
the first quarter of 2000, strategic events reversed trends, which led to unprofitable trading for the Trust. In February, the U.S. Federal Reserve announced that it was buying back
part of the debt. This led to a powerful rally in the world's interest rate markets and the Trust's short positions were closed out at a loss. In March, the decline of the Nasdaq commenced and with it
came a dramatic shift of capital from U.S. dollar into Yen. This movement of capital hurt the Trust's long dollar and Euro positions. Prices of agriculture, energy and metals markets were flat during
the first quarter.
The
second quarter was marked by conflicting economic signals, which often reversed long term price trends. The U.S. dollar, after having lost value
21
in
March, was strong in April and then declined in value in May and June. Interest rates, followed a similar directionless path with the "hard landing or soft landing" question being the primary
driver. Through the end of June, the only market sector with defined direction was the energy sector, which has been the Trust's most consistent source of profits over the past few years.
As
the third quarter began, the futures markets continued seeking direction. Metal and agricultural prices were listless. Stock index trading was volatile in the short term and sideways
over a longer period. Up trends emerged in the world's bond markets where open trade profits were accrued. In the currency sector, the U.S. dollar gained very steadily versus the Euro during July and
August. By September, the dollar was gaining value on all major currencies. However, on September 22, the European Central Bank intervened to support the Euro. Consequently, price trends
reversed dramatically and the Trust's accrued profits in the currency and interest rate sectors turned into open trade losses.
Despite
the intervention, the Trust remained long U.S. dollar and interest rates and reaped the benefits of those positions as the fourth quarter began. In October, the dollar hit its
all-time high versus the Euro and gained substantially versus the Swiss, British and Japanese currencies. By November, interest rate trading became the Trust's strongest sector as long
positions in global bond markets amassed large open trade gains. Strong performance in interest rate markets continued in December. A revival of European currencies provided the bulk of the month's
gain in the currency sector. These trends remained in place through year-end.
Effective
October 1, Management Fees paid by the Trust to JWH were reduced from 4% to 2% annually (paid monthly). Incentive fees were increased from 15% to 20% of quarter end new
high profits.
1999
The Trust experienced a disappointing year in 1999. The year-end Net Asset Value for 1999 ended at $104.51 per Unit, representing a loss of 9.44%.
A
lack of sustained price movements coupled with abrupt trend reversals in many market sectors resulted in a very difficult trading environment in 1999. The forces that supported strong
returns in the equity markets such as strong
consumer confidence and the perception of economic equilibrium caused volatile, sideways price patterns in the futures markets. This type of price movement is extremely difficult for
long-term trend followers such as JWH. The currency sector provided profit opportunities for the Trust. As the conflict in Kosovo escalated in early March, there was a flight to quality
into the U.S. dollar and out of the Euro and Swiss franc. This crisis-related selling of these two currencies continued through mid-July. Short U.S. dollar positions against the Japanese
yen were also profitable. In addition, crude oil began its sharp ascent from less than $12/barrel in March to $25.60/barrel at year-end. This sustained trend proved profitable for the
Trust throughout the year as was the strengthening Yen relative to the U.S. dollar during the second half of the year.
The
"choppy" markets described above surfaced in many areas but most particularly the world's interest rate markets. The Fed's attempt to slow down the escalating economy resulted in
1/4 point increases in the fed funds rate in June, August and October. Despite these increases, short positions in the 10-year and 30-year U.S. bonds resulted in
flat performance largely due to occasional price aberrations, which triggered stop loss orders. The most difficult trading period for the Trust occurred in the last quarter. Whipsaw price activity in
the Japanese and Australian interest rates led to major losses. Short gold positions, which had been profitable during the first part of the year, sustained losses when the price of gold rose
$50/ounce in 10 days. Once again, stop loss orders were triggered and the Trust suffered a significant setback. While unpleasant, the loss sustained in 1999 was within the expected range of
returns over time.
22
Liquidity and Capital Resources
The amount of assets invested in the Trust generally does not affect its performance, as typically this amount is not a limiting factor on the positions acquired
by JWH, and the Trust's expenses are primarily charged as a fixed percentage of its asset base, however large.
The
Trust sells no securities other than the Units. The Trust borrows only to a limited extent and only on a strictly short-term basis in order to finance losses on
non-U.S. dollar denominated trading positions pending the conversion of the Trust's dollar deposits. These borrowings are at a prevailing short-term rate in the relevant
currency. They have been immaterial to the Trust's operation to date and are expected to continue to be so.
The
Net Asset Value of the Trust's cash and financial instruments is not materially affected by inflation. Changes in interest rates, which are often associated with inflation, could
cause the value of certain of the Trust's debt securities to decline, but only to a limited extent. More importantly, changes in interest rates could cause periods of strong up or down price trends,
during which the Trust's profit potential generally increases. Inflation or deflation in commodity prices could also generate price movements which the programs might successfully follow.
The
Trust's assets are held primarily in cash. Except in very unusual circumstances, the Trust should be able to close out any or all of its open trading positions and liquidate any or
all of its securities holdings quickly and at market prices. This should permit JWH to limit losses as well as reduce market exposure on short notice should its programs indicate reducing market
exposure. In addition, because there is a readily available market value for the Trust's positions and assets, the Trust's monthly Net Asset Value calculations are precise, and investors need only
wait ten business days to receive the full redemption proceeds of their Units.
Quantitative and Qualitative Disclosures About the Trust's Market Risk
Introduction
Past Results Are Not Necessarily Indicative of Future Performance
The Trust is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or substantially all
of the Trust's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Trust's main line of business.
Market
movements result in frequent changes in the fair market value of the Trust's open positions and, consequently, in its earnings and cash flow. The Trust's market risk is influenced
by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification
effects among the Trust's open positions and the liquidity of the markets in which it trades.
The
Trust can acquire and/or liquidate both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market
scenario will affect performance, and the Trust's past performance is not necessarily indicative of its future results.
Value
at Risk is a measure of the maximum amount which the Trust could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Trust's
speculative trading and the recurrence in the markets traded by the Trust of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Trust's experience to date (i.e., "risk of ruin"). In light of the foregoing as well as the risks and uncertainties
intrinsic to all future projections, the inclusion of the quantification included in this section should not be considered to constitute any assurance or representation that the Trust's losses in any
market
23
sector will be limited to Value at Risk or by the Trust's attempts to manage its market risk.
Standard of Materiality
Materiality as used in this section, "Qualitative and Quantitative Disclosures About Market Risk," is based on an assessment of reasonably possible market
movements and the potential losses caused by such movements, taking into account the leverage, optionality and multiplier features of the Trust's market sensitive instruments.
Interim Periods
Quantitative and qualitative disclosures about the Trust's market risk are provided as of December 31, 2001 and 2000. CISI believes that there have not
been any material changes to either the sources of the Trust's trading and non-trading market risk or their impacts on the Trust since the end of 2001.
Quantifying the Trust's Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Trust's market risk exposures contain "forward-looking statements" within the meaning
of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for
statements of historical fact.
The Trust's risk exposure in the various market sectors traded by JWH is quantified below in terms of Value at Risk. Due to the Trust's
mark-to-market accounting, any loss in the fair value of the Trust's open positions is directly reflected in the Trust's earnings (realized or unrealized) and cash flow (at
least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).
Exchange
maintenance margin requirements have been used by the Trust as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the
maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day intervals. The maintenance margin levels are established by
dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic
fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation. Maintenance margin has been used rather than the more generally
available initial margin, because initial margin includes a credit risk component which is not relevant to Value at Risk.
In
the case of market sensitive instruments which are not exchange traded (almost exclusively currencies in the case of the Trust), the margin requirements for the equivalent futures
positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available, dealers' margins have been used.
The
fair value of the Trust's futures and forward positions does not have any optionality component.
In
quantifying the Trust's Value at Risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements
applicable to the open contracts have simply been aggregated to determine each trading category's aggregate Value at Risk. The diversification effects resulting from the fact that the Trust's
positions are rarely, if ever, 100% positively correlated have not been reflected.
The Trust's Trading Value at Risk in Different Market Sectors
The following tables indicate the average, highest and lowest amounts of trading Value at Risk associated with the Trust's open positions by market category for
fiscal year 2001 and 2000. All open position trading risk exposures of the Trust have been included in calculating the figures set forth in the tables below. During fiscal year 2001, the Trust's
average total capitalization was approximately $49.6 million. During fiscal year 2000, the Trust's average total capitalization was approximately $57.0 million.
24
Fiscal Year 2001
Market Sector
|
|
Highest
Value
at Risk*
|
|
Lowest
Value
at Risk*
|
|
Average
Value
at Risk*
|
|
% of
Average
Capitalization**
|
|
Interest Rates |
|
$ |
2.3 |
|
$ |
0.6 |
|
$ |
1.5 |
|
2.9 |
% |
Currencies |
|
$ |
2.5 |
|
$ |
1.0 |
|
$ |
1.9 |
|
3.8 |
% |
Stock Indices |
|
$ |
0.6 |
|
$ |
0.1 |
|
$ |
0.3 |
|
0.6 |
% |
Precious Metals |
|
$ |
0.3 |
|
$ |
0.1 |
|
$ |
0.2 |
|
0.4 |
% |
Commodities |
|
$ |
0.2 |
|
$ |
0.1 |
|
$ |
0.1 |
|
0.2 |
% |
Energy |
|
$ |
0.5 |
|
$ |
0.0 |
|
$ |
0.3 |
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
6.4 |
|
$ |
1.9 |
|
$ |
4.3 |
|
8.5 |
% |
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2000
Market Sector
|
|
Highest
Value
at Risk*
|
|
Lowest
Value
at Risk*
|
|
Average
Value
at Risk*
|
|
% of
Average
Capitalization**
|
|
Interest Rates |
|
$ |
2.8 |
|
$ |
0.9 |
|
$ |
2.1 |
|
3.7 |
% |
Currencies |
|
$ |
4.3 |
|
$ |
1.1 |
|
$ |
2.4 |
|
4.2 |
% |
Stock Indices |
|
$ |
1.2 |
|
$ |
0.1 |
|
$ |
0.7 |
|
1.2 |
% |
Precious Metals |
|
$ |
1.0 |
|
$ |
0.1 |
|
$ |
0.5 |
|
0.9 |
% |
Commodities |
|
$ |
0.3 |
|
$ |
0.0 |
|
$ |
0.1 |
|
0.2 |
% |
Energy |
|
$ |
0.5 |
|
$ |
0.1 |
|
$ |
0.3 |
|
0.5 |
% |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10.1 |
|
$ |
2.3 |
|
$ |
6.1 |
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
|
- *
- Average,
highest and lowest Value at Risk amounts relate to the quarter-end amounts for each calendar quarter-end during the fiscal year. All amounts represent
millions of dollars.
- **
- Average
Capitalization is the average of the Trust's capitalization at the end of each fiscal quarter for each fiscal year.
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Trust is typically many times the applicable maintenance margin requirement (maintenance margin
requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Trust. The magnitude of the Trust's open positions creates a
"risk of ruin" not typically found in most other investment vehicles. Because of the size of its positions, certain market conditionsunusual, but historically recurring from time to
timecould cause the Trust to incur severe losses over a short period of time. The foregoing Value at Risk tablesas well as the past performance of the Trustgive
no indication of this "risk of ruin."
Non-Trading Risk
The Trust has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as any market risk they
represent) are immaterial.
The
Trust holds substantially all of its assets in cash on deposit with CIS and CISFS. The Trust has cash flow risk on these cash deposits because if interest rates decline, so will the
interest paid out by CIS and CISFS at the 91-day Treasury bill rate. As of November 30, 2002, December 31, 2001 and December 31, 2000, the Trust had approximately
$57,398,000, $46,977,000 and $44,316,000, respectively, in cash on deposit with CIS and CISFS.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Trust's market risk exposuresexcept for (i) those disclosures that
are statements of historical fact and (ii) the descriptions of how the Trust and JWH manage the Trust's primary market risk exposuresconstitute forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Trust's primary market risk exposures as well as the strategies used and to be used
by JWH for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Trust's risk controls to differ materially
from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures
and the risk management strategies of the Trust. There can be no assurance that the Trust's current market exposure and/or risk management strategies will not change materially or that any such
strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Trust.
25
The following were the primary trading risk exposures of the Trust as of December 31, 2001 and December 31, 2000, by market sector.
Interest Rates
Interest rate risk is a major market exposure of the Trust. Interest rate movements directly affect the price of the sovereign bond positions held by the Trust
and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact the Trust's
profitability. The Trust's primary interest rate exposure is to interest rate fluctuations in the United States and the other G-7 countries. However, the Trust also takes positions in the
government debt of smaller nationse.g.,Australia. The changes in interest rates which have the most effect on the Trust are changes in
long-term, as opposed to short-term, rates. Most of the speculative positions held by the Trust are in medium- to long-term instruments. Consequently, even a
material change in short-term rates would have little effect on the Trust were the medium- to long-term rates to remain steady.
Currencies
The Trust's currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different
currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Trust trades in a large number of currencies,
including cross-ratesi.e., positions between two currencies other than the U.S. dollar. However, the Trust's major exposures have typically
been in the dollar/yen, dollar/Euro, dollar/Swiss franc, dollar/pound and Euro/yen positions. The Managing Owner does not anticipate that the risk profile of the Trust's currency sector will change
significantly in the future. The currency trading Value at Risk figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk
inherent to the dollar-based Trust in expressing Value at Risk in a functional currency other than dollars.
Stock Indices
The Trust's primary equity exposure is to equity price risk in the G-7 countries. As of December 31, 2001, the Trust's exposure was in the DAX
(Germany) stock index. As of December 31, 2000, the Trust's primary exposures were in the Nikkei (Japan) and FTSE (U.K.) stock indices. The Managing Owner anticipates little, if any, trading in
non-G-7 stock indices. The Trust is primarily exposed to the risk of adverse price trends or static markets in the major U.S., European and Japanese indices. (Static markets
would not cause major market changes but would make it difficult for the Trust to avoid being "whipsawed" into numerous small losses.)
Metals
The JWH programs currently used for the Trust trade mainly precious, not base, metals, and the Trust's primary metals market exposure is to fluctuations in the
price of gold. The Managing Owner anticipates that gold will remain the primary metals market exposure for the Trust.
Commodities
The Trust's primary commodities exposure is to agricultural price movements which are often directly affected by severe or unexpected weather conditions. Grains,
the soybean complex, coffee, sugar, cotton and cocoa accounted for the substantial bulk of the Trust's commodities exposure as of December 31, 2001 and December 31, 2000. JWH and the
Trust will maintain an emphasis on grains, coffee, sugar and cocoa, in which the Trust has historically taken its largest commodity positions.
Energy
The Trust's primary energy market exposure is to gas and oil price movements, often resulting from political developments in the Middle East. Although JWH trades
natural gas to a limited extent, oil is by far the dominant energy market exposure of the Trust. Oil prices can be volatile and substantial profits and losses have been and are expected to continue to
be experienced in this market.
26
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Trust as of December 31, 2001 and December 31, 2000.
Foreign Currency Balances
The Trust's primary foreign currency balances are in Japanese yen, Euros, British pounds and Australian dollars. The Trust controls the non-trading
risk of these balances by regularly converting these balances back into dollars (no less frequently than twice a month).
Cash Position
The Trust holds substantially all its assets in cash at CIS and CISFS, earning interest at the 91-day Treasury bill rate.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Managing Owner monitors the Trust's performance and the concentration of its open positions, and consults with JWH concerning the Trust's overall risk
profile. If the Managing Owner felt it necessary to do so, the Managing Owner could require JWH to close out individual positions as well as entire programs traded on behalf of the Trust. However, any
such intervention would be a highly unusual event. The Managing Owner primarily relies on JWH's own risk control policies while maintaining a general supervisory overview of the Trust's market risk
exposures.
Risk Management
JWH attempts to control risk in all aspects of the investment processfrom confirmation of a trend to determining the optimal exposure in a given
market, and to money management issues such as the startup or upgrade of investor accounts. JWH double checks the accuracy of market data, and will not trade a market without multiple price sources
for analytical input. In constructing a portfolio, JWH seeks to control overall risk as well as the risk of any one position,
and JWH trades only markets that have been identified as having positive performance characteristics. Trading discipline requires plans for the exit of a market as well as for entry. JWH factors the
point of exit into the decision to enter (stop loss). The size of JWH's positions in a particular market is not a matter of how large a return can be generated but of how much risk it is willing to
take relative to that expected return.
To
attempt to reduce the risk of volatility while maintaining the potential for excellent performance, proprietary research is conducted on an ongoing basis to refine the JWH investment
strategies. Research may suggest substitution of alternative investment methodologies with respect to particular contracts; this may occur, for example, when the testing of a new methodology has
indicated that its use might have resulted in different historical performance. In addition, risk management research and analysis may suggest modifications regarding the relative weighting among
various contracts, the addition or deletion of particular contracts from a program, or a change in position size in relation to account equity. The weighting of capital committed to various markets in
the investment programs is dynamic, and JWH may vary the weighting at its discretion as market conditions, liquidity, position limit considerations and other factors warrant.
JWH
may determine that risks arise when markets are illiquid or erratic, such as may occur cyclically during holiday seasons, or on the basis of irregularly occurring market events. In
such cases, 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.
Adjustments
in position size in relation to account equity have been and continue to be an integral part of JWH's investment strategy. At its discretion, JWH may adjust the size of a
position in relation to equity in certain markets or entire programs. Such adjustments may be made at certain times for some programs but not for others. Factors which may affect the decision to
adjust the size of a position in relation to account equity include ongoing research, program volatility, current market volatility, risk exposure, subjective judgment and evaluation of these and
other general market conditions.
27
Managed Futures Funds in General
The Trust is one type of managed futures fund. All of these investments products offer, in varying degrees, the possibility of achieving
substantial capital appreciation as well as diversifying a portion of a traditional portfolio. The purpose of this section is to provide prospective investors a general overview of where the Trust is
positioned in the spectrum of managed futures funds.
Managed Futures Funds
A managed futures fund is a professionally managed portfolio typically trading in a wide range of markets through futures, forwards and options contracts. These
markets may include global currencies, interest rates, energy, stock indices, metals and agricultural commodities. Managed futures funds may trade either or both the short or long side of the market,
often on a 24-hour basis, and are generally riskier and have more volatile performance than many other traditional investments. However, managed futures investments offer a unique return
pattern when compared to traditional long-only equity or fixed income investments. As a result, professional management can be an important advantage in this highly complex and specialized
investment area.
Not
all managed futures funds are the same. Like other investment products, managed futures funds are designed with a variety of risk/reward parameters. The variety of available managed
futures funds matches a wide range of individual investment objectives.
The Different Types of Managed Futures Funds
Risk/reward parameters of a managed futures fund may be modified by adjusting the number of trading advisors, trading strategies and/or markets traded. The
increase of diversification in one or more of these categories is generally expected to produce lower but more consistent returns.
Certain
managed futures funds are more aggressive than others. For example, single advisor, single strategy funds are typically expected to have higher profit potential as well as risk
because of their dependence upon just one advisor's performance and, in many cases, a limited number of markets traded. The returns in these types of managed futures funds often fluctuate
significantly from month to month.
The
performance volatility of single advisor funds may be reduced by a multi-advisor approach. Multi-advisor funds typically have lower returns, but also lower risk and volatility than
single-advisor managed futures funds (although more risk and volatility than many other investments). The Trust is a single-advisor, multi-strategy, not a multi-advisor, single-strategy investment.
Managed Futures and the Asset Allocation Process
The primary objective of an asset allocation process is to diversify a portfolio into a variety of investment components. Each component of investments may
respond differently to economic cycles and shifts in the financial markets. Thus, each component of investments contributes differently to a portfolio's overall performance.
A
traditional investment portfolio is invested in stocks, bonds and cash equivalents. Adding "non-traditional" or "alternative" investments, such as managed futures, to a
traditional portfolio can be beneficial in the asset allocation process. Because of its potential non-correlation with the performance of stocks and bonds, the non-traditional
component can, if it outperforms either stocks or bonds, improve long-term returns and can also help to reduce volatility of a portfolio.
Prospective
investors should carefully evaluate managed futures, weighing its return and diversification potential against the risks, before investing. Managed futures are speculative
investments and are not appropriate for everyone. There can be no assurance that these investments will be profitable or will avoid losses.
28
Growth in Futures Investments
There has been a dramatic increase over the past twenty-one years in the volume of futures contracts traded in general as well as the amount of assets
invested in the managed futures industry. The first chart below, Futures Volume by Market Sector, depicts the increased volume of futures contracts traded by market sector from 1980 to 2001. The
second chart below, Growth in Managed Futures Industry, illustrates the substantial increase in the amount of assets invested in managed futures. In 1980, the amount of assets in the managed futures
industry were estimated at approximately $300 million; by September 30, 2002, this estimate had risen to approximately $48.6 billion.
Futures Volume by Market Sector
Source: Futures Industry Association.
The futures volume figures and market sector distributions presented above include both speculative and hedging
transactions, as well as options on futures. A significant portion of currency trading is done in the forward rather than in the futures markets, and, accordingly, is not reflected in the foregoing
chart.
29
Growth in Managed Futures Industry
Source: Barclay Trading Group, Ltd. Fairfield, Iowa 52556 Phone (641) 472-3456
The assets categorized above as invested in managed futures are invested in a wide range of different products, including
single-advisor and multi-advisor funds, "funds of funds," "principal protection" pools (in which only a fraction of the assets invested are committed to trading) and to individual managed accounts.
The Role of Managed Futures in Your Portfolio
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
By investing in the Trust, subscribers have the opportunity to place assets with an experienced active managed futures advisor. 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 over twenty years and, as of
October 31, 2002, managed approximately $1.3 billion in client capital. JWH has achieved substantial profits under a variety of different market conditions and trading a variety of
different programs, including the Financial and Metals Portfolio, the G-7 Currency Portfolio and JWH GlobalAnalytics® Family of Programs.
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. In recent years, the futures markets have expanded to include a wide array of innovative products to capture potential profit opportunities that arise from volatility
in interest rates, significant fluctuations in the value of commodities and currencies, the consolidation of European currencies, fragility in world banking and credit mechanisms and the growing
interdependence among national economies. Moreover, trading on the major exchanges in
30
Chicago,
Frankfurt, London, New York, Paris, Singapore, Sydney and Tokyo has expanded and gives managed futures investors access to international markets and global diversification.
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 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
a traditional diversified portfolio to the Trust, an investor has the potential, if the Trust is successful, to enhance the prospects for superior performance of the overall portfolio as well as to
reduce the volatility of the portfolio over time and the dependence of such portfolio on any single country's economy.
Opportunity to Profit in Declining as Well as in Rising Markets
The futures markets offer the ability to trade either side of the 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.
Non-Correlation
Managed futures investments have often performed differently from stocks and bonds. In addition, different types of alternative investments are frequently
non-correlated with each other. This creates the potential to assemble a combination of alternative investments able to profit in different economic cycles and international markets, while
reducing the portfolio concentration of traditional long equity and debt holdings.
The
following chart illustrates the generally low historical correlation between the Trust, stocks and bonds.
Low Historical Correlation to Other Investments
|
|
Correlation to the Trust
(June 1997 through September 2002)
|
|
Correlation to the S&P 500®
(June 1997 through September 2002)
|
S&P 500® Stock Index |
|
-.315 |
|
1.00 |
Lehman Brothers Long-term Government Bond Index |
|
.310 |
|
-.200 |
Europe, Australasia, Far East Index (EAFE) |
|
-.291 |
|
.818 |
NASDAQ Composite |
|
-.343 |
|
.789 |
Goldman Sachs Commodity Index |
|
.025 |
|
.042 |
Barclay's CTA Index |
|
.816 |
|
-.249 |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
The source for all indices except the Barclay's CTA Index in the table above is Standard & Poor's Fund Services (2002)
1-800-596-5323. The source for the Barclay's CTA Index is Barclay Trading Group, Ltd.
31
The Trust is an actively managed portfolio of futures and forward contracts and related options that pays the fees and expenses described in this prospectus. The
foregoing indices are unmanaged indices commonly used as benchmarks. The performance of the indices does not reflect any fees or transaction costs as these expenses do not apply to market indices.
Neither the performance of the Trust nor the market indices have been adjusted to reflect any taxes applicable to an investor in the Trust or in the investment products that track market indices.
Non-correlation
is not negative correlation. Managed futures' performance is not expected to be opposite, but rather unrelated, to the performance of stocks and bonds. For
example, during certain periods, the Trust has demonstrated a strong degree of positive correlation to the S&P 500® Stock Index.
By
allocating a portion of the risk segment of a traditional portfolio of stocks and bonds to the Trust, an investor has the potential, if the Trust is successful, to enhance the
prospects for superior performance of the overall portfolio as well as to reduce the volatility of the portfolio over time. The following graphs, prepared by the Managing Owner and JWH demonstrate the
potential effects of adding managed futures to a diversified stock portfolio and a traditional stock and bond portfolio. Adding futures has the potential to increase the portfolio's overall returns
while decreasing the standard deviation of returns (one measure of risk). In the first graph, once the managed futures portion exceeds approximately 50% of the investment portfolioan
amount not typically recommended for an investor's portfoliostandard deviation increases without substantial increase in returns. The second graph demonstrates a similar effect when the
Trust is added to a traditional portfolio of 60% stocks and 40% bonds. Neither graph reflects the risk of the Trust incurring sudden, major losses as both graphs are based on statistical averages over
time.
JWH Global Trust and S&P 500® Stock Index
JWH Global Trust with 60/40 Blend of
S&P 500® Stock Index and Lehman Brothers
Government Bond Index
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Standard Deviation measures the variability of a probability distribution and is widely used as a measure of risk. Figures are annualized using the
monthly rates of return of the Trust on a compounded basis since June 1997.
The
NFA requires the following hypothetical disclaimer: HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY
ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN ABOVE. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS
FREQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION,
HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO
WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS
RELATED TO THE MARKETS IN GENERAL OR TO THE PROGRAMS WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
32
The foregoing charts are provided for illustrative purposes only. Prospective investors should note that JWH has not managed any accounts consisting of the
portfolio mixes shown in the above charts and that the charts are presented only as an illustration of the potential advantage of adding a managed futures component to a portfolio of stocks and/or
bonds, not as a recommendation that any investor should allocate more than 10% of his or her portfolio to managed futures. For a portfolio consisting of managed futures, stocks and bonds, the managed
futures component itself must outperform stocks or bonds over the period being measured in order for returns to increase. There can be no assurance that that will, in fact,
occur.
The
following chart compares the Trust's performance since June 1, 1997 with the S&P 500® Stock Index (assuming the reinvestment of all dividends), the NASDAQ
Composite, the Lehman Brothers Long-term Government Bond Index (including all interest paid), the Goldman Sachs Commodity Index, the Morgan Stanley Capital International EAFE Index and the
Barclay's CTA Index. The chart begins with 100 as the arbitrary starting point for all seven graphics and tracks the monthly rates of return for each. The periods during which the graph of the Trust's
performance diverges from that of an index indicates, when compared to the periods during which their respective performance graphs are similar, the extent of the non-correlation between
them. Past performance, including past non-correlation patterns, is not necessarily indicative of future results.
Comparison of JWH Global Trust and Certain General Market Indices
June 1, 1997 through September 30, 2002
Past results are not necessarily indicative of future performance. The comparison of the
Trust, an actively managed investment, to passive indices of general securities
returns has certain inherent material limitations.
The source for all indices except the Barclay's CTA Index in the graph above is Standard & Poor's Fund Services (2002)
1-800-596-5323. The Barclay's CTA Index is produced by Barclay Trading Group, Ltd.
33
The S&P 500® Stock Index and NASDAQ Composite are capitalization-weighted indices of the common stocks of publicly-traded United States issuers. The
Lehman Brothers Long-term Government Bond Index is a total-return index comprised of Treasury Bonds with at least ten years to maturity. The Goldman Sachs Commodities Index is a composite
index of commodity sector returns, representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The returns are
calculated on a fully-collateralized basis with full reinvestment. The Morgan Stanley Capital International EAFE Index comprises stock indices for 21 countries representing the developed markets in
Europe, Australasia and the Far East.
The Barclay's CTA Index represents the composite performance of a large number of commodity trading advisors. The accounts included in this Index represent a wide
variety of materially different products, including discretionary and systematic traders' styles. Combining the results of accounts with materially different performance objectives and fee structures
into a single index is subject to certain inherent and material limitations. There can be no assurance that the Barclay's CTA Index provides any meaningful indication of how managed futures
investments, in general, have performed in the past or will perform in the future. Nevertheless, the Barclay's CTAs Index is one of several widely-used benchmarks of general U.S. managed
futures industry performance.
Graphic comparisons of securities indices and the Trust may not adequately reflect all differences between the securities and futures market or between passive
and managed investments.
The
following chart compares the Trust's performance since June 1, 1997 with the S&P 500® Stock Index (assuming the reinvestment of all dividends) and a portfolio
consisting 50% of the Trust and 50% of the S&P 500® Stock Index (assuming the reinvestment of all dividends). The chart begins with 100 as the arbitrary starting point for each graph and
tracks the monthly rates of return for each. Past performance, including past non-correlation patterns, is not necessarily indicative of future results.
JWH Global Trust versus the S&P 500® 500 Stock Index and an Equally
Weighted Portfolio of the Trust and the S&P 500® 500 Stock Index
June 1, 1997 through September 30, 2002
Past results are not necessarily indicative of future performance. The comparison of the Trust, an actively managed investment, to passive indices of general
securities returns has certain inherent material limitations.
34
Graphic comparisons of securities indices and the Trust may not adequately reflect all differences between the securities and futures market or between passive
and managed investments.
Extreme Correlation Analysis
Extreme Correlation measures the correlation for the selected data based on groupings of the data. Since correlation quantifies the relationship of two assets as
a single number, it is often useful to divide the historical data into segments and examine the correlations for each of the segments. The objective of this analysis is to determine if the overall
correlation is uniform across the entire period. For example, return data for the S&P 500® Stock Index and the Trust can be divided into data thirds based on the S&P 500® Stock
Index returns: the highest return months, the middle return months and the lowest return months. The following analysis shows how the correlation changes depending on the return pattern of the S&P
500® Stock Index. The analysis presented is for the 64-month period June 1997 through September 2002. Extreme Correlation analysis is statistically significant
using a dataset with a minimum of 90 months divided into equal thirds. Although the Trust does not have 90 months of performance history, the Managing Owner and JWH believe that the
following analysis is representative of the correlation that would exist among the indices shown below if the Trust had 90 months of performance history. For this analysis the
64-month period was divided into thirds representing the best 21 months, the middle 22 months and the worst 21 months. An analysis of other time periods may have
different results than those in this presentation. Source Standard & Poor's Fund Services (2002) 1-800-596-5323. The Managing Owner and JWH cannot be
responsible for errors or omissions from this source.
Correlation in S&P 500® Stock
IndexBest 21 Months |
|
|
|
|
Correlation in S&P 500® Stock IndexWorst 21 Months |
35
JWH Global Trust and Selected Indices versus the
Best and Worst 42 Months of the S&P 500® Stock Index
Past performance is not necessarily indicative of future results. The accompanying notes set forth before this presentation are an integral part of the above
chart. Trading futures is speculative, involves substantial risk and is not suitable for all investors.
Interest on Trust Assets
The Trust receives interest income on its assets. On the fifth business day of each month, CIS and CISFS 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. The interest earned on the Trust's assets can offset a portion,
although at current rates not all, of its routine costs. The Trust's interest income represents a source of revenue entirely independent of its speculative futures and forward trading, but is subject
to the risk of trading losses.
Although
CISI has not yet done so, CISI may place some of the Trust's assets with a Custodian and hire a third-party cash manager to manage that money. 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
JWH is typically available to manage individual accounts only of substantial size$5,000,000 or more. Investors in the Trust are currently able to
gain access to three JWH programs for a minimum investment of only $5,000; $2,000 in the case 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.
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 large positions in relation to capital
36
used
in futures and forward trading. However, a Unitholder cannot lose more than his or her investment in the Trust plus undistributed profits. In fact, in the event the Net Asset Value of a Unit
decreases to less than 50% of the previous highest month-end Net Asset Value per Unit 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. Without limited liability, it could be imprudent
for an investor to participate in strategies like those applied by JWH where positions may be large in relation to account equity.
Administrative Convenience
The Trust is structured so as to substantially eliminate the administrative burden which would otherwise be involved in Unitholders engaging directly in futures
and forward trading. Unitholders 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 and state income tax returns. The approximate daily Net Asset Value per Unit is available by calling your financial advisor or CISI at (312) 460-4000 or toll free at
(888) 292-9399.
The Managing Owner
The Managing Owner and Commodity Pool Operator of the Trust is CISI, a wholly-owned subsidiary of CIS, 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 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 are kept at CISI's principal office. The
officers and directors of CISI do not receive any compensation directly from CISI.
In
addition to the Trust, CISI currently operates two public commodity pools jointly with IDS Futures Corporation. CISI operated two other private commodity pools which have been
liquidated.
The
directors and officers of CISI are as follows:
James A. Davison (born in May 1961) is President and a director. Mr. Davison is a graduate of the School of Oriental and
African Studies, University of London. He began his career with Cargill plc and joined Cargill Investor Services Ltd. in 1987. His management responsibilities included commodity and financial
markets as well as the development of all business activity with alternative asset management clients in European and Middle Eastern geographies. He resigned from Cargill plc in 1996 to establish his
own consultancy business. One of his assignments of this business included
Managing Director for Hasenbichler Asset Management Ltd., one of Europe's largest alternative asset management groups and, in 1998, he assumed responsibility for all international activity of a
portfolio of trading advisors. He re-joined Cargill plc in December 2000 as European Managing Director of Cargill Investor Services Ltd. and was named Worldwide Business Unit
Leader of CIS in July of 2001.
Shaun D. O'Brien (born in November 1964) is Vice President, Chief Financial Officer and a director. Mr. O'Brien became a
Vice President and a director of CISI on July 1, 1999. Mr. O'Brien graduated from Northeastern University in 1987 and received a Master's degree from the University of Minnesota's
Carlson School of Management in 1999. Mr. O'Brien began working for Cargill in 1988 and joined CIS in 1999.
Barbara A. Pfendler (born in May 1953) is Vice President and a director. 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 the Fund Services Group. She was appointed Vice President of CISI in May 1990 and Vice President of CIS in June 1996.
37
Christopher Malo (born in August 1956) is Vice President. Mr. Malo graduated from Indiana University in 1978 with a B.S. in
Accounting and further completed the University of Minnesota Executive Program in 1993. He started work at Cargill, Incorporated in June 1978. He joined CIS in 1979, and served as
Secretary/Treasurer and Controller from 1983 until 1991. He was elected Vice President, Administration and Operations in July 1991. He was Managing Director in Europe from 1996 until
January 1999, responsible for CIS activities and operations in Europe, the Middle East and Russia. He was an active member of the FIA-UK Chapter and LIFFE Membership and Rules
Committee. He currently serves on the Board of the FIA in Chicago.
Patrice H. Halbach (born in August 1953) is a Vice President. Ms. Halbach graduated Phi Beta Kappa from the University of
Minnesota with a B.A. 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. She was named Assistant Vice President of Cargill, Incorporated's Administrative Division in April 1994. In January 1999, she was named Vice President,
Tax, of Cargill, Incorporated. In her current position as Vice President, Tax, Ms. Halbach oversees Cargill, Incorporated's global tax function.
Jennifer S. Johnston (born in January 1967) is Treasurer. Ms. Johnston became a Vice President of CIS in
October 2002. Ms. Johnson graduated from the University of Illinois in 1989 with a B.S. in Finance. Ms. Johnston began working at CIS in 1990. She has worked in various
departments at CIS during her 12 year career.
Penelope J. Beckhardt (born November 1965) is Chief Compliance Officer and Secretary. Ms. Beckhardt graduated from the
University of Wisconsin, Madison with a B.B.A. in Marketing in 1987 and received an M.B.A. with a Finance concentration from Loyola University of Chicago in 1989. She began her career at the Chicago
Board of Trade in the Office of Investigations and Audits. In March 1993, she moved to LFG, L.L.C. and served in both Compliance Specialist and Accounting Manager roles. Ms. Beckhardt
continued her career with UBS Warburg as Associate Director and N.A. Head of Exchange Traded Derivatives Compliance from June 1997 through March 2002. She began working for CIS in
March 2002. She is currently a member of the FIA Law and Compliance Division.
The
following are additional officers of CISI: James Clemens, Assistant Secretary; Lillian
Lundeen, Assistant Secretary; Anne R. Carlson, Assistant Secretary; and Jeanne Y.
Smith, Assistant Secretary.
John W. Henry & Company, Inc.
Background
JWH, a Florida corporation, began managing assets in 1981 as a sole proprietorship and was later incorporated in 1982 to conduct business as a commodity trading
advisor ("CTA"; a person who directs the trading of futures accounts for clients, including commodity pools). JWH's offices are located at 301 Yamato Road, Suite 2200, Boca Raton, Florida 33431. JWH's
registration as a CTA became effective in November 1980. JWH is a member of NFA in this capacity. "JWH" is the registered trademark of John W. Henry & Company, Inc.
For
a description of the principals of JWH, see "JWH Principals" beginning at page 43.
Trading Strategy
The following description of JWH's trading strategy relates to JWH generally and not to the Trust itself.
General
JWH specializes in managing institutional and individual capital in the global futures, financial futures and foreign exchange markets. Since 1981, JWH has
developed and implemented proprietary trend-following trading techniques. As of the date of
38
this
prospectus, JWH operates eleven trading programs.
Investment Philosophy and Methodology
The JWH investment philosophy has been based, since the inception of the firm, on the premise that market prices, rather than market fundamentals, are the key
aggregator of information necessary to make investment decisions and that market prices, which may at first seem random, are actually related through time in complex, but discernible ways. This
philosophy is based on analysis of historical data that revealed that market adjustments sometimes form price trends that can be exploited for profit. JWH believes there is an inherent return
opportunity in participating in price
movement trends that its systematic and analytic models have identified. JWH trading programs may participate in either rising or falling trends; they do not have a directional bias nor do they try to
forecast or predict market turning points. Once a program has established a position in a market that has been identified as trending, no pre-set price target for profits is established
given the highly variable nature of market trends.
JWH
believes that changes in market prices initially reflect human reactions to new or emerging information or events that will cause trends, but that prices eventually reflect all
relevant information. The price adjustment process takes time, however, since reactions of market participants to changing market dynamics initially may be inefficient. For example, investors may not
react immediately to information because of differing evaluation processes, differing levels of risk tolerance or uncertainty. Gradual price adjustments manifest themselves in long-terms
trends, which themselves can influence the course of events and from which profit opportunities can arise. JWH believes that such market inefficiencies can be exploited through a combination of trend
detection and risk management.
There
is strong economic and statistical evidence to suggest that trends do exist in most markets although they may be difficult to identify. Since it was founded, JWH has employed
analytical methods to identify short- to long-term trends. Comprehensive research undertaken by the firm's founder, John W. Henry, led to the development of disciplined systematic
quantitative models. JWH's computer models examine market data for systematic price behavior or relationships which will characterize a trend. When price trends are identified, the JWH trading system
generates buy and sell signals for implementing trades. The strict application of these signals is one of the most important aspects of JWH's investment process.
JWH
attempts to control risk throughout the investment process. This includes the confirmation of a trend, determining the optimal exposure in a given market and money management issues
such as the startup or upgrade of accounts. JWH's research on these and other issues has resulted in investment program modifications from time to time that have decreased from previous levels the
overall volatility of its investment programs while maintaining the potential for generating attractive performance returns.
Style, Timing and Market Characteristics
JWH investment programs have different style, timing and market characteristics. Investment style differences are primarily based on the number of directional
phases that investment programs use for marketslong, short or neutraland how position sizes are determined. Timingwhether trends are recognized over a short to
very long-term periodis a distinguishing characteristic of JWH investment programs. JWH investment programs can also be distinguished by the markets they trade.
While
some characteristics may overlap, each investment program has a distinctive combination of style, timing and markets. This does not mean that one program will have higher returns
than another will or that a certain set of characteristics are preferable for one type of market. At times, an investment program may, for certain markets, use a style different from its primary
style.
Detecting Price Trends
The first step in the investment process is the identification of sustained price movementsor trendsin a given market. JWH's
well-researched investment process uses a consistent approach whose fundamental principles have not changed over the life of the firm. The JWH systems examine market data
39
for
relationships among movements in prices, detecting frequencies or repetitive behavior hidden within thousands of pieces of raw price data. JWH's trading models seek to identify signals by
separating short-term market noise from relevant information and locating a directional opportunity that has favorable risk characteristics. Prices are an aggregate of market information.
JWH considers the price paid to be the sum of the signal plus "noise," where the signal is the trend information and the "noise" is market volatility.
How JWH Can Make Money
Trading
JWH's experienced traders work on a 24-hour rotation schedule, executing trades worldwide in markets that are the most liquid for the specific trade
that is being made. Trades are executed by teams, with each member of the team fully responsible for the trade's fulfillment, and are recorded and reviewed for strict adherence to procedures.
Once
those trades are received, traders focus on the manner and speed with which the trade will be executed in an effort to minimize market disturbance at the best price. Whether
entering or exiting the markets, traders follow specific procedures designed to help minimize the impact of any immediate adverse price developments.
Preserving Capital
Given the noisy nature of price data, all market signals may not lead to profitable trades. Consequently, JWH places significant emphasis on risk management
techniques to minimize the losses on any particular trade on the portfolio as a whole. Stop-losses are used and managed in a proprietary manner to balance the potential loss in any trade
versus the opportunity for maximum profit. Depending on the model used, risk may be managed through variable position size or risk levels for any market. Additionally, modern portfolio techniques,
which account for the volatility and correlation of markets as well as behavior during extreme market conditions, are used to construct the overall portfolio for a given program. Portfolio adjustments
will be made to account for systematic changes in the relationships across markets. Portfolios are managed to meet longer-term risk and volatility tolerances. Risk management on a market
basis accounts for volatility and the fact that markets may turn against the prevailing trend.
While
JWH is looking for longer-term trends, the preservation of capital is paramount. If a predetermined amount of capital is lost, positions will be closed regardless of
fundamental market conditions. Unlike some managers, such as
traditional equity or fixed income managers, JWH does not manage or seek to perform against a natural benchmark, such as an index of performance. JWH seeks to generate returns in all market
conditions.
In
markets with short-term volatility or where no trends existconditions which can result in flat or negative performanceJWH strives to preserve
capital. Some of the JWH programs may take a neutral position (exit a market) rather than risk trading capital. While there can be no guarantee against losses, the JWH trading discipline is designed
to preserve capital while waiting for opportunities where programs generate profits over longer periods of time.
Duration of Positions Held
JWH's historical performance demonstrates that, because trends often last longer than most market participants expect, significant returns can be generated from
positions held over a long period of time. Therefore, market exposure to profitable positions is not changed based on the time horizon of a trade, positions held for two to four months are not
unusual, and positions have been held for more than a year. Losing positions are generally reversed or eliminated relatively quickly, with most closing within a few days or weeks. However, if the JWH
system detects a profitable underlying trend, a position trading at a loss may be retained in order to capture the potential benefits of participating in that trend. Throughout the investment process,
risk
40
controls
designed to reduce the possibility of an extraordinary loss in any one market are maintained.
Equity Drawdowns
Historically, only 30% to 40% of all trades made pursuant to JWH's programs have been profitable. Large profits on a few trades in positions that typically exist
for several months have produced favorable results overall. The greatest cumulative percentage decline in daily net asset value which JWH has experienced since inception in any single program on a
composite basis was nearly 60%. Prospective investors in the Trust should understand that similar or greater drawdowns are possible in the future.
To
reduce exposure to volatility in any particular market, most JWH programs participate in several markets at one time. In total, JWH participates in more than seventy markets,
encompassing interest rates, currencies and commodities such as agricultural products, energy and precious and base metals. Most investment programs maintain a consistent portfolio composition to
allow opportunities in as many major market trends as possible.
Disciplined Investment Process
JWH believes that an investment strategy can only be as successful as the discipline of the manager to adhere to its requirements in the face of market adversity.
Unlike discretionary traders, whose decisions may be subject to behavioral biases, JWH practices a disciplined investment process. This systematic process may dictate that JWH close positions with a
loss in order to provide downside protection, but it also may ensure the discipline to stay in markets that are calm for long periods of time in order to achieve possible long-term gain
for investors. In either case, JWH investment
decisions reflect the JWH trading models' assessment of the market itself, not an emotional response to recent economic or political data.
Oversight of Trading Policies
The JWH Investment Policy Committee ("IPC") is a senior-level advisory group, broadly responsible for evaluating and overseeing trading policies. The IPC provides
a forum for shared responsibility, meeting periodically to discuss issues relating to implementation of JWH's investment process and its application to markets, including research on new markets and
strategies in relation to JWH trading models.
Typical
issues analyzed by the IPC include liquidity, position size, capacity, performance cycles and new product and market strategies. The IPC also makes the discretionary decisions
concerning investment program selection, asset allocation and leverage levels for the Strategic Allocation Program and Currency Strategic Allocation Program, each a multi-program asset allocation
methodology. Composition of the IPC, and participation in its discussions and decisions by non-members, may vary over time. The chairman participates in all IPC meetings and decisions. The
IPC does not make day-to-day trading decisions.
Discretionary Aspects
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. This could occur, for example, when JWH determines that markets are illiquid or erratic, such as may occur cyclically during holiday seasons or on the basis of
irregularly occurring market events. Subjective aspects of JWH's quantitative models also include the determination of position size in relation to account equity, when an account should commence
trading, the investment of assets associated with additions, redemptions and allocations, contracts and contract months traded, and effective trade execution.
Program Modifications
Proprietary research is conducted on an ongoing basis to refine the JWH investment strategies. While the basic philosophy underlying the firm's investment
methodology has remained intact throughout its history, the potential benefits of employing more than one investment methodology,
41
or
in varying combinations, is a subject of continual testing, review and evaluation. Extensive research may suggest substitution of alternative investment methodologies with respect to particular
contracts. This may occur, for example, when the testing of a different methodology has indicated that its use might have resulted in different historical performance. In addition, risk management
research and analysis may suggest modifications regarding the relative weighting among various contracts, modifying the style and/or timing used by an investment program to trade a particular
contract, the addition or deletion of particular contracts for an investment program or a change in position size in relation to account equity. However, most investment programs maintain a consistent
portfolio composition to allow opportunities in as many major market trends as possible.
All
cash in a JWH investment program is available to be used for trading, although the amounts committed to margin will vary from time to time. As capital in each JWH trading program
increases, additional emphasis and weighting may be placed on certain markets which have historically demonstrated the greatest liquidity and profitability. Furthermore, the weighting of capital
committed to various markets in the trading programs is dynamic, and JWH may vary the weighting at its discretion as market conditions, liquidity, position limit considerations and other factors
warrant. CISI will generally not be informed of any such changes.
Adjusting the Size of Positions Taken
Adjustments to position size in relation to account equity have been and continue to be an integral part of JWH's investment strategy. At its discretion, JWH may
adjust the size of a position in relation to account equity in certain markets or entire investment programs. Such adjustments may be made at certain times for some investment programs but not for
others. Factors which may affect the decision to adjust the size of a position in relation to account equity 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 the size of a position in relation to account equity may positively or negatively affect
performance and will alter risk exposure for an account. Such adjustments may lead to greater profits or losses, more frequent and larger margin calls and greater brokerage expense. No assurance is or
can be given that such adjustments will result in profits for investors in the Trust. JWH reserves the right to alter, at its sole discretion and without notification to the Trust, its policy
regarding the size of positions taken in relation to account equity.
Addition, Redemption and Reallocation of Capital for Commodity Pool Accounts
Investors purchase or redeem Units at Net Asset Value on the close of business on the last business day of the month. In order to provide market exposure
commensurate with the Trust's equity on the date of these transactions, JWH's general practice is to adjust positions as near as possible to the close of business on the last trading date of the
month. The intention is to provide for additions and redemptions at a Net Asset Value that will be the same for each of these transactions, and to eliminate possible variations in Net Asset Values
that could occur as a result of inter-day price changes if, for example, additions were calculated on the first day of the subsequent month. Therefore, JWH may, at its sole discretion,
adjust its investment of the assets associated with the addition or redemption as near as possible to the close of business on the last business 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, or at its
sole discretion, delay adjustments to trading for an account to a date or time after the close of business on the last day of the month. No assurance is given that JWH will be able to achieve the
objectives described above in connection with Trust equity level changes. The use of discretion by JWH in the application of this procedure may affect performance positively or negatively.
Physical and Cash Commodities
JWH may trade in physical or cash commodities for immediate or deferred delivery, including specifically gold bullion, as well as futures, options and forward
contracts when JWH believes that cash markets offer comparable or superior market liquidity or the ability to execute transactions
42
at
a single price. The CFTC does not regulate cash transactions, which are subject to the risk of counterparty failure, inability or refusal to perform with respect to such contracts.
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 Trading Advisory Agreement also provides that 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 term of the Trading Advisory Agreement ended on the last day of June 2002
and was automatically renewed pursuant to a provision which provides for automatic renewal for three one-year periods on the same terms unless the Managing Owner gives notice of
termination to JWH at least forty-five days prior to the expiry of the then current term. The Trading Advisory Agreement will terminate automatically if the Trust is terminated.
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 such actions or omissions were 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 fullest 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 in the reasonable 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.
Legal Concerns
There neither now exists nor has there previously ever been any material administrative, civil or criminal action against JWH or its principals.
Principals
of JWH serve on the board of directors and committees of various organizations, both in and outside of the managed futures industry. In such capacities, these individuals have
a fiduciary duty to the other organizations they serve, and they are required to act in the best interests of those organizations even if those actions were to be adverse to the interest of JWH and
its clients.
JWH Principals
The following are the principals of JWH:
The
sole shareholder of JWH is the John W. Henry Trust dated July 27, 1990. Mr. John W. Henry is chairman of the JWH Board
of Directors and is trustee and sole beneficiary of the John W. Henry Trust. Mr. Henry is also a member of the Investment Policy Committee. He currently oversees trading program design and
composition, reviews and approves research and system development proposals prior to implementation in trading, reviews and approves decisions involving the strategic direction of the firm and
discusses trading activities with trading supervisors. JWH's corporate officers, rather than Mr. Henry, manage JWH's day-to-day operations. Mr. Henry is the
exclusive owner of certain trading systems
licensed to Elysian Licensing Corporation, a corporation wholly-owned by Mr. Henry and sublicensed by Elysian Licensing Corporation to JWH and utilized by JWH in managing investor accounts.
Mr. Henry conducts his
43
business
responsibilities for JWH from Boca Raton, Florida and Boston, Massachusetts.
Mr. Henry
has served on the Board of Directors of the Futures Industry Association ("FIA"), the National Association of Futures Trading Advisors ("NAFTA") and the Managed Futures
Trade Association, and has served on the Nominating Committee of NFA. He has served on a panel created by the Chicago Mercantile Exchange and the Chicago Board of Trade to study cooperative efforts
related to electronic trading, common clearing and issues regarding a potential merger. Mr. Henry is a principal of Westport Capital Management Corporation, Global Capital Management Limited,
and JWH Investment Management, Inc., all affiliates of JWH. Since the beginning of 1987, Mr. Henry has devoted, and will continue to devote, considerable time to activities in businesses
other than JWH and its affiliates. From January, 1999 until February, 2002, Mr. Henry was chairman of the Florida Marlins Baseball Club LLC. Effective February, 2002, Mr. Henry is
Principal Owner of New England Sports Ventures, LLC, which owns the Boston Red Sox baseball team, New England Sports Network, and certain real estate, including Fenway Park. He holds comparable
positions with the individual business entities engaged in these activities. Mr. Henry expects to be regularly involved in the businesses of New England Sports Ventures, LLC with professional
management of the Boston Red Sox (including its president and chief executive officer) and of the other associated entities.
Mr. Mark H. Mitchell is vice chairman, counsel to the firm and a member of the JWH Board of Directors. His duties include the
coordination and allocation of responsibilities among JWH and its affiliates. Prior to joining JWH in January 1994, Mr. Mitchell was a partner at Chapman and Cutler, in Chicago, where he
headed the law firm's futures law practice from August 1983 to December 1993. He also served as General Counsel of the Managed Funds Association ("MFA") and General Counsel of NAFTA.
Mr. Mitchell is currently a member of the NFA CPO/CTA Advisory Committee. In addition, he has served as a member of the NFA Special Committee for the Review of Multi-tiered Regulatory Approach
to NFA Rules, the MFA Government Relations Committee 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 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.
Dr. Mark S. Rzepczynski is president, chief investment officer and a member of the JWH Investment Policy Committee.
Dr. Rzepczynski is responsible for the day-to-day management of the firm. He is also a principal of Westport Capital Management Corporation, Global Capital Management
Limited and JWH Investment Management, Inc. Dr. Rzepczynski joined JWH in May 1998. From May 1995 to April 1998, he was vice president and director of taxable credit
and quantitative research in the fixed-income division of Fidelity Management and Research, where he oversaw credit and quantitative research recommendations for all Fidelity taxable fixed-income
funds. From April 1993 to April 1995, he was a portfolio manager and director of research for CSI Asset Management, Inc., a fixed-income money management subsidiary of Prudential
Insurance. Dr. Rzepczynski has a B.A. cum laude in Economics from Loyola University of Chicago and an A.M. and Ph.D. in Economics from
Brown University.
Mr. David M. Kozak is a senior vice president, general counsel and secretary to the corporation. He is also a principal of JWH
Investment Management, Inc. and Westport Capital Management Corporation. Prior to joining JWH in September 1995, he had been a partner at the law firm of Chapman and Cutler since 1989.
In his practice there, he concentrated in commodity futures law, with an emphasis on commodity money management. Mr. Kozak is chairman of the MFA's Government Relations Committee. He formerly
served as the secretary and a director of the MFA, and was a member of that organization's Executive Committee. He is also a member of the NFA's Membership Committee, as well as the NFA's Special
Committee on CPO/CTA Disclosure Issues and the Special Committee for the Review of Multi-Tiered Regulatory Approach to NFA Rules. He is chairman of the subcommittee on CTA and CPO
44
issues
of the Futures Regulation Committee of the Association of the Bar of the City of New York. 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, proprietary trading and a member of the JWH Investment Policy Committee. He is
responsible for the implementation and oversight of the firm's proprietary strategies and investments. 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. Matthew J. Driscoll is a vice president, trading, and chief trader and a member of the JWH Investment Policy Committee. He is
responsible for the supervision and administration of all aspects of order execution strategies and implementation of trading policies and procedures. Mr. Driscoll joined JWH in
March 1991 as a member of its trading department. Since joining the firm, he has held positions of increasing responsibility as they relate to the development and implementation of JWH's
trading strategies and procedures. He has played a major role in the development of JWH's 24-hour trading operation. Mr. Driscoll attended Pace University.
Mr. Edwin B. Twist is a member of the JWH Board of Directors. He is also a director of JWH Investment Management, Inc.
Mr. Twist joined JWH as internal projects manager in September 1991 and has been a director since August 1993. His responsibilities include assisting with internal projects.
Mr. Julius A. Staniewicz is a vice president of product development and senior strategist and a member of the JWH Investment Policy
Committee. Since joining JWH in March of 1992. Mr. Staniewicz has held positions of increasing responsibility at the firm. These include long-term strategic planning in the areas of
trading and investment strategies and business development. Mr. Staniewicz received a B.A. in Economics from Cornell University.
The
additional principals of JWH have the following titles: Mr. Andrew D. Willard, vice president, information technology; Mr. Paul D. Braica, vice
president, finance; Mr. Ted A. Parkhill, vice president,
marketing; Mr. William S. Dinon, vice president, sales and manager of retail distribution; Ms. Wendy B.
Goodyear, vice president, investor services; and Mr. Kenneth S. Webster, vice president, investment support.
Performance of the JWH Programs
General
The composite capsule performance of all accounts managed by JWH pursuant to the trading programs used for the Trust is presented below. All performance is
current as of October 31, 2002.
Monthly
rates of return from inception of client trading through October 31, 2002 are also presented below for the programs used for the Trust. Descriptions of these programs are
set forth on pages 5 and 6. The line appearing in these performance tables between 1997 and 1996 separates the CFTC required performance period for the past five years and year to date from the
performance record of the investment programs prior to that period.
The
Trust may use any of JWH's active programs in the future subject to JWH's agreement.
From the inception of trading of the JWH programs, the greatest cumulative percentage decline in daily net asset value experienced in any single program was
nearly 60% on a composite basis, and certain individual accounts included in such program experienced even greater declines. Certain JWH accounts have lost 10% or more in a single trading day.
Prospective investors 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.
45
THE JWH PROGRAMS USED BY THE TRUST
CAPSULE PERFORMANCE AND
ANNUAL AND MONTHLY RATES OF RETURN
FINANCIAL AND METALS PORTFOLIO
October 1984 through October 2002
Inception of Client Account Trading by JWH: October 1982
Inception of Client Account Trading in Program:
October 1984
Assets under Management in all Programs on October 31, 2002: $1.3 billion
Assets under Management in the Program on October 31, 2002: $271.5 million
Number of Open Accounts: 17
Worst Monthly Decline on an Individual Account Basis: (18.5)% (11/01)
Worst Peak-to-Valley Decline on an Individual Account Basis: (47.9)% (10/98-9/00)
2002 Compound Annual Rate of Return: 40.7% (10 months)
2001 Compound Annual Rate of Return:
7.1%
2000 Compound Annual Rate of Return: 13.0%
1999 Compound Annual Rate of Return:
(18.7)%
1998 Compound Annual Rate of Return: 7.2%
1997 Compound Annual Rate of Return: 15.2%
Average Compounded Annualized Rate of Return from January 1997 through October 31, 2002:
9.7%
Average Compounded Annualized Rate of Return from inception in October 1984 through October 31, 2002: 30.3%
|
|
Annual and Monthly Rates of Return (%)
|
|
Year
|
|
January
|
|
February
|
|
March
|
|
April
|
|
May
|
|
June
|
|
July
|
|
August
|
|
September
|
|
October
|
|
November
|
|
December
|
|
Compound Annual ROR
|
|
2002 |
|
(0.8 |
) |
(6.0 |
) |
(5.5 |
) |
(1.0 |
) |
11.0 |
|
28.3 |
|
11.2 |
|
3.6 |
|
7.4 |
|
(8.5 |
) |
|
|
|
|
40.7
(10 months |
) |
2001 |
|
3.3 |
|
2.5 |
|
12.8 |
|
(8.3 |
) |
1.0 |
|
(4.1 |
) |
(4.4 |
) |
8.5 |
|
5.4 |
|
4.6 |
|
(17.8 |
) |
7.4 |
|
7.1 |
|
2000 |
|
(3.6 |
) |
(6.2 |
) |
(2.3 |
) |
2.5 |
|
(2.1 |
) |
(9.0 |
) |
(1.7 |
) |
(0.4 |
) |
(6.2 |
) |
9.4 |
|
13.3 |
|
23.0 |
|
13.0 |
|
1999 |
|
(4.8 |
) |
0.9 |
|
(2.6 |
) |
1.6 |
|
5.9 |
|
6.1 |
|
(2.3 |
) |
(3.1 |
) |
(7.0 |
) |
(8.1 |
) |
(3.2 |
) |
(2.8 |
) |
(18.7 |
) |
1998 |
|
(3.5 |
) |
(4.0 |
) |
(1.6 |
) |
(7.9 |
) |
3.2 |
|
(4.8 |
) |
(0.9 |
) |
17.5 |
|
15.3 |
|
(3.8 |
) |
(7.5 |
) |
8.9 |
|
7.2 |
|
1997 |
|
4.4 |
|
(2.2 |
) |
(0.7 |
) |
(2.9 |
) |
(8.3 |
) |
4.1 |
|
15.8 |
|
(3.7 |
) |
2.2 |
|
2.0 |
|
2.5 |
|
2.9 |
|
15.2 |
|
1996 |
|
6.0 |
|
(5.5 |
) |
0.7 |
|
2.3 |
|
(1.7 |
) |
2.2 |
|
(1.1 |
) |
(0.8 |
) |
3.2 |
|
14.3 |
|
10.9 |
|
(2.6 |
) |
29.7 |
|
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 |
|
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 |
) |
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 |
|
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 |
) |
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 |
|
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 |
|
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 |
|
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 |
|
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 |
* |
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 |
|
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 |
|
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 |
) |
- *
- The
timing of additions and withdrawals materially inflated the 1987 rate of return. The three accounts that were open for the entire year of 1987 achieved rates of return of 138%, 163%
and 259%.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
46
THE JWH PROGRAMS USED BY THE TRUST
CAPSULE PERFORMANCE AND
ANNUAL AND MONTHLY RATES OF RETURN
G-7 CURRENCY PORTFOLIO
February 1991 through October 2002
Inception of Client Account Trading by JWH: October 1982
Inception of Client Account Trading in Program:
February 1991
Assets under Management in all Programs on October 31, 2002: $1.3 billion
Assets under Management in the Program on
October 31, 2002: $24.9 million
Number of Open Accounts: 3
Worst Monthly Decline on an Individual Account
Basis: (12.2)% (3/02)
Worst Peak-to-Valley Decline on an Individual Account Basis: (29.3)% (6/01 - 3/02)
2002 Compound Annual Rate of Return: 4.2% (10 months)
2001 Compound Annual Rate of Return: 0.2%
2000 Compound Annual Rate of Return: 8.1%
1999 Compound Annual Rate of Return: 20.7%
1998 Compound Annual Rate of Return: (4.8)%
1997 Compound
Annual Rate of Return: 21.0%
Average Compounded Annualized Rate of Return from January 1997 through October 31, 2002: 8.0%
Average Compounded Annualized Rate of Return from inception in February 1991 through October 31, 2002: 11.5%
|
|
Annual and Monthly Rates of Return (%)
|
|
Year
|
|
January
|
|
February
|
|
March
|
|
April
|
|
May
|
|
June
|
|
July
|
|
August
|
|
September
|
|
October
|
|
November
|
|
December
|
|
Compound Annual
ROR
|
|
2002 |
|
(1.6 |
) |
(3.9 |
) |
(11.8 |
) |
4.4 |
|
12.9 |
|
22.9 |
|
(2.5 |
) |
(7.5 |
) |
(2.0 |
) |
(2.2 |
) |
|
|
|
|
4.2
(10 months |
) |
2001 |
|
1.4 |
|
(3.1 |
) |
9.5 |
|
(2.8 |
) |
9.5 |
|
(3.7 |
) |
(6.2 |
) |
3.0 |
|
(4.8 |
) |
(4.8 |
) |
(8.2 |
) |
13.1 |
|
0.2 |
|
2000 |
|
(1.4 |
) |
(1.1 |
) |
(2.8 |
) |
8.2 |
|
(6.2 |
) |
(3.1 |
) |
(1.4 |
) |
(1.3 |
) |
(2.6 |
) |
4.7 |
|
(4.5 |
) |
22.4 |
|
8.1 |
|
1999 |
|
(2.2 |
) |
3.3 |
|
5.9 |
|
5.0 |
|
(1.4 |
) |
(0.3 |
) |
(5.6 |
) |
4.2 |
|
1.4 |
|
(0.1 |
) |
9.1 |
|
0.5 |
|
20.7 |
|
1998 |
|
(4.1 |
) |
(2.6 |
) |
4.7 |
|
(1.9 |
) |
6.6 |
|
(2.8 |
) |
0.4 |
|
(2.5 |
) |
2.0 |
|
7.4 |
|
(9.1 |
) |
(1.7 |
) |
(4.8 |
) |
1997 |
|
2.5 |
|
3.9 |
|
0.4 |
|
3.1 |
|
(3.3 |
) |
5.7 |
|
4.1 |
|
(3.5 |
) |
(1.2 |
) |
1.2 |
|
6.0 |
|
0.9 |
|
21.0 |
|
1996 |
|
2.9 |
|
(4.2 |
) |
(0.4 |
) |
2.2 |
|
0.7 |
|
1.8 |
|
(2.7 |
) |
(4.3 |
) |
1.6 |
|
10.9 |
|
4.1 |
|
1.8 |
|
14.5 |
|
1995 |
|
(3.0 |
) |
9.6 |
|
21.2 |
|
2.2 |
|
(4.3 |
) |
(0.2 |
) |
(1.8 |
) |
5.3 |
|
1.8 |
|
2.0 |
|
(1.3 |
) |
(0.8 |
) |
32.2 |
|
1994 |
|
(1.3 |
) |
(1.7 |
) |
0.9 |
|
(1.3 |
) |
(1.0 |
) |
7.9 |
|
(3.5 |
) |
(0.3 |
) |
2.9 |
|
4.1 |
|
(7.2 |
) |
(3.6 |
) |
(4.9 |
) |
1993 |
|
(4.4 |
) |
7.9 |
|
(0.3 |
) |
(1.8 |
) |
(1.0 |
) |
4.6 |
|
2.6 |
|
(5.0 |
) |
(1.8 |
) |
(5.4 |
) |
(0.6 |
) |
(0.5 |
) |
(6.3 |
) |
1992 |
|
(10.7 |
) |
(1.4 |
) |
(0.1 |
) |
(2.6 |
) |
1.8 |
|
10.0 |
|
5.8 |
|
10.9 |
|
1.6 |
|
2.3 |
|
(0.3 |
) |
(1.8 |
) |
14.6 |
|
1991 |
|
N/A |
|
(1.8 |
) |
19.6 |
|
0.8 |
|
3.5 |
|
7.8 |
|
(2.9 |
) |
(4.1 |
) |
2.1 |
|
0.5 |
|
1.7 |
|
15.7 |
|
48.5
(11 months |
) |
47
THE JWH PROGRAMS USED BY THE TRUST
CAPSULE PERFORMANCE AND
ANNUAL AND MONTHLY RATES OF RETURN
JWH GLOBALANALYTICS® FAMILY OF PROGRAMS
June 1997 through October 2002
The performance of JWH GlobalAnalytics® Family of Programs is presented in three components: (1) JWH GlobalAnalytics® Family of
Programs Composite Performance Record; (2) JWH GlobalAnalytics® Family of Programs Exclusive Fund Accounts Composite Performance Record; and (3) JWH
GlobalAnalytics® 99. A portion of component (1) and all of component (2) relate to the same two accounts. These two accounts were subject to an agreement with one client
operating two funds. Between May 8, 1998 and September 18, 1998, the position size in relation to account equity was increased for these two accounts. As a result, the performance of
these two accounts has been presented separately for the periods June 1997 through May 7, 1998 and from May 8, 1998 through December 1999. Beginning in January 2000,
the Trust allocated assets to the JWH GlobalAnalytics® Family of Programs and, since then, the Trust's account has been combined in the Composite Performance Record shown in component (1).
In
March 1999, an additional account began trading pursuant to the JWH GlobalAnalytics® Family of Programs. This account is referred to as JWH
GlobalAnalytics® 99. Due to the size of the account, it may have different results than other accounts using this program. Therefore, performance for this account is presented separately
through September 2000. As of October 2000, the initial account increased in size to a level sufficient to trade the JWH GlobalAnalytics® Family of Programs. A new account
was added to JWH GlobalAnalytics® 99 on September 27, 2001.
JWH GlobalAnalytics® Family of Programs Composite Performance Record
(June 1997 through October 2002)
Inception of Client Account Trading by JWH: October 1982
Inception of Client Account Trading in Program: June 1997
Assets under Management in all Programs on October 31, 2002: $1.3 billion
Assets under Management in the Composite Performance Record Accounts on October 31, 2002: $39.9 million
Number of Open Accounts:
2
Worst Monthly Decline on an Individual Account Basis: (10.5)% (11/01)
Worst Peak-to-Valley Decline on an Individual
Account Basis: (20.5)% (4/01-4/02)
2002 Compound Annual Rate of Return: 22.0% (10 months)
2001 Compound Annual
Rate of Return: (3.5)%
2000 Compound Annual Rate of Return: 22.7%
1999 Compound Annual Rate of Return:
N/A
1998 Compound Annual Rate of Return: (3.6)% (5 months)
1997 Compound Annual Rate of Return: 17.6% (7 months)
Average Compounded Annualized Rate of Return from inception in June 1997 through
October 31, 2002: N/A
|
|
Annual and Monthly Rates of Return (%)
|
|
Year
|
|
January
|
|
February
|
|
March
|
|
April
|
|
May
|
|
June
|
|
July
|
|
August
|
|
September
|
|
October
|
|
November
|
|
December
|
|
Compound Annual ROR
|
|
2002 |
|
(0.9 |
) |
(5.6 |
) |
0.4 |
|
(2.6 |
) |
2.6 |
|
14.9 |
|
8.3 |
|
5.6 |
|
6.7 |
|
(7.3 |
) |
|
|
|
|
22.0
(10 months |
) |
2001 |
|
0.4 |
|
1.0 |
|
6.6 |
|
(8.2 |
) |
(0.8 |
) |
(2.4 |
) |
(1.1 |
) |
1.1 |
|
2.4 |
|
6.1 |
|
(10.4 |
) |
3.1 |
|
(3.5 |
) |
2000 |
|
0.3 |
|
(0.1 |
) |
(4.9 |
) |
(0.8 |
) |
6.8 |
|
(1.2 |
) |
(2.3 |
) |
6.2 |
|
(2.6 |
) |
5.3 |
|
5.3 |
|
9.7 |
|
22.7 |
|
1999 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
1998 |
|
(1.8 |
) |
(1.1 |
) |
4.7 |
|
(4.9 |
) |
(0.3 |
) |
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
(3.6
(5 months |
) ) |
1997 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
3.2 |
|
8.4 |
|
(4.4 |
) |
3.4 |
|
0.7 |
|
0.5 |
|
5.0 |
|
17.6
(7 months |
) |
48
THE JWH PROGRAMS USED BY THE TRUST
CAPSULE PERFORMANCE AND
ANNUAL AND MONTHLY RATES OF RETURN
JWH GlobalAnalytics® Family of Programs Exclusive Fund Accounts Composite Performance Record
(May 8, 1998 to December 31, 1999)
Inception of Client Account Trading by JWH: October 1982
Inception of Client Account Trading in Program:
June 1997
Assets under Management in all Programs on October 31, 2002: $1.3 billion
Assets under Management in the Exclusive Fund
Accounts on December 31, 1999: $95.0 million
Number of Open Accounts on December 31, 1999: 2
Worst
Monthly Decline on an Individual Account Basis: (9.2)% (10/99)
Worst Peak-to-Valley Decline on an Individual Account Basis: (13.1)%
(7/99 - 10/99)
1999 Compound Annual Rate of Return: (1.3)%
1998 Compound Annual Rate of Return: 25.5% (8 months)
1997 Compound Annual Rate of Return: N/A
Average Compounded Annualized Rate of Return from May 8, 1998 through December 1999:
13.7%
|
|
Annual and Monthly Rates of Return (%)
|
|
Year
|
|
January
|
|
February
|
|
March
|
|
April
|
|
May
|
|
June
|
|
July
|
|
August
|
|
September
|
|
October
|
|
November
|
|
December
|
|
Compound Annual ROR
|
|
1999 |
|
(1.9 |
) |
4.0 |
|
(3.9 |
) |
3.7 |
|
2.6 |
|
3.0 |
|
(2.6 |
) |
(0.7 |
) |
(1.0 |
) |
(9.2 |
) |
3.5 |
|
2.0 |
|
(1.3 |
) |
1998 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
6.2 |
|
(1.9 |
) |
0.6 |
|
12.4 |
|
8.2 |
|
(0.3 |
) |
(5.6 |
) |
4.8 |
|
25.5
(8 months |
) |
49
THE JWH PROGRAMS USED BY THE TRUST
CAPSULE PERFORMANCE AND
ANNUAL AND MONTHLY RATES OF RETURN
JWH GlobalAnalytics® 99
(March 1999 through October 2002)
Inception of Client Account Trading by JWH: October 1982
Inception of Client Account Trading in Program: March 1999
Assets under Management in all Programs on October 31, 2002: $1.3 billion
Assets under Management in the JWH
GlobalAnalytics®
99 Account on October 31, 2002: $14 million
Number of Open Accounts:
1
Worst Monthly Decline on an Individual Account Basis: (9.6)% (11/01)
Worst Peak-to-Valley Decline on an Individual
Account Basis: (16.3)% (7/99 - 4/00)
2002 Compound Annual Rate of Return: 20.3% (10 months)
2001 Compound Annual Rate of Return: (2.8)%
(9/27/01 - 12/31/01)
2000 Compound Annual Rate of Return: (2.9)% (9 months)
1999 Compound Annual Rate of Return: (7.5)% (10 months)
Average Compounded Annualized Rate of Return from March 1999 through October 31, 2002: N/A
|
|
Annual and Monthly Rates of Return (%)
|
|
Year
|
|
January
|
|
February
|
|
March
|
|
April
|
|
May
|
|
June
|
|
July
|
|
August
|
|
September
|
|
October
|
|
November
|
|
December
|
|
Compound Annual ROR
|
|
2002 |
|
(0.8 |
) |
(5.9 |
) |
0.6 |
|
(2.5 |
) |
2.8 |
|
13.1 |
|
7.4 |
|
5.9 |
|
6.8 |
|
(7.1 |
) |
|
|
|
|
20.3
(10 months |
) |
2001 |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
(0.3 |
) |
4.9 |
|
(9.6 |
) |
2.9 |
|
(2.8
(9/27 - 12/31 |
) ) |
2000 |
|
(0.5 |
) |
(0.1 |
) |
(5.2 |
) |
(0.8 |
) |
6.5 |
|
(1.6 |
) |
(2.6 |
) |
5.4 |
|
(3.4 |
) |
N/A |
|
N/A |
|
N/A |
|
(2.9
(9 months |
) ) |
1999 |
|
N/A |
|
N/A |
|
(4.7 |
) |
2.9 |
|
2.3 |
|
2.9 |
|
(3.2 |
) |
(1.5 |
) |
(1.7 |
) |
(9.4 |
) |
3.7 |
|
1.7 |
|
(7.5
(10 months |
) ) |
50
Notes on Performance Records
An investor should note that the composite capsule performance presentations include individual accounts which, even though traded according to the same
investment program, have materially different rates of return. The reasons for this are numerous material differences among accounts: (a) procedures governing timing for the commencement of
trading and means of moving toward full portfolio commitment of new accounts; (b) the period during which accounts are active; (c) client trading restrictions, including futures versus
forward contracts and contract months; (d) trading size to equity ratio resulting from JWH procedures for the commencement of trading and full portfolio commitment of new accounts and new
capital; (e) 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;
(f) the amount of interest income earned by an account, which will depend 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 U.S. Treasury bills; (g) the amount of management and incentive fees paid to JWH and the amount of brokerage commissions paid, which will vary and will
depend on the commissions negotiated by the client with the broker; (h) the timing of orders to open or close positions; (i) the market conditions, which in part determine the quality of
trade executions; (j) variations in fill prices; and (k) timing of additions and withdrawals. Notwithstanding these material differences among accounts, the composite remains a valid
representation of the accounts included therein.
Composite
performance presentation is only allowed for accounts which are not materially different. For the purpose of determining whether material differences exist among accounts
traded pursuant to the same trading program, the gross trading performance of each JWH investment program and each individual JWH account within the relevant program is reviewed against the following
parameters established by interpretations of the Division of Trading and Markets of the CFTC to determine whether the differences are material: (i) if the arithmetic average of two percentages
is greater than ten percentage points, the difference between the two is less than 10% of their average; (ii) if the arithmetic average of the two percentages is greater than five percentage
points, but less than ten percentage points, the difference between the two is 1.5 percentage points or less; and (iii) if the arithmetic average of the two percentages is less than five
percentage points, and the difference between the two is one percentage point or less. If one of the parameters (i) - (iii) is satisfied in the review, then the results within the
designated range are deemed "materially the same" or "not materially different." The parameters (i) - (iii) determine if differences between accounts are material. The gross
trading performance of each JWH investment program and each individual JWH account within the relevant program not satisfying the above parameters (i) - (iii) is then reviewed to
determine whether any material differences detected could produce misleading composite performance results. With the exception of accounts that were established at levels below JWH's current minimum
account size, JWH's policy is to provide separate performance capsules when an account is consistently performing differently on a gross trading basis than the other JWH accounts traded pursuant to
the same trading program and the continued inclusion of that account in the composite would create a distortion in the composite rate of return.
The
composite rates of return indicated should not be taken as representative of any rate of return actually achieved by any single account represented in the records. Investors are
further cautioned that the data set forth in the performance capsule records is not indicative of any results which may be attained by JWH in the future since past performance is not necessarily
indicative of future results.
During
the periods covered by the preceding capsule performance records, and particularly since 1989, JWH has increased and decreased position size in relation to account equity in
certain markets and entire programs, and also altered the composition of the markets and contracts for certain programs. In general since 1992, JWH began implementing certain position size adjustments
that were of a more permanent nature. While historical returns represent actual performance achieved, you should be aware that the position size relative to account equity
51
utilized
currently or in the future may be significantly different from that used during previous time periods. You should be aware of the following position size adjustments relative to account
equity:
Financial
and Metals Portfolioreduced 50% commencing in August 1992
G-7
Currency Portfolioincreased 50% commencing in May 1998.
Prior
to December 1991, capsule performance records are presented on a cash basis except as otherwise stated in the notes to the records. 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 are immaterial to
the overall performance presented. With the change to the accrual basis of accounting for incentive fees in December 1991, the net effect on monthly net performance and the rate of return in
the capsule performance records of continuing to record interest income, management fees, commissions and other expenses on a cash basis is materially equivalent to the full accrual basis. JWH began
reflecting all items of net performance on an accrual basis for the G-7 Currency Portfolio in July 1992, and at the inception of client trading for the JWH
GlobalAnalytics® Family of Programs. In August 1998, JWH made an adjustment to the accounting method employed for every investment program not already utilizing the full accrual
basis of accounting. This adjustment moved all JWH investment programs to the full accrual basis beginning on September 1, 1998.
The
calculation of management and incentive fees is subject to variation due to the agreed upon definitions contained in each account's advisory agreement. Management fees range
historically from 0% to 6% of assets under management and incentive fees range from 0% to 25% of trading profits. From time to time, such variations in advisory fees may have a material impact on the
performance of an account.
Notes to JWH Programs' Capsule Performance Records
Number of open accounts is the number of accounts directed by JWH pursuant to the investment program shown as of October 31, 2002.
Assets
under management in a program is the aggregate amount of total equity, excluding "notional" equity under management, in the investment program shown as of October 31, 2002.
Worst
monthly decline on an individual account basis within the past five years is the largest monthly loss experienced by any single account in the relevant investment program in any
calendar month covered by the capsule. "Loss" for
these purposes is calculated on the basis of the loss experienced by the individual account, expressed as a percentage of total equity (including "notional" equity) in the account. Worst monthly
decline information includes the month and year of such decline.
Worst
peak-to-valley decline on an individual account basis is the largest percentage decline by any single account in the relevant investment program (after
eliminating the effect of additions and withdrawals) during the period covered by the capsule from any month-end net asset value, without such month-end net asset value being
equalled or exceeded as of a subsequent month-end by the individual account, expressed as a percentage of the total equity (including "notional" equity) in the account. The worst
peak-to-valley decline since inception is the worst peak-to-valley decline by the program as a composite.
Compound
Annual Rate of Return is calculated by compounding the monthly rates of return over the number of periods in a given year. For example, each monthly rate of return in hundredths
is added to one (1) and the result is multiplied by the previous month's compounded monthly rate of return similarly expressed. One (1) is then subtracted from the product. For periods
less than one year, the results are year to date.
Average
Compounded Annualized Rate of Return is calculated in a similar manner to Compound Annual Rate of Return, except that before
52
subtracting
one (1) from the product, the product is exponentially changed by the factor of one (1) divided by the number of years in the program's performance record, then one
(1) is subtracted.
Monthly
Rates of Return are daily compounded monthly rates of return in the investment program. The daily compounded monthly rate of return is calculated by compounding the daily rates
of return over the number of days in the month. For example, each of the daily rates of return in hundredths is added to one (1) and the result is multiplied by the previous day's daily rate of
return similarly expressed. One (1) is then subtracted from the product. The daily rates of return are calculated by dividing the day's net performance by the sum of the beginning equity, plus
additions minus withdrawals for the day. Prior to September 1998, Monthly Rates of Return were calculated by dividing net performance by the sum of the beginning equity, plus additions minus
withdrawals in the investment program for the month. For such purposes all additions and withdrawals were treated as if they had been made on the first day of the month, even if, in fact, they
occurred later. From December 1991 through August 1998, if additions and withdrawals were material to a program's performance, they were time weighted. If time weighting was materially
misleading, then the only accounts traded method was utilized. As of September 1998, time weighting is no longer relevant as the monthly rates of return are daily compounded monthly rates of
return.
Proprietary
capital is included in the rates of return for the Financial and Metals Portfolio for certain periods. The absence of management and incentive fees as well as reduced
commissions during these periods may have had a material effect on the rates of return. This potential material effect occurred from inception of the program through July 1987 for the Financial
and Metals Portfolio. In addition, during the period May 1991 through August 1995, the Financial and Metals Portfolio included two other proprietary accounts, which had no material
impact on the rates of return presented.
For
periods other than those described above, proprietary capital is included in the rates of return for the G-7 Currency Portfolio pursuant to an investment in a fund. These
proprietary accounts were traded in exactly the same manner as client funds, and were subject to all of the same fees and expenses charged to a client investment in the fund. Therefore, there is no
material impact on the rates of return presented.
Additional Note for the Financial and Metals Portfolio
In May 1992, position sizes were reduced by 50% for 35% of the assets in the Financial and Metals Portfolio at the request of a client. This reduction in
position size materially affected the rates of return in some JWH accounts; the 1992 annual rate of return for the relevant accounts was negative 24.3%. The 1992 annual rate of return for the
Financial and Metals Portfolio was negative 10.9%. If these accounts had been excluded from the performance record, the 1992 annual rate of return would have been negative 3.9%. The effect of this
reduction in position size was eliminated in September 1992 when all accounts in this program underwent a reduction in position size.
Interest Income
The Trust's assets are generally deposited with CIS and CISFS.
On
the fifth business day of each month, CIS and CISFS 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.
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 credit the Trust with interest on the fifth 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). With respect to currencies required
for margin on markets not currently traded by JWH, CIS and CISFS will credit the Trust with interest at the rates paid by,
53
respectively,
CIS and CISFS to other accounts similar in size and character to that of the Trust.
The
economic benefit from possession of the Trust's assets in excess of the interest credited by CIS and CISFS to the Trust is retained by CIS and CISFS, respectively.
To
the extent that the Trust participates in the spot and forward currency markets, the Trust is required to deposit margin with CISFS. CIS satisfies 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 are not held by CISFS as customer
segregated funds under the CEA and the rules of the CFTC but are included in determining the interest to be credited to the Trust as described above.
The
Trust's assets are 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 are 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 are held in unregulated accounts. In general, approximately 70% to 90% of the Trust's assets are held in customer segregated funds accounts or with a
Custodian, approximately 5% to 15% in foreign futures and options secured amount accounts and approximately 3% to 20% 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.
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. There can be no assurance that, if the
services of one or more cash managers are used, the Trust will avoid loss of principal with respect to Trust assets placed with such
managers.
54
Charges
Charges Paid by the Trust
The Trust is subject to the following charges and fees.
Recipient
|
|
Nature of Payment
|
|
Amount of Payment
|
Third Parties |
|
Ongoing offering costs |
|
As incurred, subject to a ceiling of 0.5% of the Trust's average month-end Net Assets in each fiscal year. Year-to-date through November 2002, ongoing offering costs equalled $237,308. During 2001, ongoing offering costs
equalled $248,048. |
CIS |
|
Brokerage Fee |
|
6.5% annually (or approximately 0.542% per month) of the Trust's month-end assets (after deduction of the Management Fee payable to JWH and before recognizing the purchases and redemptions for the month) is paid to CIS. Such Brokerage Fee covers all
brokerage, exchange, clearing and NFA fees incurred in the Trust's trading including brokerage fees payable to CISFS on spot and forward currency trading. Year-to-date through November 2002, Brokerage Fees equalled $3,126,437. During 2001, Brokerage
Fees equalled $3,248,165.
Certain large investors are eligible to be charged the Special Brokerage Fee Rate as described under "ChargesBrokerage FeeSpecial Brokerage Fee Rate." |
CIS and CISFS |
|
Interest income earned above amount credited to the Trust, if any |
|
CIS and CISFS credit the Trust with interest on 100% of the Trust's average daily U.S. dollar balances on deposit with CIS or CISFS during each month at the average 91-day Treasury bill rate and at the applicable rates (which may be zero in some
cases) in respect of non-U.S. dollar deposits. The economic benefit from the possession of the Trust's assets in excess of the interest credited by CIS and CISFS to the Trust will be retained by CIS and CISFS, respectively. |
Third Parties |
|
Administrative expenses |
|
As incurred, currently estimated to be approximately $60,000 annually. Year-to-date through November 2002, administrative expenses equalled $54,882. During 2001, administrative expenses equalled $64,643. |
|
|
|
|
|
|
|
|
|
|
55
JWH |
|
Management Fee |
|
2% annually (or approximately 0.166% 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) and before recognizing the purchases and redemptions for the
month; payable monthly. Year-to-date through November 2002, Management Fees equalled $963,515. During 2001, Management Fees equalled $1,001,094. |
JWH |
|
Incentive Fee |
|
As of each calendar quarter-end, 20% of any New Trading Profits for such quarter will be paid to JWH. Trading Profits for any period equal the sum of (i) the net of any profits and losses realized on all trades closed out during a quarter, (ii) the
net of any unrealized profits and losses on open positions as of the end of such quarter less the net of any unrealized profits and losses on open positions as of the end of the immediately preceding quarter, minus (iii) the Brokerage Fee at the
annual rate of 1.25% (rather than 6.5% annual rate) of the Trust's month-end assets and the Management Fee.
Trading Profits do not include interest income.
Trading Profits are calculated on the basis of the overall performance of the Trust, not the performance of each trading program considered individually.
New Trading Profits for any quarter are the amount of cumulative calendar quarter-end Trading Profits in excess of the highest level of such cumulative Trading Profits as of any previous calendar quarter-end.
Year-to-date through November 2002, Incentive Fees equalled $2,741,521. During 2001, Incentive Fees were $990,171. |
Third Parties |
|
Reimbursement of delivery, insurance, storage and any other extraordinary charges; taxes (if any) |
|
Actual payments to third parties; not subject to estimate. |
The
above fees are the complete compensation that will be received by CIS or its affiliates from the Trust. This excludes redemption fees which will be charged to some Unitholders if
they redeem on or before the eleventh month-end of ownership.
56
Brokerage Commissions; Administrative Fees
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 does
not pay commodity brokerage commissions on a per-trade basis but rather pays monthly flat-rate Brokerage Fees at the annual rate of 6.5% (or a monthly rate of approximately
0.542%) of the Trust's average month-end assets after deduction of the Management Fee but before inclusion of purchases and redemptions for the month. CIS receives such Brokerage Fee,
irrespective of the number of trades executed on the Trust's behalf.
Special Brokerage Fee Rate. A Unitholder who purchases at least $5,000,000 of Units as of any month-end (an
"Eligible Unitholder") will be charged Brokerage Fees at the flat rate of 5% per annum (or 0.417% per month; the "Special Brokerage Fee Rate"). As of each month-end that a Unitholder holds
Units with an aggregate issue price of at least $5,000,000, such Unitholder will remain an Eligible Unitholder regardless of the aggregate Net Asset Value of such Units.
An
investor who makes an additional 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 additional 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 November 30, 2002 ("Initial Purchase Date") and an incremental investment of $3,000,000 as
of May 31, 2003 ("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 December 31, 2003 with respect to Units acquired as of the Initial Purchase Date. In determining the Brokerage Fees due on such an investor's
Units, Units when redeemed will be treated on a "first-in, first-out" basis.
The
Special Brokerage Fee reduction is effected while maintaining a uniform Net Asset Value per Unit by issuing additional Units to Eligible Unitholders.
The Trust's Brokerage Fees constitute a "wrap fee," which cover the CIS Group's costs and expenses, not just the cost of brokerage
executions.
The Brokerage Fees may not be increased above the current level without the unanimous consent of all Unitholders.
JWH's Management Fees
The Trust pays monthly Management Fees to JWH at a rate of 0.166% (a 2% annual rate) of the month-end assets of the Trust, after reduction for a 1.25%
(rather 6.5% per annum) portion of the Brokerage Fee charged, but before reduction for any Incentive Fee or other costs and before inclusion of purchases and redemptions for the month.
Incentive Fees
Method of Calculating
The Trust pays to JWH an Incentive Fee equal to 20% of any New Trading Profits as of the end of each calendar quarter. New Trading Profits are any cumulative
Trading Profit in excess of the highest levelthe "High Water Mark"of cumulative Trading Profits as of any previous calendar quarter-end.
Trading
Profits (i) include realized and unrealized profits and losses, (ii) exclude interest income and (iii) are reduced by Brokerage Fees of 1.25% (not 6.5%) of
month-end assets, the Management Fee and by no other costs.
Accrued
Incentive Fees on Units when redeemed are paid to JWH. Any shortfall between cumulative Trading Profits and the "High Water Mark" in cumulative Trading Profits is proportionately
reduced when Units are redeemed.
Trading
Profits are not reduced by redemption charges.
57
For
example, assume that as of January 1, 2003, the Trust is at a "High Water Mark" in cumulative Trading Profits. If Trading Profits for such month equalled $500,000, all of such
Trading Profits would be New Trading Profits, resulting in an accrued $100,000 Incentive Fee. Assume also that by the end of the next month, losses, the 1.25% Brokerage Fee and the Management Fee have
reduced the $500,000 New Trading Profits to a loss of ($180,000). If the Trust then withdrew 50% of its assets, this ($180,000) loss carryforward would be reduced by 50% to ($90,000) for Incentive Fee
calculation purposes. If during the following month Trading Profits equalled $200,000, New Trading Profits of $110,000 would be accrued as of the end of such quarter, and JWH would be entitled to an
Incentive Fee of $22,000 for the quarter.
Paid Equally by All Units
New Trading Profits may be generated even though the Net Asset Value per Unit has declined below the purchase price of certain Units. Conversely, if new Units are
purchased at a Net Asset Value reduced by an accrued Incentive Fee which is subsequently reversed, the reversal is allocated equally among all Units, although the accrual itself was attributable only
to the previously outstanding Units.
Extraordinary Expenses
The Trust will be required to pay any extraordinary expenses, such as taxes, incurred in its operation. The Trust has had no such expenses to date, and in CISI's
experience with other managed futures funds, such expenses have been negligible. Extraordinary expenses, if any, would not reduce Trading Profits for purposes of calculating the Incentive Fees.
Fees and Expenses Paid by CIS and CISSI
Brokerage Fee for Currency and Precious Metals Trading
CIS pays CISFS, from CIS's own funds, brokerage fees on a per trade basis for the Trust's trading of spot and forward contracts on currencies.
Selling Commissions and Ongoing Compensation
CISSI is the Lead Selling Agent. At the instruction of CISSI, CIS pays the Selling Agents selling commissions of up to 4% (up to 2.5% in respect of Units sold to
Eligible Unitholders). CIS, at the instruction of CISSI, also pays eligible Selling Agents ongoing compensation of 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 2.5% per annum in respect of Units owned by Eligible Unitholders), beginning in the thirteenth month after sale. 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 AspectsSyndication Expenses."
Wholesalers
who introduce Additional Selling Agents to CISSI 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 DistributionSelling Agents."
Redemption Charges
A redemption charge of 3% of the redemption date Net Asset Value per Unit is imposed on Units redeemed on or before the end of the first eleven months after
issuance. This redemption charge is deducted from investors' redemption proceeds and paid to CIS.
Brokerage Arrangements
The Futures Broker
CIS is the Trust's Futures Broker. CIS executes and clears the Trust's futures transactions and provides other brokerage-related services. CIS is a Delaware
corporation. Its principal office is located
58
at
233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606. It has offices and affiliated offices in Chicago, New York, Kansas City and Minneapolis as well as in England, France, Switzerland and
Singapore. 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 425 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 clearinghouses 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.
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 with respect to 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 are permitted to 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 have entered into a Customer Agreement that provides that, for as long as the Trust maintains an account with CIS, CIS will execute and clear trades for the Trust upon
instruction of JWH, and will receive the monthly flat-rate Brokerage Fees. The Customer Agreement is terminable on sixty days' notice by either party. If for any reason 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 record keeping, 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.
59
Trust
assets are deposited with CIS in its capacity as the Trust's Futures Broker. CIS credits interest monthly to the Trust's account on substantially all of the Trust's average daily
balances on deposit at CIS, as described under "Interest Income." CIS retains any economic benefit derived from possession of the Trust's assets in excess of the amount credited to the Trust's
account.
The Foreign Currency Broker
CISFS acts 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. Written
redemption requests may be submitted to CISI or to a redeeming Unitholder's financial advisor but in either case must be received by CISI no later than five business days prior to
month-end (including the last business day of the month) to effect redemption as of such month-end. A form of Request for Redemption is attached to the Subscription Agreement
and Power of Attorney as an Annex.
Redemption
proceeds will generally be paid within ten business days after the month-end of redemption, either directly to the redeeming Unitholder or to the Unitholder's
customer securities account as directed by the Unitholder. 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.
A
Unit which is redeemed at or prior to the end of the eleventh full month after its issuance will be assessed a redemption charge of 3% of the Net Asset Value per Unit as of the date of
redemption. 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 previous highest month-end Net Asset Value per Unit, 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 the suspension of trading declare a Special Redemption Date by notice to Unitholders and otherwise in accordance with the
Declaration and Agreement 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.
Notices of redemption are irrevocable once submitted. The Net Asset Value per Unit as of the
60
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.
Futures
or option contracts traded on a United States commodity exchange are 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.
Conflicts of Interest
General
Neither CISI nor JWH has established any formal procedures to resolve the following conflicts of interest. Consequently, there is no independent control on how
CISI or JWH resolves these conflicts which can be relied upon by investors as ensuring that the Trust is treated equitably with other CISI or JWH clients.
Because
no formal procedures are in place for resolving conflicts, they may be resolved by CISI and/or JWH in a manner which causes the Trust losses. The value of Unitholders' investment
may be diminished by actions or omissions which independent third parties could have prevented or corrected.
Although
the following conflicts of interest are present in the operation of the Trust, CISI does not believe that they are likely to have a material adverse effect on its performance.
This belief is based on a number of factors, including the following.
- (i)
- JWH
trades all similarly situated CIS accounts in parallel, placing bulk orders which are allocated among the JWH accounts pursuant to
pre-established procedures. Consequently, JWH has little opportunity to prefer another JWH client over the Trust.
- (ii)
- CIS
simply receives and executes JWH's bulk orders based on pre-established procedures. CIS has no ability in allocating positions to favor
one account over another.
- (iii)
- JWH
charges similar accounts the same fees.
- (iv)
- CISI,
as a fiduciary, is prohibited from benefiting itself at the expense of the Trust.
In
CISI's view, the most important conflict of interest relating to the Trust is that the business terms applicable to the CIS Group's dealings with the Trust were not negotiated when
they were initially established. These business terms are described in detail in this prospectus in order to give prospective investors ample opportunity to accept or reject such terms. However, it
may be difficult for investors to assess, for example, the extent of the adverse impact which the high level of the Trust's Brokerage Fees has on its long-term prospects for profitability.
CISI
CISI organized and controls the Trust. CISI and its affiliates are the primary service providers to the Trust and will remain so even if using other firms might
be better for the Trust. Futures trading is highly competitive. To the extent that CIS Group
61
entities
continue to be retained by the Trust despite providing non-competitive services, the Trust is likely to be less profitable or incur greater losses.
CISI
allocates its resources among a number of different funds. CISI may have financial incentives to favor certain funds over the Trust. To the extent that CISI actually does so, the
Net Asset Value per Unit is likely to be negatively impacted.
The
business terms of the Trustother than the Management and Incentive Fees due to JWH which were negotiated between CISI and JWHwere not negotiated. CISI
unilaterally established these terms, balancing marketing and performance considerations and its interest in maximizing the revenues generated to CISI.
CISI's interest in maximizing its revenues could cause it to take actions which are detrimental to the Trust in order to increase CISI's income from the Trust or
decrease its costs in sponsoring the Trust. Also, because CISI does not have to compete with third parties to provide services to the Trust, there is no independent check on the quality of such
services. CISI may lower the quality of such services in order to maximize the net revenues which it receives from the Trust, possibly causing the Net Asset Value per Unit to
decline.
CIS; CISFS
General
CIS executes trades for different clients in the same markets at the same time. Consequently, other clients may receive better prices on the same trades than the
Trust, causing the Trust to pay higher prices for its positions.
Many
CIS clients pay lower brokerage rates than the Trust. Brokerage Fees are a major drag on the Trust's performance, and the cumulative effect of the higher rates paid by the Trust is
material.
CIS
and CISFS must allocate their resources among many different clients. They all have financial incentives to favor certain accounts over the Trust. Because of the competitive nature
of the markets in which they trade, to the extent that either CIS or CISFS prefers other clients over the Trust, the Trust is likely to be negatively impacted.
CIS and CISFS do not have to compete to provide services to the Trust; consequently, there is no independent check on the quality of their
services.
JWH
General
JWH manages many accounts other than the Trust. Consequently, JWH may devote less resources to the Trust's trading than JWH otherwise might, to the detriment of
the Trust.
Some
of JWH's principals and staff members devote a substantial portion of their business time to ventures other than managing the Trust, including ventures unrelated to futures trading.
The Trust may be at a competitive disadvantage to other accounts which are managed by advisors whose principals devote their entire attention to futures trading.
Financial Incentives to Disfavor the Trust
If the Trust has losses, JWH may have an incentive to prefer other clients because JWH could begin to receive incentive compensation from such clients without
having to earn back any losses.
Any action which JWH takes to maximize its revenues by disfavoring the Trust, either in respect of the resources devoted to its trading or the programs selected
for it, could adversely affect the Trust's performance, perhaps to a material extent.
The Selling Agents
The Selling Agents will receive substantial selling commissions on the sale of Units. Consequently, the Selling Agents have a conflict of interest in advising
their clients whether to invest in the Units.
The
Selling Agents 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
62
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.
Proprietary Trading
The CIS Group and their employees are prohibited from trading for their own accounts.
JWH
and Mr. Henry may engage in discretionary trading for their own accounts, as long as such trading does not amount to a breach of fiduciary duty. Such trading will be for
purposes of testing new investment programs and concepts, as well as for proprietary profit. Proprietary trading may involve contract markets that are not traded for client accounts. The reasons for
not trading a contract market for clients may include: the contract market does not trade reasonable volume and is not expected to grow such that JWH could trade significant size with appropriate
liquidity; the contract markets are liquid but are highly correlated or redundant to existing markets or sectors traded for clients; or the contract markets have excessively high volatility associated
with low liquidity and no historical trends. In the course of trading for their own accounts, JWH and Mr. Henry may take positions that are the same as or opposite to the Trust's positions, due
to testing a new quantitative model or investment program, an allocation system, and/or trading pursuant to individual discretionary methods. On occasion, the accounts of JWH and Mr. Henry may
receive better fills than the Trust's account. Records for these accounts will not be made available to the Trust.
Employees
and principals of JWH (other than Mr. Henry) are not permitted to trade 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., for which JWH
is the trading advisor. Records of these accounts will not be made available to the Trust.
Records
of proprietary trading will not be available for inspection by Unitholders.
Proprietary
trading by JWH or Mr. Henry could, if substantial in size and conducted in the same markets traded by the Trust, cause losses for the Trust by increasing the cost at
which it must acquire and liquidate positions. Over time, the losses resulting from such increased prices could make it difficult for the Trust to earn profits even if its trading were otherwise
successful.
Transactions Between the CIS Group and the Trust
All of the service providers to the Trust, other than JWH and the Trustee, are affiliates of CIS. CISI negotiated with JWH over the level of its Management and
Incentive Fees. However, none of the fees paid by the Trust to the CIS Group were negotiated, and they may be higher than would have been obtained in arm's-length bargaining.
The
Trust pays CIS substantial Brokerage Fees. The Trust also pays CIS interest on short-term loans extended by CIS to cover losses on foreign currency positions and permits
CIS to retain a portion of the benefit derived from possession of the Trust's assets.
Within
the CIS Group, CISI is the direct beneficiary of the revenues received by CIS from the Trust. CISI controls the management of the Trust and CISSI serves as its promoter. Although
CISI has not sold any assets, directly or indirectly, to the Trust, CISI makes substantial profits from the Trust due to the foregoing revenues.
No
loans have been, are or will be outstanding between CISI or any of its principals and the Trust.
CIS,
at the instruction of CISSI, pays substantial selling commissions (up to 4% of the subscription price of Units) and trailing commissions (up to 4% annually of the average Net Asset
Value per Unit, beginning in the thirteenth month after a Unit is sold) to the Selling Agents for distributing the Units. CIS is ultimately paid back for these expenditures from the revenues it
receives from the Trust.
63
Descriptions of the dealings between the Trust and the CIS Group are set forth under "Selected and Supplementary Financial Data," "Interest Income" and "Charges."
The Trust and the Trustee
Principal Office; Location of Records
The Trust is organized under the Delaware Statutory Trust Act. The Trust is administered by the Managing Owner, whose office is located at 233 South Wacker Drive,
Suite 2300, Chicago, Illinois 60606 (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 60606 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 Statutory Trust Act greater than those available to limited partners.
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 Statutory 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 Statutory 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 Statutory 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.
64
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.
The
Trust's Declaration and Agreement of Trust effectively gives CISI, as Managing Owner, full control over the management of the Trust. Unitholders have no voice in its operations. In
addition, CISI in its operation of the Trust is specifically authorized to engage in the transactions described herein (including those involving affiliates of CISI), and is exculpated and indemnified
by the Trust against claims sustained in connection with the Trust, provided that such claims were not the result of negligence or misconduct and that CISI determined that such conduct was in the best
interests of the Trust.
Although
Unitholders have no right to participate in the control or management of the Trust, they are entitled to: (i) vote on a variety of different matters; (ii) receive
annual audited financial statements, unaudited monthly reports and timely tax information; (iii) inspect the Trust's books and records; (iv) redeem Units; and (v) not have the
business terms of the Trust changed in a manner which increases the compensation received by CISI or its affiliates without their unanimous consent.
Unitholders'
voting rights extend to any proposed change in the Declaration and Agreement of Trust which would adversely affect them, as well as to their right to terminate the Trust's
contracts with affiliates of CISI. Unitholders also have the right to call meetings of the Trust in order to permit Unitholders to vote on any matter on which they are entitled to vote, including the
removal of CISI as Managing Owner of the Trust.
Unitholders
or their duly authorized representatives may inspect the Trust's books and records, for any purpose reasonably related to their status as Unitholders in the Trust, during
normal business hours upon reasonable written notice to the CISI. They may also obtain copies of such records upon payment of reasonable reproduction costs; provided, however, that such Unitholders
represent that the inspection and/or copies of such records will not be for commercial purposes unrelated to such Unitholders' interest in the Trust.
The
Declaration and Agreement of Trust contains restrictions on CISI's ability to raise Brokerage Fees, Administrative Fees and other revenues received by the CIS Group from the Trust,
as well as certain other limitations on the various conflicts of interest to which the CIS Group is subject in operating the Trust.
65
The
Declaration and Agreement of Trust provides for the economic and tax allocations of the Trust's profit and loss. Economic allocations are based on investors' capital accounts, and
the tax allocations generally attempt to equalize tax and capital accounts by, for example, making a priority allocation of taxable income to Unitholders who redeem at a profit.
A
Unitholder may transfer or assign his or her Units upon prior written notice to his or her financial advisor and CISI and subject to approval of the assignee, CISI will provide consent
when it is satisfied that the transfer complies with applicable laws. An assignee not admitted to the Trust as a Unitholder will have only limited rights to share the profits and capital of the Trust
and a limited redemption right.
The
Managing Owner may amend the Declaration and Agreement of Trust in any manner not adverse to the Unitholders without need of obtaining their consent. These amendments can be for
clarification of inaccuracies or
ambiguities, modifications in response to changes in tax code or regulations or any other changes CISI deems advisable so long as they do not change the basic investment policy or structure.
The
Trust has agreed to indemnify CISI, as Managing Owner, for actions taken on behalf of the Trust, provided that CISI's conduct was in the best interests of the Trust and the conduct
was not the result of negligence or misconduct. Indemnification by the Trust for alleged violation of securities laws is only available if the following conditions are satisfied:
- 1)
- a
successful adjudication on the merits of each count alleged has been obtained; or
- 2)
- such
claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or
- 3)
- a
court of competent jurisdiction approves a settlement of the claims and finds indemnification of the settlement and related costs should be made; and
- 4)
- in
the case of 3), the court has been advised of the position of the SEC and the states in which the Units were offered and sold as to indemnification for the violations.
Tax Consequences
The following constitutes the opinion of Sidley Austin Brown & Wood and summarizes the material federal income tax consequences to
United States taxpayers who are individuals.
The Trust's Tax Status
In the opinion of Sidley Austin Brown & Wood, the Trust will be classified as a partnership for federal income tax purposes. 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 Brown & Wood. As a
result, in the opinion of Sidley Austin Brown & Wood, the Trust will not be subject to tax as a corporation under the provisions applicable to "publicly-traded partnerships."
Taxation of Unitholders on Profits or Losses of the Trust
Each Unitholder must pay tax on his or her share of the Trust's income and gains. Such share must be included each year in a Unitholder's taxable income whether
or not such Unitholder has redeemed Units. In addition, a Unitholder may be subject to paying taxes on the Trust's interest income even though the Net Asset Value per Unit has decreased due to trading
losses. See "Tax on Capital Gains and Losses; Interest Income," below.
The
Trust provides each Unitholder with an annual schedule of his or her share of the Trust's tax items. The Trust generally allocates these items equally to each Unit. However, when a
Unitholder redeems Units, the Trust allocates capital gains or
66
losses
so as to eliminate any difference between the redemption proceeds and the tax accounts of such Units.
Limited Deductibility of Trust Losses and Deductions
A Unitholder may not deduct Trust losses or deductions in excess of his or her tax basis in his or her Units as of year-end. Generally, a Unitholder's
tax basis in his or her Units is the amount paid for such Units reduced (but not below zero) by his or her share of any Trust distributions, losses and deductions and increased by his or her share of
the Trust's income and gains.
Limited Deductibility for Certain Expenses
Individual taxpayers are subject to material limitations on their ability to deduct investment advisory expenses and other expenses of producing income. Sidley
Austin Brown & Wood has opined that the amount, if any, of the Trust's expenses which might be subject to this limitation should be de minimis.
However, the IRS could take a different position. The IRS could contend that the Management and Incentive Fees should be characterized as "investment advisory expenses" because the Trust is not
engaged in a "trade or business."
Individuals
cannot deduct investment advisory expenses in calculating their alternative minimum tax.
Year-End Mark-to-Market of Open Positions
Section 1256 Contracts are futures, futures options traded on U.S. exchanges, certain foreign currency contracts and stock index options. Certain of the
Trust's open positions are Section 1256 Contracts. Section 1256 Contracts that remain open at the end of each year are treated for tax purposes as if such positions had been sold and any
gain or loss recognized. The gain or loss on Section 1256 Contracts is characterized as 40% short-term capital gain or loss and 60% long-term capital gain or loss
regardless of how long any given position has been held. Non-U.S. exchange-traded futures and forwards are generally non-Section 1256 Contracts. Gain or loss on
non-Section 1256 Contracts will be recognized when sold by the Trust and will be primarily short-term gain or loss. Gain or loss on certain currency contracts will be
ordinary income or loss.
Tax on Capital Gains and Losses; Interest Income
As described under "Year-End Mark-to-Market of Open Positions," the Trust's trading generates 60%
long-term capital gains or losses and 40% short-term capital gains or losses from its Section 1256 Contracts and primarily short-term capital
gain or loss from its non-Section 1256 Contracts. Individuals pay tax on long-term capital gains at a maximum rate of 20%. Short-term capital gains are
subject to tax at the same rates as ordinary income.
Individual
taxpayers may deduct capital losses only to the extent of their capital gains plus $3,000. Accordingly, the Trust could incur significant losses but a Unitholder could be
required to pay taxes on his or her share of the Trust's interest income.
If
an individual taxpayer incurs a net capital loss for a year, he may elect to carryback (up to three years) the portion of such loss which consists of a net loss on Section 1256
Contracts. A taxpayer may deduct such losses only against net capital gain for a carryback year to the extent that such gain includes gains on Section 1256 Contracts. To the extent that a
taxpayer could not use such losses to offset gains on Section 1256 Contracts in a carryback year, the taxpayer may carryforward such losses indefinitely as losses on Section 1256
Contracts.
Syndication Expenses
The $650,000 in organizational and initial offering costs reimbursed by the Trust to CISI were non-deductible syndication expenses, as will be the
estimated $250,000 in costs in 2002 associated with the ongoing offering of the Units under this prospectus and any subsequent ongoing offering expenses incurred by the Trust. The IRS could also
contend that a portion of the Brokerage Fees paid to CIS constitute non-deductible syndication expenses.
Taxation of Foreign Investors
A Unitholder who is a non-resident alien individual, foreign corporation, foreign partnership,
67
foreign
trust or foreign estate (a "Foreign Unitholder") generally is not subject to taxation by the United States on capital gains from commodity or derivatives 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 whose U.S. business activities consist solely of trading commodities and derivatives 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 or derivatives and that the commodities traded are of a kind
customarily dealt in on an organized commodity exchange. The Managing Owner has advised Sidley Austin Brown & Wood 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 Brown & Wood, 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 the appropriate
Form W-8.
Unrelated Business Taxable Income
Tax-exempt Unitholders will not be required to pay tax on their share of income or gains of the Trust, provided that such Unitholders do not purchase
Units with borrowed funds.
IRS Audits of the Trust and Its Unitholders
The IRS is required to audit Trust-related items at the Trust rather than the Unitholder level. CISI is the Trust's "tax matters partner" with general authority
to determine the Trust's responses to a tax audit. If an audit of the Trust results in an adjustment, all Unitholders may be required to pay additional taxes plus interest as well as penalties and
additions to tax.
Disclosure of Reportable Transactions.
The IRS has recently issued temporary regulations (the "Regulations") that may require certain taxpayers, including partnerships and their partners, to disclose
their direct or indirect participation in certain reportable transactions, including "loss transactions." Loss transactions are broadly defined to include any transaction resulting in (or reasonably
expected to result in) gross losses (including losses arising from the sale or other disposition of securities and losses arising from Section 988 transactions) in excess of certain
threshholds. The Regulations will generally only apply to transactions entered into on or after January 1, 2003.
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. For example,
the Trust may be subject to a
68
1.5%
Personal Property Replacement Tax in Illinois. Such tax is imposed on the net income of the Trust allocable to Illinois.
PROSPECTIVE
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS
BEFORE DECIDING WHETHER TO INVEST.
Plan of Distribution
Subscription Procedure
Units are offered 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. Pending investment in the Units, subscriptions will be held in escrow at Bank One, NA. Checks should be
made payable to "BANK ONE, NA ESCROW AGENT FOR JWH GLOBAL TRUST," and shall be transmitted to the Escrow Agent by noon of the second business day after receipt by the Managing Owner.
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 when the subscription is
submitted. The account will be debited, and amounts so debited will be transmitted directly to Bank One, NA by such Selling Agent via Selling Agent check or wire transfer made payable to "BANK ONE, NA
ESCROW AGENT FOR JWH GLOBAL TRUST" 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 after the
receipt of a subscription by the Managing Owner. The Managing Owner will send each subscriber whose subscription for Units has been accepted a confirmation of such acceptance.
Subscription
documents must be received no later than the fifth business day prior to the month-end of investment (including the last business day of the month) 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 Trust,
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
(i.e., the date of subscription).
CISI
advanced the Trust's organizational and initial offering costs (approximately $650,000), for
69
which
CISI was reimbursed by the Trust at the initial closing. The Trust amortized such costs over the first sixty months of its operations, which ended May 31, 2002.
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 BSubscription 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. At the instruction of CISSI, CIS pays the Selling Agents selling commissions of up to 4% of
the subscription price of all Units sold by each Selling Agent. In addition to selling commissions, CIS, at the instruction of CISSI, 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 the subscription was accepted); provided that such ongoing
compensation may only be paid on Units in respect of which
financial advisors who are registered with the CFTC and have passed either the Series 3 or the Series 31 Examination agree to provide certain ongoing services to their clients who own
outstanding Units. Such ongoing compensation may be deemed to constitute underwriting compensation. See "Federal Income Tax AspectsSyndication Expenses."
Under
applicable rules of the National Association of Securities Dealers, Inc., if either a Selling Agent or a Selling Agent's registered representative is not duly registered
with the CFTC, or such registered representative does not agree to provide ongoing services to his or her clients who own outstanding Units, no ongoing compensation may be paid either to such Selling
Agent or to such registered representative. Rather, such Selling Agent and such registered representative are restricted to receiving installment selling commissions, which will be calculated in the
same manner as ongoing compensation except that 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 that remains outstanding 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 Unitholder (an investor who purchases at least $5,000,000 of Units, as described under
"ChargesBrokerage FeeSpecial Brokerage Fee Rate") shall be up to 2.5% of the subscription amount and up to 2.5% of the average month-end Net Asset Value. The
total amount of initial selling commissions and installment selling commissions paid on Units sold to Eligible Unitholders by a Selling Agent or registered representative ineligible to receive ongoing
compensation also may not exceed 9% of the initial subscription price of such Units.
The
Lead Selling Agent may engage Wholesalers who are registered broker-dealers, or their registered representatives who will introduce Additional Selling Agents to the Lead Selling
Agent and assist such Additional Selling Agents in the offering and sale of Units. Each such Wholesaler will share with an Additional Selling Agent
70
introduced
by the Wholesaler (i) the up to 4% (in the case of sales to Eligible Unitholders, up to 2.5%) initial selling commissions and (ii) the up to 4% (in the case of sales to
Eligible Unitholders, up to 2.5%) 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 correspondent, who must be registered as a
broker-dealer, the relevant Additional Selling Agent will retain (i) up to 1% of the 4% (in the case of sales to an Eligible Unitholder, up to 0.5% of the 2.5%) initial selling commissions and
(ii) up to 1% of the 4% (in the case of sales to an Eligible Unitholder, up to 0.5% of the 2.5%) ongoing compensation to be received by such Additional Selling Agent in respect of Units sold by
such correspondent, and will in each case pass on the remainder of the initial selling commissions and ongoing compensation to the correspondent.
Wholesalers
and correspondents must meet the same eligibility requirements applicable to Selling Agents in order to receive ongoing compensation.
Lawyers; Accountants
Sidley Austin Brown & Wood, Chicago, Illinois and Richards, Layton & Finger, Wilmington, Delaware have advised CISI and CISSI on the offering of the
Units. Sidley Austin Brown & Wood drafted "Tax Consequences."
The
financial statements of CISI as of May 31, 2002 and 2001 and the financial statements of the Trust as of December 31, 2001, 2000 and 1999 included herein have been
audited by KPMG LLP.
71
Financial Statements
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.
INDEX OF FINANCIAL STATEMENTS
|
|
Page
|
JWH GLOBAL TRUST |
|
|
|
Statements of Financial Condition (unaudited) as of September 30, 2001 and 2002 |
|
73 |
|
Statements of Operations (unaudited) for the period from January 1, 2002 to September 30, 2002 and the period from January 1, 2001 to September 30, 2001 |
|
74 |
|
Statement of Changes in Unitholders' Capital (unaudited) for the period from January 1, 2002 to September 30, 2002 |
|
75 |
|
Independent Auditors' Report |
|
76 |
|
Statements of Financial Condition as of December 31, 2001 and 2000 |
|
77 |
|
Statements of Operations for the years ended December 31, 2001, 2000 and 1999 |
|
78 |
|
Statements of Changes in Unitholders' Capital for the years ended December 31, 2001, 2000 and 1999 |
|
79 |
|
Schedule of Investments as of December 31, 2001 |
|
80 |
|
Notes to Financial Statements |
|
82 |
CIS INVESTMENTS, INC. |
|
|
|
Statement of Financial Condition (unaudited) as of September 30, 2002 |
|
87 |
|
Independent Auditors' Report |
|
88 |
|
Statements of Financial Condition as of May 31, 2002 and 2001 |
|
89 |
|
Statements of Income for the years ended May 31, 2002 and 2001 |
|
90 |
|
Statements of Changes in Stockholder's Equity for the years ended May 31, 2002 and 2001 |
|
91 |
|
Statements of Cash Flows for the years ended May 31, 2002 and 2001 |
|
92 |
|
Notes to Financial Statements |
|
93 |
72
JWH GLOBAL TRUST
Statements of Financial Condition (Unaudited)
September 30, 2002 and 2001
|
|
September 30,
2002
|
|
September 30,
2001
|
Assets |
|
|
|
|
|
Assets: |
|
|
|
|
|
|
Equity in commodity trading accounts: |
|
|
|
|
|
|
|
Cash on deposit with Brokers |
|
$ |
58,408,986 |
|
49,290,029 |
|
|
Unrealized gain on open contracts |
|
|
4,177,394 |
|
1,621,265 |
|
|
|
|
|
|
|
|
62,586,380 |
|
50,911,294 |
|
Receivable for units sold |
|
|
1,188,031 |
|
930,701 |
|
Interest receivable |
|
|
81,148 |
|
116,523 |
|
Prepaid initial organization and offering costs |
|
|
0 |
|
88,115 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
63,855,559 |
|
52,046,633 |
|
|
|
|
|
Liabilities and Unitholders' Capital |
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
Accrued commissions on open contracts due to CIS |
|
$ |
337,333 |
|
271,518 |
|
Accrued management fees |
|
|
104,339 |
|
85,131 |
|
Accrued incentive fees |
|
|
1,701,976 |
|
0 |
|
Accrued operating expenses |
|
|
41,157 |
|
57,594 |
|
Accrued offering expenses |
|
|
25,201 |
|
21,130 |
|
Redemptions payable |
|
|
450,855 |
|
922,773 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,660,861 |
|
1,358,146 |
|
|
|
|
|
Unitholders' capital: |
|
|
|
|
|
|
Beneficial owners (422,248.43 and 425,783.91 units outstanding at September 30, 2002 and 2001, respectively) |
|
|
60,371,941 |
|
50,012,564 |
|
Managing owner (5,754.50 and 5,754.50 units outstanding at September 30, 2002 and 2001, respectively) |
|
|
822,757 |
|
675,923 |
|
|
|
|
|
|
|
|
Total unitholders' capital |
|
|
61,194,698 |
|
50,688,487 |
|
|
|
|
|
|
|
|
Total liabilities and unitholders' capital |
|
$ |
63,855,559 |
|
52,046,633 |
|
|
|
|
|
This Statement of Financial Condition, in the opinion of the Managing Owner, reflects all adjustments necessary to fairly state the financial condition of the Trust at
September 30, 2002 and 2001.
73
JWH GLOBAL TRUST
Statements of Operations (unaudited)
Periods ended September 30, 2002 and 2001
|
|
January 1, 2002
through
September 30, 2002
|
|
January 1, 2001
through
September 30, 2001
|
|
Revenues: |
|
|
|
|
|
|
Gain (loss) on trading of commodity contracts: |
|
|
|
|
|
|
|
|
Realized gain on closed positions |
|
$ |
17,295,791 |
|
10,534,796 |
|
|
|
Change in unrealized gain (loss) on open positions |
|
|
1,620,074 |
|
(6,382,699 |
) |
|
Interest income |
|
|
608,836 |
|
1,411,804 |
|
|
Foreign currency transaction gain (loss) |
|
|
93,428 |
|
174,975 |
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
19,618,129 |
|
5,738,876 |
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
Commission |
|
|
2,506,721 |
|
2,428,788 |
|
|
Exchange, clearing and NFA fees |
|
|
12,212 |
|
24,504 |
|
|
Management fees |
|
|
776,304 |
|
756,129 |
|
|
Incentive fees |
|
|
2,741,520 |
|
990,171 |
|
|
Amortization of prepaid initial organization and offering costs |
|
|
55,072 |
|
99,129 |
|
|
Ongoing organization and offering expenses |
|
|
190,811 |
|
187,249 |
|
|
Operating expenses |
|
|
44,882 |
|
45,000 |
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
6,327,522 |
|
4,530,970 |
|
|
|
|
|
|
|
|
|
|
Net profit (loss) |
|
$ |
13,290,607 |
|
1,207,906 |
|
|
|
|
|
|
|
Profit (loss) per unit of beneficial ownership interest |
|
$ |
31.35 |
|
2.87 |
|
Profit (loss) per unit of managing ownership interest |
|
|
31.35 |
|
2.87 |
|
|
|
|
|
|
|
These Statements of Operations, in the opinion of the Managing Owner, reflect all adjustments necessary to fairly state the financial condition of the Trust.
74
JWH GLOBAL TRUST
Statements of Changes in Unitholders' Capital (unaudited)
Periods from January 1, 2002 through September 2002
|
|
Units*
|
|
Beneficial
Owners
|
|
Managing
Owner
|
|
Total
|
|
Unitholders' Capital at January 1, 2002 |
|
438,008.69 |
|
$ |
48,892,753 |
|
642,340 |
|
49,535,093 |
|
Net Profit (loss) |
|
|
|
|
13,110,190 |
|
180,417 |
|
13,290,607 |
|
Unitholders' contributions |
|
45,196.05 |
|
|
5,390,322 |
|
0 |
|
5,390,322 |
|
Unitholders' redemptions |
|
(60,956.31 |
) |
|
(7,021,324 |
) |
0 |
|
(7,021,324 |
) |
|
|
|
|
|
|
|
|
|
|
Unitholders' Capital at September 30, 2002 |
|
422,248.43 |
|
|
60,371,941 |
|
822,757 |
|
61,194,698 |
|
Net asset value per unit at January 1, 2002 |
|
|
|
$ |
111.63 |
|
111.63 |
|
|
|
Net profit (loss) per unit |
|
|
|
|
31.35 |
|
31.35 |
|
|
|
Net asset value per unit at September 30, 2002 |
|
|
|
$ |
142.98 |
|
142.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- *
- Units
of beneficial ownership.
These Statements of Changes in Unitholders' Capital, in the opinion of the Managing Owner, reflects all adjustments necessary to fairly state the financial condition of the
Trust.
75
The Unitholders
JWH Global Trust:
We
have audited the accompanying statements of financial condition, including the schedule of investments, of JWH Global Trust (the Trust) as of December 31, 2001 and 2000, and
the related statements of operations and changes in unitholders' capital for each of the years in the three-year period ended December 31, 2001. These financial statements are the
responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 JWH Global Trust as of December 31, 2001 and 2000,
and the results of its operations and changes in its unitholders' capital, for each of the years in the three-year period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.
February
11, 2002
76
JWH GLOBAL TRUST
Statements of Financial Condition
December 31, 2001 and 2000
|
|
2001
|
|
2000
|
Assets |
Assets: |
|
|
|
|
|
|
Equity in commodity trading accounts: |
|
|
|
|
|
|
|
Cash on deposit with Brokers |
|
$ |
46,976,650 |
|
44,316,136 |
|
|
Unrealized gain on open contracts |
|
|
2,557,319 |
|
8,003,965 |
|
|
|
|
|
|
|
|
49,533,969 |
|
52,320,101 |
|
Receivable for units sold |
|
|
618,077 |
|
191,437 |
|
Interest receivable |
|
|
70,569 |
|
223,611 |
|
Prepaid initial organization and offering costs |
|
|
55,072 |
|
187,244 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
50,277,687 |
|
52,922,393 |
|
|
|
|
|
Liabilities and Unitholders' Capital |
Liabilities: |
|
|
|
|
|
|
Accrued commissions |
|
$ |
265,856 |
|
282,628 |
|
Accrued management fees |
|
|
82,703 |
|
87,816 |
|
Accrued operating expenses |
|
|
60,000 |
|
60,000 |
|
Accrued offering expenses |
|
|
20,526 |
|
21,796 |
|
Redemptions payable |
|
|
313,509 |
|
2,340,419 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
742,594 |
|
2,792,659 |
|
|
|
|
|
Unitholders' capital: |
|
|
|
|
|
|
Beneficial owners (438,008.69 and 430,765.38 units outstanding at December 31, 2001 and 2000, respectively) |
|
|
48,892,753 |
|
49,361,538 |
|
Managing owner (5,754.50 and 6,703.91 units outstanding at December 31, 2001 and 2000, respectively) |
|
|
642,340 |
|
768,196 |
|
|
|
|
|
|
|
|
Total unitholders' capital |
|
|
49,535,093 |
|
50,129,734 |
|
|
|
|
|
|
|
|
Total liabilities and unitholders' capital |
|
$ |
50,277,687 |
|
52,922,393 |
|
|
|
|
|
See
accompanying notes to financial statements.
77
JWH GLOBAL TRUST
Statements of Operations
Years ended December 31, 2001, 2000 and 1999
|
|
2001
|
|
2000
|
|
1999
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
Gain (loss) on trading of commodity contracts: |
|
|
|
|
|
|
|
|
|
|
Realized gain on closed positions |
|
$ |
8,079,390 |
|
740 |
|
2,105,322 |
|
|
|
Change in unrealized gain (loss) on open positions |
|
|
(5,446,646 |
) |
4,664,653 |
|
(4,219,845 |
) |
|
Interest income |
|
|
1,657,888 |
|
3,265,169 |
|
4,299,669 |
|
|
Foreign currency transaction gain (loss) |
|
|
139,504 |
|
(483,085 |
) |
153,831 |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
4,430,136 |
|
7,447,477 |
|
2,338,977 |
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
Commission |
|
|
3,215,618 |
|
3,737,532 |
|
6,136,926 |
|
|
Exchange, clearing and NFA fees |
|
|
32,547 |
|
38,489 |
|
83,215 |
|
|
Management fees |
|
|
1,001,094 |
|
2,088,954 |
|
3,833,530 |
|
|
Incentive fees |
|
|
990,171 |
|
|
|
853,599 |
|
|
Amortization of prepaid initial organization and offering costs |
|
|
132,172 |
|
132,173 |
|
132,172 |
|
|
Ongoing organization and offering expenses |
|
|
248,048 |
|
288,770 |
|
474,221 |
|
|
Operating expenses |
|
|
64,643 |
|
35,740 |
|
47,406 |
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
5,684,293 |
|
6,321,658 |
|
11,561,069 |
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) |
|
$ |
(1,254,157 |
) |
1,125,819 |
|
(9,222,092 |
) |
|
|
|
|
|
|
|
|
Profit (loss) per unit of beneficial ownership interest |
|
$ |
(2.96 |
) |
10.08 |
|
(10.89 |
) |
Profit (loss) per unit of managing ownership interest |
|
|
(2.96 |
) |
10.08 |
|
(10.89 |
) |
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements.
78
JWH GLOBAL TRUST
Statements of Changes in Unitholders' Capital
Years ended December 31, 2001, 2000 and 1999
|
|
Units*
|
|
Beneficial
Owners
|
|
Managing
Owner
|
|
Total
|
|
Balance at December 31, 1998 |
|
818,706.12 |
|
$ |
94,471,052 |
|
1,001,494 |
|
95,472,546 |
|
Net loss |
|
|
|
|
(9,119,572 |
) |
(102,520 |
) |
(9,222,092 |
) |
Unitholders' contributions |
|
164,883.44 |
|
|
18,624,039 |
|
|
|
18,624,039 |
|
Unitholders' redemptions |
|
(177,214.77 |
) |
|
(19,704,627 |
) |
|
|
(19,704,627 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 1999 |
|
806,374.79 |
|
|
84,270,892 |
|
898,974 |
|
85,169,866 |
|
Net gain |
|
|
|
|
1,056,111 |
|
69,708 |
|
1,125,819 |
|
Unitholders' contributions |
|
18,386.99 |
|
|
1,766,481 |
|
58 |
|
1,766,539 |
|
Unitholders' redemptions |
|
(393,996.40 |
) |
|
(37,731,946 |
) |
(200,544 |
) |
(37,932,490 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2000 |
|
430,765.38 |
|
|
49,361,538 |
|
768,196 |
|
50,129,734 |
|
Net loss |
|
|
|
|
(1,238,945 |
) |
(15,212 |
) |
(1,254,157 |
) |
Unitholders' contributions |
|
72,485.25 |
|
|
8,406,483 |
|
|
|
8,406,483 |
|
Unitholders' redemptions |
|
(65,241.94 |
) |
|
(7,636,323 |
) |
(110,644 |
) |
(7,746,967 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2001 |
|
438,008.69 |
|
$ |
48,892,753 |
|
642,340 |
|
49,535,093 |
|
|
|
|
|
|
|
|
|
|
|
Net asset value per unit at December 31, 2001 |
|
|
|
$ |
111.63 |
|
111.63 |
|
|
|
Net asset value per unit at December 31, 2000 |
|
|
|
|
114.59 |
|
114.59 |
|
|
|
Net asset value per unit at December 31, 1999 |
|
|
|
|
104.51 |
|
104.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- *
- Units
of beneficial ownership.
See
accompanying notes to financial statements.
79
JWH GLOBAL TRUST
Schedule of Investments
December 31, 2001
|
|
Number of
Contracts
|
|
Principal
(notional)
|
|
Value (OTE)
|
|
Long positions: |
|
|
|
|
|
|
|
|
|
Futures positions (-0.32%) |
|
|
|
|
|
|
|
|
|
|
Agriculture |
|
8 |
|
$ |
142,360 |
|
|
(12,440 |
) |
|
Interest rates |
|
70 |
|
|
15,945,260 |
|
|
(38,036 |
) |
|
Metals |
|
120 |
|
|
3,698,602 |
|
|
(121,987 |
) |
|
Indices |
|
17 |
|
|
1,101,596 |
|
|
11,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,887,818 |
|
|
(160,507 |
) |
|
|
|
|
|
|
|
|
Forward positions (-0.08%) |
|
|
|
|
|
|
|
|
|
|
Currencies |
|
14 |
|
|
65,814,186 |
|
|
(38,791 |
) |
|
|
|
|
|
|
|
|
|
|
Total long positions |
|
|
|
$ |
86,702,004 |
|
|
(199,298 |
) |
|
|
|
|
|
|
|
|
Short positions: |
|
|
|
|
|
|
|
|
|
Futures positions (0.16%) |
|
|
|
|
|
|
|
|
|
|
Agriculture |
|
201 |
|
$ |
2,648,226 |
|
|
54,109 |
|
|
Energy |
|
122 |
|
|
2,515,245 |
|
|
(2,949 |
) |
|
Interest rates |
|
1,214 |
|
|
145,427,455 |
|
|
240,137 |
|
|
Metals |
|
194 |
|
|
5,697,334 |
|
|
(211,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
156,288,260 |
|
|
79,341 |
|
|
|
|
|
|
|
|
|
Forward positions (5.40%) |
|
|
|
|
|
|
|
|
|
|
Currencies |
|
|
|
|
|
|
|
|
|
|
|
Swiss Francs |
|
|
|
$ |
5,879,530 |
|
|
(77,754 |
) |
|
|
Swiss Francs |
|
|
|
|
5,804,151 |
|
|
(79,745 |
) |
|
|
Euros |
|
|
|
|
3,910,595 |
|
|
(46,119 |
) |
|
|
Japanese Yens |
|
|
|
|
2,775,988 |
|
|
117,327 |
|
|
|
Japanese Yens |
|
|
|
|
2,223,405 |
|
|
98,369 |
|
|
|
Japanese Yens |
|
|
|
|
20,491,775 |
|
|
905,518 |
|
|
|
Japanese Yens |
|
|
|
|
4,973,001 |
|
|
213,708, |
|
|
|
Swiss Francs |
|
|
|
|
9,949,973 |
|
|
(131,584 |
) |
|
|
Euros |
|
|
|
|
3,643,964 |
|
|
41,116 |
|
|
|
Euros |
|
|
|
|
22,752,556 |
|
|
(268,332 |
) |
|
|
Japanese Yens |
|
|
|
|
11,746,572 |
|
|
504,793 |
|
|
|
Japanese Yens |
|
|
|
|
3,093,638 |
|
|
130,753 |
|
|
|
Japanese Yens |
|
|
|
|
18,766,272 |
|
|
829,269 |
|
|
|
Swiss Francs |
|
|
|
|
1,432,193 |
|
|
(18,940 |
) |
|
|
Swiss Francs |
|
|
|
|
1,432,193 |
|
|
(19,677 |
) |
|
|
Euros |
|
|
|
|
888,772 |
|
|
(9,985 |
) |
|
|
Japanese Yens |
|
|
|
|
11,056,027 |
|
|
488,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,820,605 |
|
|
2,677,276 |
|
|
|
|
|
|
|
|
|
|
|
|
Total short positions |
|
|
|
$ |
287,108,865 |
|
|
2,756,617 |
|
|
|
|
|
|
|
|
|
80
Total open contracts (5.16%) |
|
|
|
|
|
|
$ |
2,557,319 |
|
Cash on deposit with brokers (94.84%) |
|
|
|
|
|
|
|
46,976,650 |
|
Other assets in excess of liabilities (0.002%) |
|
|
|
|
|
|
|
1,124 |
|
|
|
|
|
|
|
|
|
|
Net assets (100.0%) |
|
|
|
|
|
|
$ |
49,535,093 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
81
JWH GLOBAL TRUST
Notes to Financial Statements
December 31, 2001, 2000 and 1999
- (1)
- General Information and Summary
JWH
Global Trust (the Trust), a Delaware statutory trust organized on November 12, 1996, was formed to engage in the speculative trading of futures contracts on currencies, interest rates,
energy and agricultural products, metals and stock indices, spot and forward contracts on currencies and precious metals, and exchanges for physicals pursuant to the trading instructions of
independent trading advisors. The Managing Owner of the Trust is CIS Investments, Inc. (CISI). The clearing broker is Cargill Investor Services, Inc. (Clearing Broker or CIS), the parent
company of CISI. The broker for forward contracts is CIS Financial Services, Inc. (CISFS or Forwards Currency Broker), an affiliate of CISI. The Clearing Broker and the Forwards Currency Broker
will collectively be referred to as the Brokers.
Units
of beneficial ownership of the Trust commenced selling on April 3, 1997 and trading began on June 2, 1997. The initial amount offered for investment was $50,000,000. On
September 26, 1997, the Trust registered an additional $155,000,000 for further investment and continued the offering. By December 31, 2001, a total of 1,204,153.28 units representing an
investment for $127,470,596 of beneficial ownership interest had been sold in the combined offerings. In addition, during the offerings, the Managing Owner purchased a total of 8,602.73 units,
representing a total investment of $885,058. See the JWH Global Trust prospectus for further details of the offering.
The
Trust will be terminated on December 31, 2026, if none of the following occur prior to that date: (1) beneficial owners holding more than 50% of the outstanding units notify the
Managing Owner to dissolve the Trust as of a specific date; (2) disassociation of the Managing Owner with the Trust; (3) bankruptcy of the Trust; (4), a decrease in the net asset value
to less than $2,500,000; (5) a decline in the net asset value per unit to $50 or less; (6) dissolution of the Trust; or (7) any event that would make it unlawful for the existence
of the Trust to be continued or require dissolution of the Trust.
- (2)
- Summary of Significant Accounting Policies
The
accounting and reporting policies of the Trust conform to accounting principles generally accepted in the United States of America and to general practices in the commodities industry. The
following is a description of the more significant of those policies that the Trust follows in preparing its financial statements.
Revenue Recognition
Commodity futures contracts, forward contracts, physical commodities, and related options are recorded on the trade date. All such transactions are recorded on the identified cost basis and marked to
market daily. Unrealized gains and losses on open contracts reflected in the statements of financial condition represent the difference between original contract amount and market value (as determined
by exchange settlement prices for futures contracts and related options and cash dealer prices at a predetermined time for forward contracts, physical commodities, and their related options) as of the
last business day of the year or as of the last date of the financial statements.
82
The
Trust earns interest on its assets on deposit at the Brokers at 100% of the 91-day Treasury bill rate for deposits denominated in U.S. dollars, and at the rates agreed between the
Trust and CIS and CISFS for deposits denominated in other currencies.
Redemptions
A beneficial owner may cause any or all of his or her units to be redeemed by the Trust effective as of the last trading day of any month of the Trust based on the Net Asset Value per unit on five
days' written notice to the Managing Owner. Payment will be made within ten business days of the effective date of the redemption. Any redemption made during the first 11 months of investment
is subject to a 3% redemption penalty. Any redemption made in the 12th month of investment or later will not be subject to any penalty. The Trust's Amended and Restated Declaration and Agreement of
Trust contains a full description of redemption and distribution policies.
Organizational and Offering Costs
Initial organizational and offering costs advanced to the Trust are being amortized over the first 60 months of the Trust's operations, subject to a maximum monthly expense of
1/60 of 2% of the month-end net assets. Ongoing offering costs, subject to a ceiling of 0.5% of the Trust's average month-end net assets, are paid by the Trust
and expensed as incurred.
Commissions
Commodity brokerage commissions are typically paid for each trade transacted and are referred to as "round-turn commissions". These commissions cover both the initial purchase (or sale)
and the subsequent offsetting sale (or purchase) of a commodity futures contract. The Trust does not pay commodity brokerage commissions on a per-trade basis, but rather pays 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 reduction of the Management Fee. CIS
receives these Brokerage Fees irrespective of the number of trades executed on the Trust's behalf. The amount paid to CIS is reduced by exchange fees paid by the Trust. The round-turn
equivalent rate for commissions paid by the Trust for the years ended December 31, 2001, 2000, and 1999 was $56, $57, and $59, respectively.
Foreign Currency Transactions
Trading accounts in foreign currency denominations are susceptible to both movements in the underlying contract markets as well as fluctuation in currency rates. Translation of foreign currencies into
U.S. dollars for closed positions are translated at an average exchange rate for the year, while year-end balances are translated at the year-end currency rates. The impact of
the translation is reflected in the statements of operations.
83
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
- (3)
- Fees
Management
fees are accrued and paid monthly, incentive fees are accrued monthly and paid quarterly. Trading decisions for the period of these financial statements were made by John W. Henry &
Company, Inc. (JWH) utilizing three of its trading programs, the GlobalAnalytics Family of Programs, the Financial and Metals Portfolio, and the G-7 Currency Portfolio.
Under
signed agreement, prior to October 1, 2000, JWH received a monthly management fee of 1/12 of 4% of the Trust's month-end assets after deduction of a portion of
the Brokerage Fee at an annual rate of 1.25% of month-end Trust assets but before deduction of any management fees, redemptions, distributions, or incentive fee accrued or payable as of
the relevant month end. Effective October 1, 2000, the agreement with JWH was changed to reduce the monthly management fee to 1/12 of 2% of the month-end net assets
after the deductions.
Also,
under signed agreement, prior to October 1, 2000, the Trust paid to JWH a quarterly incentive fee equal to 15% of the new trading profits of the Trust. The incentive fee is based on the
overall performance of the Trust, not individually in respect of the performance of the individual programs utilized by the Trust. This fee is also calculated by deducting a portion of the Brokerage
Fees at an annual rate of 1.25%. Effective October 1, 2000, the agreement with JWH was changed to increase the incentive fee to 20% of the net trading profits.
- (4)
- Income Taxes
No
provision for Federal income taxes has been made in the accompanying financial statements as each beneficial owner is responsible for reporting income (loss) based on the pro rata share of the
profits or losses of the Trust. Generally, for both Federal and state tax purposes, trusts, such as the JWH Global Trust, are treated as partnerships. The Trust is responsible for the Illinois State
Partnership Information and Replacement Tax based on the operating results of the Trust. Such tax amounted to $0 for the years ended December 31, 2001, 2000, and 1999, respectively, and is
included in operating expenses in the statement of operations.
- (5)
- Trading Activities and Related Risks
The
Trust engages in the speculative trading of U.S. and foreign futures contracts, and forward contracts (collectively derivatives). These derivatives include both financial and
non-financial contracts held as part of a diversified trading strategy. The Trust is exposed to both market risk, the risk arising from changes in
84
the
market value of the contracts; and credit risk, the risk of failure by another party to perform according to the terms of a contract.
The
purchase and sale of futures requires margin deposits with a Futures Commission Merchant (FCM). Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act
(CEAct) requires an FCM to segregate all customer transactions and assets from the FCM's proprietary activities. A customer's cash and other property such as U.S. Treasury Bills, deposited with an FCM
are considered commingled with all other customer funds subject to the FCM's segregation requirements. In the event of an FCM's insolvency, recovery may be limited to a pro rata share of segregated
funds available. It is possible that the recovered amount could be less than the total of cash and other property deposited.
The
Trust has cash on deposit with an affiliate interbank market maker in connection with its trading of forward contracts. In the event of interbank market maker's insolvency, recovery of the Trust
assets on deposit may be limited to account insurance or other protection afforded such deposits. In the normal course of business, the Trust does not require collateral from such interbank market
maker. Because forward contracts are traded in unregulated markets between principals, the Trust also assumes a credit risk, the risk of loss from counter party non-performance.
For
derivatives, risks arise from changes in the market value of the contracts. Theoretically, the Trust is exposed to a market risk equal to the value of futures and forward contracts purchased and
unlimited liability on such contracts sold short.
Net
trading results from derivatives for the years ended December 31, 2001, 2000, and 1999, are reflected in the statement of operations and equal gains (losses) from trading less brokerage
commissions. Such trading results reflect the net gain arising from the Trust's speculative trading of futures contracts, and forward contracts.
The
notional amounts of open contracts at December 31, 2001, as disclosed in the Schedule of Investments, do not represent the Trust's risk of loss due to market and credit risk, but rather
represent the Trust's extent of involvement in derivatives at the date of the statement of financial condition.
The
Beneficial Owners bear the risk of loss only to the extent of the market value of their respective investments.
85
- (6)
- Financial Highlights
The
following financial highlights show the Trust's financial performance for the period ended December 31, 2001. Total return is calculated as the change in a theoretical beneficial owner's
investment over the entire period. Total return is calculated based on the aggregate return of the Trust taken as a whole.
Total return |
|
(2.58 |
)% |
|
|
|
|
Ratio to average net assets: |
|
|
|
|
Net loss |
|
(2.56 |
)% |
|
Expenses |
|
|
|
|
|
Expenses |
|
9.58 |
% |
|
|
Incentive fees |
|
2.02 |
% |
|
|
|
|
|
|
|
Total expenses |
|
11.60 |
% |
|
|
|
|
The
net investment income and operating expenses ratios are computed based upon the weighted average net assets for the Trust for the period ended December 31, 2001.
86
CIS INVESTMENTS, INC.
Statement of Financial Condition (unaudited)
September 30, 2002
|
|
2002
|
|
Assets |
|
Assets: |
|
|
|
|
|
Accrued organizational and offering costs due from JWH Global Trust |
|
$ |
15,273 |
|
|
Receivable from funds |
|
|
1,088 |
|
|
Due from Cargill, Inc. |
|
|
3,257,261 |
|
|
Fee income receivable |
|
|
65,103 |
|
|
Investments in registered commodity pools |
|
|
1,050,555 |
|
|
|
|
|
|
|
Total assets |
|
$ |
4,389,280 |
|
|
|
|
|
Liabilities and Stockholder's Equity |
|
Liabilities: |
|
|
|
|
|
Deferred tax liabilities |
|
$ |
74,113 |
|
|
Accrued taxes payable |
|
|
101,053 |
|
|
Deferred management fees |
|
|
17,469 |
|
|
|
|
|
|
|
Total liabilities |
|
|
192,635 |
|
|
|
|
|
Stockholder's equity: |
|
|
|
|
|
Common stock, $100 par value. Authorized 30,000 shares; issued 10 shares |
|
|
1,000 |
|
|
Common stock subscribed, 29,990 shares |
|
|
2,999,000 |
|
|
Less: subscriptions receivable |
|
|
(2,999,000 |
) |
|
Paid-in capital |
|
|
18,250,000 |
|
|
Less: demand note receivable |
|
|
(18,000,000 |
) |
|
Retained earnings |
|
|
3,945,645 |
|
|
|
|
|
|
|
Total stockholder's equity |
|
|
4,196,645 |
|
|
|
|
|
|
|
Total liabilities and stockholder's equity |
|
$ |
4,389,280 |
|
|
|
|
|
This Statement of Financial Condition, in the opinion of management, reflects all adjustments necessary to fairly state the financial condition of CIS
Investments, Inc. at September 30, 2002. All adjustments made were of a normal and recurring nature.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
87
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, 2002 and 2001, 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 auditing standards generally accepted in the United States of America. 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 condition of CIS Investments, Inc. as of May 31, 2002 and
2001, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
KPMG
LLP
July
15, 2002
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
88
CIS INVESTMENTS, INC.
Statements of Financial Condition
May 31, 2002 and 2001
|
|
2002
|
|
2001
|
|
Assets |
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
Receivable from funds |
|
$ |
1,088 |
|
1,088 |
|
|
Due from Cargill, Inc. |
|
|
3,101,529 |
|
2,342,529 |
|
|
Accrued taxes receivable |
|
|
30,449 |
|
69,235 |
|
|
Fee income receivable |
|
|
48,645 |
|
53,259 |
|
|
Investments in registered commodity pools |
|
|
770,026 |
|
1,023,584 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,951,737 |
|
3,489,695 |
|
|
|
|
|
|
|
Liabilities and Stockholder's Equity |
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Accrued organizational and offering costs due to JWH Global Trust |
|
$ |
8,855 |
|
40,737 |
|
|
Deferred tax liabilities |
|
|
74,113 |
|
9,791 |
|
|
Deferred management fees |
|
|
40,760 |
|
53,205 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
123,728 |
|
103,733 |
|
|
|
|
|
|
|
Stockholder's equity: |
|
|
|
|
|
|
|
Common stock, $100 par value. Authorized 30,000 shares; issued 10 shares |
|
|
1,000 |
|
1,000 |
|
|
|
Common stock subscribed, 29,990 shares |
|
|
2,999,000 |
|
2,999,000 |
|
|
Less subscriptions receivable |
|
|
(2,999,000 |
) |
(2,999,000 |
) |
|
Paid-in-capital |
|
|
18,250,000 |
|
18,250,000 |
|
|
Less demand note receivable |
|
|
(18,000,000 |
) |
(18,000,000 |
) |
|
Retained earnings |
|
|
3,577,009 |
|
3,134,962 |
|
|
|
|
|
|
|
|
|
|
Total stockholder's equity |
|
|
3,828,009 |
|
3,385,962 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholder's equity |
|
$ |
3,951,737 |
|
3,489,695 |
|
|
|
|
|
|
|
See accompanying notes to financial statements.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
89
CIS INVESTMENTS, INC.
Statements of Income
Years ended May 31, 2002 and 2001
|
|
2002
|
|
2001
|
Revenues: |
|
|
|
|
|
|
Management fees |
|
$ |
|
|
36,009 |
|
Interest income |
|
|
72,156 |
|
132,897 |
|
Accounting and administrative services income |
|
|
680,663 |
|
787,445 |
|
Realized and unrealized gain (loss) on investments |
|
|
(134,085 |
) |
207,794 |
|
|
|
|
|
|
|
Total revenues |
|
|
618,734 |
|
1,164,145 |
Expensesoperating |
|
|
3,276 |
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
615,458 |
|
1,164,145 |
Income tax expense |
|
|
173,411 |
|
410,283 |
|
|
|
|
|
|
|
Net income |
|
$ |
442,047 |
|
753,862 |
|
|
|
|
|
See accompanying notes to financial statements.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
90
CIS INVESTMENTS, INC.
Statements of Changes in Stockholder's Equity
Years ended May 31, 2002 and 2001
|
|
Common
stock
|
|
Common
stock
subscribed
|
|
Subscriptions
receivable
|
|
Paid-in
capital
|
|
Demand
note
receivable
|
|
Retained
earnings
|
|
Total
|
Balance at May 31, 2000 |
|
$ |
1,000 |
|
2,999,000 |
|
(2,999,000 |
) |
18,250,000 |
|
(18,000,000 |
) |
2,381,000 |
|
2,632,100 |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
753,862 |
|
753,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 31, 2001 |
|
|
1,000 |
|
2,999,000 |
|
(2,999,000 |
) |
18,250,000 |
|
(18,000,000 |
) |
3,134,962 |
|
3,385,962 |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
442,047 |
|
442,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 31, 2002 |
|
|
1,000 |
|
2,999,000 |
|
(2,999,000 |
) |
18,250,000 |
|
(18,000,000 |
) |
3,577,009 |
|
3,828,009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
91
CIS INVESTMENTS, INC.
Statements of Cash Flows
Years ended May 31, 2002 and 2001
|
|
2002
|
|
2001
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
442,047 |
|
$ |
753,862 |
|
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
Realized and unrealized (gain) loss on investments |
|
|
134,085 |
|
|
(207,794 |
) |
|
|
Decrease (increase) in assets: |
|
|
|
|
|
|
|
|
|
|
Receivable from funds |
|
|
|
|
|
(602 |
) |
|
|
|
Due from Cargill, Inc. |
|
|
(759,000 |
) |
|
(1,487,423 |
) |
|
|
|
Accrued taxes receivable |
|
|
38,786 |
|
|
(69,235 |
) |
|
|
|
Miscellaneous receivable |
|
|
4,614 |
|
|
(53,259 |
) |
|
|
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
|
|
Deferred management fees |
|
|
(12,445 |
) |
|
(14,321 |
) |
|
|
|
Deferred tax liabilities |
|
|
64,322 |
|
|
8,825 |
|
|
|
|
Accounts payable |
|
|
|
|
|
(387 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
$ |
(87,591 |
) |
$ |
(1,070,334 |
) |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Organizational and offering costs of JWH Global Trust |
|
$ |
(31,882 |
) |
$ |
117,239 |
|
|
Proceeds from sale of registered commodity pools |
|
|
119,473 |
|
|
953,095 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
87,591 |
|
|
1,070,334 |
|
|
|
|
|
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 |
|
$ |
70,303 |
|
$ |
467,418 |
|
|
|
|
|
|
|
See accompanying notes to financial statements.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
92
CIS INVESTMENTS, INC.
Notes to Financial Statements
May 31, 2002 and 2001
- (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 a registered commodity pool operator with the Commodity Futures Trading
Commission. The Company is the general partner or managing owner in various limited partnerships or trusts (Funds) organized for the purpose of engaging in the speculative trading of commodity
interests, including futures contracts, physical commodities, and related options.
Revenue Recognition
The Company earns accounting and administrative fees from the Funds for which it acts as general partners and managing owner which is recognized into income as it is earned. Unearned management fees
are amortized over one year, the life of the contract, using the straight-line method.
Investments
Investments in Funds are recorded at a value which approximates the Company's proportionate share of each Fund's net asset value.
Income Taxes
The Company is included in the consolidated Federal income tax return of the Parent. Income tax expense is calculated as if the Company would file a separate return. Accrued taxes represents
the remaining balance due from the Parent for the current year and prior year taxes including the impact of deferred taxes.
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. 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.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
93
Due from Cargill Inc.
Due from Cargill, Inc. represents the net balance to/from Cargill Inc., the Company's ultimate parent. Cash on deposit with Cargill, Inc., earns interest daily at the one month
LIBOR.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
- (2)
- Receivable/Payable from/to JWH Global Trust
The
Company advanced JWH Global Trust (the Trust) funds for payment of its initial organizational and offering costs. These costs were being reimbursed currently by the Trust at an annual rate of
1/2 of 1% of the net assets of the Trust. At May 31, 2002, the aggregate amount that the Trust has reimbursed the Company exceeded the aggregate amounts provided by the Company,
thus creating a payable. Ongoing offering costs are paid by the Trust and expensed as incurred.
- (3)
- Investments in Funds
Investments
in IDS Managed Futures, L.P., IDS Managed Futures II, L.P., and JWH Global Trust are 0.53%, 0.52%, and 1.33% of the total interest of each fund, respectively. Investments in the Funds at
May 31, 2002 and 2001 are as follows:
|
|
2002
|
|
2001
|
|
|
Units
|
|
Amount
|
|
Units
|
|
Amount
|
IDS Managed Futures, L.P. |
|
478 |
|
$ |
133,782 |
|
807 |
|
$ |
253,594 |
IDS Managed Futures II, L.P. |
|
54 |
|
|
27,475 |
|
128 |
|
|
72,730 |
JWH Global Trust |
|
5,755 |
|
|
608,769 |
|
5,754 |
|
|
697,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
770,026 |
|
|
|
$ |
1,023,584 |
|
|
|
|
|
|
|
|
|
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
94
The
following represents condensed combined financial information of the Funds as of May 31, 2002 and 2001 (in thousands).
|
|
2002
|
|
2001
|
Assets |
|
$ |
78,310 |
|
93,770 |
|
|
|
|
|
Liabilities |
|
|
2,207 |
|
1,869 |
Capital |
|
|
76,103 |
|
91,901 |
|
|
|
|
|
|
Total liabilities and capital |
|
$ |
78,310 |
|
93,770 |
|
|
|
|
|
- (4)
- Net Worth Requirements
The
Company is required to maintain an amount of net worth as stated in each Fund's agreement. For the purpose of compliance, net worth is defined as the total of common stock issued and subscribed,
paid in capital, demand note receivables, and retained earnings. At May 31, 2002, the Company believes it is in compliance with its net worth requirements.
- (5)
- Common Stock Subscriptions
The
Company and its Parent entered into stock subscription agreements whereby the Parent subscribed to purchase up to 29,990 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.
- (6)
- Demand Note Receivable
The
Company received a capital contribution of $18,000,000 from its Parent and entered into a related non-interest bearing demand note for $18,000,000. No cash was transferred, nor is it
known when and if any will be transferred in the future. As such, the demand note is shown as a deduction from stockholder's equity.
- (7)
- Related Parties
The
Company has no employees. The Parent provides facilities and administrative services to the Company at no cost. The Parent also pays certain expenses on behalf of the Company.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
95
- (8)
- Financial Instruments with Off-balance Sheet Risk
As
general partner or managing owner of the Funds, the Company's investment in the Funds are subject to the risks related to financial instruments and commodity contracts held or sold short by these
Funds. The Company is exposed to both market risk, the risk arising from changes in the market value of the contracts; and credit risk, the risk of failure by another party to perform according to the
terms of the contract. However, the Company bears the risk of loss only to the extent of the market value of its respective investment and, in certain specific circumstances, distributions and
redemptions received.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
96
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
This Prospectus is in two parts: a Disclosure Document and a Statement of Additional
Information. These parts are bound together, and both contain important information.
Futures Markets and Trading Methods
The Futures and Forward Markets
The Commodity Futures Modernization Act of 2000 ("CFMA") became effective in December 2000 and substantially amended various laws relating to the trading
of futures and derivatives contracts. New regulations regarding the trading of futures contracts have been enacted and more are expected. It cannot be predicted at this time how such regulations will
impact the trading activities of the Trust. The following discussion describes traditional futures trading and briefly describes the characteristics of new exchanges permitted by the CFMA.
Futures and Forward Contracts
Futures contracts normally have standardized terms, such as size and delivery month, and call for the future delivery of various commodities. These contractual
obligations may be satisfied either by taking or making physical delivery or by making an offsetting sale or purchase of a futures contract.
Prior
to the enactment of the CFMA, futures contracts could only be traded on exchanges that were designated as "contract markets" by the CFTC. The CFMA permits certain futures contracts
between sophisticated parties to be traded "off exchange." The CFMA permits several new categories of exchanges to be created, each of which is subject to less regulation than traditional
CFTC-approved contract markets. The Managing Owner currently expects that
substantially all of the Trust's futures trading in the United States will be conducted on exchanges subject to the full oversight of the CFTC. However, it is not now possible to determine what impact
the existence of these new exchanges will have on the Trust's trading activities.
Forward
currency contracts are traded off-exchange through banks or dealers. In such instances, the bank or dealer generally acts as principal in the transaction and charges
"bid-ask" spreads.
Futures
and forward trading is a "zero-sum," risk transfer economic activity. For every gain there is an equal and offsetting loss.
Exchange of Futures for Physicals ("EFP") Transactions
Although futures contracts are normally entered into through competitive bidding and offering on an exchange floor (or its electronic equivalent), most U.S.
exchanges allow futures contracts also to be established in a transaction known as an exchange of futures for physicals ("EFP"). In an EFP transaction where two parties engage in a cash sale of a
commodity underlying a futures contract, those same two parties are permitted to establish futures positions of an equivalent quantity opposite to their cash transaction. For example, a seller of a
cash commodity would be permitted to establish a long futures position of an equivalent quantity and the buyer of the cash commodity would be permitted to establish a short futures position of the
equivalent commodity. In some futures markets, the cash transaction upon which the EFP is based can be the reversal of a previously entered into but unsettled cash transaction. In those markets,
because the cash transaction is essentially "transitory," EFPs can serve as a means for parties to enter into futures contracts at negotiated prices and at other than during normal trading hours.
97
Hedgers and Speculators
The two broad classifications of persons who trade futures are "hedgers" and "speculators." Hedging is designed to minimize the losses that may occur because of
price changes, for example, between the time a merchandiser contracts to sell a commodity and the time of delivery. The futures and forward markets enable the hedger to shift the risk of price changes
to the speculator. The speculator risks capital with the hope of making profits from such changes. Speculators, such as the Trust, rarely take delivery of the physical commodity but rather close out
their futures positions through offsetting futures contracts.
Exchanges; Position and Daily Limits; Margins
Each of the existing futures exchanges in the United States has an associated "clearinghouse." Once trades made between members of an exchange have been cleared,
each clearing broker looks only to the clearinghouse for all payments in respect of such broker's open positions. The clearinghouse "guarantee" of performance on open positions does not run to
customers. If a member firm goes bankrupt, customers could lose money.
JWH
trades for the Trust on a number of foreign commodities exchanges. Foreign commodity exchanges differ in certain respects from their United States counterparts and are not regulated
by any United States agency.
The
CFTC and the United States exchanges have established "speculative position limits" on the maximum positions that JWH may hold or control in futures contracts on certain commodities.
Most
United States futures exchanges limit the maximum change in futures prices during any single trading day. Once the "daily limit" has been reached, it becomes very difficult to
execute trades. Because these limits apply on a day-to-day basis, they do not limit ultimate losses, but may reduce or eliminate liquidity.
When
a position is established, "initial margin" is deposited. On most futures exchanges, at the close of each trading day "variation margin," representing the unrealized gain or loss on
the open positions, is either credited to or debited from a trader's account. If "variation margin" payments cause a trader's "initial margin" to fall below "maintenance margin" levels, a "margin
call" is made, requiring the trader to deposit additional margin or have his position closed out.
Trading Methods
Managed futures strategies are generally classified as either (i) systematic or discretionary; and (ii) technical or fundamental.
Systematic and Discretionary Trading Approaches
A systematic trader relies on trading programs or models to generate trading signals. Discretionary traders make trading decisions on the basis of their own
judgment.
Each
approach involves 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 signaled by a system.
Technical and Fundamental Analysis
Technical analysis operates on the theory that market prices, momentum and patterns at any given point in time reflect all known factors affecting the supply and
demand for a particular commodity. Consequently, technical analysis focuses on market data as the most effective means of attempting to predict future prices.
Fundamental
analysis, in contrast, focuses on the study of factors external to the markets, for example: weather, the economy of a particular country, government policies, domestic and
foreign political and economic events, and changing trade prospects. Fundamental analysis assumes that markets are imperfect and that market mispricings can be identified.
98
Trend-Following
Trend-following advisors try to take advantage of major price movements, in contrast with traders who focus on making many small profits on short-term
trades or through relative value positions. Trend-following traders assume that most of their trades will be unprofitable. They look for a few large profits from big trends. During periods with no
major price movements, a trend-following trading advisor is likely to have big losses.
Risk Control Techniques
Trading advisors often adopt risk management principles. Such principles typically restrict the size of positions taken as well as establishing
stop-loss points at which losing positions must be liquidated. However, no risk control technique can assure that big losses will be avoided.
The JWH programs are systematic, technical and trend-following.
"Blue Sky" Glossary
The following definitions are included in this Appendix II in compliance with the requirements of various state securities
administrators who review public futures fund offerings for compliance with the "Guidelines for the Registration of Commodity Pool Programs" Statement of Policy promulgated by the North American
Securities Administrators Association, Inc. The following definitions are reprinted verbatim from such Guidelines and may, accordingly, not in all cases be relevant to an investment in the
Trust.
DefinitionsAs used in the Guidelines, the following terms have the following meanings:
AdministratorThe official or agency administering the security laws of a state.
AdvisorAny 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.
AffiliateAn 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 ContributionsThe total investment in a Program by a Participant or by all Participants, as the case may be.
Commodity BrokerAny 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 ContractA 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 SheetA 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 AssetsThe 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 InterestThe Net Assets of the Trust divided by the number of Units outstanding.
Net WorthThe excess of total assets over total liabilities as determined by generally accepted accounting principles. Net
Worth shall be
99
determined
exclusive of home, home furnishings and automobiles.
New Trading ProfitsThe 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 a margin account.
Organizational and Offering ExpensesAll 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 Interests under federal and state law, including taxes and fees, and accountants' and attorneys' fees.
ParticipantThe holder of a Program Interest.
PersonAny natural person, partnership, corporation, association or other legal entity.
Pit Brokerage FeePit Brokerage Fee shall include floor brokerage, clearing fees, National Futures Association fees, and
exchange fees.
ProgramA limited partnership, joint venture, corporation, trust or other entity formed and operated for the purpose of
investing in Commodity Contracts.
Program BrokerA Commodity Broker that effects trades in Commodity Contracts for the account of a Program.
Program InterestA limited partnership interest or other security representing ownership in a program.
PyramidingA 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.
SponsorAny 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 DateThe date as of which the Net Assets of the Program are determined.
Valuation PeriodA regular period of time between Valuation Dates.
100
EXHIBIT A
JWH GLOBAL TRUST
FOURTH AMENDED AND RESTATED
DECLARATION AND AGREEMENT OF TRUST
Dated as of June 5, 1998
JWH GLOBAL TRUST
FOURTH AMENDED AND RESTATED
DECLARATION AND AGREEMENT OF TRUST
TABLE OF CONTENTS
|
|
|
|
Page
|
1. |
Declaration of Trust |
|
A-1 |
2. |
The Trustee |
|
A-1 |
|
(a) |
Term; Resignation |
|
A-1 |
|
(b) |
Powers |
|
A-1 |
|
(c) |
Compensation and Expenses of the Trustee |
|
A-1 |
|
(d) |
Indemnification |
|
A-2 |
|
(e) |
Successor Trustee |
|
A-2 |
|
(f) |
Liability of the Trustee |
|
A-2 |
|
(g) |
Reliance by the Trustee and the Managing Owner; Advice of Counsel |
|
A-3 |
|
(h) |
Not Part of Trust Estate |
|
A-3 |
3. |
Principal Office |
|
A-3 |
4. |
Business |
|
A-4 |
5. |
Term, Dissolution, Fiscal Year and Net Asset Value |
|
A-4 |
|
(a) |
Term |
|
A-4 |
|
(b) |
Dissolution |
|
A-4 |
|
(c) |
Fiscal Year |
|
A-4 |
|
(d) |
Net Asset Value |
|
A-4 |
6. |
Net Worth of Managing Owner |
|
A-5 |
7. |
Capital Contributions; Units; Managing Owner's Liability |
|
A-5 |
|
(a) |
Capital Contributions; Units |
|
A-5 |
|
(b) |
Managing Owner's Liability |
|
A-5 |
8. |
Allocation of Profits and Losses |
|
A-5 |
|
(a) |
Capital Accounts and Allocations |
|
A-5 |
|
(b) |
Allocation of Profit and Loss for Federal Income Tax Purposes |
|
A-6 |
|
(c) |
Expenses |
|
A-7 |
|
(d) |
Limited Liability of Unitholders |
|
A-8 |
|
(e) |
Return of Capital Contributions |
|
A-8 |
9. |
Management of the Trust |
|
A-8 |
|
(a) |
Authority of the Managing Owner |
|
A-8 |
|
(b) |
Fiduciary Duties |
|
A-9 |
|
(c) |
Loans; Investments |
|
A-9 |
|
(d) |
Certain Conflicts of Interest Prohibited |
|
A-10 |
|
(e) |
Certain Agreements |
|
A-10 |
|
(f) |
Prohibition on "Pyramiding" |
|
A-10 |
|
(g) |
Freedom of Action |
|
A-10 |
10. |
Audits and Reports to Unitholders |
|
A-11 |
11. |
Assignability of Units |
|
A-12 |
12. |
Redemptions |
|
A-12 |
13. |
Offering of Units |
|
A-13 |
14. |
Additional Offerings |
|
A-14 |
15. |
Special Power of Attorney |
|
A-14 |
16. |
Withdrawal of a Unitholder |
|
A-14 |
17. |
Benefit Plan Investors |
|
A-15 |
18. |
Standard of Liability; Indemnification |
|
A-15 |
|
(a) |
Standard of Liability for the Managing Owner |
|
A-15 |
|
(b) |
Indemnification of the Managing Owner by the Trust |
|
A-15 |
|
(c) |
Indemnification by the Unitholders |
|
A-16 |
19. |
Amendments; Meetings |
|
A-16 |
|
(a) |
Amendments with Consent of the Managing Owner |
|
A-16 |
|
(b) |
Amendments and Actions without Consent of the Managing Owner |
|
A-17 |
|
(c) |
Meetings; Other |
|
A-17 |
|
(d) |
Consent by Trustee |
|
A-17 |
20. |
Governing Law |
|
A-18 |
21. |
Miscellaneous |
|
A-18 |
|
(a) |
Notices |
|
A-18 |
|
(b) |
Binding Effect |
|
A-18 |
|
(c) |
Captions |
|
A-18 |
22. |
Certain Definitions |
|
A-18 |
23. |
No Legal Title to Trust Estate |
|
A-19 |
24. |
Legal Title |
|
A-19 |
25. |
Creditors |
|
A-19 |
Testimonium |
|
|
Signatures |
|
|
A-ii
JWH GLOBAL TRUST
FOURTH AMENDED AND RESTATED
DECLARATION AND AGREEMENT OF TRUST
This FOURTH AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST ("Declaration and Agreement of Trust") of JWH Global
Trust (the "Trust") is made and entered into as of this 5th day of June, 1998 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").
WITNESSETH:
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 Third
Amended and Restated 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.
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,
A-1
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 does 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.
(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;
A-2
(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 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
A-3
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.
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 (except Unitholders owning more than 50% of
the Units then outstanding may agree in writing to the appointment of one or more managing owners to continue the business 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
A-4
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.
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.
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.
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.
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.
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).
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
A-5
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 following month-end Net Asset Value per Unit 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) 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
A-6
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.
(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 advanced all organizational and initial offering costs incurred in connection
with the initial public offering of Units, for which the Managing Owner was reimbursed by the Trust on the closing date of the initial public offering of Units (the "Initial Closing Date") and such
costs are being amortized over 60 months beginning with June 1997. 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
A-7
shall
be paid a Brokerage Fee at an annual rate equal to 5% (or a monthly rate of approximately 0.417%) 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 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).
In
no event shall organizational and offering expenses (including redemption fees, but excluding selling commission and ongoing compensation) exceed 15% of the capital contributions to
the Trust.
The
Managing Owner shall not allocate any of its internal expenses or overhead to the account of the Trust.
(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 Unit-holder 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.
A-8
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 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% annuallyincluding pit brokerage and service feesof 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.
During
any fiscal year of the Trust, if the Management Fee exceeds the 6% annual management fee contemplated by the NASAA Guidelines, the Managing Owner shall reimburse the Trust for
such excess.
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, the Foreign Exchange Account
Agreement, the 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
A-9
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 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. 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, or a trading advisor, shall be terminable by the Trust, without penalty, 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; provided, however, 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 and the Managing Owner shall notify Unitholders of any material changes relating to the Trust as provided in Section 10 hereof.
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 Prospectus 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 91-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."
(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
A-10
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 shall cause each Unitholder to receive (i) within 90 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 a beneficial owner of the Trust. The Managing Owner shall have the right to keep confidential from the Unitholders, for such period of time as the Managing Owner deems reasonable, any
information that the Managing Owner reasonably believes to be in the nature of trade secrets or other information the disclosure of which the Managing Owner in good faith believes is not in the best
interest of the Trust or could damage the Trust or its business or which the Trust is required by law or by agreement with a third party to keep confidential.
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 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
A-11
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, 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 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 fifth business day prior to the month-end of redemption
(including the last business day of the month), 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 highest month-end Net Asset Value per Unit or to $50 or less, after adding back
A-12
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 business 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.
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 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") until released as of the last business day of the month. The interest actually earned
on subscriptions funds while held by the Escrow Agent will be invested in the Trust, and
A-13
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.
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
A-14
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.
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 Missouri 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.
A-15
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.
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 the capital
contributed by such Unitholder, his or her share of undistributed profits and assets and the amount of any distributions wrongfully distributed to such Unitholder.
(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
A-16
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) 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 or extending the term of the Trust; 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.
A-17
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.
(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 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.
A-18
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, if required by law) may cause legal title to the Trust Estate or 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 Fourth 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: |
|
/s/ EMMETT R. HARMAN Name: Emmett R. Harmon
Title: Vice President |
|
|
CIS INVESTMENTS, INC.
as Managing Owner |
|
|
By: |
|
/s/ BARBARA A. PFENDLER Name: Barbara A. Pfendler
Title: 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, INC.
as Attorney-in-Fact |
|
|
By: |
|
/s/ BARBARA A. PFENDLER Name: Barbara A. Pfendler
Title: Vice President
|
|
|
A-19
EXHIBIT B
JWH GLOBAL TRUST
SUBSCRIPTION REQUIREMENTS
By executing a Subscription Agreement and Power of Attorney Signature Page for JWH Global Trust (the "Trust"),
each purchaser ("Purchaser") of units of beneficial interest ("Units") in the Trust subscribes for Units
at the Net Asset Value per Unit, as described in the Trust's current Prospectus (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 DistributionSubscription 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),
including, without limitation, the provisions of Sections 9(a), 11 and 15 thereof. 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"), CIS Securities, Inc. ("CISSI"), any Selling Agent, wholesaler or
correspondent, Bank One, NA (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, CISSI 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.
B-1
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 (required, in the
case of an individual Pennsylvania Purchaser) that no individual Purchaser should (may, in the case of an individual Pennsylvania Purchaser) invest more than 10% of his 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. AlaskaNet
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. ArizonaNet
worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000.
3. CaliforniaLiquid
net worth of at least $100,000 and an annual taxable income of at least $50,000.
4. IowaNet
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.
5. MaineMinimum
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 residents, 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
be delivered to all Maine residents.
6. MassachusettsNet
worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000.
7. MichiganNet
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.
8. MinnesotaExcept
as provided in the immediately following sentence, each Minnesota Purchaser must be an "accredited investor" as defined in
Regulation D under the Securities Act of 1933 and must, either alone or together with a purchaser representative, have sufficient financial knowledge and experience to be capable of evaluating
the risks and merits of an investment in the Units. The Trust may effect no more than 35 sales of Units to non-accredited investors in Minnesota in any consecutive 12-month
period. Each non-accredited investor must have a 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. Minnesota residents must sign a
Subscription Agreement and Power of Attorney Signature Page specifically prepared for Minnesota residents, a copy of which shall accompany this Prospectus and be delivered to all Minnesota residents.
9. MississippiNet
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. MissouriNet
worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000.
11. New
HampshireNet 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.
12. North
CarolinaNet worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000.
13. OklahomaNet
worth of at least $225,000 or a net worth of $60,000 and an annual income of at least $60,000.
14. OregonNet
worth of at least $225,000 or a net worth of at least $60,000 and an annual income of at least $60,000.
15. PennsylvaniaNet
worth of at least $175,000 or a net worth of at least $100,000 and an annual income of at least $50,000.
16. South
CarolinaNet 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.
B-2
17. South
DakotaNet worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000.
18. TennesseeNet
worth of at least $250,000 or a net worth of at least $65,000 and annual taxable income of at least $65,000.
19. TexasNet
worth of at least $225,000 or a net worth of at least $60,000 and annual taxable income of at least $60,000.
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. In the case of a
custodian purchasing Units for a minor, the Units will be either a gift to the minor and not paid with funds of the minor or the minor meets the foregoing suitability standards.
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
EXHIBIT C
JWH GLOBAL TRUST
SUBSCRIPTION INSTRUCTIONS
FOR
UNITS OF BENEFICIAL INTEREST
Any person considering subscribing for Units should carefully read and review the Prospectus, including the Privacy Policy of the Managing Owner contained therein. The
Prospectus must be accompanied by the most recent Account Statement of the Trust (current within 60 calendar days).
The
Units are speculative and involve a high degree of risk. It is recommended that no subscriber should invest more than 10% of such subscriber's net worth (which excludes home,
furnishings and automobiles) in the Trust.
Attached
to these subscription instructions is a detachable carbonless copy set of the Subscription Agreement and Power of Attorney Signature Page (the "Signature Page") with the
Subscription Agreement and Power of Attorney on the reverse side. The Signature Page is the document which you must execute if you wish to subscribe for Units. One copy of such Signature Page should
be retained by you for your records and the others delivered to your Financial Advisor.
FILL
IN ALL THE INFORMATION ON THE ATTACHED SIGNATURE PAGE, USING BLUE OR BLACK INK ONLY, AS FOLLOWS:
Item 1 |
|
|
|
Enter the whole dollar amount of the subscription (no cents). Check the box if the subscriber currently owns Units. |
Item 2 |
|
|
|
Check the box if payment is to be made by debit from investor's securities account. If debited, enter the investor's securities account number. |
Item 3 |
|
|
|
Enter the Social Security or Taxpayer ID Number of the investor. Check the appropriate box to indicate the type of ownership for the entity that is subscribing. In the case of joint ownership, either Social Security Number may be used. If the
Non-Taxable Investor is a plan or IRA of a Financial Advisor, check the box for "Other" and indicate "Selling Agent Plan" in the space provided. |
Items 4 through 8 |
|
|
|
The following specific instructions are provided for certain ownership types identified on the Signature Page: |
|
|
|
|
TrustEnter the trust's name in Item 4 and the trustee's name in Item 5, followed by "Ttee." |
|
|
|
|
Custodian Under Uniform Gifts to Minors ActComplete Item 4 with the name of minor followed by "UGMA." Enter the minor's Social Security Number in Item 3. In Item 8,
enter the custodian's name followed by "Custodian." Be sure to furnish the Taxpayer ID Number of the Custodian. |
|
|
|
|
Partnership or CorporationThe partnership's or corporation's name is required in Item 4. Enter a partner's or officer's name in Item 5. Enter the Taxpayer ID Number of the
partnership or corporation in Item 3. |
|
|
|
|
Non-Taxable InvestorIf applicable, complete Item 8 for the Custodian. Be sure to furnish the Taxpayer ID Number of the Custodian. |
|
|
|
|
Complete residence address in Item 6 and mailing address (if different) in Item 7. |
|
|
|
|
The investor(s) must review the representations relating to backup withholding tax or non-resident alien status following Item 7. Check box if applicable. |
Item 9 |
|
|
|
The investor(s) must sign the Subscription Agreement and Power of Attorney Signature Page. Joint accounts must include signatures of all parties. |
Items 10 and 11 |
|
|
|
Financial Advisor must complete. |
The Selling Agent's copy of the Subscription Agreement and Power of Attorney Signature Page may be required
to be retained in the Branch Office.
C-1
JWH GLOBAL 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 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 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 Net Asset Value. 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 current Prospectus of the Trust (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 payable to "Bank One, NA, Escrow Agent
for JWH Global Trust." If I have chosen to subscribe by account debit, I acknowledge that I must have my subscription payment in such account when I submit my subscription. My
Financial Advisor shall debit my account 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 five business days before month-end (including the last business day of the month) 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 an account statement (current
within 60 days) relating to the Trust. 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 BSubscription 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 advice 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, subscriber is authorized to invest in the Trust
and 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. Subscriber is registered with the
Commodity Futures Trading Commission and is a member of National Futures Association in all capacities that subscriber is required to be registered or such a member. If subscriber is a custodian for a
minor, the Units purchased will be either a gift to the minor and not paid with funds of the minor or the minor meets the net worth and annual income requirements set forth in
"Exhibit BSubscription Requirements" to the Prospectus.
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
derives from a business initiated in and concluded in the United States of America and 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. It is recommended that you should
invest no more than 10% of your net worth (excluding home, furnishings and automobiles) in the Trust. Risk factors relating to the Units include the following:
(i) You could lose all or substantially all of your investment in the Trust; (ii) the Trust is speculative and it takes positions with total
values that are bigger than the total amount of the Trust's assets; the face value of the Trust's positions typically range from three to fifteen times its aggregate Net Asset Value;
(iii) performance has been volatile; the Net Asset Value per Unit has fluctuated over 21% in a single month; (iv) the use of a single advisor applying a limited number of generally
similar trading programs decreases diversification relative to a fund using multiple advisors and increases risk; (v) substantial expenses, totalling almost 10.1% per annum, must be offset by
trading profits and interest income; (vi) there is no market for the Units; Units may only be redeemed as of the end of a calendar month subject to a 3% redemption charge through the end of the
eleventh month after issuance; (vii) the Trust trades to a substantial degree on non-U.S. markets which are not subject to the same degree of regulation as U.S. markets;
(viii) investors are required to make representations and warranties in connection with their investment; (ix) each prospective investor is encouraged to discuss the investment with
his/her individual financial, legal and tax adviser.
See
"The Risks You Face" beginning at page 11 of the Prospectus.
PLEASE COMPLETE THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE WHICH ACCOMPANIES THIS PROSPECTUS CAREFULLY AND ENSURE THAT YOUR FINANCIAL ADVISOR KNOWS WHETHER
YOU ARE SUBSCRIBING BY CHECK OR ACCOUNT DEBIT.
C-2
JWH GLOBAL TRUST
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE
(See Subscription Instructions on Cover)
The investor named below, by executing and delivering this Signature Page and by payment of the purchase price for units of
beneficial interest ("Units") in JWH Global Trust (the "Trust"), and by either (i) enclosing a check payable to "Bank One,
NA, as Escrow Agent for JWH Global 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% of the Net Asset Value per Unit.
The named investor further acknowledges receipt of the current Prospectus of the Trust (the "Prospectus"),
together with a recent Account Statement relating to the Trust (current within 60 calendar days) and the Trust's most recent Annual Report if not included in the Prospectus. The Prospectus includes
the Trust's Declaration and Agreement of Trust, Subscription Requirements and Subscription Agreement and Power of Attorney, the terms of which govern the investment in the Units being subscribed for
hereby.
1) |
Investment Amount $
(minimum $5,000, except $2,000 minimum for IRAs and
other qualified accounts; $1,000 minimum for additional
investments; $100 increments.) |
|
o |
Check box if
own Units |
|
2) |
Investor's securities account: Account #
o check box if debiting investor's securities account |
3) |
Social Security # |
|
|
or |
|
Taxpayer ID # |
|
Taxable Investors (check one) |
|
|
|
|
|
|
|
o |
Individual Investor |
|
o |
Community Property |
|
o |
Partnership |
|
o |
Tenants in Common |
|
|
|
|
o |
Joint Tenants with Right of Survivorship |
|
o |
Estate |
|
o |
UGMA/UTMA (Minor) |
|
o |
Corporation |
|
o |
Trust |
|
Non-Taxable InvestorsCustodian Signature Required (check one) |
|
|
|
|
|
|
|
o |
IRA |
|
o |
IRA Rollover |
|
o |
Profit Sharing |
|
o |
SEP |
|
|
|
|
o |
Roth IRA |
|
o |
Pension |
|
o |
Defined Benefit |
|
o |
Other |
4) |
Investor(s) Name(s): |
|
5) |
Additional Information (For Estate, Partnerships, Trust and Corporations) |
6) |
Residence Address of Unitholder: |
|
|
|
|
|
|
|
Street (P.0. Box numbers are not acceptable for residence address) |
City |
State |
Zip |
7) |
Mailing Address (if different): |
|
|
|
|
|
|
|
Street |
City |
State |
Zip |
8) |
Custodian Information: |
Taxpayer ID# |
|
|
|
|
|
|
Name |
Street |
City |
State |
Zip |
|
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: o. Under the penalties of perjury, by signature below I hereby certify that the Social Security or Taxpayer ID Number set forth in Item 3 above is my true, correct and complete Social Security or Taxpayer ID Number and
that the information given in the immediately preceding sentence is true, correct and complete. Moreover, under penalties of perjury, by signature below I certify that I am a U.S. Person. |
|
NON-UNITED STATES INVESTORS ONLY |
Under penalties of perjury, by signature below I hereby certify that I am not a U.S. Person (including (a) a citizen or resident of the United States or (b) (in the case of an
investor which is not an individual) a United States corporation, partnership, estate or trust): o. Moreover, under penalties of perjury, by signature below I certify that I am (or am authorized to sign for) the
beneficial owner (as defined in the Internal Revenue Code) of all the income to which this form relates. I will deliver the appropriate Form W-8 as instructed by my Selling Agent. |
9) |
INVESTOR(S) MUST SIGN |
The Internal Revenue Service does not require your consent to any provisions of this document other than the certifications required to avoid backup withholding
set forth after Section 7 above. |
|
|
|
|
|
Signature |
Date |
|
Signature of Joint Investor (if any) |
Date |
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. |
10) |
FINANCIAL ADVISOR MUST SIGN |
I hereby certify that I have provided the investor with a copy of the Prospectus and 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 the 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 suitability characteristics. The Financial Advisor MUST sign below in order to substantiate compliance with
Rule 2810 of the NASD. |
|
X
|
|
X
|
|
Financial Advisor Signature |
Date |
|
Office Manager Signature (if required) |
Date |
11) |
Broker-Dealer Firm: |
|
|
Financial Advisor: |
|
|
|
|
|
|
|
|
First |
|
M.I. |
|
Last |
|
Fin. Adv. Number |
|
Financial Advisor Mailing Address: |
|
|
|
Street (P.0. Box numbers are not acceptable for residence address) |
|
City |
|
State |
|
Zip |
Financial Advisor Phone |
|
Financial Advisor Fax |
|
E-mail address |
C-3
JWH GLOBAL TRUST
UNITS OF BENEFICIAL INTEREST
REQUEST FOR REDEMPTION
JWH GLOBAL TRUST
c/o CIS Investments, Inc.
Managing Owner
233 South Wacker Drive, Suite 2300
Chicago, Illinois 60606 |
|
|
|
Date |
|
|
|
|
|
Dear
Sirs:
The
undersigned 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 TRUST (the "Trust") of Units of Beneficial Interest ("Units") in the Trust. (Insert number of Units or dollar amount to be redeemed below. Unitholders
need not redeem all of their Units provided they redeem at least $1,000 of Units and they must hold minimum investment of $1,000 after any partial redemption. If no number of Units or dollar amount is
indicated, ALL Units held 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 this Request for Redemption is received no later than five business
days before the end of such month (including the last business day of the month). Payment of the redemption proceeds will generally be made within ten business 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.
Units
redeemed at 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 of Units at which they are
redeemed. Such charges will be deducted from the redemption proceeds 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:
The undersigned has checked the following box if he, she or it is 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 below the undersigned hereby certifies that the Social Security or Taxpayer ID Number set forth below is his, her or its true,
correct and complete Social Security or Taxpayer ID Number and that the information given in the immediately preceding sentence is true, correct and complete. Moreover, under penalties or perjury, by
signature below the undersigned certifies that he, she or it is a U.S. Person.
Non-United States Unitholders Only:
Under penalties of perjury, by signature below the undersigned hereby certifies that he, she or it is not a U.S. person (including (a) a citizen or
resident of the United States or (b) (in the case of an investor which is not an individual) a United States corporation, partnership, estate or trust):?. Moreover, under penalties of perjury,
by signature below the undersigned certifies that he, she or it is (or is authorized to sign for) the beneficial owner (as
C-4
defined
in the Internal Revenue Code) of all the income to which this form relates. The undersigned will deliver the appropriate Form W-8 as instructed by his, her or its Selling
Agent.
Tax IDSS# or Fed No (No hyphens) |
|
Account Number |
|
|
|
Account Name |
|
|
|
|
By: |
|
|
|
(Authorized corporate officer, partner, trustee or custodian) |
Account Mailing Address |
Street or P.O. Box |
|
City |
|
|
|
|
|
|
|
|
State |
|
|
Zip |
|
|
Country |
|
|
|
|
|
|
|
|
|
Phone |
|
JWH Global Trust: |
|
|
|
|
|
|
Redeem: Number of Units |
|
|
OR Amount $ |
|
|
|
|
|
|
|
|
|
|
|
(Write "ALL" for full redemption)
|
|
|
|
|
|
(Check one) |
|
|
|
|
|
Mail check to the address above |
|
|
Credit my customer securities account at: |
|
|
Name of Broker Dealer: |
|
|
|
Account Name: |
|
|
|
Account Number: |
|
SIGNATURES MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED. |
|
|
|
Individual Unitholder(s)/Custodian Signature |
|
|
Individual Unitholder(s)/Custodian Signature |
|
|
C-5
QuickLinks
RISK DISCLOSURE STATEMENT
PRIVACY POLICY
Organizational Chart
Contents
Summary
The Risks You Face
How the Trust Works
Performance of the Trust
Futures Volume by Market Sector
Growth in Managed Futures Industry
Comparison of JWH Global Trust and Certain General Market Indices June 1, 1997 through September 30, 2002
JWH Global Trust versus the S&P 500® 500 Stock Index and an Equally Weighted Portfolio of the Trust and the S&P 500® 500 Stock Index June 1, 1997 through September 30, 2002
JWH Global Trust and Selected Indices versus the Best and Worst 42 Months of the S&P 500® Stock Index
How JWH Can Make Money
THE JWH PROGRAMS USED BY THE TRUST CAPSULE PERFORMANCE AND ANNUAL AND MONTHLY RATES OF RETURN FINANCIAL AND METALS PORTFOLIO October 1984 through October 2002
THE JWH PROGRAMS USED BY THE TRUST CAPSULE PERFORMANCE AND ANNUAL AND MONTHLY RATES OF RETURN G-7 CURRENCY PORTFOLIO February 1991 through October 2002
THE JWH PROGRAMS USED BY THE TRUST CAPSULE PERFORMANCE AND ANNUAL AND MONTHLY RATES OF RETURN JWH GLOBALANALYTICS® FAMILY OF PROGRAMS June 1997 through October 2002
JWH GlobalAnalytics® Family of Programs Composite Performance Record (June 1997 through October 2002)
THE JWH PROGRAMS USED BY THE TRUST CAPSULE PERFORMANCE AND ANNUAL AND MONTHLY RATES OF RETURN JWH GlobalAnalytics® Family of Programs Exclusive Fund Accounts Composite Performance Record (May 8, 1998 to
December 31, 1999)
THE JWH PROGRAMS USED BY THE TRUST CAPSULE PERFORMANCE AND ANNUAL AND MONTHLY RATES OF RETURN JWH GlobalAnalytics® 99 (March 1999 through October 2002)
Charges Paid by the Trust
INDEX OF FINANCIAL STATEMENTS
JWH GLOBAL TRUST Statements of Financial Condition (Unaudited) September 30, 2002 and 2001
JWH GLOBAL TRUST Statements of Operations (unaudited) Periods ended September 30, 2002 and 2001
JWH GLOBAL TRUST Statements of Changes in Unitholders' Capital (unaudited) Periods from January 1, 2002 through September 2002
JWH GLOBAL TRUST Statements of Financial Condition December 31, 2001 and 2000
JWH GLOBAL TRUST Statements of Operations Years ended December 31, 2001, 2000 and 1999
JWH GLOBAL TRUST Statements of Changes in Unitholders' Capital Years ended December 31, 2001, 2000 and 1999
JWH GLOBAL TRUST Schedule of Investments December 31, 2001
JWH GLOBAL TRUST Notes to Financial Statements December 31, 2001, 2000 and 1999
CIS INVESTMENTS, INC. Statement of Financial Condition (unaudited) September 30, 2002
INDEPENDENT AUDITORS' REPORT
CIS INVESTMENTS, INC. Statements of Financial Condition May 31, 2002 and 2001
CIS INVESTMENTS, INC. Statements of Income Years ended May 31, 2002 and 2001
CIS INVESTMENTS, INC. Statements of Changes in Stockholder's Equity Years ended May 31, 2002 and 2001
CIS INVESTMENTS, INC. Statements of Cash Flows Years ended May 31, 2002 and 2001
CIS INVESTMENTS, INC. Notes to Financial Statements May 31, 2002 and 2001
PART TWO STATEMENT OF ADDITIONAL INFORMATION
JWH GLOBAL TRUST FOURTH AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST Dated as of June 5, 1998
JWH GLOBAL TRUST FOURTH AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST TABLE OF CONTENTS
JWH GLOBAL TRUST
SUBSCRIPTION REQUIREMENTS
JWH GLOBAL TRUST
SUBSCRIPTION INSTRUCTIONS FOR UNITS OF BENEFICIAL INTEREST
JWH GLOBAL TRUST SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE (See Subscription Instructions on Cover)
JWH GLOBAL TRUST UNITS OF BENEFICIAL INTEREST REQUEST FOR REDEMPTION