SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
Commission File No. 333-16825
JWH GLOBAL TRUST
(Exact name of registrant as specified in its charter)
Delaware 36-4113382
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification #)
233 South Wacker Drive, Suite 2300, Chicago, IL 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312)460-4000
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Units of Beneficial Ownership
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K: [X]
The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the Registrant as of February 28, 2002:
$45,900,486.
Documents Incorporated by Reference
Incorporated by Reference in Part IV, Item 14 is Amendment No. 2 to
Registration Statement No. 333-16825 of the Trust on Form S-1 under the
Securities Act of 1933, declared effective on April 3, 1997.
Incorporated by Reference in Part IV, Item 14 is Registration Statement
No. 333-33937 of the Trust on Form S-1 under the Securities Act of 1933,
declared effective on September 24, 1997.
Incorporated by Reference in Part IV, Item 14 is Post-Effective
Amendment No. 1 to Registration Statement No. 333-33937 of the Trust on
Form S-1 under the Securities Act of 1933, declared effective on June
26, 1998.
Incorporated by Reference in Part IV, Item 14 is Post-Effective
Amendment No. 2 to Registration Statement No. 333-33937 of the Trust on
Form S-1 under the Securities Act of 1933, filed on March 1, 1999.
Incorporated by Reference in Part IV, Item 14 is Post-Effective
Amendment No. 3 to Registration Statement No. 333-33937 of the Trust on
Form S-1 under the Securities Act of 1933, filed on November 29, 1999.
Incorporated by Reference in Part IV, Item 14 is Post-Effective
Amendment No. 4 to Registration Statement No. 333-33937 of the Trust on
Form S-1 under the Securities Act of 1933, filed on September 18, 2000.
Incorporated by Reference in Part IV, Item 14 is Post-Effective
Amendment No. 5 to Registration Statement No. 333-33937 of the Trust on
Form S-1 Under the Securities Act of 1933, filed on May 29, 2001.
Part I
Item 1. Business
JWH Global Trust (the "Trust") is a Delaware business trust organized
on November 12, 1996 under the Delaware Business Trust Act. The
business of the Trust is the speculative trading of commodity interests,
including 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
("Commodity Interests") pursuant to the trading instructions of an
independent trading advisor. The managing owner of the Trust is CIS
Investments, Inc., a Delaware corporation organized in June 1983 ("CISI"
or the "Managing Owner"). The Managing Owner is registered as a
commodity pool operator under the Commodity Exchange Act, as amended,
and is responsible for administering the business and affairs of the
Trust exclusive of trading decisions. The Managing Owner is an
affiliate of Cargill Investor Services, Inc., the clearing broker for
the Trust ("CIS" or the "Clearing Broker") and CIS Financial Services,
Inc., which acts as the Trust's currency dealer ("CISFS"). Trading
decisions for the Trust are made by an independent commodity trading
advisor, John W. Henry and Company, Inc.
CIS is a "Futures Commission Merchant", the Managing Owner is a
"Commodity Pool Operator" and the trading advisor to the Trust is a
"Commodity Trading Advisor", as those terms are used in the Commodity
Exchange Act, as amended ("CE Act"). As such, they are registered with
and subject to regulation by the Commodity Futures Trading Commission
("CFTC") and the National Futures Association ("NFA"). CIS is also
registered as a broker-dealer with the National Association of
Securities Dealers, Inc. ("NASD") and the Securities and Exchange
Commission (the "SEC").
The initial public offering of the Trust's units of beneficial interest
("units") commenced on April 3, 1997 and concluded on September 23,
1997. The initial offering price was $100 per unit until the initial
closing of the Trust on May 30, 1997, and thereafter at the current Net
Asset Value of the Trust on the last business day of the calendar month.
The total amount of the initial offering was $50,000,000. On September
24, 1997, a registration statement was declared effective with the SEC
to register $155,000,000 of additional units. A Post-Effective
Amendment was declared effective with the SEC on October 20, 1997 to
deregister $3,120,048.99 of units which remained unsold upon the
termination of the initial offering of the units. On June 26, 1998,
Post-Effective Amendment No. 1 to the registration statement was
declared effective with the SEC. On March 1, 1999, Post-Effective
Amendment No. 2 was filed with the SEC. On November 29, 1999
Post-Effective Amendment No. 3 was filed with the SEC, on September 18,
2000 Post-Effective Amendment No. 4 was filed with the SEC and on May
29, 2001 Post-Effective Amendment No.5 was filed with the SEC. The
units are currently offered pursuant to a Prospectus dated July 3,
2001. The current prospectus will expire on April 3, 2002. As a
result of the units being offered at each month-end's Net Asset Value,
the total number of units authorized for the Trust is not determinable
and therefore is not disclosed in the financial statements.
The initial closing of the Trust was on May 30, 1997 and the Trust
commenced trading on June 2, 1997. The initial Beneficial Owners of the
Trust, representing ownership of $1,000, were redeemed on May 30, 1997,
prior to the commencement of trading.
Under the terms of the Fourth Amended and Restated Declaration and
Agreement of Trust, the Managing Owner may not select Trust transactions
involving the purchase or sale of any commodity interests, but must
select one or more advisors to direct the Trust's trading with respect
thereto. The Managing Owner has chosen and caused the Trust to enter
into a Trading Advisory Agreement (the "Advisory Agreement") with John
W. Henry and Company, Inc. ("JWH" or the "Advisor"), the Trust's sole
commodity trading advisor. Commencing on June 2, 1997, after the
conclusion of the offering period with respect to the Trust's units, JWH
began to provide commodity trading instructions to CISI on behalf of the
Trust.
The Managing Owner is responsible for the preparation of monthly and
annual reports to the Beneficial Owners; filing reports required by the
CFTC, the NFA, the SEC and any other Federal or state agencies having
jurisdiction over the Trust's operations; calculation of the Net Asset
Value (meaning the total assets less total liabilities of the Trust) and
directing payment of the management and incentive fees payable to the
Advisor under the Advisory Agreement.
The Managing Owner provides suitable facilities and procedures for
handling redemptions, transfers, distributions of profits (if any) and,
if necessary, the orderly liquidation of the Trust. Although CIS, an
affiliate of the Managing Owner, acts as the Trust's clearing broker,
the Managing Owner is responsible for selecting another clearing broker
in the event CIS is unable or unwilling to continue in that capacity.
The Managing Owner is further authorized, on behalf of the Trust (i) to
enter into a brokerage clearing agreement and related customer
agreements with CIS, pursuant to which CIS will render clearing services
to the Trust; and (ii) to cause the Trust to pay brokerage commissions
at the rates provided for in the Prospectus; and to pay delivery,
insurance, storage, service and other fees and charges incidental to the
Trust's trading. The Managing Owner of the Trust advanced organization
and offering costs of $650,000. The Trust reimbursed the Managing Owner
for these costs at the initial closing. The Trust is amortizing these
costs over the Trust's first 60 months of operations. The Managing
Owner also advances payment of ongoing offering expenses for which it
receives reimbursement of 0.5% of the Trust's net assets per year. The
Prospectus includes a complete discussion of the Trust's fees and
expenses.
The Advisory Agreement between the Trust and JWH provides that JWH shall
have sole discretion in and responsibility for the selection of the
Trust's commodity transactions with respect to that portion of the
Trust's assets allocated to it. As of December 31, 2001, JWH was
managing 100% of the Trust's assets. The Advisory Agreement with JWH
commenced on April 3, 1997 and continued in effect until the close of
business on the last day of the 12th full calendar month following the
commencement of trading activities by the Trust, with automatic renewal
for three additional twelve-month terms. The Trust and JWH amended the
Advisory Agreement as of September 29, 2000 to extend the term of the
Advisory Agreement until June 30, 2002 with automatic renewal for three
additional twelve-month terms, unless earlier terminated in accordance
with the termination provisions contained therein.
The Advisory Agreement shall terminate automatically in the event that
the Trust is terminated in accordance with the Fourth Amended and
Restated Declaration and Agreement of Trust. The Advisory Agreement may
be terminated by the Trust at any time, upon 60 days' prior written
notice to the Advisor. In addition, the Advisory Agreement may be
terminated by the Trust at any time, upon written notice to the Advisor,
in the event that (A) the Net Asset Value of Trust funds allocated to
the Advisor's management decreases as of the close of trading on any
business day by more than 30% from the sum of the Net Asset Value of the
Trust's funds allocated to the Advisor on the date that Trust commenced
trading plus the Net Asset Value of any funds which may be allocated to
the Advisor thereafter (after adding back all redemptions, distributions
and reallocations made to any additional trading advisors in respect of
such assets); (B) the Advisor is unable, to any material extent, to use
the Trading Programs (as defined in the Advisory Agreement), as the
Trading Programs may be refined or modified in the future in accordance
with the terms of the Advisory Agreement for the benefit of the Trust;
(C) the Advisor's registration as a commodity trading advisor under the
CE Act, or membership as a commodity trading advisor with NFA is
revoked, suspended, terminated or not renewed; (D) the Managing Owner
determines in good faith that the Advisor has failed to conform to (i)
the Trust's trading policies or limitations, as they may be revised or
modified, or (ii) a Trading Program; (E) there is an unauthorized
assignment of the Advisory Agreement by the Advisor; (F) the Advisor
dissolves, merges or consolidates with another entity or sells a
substantial portion of its assets, any portion of the Trading Programs
utilized by the Trust or its business goodwill to any person or entity
other than one controlled, directly or indirectly, by John W. Henry, in
each instance without the consent of the Managing Owner; (G) the Advisor
becomes bankrupt or insolvent; (H) John W. Henry ceases to be a
principal of the Advisor; or (I) the Managing Owner determines in good
faith that such termination is necessary for the protection of the
Trust.
The Advisor has the right to terminate the Advisory Agreement at any
time, upon written notice to the Trust in the event (i) of the receipt
by the Advisor of an opinion of independent counsel that solely by
reason of the Advisor's activities with respect to the Trust, the
Advisor is required to register as an investment adviser under the
Investment Advisers Act of 1940; (ii) that the registration of the
Managing Owner as a commodity pool operator under the CE Act, or its NFA
membership as a commodity pool operator is revoked, suspended,
terminated or not renewed; (iii) that the Managing Owner elects
(pursuant to Section 1 of the Advisory Agreement) to have the Advisor
use a different trading program in the Advisor's management of the
Trust's assets from that which the Advisor is then using to manage such
assets and the Advisor objects to using such different trading program;
(iv) that the Managing Owner overrides a trading instruction of the
Advisor pursuant to Section 1 of the Advisory Agreement for reasons
unrelated to a determination by the Managing Owner that the Advisor has
violated the Trust's trading policies or limitations; (v) that the
Managing Owner imposes additional trading limitation(s) pursuant to
Section 1 of the Advisory Agreement which the Advisor does not agree to
follow in the Advisor's management of its allocable share of Trust's
assets; (vi) there is an unauthorized assignment of the Advisory
Agreement by the Managing Owner of the Trust; or (vii) other good cause
is shown to which the written consent of the Managing Owner is
obtained. The Advisor may also terminate the Advisory Agreement on 60
days written notice to the Managing Owner during any renewal term.
The Advisor will continue to advise other futures trading accounts. The
Advisor and its officers, directors and employees also will be free to
trade commodity interests for their own accounts provided such trading
is consistent with the Advisor's obligations and responsibilities to the
Trust. To the extent that the Advisor recommends similar or identical
trades to the Trust and other accounts which they manage, the Trust may
compete with those accounts for the execution of the same or similar
trades.
Pursuant to the Advisory Agreement between the Trust and JWH, the Trust
paid JWH 0.33% of the month-end assets under its management after
deduction of a portion of the brokerage commissions at a 1.25% annual
rate (rather than the full brokerage commission at a 6.5% annual rate)
prior to October 1, 2000. Effective October 1, 2000, the management fee
was reduced to 0.167%. The Trust paid JWH a quarterly incentive fee of
15% of trading profits (after deduction of a portion of the brokerage
commissions at a 1.25% annual rate, rather than the 6.5% annual rate)
achieved on the assets of the Trust allocated by the Managing Owner to
JWH's management prior to October 1, 2000. Effective October 1, 2000,
the incentive fee was increased to 20%. Trading profits are calculated
on the basis of the overall performance of the Trust, not the
performance of each Trading Program utilized by JWH, considered
individually. See Exhibit 10.1 incorporated by reference herein for a
description of Net Asset Value and trading profits.
The Trust trades in the global futures and forward markets pursuant to
the Advisor's proprietary trading strategies. From the commencement of
trading on June 2, 1997 until October 4, 1998, the Trust allocated its
assets 50% to the Original Investment Program and 50% to the Financial
and Metals Portfolio. For the period beginning October 5, 1998 and
ending December 31, 1999, the Trust allocated its assets 40% to the
Original Investment Program, 35% to the Financial and Metals Portfolio
and 25% to the G-7 Currency Portfolio. On January 1, 2000, the Trust
substituted the JWH GlobalAnalytics Family of Programs for the Original
Investment Program. Trust assets were reallocated 40% to the Financial
and Metals Portfolio, 30% to the G-7 Currency Portfolio and 30% to the
JWH GlobalAnalytics Family of Programs. JWH continues to rebalance the
Trust's assets at the end of each quarter among these three trading
programs in accordance with the proceeding percentages.
The Trust's net assets are deposited in the Trust's accounts with CIS
and CISFS, the Trust's clearing broker and currency dealer,
respectively. The Trust earns interest on 100 percent of the Trust's
average daily balances on deposit with CIS or CISFS, as the case may be,
during each month at the average 91-day Treasury bill rate for that
month in respect of deposits denominated in U.S. dollars or at the
applicable rates in respect of deposits denominated in currencies other
than U.S. dollars (which may be zero in some cases).
The Trust currently has no salaried employees and all administrative
services performed for the Trust are performed by the Managing Owner.
The Managing Owner has no employees other than their officers and
directors, all of whom are employees of the affiliated companies of the
Managing Owner.
The Trust's business constitutes only one segment for financial
reporting purposes; it is a Delaware business trust whose purpose is to
trade, buy, sell, spread or otherwise acquire, hold or dispose of
commodity interests including 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. The Trust does not engage in the production or sale of
any goods or services. The objective of the Trust business is
appreciation of its assets through speculative trading in such commodity
interests. Financial information about the Trust's business, as of
December 31, 2001, is set forth under Items 6 and 7 herein.
Competition
The Advisor and its principals, affiliates and employees are free to
trade for their own accounts and to manage other commodity accounts
during the term of the Advisory Agreement and to use the same
information and trading strategy which the Advisor obtains, produces or
utilizes in the performance of services for the Trust. To the extent
that the Advisor recommends similar or identical trades to the Trust and
other accounts which it manages, the Trust may compete with those
accounts for the execution of the same or similar trades.
Other trading advisors who are not affiliated with the Trust may utilize
trading methods which are similar in some respects to those methods used
by the Trust's Advisor. These other trading advisors could also be
competing with the Trust for the same or similar trades as requested by
the Trust's Advisor.
Item 2. Properties
The Trust does not utilize any physical properties in the conduct of its
business. The Managing Owner use the offices of CIS, at no additional
charge to the Trust, to perform their administration functions, and the
Trust uses the offices of CIS, again at no additional charge to the
Trust, as its principal administrative offices.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Part II
Item 5. Market for the Registrant's Units and Related Security Holder Matters
(a) There is no established public market for the units and none is
expected to develop.
(b) As of December 31, 2001, there were 438,008.69 units held by the
Beneficial Owners for an investment of $48,892,753. The Managing
Owner held an investment of $642,340 (which is the equivalent of
5,754.50 units). A total of 65,241.94 units had been redeemed by
Beneficial Owners and 949.41 units by the Managing Owners during
the period from January 1, 2001 to December 31, 2001. The Trust's
Fourth Amended and Restated Declaration and Agreement of Trust
(Exhibit 3.1 hereto) contains a full description of redemption and
distribution procedures.
(c) To date no distributions have been made to owners of beneficial
interest in the Trust.
The Fourth Amended and Restated Declaration and Agreement of Trust does
not provide for regular or periodic cash distributions, but gives the
Managing Owner sole discretion in determining what distributions, if
any, the Trust will make to its owners of beneficial interest. The
Managing Owner has not declared any such distributions to date, and do
not currently intend to declare such distributions.
Item 6. Selected Financial Data
(1997 was the Trust's first year of trading, so no data is
available prior to 1997)
Year Ended December 31,
1997 1998 1999 2000 2001
1. Operating Revenues (000) $6,988 $16,869 $2,339 $7,447 $4,430
2. Profit (Loss) From Continuing Operations(000) 3,651 6,401 (9,222) 1,126 1,254
3. Profit (Loss) Per Unit 9.70 5.70 (10.89) 10.08 (2.96)
4: Total Assets(000) 65,693 100,133 89,612 52,922 50,278
5. Long Term Obligations 0 0 0 0 0
6. Cash Dividend Per Unit 0 0 0 0 0
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Most United States commodity exchanges limit the amount of fluctuation
in commodity futures contract prices during a single trading day by
regulations. These regulations specify what are referred to as "daily
price fluctuation limits" or "daily limits". The daily limits establish
the maximum amount the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular
commodity, no trades may be made at a price beyond the limit. Positions
in the commodity could then be taken or liquidated only if traders are
willing to effect trades at or within the limit during the period for
trading on such day. Because the "daily limit" rule only governs price
movement for a particular trading day, it does not limit losses. In the
past, futures prices have moved the daily limit for numerous consecutive
trading days and thereby prevented prompt liquidation of futures
positions on one side of the market, subjecting commodity futures
traders holding such positions to substantial losses for those days.
It is also possible for an exchange or the CFTC to suspend trading in a
particular contract, order immediate settlement of a particular
contract, or direct that trading in a particular contract be for
liquidation only.
The Trust's net assets are held in brokerage accounts with CIS and
CISFS. The Trust earns interest on 100 percent of the Trust's average
daily balances on deposit with CIS or CISFS, as the case may be, during
each month at the average 91-day Treasury bill rate for that month in
respect of deposits denominated in dollars or at the applicable rates in
respect of deposits denominated in currencies other than dollars (which
may be zero in some cases). For the calendar year ended December 31,
2001 CIS and CISFS had paid or accrued to pay interest of $1,657,888 to
the Trust. For the calendar year ended December 31, 2000 CIS and CISFS
paid or accrued to pay interest of $3,265,169 to the Trust.
For the fiscal year ended December 31, 2001, the Beneficial Owners
redeemed a total of 65,241.94 units for $7,636,323. The Managing Owner
redeemed units for $110,644. For the fiscal year ended December 31,
2000, Beneficial Owners redeemed a total of 393,996.40 units for
$37,731,946. The Managing Owner redeemed units for $200,544.
During 2001, Beneficial Owners purchased 72,485.25 units for
$8,406,483. The Managing Owner did not make a contribution in 2001
leaving the total contribution to equal $8,406,483.
Results of Operations
2001
During 2001, total contributions to the Trust equaled $8,406,483.
Investors redeemed Units in the amount of $7,636,323 and the Managing
Owner redeemed units in the amount of $110,644. The Trust achieved a
realized and unrealized gain of $2,772,249 and interest income of
$1,657,888. Total expenses of the Trust were $5,684,293, resulting in a
net loss of $1,254,157 and and a decrease in the Net Asset Value per
Unit of $2.96.
The Trust was down slightly in 2001, producing 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 sectors for the Trust's Trading Advisor, the John W. Henry and
Company, Inc.
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
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. Positions in these markets were large
and had been held for several months prior to being closed out. News
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 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 sympathy
with interest rates, which also caused portfolio losses. The Trust was
down approximately 5% for the quarter.
Effective July 1, 2001 James Davison became President of CIS, replacing
Bernard Dan. Mr. Davison has been an executive in the futures industry
for several years and has extensive experience in the managed futures
arena. On a similar note, Mark Rzepczynski Ph.D. became President and
Chief Investment Officer of the JWH effective January 1, 2002. Dr.
Rzepczynski has been with the JWH since 1998. The Managing Owner does
not feel that these appointments will materially effect the Trust.
2000
During 2000, total contributions to the Trust equaled $1,766,539.
Investors redeemed units in the amount of $37,731,946 and the Managing
Owner redeemed units in the amount of $200,544. The Trust achieved
realized and unrealized gains of $4,182,309 and interest income of
$3,265,169. Total expenses of the Trust were $6,321,658, resulting in a
net profit of $1,125,819 and an increase in the Net Asset Value per unit
of $10.08.
The trust had a profitable year in 2000, producing a gain of 9.65% for
the calendar year. After experiencing difficult trading environments
during the first three quarters of the year, JWH, the trading advisor to
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. In February, the U.S. Federal Reserve
announced that they were 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
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 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 had been the Trust's most consistent source
of profits over the prior 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 Euro during July and August. By September, the U.S.
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 U.S. 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. This change
in fees, when coupled with the reduction in the Treasury bill rate,
reduced the "breakeven" on the Trust from 7.3% to 4.8%.
1999
The Trust experienced a disappointing year in 1999. The year-end Net
Asset Value was at $104.51 per unit, representing a loss of 9.44% for
the year.
In 1999, JWH experienced its most difficult year in the firm's 18 year
history. A lack of sustained price movements coupled with abrupt trend
reversals in many market sectors resulted in a very difficult trading
environment. 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 one-quarter 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. Historically, performance tends to be
cyclical, producing strong overall results.
Inflation
Inflation does have an effect on commodity prices and the volatility of
commodity markets; however, continued inflation is not expected to have
a material adverse effect on the Trust's operations or assets.
Item 7(A). Quantitative and Qualitative Disclosures About 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.
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.
Quantifying the Trust's Trading Value at Risk
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 sector will be limited to Value at Risk or
by the Trust's attempts to manage its market risk.
Qualitative 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 table indicates 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 below. During fiscal year 2001, the Trust's
average total capitalization was approximately $49.6 million, and during
fiscal year 2000, the Trust's average total capitalization was
approximately $57.0 million.
Fiscal Year 2001
Highest Lowest Average % of
Market Value Value Value Average
Sector at Risk* at Risk* at Risk* 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 $0.4 0.6%
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 $4.4 8.5%
Fiscal Year 2000
Highest Lowest Average % of
Market Value Value Value Average
Sector at Risk* at Risk* at Risk* 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%
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 during the relevant 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 conditions, unusual, but historically recurring from time to time
- - could cause the Trust to incur severe losses over a short period of
time. The foregoing Value at Risk table, as well as the past
performance of the Trust - give 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 December 31, 2001 and December 31, 2000, the Trust had
approximately $47.0 million and $44.0 million, 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
exposures - except 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 exposures - constitute
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.
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 nations - e.g., Australia.
The Managing Owner anticipates that G-7 interest rates will remain the
primary market exposure of the Trust for the foreseeable future. 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-rates - i.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 and dollar/pound 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 excluding the U.S. The stock index futures
traded by the Trust are by law limited to futures on broadly based
indices. As of December 31, 2001, the Trust's primary 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. JWH has from time to
time taken substantial positions as it has perceived market
opportunities in these metals to develop.
Commodities. The Trust's primary commodities exposure is to
agricultural price movements which are often directly affected by severe
or unexpected weather conditions. Grains and cotton accounted for the
substantial bulk of the Trust's commodities exposure as of December 31,
2001 and December 31, 2000. In the past, the Trust has had material
market exposure to live cattle, coffee, sugar, cocoa and the soybean
complex and may do so again in the future. However, 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.
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, Euro, British pounds and Australian
dollars. The Trust controls the non-trading risk of these balances by
regularly converting these balances back into U.S. 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 90-day Treasury bill rate
(calculated daily).
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Manager 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 enter 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 process
from 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, assessments
of current market volatility and risk exposure, subjective judgment, and
evaluation of these and other general market conditions.
Item 8. Financial Statements and Supplementary Data
Reference is made to the financial statements and the notes
thereto attached to this report.
The following summarized quarterly financial information presents the
results of operations and other data for three-month periods ended March
31, June 30, September 30 and December 31, 2001 and 2000. This
information has not been audited.
First Quarter Second Quarter Third Quarter Fourth Quarter
2001 2001 2001 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)
First Quarter Second Quarter Third Quarter Fourth Quarter
2000 2000 2000 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 reporter above.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
The Trust is managed by its Managing Owner, CIS Investments, Inc. The
officers and directors of the Managing Owner as of December 31, 2001
were as follows:
CIS Investments, Inc.
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.
Jan R. Waye (born in June 1948) is Vice President and a director. Mr.
Waye assumed the position of Senior Vice President of CIS in
mid-September 1996, after returning from London where he held various
management positions for Cargill Investor Services, Ltd. including most
recently Managing Director for CIS Europe. He was appointed Vice
President with CISI on June 24, 1997. Mr. Waye joined Cargill in 1970
and served in various commodity trading and management position in
Chesapeake, Virginia; Winnipeg, Manitoba; and Vancouver, British
Columbia. In 1978 he moved to New York and shortly thereafter
Minneapolis as head of Foreign Exchange for Cargill's metals trading
business. Mr. Waye served in various management positions in the
Financial Markets Group until 1988 when he assisted in the management
and sale of Cargill's life insurance business in Akron, Ohio. He moved
to London in late 1988. Mr. Waye has served as a member of the Board of
LIFFE, the London International Financial Futures and Options Exchange,
and as Vice Chairman of its Membership and Rules Committee. He also
served on the Board of the London Commodity Exchange up to its merger
with LIFFE. Mr. Waye graduated from Concordia College, Moorhead,
Minnesota, with a B.A. degree in Communications and Economics in 1970.
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. 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.
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 and 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.
Todd R. Urbon (born in April 1967) is Treasurer. Mr. Urbon became the
Treasurer and director on June 14, 2001. Mr. Urbon graduated from
Northern Illinois University in 1989 with a B.S. degree in Finance. He
became a Certified Cash Manager in July 1999. Mr. Urbon began working
for CIS in 1989.
Barbara A. Walenga (born in February 1960) is the Secretary. Ms.
Walenga graduated from Fayetteville Technical Institute in 1981. She
began working at CIS in August 1981. She has held various compliance
management positions at CIS and is currently the Legal Compliance
Manager. She is currently a member of the FIA Law and Compliance
Division and the SIA Compliance and Legal 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.
Each officer and director holds such office until the election and
qualification of his or her successor or until his or her earlier death,
resignation or removal.
Item 11. Executive Compensation
The Trust has no officers or directors. The Managing Owner administers
the business and affairs of the Trust (exclusive of Trust trading
decisions which are made by an independent commodity trading advisor).
The officers and directors of the Managing Owner receive no compensation
from the Trust for acting in their respective capacities with the
Managing Owner.
All operating and administrative expenses attributable to the Trust are
paid by the Managing Owner except for brokerage commissions, advisory
fees, legal, accounting, auditing, printing, recording and filing fees,
postage charges and Trustee fees which are paid directly by the Trust.
CIS and CISFS, affiliates of the Managing Owner, are the Trust's
clearing broker and currency dealer, respectively. During the year
ended December 31, 2001, the Trust accrued and paid $3,215,618 in
brokerage commissions to CIS, as compared to $3,737,532 in 2000 and
$6,136,926 in 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) As of December 31, 2001, no person was known to the Trust to own
beneficially more than 5% of the outstanding units.
(b) As of December 31, 2001, the Managing Owner beneficially held an
ownership of $642,340 (which is the equivalent of 5,754.50 units)
or approximately 1.30% of the ownership of the Trust as of that
date.
(c) As of December 31, 2001, no arrangements were known to the
registrant, including any pledges by any person of units of the
Trust or shares of its Managing Owner or the parent of the
Managing Owner, such that a change in control of the Trust may
occur at a subsequent date.
Item 13. Certain Relationships and Related Transactions
(a) None other than the compensation arrangements described herein.
(b) None.
(c) None.
(d) Not Applicable.
Part IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) The following documents are included herein:
(1) Financial Statements:
a. Report of Independent Public Accountants.
b. Statements of Financial Condition as of December 31, 2001 and
2000.
c. Statements of Operations and Statements of Unitholders' Capital
for the years ended December 31, 2001, 2000 and 1999.
d. Notes to Financial Statements.
(2) All financial statement schedules have been omitted either because
the information required by the schedules is not applicable, or
because the information required is contained in the financial
statements included herein or the notes hereto.
(3) Exhibits:
See the Index to Exhibits annexed hereto.
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 29, 2002 JWH GLOBAL TRUST
By: CIS Investments, Inc.
(Managing Owner)
By: /s/ James A. Davison
James A. Davison
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
Date: March 29, 2002
/s/ James A. Davison
James A. Davison
President and Director
/s/ Barbara A. Pfendler
Barbara A. Pfendler
Vice President
/s/ Shaun D. O'Brien
Shaun D. O'Brien
Vice President and CFO
Index to Exhibits
Exhibit Sequentially
Number Description of Document Numbered Page
Reference
1.01 Form of Selling Agreement among CIS Securities, Inc. (the N/A
"Lead Selling Agent"), JWH Global Trust (the "Registrant"),
CIS Investments, Inc. (the "Managing Owner"), CIS Financial
Services, Inc. ("CISFS"), Cargill Investor Services, Inc.
("CIS") and John W. Henry and Company, Inc. ("JWH").1
3.01 Fourth Amended and Restated Declaration and Agreement of N/A
Trust of the Registrant.1
3.02 Certificate of Amendment of Certificate of Trust of the N/A
Registrant.2
10.01 Form of Subscription Agreement and Power of Attorney.1 N/A
10.02 Form of Amended Escrow Agreement among the Registrant, The N/A
First National Bank of Chicago, the Managing Owner and the
Lead Selling Agent.3
10.03 Form of Trading Advisory Agreement among the Registrant, N/A
the Managing Owner, CIS and JWH.3
10.04 Form of Customer Agreement between the Registrant and CIS.3 N/A
10.05 Form of Foreign Exchange Account Agreement between the N/A
Registrant and CIS Financial Services, Inc. ("CISFS").3
10.06 Form of Cash Bullion Account Agreement between the N/A
Registrant and CISFS.3
10.07 Form of Transfer Agent Agreement.3 N/A
13.01 Annual Report to Unitholders for Fiscal Year 2001 1
1 Incorporated by reference to Post-Effictive Amendment No. 6 to the
respective exhibit to the Registrant's Registration Statement on Form
S-1 in (Reg. No. 333-33937) filed on March 12, 2002.
2 The following exhibits are incorporated by reference herein from the
exhibits of the same description and number filed on August 19, 1997
with Registrant's Registration Statement on Form S-1 (Reg. No.
333-33937).
3 The following exhibits are incorporated by reference herein from the
exhibits of the same description and number filed on February 10, 1997
with Amendment No. 1 to Registrant's Registration Statement on Form S-1
(Reg. No. 333-16825; declared effective April 3, 1997).
Index to Financial Statements
Table of Contents
Independent Auditors' Report
Financial Statements:
Statements of Financial Condition, December 31, 2001 and 2000
Statements of Operations, Years ended December 31, 2001, 2000, and 1999
Statements of Changes in Unitholders' Capital, Years ended December 31,
2001, 2000, and 1999
Notes to Financial Statements
Schedule of Investments, December 31, 2001
Acknowledgment
Independent Auditors' Report
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.
Chicago, Illinois
February 11, 2002
Statements of Financial Condition December 31, 2001 and 2000
Assets 2001 2000
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 on open contracts $ 265,856 282,628
due to CIS
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
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 paid to CIS 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.
Statements of Changes in Unitholders' Capital Years ended December 31, 2001, 2000 and 1999
Beneficial Managing
Units* Owners 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 loss - 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 income - (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.
Notes to Financial Statements
December 31, 2001, 2000 and 1999
(1) General Information and Summary
JWH Global Trust (the Trust), a Delaware business 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.
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.
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 and
Company, Inc. (JWH) utilizing three of its trading programs, the
JWH 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) Financial Instruments with Off-balance Sheet Risk
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 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 (CE Act) 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.
(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.
JWH GLOBAL TRUST
Schedule of Investments
December 31, 2001
Number of Principal (notional) Value (OTE)
contracts
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)
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 40,137
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
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
Acknowledgment
To the best of my knowledge and belief, the information contained herein
is accurate and complete.
Shaun D. O'Brien
Chief Financial Officer,
CIS Investments, Inc.,
The Managing Owner and Commodity Pool Operator of JWH Global Trust
