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WRITER'S DIRECT NUMBER WRITER'S E-MAIL ADDRESS
(212) 839-5458 mschmidtberger@sidley.com
March 29, 2005
Owen Pinkerton, Esq., Senior Attorney
United States Securities and Exchange
Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Re: World Monitor Trust III
Pre-Effective Amendment No. 3 to Registration Statement
File No. 333-119612
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Dear Mr. Pinkerton:
Thank you for your comment letter of March 24, 2005 to Marc
Goodman at Preferred Investment Solutions Corp. regarding the captioned
registration statement for World Monitor Trust III (the "Company"). This letter
is to respond on behalf of Preferred Investment Solutions Corp. to the comments
you raised. Each of your numbered comments is set forth below in italics, with
our response immediately following.
General
1. We have reviewed your response to Comment No. 4 from our last comment
letter. Since you are conducting a continuous offering, please include
disclosure indicating that you are registering units that are
anticipated to be sold within two years of the effectiveness of the
registration statement. Please see Rule 415(a)(2) of the Securities Act
of 1933.
Response:
--------
We represent to you on behalf of Preferred Investment
Solutions Corp. and Kenmar Securities Inc. that it is our clients' expectation
that the units being registered will be sold within two years from the initial
effective date of the registration statement and that our clients consider their
expectation to be reasonable. On the basis of conversations between and among
Jim Munsell of our office and you and Paul
SIDLEY AUSTIN BROWN & WOOD LLP IS A DELAWARE LIMITED LIABILITY PARTNERSHIP
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SIDLEY AUSTIN BROWN & WOOD LLP NEW YORK
Owen Pinkerton, Esq., Senior Attorney
March 29, 2005
Page 2
Fischer of your office on Thursday, March 24, and Monday, March 8, we have not
made any changes to the Registration Statement in response to this comment.
2. We note your response to Comment 7 from our last letter, but are unable
to determine where you have indicated that the company has no formal
procedure in place to resolve conflicts. Please revise this summary
risk factor on page 3 to include this.
Response:
--------
We have added the following language on page 3 in response to
the foregoing comment:
"The Managing Owner has not established any formal procedure
to resolve conflicts of interest. Consequently, investors will be dependent on
the good faith of the respective parties subject to such conflicts to resolve
them equitably. Although the Managing Owner attempts to monitor these conflicts,
it is extremely difficult, if not impossible, for the Managing Owner to ensure
that these conflicts do not, in fact, result in adverse consequences to the
various Series of the Trust."
3. We note your response to Comment 14. Your response does not appear to
address the extent, beyond a general reference, to which the trading
advisors you have selected to trade for the fund have encountered
illiquid situations in the past.
Response:
--------
We respectfully take the view that specific disclosure of past
experiences of market illiquidity by the trading advisors initially selected to
manage the various series is not required by the instructions to Form S-1 or the
applicable rules of the Commodity Futures Trading Commission, the National
Futures Association or the North American Securities Administrators Association,
Inc. and is not disclosed customarily in registration statements of commodity
pools. Neither have we seen comparable disclosure in registration statements of
registered investment companies, which encounter similar risks. Moreover, we do
not view this information as material to an investment decision by a prospective
investor as past experiences of illiquidity are poor indicators of future
events. Finally, this information is not easily obtained and, if obtained, would
at best be anecdotal and unreliable as trading advisors are not required to and
do not in fact keep records of such information in respect of any period of time
SIDLEY AUSTIN BROWN & WOOD LLP NEW YORK
Owen Pinkerton, Esq., Senior Attorney
March 29, 2005
Page 3
and the point at which a market has become "illiquid" is a highly subjective
judgment. A relatively low volume of trading in a particular market at a
particular time or over a particular period may be an indicator of illiquidity
in such market at such time or during such period and this information may be
obtainable by prospective investors from public sources in respect of certain
markets and certain periods, although we have made no investigation in this
regard. We are aware of other public commodity pools that recently have been
declared effective by the Staff whose registration statements do not contain
this disclosure. Notwithstanding the foregoing, we have added the following
language at the end of risk factor no. 12 on page 21 of the prospectus:
"Generally, none of the Advisors selected to manage the assets
of the various Series historically has allocated more than 10% of the assets
under such Advisor's management pursuant to the programs selected for the
various Series to over-the-counter instruments. The risk of loss due to
potentially illiquid markets is more acute in respect of over-the-counter
instruments than in respect of exchange-traded instruments because the
performance of those contracts is not guaranteed by an exchange or clearinghouse
and the Series will be at risk to the ability of the counterparty to the
instrument to perform its obligations thereunder. Because these markets are not
regulated, there are no specific standards or regulatory supervision of trade
pricing and other trading activities that occur in those markets."
4. Please revise to opine that each Series of the Trust will be classified
as a partnership for federal income tax purposes, as opposed to "should
be." Likewise, please revise your disclosure on Page 13 accordingly.
Response:
--------
We have revised the opinion and the related disclosure in
response to the foregoing comment.
5. Since the Registrant's year end is December 31, an audited balance
sheet as of that date is required in the filing. Refer to Rule 3-12 of
Regulation S-X.
Response:
--------
We have added an audited balance sheet of the Registrant as of
December 31, 2004. We have left in the audited balance sheet of the Registrant
as of March 10, 2005 because Series J had not been formed or initially
capitalized prior to
SIDLEY AUSTIN BROWN & WOOD LLP NEW YORK
Owen Pinkerton, Esq., Senior Attorney
March 29, 2005
Page 4
such date and the audited balance sheet of the Registrant as of December 31,
2004 does not reflect the existence or initial capitalization of Series J.
6. We note that you have obtained a standby letter of credit guaranteeing
a substantial portion of the receivable from Kenmar Management Ltd. in
lieu of providing an audited balance sheet for KML as requested in our
prior comment 18. We are in the process of discussing this issue with
the Division's Chief Accountant's Office and additional comments may be
forthcoming.
Response:
--------
Based on conversations between and among you and Paul Fischer
and Kristi Beshears of your office and me and Jim Munsell of my office on
Thursday, March 24, Monday, March 28 and today, we have added to footnote 8 of
the audited balance sheet of the managing owner disclosure regarding the amount
of the standby letter of credit supporting the receivable from MKL Limited (the
"LoC"), the identity of the issuer of the LoC and the credit rating of the
issuer of the LoC. Also, Preferred Investment Solutions Corp. ("Preferred")
hereby undertakes to provide an audited balance sheet of MKL in the event the
amount of the receivable from MKL Limited reflected on the balance sheet of
Preferred grows to exceed 20% of the total assets of Preferred.
SIDLEY AUSTIN BROWN & WOOD LLP NEW YORK
Owen Pinkerton, Esq., Senior Attorney
March 29, 2005
Page 5
7. We note your response to Comment 21, but are unable to determine where
you have made the referenced revision. Please revise or advise.
Response:
--------
We have removed the condition referenced in Comment 21 of your
letter of March 11, 2005.
* * *
If you have any further questions or comments, please do not
hesitate to call me at 212 839 5458.
Very truly yours,
Michael J. Schmidtberger
Enclosure
cc: Marc S. Goodman
Esther Goodman