As Filed with the Securities and Exchange Commission on November 26, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
JWH GLOBAL PORTFOLIO TRUST
(Exact name of registrant as specified in its charter)
DELAWARE 6793 36-4113382
(State of Organization) (Primary Standard Industrial (I.R.S. Employer
Classification Number) Identification Number)
C/O CIS INVESTMENTS, INC.
233 SOUTH WACKER DRIVE, SUITE 2300
CHICAGO, ILLINOIS 60606
(312) 460-4000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
L. CARLTON ANDERSON
CIS INVESTMENTS, INC.
233 SOUTH WACKER DRIVE, SUITE 2300
CHICAGO, ILLINOIS 60606
(312) 460-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
JOSEPH H. HARRISON, JR.
WOON-WAH SIU
SIDLEY & AUSTIN
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60603
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box: /X/
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
REGISTERED PER UNIT* PRICE
Units of Beneficial 500,000 Units $100 $50,000,000 $15,152
Interest
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* Estimated solely for purposes of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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JWH GLOBAL PORTFOLIO TRUST
CROSS REFERENCE SHEET
ITEM
NO. PROSPECTUS HEADING
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1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus. . . . . . . . . . . . . . . . . Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . . . . . Inside Cover Page; Table
of Contents
3. Summary Information. Risk Factors
and Ratio of Earnings to
Fixed Charges . . . . . . . . . . . . . . . Risk Disclosure
Statement; Summary; Risk
Factors; Charges
4. Use of Proceeds . . . . . . . . . . . . . . Use of Proceeds; The
Futures and Forward
Markets
5. Determination of Offering Price . . . . . . Inside Cover Page; Plan
of Distribution
6. Dilution. . . . . . . . . . . . . . . . . . Not Applicable
7. Selling Security Holders. . . . . . . . . . Not Applicable
8. Plan of Distribution. . . . . . . . . . . . Inside Cover Page; Plan
of Distribution
9. Description of Securities to Be
Registered . . . . . . . . . . . . . . . . Cover Page; Redemptions;
Net Asset Value; The
Trust and Its Objectives;
The Managing Owner.
10. Interests of Named Experts and
Counsel . . . . . . . . . . . . . . . . . . Legal Matters; Experts
11. Information with Respect to the
Registrant . . . . . . . . . . . . . . . . Summary; Risk Factors;
The Trust and Its
Objectives; The Trust
and the Trustee;
Investment Factors; The
Managing Owner; Use of
Proceeds; Charges;
Redemptions; Net Asset
Value; Brokerage
Arrangement; Conflicts
of Interest; The Futures
and Forward Markets;
Index of Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities . . . . . . . . . . . . . . . . Not Applicable
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
JWH GLOBAL PORTFOLIO TRUST
$50,000,000 OF UNITS OF BENEFICIAL INTEREST
$10,000,000 MINIMUM
MINIMUM PURCHASE: $5,000 EXCEPT AS PROVIDED BELOW
JWH Global Portfolio Trust (the "Trust") is a Delaware business trust
organized to engage in the speculative trading of futures contracts on
currencies, interest rates, energy and agricultural products, metals and
stock indices, options on such futures contracts, and spot and forward
contracts on currencies and precious metals. CIS Investments, Inc. ("CISI"
or "Managing Owner") will serve as managing owner of the Trust. John W.
Henry & Company, Inc. ("JWH" or "Trading Advisor") will serve as the sole
trading advisor of the Trust. Cargill Investor Services, Inc. ("CIS,"
"Futures Broker" or "Lead Selling Agent"), an affiliate of CISI, will act as
the Trust's futures broker and lead selling agent. CIS Financial Services,
Inc. ("CISFS" or "Foreign Currency Broker"), an affiliate of CISI, will act
as the Trust's counterparty in the Trust's spot and forward currency and
precious metals trades. See "Conflicts of Interest."
The Trust will trade in the global futures and forward markets pursuant
to the Trading Advisor's proprietary trading strategies, initially under its
Financial and Metals Portfolio and Original Investment Program (the "Trading
Programs"). The Trust's objective is substantial capital appreciation.
There can be no assurance that the Trust will achieve its objectives or avoid
substantial losses.
The Trust initially will allocate 50% of its assets to each Trading
Program, with quarterly automatic rebalancing by the Trading Advisor between the
Programs. The Trust may utilize other JWH programs or other combinations of JWH
programs as agreed between CISI and JWH.
The initial sale of the units of beneficial interest (the "Units") will
occur on _________ __, 1997 (subject to extension until up to _________ __, 1997
in the discretion of the Managing Owner), or such earlier date as the Managing
Owner may determine, provided that a minimum of $10,000,000 in subscriptions has
been accepted. Units will initially be offered at $100 per Unit. Once the
Trust has begun operating, Units will be offered for sale as of the last day of
each calendar month at Net Asset Value (assets less liabilities divided by Units
outstanding). The minimum initial investment is $5,000; $2,000 for trustees or
custodians of eligible employee benefit plans and individual retirement accounts
(subject to higher minimums in certain States); and $1,000 for existing
investors in the Trust (the "Unitholders"). Incremental investments are
permitted in multiples of $100. The Trust may register additional Units in
500,000-Unit increments until a total of 2,000,000 Units are registered.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE FOR INVESTMENT ONLY BY THOSE INVESTORS WHO CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. SEE "COMMODITY FUTURES TRADING COMMISSION RISK
DISCLOSURE STATEMENT" AT PAGE 1 AND "RISK FACTORS" AT PAGES 16 TO 24. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
An investment in the Trust involves significant risks, including the following:
- - The speculative, volatile and leveraged nature of futures and forward trading
could result in the loss of all or a substantial part of an investment.
See page 17. Trading on foreign futures and forward markets may involve
additional risks. See page 16.
- - The Trust has not commenced trading and does not have any performance
history. See page 19.
- - The Trust's profitability is dependent on JWH's performance. See pages 17
to 18. JWH's performance has been volatile. See page 20. The single-advisor
structure of the Trust and the positive correlation between the Trading
Programs may further increase the risk of loss. See pages 18 and 21.
- - The Trust is subject to substantial charges, payable irrespective of
profitability. The Managing Owner estimates that based on the $10,000,000
minimum Trust size the Trust will need to achieve trading profits of
approximately 7.92% (assuming the Trust will earn interest income at the
91-day Treasury bill rate prevailing on or about the date of this Prospectus)
in its first twelve months of trading to offset expenses. See page 18.
See also "Break-even Table" at pages 13 and 14.
- - The Trust is subject to certain potential and actual conflicts of interest.
See page 19.
- - The Units are not liquid as Unitholders have limited ability to redeem Units.
See page 19.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR
ACCURACY OF THIS DISCLOSURE DOCUMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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Selling Commissions,
Organizational and Offering Proceeds to Trust
Price to Public (1) Expenses (2)(3)(4)(5)
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Prior to Initial Closing, Per Unit $100 (2)(3)(4) $100
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After Initial Closing, Per Unit Net Asset Value (2)(3)(4) Net Asset Value
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Minimum Total Proceeds $10,000,000 (2)(3)(4) $10,000,000
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Maximum Total Proceeds $50,000,000 (2)(3)(4) $50,000,000
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See notes on pages (i)-(ii).
THE DATE OF THIS PROSPECTUS IS __________, 1996
(NOT FOR USE AFTER _________, 1997)
NOTES TO COVER PAGE
(1) The Units will be sold at $100 per Unit prior to the initial
closing date (the "Initial Offering Period") and thereafter at the Net Asset
Value per Unit as of the last day of each calendar month (the "Ongoing
Offering Period"). The $100 initial offering price was arbitrarily
determined. Once the Trust has begun trading, the Net Asset Value per Unit
will equal the aggregate Net Assets of the Trust, reflecting the initial
subscription price and the Trust's trading results net of fees and expenses
(all the assets of the Trust will have, except in highly unusual
circumstances, a readily ascertainable market value), divided by the number
of Units outstanding. see "Redemptions; Net Asset Value -- Net Asset Value"
at page 67.
The Units are offered on a "best efforts" basis without any firm
underwriting commitment through Cargill Investor Services, Inc. (the "Lead
Selling Agent"), as well as certain Additional Selling Agents (including
those introduced by "wholesalers" ("Wholesalers")) selected by the Lead
Selling Agent (together with the Lead Selling Agent, the "Selling Agents")
with the consent of the Managing Owner. With the consent of the Managing
Owner and the Lead Selling Agent, certain Additional Selling Agents may
distribute Units through correspondent "introducing brokers."
Units may be sold in each State only by persons appropriately registered as
broker-dealers or exempt from registration in such State.
No Units will be sold unless acceptable subscriptions for at least 100,000
Units ($10,000,000) are received on or before __________ __, 1997 (subject to
extension until up to _________ __, 1997 in the discretion of the Managing
Owner). If no units are ultimately sold, all subscriptions will be promptly
returned to subscribers with all interest earned thereon while held in escrow.
All subscription funds, plus all interest earned on such funds, will be promptly
returned to subscribers in the event that their subscriptions are rejected.
All investors will have the right to revoke their subscriptions (and
receive a refund of their subscriptions promptly after revocation) for a
period of five business days following receipt of a final Prospectus.
This Prospectus will first be used to solicit investors on or about the
date hereof.
(2) No selling commissions are paid from the proceeds of
subscriptions. The Selling Agents receive, from the Lead Selling Agent, (i)
selling commissions of up to 4% of the subscription price of all Units sold by
them and (ii) provided that they (a) are registered with the Commodity Futures
Trading Commission ("CFTC") as "futures commission merchants" or "introducing
brokers" and (b) sell Units through Registered Representatives who are
themselves registered with the CFTC, ongoing compensation of up to 4% per annum
of average month-end Net Asset Value per Unit on Units sold by them that have
been outstanding for twelve months. Such ongoing compensation will accrue from
the first day of the thirteenth month after a particular Unit is issued and
continue for as long as such Unit remains outstanding and will be payable
monthly in arrears. Such ongoing compensation may be deemed to constitute
"underwriting compensation." see "Federal Income Tax Aspects -- Syndication
Expenses" at page 77. The selling commissions and ongoing compensation with
respect to Units eligible to be charged the Special Brokerage Fee Rate as
described under "Charges -- Brokerage Fee -- Special Brokerage Fee Rate" will
be up to 2% of, respectively, the subscription price and average month-end Net
Asset Value of such Units.
Registered Representatives who are not registered with the CFTC will not be
eligible to receive ongoing compensation. Rather, such Registered
Representatives are restricted to receiving installment selling commissions.
The total amount of installment selling commissions and initial selling
commission received by any such Registered Representative on each Unit sold by
him or her may not exceed 9% of the initial subscription price of the Unit.
The Lead Selling Agent may engage Wholesalers who will introduce Additional
Selling Agents to the Lead Selling Agent, in which case such Wholesalers and
Additional Selling Agents will share the selling commissions and ongoing
compensation (or installment selling commissions) payable on Units sold by such
Additional Selling Agents. Certain Additional Selling Agents may distribute
Units through correspondent "introducing brokers," in which case such Additional
Selling Agents share with their respective correspondents the selling
commissions and ongoing compensation (or installment selling commissions)
described above due in respect of Units sold by such correspondents.
Wholesalers and correspondents must either be registered or exempt broker-
dealers and must satisfy the same eligibility requirements as those applicable
to the Selling Agents in order to receive ongoing compensation. See "Plan of
Distribution -- The Selling Agents" at page 85.
-i-
(3) The Trust's organizational and initial offering costs are
estimated to be approximately $500,000-$600,000. The organizational and
initial offering costs will be advanced by CISI and reimbursed, without
interest, to CISI by the Trust at the initial closing. The actual amount
available for trading by the Trust will be the amount shown as proceeds to
the Trust less the amount of such organizational and initial offering costs.
The amount of such organizational and initial offering costs shall be
amortized over 60 months commencing with the end of the calendar month in
which the initial closing occurs (irrespective of whether such month is a
full month). At no month-end will the amount amortized by the Trust exceed
1/60 of 2% of Net Assets of the Trust as of such month-end. The amount
amortized each month-end shall be the lesser of (i) the product of (x) one
divided by the number of months remaining in the amortization period times
(y) the unamortized balance of the capitalized organizational and initial
offering costs, or (ii) 1/60 of 2% of the month-end Net Assets at that
month-end. If (i) the Trust is terminated prior to the end of such 60-month
period, or (ii) the entire amount of the organizational and initial offering
costs reimbursed to CISI is not amortized at the end of the 60-month period
due to the 2% limitation, CISI shall return to the Trust, without interest,
an amount equal to the unamortized balance of the capitalized organizational
and initial offering costs. see also "Use of Proceeds --Proceeds of
Subscriptions" at page 58.
The costs of the ongoing offering of the Units, including the costs of
updating this Prospectus, will be paid by the Trust; provided that the Managing
Owner will absorb all such costs to the extent that they exceed 0.5% of the
Trust's average month-end Net Assets during any fiscal year.
(4) The Trust is not a "no load" fund: the Trust will pay
organizational and initial offering costs up to 2% of its average month-end Net
Assets for the first 60 months of operations and ongoing offering costs up to
0.5% of average month-end Net Assets in each fiscal year, and early redemption
charges apply.
(5) The Trust will maintain an escrow account at The First National
Bank of Chicago, Chicago, Illinois (the "Escrow Agent"). The Selling Agents
will deposit accepted subscription proceeds in escrow, pending investment in the
Units as of the initial closing date or, during the Ongoing Offering Period, as
of the last day of each calendar month, as the case may be.
Interest actually earned on subscriptions while held in escrow will be
invested in the Trust, and investors will be issued additional Units reflecting
each investor's attributable share of such interest.
_______________________
UNTIL _________ ___, 199_, ALL DEALERS EFFECTING TRANSACTIONS IN THE UNITS,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
THE SELLING AGENTS MUST DELIVER ANY SUPPLEMENTED OR AMENDED PROSPECTUS
ISSUED BY THE TRUST DURING THE INITIAL AND ONGOING OFFERING PERIODS.
THIS PROSPECTUS (AFTER THE TRUST BEGINS OPERATING) MUST BE ACCOMPANIED BY
THE MOST CURRENT ACCOUNT STATEMENT (OR PERFORMANCE INFORMATION, CURRENT WITHIN
60 CALENDAR DAYS, RELATING TO THE TRUST) AND, IF APPLICABLE, THE MOST CURRENT
ANNUAL REPORT OF THE TRUST.
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE TRUST, CISI, ANY SELLING AGENT OR ANY OTHER
PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.
-ii-
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SUBSCRIBERS WILL BE REQUIRED TO MAKE CERTAIN REPRESENTATIONS AND WARRANTIES
IN THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY.
_______________________
THE BOOKS AND RECORDS OF THE TRUST WILL BE MAINTAINED AT ITS PRINCIPAL
OFFICE, C/O CIS INVESTMENTS, INC., 233 SOUTH WACKER DRIVE, SUITE 2300, CHICAGO,
ILLINOIS 60606, TELEPHONE NUMBER (312) 460-4000. UNITHOLDERS WILL HAVE THE
RIGHT DURING NORMAL BUSINESS HOURS TO HAVE ACCESS TO AND COPY (UPON PAYMENT OF
REASONABLE REPRODUCTION COSTS) SUCH BOOKS AND RECORDS (OTHER THAN RECORDS OF
SPECIFIC TRADES MADE BY THE TRUST) IN PERSON OR BY THEIR AUTHORIZED ATTORNEY OR
AGENT. CISI WILL SEND ALL UNITHOLDERS ANNUAL AND MONTHLY REPORTS COMPLYING WITH
CFTC AND NATIONAL FUTURES ASSOCIATION ("NFA") REQUIREMENTS. THE ANNUAL REPORTS
CONTAIN CERTIFIED AND AUDITED, AND THE MONTHLY REPORTS UNAUDITED, FINANCIAL
INFORMATION.
_______________________
THE DIVISION OF INVESTMENT MANAGEMENT OF THE SECURITIES AND EXCHANGE
COMMISSION REQUIRES THAT THE FOLLOWING STATEMENT BE SET FORTH PROMINENTLY
HEREIN: "JWH GLOBAL PORTFOLIO TRUST IS NOT A MUTUAL FUND OR ANY OTHER TYPE OF
INVESTMENT COMPANY WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED, AND IS NOT SUBJECT TO REGULATION THEREUNDER."
_______________________
IT IS RECOMMENDED THAT NO SUBSCRIBER SHOULD INVEST MORE THAN 10% OF SUCH
SUBSCRIBER'S "LIQUID" NET WORTH (WHICH EXCLUDES HOME, FURNISHINGS AND
AUTOMOBILES IN THE CASE OF INDIVIDUALS AND INCLUDES ONLY READILY MARKETABLE
SECURITIES IN THE CASE OF ENTITIES) IN THE TRUST.
THE TRUST WILL BE SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE
SECURITIES EXCHANGE ACT OF 1934 AND IN ACCORDANCE THEREWITH WILL FILE REPORTS
AND OTHER INFORMATION WITH THE COMMISSION. REPORTS, PROXIES (IF ANY),
INFORMATION STATEMENTS (IF ANY), AND OTHER INFORMATION FILED BY THE TRUST, CAN
BE INSPECTED AND COPIED AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE
COMMISSION AT 450 FIFTH STREET, N.W., WASHINGTON, DC 20549 AND AT ITS NORTHEAST
REGIONAL OFFICE AT 7 WORLD TRADE CENTER, SUITE 1300, NEW YORK, NY 10048 AND AT
ITS MIDWEST REGIONAL OFFICE AT CITICORP CENTER, 500 WEST MADISON STREET, SUITE
1400, CHICAGO, IL 60661. COPIES OF SUCH MATERIAL CAN BE OBTAINED FROM THE
PUBLIC REFERENCE SECTION OF THE COMMISSION, 450 FIFTH STREET, N.W., WASHINGTON,
DC 20549 AT PRESCRIBED RATES. THE COMMISSION MAINTAINS A WEB SITE AT
HTTP://WWW.SEC.GOV THAT CONTAINS REPORTS, PROXY AND INFORMATION STATEMENTS AND
OTHER INFORMATION REGARDING REGISTRANTS THAT FILE ELECTRONICALLY WITH THE
COMMISSION.
-iii-
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU
TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS.
SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS
ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE
POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE
POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO
AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT
CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES
59 THROUGH 65 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO "BREAK-
EVEN," THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGES 13 TO
14.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY
STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK
FACTORS OF THIS INVESTMENT, AT PAGES 16 TO 24.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE
SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE
POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE
UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR
MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY
BE EFFECTED.
-1-
JWH GLOBAL PORTFOLIO TRUST
TABLE OF CONTENTS
Page
----
INDEX OF DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . 5
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Diversification . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Trading Advisor . . . . . . . . . . . . . . . . . . . . . . . 8
The Trading Programs. . . . . . . . . . . . . . . . . . . . . . . 9
The Managing Owner. . . . . . . . . . . . . . . . . . . . . . . . 10
The Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Charges 12
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . 12
"Break-even Table". . . . . . . . . . . . . . . . . . . . . . . . 13
Federal Income Tax Aspects. . . . . . . . . . . . . . . . . . . . 15
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Futures and Forward Trading . . . . . . . . . . . . . . . . . . . 16
(1) "Exchange of Futures for Physical" Transactions. . . . . . . 16
(2) Trading on Commodity Exchanges Outside the United States . . 16
(3) Bankruptcy of Futures Broker and Bankruptcy or Default of
Counterparties . . . . . . . . . . . . . . . . . . . . . . . 16
(4) Markets May be Illiquid. . . . . . . . . . . . . . . . . . . 16
(5) Unregulated Markets. . . . . . . . . . . . . . . . . . . . . 17
(6) Volatile Markets and Highly Leveraged Trading. . . . . . . . 17
(7) "Zero-Sum" Trading . . . . . . . . . . . . . . . . . . . . . 17
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(8) All or Substantially all of an Investment Could be Lost;
Past Performance Is Not Necessarily Indicative of Futures
Results . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(9) Specific Risks Associated with a Single-Advisor Portfolio. . 18
(10) Non-Correlated and Not Negatively Correlated Anticipated
Performance . . . . . . . . . . . . . . . . . . . . . . . .. 18
(11) Substantial Charges Payable Regardless of Profitability. . . 18
(12) Limited Ability to Liquidate an Investment in the Units. . . 19
(13) The Trust Is Subject to Conflicts of Interest. . . . . . . . 19
(14) The Trust Has No Operating History . . . . . . . . . . . . . 19
(15) Unitholders Have No Role in Management . . . . . . . . . . . 19
The Trading Advisor . . . . . . . . . . . . . . . . . . . . . . . 20
(16) Volatile JWH Trading History . . . . . . . . . . . . . . . . 20
(17) Possible Adverse Effects of Increasing JWH'S Assets Under
Management . . . . . . . . . . . . . . . . . . . . . . . . . 20
(18) Limitation of Liability and Indemnification of Trading
Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
The Trading Programs. . . . . . . . . . . . . . . . . . . . . . . 20
(19) Positive Correlation Between the Trading Programs. . . . . . 20
(20) Overlap of Markets . . . . . . . . . . . . . . . . . . . . . 21
(21) Technical, Trend-Following Trading Programs. . . . . . . . . 21
(22) Importance of Market Conditions to Profitability . . . . . . 21
(23) Possible Liquidation of Profitable Positions . . . . . . . . 22
(24) Alteration of Trading Systems and Contracts and Markets
Traded . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(25) Mandatory Closing Out of Offsetting Positions. . . . . . . . 22
(26) Limited Ability to Describe Proprietary Strategies . . . . . 22
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(27) Unitholders are Taxed on Allocable Trust Income Although
Such Income Is Not Distributed . . . . . . . . . . . . . . . 22
(28) Taxation of Interest Income Irrespective of Trading Losses . 23
(29) Limitations on the Deductibility of "Investment
Advisory Fees" . . . . . . . . . . . . . . . . . . . . . . . 23
-2-
JWH GLOBAL PORTFOLIO TRUST
TABLE OF CONTENTS (CONT'D)
Page
----
RISK FACTORS (cont'd)
(30) Nondeductibility of "Syndication Expenses" . . . . . . . . . 23
(31) Possibility of Tax Audit of Both the Trust and Individual
Unitholders . . . . . . . . . . . . . . . . . . . . . . . . 23
Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(32) Absence of Regulation Applicable to Investment Companies
and Their Advisers . . . . . . . . . . . . . . . . . . . . . 23
(33) Future Regulatory Changes. . . . . . . . . . . . . . . . . . 23
INVESTMENT FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Access to JWH and the Trading Programs. . . . . . . . . . . . . . 24
Investment Diversification. . . . . . . . . . . . . . . . . . . . 24
Opportunity to Profit in Declining as Well as in Rising Markets . 25
Interest on Trust Assets. . . . . . . . . . . . . . . . . . . . . 25
Small Minimum Investment; Smaller Minimum Additional Investment . 25
Limited Liability . . . . . . . . . . . . . . . . . . . . . . . 25
Administrative Convenience. . . . . . . . . . . . . . . . . . . . 26
THE TRUST AND ITS OBJECTIVES . . . . . . . . . . . . . . . . . . . . . 26
Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
The Managing Owner's Discussion and Analysis of the Trust's
Prospective Financial Condition and Results of Operations . . . 27
THE MANAGING OWNER . . . . . . . . . . . . . . . . . . . . . . . . . . 28
JOHN W. HENRY & COMPANY, INC.. . . . . . . . . . . . . . . . . . . . . 29
Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
A Disciplined Investment Philosophy . . . . . . . . . . . . . . . 29
Principals. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
The Investment Policy Committee . . . . . . . . . . . . . . . . . 33
Legal and Ethical Concerns. . . . . . . . . . . . . . . . . . . . 33
Trading Techniques. . . . . . . . . . . . . . . . . . . . . . . . 34
Program Modifications . . . . . . . . . . . . . . . . . . . . . . 34
Leverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Additions, Redemption and Reallocation of Capital for Pool
Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
The Trading Programs. . . . . . . . . . . . . . . . . . . . . . . 35
Other Programs Developed by JWH . . . . . . . . . . . . . . . . . 36
JWH Programs: Performance Summaries and Monthly Rates of Return . 37
The Trading Advisory Agreement. . . . . . . . . . . . . . . . . . 56
FIDUCIARY OBLIGATIONS OF THE MANAGING OWNER. . . . . . . . . . . . . . 56
Nature of Fiduciary Obligations; Conflicts of Interest. . . . . . 56
Remedies Available to the Unitholders . . . . . . . . . . . . . . 57
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Proceeds of Subscriptions . . . . . . . . . . . . . . . . . . . . 58
Speculative Trading . . . . . . . . . . . . . . . . . . . . . . . 58
Maintenance of Assets; Interest Income. . . . . . . . . . . . . . 58
CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Charges Paid by The Trust . . . . . . . . . . . . . . . . . . . . 59
Organization and Initial Offering Costs . . . . . . . . . . . . . 61
Brokerage Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Ongoing Offering Costs. . . . . . . . . . . . . . . . . . . . . . 63
Management Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 63
Incentive Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Administrative Expenses . . . . . . . . . . . . . . . . . . . . . 65
Extraordinary Expenses. . . . . . . . . . . . . . . . . . . . . . 65
Charges Paid by Others. . . . . . . . . . . . . . . . . . . . . . 65
Brokerage Fee for Currency and Precious Metals Trading. . . . . . 65
Selling Commissions and Ongoing Compensation. . . . . . . . . . . 65
Redemption Charges. . . . . . . . . . . . . . . . . . . . . . . . 65
-3-
JWH GLOBAL PORTFOLIO TRUST
TABLE OF CONTENTS (CONT'D)
Page
----
BROKERAGE ARRANGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 66
The Futures Broker. . . . . . . . . . . . . . . . . . . . . . . . 66
The Foreign Currency Broker . . . . . . . . . . . . . . . . . . . 67
REDEMPTIONS; NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . 67
Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . 68
THE TRUST AND THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . 68
Principal Office; Location of Records . . . . . . . . . . . . . . 68
Certain Aspects of the Trust. . . . . . . . . . . . . . . . . . . 68
The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Management of Trust Affairs; Voting by Unitholders. . . . . . . . 70
Recognition of the Trust in Certain States. . . . . . . . . . . . 70
Possible Repayment of Distributions Received by Unitholders;
Indemnification of the Trust by Unitholders . . . . . . . . . 70
Transfers of Units Restricted . . . . . . . . . . . . . . . . . . 70
Reports to Unitholders. . . . . . . . . . . . . . . . . . . . . . 71
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
CONFLICTS OF INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . 71
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Relationship of the Managing Owner, the Futures Broker
and the Foreign Currency Broker . . . . . . . . . . . . . . . . 71
Other Commodity Pools and Accounts. . . . . . . . . . . . . . . . 72
Commodity Transactions of Affiliates and Customers of the
Futures Broker . . . . . . . . . . . . . . . . . . . . . . . . 72
Other Activities of CIS, the Managing Owner, JWH and Their
Officers and Employees. . . . . . . . . . . . . . . . . . . . . 73
The Selling Agents. . . . . . . . . . . . . . . . . . . . . . . . 73
Indemnification and Standard of Liability . . . . . . . . . . . . 73
FEDERAL INCOME TAX ASPECTS . . . . . . . . . . . . . . . . . . . . . . 74
PURCHASES BY EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . 79
THE FUTURES AND FORWARD MARKETS. . . . . . . . . . . . . . . . . . . . 81
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . 84
Subscription Procedure. . . . . . . . . . . . . . . . . . . . . . 84
Subscribers' Representations and Warranties . . . . . . . . . . . 85
The Selling Agents. . . . . . . . . . . . . . . . . . . . . . . . 85
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 86
INDEX OF FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . 87
APPENDIX I: PERFORMANCE OF OTHER CISI-SPONSORED FUNDS
APPENDIX II: "BLUE SKY" GLOSSARY
EXHIBIT A: DECLARATION AND AGREEMENT OF TRUST
EXHIBIT B: SUBSCRIPTION REQUIREMENTS
EXHIBIT C: SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY (WITH REDEMPTION
REQUEST)
__________________________________
CIS INVESTMENTS, INC.
233 South Wacker Drive, Suite 2300
Chicago, Illinois 60606
(312) 460-4000
MANAGING OWNER
__________________________________
-4-
INDEX OF DEFINED TERMS
A NUMBER OF DEFINED OR SPECIALIZED TERMS ARE USED IN THIS PROSPECTUS. THE
RESPECTIVE DEFINITIONS OR DESCRIPTIONS OF SUCH TERMS MAY BE FOUND ON THE
FOLLOWING PAGES OF THIS PROSPECTUS.
Page(s)
-------
Additional Selling Agents. . . . . . . . . . . . . . . . . . . . . . . -i-
Administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . 65
"Break-even" table . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Brokerage Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Brokerage Fee Excess . . . . . . . . . . . . . . . . . . . . . . . . . 62
CEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
CFTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -i-
CIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
CISFS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
CISI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Correspondent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -i-
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Futures Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Clearinghouse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Daily limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Declaration and Agreement of Trust . . . . . . . . . . . . . . . . . . 68, A-1
"EFPs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Eligible Unitholder. . . . . . . . . . . . . . . . . . . . . . . . . . 62
Employee benefit plan. . . . . . . . . . . . . . . . . . . . . . . . . 79
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . -ii-
Financial and Metals Portfolio . . . . . . . . . . . . . . . . . . . . 9, 35
Foreign Currency Broker. . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Forward Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Futures Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 81
High Water Mark. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Incentive Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Initial margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Initial Offering Period. . . . . . . . . . . . . . . . . . . . . . . . -i-
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
JWH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Lead Selling Agent . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Managing Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Margin call. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
NASAA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . -i-, 68
New Trading Profit . . . . . . . . . . . . . . . . . . . . . . . . . . 64
NFA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Ongoing compensation . . . . . . . . . . . . . . . . . . . . . . . . . 65
Ongoing offering costs . . . . . . . . . . . . . . . . . . . . . . . . 63
Ongoing Offering Period. . . . . . . . . . . . . . . . . . . . . . . . -i-
Organizational and initial offering cost reimbursement . . . . . . . . -i-, 61
Organizational and initial offering cost amortization. . . . . . . . . -i-, 61
Original Investment Program. . . . . . . . . . . . . . . . . . . . . . 9, 35
Principals' markets. . . . . . . . . . . . . . . . . . . . . . . . . . 81
Redemption charges . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 65
Selling Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . -i-
-5-
Page(s)
-------
Selling commissions. . . . . . . . . . . . . . . . . . . . . . . . . . -i-, 65
Special Brokerage Fee Rate . . . . . . . . . . . . . . . . . . . . . . 62
Speculative position limits. . . . . . . . . . . . . . . . . . . . . . 82
Trading Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Trading Advisory Agreement . . . . . . . . . . . . . . . . . . . . . . 56
Trading Programs . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Trend-following. . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Unitholder(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
Variation margin . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Wholesalers . . . . . . . . . . . . . . . . . . . . . . . . . . . . -i-
"Zero-sum" trading . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-6-
JWH GLOBAL PORTFOLIO TRUST
SUMMARY
THE FOLLOWING SUMMARY IS INTENDED TO HIGHLIGHT CERTAIN INFORMATION
CONTAINED IN THIS PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS
SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS AND CAREFULLY CONSIDER THE
INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS."
THE TRUST JWH Global Portfolio Trust is a newly-organized Delaware
business trust whose objective is to achieve substantial
capital appreciation through speculative trading of
futures, options on futures, and spot and forward
contracts in global markets. It is the primary public
vehicle through which U.S. regional brokerage firms
market on an open-ended basis investment strategies of
John W. Henry & Company, Inc., the Trust's sole trading
advisor. The Trust will provide access to multiple JWH
programs. The Trust's offices are located at c/o
CIS Investments, Inc., 233 South Wacker Drive, Suite 2300,
Chicago, Illinois 60606; telephone (312) 460-4000.
The Trust aims to achieve its objectives using the
Financial and Metals Portfolio and the Original Investment
Program, two of the longest established proprietary JWH
programs, both of which have been trading client funds for
more than a decade.
OBJECTIVE While the Trust has the primary objective of substantial
capital appreciation by identifying and exploiting trends
in the markets it trades, it will at the same time
strive to reduce volatility and risk of loss by
participating in broadly diversified global markets and
implementing the Trading Programs' risk control policies.
If the Trust is able to preserve capital during periods of
unfavorable, non-trending markets, it has the potential to
benefit from major price movements in a wide range of
global markets when, from time to time, such trends do
occur.
JWH will take a long-term perspective of the markets in
seeking to achieve the Trust's objectives. The Trust will
not be managed in a manner likely to produce significant
short-term profits. On the contrary, JWH anticipates that
the Trust may incur major short-term losses from time to
time even if it succeeds in achieving its cumulative
performance objective over time. CISI and JWH recommend
that only those investors who are prepared to make at
least a medium- to long-term (minimum two-year) commitment
to the Trust should consider purchasing Units.
JWH is typically available to manage individual accounts
of substantial size -- $1,000,000 or more. Investors in
the Trust will gain access to JWH with a minimum
investment of only $5,000, or $2,000 in the case of
trustees or custodians of eligible employee benefit plans
and individual retirement accounts. In addition to
providing access to JWH, the small minimum requirement
also means that investors need not commit a significant
amount of assets in order to participate in speculative
trading of futures interests.
DIVERSIFICATION The Trust offers a potentially valuable means of
diversification from traditional investments. Investors in
the Trust will have the opportunity to participate in
markets which are typically not represented in an
individual's portfolio and which (because futures and
forward contracts can be traded on both the long and short
sides) offer profit potential in both rising and falling
markets. In addition, the Trading Programs trade in a
large number of global markets and sectors, providing
broad diversification in the Trust's trading despite its
single-advisor structure. This market and geographical
diversification means that the Trust's performance is not
dependent on any single sector or any single nation's
economy or currency. See "John W. Henry & Company, Inc.
--The Trading Programs" at page 36 for the markets traded
by the Trading Programs.
-7-
The expected lack of correlation between the performance
of the Trust and the performance of the general equity and
debt markets suggests that, if the Trust is successful,
allocating a portion of one's investment portfolio to the
Trust may provide real portfolio diversification that
enhances returns while decreasing overall portfolio
volatility.
HISTORICAL PERFORMANCE CHARACTERISTICS
Annualized returns show average compounded annualized
rates of return. Figures are calculated using the monthly
rates of return on a compound basis for the periods shown,
and are not a sum or average of the annualized rates of
return.
This data is not representative of the performance of any
one account. Rather, this information makes use of the
data provided in each Trading Program's performance record
which is the composite of the actual performance of all
the accounts trading in the Trading Program.
3-Year 5-Year 10-Year 5-Year
Annualized Annualized Annualized Correlation*
Return Return Return to S&P 500
---------- ---------- ---------- ------------
(Ending 9/30/96)
--------------------------------------------------
JWH Programs
- ------------
Original Investment Program(a) 19.6% 21.3% 16.7% 0.09
Financial and Metals
Portfolio(a) 11.7% 19.7% 38.5% 0.25
Benchmark Comparison
- --------------------
LBGBI(b) 4.0% 9.1% 9.1% 0.51
S&P 500 (Total Return)(c) 17.4% 15.2% 15.0% 1.00
* Correlation is measured as the correlation of monthly
returns to the S&P 500 over 5 years ending September 1996.
(a) Figures based on adjusted rates of return, net of
fees.
(b) LBGBI is the Lehman Brothers' Long-Term Government
Bond Index as published by Lehman Brothers International.
(c) S&P 500 is the Standard & Poor's Stock Index (Total
Return) as published by S&P Comstock.
The Original Investment Program began trading client
capital in October 1982 while the Financial and Metals
Portfolio began trading client capital in October 1984.
Comparison with the S&P 500 Index does not reflect
different tax treatment of each investment.
Futures trading is speculative and involves substantial
risk. PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS.
THE TRADING ADVISOR JWH is one of the largest advisors in the managed futures
industry with more than $1.6 billion of assets under
management as of September 30, 1996. It has been
continuously managing client funds in the futures and
forward markets for over 15 years. JWH has achieved
substantial profits under a variety of different market
conditions and through a variety of different programs
including the Original Investment Program and the
Financial and Metals Portfolio, the two programs that will
be utilized by the Trust initially. In investing in the
Trust, Unitholders will have the opportunity to place
assets with one of the world's most experienced global
futures and foreign exchange trading managers.
-8-
JWH manages capital in commodities, interest rate and
foreign exchange markets on a 24-hour basis for
international banks, brokerage firms, pension funds,
institutions, and high-net-worth individuals. JWH trades a
wide range of futures and forward contracts in the United
States, Europe and Asia, and has grown to have among the
largest amount of assets under management in its industry.
For information about JWH and JWH programs, see "John W.
Henry & Company, Inc." commencing at page 29.
THE TRADING ORIGINAL INVESTMENT PROGRAM. The first program offered by
PROGRAMS JWH, this program began trading in October 1982 and has an
annualized net return of 17% from inception to September
30, 1996. It is a broadly diversified portfolio giving
access to a diverse group of financial and non-financial
markets on U.S. and non-U.S. exchanges. Based on the
results of extensive research, this Trading Program's
composition was revised in July 1992 to include additional
global markets and an increased weighting in financial
sectors. The Trading Program utilizes long-term
quantitative reversal models which hold either long or
short positions at all times in every market in which it
participates. As of September 30, 1996, JWH had
approximately $180 million under management in the
Original Investment Program.
FINANCIAL AND METALS PORTFOLIO. The Financial and Metals
Portfolio started trading in October 1984 and has an
annualized net return of 40% from inception to September
30, 1996. This Trading Program seeks to capitalize on
sustained moves in global financial markets utilizing
intermediate- and long-term quantitative trend analysis
models, some of which attempt to employ neutral stances
during periods of non-trending markets. As of
September 30, 1996, JWH had approximately $949 million
under management in the Financial and Metals Portfolio.
The Trust will initially allocate its assets equally
between the Trading Programs. Thereafter, JWH will
automatically rebalance Trust assets equally between the
Trading Programs at the end of each quarter. For
historical performance information concerning the Trading
Programs, see "John W. Henry & Company, Inc. -- JWH
Programs: Performance Summaries and Monthly Rates of
Return" commencing on page 37. From time to time, CISI and
JWH may agree to alter the allocation of Trust assets
between the Trading Programs, to delete a Trading Program
or add other JWH programs.
DIVERSIFICATION
50/50 Mix of Original Investment Program and Financial
and Metals Portfolio Hypothetical Section Allocation
as of September 30, 1996
European Interest Rates 14.94%
Pacific Rim Interest Rates 24.02%
U.S. Interest Rates 6.54%
[Colored Pie Chart] Foreign Exchange 13.98%
Stock Indices 5.23%
Energy 9.72%
Agriculture 11.29%
Metals 14.29%
Sector allocations for the Original Investment Program and
Financial and Metals Portfolio are based on the margin per
million dollar invested required, as set by the exchange
where the contract is traded, for all open positions as of
September 30, 1996. In an account where forward contracts
were traded, IMM equivalent positions were used. In cases
where there was no IMM equivalent, 2% was used as a
representative margin requirement. These numbers will
change as the composition of the portfolio is based on
exit and entry signals, but will not reflect changes in
leverage utilized by JWH. These allocations are shown for
illustrative purposes only; allocations can and do change
over time and from time to time.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE
OF FUTURE RESULTS.
-9-
THE MANAGING OWNER The managing owner and commodity pool operator of the
Trust is CIS Investments, Inc. CISI was incorporated in
Delaware in 1983 and is an affiliate of Cargill Investor
Services, Inc., the Trust's futures broker. CISI is
registered with the CFTC under the Commodity Exchange Act,
as amended (the "CEA"), as a commodity pool operator and
is a member of the National Futures Association ("NFA").
CISI currently operates two public commodity pools jointly
with IDS Futures Corporation and one private commodity
pool. CISI maintains its principal office at 233 South
Wacker Drive, Suite 2300, Chicago, Illinois 60606;
telephone (312) 460-4000. See "The Managing Owner"
commencing at page 28.
THE OFFERING Units are offered at $100 per Unit during the three-month
Initial Offering Period (which may be terminated earlier
or extended for up to three additional months at the
discretion of CISI). No Units will be sold unless
acceptable subscriptions for at least 100,000 Units
($10,000,000) are received during the Initial Offering
Period. There can be no assurance that the minimum number
of Units that must be sold for the Trust to begin trading
will, in fact, be sold. Units will be sold as of each
month-end at their Net Asset Value during the Ongoing
Offering Period. Subscriptions must be received by the
Managing Owner no later than the 20th day of a month (or,
if the 20th is not a business day, the next business day)
for Units to be sold as of the end of that month.
Initial minimum investment is $5,000; $2,000 for trustees
or custodians of eligible employee benefit plans and
individual retirement accounts. Incremental initial
investments are permitted in multiples of $100. Existing
investors subscribing for additional Units may do so in
$1,000 minimums, also with $100 increments. Units are
sold in fractions calculated to five decimal places.
After the Trust has commenced operation, the Trust may
register additional Units in 500,000 Unit increments until
2,000,000 Units are registered.
Subscribers must complete, execute and deliver to their
Selling Agents the Subscription Agreement and Power of
Attorney Signature Page which accompanies this Prospectus.
THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY REQUIRES
INVESTORS TO MAKE CERTAIN SPECIFIED REPRESENTATIONS AND
WARRANTIES. SUBSCRIBERS SHOULD CAREFULLY READ (I) EXHIBIT
B -- SUBSCRIPTION REQUIREMENTS, (II) EXHIBIT C
-- SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY AND (III)
THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE
PAGE WHICH ACCOMPANIES THIS PROSPECTUS IN ADDITION TO
REVIEWING THIS ENTIRE PROSPECTUS CAREFULLY BEFORE THEY
DECIDE WHETHER TO INVEST IN THE UNITS. See "Plan of
Distribution -- Subscription Procedure" at pages 84 to 85.
REDEMPTIONS Unitholders have the option to redeem Units at their Net
Asset Value as of the end of any calendar month, provided
written notice is received by CISI on or before the 20th
of such month (or, if the 20th is not a business day, the
next business day), subject to early redemption charges of
3% of redemption-date Net Asset Value through the end of
the eleventh full calendar month after Units are sold.
All such charges are paid to CIS.
Units subscribed for are considered sold, for purposes of
determining whether redemption charges apply, as of the
day subscription funds are released from escrow (which, in
the case of Units subscribed for during the Initial
Offering Period, will be the day the Trust begins trading
and, in the case of Units subscribed for during the
Ongoing Offering Period, will be the last day of a
calendar month), not the day subscriptions for such Units
are accepted or subscription funds are deposited into
escrow.
See "Redemptions; Net Asset Value -- Redemptions" at
page 67.
-10-
RISK FACTORS An investment in the Trust is speculative and involves
a high degree of risk. The following are, in the opinion
of the Managing Owner, some of the significant risks
associated with investing in the Trust. A more detailed
list of the relevant risk factors is set forth under "Risk
Factors" at pages 16 through 24 of this Prospectus.
- Futures and forward trading is speculative,
highly volatile and highly leveraged. Investors
may lose all or a substantial part of their
investment. Trading on foreign futures and
forward contract markets involves additional
risks, including the lack of regulatory
protection for trading in certain foreign
markets, exchange rate risk, risk of
expropriation, credit and investment controls
and counterparty credit risk. See "Risk Factors
-- Futures and Forward Trading" at pages 16 to 17.
- The Trust has not commenced trading and has no
performance history. Therefore, investors have no
information concerning the Trust's actual results of
operation on which to base their investment
decision. See "Risk Factor (14) -- The Trust Has No
Operating History" at page 19. Although both
Trading Programs to be utilized initially by the
Trust have been in continuous operation for over
10 years, past performance is not necessarily
indicative of future results.
- The Trust is a single-advisor fund, which is
considered by some to involve higher risk than
multi-advisor funds. The Trust's profitability
depends on JWH's trading performance. There can be
no assurance that the Trust will have the continued
services of JWH and its key principals. JWH's past
performance has exhibited significant volatility.
The Trust could incur large losses over short-term
periods. See "Risk Factors -- The Trust" at
pages 17 to 19 and "-- The Trading Advisor" at
page 20.
- In addition, the positive correlation between the
Trading Programs (because they trade in some of the
same markets and are both technical, trend following
programs) may further increase the risk of loss
because it potentially reduces the benefit of
diversification. See "Risk Factors -- The Trading
Programs" at pages 20 to 22.
- The Trust is subject to substantial charges,
payable regardless of profitability. The Managing
Owner estimates that based on the $10,000,000
minimum Trust size the Trust will need to achieve
trading profits of 7.92% (assuming the Trust will
earn interest income at the 91-day Treasury bill
rate prevailing on or about the date of this
Prospectus) in its first twelve months of trading
to offset the Brokerage Fee, Management Fee,
organizational and initial offering cost
amortization, ongoing offering costs and
administrative costs. Furthermore, the quarterly
Incentive Fee is calculated on the trading profit
of the Trust as a whole, not on the Net Asset
Value of Units held by each Unitholder, which,
together with possible misallocation of trading
profits due to timing of purchase and redemption
of Units, could cause an Incentive Fee to be
assessed on Units of a Unitholder even though
such Units have declined in value. See "Risk
Factor (11) -- Substantial Charges Payable
Regardless of Profitability" at page 18 and
"Charges" at pages 59 through 65.
- The Trust is subject to a number of potential and
actual conflicts of interest. The Trust's
Futures Broker and Foreign Currency Broker are
affiliates of the Managing Owner. No formal
mechanism is in place to resolve the conflicts
of interest that may arise due to the affiliation
of these parties. However, the Managing Owner
is subject to restrictions imposed on
"fiduciaries" under both statutory and common
law. See "Risk Factor (13) --The Trust Is Subject
to Conflicts of Interest" at page 19.
-11-
- No market exists for the Units. Units are
redeemable only at month-end. Redemption requests
must be received by CISI on or before the 20th of a
month (or if the 20th is not a business day, the
next business day) to effect redemption as of such
month-end. Given the volatile nature of the
investment, the Net Asset Value could vary
significantly between the date on which redemption
is requested and the date on which redemption
occurs. In addition, a redemption charge of 3%
applies to Units redeemed at or prior to the end of
the eleventh month after they are issued. See "Risk
Factor (12) -- Limited Ability to Liquidate an
Investment in the Units" at page 19.
DISTRIBUTIONS Distribution of profits, which is currently not
contemplated, will be made at the discretion of the
Managing Owner. There is no assurance that any
distribution will be made. Tax liabilities incurred
by a Unitholder as a result of profitable trading by
the Trust may exceed distributions, if any, the
Unitholder receives from the Trust. See "Risk
Factor (27) --Unitholders Are Taxed on Allocable
Trust Income Although Such Income Is Not
Distributed" at page 22.
CHARGES The Trust will pay substantial charges. The
Brokerage Fee, Management Fee, Incentive Fee (even
in "break-even" or losing years), administrative
expenses, organizational and initial offering cost
amortization and ongoing offering costs together are
estimated to total approximately 12.62% of the
Trust's average month-end assets; and a 3%
redemption charge will be in effect through the end
of the eleventh full month after a Unit is sold. At
current interest rates, the charges to which the
Trust will be subject will exceed the interest it
will earn on its assets.
The Trust will pay CIS a monthly flat-rate Brokerage
Fee at an annual rate of 6.5% (or approximately
0.542% per month) of the Trust's month-end assets
after deduction of the Management Fee. However,
eligible Unitholders will be charged a lower Special
Brokerage Fee Rate with respect to some or all of
their Units as described under "Charges -- Brokerage
Fee -- Special Brokerage Fee Rate" at page 62.
JWH will receive a monthly Management Fee of 4% per
annum (or approximately 0.333% per month) of the
Trust's month-end assets after deduction of a
portion of the Brokerage Fee at the annual rate of
1.25% (rather than 6.5%) of month-end assets. JWH
will also be paid a quarterly Incentive Fee equal to
15% of New Trading Profit after deduction of the
Brokerage Fee at the annual rate of 1.25% of
month-end assets and the Management Fee.
The Trust will amortize organizational and initial
offering cost reimbursement over the first 60 months
of the Trust's operations, up to a limit at each
month-end of 1/60 of 2% of Net Assets as of such
month-end. In addition, the Trust will pay its
administrative expenses (estimated at 0.6% of
average month-end Net Assets based on the
$10,000,000 minimum Trust size), ongoing offering
costs of up to 0.5% of average month-end Net Assets
and, if any, extraordinary costs.
For a description of the charges payable by the Trust,
see "Charges" commencing at page 59.
INTEREST INCOME CIS and CISFS will credit the Trust, as of each
month-end, with interest on the Trust's assets
deposited with CIS and CISFS at 100% of the 91-day
Treasury bill rate for deposits denominated in
dollars and at the rates agreed between the Trust
and CIS and CISFS for deposits denominated in other
currencies. See "Use of Proceeds --Maintenance of
Assets; Interest Income" at page 58. The Managing
Owner may determine to deposit a portion of the
Trust's assets in an account in the name of the
Trust at a bank ("Custodian") and engage a cash
manager to provide cash management services with
respect to such assets. The fees of such cash
manager will be paid by the Trust. CIS has agreed to
credit the account of the Trust at each month-end
the amount, if any, by which returns (net of fees of
the cash manager) for such month on Trust assets
held by a Custodian are less than the return that
would have been realized by the Trust had such
assets been deposited with CIS.
-12-
"BREAK-EVEN TABLE" The following "Break-even Table" is calculated
pursuant to applicable CFTC and NFA requirements and
reduces the 12-month expense "load" by the interest
income estimated to be earned by the Trust (i.e.,
assuming no offsetting trading losses).
The "Break-even Table" as presented is based on the
$10,000,000 minimum Trust size. The Trust's
capitalization does not directly affect the level
of charges based on percentage of assets or Net
Assets and percentage of New Trading Profit, which
will equal approximately the same percentage of the
Trust's equity, whatever its size. Trust size will
affect the level (expressed as a percentage of Trust
assets) of fixed dollar amount expenses, which
include organizational and initial offering cost
reimbursement amortization and ongoing offering
costs (both of which are assumed in the "Break-even
Table" to equal the maximum permissible percentages
of the Trust's Net Assets).
As further discussed under "Charges," while the
Trust's expenses are directly, and its profits and
losses generally, related to its month-end assets or
Net Assets, neither has (except at the commencement
of trading) any connection with the initial Net
Asset Value per Unit (or the amount of an initial
subscription). In order for Column II in the
"Break-even Table" to present absolute dollar amount
"break-even" figures, it has been assumed that the
average month-end Net Assets attributable to an
initial investment during the 12-month "break-even"
period equals the amount of such initial investment.
This is unlikely to be the case in fact.
THERE IS NO ASSURANCE THAT THE ANTICIPATED
PERCENTAGES OF EXPENSES WILL IN FACT BE INCURRED BY
THE TRUST. INVESTORS SHOULD NOT INTERPRET THESE
ESTIMATES AS REPRESENTATIONS BY THE TRUST OF THE
ACTUAL AMOUNTS OF OPERATING EXPENSES OF THE TRUST.
IN ADDITION, NO ASSURANCE CAN BE GIVEN THAT THE
EXPENSES TO BE INCURRED BY THE TRUST WILL NOT EXCEED
THE ESTIMATED AMOUNTS OR THAT THERE WILL NOT BE ANY
OTHER EXPENSES.
The following "Break-even Table" indicates the approximate percentage
and dollar returns from trading required for the redemption value of an
initial $5,000 investment in the Units to equal, twelve months after
issuance, the amount originally invested ("break-even" level). Column I
shows the effective rates of return on average month-end assets the Trust is
required to earn from trading for a Unitholder to break-even in the first
twelve months of investment.
COLUMN I COLUMN II
PERCENTAGE RETURN REQUIRED DOLLAR RETURN REQUIRED
REQUIRED ($5,000 INITIAL INVESTMENT)
FIRST TWELVE MONTHS OF FIRST TWELVE MONTHS OF
ROUTINE EXPENSES(1) INVESTMENT INVESTMENT
- -------------------- -------------------------- ---------------------------
Brokerage Fees (2) 6.24% $ 312.00
Management Fee (3) 3.95 197.50
Incentive Fee (4) 1.11 55.50
Administrative Expenses (5) 0.53 26.50
Organizational and
Initial Offering Cost
Amortization (6) 0.35 17.50
Ongoing Offering Costs (7) 0.44 22.00
Less Interest Income (8) (4.70) (235.00)
RETURN ON $5,000 INITIAL
INVESTMENT REQUIRED FOR
"BREAK-EVEN" 7.92% $ 396.00
SEE NOTES ON THE FOLLOWING PAGE.
-13-
NOTES TO "BREAK-EVEN TABLE"
(1) See "Charges" at pages 59 through 65 for an explanation of the expenses
included in the "Break-even Table."
(2) Assumes the standard flat-rate annual Brokerage Fee at 6.5% of the Trust's
month-end assets after deduction of the Management Fee at the annual rate
of 3.95% of month-end assets but before deduction of administrative
expenses, Incentive Fee, ongoing offering costs, and organizational and
initial offering cost amortization. Calculation in such manner results in
an effective Brokerage Fee rate of 6.24% of the Trust's average month-end
assets per annum for purposes of break-even analysis. Certain investors
are eligible to pay the lower Special Brokerage Fee Rate as described under
"Charges -- Brokerage Fee -- Special Brokerage Fee Rate" at page 62.
(3) The Trust will pay JWH a Management Fee at a rate of 4% per annum of the
Trust's month-end assets after deduction of a portion of the Brokerage Fee
at per annum rate of 1.25% (rather than 6.5%) of month-end assets.
Calculating the Management Fee in this manner results in an effective
annual Management Fee rate of 3.95% of the Trust's average month-end assets
for purposes of break-even analysis.
(4) The Incentive Fee is calculated on the basis of the overall profits of the
Trust, not the investment experience of any particular Unit. Furthermore,
the Incentive Fee is calculated quarterly, not annually. Incentive Fee
misallocation may also arise from the fact that all Units are charged the
same Incentive Fee regardless of the time of purchase. Substantial
quarterly Incentive Fees may be paid to JWH in respect of interim quarters
even during a "break-even" (as well as an unprofitable) year. Furthermore,
certain Units may pay an allocable Incentive Fee even though such Units
have only "broken even" (or declined) in Net Asset Value from their
original purchase price. The Incentive Fee is calculated after reduction
of any trading profits by the Management Fee and a portion of the Brokerage
Fee at the annual rate of 1.25% (rather than 6.5%) of the Trust's month-end
assets. This means that in order to "break even," the Trust must earn
approximately 1.11% (or $55.50 per $5,000 initial investment) to defray the
Incentive Fee which could be payable on the trading profits needed to
offset the amortization of organizational and initial offering costs,
administrative expenses, ongoing offering costs and the portion of the
Brokerage Fee not deducted from trading profits for the purpose of
calculating the Incentive Fee.
(5) Administrative Expenses are estimated at 0.6% of average month-end Net
Assets per annum (an effective rate of 0.53% of average month-end assets
per annum for purposes of break-even analysis) based on aggregate Trust
assets of $10,000,000.
(6) Organizational and initial offering costs, estimated by CISI to be between
$500,000 and $600,000, will be advanced by CISI. These costs will be
reimbursed by the Trust to CISI at the initial closing and be amortized
over five years at a maximum rate of 0.4% of average month-end Net Assets
per year (an effective rate of 0.35% of average month-end assets for
purposes of break-even analysis).
(7) The Trust will pay ongoing offering costs up to 0.5% of month-end Net
Assets per annum (an effective rate of 0.44% of average month-end assets
for purposes of break-even analysis).
(8) Interest income is estimated based on the yields on 91-day Treasury bills
on or about the date of this Prospectus, approximately 5%. Since the Trust
will receive interest only on assets deposited with CIS, CISFS and any
other Custodian and will not receive interest on the amount of its
unamortized organizational and initial offering costs (assumed to be no
more than $600,000), the effective rate of interest paid to the Trust on
its assets will be 4.7% for the first year, increasing as the capitalized
organizational and initial offering costs are amortized. When such costs
are fully amortized, the interest income on Trust assets will be at the
full 91-day Treasury bill rate existing at that time. See "Use of Proceeds
-- Maintenance of Assets; Interest Income" at page 58 for a description of
interest earned on the Trust's assets.
____________________
-14-
FEDERAL INCOME TAX In the opinion of counsel, the Trust is properly
ASPECTS classified as a partnership for federal income
tax purposes and will not be subject to tax as a
corporation under provisions applicable to
"publicly-traded partnerships." Assuming such
proper classification, the Trust itself will not be
subject to federal income tax; instead, investors
will report on their individual tax returns their
allocable share of the Trust's income, gain, loss
or deduction, whether or not they redeem any of
their Units and whether or not any distributions
are made. However, no assurance can be given that
the Trust will not be subject to federal income tax.
The Trust's interest income will be taxable to
Unitholders irrespective of trading losses, which
generally constitute capital losses whereas
interest income is taxed as ordinary income.
Non-corporate Unitholders' capital losses may only
be used to offset interest income to a very limited
extent.
Non-corporate Unitholders may be required to treat
the Trust's expenses as "investment advisory fees"
which are subject to substantial restrictions on
deductibility for federal income tax purposes.
Absent statutory or administrative clarification to
the contrary, the Managing Owner will not treat the
Trust's expenses as "investment advisory fees" but
rather as ordinary and necessary business expenses.
See "Federal Income Tax Aspects" commencing on
page 74.
____________________
GENERAL
FUTURES AND FORWARD TRADING INVOLVES A HIGH DEGREE OF RISK. AN INVESTMENT
IN THE TRUST IS SPECULATIVE AND SUITABLE ONLY FOR A LIMITED PORTION OF THE RISK
SEGMENT OF AN INVESTOR'S PORTFOLIO. THERE CAN BE NO ASSURANCE THAT THE TRUST
WILL ACHIEVE ITS OBJECTIVES OR AVOID SUBSTANTIAL LOSSES.
NO ONE SHOULD INVEST MORE IN THE TRUST THAN HE OR SHE CAN AFFORD TO LOSE,
AND IT IS SUGGESTED THAT THE AMOUNT OF INVESTMENT BE NO MORE THAN 10% OF HIS OR
HER "LIQUID" NET WORTH (WHICH EXCLUDES HOME, FURNISHINGS AND AUTOMOBILES IN THE
CASE OF INDIVIDUALS AND INCLUDES ONLY READILY MARKETABLE SECURITIES IN THE CASE
OF ENTITIES).
PROSPECTIVE SUBSCRIBERS SHOULD CONSIDER THE HIGHLY LEVERAGED AND
SPECULATIVE NATURE OF AN INVESTMENT IN THE TRUST BEFORE DETERMINING WHETHER SUCH
AN INVESTMENT IS CONSISTENT WITH THEIR OVERALL PORTFOLIO OBJECTIVES.
THE UNITS ARE SPECULATIVE SECURITIES. INVESTORS MAY LOSE ALL
OR SUBSTANTIALLY ALL OF THEIR INVESTMENT IN THE TRUST.
-15-
RISK FACTORS
AN INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. A PURCHASER MAY LOSE ALL OR SUBSTANTIALLY ALL OF HIS OR HER INVESTMENT IN
THE TRUST. PROSPECTIVE INVESTORS SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS
AND CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE DECIDING WHETHER TO
SUBSCRIBE FOR UNITS. NO ONE WHO IS NOT CONFIDENT THAT HE OR SHE CLEARLY
APPRECIATES THE IMPACT OF SUCH MATTERS AS (I) THE HIGHLY LEVERAGED AND VOLATILE
NATURE OF THE MARKETS IN WHICH THE TRUST WILL TRADE, (II) THE SUBSTANTIAL FEES
TO THE TRUST, (III) THE ILLIQUIDITY OF THE UNITS AND (IV) THE NUMEROUS OTHER
RISKS DISCUSSED HEREIN SHOULD CONSIDER SUBSCRIBING FOR UNITS.
FUTURES AND FORWARD TRADING
(1) "EXCHANGE OF FUTURES FOR PHYSICAL" TRANSACTIONS
JWH may engage in "exchange of futures for physical" ("EFP") transactions
on behalf of the Trust. These transactions permit JWH to execute orders after
market hours as well as to obtain a single price for an entire order which
otherwise might be filled at a variety of different contract prices, as the
different groups of futures contracts making up the order are bought or sold at
slightly different times. If JWH were to be prevented from making use of EFPs
- -- due to a change in regulatory treatment or other factors -- the performance
of the Trust could be adversely affected. THE TRUST COULD BE DENIED CERTAIN
PROFIT OPPORTUNITIES, AS WELL AS A POTENTIALLY CONVENIENT MEANS OF LIQUIDATING
POSITIONS AGAINST WHICH THE MARKET WAS MOVING, IF THE TRUST WERE PREVENTED FROM
PARTICIPATING IN THE EFP MARKET.
(2) TRADING ON COMMODITY EXCHANGES OUTSIDE THE UNITED STATES
JWH will trade on commodity exchanges outside the United States on behalf
of the Trust. Trading on such exchanges is not regulated by any United States
governmental agency and may involve certain risks not applicable to trading on
United States exchanges, such as currency controls and expropriation. In
trading on foreign exchanges, the Trust is also subject to the risk of
fluctuation in the exchange rates between the United States dollar and the
currencies in which contracts traded on such exchanges are settled and in which
the related margin deposits must be maintained.
INVESTORS COULD INCUR SUBSTANTIAL LOSSES FROM THE TRUST'S TRADING ON
FOREIGN EXCHANGES TO WHICH THEY MIGHT NOT HAVE BEEN SUBJECT HAD JWH LIMITED ITS
TRADING ON BEHALF OF THE TRUST TO U.S. MARKETS.
(3) BANKRUPTCY OF FUTURES BROKER AND BANKRUPTCY OR DEFAULT OF COUNTERPARTIES
If the Trust's Futures Broker or a counterparty of the Trust were to become
bankrupt, the Trust would only be able to recover its PRO RATA share of all
available customer funds segregated by such Futures Broker or counterparty, even
though such Futures Broker or counterparty was holding property, such as United
States Treasury bills, specifically traceable to the Trust. In its trading of
spot and forward contracts in currencies and precious metals, the Trust will
also be exposed to the risk of counterparties' failure to perform their
obligations. THE BANKRUPTCY OF THE FUTURES BROKER OR THE BANKRUPTCY OR DEFAULT
OF A COUNTERPARTY COULD RESULT IN SUBSTANTIAL LOSSES FOR THE TRUST EVEN IN
CIRCUMSTANCES WHERE THE TRUST'S TRADING HAS BEEN PROFITABLE.
(4) MARKETS MAY BE ILLIQUID
Market conditions may exist such that it is not possible to execute a buy
or sell order at the desired price, or to close out an open position. In
addition, the CFTC has approved and U.S. and non-U.S. exchanges have imposed
limits on open positions and/or daily price fluctuation limits, which limits
also may adversely affect market liquidity. Daily price fluctuation limits
establish the maximum amount with respect to certain contracts the price of a
futures contract may vary in either direction from the previous day's settlement
price at the end of the trading session. Once the market price of a futures
contract reaches its daily price fluctuation limit, positions in the futures
contract can be neither taken nor liquidated except at or within the limit.
These limits only govern price movements on a specific trading day; they do not
limit losses. It is possible that the daily price fluctuation limits may apply
throughout the remaining life of a futures contract so that the holder of the
contract who cannot liquidate his or her position by the close of the last
trading day for that contract may be required to make or take delivery of the
underlying interests.
Furthermore, futures, options on futures, and spot and forward markets can
experience periods (of extended duration at times) of insufficient trading
liquidity as a result of government intervention, weather or other unpredictable
factors. ALTHOUGH JWH INTENDS TO PURCHASE AND SELL ACTIVELY TRADED CONTRACTS,
NO ASSURANCE CAN BE GIVEN THAT SUCH MARKETS WILL BE OR REMAIN LIQUID, OR THAT
TRUST ORDERS WILL BE EXECUTED AT OR NEAR THE DESIRED PRICES.
-16-
(5) UNREGULATED MARKETS
A substantial portion of the Trust's trading -- primarily its trading of
spot and forward contracts in currencies and precious metals -- will take place
in unregulated markets. It is impossible to determine fair pricing, prevent
abuses such as "front-running" or impose other effective forms of control over
such markets. The absence of regulation could expose the Trust in certain
circumstances to significant losses which it might otherwise have avoided.
TRADING IN UNREGULATED MARKETS CAN INVOLVE SIGNIFICANT RISKS, ESPECIALLY
DURING PERIODS OF MARKET DISRUPTIONS.
(6) VOLATILE MARKETS AND HIGHLY LEVERAGED TRADING
Futures and forward markets are volatile. Prices of commodities can
fluctuate rapidly and widely. Futures and forward prices are affected by
complex and often unpredictable factors such as severe weather, governmental
actions and other economic and political events. Futures contracts are traded
on margins ranging from 1% to 20% of the value of the relevant contract. The
low margin deposits normally required in futures trading permit a very high
degree of leverage. Even in stable markets, leveraged trading is risky. In
volatile markets, leveraged trading exacerbates the risk of sudden, substantial
loss. Even a slight adverse movement in the prices of the futures interests
underlying the Trust's open positions could result in significant losses. See
"The Futures and Forward Markets" commencing at page 81 for a description of
these markets.
THE COMBINATION OF MARKET VOLATILITY AND HIGH LEVERAGE MEANS THAT THE TRUST
COULD SUFFER SUBSTANTIAL LOSSES IN SHORT PERIODS OF TIME. SUCCESSIVE INCURRENCE
OF SUCH LOSSES MAY DEPLETE THE TRUST'S ASSETS AND SEVERELY IMPAIR THE TRUST'S
ABILITY TO GENERATE CAPITAL APPRECIATION. THE RESULTS OF THE TRUST'S TRADING
ARE ENTIRELY SPECULATIVE AND UNCERTAIN.
(7) "ZERO-SUM" TRADING
Futures and forward trading is a "zero-sum" economic activity in which for
every gain there is an equal and offsetting loss (disregarding transaction
costs), as opposed to a typical securities investment, in which there is an
expectation of consistent yields (in the case of debt) or participation over
time in general economic growth (in the case of equity). It is possible that
the Trust could incur major losses while stock and bond prices rise
substantially in a prospering economy.
THE TRUST
(8) ALL OR SUBSTANTIALLY ALL OF AN INVESTMENT COULD BE LOST;
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
The success of the Trust is entirely dependent on the result of speculative
trading. There can be no assurance that the Trust will achieve its objective of
capital appreciation or limiting risk exposure. Investors may lose all or a
substantial part of their investment.
The past performance of the Trading Programs may not be representative of
how they, considered individually, will perform in the future and cannot be
indicative of how the Trust will perform using the Trading Programs in
combination. Certain technical traders have in the past incurred significant
losses after years of successful performance, and there can be no assurance that
the same will not occur in the case of JWH.
There has been substantial regulatory concern in recent years over the
potentially misleading character of the performance records included in futures
fund prospectuses. In fact, several academic studies reached the conclusion
that public commodity pools typically significantly underperform the prior
performance records included in their prospectuses. The SEC and CFTC releases
questioning the relevance and treatment of past performance information in
commodity pool disclosure documents are filed as exhibits to the Registration
Statement of which this Prospectus is a part.
SINCE PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS,
INVESTORS SHOULD NOT INVEST IN THE TRUST IN RELIANCE ON JWH'S PERFORMANCE TO
DATE. RATHER, INVESTORS MUST CAREFULLY CONSIDER WHETHER A SPECULATIVE
INVESTMENT SUCH AS THE TRUST IS CONSISTENT WITH THE DESIRED OVERALL RISK PROFILE
OF THEIR PORTFOLIO AND THEIR INVESTMENT OBJECTIVES.
-17-
(9) SPECIFIC RISKS ASSOCIATED WITH A SINGLE-ADVISOR PORTFOLIO
Even in the speculative area of managed futures, single-advisor funds are
considered by some to be unusually high risk investments. Some observers have
the view that the use of a single advisor generally will not have the same risk-
spreading potential offered by a multi-advisor approach, which is used by many
"commodity pools" and in many cases specifically for risk control purposes. If
such view is correct, employing a single-advisor approach in trading in the
highly leveraged and volatile futures and forward markets will involve greater
risk of loss than a diversified, multi-advisor approach. In addition to the
Trust being managed by a single advisor, the Trading Programs may have a
tendency to concentrate the Trust's positions in a limited group of markets (see
"-- The Trading Programs -- Overlap of Markets"). Such portfolio concentration
may further increase the risk of loss.
Unlike a multi-advisor fund, the Trust, with its single-advisor structure,
will have little recourse in the event of a material, adverse change in the
Trust's Trading Advisor. None of the principals of JWH is obligated to continue
to provide services to the Trust. The Trust also has no contractual rights to
compel any of JWH's principals to continue to perform services for JWH. Were
the services of Mr. John W. Henry to become unavailable for any reason, the
effect on JWH could be material and adverse and the continued ability of JWH to
render services to the Trust would be subject to substantial uncertainty. If
the trading advisory services of JWH were to become unavailable for any reason,
the Trust may have to dissolve if it could not appoint a successor advisor on
satisfactory terms, which may happen at a time with adverse market conditions or
before the Trading Programs had a realistic opportunity to achieve the Trust's
objectives.
NOT ONLY DOES THE TRUST'S SINGLE-ADVISOR STRUCTURE PROVIDE INHERENTLY LESS
DIVERSIFICATION AND RISK CONTROL THAN A MULTI-ADVISOR FUND DOES, BUT ALSO THE
SUCCESS OF THE TRUST WILL DEPEND UPON THE CONTINUED AVAILABILITY OF CERTAIN KEY
JWH PRINCIPALS. THERE CAN BE NO ASSURANCE OF SUCH CONTINUED AVAILABILITY.
(10) NON-CORRELATED AND NOT NEGATIVELY CORRELATED ANTICIPATED PERFORMANCE
The Trust anticipates that its performance over time will be non-correlated
with the general equity and debt markets. NON-CORRELATION, however, is not
NEGATIVE CORRELATION. The Trust will by no means necessarily be profitable
during downward cycles in stock and bond prices. Non-correlation means only
that the performance of the Trust may or may not be similar to that of the
general financial markets, not that there should be an inverse relationship
between them -- hence stock indices may rise while Unit values fall as well as
while Unit values rise. During certain periods, the Trust may perform in a
manner very similar to more traditional portfolio holdings, providing little, if
any, diversification benefits.
THERE CAN BE NO ASSURANCE THAT THE TRUST'S PERFORMANCE WILL BE NON-
CORRELATED WITH THE GENERAL FINANCIAL MARKETS. IN ADDITION, BECAUSE THE TRUST
IS EXPECTED TO BE NON-CORRELATED, NOT NEGATIVELY CORRELATED, WITH THE GENERAL
STOCK AND BOND MARKETS, IT IS POSSIBLE THAT THE TRUST COULD INCUR SUBSTANTIAL
LOSSES AT THE SAME TIME THAT THE TRADITIONAL COMPONENTS IN AN INVESTOR'S
PORTFOLIO ARE ALSO DECLINING IN VALUE.
(11) SUBSTANTIAL CHARGES PAYABLE REGARDLESS OF PROFITABILITY
The Trust is subject to substantial charges payable regardless of the
result of the Trust's trading, which could deplete the Trust's assets. The
Trust must generate trading profits and interest income sufficient to defray the
Brokerage Fee, monthly Management Fee, administrative expenses, organizational
and initial offering cost amortization and ongoing offering costs and, possibly,
the Incentive Fee in order to avoid depletion of assets. Assuming the Trust
will earn interest income at the 91-day Treasury bill rate prevailing on or
about the date of this Prospectus, the Trust must realize trading profits
estimated at approximately 7.92% of average month-end assets (based on the
$10,000,000 minimum Trust size) in order for the Net Asset Value per Unit to
equal the initial subscription price of $100 as of the end of the first twelve
months of trading.
Trading profits (if any) recognized by the Trust are subject to the Trading
Advisor's 15% quarterly Incentive Fee. Moreover, New Trading Profit is
calculated on the basis of the overall profits of the Trust, not increases in
the Net Asset Value of each Unit. Certain Units could be allocated substantial
Incentive Fee expense despite a decline in their Net Asset Value. In addition,
accrued Incentive Fee expense which reduces the Net Asset Value per Unit at the
time of purchase will, if reversed due to subsequent losses, be misallocated
because such accrued Incentive Fee expense will be allocated equally to all
outstanding Units rather than only to those outstanding during the period when
such Incentive Fee expense accrued. See "Charges -- Incentive Fee" at page 64.
-18-
THE TRUST IS SUBJECT TO SUBSTANTIAL COSTS AND MUST GENERATE SUBSTANTIAL
PROFITS IN ORDER TO OFFSET THESE COSTS. THE MANAGING OWNER, CIS AND JWH COULD
DERIVE SUBSTANTIAL FINANCIAL BENEFITS FROM THEIR ASSOCIATION WITH THE TRUST,
WHILE THE TRUST ITSELF INCURS LOSSES.
(12) LIMITED ABILITY TO LIQUIDATE AN INVESTMENT IN THE UNITS
Unitholders may redeem Units at Net Asset Value only as of the close of
business on the last day of a calendar month. Units are subject to early
redemption charges, payable to CIS, equal to 3% of the Net Asset Value per Unit
as of the date of redemption, through the end of the eleventh full month after
such Units are issued by the Trust. Requests for redemption, which are
irrevocable, must be received by CISI on or before the 20th of the month (or if
the 20th is not a business day, the next business day) to effect redemption as
of such month-end. The Net Asset Value per Unit on the date redemption occurs
may, particularly given the volatile nature of the markets in which the Trust
will trade, vary significantly from the Net Asset Value per Unit at the time the
redemption request is tendered. Special Redemptions, which result in a
suspension of trading and, consequently, the risk of further losses pending
redemption due to the liquidation of positions, are required only if the Net
Asset Value per Unit declines to $50 or less, a very substantial decline. See
"Section 12. Redemptions" of the Declaration and Agreement of Trust attached
hereto as Exhibit A.
SINCE THEY HAVE LIMITED ABILITY TO REDEEM UNITS, UNITHOLDERS COULD BE
UNABLE TO LIMIT THEIR LOSSES IN THE TRUST, AND THEY MAY BE UNABLE TO WITHDRAW
FUNDS COMMITTED TO THE TRUST IN ORDER TO TAKE ADVANTAGE OF OTHER, MORE FAVORABLE
INVESTMENT OPPORTUNITIES AT THE RELEVANT TIME.
(13) THE TRUST IS SUBJECT TO CONFLICTS OF INTEREST
The Trust is subject to a number of actual and potential conflicts of
interest. See "Conflicts of Interest" commencing at page 71.
The Managing Owner, the Futures Broker, the Foreign Currency Broker and
their respective principals and affiliates may trade in the futures and forward
markets for the accounts of their clients. JWH and its principals and
affiliates may trade in the futures and forward markets for the accounts of
their clients and for their own accounts (however, employees and principals of
JWH, other than Mr. John W. Henry, are not permitted to trade on a discretionary
basis). In doing so, these persons may take positions opposite to, or ahead of,
those held by the Trust, or may be competing with the Trust for positions in the
market. Records of such trading are not available for inspection by investors.
Such trading may create conflicts of interest on behalf of one or more of such
persons in respect of their obligations to the Trust.
NONE OF THE PARTIES AFFECTED BY SUCH CONFLICTS OF INTEREST HAVE ADOPTED ANY
PROCEDURES OR SAFEGUARDS FOR RESOLVING THE FOREGOING CONFLICTS OF INTEREST.
INVESTORS MUST RELY ENTIRELY ON SUCH PARTIES' DUTY UNDER APPLICABLE LAW AND GOOD
FAITH IN SUCH MATTERS.
THESE CONFLICTS OF INTEREST RAISE THE POSSIBILITY THAT THE INVESTORS WILL
BE FINANCIALLY DISFAVORED TO THE BENEFIT OF THE MANAGING OWNER, JWH, THE FUTURES
BROKER, THE FOREIGN CURRENCY BROKER OR THEIR RESPECTIVE PRINCIPALS AND
AFFILIATES.
(14) THE TRUST HAS NO OPERATING HISTORY
THIS POOL HAS NOT COMMENCED TRADING AND DOES
NOT HAVE ANY PERFORMANCE HISTORY.
BECAUSE THE TRUST HAS NO OPERATING HISTORY, INVESTORS HAVE NO INFORMATION
CONCERNING THE ACTUAL RESULTS OF OPERATION OF THE TRUST ON WHICH TO BASE THEIR
INVESTMENT DECISION. MOREOVER, EVEN IF PAST PERFORMANCE INFORMATION CONCERNING
THE TRUST WERE AVAILABLE, SUCH INFORMATION MIGHT NOT, IN FACT, BE INSTRUCTIVE IN
INVESTORS' ATTEMPTS TO EVALUATE WHETHER THE TRUST IS COMPATIBLE WITH THEIR
PORTFOLIO STRATEGY, SINCE PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF
FUTURE RESULTS.
(15) UNITHOLDERS HAVE NO ROLE IN MANAGEMENT
In investing in the Trust, Unitholders are placing their reliance on the
Managing Owner. No Unitholder will have any input in the management of the
Trust, and no management elections or other investor votes will be held
regularly. Subject to its fiduciary obligations, the Managing Owner will have
essentially plenary authority over the operation of the Trust.
PROSPECTIVE INVESTORS MUST NOT ANTICIPATE THAT ANY ENTITY OTHER THAN THE
MANAGING OWNER WILL HAVE ANY CONTROL OR INFLUENCE OVER THE MANAGEMENT OF THE
TRUST, OR THAT UNITHOLDERS WILL HAVE ANY INPUT IN THE TRUST'S OPERATIONS.
-19-
THE TRADING ADVISOR
(16) VOLATILE JWH TRADING HISTORY
Over time, a number of individual JWH programs have realized profits. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. JWH's performance,
even when successful, has been characterized by significant volatility. The
largest "peak-to-valley" drawdown experience by any single program was nearly
60% on a composite basis, and certain individual accounts managed pursuant to
such program experienced even greater volatility. Moreover, certain programs
have incurred losses of 10% or more in a single trading day. Even if the Trust
is successful, it is likely to experience significant losses from time to time.
The monthly rates of return set forth in "John W. Henry & Company, Inc. -- JWH
Programs: Performance Summary and Monthly Rates of Return" are indicative of the
high degree of volatility (a widely accepted measure of risk) exhibited by JWH's
performance to date. THE HISTORICALLY VOLATILE PERFORMANCE OF JWH SUGGESTS NOT
ONLY THE RISKS INVOLVED IN INVESTING IN THE TRUST, BUT ALSO THAT THE DAY-TO-DAY
VALUE OF THE UNITS WILL LIKELY BE VARIABLE AND UNCERTAIN, WHICH, IN TURN,
SUGGESTS THAT THE NET ASSET VALUE PER UNIT MAY CHANGE MATERIALLY BETWEEN THE
DATE THAT A REDEMPTION IS REQUESTED AND THE MONTH-END REDEMPTION DATE.
(17) POSSIBLE ADVERSE EFFECTS OF INCREASING JWH'S ASSETS UNDER MANAGEMENT
The rates of return achieved by trading advisors often tend to deteriorate
as assets under management increase. On or about the date of this Prospectus,
JWH is at or near an all-time high in client funds under management and is
actively engaged in ongoing efforts in marketing its services. No assurance can
be given that JWH's strategies will not be adversely affected by the additional
equity, including the Trust's account, accepted by JWH. With increased equity
under management, JWH may be more limited in the amount of assets which it can
trade in the non-financial commodities markets than it is in the currency and
financial markets, due to the generally greater illiquidity of, and position
limits applicable to, the former. Increased equity under management also
requires advisors to enter larger orders, which can preclude trading in certain
less liquid markets, result in less favorable trading "fills" and make it
difficult to close out positions against which the market is moving without
incurring significant losses.
The possible adverse effect of increased equity under management on
performance may arguably be detected from the monthly rates of return of the
Trading Programs included in "John W. Henry & Company, Inc. -- JWH Programs:
Performance Summary and Monthly Rates of Return." Generally there were smaller
amounts of equity under management pursuant to each Trading Program in earlier
periods. Comparing earlier and later rates of return can provide some
indication of the possible effect of increased equity under management on the
rates of return realized; nevertheless, a number of other adjustments, including
varying degrees of trading deleveraging, have been made over time to the Trading
Programs which also could have affected performance materially. IF JWH'S RETURN
DECLINES AS A RESULT OF THE INCREASED EQUITY UNDER ITS MANAGEMENT, THE PROFIT
POTENTIAL OF THE TRUST WILL ACCORDINGLY BE REDUCED.
(18) LIMITATION OF LIABILITY AND INDEMNIFICATION OF TRADING ADVISOR
JWH, its principals and employees will not be liable to the Trust, the
Unitholders, any of their successors or assigns or the Managing Owner except by
reason of acts or omissions in contravention of the express terms of the
Trading Advisory Agreement or due to misconduct or negligence or for not having
acted in good faith in the reasonable belief that its actions were taken in, or
not opposed to, the best interests of the Trust.
The Trust will indemnify JWH, its principals and employees to the full
extent permitted by law for any liability incurred in connection with any acts
or omissions relating to JWH's management of Trust assets, provided that there
has been no judicial determination that such liability was the result of
negligence, misconduct or breach of the Trading Advisory Agreement nor any
judicial determination that the conduct which was the basis for such liability
was not done in good faith belief that it was in, or not opposed to, the best
interests of the Trust. Any such indemnification involving a material amount,
unless ordered or expressly permitted by a court, will be made by the Trust only
upon the opinion of mutually acceptable independent legal counsel that JWH has
met the applicable standard of conduct described above.
THE TRADING PROGRAMS
(19) POSITIVE CORRELATION BETWEEN THE TRADING PROGRAMS
The Managing Owner and JWH anticipate greater performance correlation
between the Trading Programs than would be the case if a group of independent
managers or trading programs were utilized. Historically there has been
significant positive correlation among the programs of JWH and a number of JWH
programs have incurred major losses at or about the same time. THE POSITIVE
CORRELATION BETWEEN THE TRADING PROGRAMS MAY INCREASE THE LIKELIHOOD OF THE
TRUST INCURRING SIGNIFICANT LOSSES OVER SHORT PERIODS OF TIME.
-20-
The historical volatility and positive correlation of the Trading Programs
of JWH highlight the need for effective risk management in the Trust's trading.
However, JWH's risk control policies are proprietary and confidential. NOT ONLY
CAN THERE BE NO ASSURANCE THAT THESE POLICIES WILL BE EFFECTIVE, BUT ALSO, DUE
TO THEIR PROPRIETARY NATURE, INVESTORS WILL HAVE NO BASIS TO EVALUATE THE
ADEQUACY OF THESE POLICIES (EXCEPT PAST PERFORMANCE, WHICH IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS).
(20) OVERLAP OF MARKETS
The Trading Programs trade in certain of the same markets. A concentration
of the Trust's positions in one or a limited number of markets could result in
substantial losses. INVESTORS WILL LOSE THE RISK CONTROL BENEFITS OF MARKET
DIVERSIFICATION DURING THOSE PERIODS WHEN THE TRUST'S POSITIONS ARE CONCENTRATED
IN A LIMITED NUMBER OF MARKETS.
(21) TECHNICAL, TREND-FOLLOWING TRADING PROGRAMS
The profitability of trading programs involving technical trend analysis,
such as the Trading Programs, depends upon the occurrence of significant
sustained price moves in at least some of the markets traded. In the past,
sustained periods without such price moves have occurred in the markets traded
by JWH from time to time, and such periods are expected to recur because
significant price trends can occur only when usually disparate market forces are
influencing prices in the same direction, which tends to occur infrequently.
Periods without such trends are likely to produce losses.
Any factor (such as increased governmental intervention in the markets
traded) that may lessen the prospect of sustained price moves in the future may
reduce the prospect that any advisor's technical systems will be profitable. A
number of the markets to be traded by the Trust, in particular the currency and
interest rate markets (which the Trading Programs generally emphasize), may be
likely targets for governmental intervention.
The Managing Owner believes that in recent years the use of technical
trading systems, particularly trend-following systems, has increased
substantially. Although different technical and trend-following systems will
tend to generate different trading signals, the significant increase in the use
of such systems as a proportion of the overall trading volume in the futures
markets as a whole as well as in the particular markets traded by the Trust
could result in traders attempting to initiate or liquidate substantial
positions at or about the same time as the Trust. It could also alter historical
trading patterns or affect the execution of trades, in each case to the
detriment of the Trust. The adverse effects of technical strategy saturation
can currently be detected to a certain extent in a number of less liquid
markets. The concentration of the Trading Programs in certain (the currency and
interest rate) market sectors may increase the susceptibility of these Trading
Programs to the adverse effects of technical strategy saturation.
Technical, trend-following systems such as the Trading Programs typically
anticipate that more than half of all their trades will be unprofitable
(historically, only 30% to 40% of JWH's trades pursuant to JWH's programs have
been profitable). The goal is to generate sufficiently large gains on
occasional profitable transactions to offset what are hoped to be smaller losses
on the more numerous unprofitable positions. Any factor (for example, the
imposition of speculative position limits or significantly increased margin
requirements) which would restrict the ability of trend-following traders to
realize major gains from a limited number of positions could have a materially
adverse effect on the Trust's prospects for profitability. BECAUSE THE TRADING
PROGRAMS ARE TECHNICAL AND TREND-FOLLOWING, THE PROFIT POTENTIAL OF THESE
TRADING PROGRAMS MAY BE DIMINISHED BY THE CHANGING CHARACTER OF THE MARKETS,
WHICH MAY MAKE HISTORICAL PRICE DATA (ON WHICH TECHNICAL PROGRAMS ARE BASED) OF
LITTLE PREDICTIVE VALUE. THE TRUST COULD INCUR SIGNIFICANT LOSSES UNDER CERTAIN
MARKET CONDITIONS IN WHICH DISCRETIONARY OR OTHER TRADING APPROACHES ARE
SUCCESSFUL.
(22) IMPORTANCE OF MARKET CONDITIONS TO PROFITABILITY
Although the Trading Programs appear to be as likely to trade profitably in
declining as in rising markets, managed futures advisors appear, in general, to
be profitable or unprofitable at approximately the same times. Despite the
expected degree of non-correlation between the performance of the Trust and the
traditional debt and equity markets, overall market or economic conditions can
affect the Trust's performance materially. JWH's strategies are designed to
capture major market movements. Consequently, any factors tending to produce
static or "churning" markets would reduce the likelihood of either Trading
Program being successful. In addition, trendless, "whipsaw" markets
characterized by numerous sudden price movements with rapid reversal could be
mistakenly identified by a Trading Program as "trends," which could lead to
significant losses for the Trust. THE TRADING PROGRAMS TRADE IN SOMEWHAT
DIFFERENT MARKETS, BUT THE SIMILARITIES BETWEEN THE TRADING PROGRAMS SUGGEST
THAT THEY ARE LIKELY TO BE ADVERSELY AFFECTED BY THE SAME GENERAL MARKET
CONDITIONS - E.G., STATIC, NON-TRENDING OR "WHIPSAW" MARKETS. IF THE TYPE OF
TRENDING MARKET CONDITIONS WHICH THE TRADING PROGRAMS ARE DESIGNED TO EXPLOIT DO
NOT OCCUR, INVESTORS MUST EXPECT TO INCUR SUBSTANTIAL LOSSES.
-21-
(23) POSSIBLE LIQUIDATION OF PROFITABLE POSITIONS
The quarterly rebalancing by JWH of assets equally between the Trading
Programs may result in the liquidation of profitable positions, thereby forgoing
greater profits which the Trust would otherwise have realized, and the
establishment of unprofitable positions, thereby incurring losses which the
Trust would otherwise have avoided had rebalancing not have occurred.
(24) ALTERATION OF TRADING SYSTEMS AND CONTRACTS AND MARKETS TRADED
JWH may, in its discretion, change and adjust the Trading Programs, as well
as the contracts and markets which they trade. These adjustments may result in
forgoing profits which the Trading Programs would otherwise have captured, as
well as incurring losses which they would otherwise have avoided. NEITHER THE
MANAGING OWNER NOR THE UNITHOLDERS ARE LIKELY TO BE INFORMED OF ANY NON-MATERIAL
CHANGES IN THE TRADING PROGRAMS.
(25) MANDATORY CLOSING OUT OF OFFSETTING POSITIONS
Applicable CFTC rules require that offsetting positions taken by JWH on
behalf of the Trust, even though taken by different programs, be closed out.
JWH does not believe that the requirement of liquidating offsetting positions
held for the Trust by the Trading Programs will, at this point, impede the
operation of the Trust. However, it is possible that under certain
circumstances the requirement to close out offsetting positions on an inter-
Program basis could adversely affect the performance of the Trust. THE FACT
THAT JWH CAN OPERATE BOTH STRATEGIES FOR THE SAME ACCOUNT WITHOUT HAVING ITS
OVERALL PERFORMANCE DISRUPTED BY THE CFTC'S "CLOSE OUT" RULE DEMONSTRATES THE
EXTENT OF THE SIMILARITIES BETWEEN THE TRADING PROGRAMS (WHICH MUST, IN ORDER TO
AVOID REPEATED "CLOSE OUTS," EACH TAKE EITHER LONG OR SHORT POSITIONS, ALBEIT
PERHAPS OF DIFFERENT MAGNITUDES, IN THE SAME MARKETS) AND THE LIKELIHOOD OF
SIGNIFICANT POSITIVE CORRELATION AMONG THEIR RESPECTIVE TRADING RESULTS
(CORRESPONDINGLY INCREASING THE TRUST'S RISK OF LOSS IN TRADING).
(26) LIMITED ABILITY TO DESCRIBE PROPRIETARY STRATEGIES
Prospective investors must recognize that no attempt has been or could be
made to explain in any detail the most important aspect of the Trust's
operations, namely the Trading Programs, because these strategies are
confidential. An investor who purchases Units is essentially relying on JWH's
ability to earn profits in the future applying proprietary programs and
strategies concerning which the investor can have no detailed knowledge (and the
past performance of which is not necessarily indicative of their future
results). It is impossible to predict how the Trust will perform. PROSPECTIVE
INVESTORS WHO SUBSCRIBE FOR UNITS MUST DO SO SOLELY AS A SPECULATION. THERE IS
NO DATA WHICH THEY CAN ANALYZE WHICH COULD RELIABLY PERMIT THEM TO ASSESS THE
"TRUE VALUE" OF AN INVESTMENT IN THE TRUST OR THE LIKELIHOOD OF JWH TRADING
SUCCESSFULLY ON THE TRUST'S BEHALF.
TAXES
(27) UNITHOLDERS ARE TAXED ON ALLOCABLE TRUST INCOME ALTHOUGH SUCH INCOME IS NOT
DISTRIBUTED
If the Trust recognizes income or gain in a fiscal year, such income or
gain will be taxable to Unitholders in accordance with their allocable shares of
the Trust's profits, whether or not such profits are distributed to the
Unitholders. The tax liability of Unitholders in respect of the profits, if
any, of the Trust will exceed any distributions received from it. See "Federal
Income Tax Aspects."
Because a substantial portion of the Trust's open positions are "marked-to-
market" at the end of each year, Unitholders are taxed on unrealized as well as
realized gains. Prospective investors should also note that the Trust might
sustain losses after the end of a fiscal year offsetting such realized or
unrealized gains, so a Unitholder might never receive the gains on which he or
she is taxed.
In comparing the Trust's performance objectives with the performance of
traditional investments such as common stock, prospective investors should note
that if an investor purchased common stock, the investor would not be taxed on
the appreciation in such stock until it was sold. In the case of the Trust,
however, Unitholders must pay taxes for each year a Unit is held based on any
appreciation in the Net Asset Value per Unit during such year, resulting in a
substantial cumulative reduction in the after-tax return of the Unit. BECAUSE
UNITHOLDERS ARE TAXED CURRENTLY ON THEIR ALLOCABLE SHARE OF THE TRUST'S INCOME
OR GAINS, WHILE THE TRUST MAY TRADE SUCCESSFULLY, INVESTORS WOULD HAVE
RECOGNIZED SIGNIFICANTLY GREATER GAINS ON AN AFTER-TAX BASIS IF THEY HAD
INVESTED IN CONVENTIONAL STOCKS AND BONDS WITH COMPARABLE PERFORMANCE.
-22-
(28) TAXATION OF INTEREST INCOME IRRESPECTIVE OF TRADING LOSSES
Losses on the Trust's trading are almost exclusively capital losses, and
capital losses are deductible against ordinary income only to the extent of
$3,000 per year for non-corporate investors. The limited deductibility of
capital losses for non-corporate Unitholders could result in such Unitholders
having a tax liability in respect of their investment in the Trust despite
incurring a financial loss on their Units. If a non-corporate investor had, for
example, an allocable trading (I.E., capital) loss of $10,000 in a given fiscal
year and allocable interest (after reduction for allocable ordinary Trust
business expenses) of $5,000, the investor would incur a net loss in the Net
Asset Value of his or her Units equal to $5,000, but would nevertheless
recognize taxable income of $2,000.
(29) LIMITATIONS ON THE DEDUCTIBILITY OF "INVESTMENT ADVISORY FEES"
In the absence of further clarification by legislation, the promulgation of
regulations or judicial or administrative interpretation, the Managing Owner
will not treat any ordinary expenses of the Trust as "investment advisory fees"
for federal income tax purposes. However, were the ordinary expenses of the
Trust characterized as "investment advisory fees," they would be subject to
substantial restrictions on deductibility for non-corporate taxpayers,
materially increasing the amount of tax payable by Unitholders in respect of
their investment in the Trust. In fact, if the ordinary expenses of the Trust
were to be so recharacterized, Unitholders could actually recognize taxable
income despite having incurred a financial loss.
NON-CORPORATE UNITHOLDERS' AFTER-TAX RETURNS WOULD BE SIGNIFICANTLY
DECREASED IF THE TRUST'S EXPENSES WERE TREATED AS "INVESTMENT ADVISORY FEES."
(30) NONDEDUCTIBILITY OF "SYNDICATION EXPENSES"
Neither the Trust nor any Unitholder will be entitled to any deduction for
"syndication expenses," including the Trust's initial offering costs and the
expenses of the ongoing offering of the Units as well as any redemption charges.
The Internal Revenue Service ("IRS") could contend that a portion of the
Brokerage Fee paid by the Trust constitutes non-deductible "syndication
expenses" in respect of the Unitholders.
UNITHOLDERS' AFTER-TAX RETURNS WOULD BE SIGNIFICANTLY DECREASED IF THE
SELLING COMMISSIONS AND ONGOING COMPENSATION WERE TREATED AS "SYNDICATION
EXPENSES."
(31) POSSIBILITY OF TAX AUDIT OF BOTH THE TRUST AND INDIVIDUAL UNITHOLDERS
There can be no assurance that the Trust's tax returns will not be audited
by the IRS or that adjustments to such returns will not be made as a result of
such an audit.
IF AN AUDIT RESULTS IN AN ADJUSTMENT, UNITHOLDERS COULD THEMSELVES BE
AUDITED, AS WELL AS BE REQUIRED TO PAY ADDITIONAL TAXES, PLUS INTEREST AND
PENALTIES.
PROSPECTIVE INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISERS
AND COUNSEL WITH RESPECT TO THE POSSIBLE TAX CONSEQUENCES TO THEM OF AN
INVESTMENT IN THE TRUST; SUCH TAX CONSEQUENCES MAY DIFFER IN RESPECT OF
DIFFERENT INVESTORS AND MAY HAVE A MATERIAL EFFECT ON THE NET ECONOMIC
CONSEQUENCES OF OWNING UNITS. SEE "FEDERAL INCOME TAX ASPECTS."
REGULATION
(32) ABSENCE OF REGULATION APPLICABLE TO INVESTMENT COMPANIES AND THEIR ADVISERS
The Trust is not registered as a securities investment company or "mutual
fund" under the Investment Company Act of 1940. The Trading Advisor is not
registered as an investment adviser under the Investment Advisers Act of 1940.
Therefore, investors in the Trust do not have the benefit of the protection
provided by those Acts. However, under the CEA, the Managing Owner is
registered as a commodity pool operator, the Trading Advisor is registered as a
commodity trading advisor, the Futures Broker is registered as a futures
commission merchant, and the Trust is subject to regulation of the CFTC and NFA.
(33) FUTURE REGULATORY CHANGES
Considerable international regulatory attention has been focused on, for
example: (i) the disruptive effects of speculative pools of capital trading in
the currency markets on central banks' attempts to influence the exchange rates
of
-23-
their own countries' currencies; and (ii) the need to regulate the
"derivatives" markets in general. In light of this, prospective investors must
recognize the possibility of future regulatory change altering, perhaps to a
material extent, the nature of an investment in the Trust.
INVESTORS COULD MAKE A GOOD INVESTMENT DECISION IN SUBSCRIBING FOR THE
UNITS ONLY TO HAVE THAT DECISION RESULT IN SUBSTANTIAL LOSSES DUE TO SUBSEQUENT
REGULATORY CHANGES.
____________________
THE FOREGOING LIST OF RISK FACTORS DOES NOT PURPORT TO BE A COMPLETE
EXPLANATION OF THE NUMEROUS RISKS INVOLVED IN INVESTING IN THE TRUST. POTENTIAL
INVESTORS SHOULD READ THIS ENTIRE PROSPECTUS AND ATTEMPT TO FAMILIARIZE
THEMSELVES WITH THE RISKS OF SPECULATIVE, HIGHLY LEVERAGED FUTURES AND FORWARD
TRADING BEFORE DETERMINING WHETHER TO INVEST IN THE TRUST.
INVESTMENT FACTORS
The Managing Owner's objective in sponsoring the Trust with JWH as its sole
trading advisor is to offer an investment which has the potential of achieving
substantial capital appreciation over time to those investors whose risk
tolerance levels can accept significant risk and expected volatility in
performance. If substantial losses can be avoided, the Managing Owner and JWH
believe that the Trust has a reasonable opportunity to generate significant
profits over time, despite exhibiting considerable intra-period volatility, by
capitalizing on major price movements when they do occur. If successful, the
Trust offers investors the following potential advantages.
ACCESS TO JWH AND THE TRADING PROGRAMS
JWH is one of the largest advisors in the managed futures industry in terms
of assets under management. JWH has been continuously managing client funds in
the futures and forward markets for approximately 15 years and, as of September
30, 1996, managed approximately $1.6 billion in futures accounts. JWH has
achieved substantial profits under a variety of different market conditions and
trading a variety of different programs, including the Original Investment
Program and the Financial and Metals Portfolio, which will be utilized initially
by the Trust. IN INVESTING IN THE TRUST, SUBSCRIBERS WILL HAVE THE OPPORTUNITY
TO PLACE ASSETS WITH ONE OF THE MOST EXPERIENCED OF THE CURRENTLY ACTIVE MANAGED
FUTURES ADVISORS.
INVESTMENT DIVERSIFICATION
The globalization of the world's economy offers potentially valuable
trading opportunities, as major political and economic events continue to
influence world markets, at times dramatically. Volatility in interest rates,
the possibility of significant fluctuations in the value of commodities and
currencies, fragility in world banking and credit mechanisms and the growing
interdependence among national economies create high risks but also substantial
opportunities for profit. These developments may make a diversification into an
investment vehicle such as the Trust timely.
Unlike a traditional diversified portfolio of stocks, bonds and real
estate, the profit potential of the Trust does not depend upon favorable general
economic conditions and that the Trust is as likely to be profitable (or
unprofitable) during periods of declining stock, bond and real estate markets as
at any other time. In addition to the expected non-correlation in its
performance with the performance of the general equity and debt markets, the
Trust's flexibility to take either long or short positions, as opposed to
traditional portfolios which are typically heavily weighted towards the former,
can be an important advantage in times of economic uncertainty.
An investor who is not prepared to spend substantial time trading in the
futures and forward markets may nevertheless participate in the commodities and
financial markets through investing in the Trust, thereby obtaining
diversification from traditional investments such as a diversified portfolio of
stocks, bonds and real estate. By allocating a portion of the risk segment of
their portfolios to the Trust, investors have the potential, if the Trust is
successful, to enhance their prospects for superior performance of their overall
portfolios as well as to reduce the volatility of their portfolios over time and
the dependence of such portfolios on any single country's economy.
However, prospective investors must recognize that unless the Trust is
profitable, while an investment in the Units may serve to reduce overall
portfolio volatility, the Units cannot be a successful investment. There can be
no assurance whatsoever that the Trust will be able to trade profitably.
Furthermore, regardless of the Trust's performance as a stand-alone investment,
there can be no assurance that an investment in the Trust will, in fact,
increase the risk-adjusted return of an entire portfolio since the performance
of any portfolio is dependent on its composition.
-24-
IF THE TRUST DOES NOT TRADE SUCCESSFULLY, IT CANNOT SERVE AS A BENEFICIAL
DIVERSIFICATION FOR A TRADITIONAL PORTFOLIO. THE PERFORMANCE OF THE TRUST IS
EXPECTED TO BE NON-CORRELATED, NOT NEGATIVELY CORRELATED, WITH GENERAL STOCK AND
BOND PRICE LEVELS.
OPPORTUNITY TO PROFIT IN DECLINING AS WELL AS IN RISING MARKETS
The futures markets offer the ability to trade either side of any market.
Unlike short selling in the securities markets, taking short positions in the
futures market (or buying a put option or selling a call option) in anticipation
of a drop in price can be accomplished without additional restrictions or
special margin requirements. Selling short is no more difficult than
establishing a long position.
The profit and loss potential of futures trading is not dependent upon
economic prosperity or interest rate or currency stability. Positive and
negative returns may be realized in both rising and declining markets. IT IS
POTENTIALLY ADVANTAGEOUS FOR INVESTORS TO OWN ASSETS WHICH CAN APPRECIATE DURING
A PERIOD OF GENERALLY DECLINING PRICES, FINANCIAL DISRUPTION OR ECONOMIC
INSTABILITY.
THERE CAN BE NO ASSURANCE THAT THE TRUST'S PERFORMANCE WILL, IN FACT, BE
NON-CORRELATED WITH THE GENERAL DEBT AND EQUITY MARKETS.
THERE ALSO CAN BE NO ASSURANCE THAT THE TRUST WILL NOT UNDERPERFORM THE
INDIVIDUAL TRADING PROGRAMS.
INTEREST ON TRUST ASSETS
The Trust will receive interest income on its assets. Initially all of the
Trust's available assets will be deposited with CIS and CISFS. On the fifth
business day of each month, CIS and CISFS will credit the Trust's account with
interest as if 100% of the Trust's average daily balances on deposit with CIS or
CISFS, as the case may be, in the previous month were continuously invested at
the average 91-day Treasury bill rate for that previous month for deposits
denominated in dollars and at the applicable rate for deposits denominated in
currencies other than dollars (which may be zero in certain cases) as described
under "Use of Proceeds -- Maintenance of Assets; Interest Income" at page 61.
THE INTEREST EARNED ON THE TRUST'S ASSETS CAN OFFSET A SUBSTANTIAL PORTION OF
ITS ROUTINE COSTS. THE TRUST'S INTEREST INCOME REPRESENTS A SOURCE OF REVENUE
ENTIRELY INDEPENDENT OF THE SUCCESS OR FAILURE OF ITS SPECULATIVE FUTURES AND
FORWARD TRADING.
THE TRUST'S INTEREST INCOME IS SUBJECT TO THE RISK OF TRADING LOSSES AND,
AT CURRENT INTEREST RATES, IS NOT SUFFICIENT TO OFFSET THE TRUST'S BROKERAGE
FEES PAYABLE TO CIS.
Although currently not contemplated, CISI may place certain of the Trust's
assets with a Custodian and engage a third-party cash manager to manage such
assets. If Trust assets are deposited with such Custodian, the Trust will
receive the interest actually earned by the third-party cash manager on such
assets. CIS has agreed to credit the account of the Trust at each month-end the
amount, if any, by which returns (net of fees of the cash manager) for such
month on Trust assets held by a Custodian are less than the return that would
have been realized by the Trust had such assets been deposited with CIS.
SMALL MINIMUM INVESTMENT; SMALLER MINIMUM ADDITIONAL INVESTMENT
JWH is typically available to manage individual accounts only of
substantial size -- $1,000,000 or more. Investors in the Trust are able to gain
access to JWH for a minimum investment of only $5,000; $2,000 in the case of
trustees or custodians of eligible employee benefit plans and individual
retirement accounts. A SMALL MINIMUM INVESTMENT REQUIREMENT MAKES THE TRUST
ACCESSIBLE TO A WIDE RANGE OF INVESTORS AND ALSO MEANS THAT NO INVESTOR MUST
COMMIT A SIGNIFICANT AMOUNT OF ASSETS IN ORDER TO PARTICIPATE IN THE TRUST.
NO INVESTOR SHOULD INVEST MORE IN THE TRUST THAN SUCH INVESTOR CAN
COMFORTABLY AFFORD TO LOSE. A COROLLARY OF THE SMALL MINIMUM INVESTMENT IN THE
TRUST IS THAT EXISTING AND PROSPECTIVE INVESTORS HAVE NOT BEEN REPRESENTED IN
NEGOTIATING THE TERMS OF THE TRUST.
LIMITED LIABILITY
An investor who opens an individual futures account is generally liable for
all losses incurred in such account, and may lose substantially more than such
investor committed to the account, particularly in light of the high leverage
permitted in futures and forward trading. However, a subscriber to the Trust
cannot lose more than his or her investment plus undistributed profits. In
fact, in the event the Net Asset Value of a Unit decreases to $50 or less as of
the close of business on any day, the Managing Owner is required to cause the
Trust to liquidate all open positions, suspend trading and declare a Special
Redemption Date in accordance with the provisions in the Declaration and
Agreement of Trust.
-25-
Without limited liability, it could be imprudent for an investor to participate
in such highly leveraged strategies as those applied by JWH.
ALTHOUGH UNITHOLDERS CANNOT LOSE MORE THAN THEIR INVESTMENT IN THE TRUST
PLUS UNDISTRIBUTED PROFITS, THEY MUST BE PREPARED TO LOSE ALL OR SUBSTANTIALLY
ALL OF THEIR INVESTMENT. FURTHERMORE, UNDER CERTAIN CIRCUMSTANCES UNITHOLDERS
MAY BE REQUIRED TO DISGORGE DISTRIBUTIONS AND REDEMPTION PROCEEDS RECEIVED FROM
THE TRUST AS WELL AS TO INDEMNIFY THE TRUST FOR VARIOUS TAX LIABILITIES AND
OTHER CLAIMS.
ADMINISTRATIVE CONVENIENCE
The Trust is structured so as to reduce substantially the administrative
burden which would otherwise be involved in Unitholders engaging directly in
futures and forward trading. Unitholders will receive monthly unaudited and
annual certified financial reports as well as all tax information relating to
the Trust necessary for Unitholders to complete their federal income tax
returns. The approximate daily Net Asset Value per Unit is available by calling
representatives of CISI at (312) 460-4000. THE DIVERSITY AND RANGE OF MARKETS
IN WHICH JWH TRADES, ON A 24-HOUR BASIS, MAKE THE ADMINISTRATIVE CONVENIENCE OF
AN INVESTMENT IN THE TRUST A HIGHLY ATTRACTIVE FEATURE FOR PROSPECTIVE
INVESTORS.
ALTHOUGH AN INVESTMENT IN THE TRUST IS ADMINISTRATIVELY CONVENIENT,
UNITHOLDERS HAVE ACCESS TO SUBSTANTIALLY LESS INFORMATION THAN THEY WOULD
TRADING IN AN INDIVIDUAL ACCOUNT. THE ADMINISTRATIVE CONVENIENCE OF THE TRUST
DERIVES FROM INVESTORS' COMPLETE RELIANCE ON THE MANAGING OWNER IN INVESTING IN
THE TRUST. AN INVESTMENT IN THE TRUST IS CONVENIENT BECAUSE THE MANAGING OWNER
IS RESPONSIBLE FOR ALL ASPECTS OF THE TRUST'S OPERATION.
____________________________
AN INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
THERE CAN BE NO ASSURANCE THAT JWH WILL TRADE SUCCESSFULLY ON BEHALF OF THE
TRUST OR THAT THE TRUST WILL AVOID SUBSTANTIAL LOSSES, WHICH COULD
INCLUDE THE COMPLETE LOSS OF ONE'S INVESTMENT. THE TRUST CANNOT
SERVE AS A SUCCESSFUL MEANS OF REAL DIVERSIFICATION THAT
ENHANCES OVERALL PORTFOLIO RETURNS WHILE DECREASING
OVERALL PORTFOLIO VOLATILITY UNLESS THE TRUST
ITSELF TRADES PROFITABLY.
_____________________________
THE TRUST AND ITS OBJECTIVES
OBJECTIVES
The primary objective of the Trust is substantial capital appreciation.
The Trust may be an appropriate investment vehicle for investors seeking capital
appreciation who are willing to risk significant losses. At the same time, JWH
will attempt to reduce the expected volatility and risk of loss by participating
in diversified markets. If the Trust is able to preserve capital during periods
of unfavorable, non-trending markets, it has the potential to benefit from major
price movements in a wide range of global markets when, from time to time, such
trends do occur.
Through an investment in the Trust, investors have the opportunity to
participate in markets not typically represented in an individual's portfolio,
and the potential to profit from rising as well as falling prices. Many "buy
and hold" strategies in "alternative asset classes," E.G., real estate, fine art
or precious metals, are dependent on rising prices. The Trust's profitability
is not. The success of JWH's trading is not dependent upon favorable economic
conditions, national or international. Indeed, periods of economic uncertainty
can augment the profit potential of the Trust by increasing the likelihood of
significant movements in commodity prices, the exchange rates between various
countries, world stock prices and interest rates.
Initially the Trust will allocate its assets equally between the Trading
Programs. Thereafter, at the end of each quarter, JWH will automatically
rebalance assets between the Trading Programs so that each Trading Program will
again be allocated one half of the Trust's assets. Such quarterly rebalancing
may result in the liquidation of profitable positions. See "Risk Factor (23) --
Possible Liquidation of Profitable Positions." However, the Managing Owner has
the discretion, subject to JWH's agreement, from time to time, to alter the
allocation of the Trust's assets between the Trading Programs, to delete a
Trading Program or to add other JWH programs.
-26-
The Managing Owner and JWH expect that the Trust's performance may exhibit
considerable volatility, a widely accepted measure of risk. THERE CAN BE NO
ASSURANCE THAT THE TRUST'S PERFORMANCE WILL BE CONSISTENT WITH ITS ANTICIPATED
RISK/REWARD PARAMETERS OR THAT THE TRUST WILL ACHIEVE ITS OBJECTIVES. THE TRUST
HAS NO OPERATING HISTORY.
JWH will take a long-term perspective of the markets in seeking to achieve
the Trust's objectives. The Trust will not be managed in a manner likely to
produce significant short-term profits. On the contrary, JWH anticipates that
the Trust may incur major short-term losses from time to time even if
successfully achieving its cumulative performance objective over time. The
Managing Owner and JWH recommend that no investor consider purchasing Units who
is not prepared to make at least a medium- to long-term commitment to the Trust.
THERE CAN BE NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS OBJECTIVES OR
AVOID SUBSTANTIAL LOSSES. PROSPECTIVE INVESTORS SHOULD RECOGNIZE THAT THE
PERFORMANCE OF THE TRUST IS EXPECTED TO BE MATERIALLY MORE VOLATILE THAN THAT OF
A MULTI-ADVISOR FUND. SIGNIFICANT LOSSES ARE LIKELY TO BE INCURRED FROM TIME TO
TIME.
THE MANAGING OWNER'S DISCUSSION AND ANALYSIS OF THE TRUST'S
PROSPECTIVE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PROSPECTIVE RESULTS OF OPERATIONS. The success of the Trust will be
dependent on the ability of JWH to generate profits, through speculative
trading, sufficient to produce substantial capital appreciation after payment of
all fees and expenses. Such success will, in turn, be dependent on the results
achieved by the Trading Programs. See "John W. Henry & Company, Inc."
LIQUIDITY AND CAPITAL RESOURCES. The Trust intends to raise capital only
through the sale of Units. The net proceeds of the ongoing offering of the
Units, plus the related general liability interest contributions by the Managing
Owner, will be placed under the management of JWH.
Liquidity will affect the Trust primarily in that the futures and forward
markets in which JWH takes positions may have periods in which illiquidity makes
it impossible or economically undesirable to execute trades in accordance with
signals generated by the Trading Programs. Other than in respect of the
functioning of the markets in which it trades, liquidity will be of little
relevance to the operation of the Trust, as substantially all of its assets are
expected to be maintained in highly liquid government securities or cash
deposits.
The Managing Owner does not believe that it is realistic to regard the
Trust as having a meaningful chance of achieving its profit objectives in the
short term. In fact, the Managing Owner recommends that investors look at the
Trust as a "buy and hold" investment which they intend to retain for a medium-
to long-term period (not less than 2 years). Although redemptions are available
at any month-end, the Managing Owner believes that the Units must be regarded as
a comparatively illiquid, long-term investment. The redemption charges which
remain in effect for the first eleven full months after each Unit is sold
indicate that no one should consider purchasing Units who does not intend to
hold them for at least that period of time.
RISK CONTROLS. The Trust will be subject to both market and credit risk.
The Trust will trade futures contracts on currencies, interest rates, energy and
agricultural products, metals and stock indices, options on such futures
contracts, and spot and forward contracts on currencies and precious metals.
Risk arises from changes in the value of these contracts (market risk) and the
potential inability of counterparties or brokers to perform under the terms of
the contracts (credit risk). Numerous factors can have a significant influence
on the market risk of the Trust's open positions, many of which will be highly
interest-rate sensitive. The Trading Programs incorporate risk control
policies -- relating, for example, to the maximum permissible commitment to a
particular position or the maximum loss on such position which will be tolerated
without liquidation -- but there can be no assurance that these policies will
prevent substantial market losses.
The credit risks associated with exchange-traded contracts are typically
perceived to be less than those associated with over-the-counter transactions,
because exchanges typically (but not universally) provide clearinghouse
arrangements in which the collective credit (in some cases limited in amount, in
some cases not) of the members of the exchange is pledged to support the
financial integrity of the exchange, whereas in over-the-counter transactions,
on the other hand, traders must rely solely on the credit of their respective
individual counterparties. The Trust will trade extensively in both exchange-
traded and over-the-counter instruments.
-27-
THE MANAGING OWNER
The managing owner and commodity pool operator of the Trust is CIS
Investments, Inc., a wholly-owned subsidiary of Cargill Investor Services, Inc.,
the Trust's Futures Broker. The Managing Owner was incorporated in Delaware in
1983. It has been registered with the CFTC under the CEA as a commodity pool
operator since December 13, 1985 and is a member in good standing of NFA in such
capacity. CISI maintains its principal office at 233 South Wacker Drive, Suite
2300, Chicago, Illinois 60606; telephone (312) 460-4000. The records of the
Trust will be kept at CISI's principal office. The officers and directors of
CISI do not receive any compensation directly from CISI.
CISI currently operates two public commodity pools jointly with IDS Futures
Corporation and one private commodity pool and operated one private commodity
pool (which has been liquidated). The past performance record of the Managing
Owner is set forth in Appendix I.
The directors and officers of CISI are as follows:
HAL T. HANSEN is President and a director. Mr. Hansen has been President
of Cargill Investor Services, Inc. since November 1978. He serves on the
Executive Committees of the Board of Directors of NFA and the Futures Industry
Association ("FIA") and is the Chairman of NFA. Mr. Hansen graduated from the
University of Kansas in 1958. He started work at Cargill, Incorporated in 1958,
and was employed by Cargill S.A.C.I. in Argentina from 1965 to 1969. Mr. Hansen
has been employed by Cargill Investor Services, Inc. since 1974.
L. CARLTON ANDERSON is Vice President and a director. Mr. Anderson is a
graduate of Northwestern University, Evanston, Illinois. He started work at
Cargill, Incorporated in 1959, in the Commodity Marketing Division. He served
as President of Stevens Industries Inc., Cargill's peanut shelling subsidiary,
from 1979 to 1981. He has been employed by Cargill Investor Services, Inc.
since 1981, and is currently the Director in charge of the Portfolio
Diversification Group. Mr. Anderson recently served on the Board of Directors
of the Managed Futures Association.
RICHARD A. DRIVER is Vice President and a director. Mr. Driver became a
Vice President and a director of CISI on June 29, 1993. Mr. Driver graduated
from the University of North Carolina in 1969 and he received a Masters Degree
from the American Graduate School of International Management in 1973.
Mr. Driver began working for Cargill, Incorporated in 1973 and joined Cargill
Investor Services, Inc. in 1977 as Vice President of Operations.
CHRISTOPHER MALO is Vice President. Mr. Malo graduated from Indiana
University in 1976. He started work at Cargill, Incorporated in June 1978 as an
internal auditor. He transferred to Cargill Investor Services, Inc. in August
1979, and served as Secretary/Treasurer from November 1983 until July 1991. He
was elected Vice President and Secretary in July 1991. He is a member of the
FIA Operations Division and has served as Chairman of the FIA Finance Committee.
BARBARA A. PFENDLER is Vice President. Ms. Pfendler is a graduate of the
University of Colorado, Boulder. She began her career with Cargill,
Incorporated in 1975. She held various merchandising and management positions
within the organization's Oilseed Processing Division before transferring to CIS
in 1986 where she is responsible for all marketing activities of the Portfolio
Diversification Group. She was appointed Vice President of CISI in May 1990 and
Vice President of CIS in June of 1996.
DONALD ZYCK is Secretary and Treasurer. Mr. Zyck graduated from Northern
Illinois University, DeKalb, Illinois in 1983. He began working at Cargill
Investor Services, Inc. in April 1985 as a Staff Accountant. From January 1988
to October 1994 he was a Manager of Treasury Operations at CIS. He was elected
Controller, Secretary and Treasurer of CIS in October 1994.
BRUCE H. BARNETT is an Assistant Secretary. Mr. Barnett graduated in 1968
from Southern Connecticut State College. New York University Law School awarded
Mr. Barnett a J.D. in 1971 and an L.L.M. in 1973. He started work at Cargill,
Incorporated in 1990 as Vice President, Taxes. From 1987 to 1990, Mr. Barnett
held various positions at Unilever, a European based multi-national corporation.
HENRY W. GJERSDAL, JR. is an Assistant Secretary. Mr. Gjersdal received a
bachelor of arts degree from Gustavus Adolphus College in 1976 and a J.D. degree
from the University of Michigan in 1979. He is a member of the American Bar
Association and the Tax Executives Institute. He joined the Law Department of
Cargill, Incorporated in April 1981. He had previously been an associate with
Doherty, Rumble and Butler, Minneapolis, Minnesota. In June 1985 he was named
European Tax Manager for Cargill International, Geneva, and in 1987 was named
Senior Tax Attorney for the
-28-
Law Department. He became Assistant Tax Director in the Tax Department in
December 1990. Mr. Gjersdal was named Assistant Vice President of Cargill,
Incorporated's Administrative Division in April 1994 with responsibility for the
Audit and international groups in Cargill's Tax Department and became Assistant
Secretary on June 25, 1996.
PATRICE H. HALBACH is an Assistant Secretary. Ms. Halbach graduated phi
beta kappa from the University of Minnesota with a bachelor of arts degree in
history. In 1980 she received a J.D. degree cum laude from the University of
Minnesota. She is a member of the Tax Executives Institute, the American Bar
Association and the Minnesota Bar Association. Ms. Halbach joined the Law
Department of Cargill, Incorporated in February 1983. She had previously been
an attorney with Fredrikson & Byron, Minneapolis, Minnesota. In December 1990,
she was named Senior Tax Manager for Cargill, Incorporated's Tax Department and
became Assistant Tax Director in March 1993 and was responsible for the
oversight of federal audits and international compliance. She was named
Assistant Vice President of Cargill, Incorporated's Administrative Division in
April 1994. She became Assistant Secretary on June 25, 1996.
JOHN W. HENRY & COMPANY, INC.
BACKGROUND
John W. Henry & Company, Inc., a California corporation, is a United
States-based global investment management firm. JWH is recognized as a leader
in managing capital in futures, interest rate, and foreign exchange markets for
international banks, brokerage firms, pension funds, institutions, and high-net-
worth individuals. JWH trades numerous contracts on a 24-hour basis in the
Americas, Europe and Asia, and has grown to be one of the largest advisors in
the industry, managing approximately $1.6 billion in client capital as of
September 30, 1996.
John W. Henry & Company began managing assets in 1981 as a sole
proprietorship and was later incorporated in the state of California as John W.
Henry & Co., Inc. to conduct business as a commodity trading advisor. The sole
shareholder of JWH is the John W. Henry Trust dated July 27, 1990. The trustee
and sole beneficiary of the Trust is John W. Henry. JWH is registered as a
commodity trading advisor and a commodity pool operator with the CFTC, is a
member of NFA and the FIA and a sustaining member of the Managed Futures
Association (the "MFA").
A DISCIPLINED INVESTMENT PHILOSOPHY
JWH's history of success is based on the following guiding principles:
LONG-TERM PERSPECTIVE. JWH's investment strategies rest on a long-term
perspective on the world's financial and commodities markets. Historical
performance demonstrates that, because trends often last longer than most market
participants expect, strong returns can be generated from positions held over
the long term.
DISCIPLINED INVESTMENT PROCESS. The disciplined investment process
utilized by JWH is designed to generate superior, risk-adjusted rates of return
throughout a market cycle. By consistently applying investment techniques in
financial and commodities markets worldwide, JWH is able to participate in
rising and falling markets without bias.
JWH's ongoing research has led to the development of analytical models
which suggest the appropriate content, weighting, entries and exits for each
investment position. Once established, investment positions are monitored
around the clock. While many of these positions are closed out within a few
days or weeks at a profit or loss, others are retained where JWH's investment
guidelines indicate potential opportunity for exceptional returns.
TREND IDENTIFICATION. JWH's strategies are nonpredictive. Instead, based
on comprehensive research on historic pricing data, JWH seeks to recognize the
movements of capital from one market to another after trends have begun.
GLOBAL DIVERSIFICATION. For more than a decade, JWH has recognized the
importance of global trading. Financial markets around the world are
increasingly interrelated, with actions in one country's markets often
influencing markets in other parts of the world. JWH investments are positioned
to provide access to the performance potential offered by the global
marketplace.
COMPREHENSIVE RISK MANAGEMENT. JWH's risk management strategies are
designed to decrease volatility and improve the risk/reward characteristics of
investments in futures and forwards by relying upon carefully formulated risk
management algorithms that define controlled loss parameters prior to the
establishment of a position.
-29-
PRINCIPALS
MR. JOHN W. HENRY is chairman of the JWH Board of Directors and is trustee
and sole beneficiary of the John W. Henry Trust dated July 27, 1990. Mr. Henry
is also a member of the Investment Policy Committee of JWH. He currently
concentrates his activities at JWH on portfolio management, business issues and
frequent dialogue with trading supervisors. Mr. Henry is the exclusive owner of
certain trading programs licensed to Elysian Licensing Corporation, a
corporation wholly-owned by Mr. Henry, sublicensed by Elysian Licensing
Corporation to JWH and utilized by JWH in managing client accounts. Over the
last ten years, Mr. Henry has developed many innovative investment programs
which have enabled JWH to become one of the most successful money managers in
the foreign exchange, futures and fixed income markets.
Mr. Henry has served on the Board of Directors of the National Association
of Futures Trading Advisors ("NAFTA") and the Managed Futures Trade Association,
and has served on the Nominating Committee of NFA. Mr. Henry currently serves
on the Board of Directors of the FIA and is chairman of the FIA task force on
Derivatives for Investment. He also currently serves on a panel created by the
Chicago Board of Trade and Chicago Mercantile Exchange to study cooperative
efforts related to electronic trading, common clearing and the issues regarding
the possible merger of these two exchanges. In 1989, Mr. Henry established
residency in Florida and since that time has performed services from that
location as well as at the Connecticut offices of JWH. Mr. Henry is a principal
of JWH Risk Management, Inc., Westport Capital Management Corporation, Global
Capital Management Limited, JWH Asset Management, Inc. and JWH Investments,
Inc., all of which are affiliates of JWH. Since the beginning of 1987,
Mr. Henry has devoted and will continue to devote considerable time to business
activities unrelated to JWH and its affiliates.
MR. MARK H. MITCHELL is vice chairman and a member of the Board of
Directors of JWH. He is also vice chairman and a director of JWH Risk
Management, Inc., and a director of JWH Asset Management, Inc. Prior to his
employment at JWH in January 1994, Mr. Mitchell was a partner of Chapman and
Cutler, a Chicago, Illinois law firm, where he had headed its futures law
practice since August 1983. From August 1980 to March 1991, he served as
general counsel of NAFTA and, from March 1991 to December 1993, he served as
general counsel of the MFA. Mr. Mitchell is currently a member of the Commodity
Pool Operator/Commodity Trading Advisor Advisory Committee and the Special
Committee for the Review of the Multi-Tiered Regulatory Approach to NFA Rules,
both of NFA. In addition, he has served as a member of the Government Relations
Committee of the MFA and the Executive Committee of the Law and Compliance
Division of the FIA. In 1985, he received the Richard P. Donchian Award for
Outstanding Contributions to the Field of Commodity Money Management. He was an
editor of FUTURES INTERNATIONAL LAW LETTER and of its predecessor publication,
COMMODITIES LAW LETTER. He received an A.B. with honors from Dartmouth College
and a J.D. from the University of California at Los Angeles, where he was named
to the Order of the Coif, the national legal honorary society.
MR. DAVID R. BAILIN is an executive vice president and a member of the
Operating Committee of JWH. He is also president and a director of Westport
Capital Management Corporation, president of JWH Risk Management, Inc.,
president of JWH Investments, Inc. and president and chairman of the Board of
Directors of Global Capital Management Limited. He is responsible for the
development, implementation, and management of JWH's sales and marketing
infrastructure. He currently serves on the Board of Directors of the Futures
Industry Institute. Prior to joining JWH in December 1995, Mr. Bailin was
managing director -- development since April 1994 for Global Asset Management
(GAM), a Bermuda based management firm with over $7 billion in managed assets.
He was responsible for overseeing the international distribution of GAM's funds
as well as for establishing new distribution relationships and channels. Prior
to his employment with GAM, Mr. Bailin headed the real estate asset management
division of Geometry Asset Management beginning in July 1992. Prior to that
time, beginning in 1987, he was president of Warner Financial, an investment
advisory business in Boston, Massachusetts. Mr. Bailin received a B.A. from
Amherst College and an M.B.A. from Harvard Business School.
MR. JAMES E. JOHNSON, JR. is chief financial officer, chief administrative
officer and a member of the Operating Committee of JWH. In addition, Mr.
Johnson is treasurer of Westport Capital Management Corporation and a principal
of JWH Investments, Inc., JWH Asset Management, Inc. and JWH Risk Management,
Inc. Mr. Johnson joined JWH in May 1995 from Bankers Trust Company where he had
been managing director and chief financial officer of the asset management
division since January 1983. His areas of responsibility included finance,
operations and technology for the $160 billion global asset advisor. Prior to
joining Bankers Trust, Mr. Johnson was a product manager at American Express
Company responsible for research and market strategies for the Gold Card. He
received a B.A. with honors from Columbia University and an M.B.A. in Finance
and Marketing from New York University.
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MS. ELIZABETH A.M. KENTON is a senior vice president, the director of
compliance and a member of the Operating Committee of JWH. Since joining JWH in
March 1989, Ms. Kenton has held positions of increasing responsibility in
research and development, administration and regulatory compliance. Ms. Kenton
is also senior vice president of JWH Risk Management, Inc., Executive Vice
President of JWH Investments, Inc., vice president of JWH Asset Management,
Inc., a director of Westport Capital Management Corporation and a director of
Global Capital Management Limited. Prior to her employment at JWH, Ms. Kenton
was associate manager of finance and trading operations at Krieger Investments,
a currency and commodity trading firm. From July 1987 to September 1988, Ms.
Kenton worked for Bankers Trust Company as a product specialist for foreign
exchange and Treasury options trading. Ms. Kenton is a member of the MFA's
Trading and Markets Committee. She received a B.S. in Finance from Ithaca
College.
MS. MARY ELIZABETH HARDY is a senior vice president, the director of
trading administration and a member of the Operating and Investment Policy
Committees of JWH. Since joining JWH in September 1990, Ms. Hardy has held
positions of increasing responsibility in research and development and trading.
Prior to her employment at JWH, Ms. Hardy held the position of associate editor
at Waters Information Services ("Waters"), a publishing company, where she wrote
weekly articles covering technological advances in the securities and futures
markets. Prior to joining Waters in 1989, Ms. Hardy was at Shearson Lehman
Brothers Inc. ("Shearson"), where she held the position of assistant director of
the Managed Futures Trading Department. Prior to that, Ms. Hardy was an
institutional salesperson for Shearson, in a group specializing in financial
futures and options. Previously, Ms. Hardy was an institutional salesperson for
Donaldson, Lufkin and Jenrette with a group which also specialized in financial
futures and options. Ms. Hardy serves on the Executive Committee of the MFA's
Board of Directors and has chaired its Trading and Markets Committee. She
received a B.B.A. in Finance from Pace University.
MR. DAVID M. KOZAK is counsel to the firm, a vice president and secretary
of JWH. In addition, he is assistant secretary of Westport Capital Management
Corporation and secretary of JWH Risk Management, Inc. Prior to joining JWH in
September 1995, Mr. Kozak was employed at the law firm of Chapman and Cutler,
where he was an associate from September 1983 and a partner from 1989. Mr.
Kozak has concentrated in commodity futures law since 1981, with emphasis in the
area of commodity money management. During the time he was employed at Chapman
and Cutler, he served as outside counsel to NAFTA and the MFA. Mr. Kozak is
currently a member of the NFA Special Committee on CPO/CTA Disclosure Issues,
the Government Relations Committee of the MFA, and the Visiting Committee of The
University of Chicago Library. He received a B.A. from Lake Forest College, an
M.A. from The University of Chicago, and a J.D. from Loyola University of
Chicago.
MR. KEVIN S. KOSHI is a senior vice president and chief trader of JWH. He
is also a member of the Investment Policy Committee of JWH. Mr. Koshi is
responsible for the supervision and administration of all aspects of order
execution strategies and the implementation of trading policies and procedures.
Mr. Koshi joined JWH in August 1988 as a professional in the Finance Department,
and since 1990 has held positions of increasing responsibility in the Trading
Department. He received a B.S. in Finance from California State University at
Long Beach.
MR. BARRY S. FOX is the director of research and development and is a
member of the Investment Policy Committee of JWH. Mr. Fox is responsible for
the design and testing of existing and new programs. He also supports and
maintains the proprietary systems/models used to generate JWH trades. Mr. Fox
joined JWH in March 1991 and since that time has held positions of increasing
responsibility in the Research and Product Development Department. Prior to his
employment at JWH, Mr. Fox provided sales and financial analysis support for
Spreadsheet Solutions, a financial software development company. Prior to
joining Spreadsheet Solutions in October 1990, Mr. Fox operated a trading
company where he traded his own proprietary capital. Before that, he was
employed with Bankers Trust as a product specialist for foreign exchange and
Treasury options trading. He received a B.S. in Business Administration from
the University of Buffalo.
MS. GLENDA G. TWIST is a director of JWH and has held that position since
August 1993. Ms. Twist joined JWH in September 1991 with responsibilities for
corporate liaison, and she continues her duties in that area. Her
responsibilities include assistance in the day-to-day administration of the
Florida office and review and compilation of financial information for JWH. Ms.
Twist was president of J.W. Henry Enterprises Corp., for which she performed
financial, consulting and administrative services from January 1991 to August
1991. From 1988 to 1990, Ms. Twist was executive director of Cities in Schools,
a program in Arkansas designed to prevent students from leaving school before
completing their high school education. She received her B.S. in Education from
Arkansas State University.
MR. JOHN A. F. FORD is the director of marketing at JWH and is responsible
for the development and implementation of strategic marketing and communications
programs. He joined JWH in May 1996 from J. P. Morgan where he had been vice
president and head of corporate communications for that firm's European
operations, responsible
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for public relations, advertising, and marketing from February 1995 to
October 1995. He previously held a similar position with J. P. Morgan at the
Euroclear Operations Centre in Brussels from January 1992 to February 1994.
From October 1995 to May 1996 he undertook a number of consultancy projects
while relocating to the United States. Prior to joining J. P. Morgan, Mr.
Ford was managing director of the European headquarters of Gavin Anderson &
Co. (UK), an international corporate and investor relations consultancy firm,
from February 1987 to December 1991. Mr. Ford was involved in advising the
Chicago Mercantile Exchange on marketing its services to European
institutions and advising the International Petroleum Exchange in London on
similar matters. In addition, he helped market Mercury Asset Management to
major institutions and pension funds.
MR. MICHAEL D. GOULD is director of investor services at JWH. He is
responsible for general business development and oversees investor services
support. He joined JWH in April 1994 from Smith Barney Inc. where he served as
senior sales manager and vice president futures for the Managed Futures
Department. He held the identical position with the predecessor firms of
Shearson Lehman Bros. and Lehman Bros. Prior to that time, he was engaged in a
proprietary trader development program at Tricon USA from September 1990 to
October 1991. He was a registered financial consultant with Merrill Lynch from
1985 through August 1990. His professional career began in 1982 as an owner-
operator of a nonferrous metals trading and export business which he ran until
September 1985.
MR. JACK M. RYNG, C.P.A., joined JWH as the controller in November 1991.
Mr. Ryng is also chief financial officer and secretary of JWH Investments, Inc.
Prior to that time, he was a senior manager with Deloitte & Touche where he held
positions of increasing responsibility since September 1985 for commodities and
securities industry clients. His clients included the largest commodity pool
operators in the United States, along with broker-dealers, futures commission
merchants, and foreign exchange operations in the areas of accounting,
regulatory compliance, and consulting. Prior to his employment by the Financial
Services Center of Touche Ross & Co. (the predecessor firm of Deloitte &
Touche), he was a senior accountant for Leonard Rosen & Co. Mr. Ryng is a
member of AICPA and the New York C.P.A. Society, and is a member of the board of
the New York Operations Division of the FIA. He received a B.S. in Business
Administration from Duquesne University.
MR. MICHAEL J. SCOYNI is a managing director of JWH and is secretary and a
director of Westport Capital Management Corporation. Mr. Scoyni has been
associated with Mr. Henry since 1974 and with JWH since 1982. He was engaged in
research and development for John W. Henry & Company (JWH's predecessor) from
November 1981 to December 1982 and subsequently has been employed in positions
of increasing responsibility. He received a B.A. in Anthropology from
California State University in 1974.
MR. CHRISTOPHER E. DEAKINS is a vice president of JWH. He is responsible
for general business development and investor services support. Prior to
joining JWH in August 1995, he was a vice president, national sales, and a
member of the Management Team for RXR Capital Management, Inc. His
responsibilities consisted of business development, institutional sales, and
broker dealer support. Prior to joining RXR in August 1986, he was engaged as
an account executive for Prudential-Bache Securities starting in February 1985.
Prior to that, Mr. Deakins was an account executive for Merrill Lynch. He
received a B.A. in Economics from Hartwick College.
MR. CHRIS J. LAUTENSLAGER is a vice president of JWH. He is responsible
for general business development and Investor Services support. Prior to
joining JWH in April 1996, he was the vice president of institutional sales for
I/B/E/S International Inc., a distributor of corporation earnings estimate
information. His responsibilities consisted of business development and support
of global money managers and investment bankers. Prior to his employment with
I/B/E/S, Mr. Lautenslager devoted time to personal activities from April 1994 to
March 1995, following the closing of the Stamford, Connecticut office of Gruntal
& Co., where he had worked as a proprietary equity trader since November 1993.
Before that, he held the same position at S.A.C. Capital Management starting in
February 1993. From 1987 to December 1993, Mr. Lautenslager was a partner and
managing director of Limitless Option Partners, a registered Chicago Mercantile
Exchange trading and brokerage organization, where he traded currency futures
and options. He received a B.S. in Accounting from the University of Colorado
and a Masters in Management from Northwestern University.
MR. EDWIN B. TWIST is a director of JWH and has held that position since
August 1993. He is also a director of JWH Risk Management, Inc. Mr. Twist
joined JWH as internal projects manager in September 1991. Mr. Twist's
responsibilities include assistance in the day-to-day administration of JWH's
Florida office and internal projects. Mr. Twist was secretary and treasurer at
J.W. Henry Enterprises Corp., a Florida corporation engaged in administrative
and financial consulting services, for which he performed financial, consulting
and administrative services from January 1991 to August 1991.
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MS. NANCY O. FOX, C.P.A., is a vice president and the director of
investment support of JWH. She is responsible for the day-to-day activities of
the Investment Support Department, including all aspects of operations and
performance reporting. Prior to joining JWH in January 1992, Ms. Fox was a
senior accountant at Deloitte & Touche, where she served commodities and
securities industry clients and held positions of increasing responsibility
since July 1987. Ms. Fox is a member of the AICPA and the New Jersey Society of
C.P.A.s. She received a B.S. in Accounting and Finance from Fairfield
University and an M.B.A. from the University of Connecticut.
MS. WENDY B. GOODYEAR is a director of the office of the chairman. She is
responsible for managing and coordinating projects involving Mr. Henry. Ms.
Goodyear joined JWH in October 1995 as director of marketing, responsible for
the development and implementation of strategic marketing and communications
programs. Prior to her employment at JWH, Ms. Goodyear was a vice president at
Citibank where she held several positions, including product development manager
for the depository receipt business and marketing manager for the pension
business. Prior to joining Citibank in May 1993, Ms. Goodyear was employed at
Bankers Trust Company from 1985 where she held positions of increasing
responsibility in both the private bank and pension businesses. Ms. Goodyear
received a B.A. in History from the University of Virginia and an M.B.A. from
the Stern School of Business at New York University.
MR. JULIUS A. STANIEWICZ is the senior strategist in JWH's Product
Development Department. He is also president of JWH Asset Management, Inc.
Prior to joining JWH in March of 1992, Mr. Staniewicz was employed with Shearson
Lehman Brothers as a financial consultant since April 1991. Prior to that,
beginning in 1990, Mr. Staniewicz was a vice president of Phoenix Asset
Management, a commodity pool operator and introducing broker, where he helped
develop futures funds for syndication and institutional investors. From 1986 to
1989, Mr. Staniewicz worked in the managed futures department at Prudential-
Bache Securities, Inc., lastly as an assistant vice president and co-director of
managed futures. In that capacity, he oversaw all aspects of forming and
offering futures funds, including the selection and monitoring of commodity
trading advisors. Mr. Staniewicz received a B.A. in Economics from Cornell
University.
THE INVESTMENT POLICY COMMITTEE
The Investment Policy Committee is one vehicle for decision-making at JWH
about the content and application of JWH trading programs. Composition of the
Investment Policy Committee, and participation in its discussion and decisions
by non-members, may vary over time.
LEGAL AND ETHICAL CONCERNS
In September 1996, JWH was named as a co-defendant in class action lawsuits
brought in the California Superior Court, Los Angeles County and in the New York
Supreme Court, New York County. The actions, which seek unspecified damages,
purport to be brought on behalf of investors in certain commodity pools operated
by Dean Witter Reynolds Inc. or its affiliates ("Dean Witter"), some of which
are advised by JWH, and are primarily directed at Dean Witter's alleged
fraudulent selling practices in connection with the marketing of those pools.
JWH is essentially alleged to have aided and abetted or directly participated
with Dean Witter in those practices. JWH believes the allegations against it
are without merit; it intends to contest these allegations vigorously and is
convinced that it will be shown to have acted properly and in the best interest
of investors.
JWH and Mr. Henry may engage in discretionary trading for their own
accounts, and may trade for the purpose of testing new investment programs and
concepts, as long as such trading does not amount to a breach of fiduciary duty.
In the course of such trading, JWH and Mr. Henry may take positions in their own
accounts which are the same or opposite from client positions, and on occasion
orders may be filled better for their accounts than for client accounts due to
testing a new quantitative model or program, a neutral allocation system, and/or
trading pursuant to individual discretionary methods. Records for these
accounts will normally not be made available to clients. Employees and
principals of JWH (other than Mr. Henry) are not permitted to trade on a
discretionary basis in futures, options on futures or forward contracts.
However, such principals and employees may invest in investment vehicles that
trade futures, options on futures, or forward contracts, when an independent
trader manages trading in that vehicle, and in the JWH Employee Fund, L.P.,
which is managed by JWH. The records of these accounts also will not be made
available to clients.
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TRADING TECHNIQUES
JWH specializes in managing institutional and individual capital in the
global commodities, interest rate and foreign exchange markets. Since 1981, JWH
has developed and implemented proprietary trend-following trading techniques
that focus on long-term rather than short-term, day-to-day trends. In addition
to the Trading Programs, JWH currently operates ten other programs that trade
from either a U.S. or a foreign currency perspective, none of which will be
employed by the Trust initially.
JWH's systematic investment process in designed to generate, over market
cycles, excellent risk-adjusted rates of return under favorable and adverse
market conditions. The JWH process capitalizes on emerging, long-term, rising
and falling price trends and ignores day-to-day price fluctuations. To ensure
disciplined implementation of its investment philosophy, JWH uses mathematical
models to execute investment decisions in more than 50 global markets
encompassing currencies, commodities and financial securities. All JWH
investment programs follow the strict money management framework outlined below.
The first step in the JWH investment process is the identification of a
price trend. While there are many ways to identify trends, JWH uses a
methodology which identifies opportunities in order to attempt to capture a
majority of the significant price movements in a given market. The process
presumes that such price movements will often exceed the expectation of the
general marketplace. As such, the JWH discipline is to pare losing positions
relatively quickly while allowing profitable positions to mature. Positions
held for two to four months are not unusual, and positions have been held for
more than one year. Historically, only thirty to forty percent of all trades
made pursuant to the investment methods have been profitable. Large profits on
a few trades in positions that typically exist for several months have produced
favorable results overall. Generally, most losing positions are liquidated
within weeks. The maximum equity retracement JWH has experienced in any single
program was nearly sixty percent. Clients should understand that similar or
greater drawdowns are possible in the future. THERE CAN BE NO ASSURANCE THAT
JWH WILL TRADE PROFITABLY FOR THE TRUST OR AVOID SUDDEN AND SEVERE LOSSES.
JWH at its sole discretion may override computer-generated signals and may
at times use discretion in the application of its quantitative models which may
affect performance positively or negatively. Subjective aspects of JWH's
quantitative models also include the determination of leverage, commencement of
trading an account, contracts and contract months, margin utilization, and
effective trade execution.
PROGRAM MODIFICATIONS
In an effort to maintain and improve performance, JWH has engaged, and
continues to engage, in an extensive program of research. While the basic
philosophy underlying JWH's investment methodology has remained intact
throughout its history, the potential benefits of employing more than one
investment methodology, alternatively, or in varying combinations, is a subject
of continual testing, review and evaluation. Extensive research may suggest the
substitution of alternative investment methodologies with respect to particular
contracts in light of relative differences in the hypothetical historical
trading performance achieved through testing different methodologies. In
addition, risk management research and analysis may suggest modifications
regarding the relative weighting among various contracts, the addition or
deletion of particular contracts for a program or a change in the degree of
leverage employed.
As the capital in each program increases, additional emphasis and weighting
may be placed on certain markets which have historically demonstrated the
greatest liquidity and profitability. The weightings of capital committed to
various markets in the trading programs are dynamic, and JWH may vary the
weightings at its discretion as market conditions, liquidity, position limit
considerations and other factors warrant. The Managing Owner (and, accordingly,
the Unitholders) will generally not be informed of any such changes.
LEVERAGE
Leverage adjustments have been and continue to be an integral part of JWH's
investment strategy. At its discretion, JWH may adjust leverage in certain
markets or entire programs. Leverage adjustments may be made at certain times
for one program but not for others. Factors which may affect the decision to
adjust leverage include: ongoing research; program volatility; current market
volatility; risk exposure; and subjective judgment and evaluation of these and
other general market conditions. Such decisions to change leverage may
positively or negatively affect performance, and will alter risk exposure of an
account. Leverage adjustments may lead to greater profits or losses, more
frequent and larger margin calls, and greater brokerage expense. NO ASSURANCE
IS GIVEN THAT SUCH LEVERAGE ADJUSTMENTS WILL BE TO THE
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FINANCIAL ADVANTAGE OF THE TRUST. JWH RESERVES THE RIGHT, IN ITS SOLE
DISCRETION, TO ADJUST ITS LEVERAGE POLICY WITHOUT NOTIFICATION TO INVESTORS.
ADDITION, REDEMPTION AND REALLOCATION OF CAPITAL FOR POOL ACCOUNTS
JWH has developed procedures for pool accounts, such as the Trust, that
provide for the addition, redemption and/or reallocation of capital. Investors
who purchase or redeem units in a pool are most frequently permitted to do so at
a price equal to the net asset value per unit on the close of business on the
last business day of the month or quarter. In addition, pools often may
reallocate capital among advisors at the close of business on the last business
day of the month. In order to provide market exposure commensurate with the
equity in the account on the date of these transactions, JWH's general practice
is to adjust positions at a time as close as possible to the close of business
on the last trading date of the month. The intention is to provide for
additions, redemptions and reallocations at a net asset value per unit that will
be the same for each of these transactions and to eliminate possible variation
in the net asset value per unit that could occur as a result of inter-day price
changes when additions are calculated on the first day of the subsequent month.
Therefore, JWH may, in its sole discretion, adjust its investment of the assets
associated with the addition, redemption or reallocation of capital as near as
possible to the close of business on the last trading day of the month to
reflect the amount then available for trading. Based on JWH's determination of
liquidity or other market conditions, JWH may decide to commence trading earlier
in the day on, or before, the last business day of the month. In the case of an
addition to a pool account, JWH may also, in its sole discretion, delay the
actual start of trading for those new assets. No assurance is given that JWH
will be able to achieve the objectives described above in connection with
funding level changes. The use of discretion by JWH in the application of its
procedures for trading pool accounts may affect performance positively or
negatively.
In addition to futures contracts, JWH may from time to time trade spot and
forward contracts on physical or cash commodities, including specifically gold
bullion, when it believes that such markets offer comparable or superior market
liquidity or a greater ability to execute transactions at a single price. Such
transactions, as opposed to futures transactions, relate to the purchase and
sale of specific physical commodities. Whereas futures contracts are generally
uniform except for price and delivery time, cash contracts may differ from each
other with respect to such terms as quantity, grade, mode of shipment, terms of
payment, penalties, risk of loss and the like. There is no limitation on the
daily price movements of spot or forward contracts transacted through banks,
brokerage firms or dealers, and those entities are not required to continue to
make markets in any commodity. In addition, the CFTC does not comprehensively
regulate such transactions, which are subject to the risk of the foregoing
entities' failure, inability or refusal to perform with respect to such
contracts. JWH intends that the Trust will not take physical deliveries of
commodities, other than in the case of EFP transactions in currencies.
THE TRADING PROGRAMS
The Trust will initially allocate its assets equally between the Original
Investment Program and the Financial and Metals Portfolio, which are the two
longest established, continuously offered JWH programs. Thereafter, JWH will
automatically rebalance Trust assets equally between the two Trading Programs at
the end of each quarter. The timing of reallocation to rebalance assets between
the Trading Programs may result in closing positions other than at times when a
Trading Program would dictate, causing the Trust to incur losses or forgo
profits that it would otherwise achieve.
ORIGINAL INVESTMENT PROGRAM. The first program offered by JWH, this
Trading Program is a broadly diversified portfolio providing access to a diverse
group of financial and nonfinancial markets on U.S. and non-U.S. exchanges.
Based on the results of extensive research, the Trading Program's composition
was revised in July 1992 to include new global markets and an increased
weighting in financial sectors. The Trading Program utilizes long-term
quantitative reversal models which hold either long or short positions at all
times in every market in which it participates. As of September 30, 1996, JWH
had approximately $180 million under management pursuant to the Original
Investment Program.
FINANCIAL AND METALS PORTFOLIO. The Financial and Metals Portfolio seeks
to capitalize on sustained moves in global financial markets utilizing
intermediate- and long-term quantitative trend analysis models, some of which
attempt to employ neutral stances during periods of nontrending markets. As of
September 30, 1996, JWH had approximately $949 million under management pursuant
to the Financial and Metals Portfolio.
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MARKETS AND SECTORS TRADED
The Trust will trade, from time to time, in over 50 markets pursuant to the
Trading Programs. Portfolio allocations within each Trading Program are under
continuous review, on the basis of both systematic and discretionary analysis,
and are adjusted from time to time as JWH deems advisable. The following
depicts the market allocations as of September 30, 1996 of the Trading Programs.
ORIGINAL INVESTMENT PROGRAM
Global Interest Rates 34.4% Energy 18.7%
Global Stock Indices 7.0% Fiber, Grain & Softs 21.8%
Foreign Exchange 10.6% Precious and Base Metals 7.5%
FINANCIAL AND METALS PORTFOLIO
Global Interest Rates 57.5% Foreign Exchange 17.7%
Global Stock Indices 3.2% Precious Metals 21.6%
Each of the above charts reflects each contract group's percentage
committed to margin requirements relative to the margin requirement of the
entire portfolio as of September 30, 1996. These percentages are shown for
illustrative purposes only; allocations can and do change over time and from
time to time. These allocations are not meant to indicate that they are
"average" or necessarily typical. Margin requirements for any interbank
currency trading are calculated as futures contract equivalents.
OTHER PROGRAMS DEVELOPED BY JWH
In addition to the Original Investment Program and the Financial and Metals
Portfolio, JWH currently operates ten other trading programs for U.S. and non-
U.S. investors, none of which will be utilized by JWH for the trust initially.
Each program is operated separately and independently. These programs are
intermediate- and long-term, quantitative trend identification models designed
with the objective of achieving speculative rates of return.
The Global Diversified Portfolio opened in 1988 and invests in futures and
forward contracts traded on domestic and foreign exchanges in over 30 markets.
Sectors traded may include foreign exchange, metals, agriculture, global
interest rates, stock indices and energy. The program is designed to identify
and capitalize on intermediate- and long-term price movements.
The World Financial Perspective seeks to capitalize on market opportunities
by holding positions from multiple currency perspectives, including the
Australian dollar, British pound, Canadian dollar, French franc, German mark,
Japanese yen, Swiss franc and U.S. dollar. Sectors traded may include energy,
foreign exchange, stock indices, metals and global interest rates. The program
began in 1987 and is designed to identify and capitalize on long-term price
movements.
The Yen Financial Portfolio, active since 1992, offers investors access to
profit opportunities in several Japanese capital markets, including the Japanese
yen, the 10-Year Japanese Government Bond, Euroyen and Nikkei stock index. The
program is designed to identify and capitalize on intermediate- and long-term
price movements. Accounts may be denominated in U.S. Dollars or Japanese yen.
Performance may be affected by the dollar/yen conversion rate.
The International Currency and Bond Portfolio (ICB), which began investing
in 1993, is a portfolio of currencies and international long-term bonds of major
industrialized nations. Foreign exchange positions are held both as outrights
and cross rates. ICB is designed to identify and capitalize on intermediate-
and long-term price movements in the markets it trades.
The Global Financial Portfolio began trading in 1994. The program offers
access to energy and select financial markets, including global currencies,
interest rates, and stock indices and is designed to identify and capitalize on
long-term price movements.
The Worldwide Bond Program (WWB), which began in 1994, invests in the long-
term portion of global interest rate markets, including the U.S. 30-Year bond,
U.S. 10-Year note, British long gilt, the French, German and Italian bond
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and Australian 10-Year bond. Although WWB concentrates on one sector,
diversification is achieved by trading the interest rate instruments of
numerous countries. Unlike most fixed income investments, WWB is not limited
to investments that have the potential to profit in a stable or declining
interest rate environment. Rather, WWB is designed to capitalize on dominant
trends, whether rising or falling, in worldwide bond markets.
The International Foreign Exchange Program (Forex), which began in 1986,
invests in a broad range of major and minor currencies primarily in the highly
liquid interbank market. Positions are taken as outrights or cross rates.
Forex is designed to identify and capitalize on intermediate-term price
movements in these markets.
The G-7 Currency Portfolio began in 1991 and invests in the highly liquid
currencies of the major industrialized nations known as the group of seven and
Switzerland. Currencies traded are the Japanese yen, British pound, Canadian
dollar, German mark, French franc, Italian lira, U.S. dollar and Swiss franc.
Not all currencies are traded at all times. Positions are taken as outrights
and cross rates. The program is designed to identify and capitalize on
intermediate-term price movements in these markets.
The Dollar Program began trading client capital in 1996. This program
trades four of the world's major currencies -- Japanese yen, German mark, Swiss
franc and British pound -- versus the U.S. dollar, a methodology known as
"outright" trading, and is designed to identify and capitalize on intermediate-
term price movements.
The Delevered Yen Denominated Financial and Metals Profile, which began
trading in October 1995, seeks to capitalize on sustained moves in global
financial markets utilizing intermediate-term and long-term quantitative trend
analysis models, some of which attempt to employ neutral stances during periods
of nontrending markets. This portfolio is traded at approximately one half of
the leverage of the traditional Financial and Metals Portfolio and is traded
from the perspective of the Japanese yen.
InterRate-TM-, a yield-enhancement strategy, began trading 1987 and closed
in July 1996. It was designed to enhance returns available in short-term
instruments such as U.S. Treasury bills and money market instruments. Assets
were invested in U.S. Treasury bills to provide both secure income and
collateral for a portfolio of interbank forward and exchange-traded futures
contracts. These transactions are designed to capture the implicit interest
rate differentials between countries.
The KT Diversified Program began in january 1984 and closed in February
1994. The program participated in eight market sectors on U.S. exchanges only.
JWH PROGRAMS: PERFORMANCE SUMMARIES AND MONTHLY RATES OF RETURN
PERFORMANCE SUMMARIES
The following information summarizes the composite performance of certain
proprietary and all client accounts managed by JWH and JWH Investments, Inc. (an
affiliate of JWH). As of September 30, 1996, JWH was managing approximately
$1.6 billion of client funds in the futures and forward markets. All
performance information is current as of September 30, 1996.
Performance summaries are set forth, pursuant to applicable cftc
regulations, for the most recent five full years for each JWH and JWH
Investments, Inc. program or, in the event that a program has been trading for
less than five years, from the inception of account trading in such program.
The monthly rates of return tables which follow the performance summaries of the
trading programs present the performance of the trading programs since their
inception. The trust may in the future use other combinations of JWH programs.
NOTES ON PERFORMANCE RECORDS
An investor should note that in a presentation of past performance data,
different accounts, even though traded according to the same program, can have
varying investment results. The reasons for this involve numerous material
differences among accounts including, but not limited to: (a) the periods
during which accounts are active; (b) the investment program used (although all
accounts may be traded in accordance with the same approach, such approach may
be modified periodically as a result of ongoing research and development by
JWH); (c) the leverage employed; (d) the size of the account, which can
influence the size of positions taken and restrict the account from
participating in all markets available to an investment program; (e) the amount
of interest income earned by an account, which will depend
-37-
on the rates paid by futures commission merchants on equity deposits and/or
on the portion of an account invested in interest-bearing obligations such as
Treasury bills; (f) the amount of management and incentive fees paid to JWH
and the amount of brokerage commissions paid; (g) the timing of orders to
open or close positions; (h) market conditions, which in part determine the
quality of trade executions; (i) the trading instructions/restrictions of the
client; (j) procedures governing the timing for the commencement of trading
and the method of moving toward full portfolio commitment for new accounts;
(k) variations in fill prices; and (l) the timing of additions and
withdrawals.
During the respective periods covered by the performance summaries and the
monthly rates of return tables, and particularly since 1989, JWH increased and
decreased leverage in certain markets as well as in entire programs, and also
altered the composition of the markets and contracts for certain programs. In
general, before 1993 JWH traded its programs with greater leverage than it does
currently. In addition, the subjective aspects of JWH's trading methods
described under "-- Trading Techniques" above, have been utilized more often in
recent years and therefore may have had a more pronounced effect on performance
results during such period. In reviewing the JWH performance information,
prospective investors should bear in mind the possible effects of these
variations on rates of return and the application of JWH's investment methods.
The composite rates of return indicated for the various programs should not
be taken as representative of any rate of return actually achieved by any of the
individual accounts which are included in the performance summaries or the
monthly rates of return tables.
THE PERFORMANCE SUMMARIES AND MONTHLY RATES OF RETURN TABLES ARE NOT
NECESSARILY INDICATIVE OF ANY TRADING RESULTS WHICH MAY BE ATTAINED BY JWH IN
THE FUTURE. CURRENTLY, THE TRUST CONTEMPLATES USING ONLY THE TRADING PROGRAMS
AND NO OTHER JWH PROGRAMS.
On several occasions, JWH has decreased leverage in certain markets as well
as in entire JWH programs. These actions have reduced the volatility of certain
programs as compared to the volatility prior to such decreases in leverage.
While historical returns represent actual performance achieved, investors should
be aware that the degree of leverage currently utilized by JWH may be
significantly different from that used from time to time during previous
periods.
Prior to December 1991 for JWH, and July 1992 for JWH Investments, Inc.,
the JWH performance information is presented on a cash basis (except as
otherwise described herein). The recording of items on a cash basis should not,
for most months, be materially different from presenting such rates of return on
an accrual basis. Any differences in the monthly rates of return between the
two methods would be immaterial to the overall performance presented.
In July 1992, JWH began reflecting all items of net performance on an
accrual basis for the G-7 Currency Portfolio and in January 1993 for the
International Currency and Bond Portfolio.
Beginning with the change to accrual basis accounting for incentive fees
(in December 1991 for JWH and July 1992 for JWH Investments, Inc.), the net
effect on the performance information presented herein of continuing to record
interest income, management fees, brokerage commissions and other expenses on a
cash basis differs immaterially from the results which would be obtained using
accrual basis accounting.
Due to the commencement of trading in July 1996 by a new multi-program fund
managed by JWH, JWH developed a new method for treating the accrual of incentive
fees for the multi-advisor funds and multi-program accounts it manages. For
these accounts, JWH agreed that it would earn incentive fees only when overall
fund performance for multi-advisor funds, or overall JWH performance for multi-
program accounts, as the case may be, is profitable. As applied, this new
method presents incentive fees due for each program on a stand-alone basis -- in
essence, to reflect the performance results that would have been experienced by
an investor in that program, regardless of any external business arrangements
(such as a multi-advisor structure or the use of multiple JWH programs) that
might have affected actual incentive fees paid. The new method was applied
initially in August 1996 performance. In that month, a one-time adjustment to
performance rate of return was made to each affected program to show the impact
of this adjustment from program inception through August 1996. In the case of
certain programs, the adjustment had a material, I.E., greater than 10% impact
on the rate of return that otherwise would have been shown. In the case of
accounts that closed before JWH received an incentive fee due to the operation
of such netting arrangements, a balancing entry was made to offset the effect of
incentive fee accrual on ending equity.
-38-
Advisory fees vary among accounts in the case of all programs. Management
fees vary from 0% to 6% of assets under management; incentive fees vary from 0%
to 25% of profits. Such variations in advisory fees may have a material impact
on the performance of an account from time to time.
Performance summaries are included for other JWH programs and JWH
Investments, Inc. programs. These programs will not be used initially by the
Trust (although they may be in the future upon agreement between the Managing
Owner and JWH), but applicable CFTC rules require that these performance
summaries be included herein, together with a brief description of these
programs. Because these programs will not be utilized initially by the Trust,
no monthly rates of return tables are presented for them.
JWH AND JWH INVESTMENTS, INC. BELIEVE THAT THE FOLLOWING PERFORMANCE
INFORMATION IS ACCURATE AND FAIRLY PRESENTED.
INTERRATE-TM- IS QUALITATIVELY DIFFERENT FROM THE OTHER JWH TRADING
PROGRAMS WITH RESPECT TO: A) FEES CHARGED; B) LENGTH OF TIME FOR WHICH POSITIONS
ARE HELD; C) POSITIONS TAKEN; D) LEVERAGE USED; AND E) RATE OF RETURN
OBJECTIVES.
THE POTENTIALLY MATERIAL TAX CONSEQUENCES OF A MANAGED FUTURES INVESTMENT
IN WHICH PROFITS ARE TAXED EVERY YEAR, AS OPPOSED TO A STOCK OR BOND INVESTMENT
IN WHICH GAINS BECOME TAXABLE ONLY WHEN POSITIONS ARE SOLD, ARE NOT REFLECTED IN
THE PERFORMANCE DATA IN THIS PROSPECTUS.
THE RATES OF RETURN ACHIEVED WHEN A JWH TRADING PROGRAM IS MANAGING A
LIMITED AMOUNT OF EQUITY MAY HAVE LITTLE RELATIONSHIP TO THE RATES OF RETURN
WHICH SUCH PROGRAM MAY BE ABLE TO ACHIEVE MANAGING LARGER AMOUNTS OF EQUITY.
THE FOLLOWING PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE
CHARGES TO THE TRUST BECAUSE JWH'S ACCOUNTS HAVE, ON AN OVERALL BASIS, BEEN
SUBJECT TO FEES GENERALLY COMPARABLE TO THOSE TO BE CHARGED TO THE TRUST.
CONSEQUENTLY, THERE IS NO NEED TO "PRO FORMA" JWH'S HISTORICAL PERFORMANCE IN
ORDER THAT SUCH PERFORMANCE REFLECT CHARGES COMPARABLE TO THE FEE STRUCTURE OF
THE TRUST.
COMMODITY INTEREST TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. THERE CAN BE NO ASSURANCE THAT ANY JWH TRADING PROGRAM WILL TRADE
PROFITABLY OR AVOID INCURRING SUBSTANTIAL LOSSES.
INVESTORS SHOULD NOTE THAT INTEREST INCOME MAY CONSTITUTE A SIGNIFICANT
PORTION OF A COMMODITY TRADING ADVISOR'S TOTAL INCOME AND, IN CERTAIN INSTANCES,
MAY GENERATE PROFITS WHERE THERE HAVE BEEN REALIZED OR UNREALIZED LOSSES FROM
COMMODITIES TRADING.
THE NOTES AND INTRODUCTIONS TO THE PERFORMANCE SUMMARIES AND MONTHLY RATES
OF RETURN TABLES ARE AN INTEGRAL PART OF SUCH PERFORMANCE INFORMATION.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
See "Risk Factor (8) -- All or Substantially All of an Investment Could Be Lost;
Past Performance Not Necessarily Indicative of Future Results" at page 17.
INFORMATION IN THE PERFORMANCE SUMMARIES IS CURRENT AS OF SEPTEMBER 30, 1996.
-39-
JWH PROGRAMS
PERFORMANCE SUMMARIES
----------------------------------------------------------------------
THE TRADING PROGRAMS
NAME OF PROGRAM: FINANCIAL AND METALS PORTFOLIO
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: OCTOBER 1984
NUMBER OF OPEN ACCOUNTS: 70
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $949 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $949 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (18.0)% (1/92)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (27.7)% (1/92)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (39.5)% (12/91-5/92)
1996 COMPOUND RATE OF RETURN: 4.9% (9 MONTHS)
1995 COMPOUND RATE OF RETURN: 38.5%
1994 COMPOUND RATE OF RETURN: (5.3)%
1993 COMPOUND RATE OF RETURN: 46.8%
1992 COMPOUND RATE OF RETURN: (10.9)%
1991 COMPOUND RATE OF RETURN: 61.9%
SEE ADDITIONAL NOTE ON P. 53.
SEE MONTHLY RATES OF RETURN ON P. 42.
NAME OF PROGRAM: ORIGINAL INVESTMENT PROGRAM
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: OCTOBER 1982
NUMBER OF OPEN ACCOUNTS: 28
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $179 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $179 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (14.1)% (10/94)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (18.1)% (2/92)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (26.2)% (6/94-10/94)
1996 COMPOUND RATE OF RETURN: 4.5% (9 MONTHS)
1995 COMPOUND RATE OF RETURN: 53.2%
1994 COMPOUND RATE OF RETURN: (5.7)%
1993 COMPOUND RATE OF RETURN: 40.6%
1992 COMPOUND RATE OF RETURN: 10.9%
1991 COMPOUND RATE OF RETURN: 5.4%
SEE ADDITIONAL NOTE ON P. 53.
SEE MONTHLY RATES OF RETURN ON P. 43.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52.
-40-
MONTHLY RATES OF RETURN OF THE TRADING PROGRAMS
The following monthly rates of return tables present the performance of the
Trading Programs currently proposed to be used by the Trust. Monthly rates of
return are included since the inception of each such Program's client trading as
well as since January 1, 1991. See "-- Notes to JWH Trading Programs
Performance Summaries -- (12) Monthly Rates of Return."
In the following tables, Compound Annual ROR (Rate of Return) for any given
year is calculated by compounding the monthly rates of return during such year.
See "-- Notes to JWH Trading Programs Performance Summaries -- (13) Compound
Rate of Return." For periods of less than one year, the results are year-to-
date. DUE TO THE SPECULATIVE NATURE OF MANAGED FUTURES STRATEGIES, PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. NO REPRESENTATION
IS, OR COULD BE, MADE THAT THE FOLLOWING INFORMATION -- OR THAT INCLUDED IN THE
FOREGOING PERFORMANCE SUMMARIES -- IS IN ANY RESPECT INDICATIVE OF HOW THE TRUST
ITSELF, OR EITHER OF THE TRADING PROGRAMS USED FOR IT, WILL PERFORM.
THE HIGH DEGREE OF POSITIVE CORRELATION BETWEEN THE TRADING PROGRAMS IS
INDICATED BY THE NUMBER OF MONTHS IN WHICH THE TRADING PROGRAMS EACH HAVE EITHER
POSITIVE OR NEGATIVE RATES OF RETURN, IN SOME CASES OF NEARLY THE SAME
MAGNITUDE. POSITIVE CORRELATION BETWEEN THE TRADING PROGRAMS REDUCES
DIVERSIFICATION AND INCREASES RISK. SEE "RISK FACTOR (19) -- POSITIVE
CORRELATION BETWEEN THE TRADING PROGRAMS."
PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS.
See "Risk Factor (8) -- All or Substantially All of an Investment Could Be Lost;
Past Performance Not Necessarily Indicative of Future Results" at page 17.
INFORMATION IN THE MONTHLY RATES OF RETURN TABLES
IS CURRENT AS OF SEPTEMBER 30, 1996.
-41-
THE TRADING PROGRAMS
MONTHLY RATES OF RETURN
FINANCIAL AND METALS PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
MONTHLY RATES OF RETURN (%)
- ------------------------------------------------------------------------------------------------------------------------------------
COMPOUND
Year January February March April May June July August September October November December ANNUAL ROR
- ------------------------------------------------------------------------------------------------------------------------------------
1984 N/A N/A N/A N/A N/A N/A N/A N/A N/A 1.6 (3.2) 11.7 9.9
(3 MONTHS)
- ------------------------------------------------------------------------------------------------------------------------------------
1985 6.6 17.7 (9.3) (7.8) (7.7) (1.8) 41.3 (10.1) (27.3) 6.4 26.6 1.9 20.7
- ------------------------------------------------------------------------------------------------------------------------------------
1986 4.8 21.9 (6.3) 3.7 (17.5) 17.6 25.0 9.4 (0.2) 2.6 (3.6) (0.5) 61.5
- ------------------------------------------------------------------------------------------------------------------------------------
1987 33.0 12.1 34.2 18.2 (7.2) (10.7) 12.2 (14.6) (8.9) 28.0 32.5 21.2 252.4
- ------------------------------------------------------------------------------------------------------------------------------------
1988 (12.6) 9.8 (2.3) (15.0) 0.3 44.2 5.5 6.9 (8.1) 2.5 5.2 (19.2) 4.0
- ------------------------------------------------------------------------------------------------------------------------------------
1989 31.7 (8.7) 8.5 3.2 37.0 (6.6) 4.4 (8.2) (14.9) (17.5) 21.6 (4.5) 34.6
- ------------------------------------------------------------------------------------------------------------------------------------
1990 28.0 19.5 11.4 2.4 (22.7) 6.9 12.2 11.2 8.3 (5.0) 3.1 (3.7) 83.6
- ------------------------------------------------------------------------------------------------------------------------------------
1991 (2.3) 3.8 4.5 (0.8) (0.3) (1.3) (13.4) 4.8 25.8 (7.7) 6.6 39.4 61.9
- ------------------------------------------------------------------------------------------------------------------------------------
1992 (18.0) (13.5) 3.0 (12.2) (5.7) 21.9 25.5 10.2 (5.2) (4.5) (0.8) (2.6) (10.9)
- ------------------------------------------------------------------------------------------------------------------------------------
1993 3.3 13.9 (0.3) 9.3 3.3 0.1 9.7 (0.8) 0.2 (1.1) (0.3) 2.9 46.8
- ------------------------------------------------------------------------------------------------------------------------------------
1994 (2.9) (0.6) 7.2 0.9 1.3 4.5 (6.1) (4.1) 1.5 1.7 (4.4) (3.5) (5.3)
- ------------------------------------------------------------------------------------------------------------------------------------
1995 (3.8) 15.7 15.3 6.1 1.2 (1.7) (2.3) 2.1 (2.1) 0.3 2.6 1.7 38.5
- ------------------------------------------------------------------------------------------------------------------------------------
1996 6.0 (5.5) 0.7 2.3 (1.7) 2.2 (1.1) (0.8) 3.2 N/A N/A N/A 4.9
(9 MONTHS)
- ------------------------------------------------------------------------------------------------------------------------------------
SEE ADDITIONAL NOTE ON P. 53.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
-42-
THE TRADING PROGRAMS
MONTHLY RATES OF RETURN
ORIGINAL INVESTMENT PROGRAM
- -----------------------------------------------------------------------------------------------------------------------------------
MONTHLY RATES OF RETURN (%)
- -----------------------------------------------------------------------------------------------------------------------------------
COMPOUND
Year January February March April May June July August September October November December ANNUAL ROR
- -----------------------------------------------------------------------------------------------------------------------------------
1982 N/A N/A N/A N/A N/A N/A N/A N/A N/A 7.1 (16.8) 2.7 (8.5)
(3 MONTHS)
- -----------------------------------------------------------------------------------------------------------------------------------
1983 14.4 (28.6) 1.6 4.9 8.3 (9.6) 10.9 13.4 (7.3) (3.3) (6.4) (2.5) (12.4)
- -----------------------------------------------------------------------------------------------------------------------------------
1984 5.5 (4.8) (7.5) (2.1) 16.6 (10.3) 28.7 (9.0) 16.0 (5.2) (2.2) 12.5 34.7
- -----------------------------------------------------------------------------------------------------------------------------------
1985 2.4 0.9 (8.8) (17.1) 11.0 4.4 16.8 1.7 (15.5) 9.6 7.4 18.6 26.8
- -----------------------------------------------------------------------------------------------------------------------------------
1986 (4.4) 22.2 15.4 (5.8) (2.8) (2.1) 11.5 7.2 (2.9) (10.3) (1.9) (3.0) 19.8
- -----------------------------------------------------------------------------------------------------------------------------------
1987 9.0 3.7 2.7 21.9 0.8 (3.5) 8.8 (3.1) (10.4) 35.8 16.5 11.9 129.8
- -----------------------------------------------------------------------------------------------------------------------------------
1988 (6.9) 4.7 (16.1) (5.1) 3.6 13.9 (19.8) (4.3) 6.3 (2.5) 1.6 (12.5) (35.2)
- -----------------------------------------------------------------------------------------------------------------------------------
1989 0.8 (19.9) 11.7 (5.1) 29.0 (3.9) 8.1 (13.7) (13.2) (12.0) 7.4 9.8 (10.8)
- -----------------------------------------------------------------------------------------------------------------------------------
1990 7.1 (2.0) 18.4 12.4 (10.9) 7.2 10.9 19.1 (2.1) (1.9) 1.0 (2.3) 66.8
- -----------------------------------------------------------------------------------------------------------------------------------
1991 (0.5) 0.3 (2.1) (5.8) 4.4 (0.7) (7.4) (3.6) 10.7 (3.9) (1.3) 17.7 5.4
- -----------------------------------------------------------------------------------------------------------------------------------
1992 (6.1) (8.8) 0.7 (0.8) (4.5) 8.3 9.1 9.1 (2.7) 2.2 3.6 2.2 10.9
- -----------------------------------------------------------------------------------------------------------------------------------
1993 (0.8) 9.5 (3.5) 10.4 0.1 (4.1) 14.9 (3.6) 0.6 (1.5) 3.5 11.4 40.6
- -----------------------------------------------------------------------------------------------------------------------------------
1994 (2.9) 1.5 4.4 0.2 5.5 6.6 (7.1) (4.7) (2.8) (14.1) 10.2 (0.0) (5.7)
- -----------------------------------------------------------------------------------------------------------------------------------
1995 2.2 17.9 16.6 9.1 (4.4) 1.7 (0.0) (3.9) (3.9) 3.3 1.1 6.8 53.2
- -----------------------------------------------------------------------------------------------------------------------------------
1996 5.3 (7.4) 1.0 3.8 (6.5) 8.0 (4.4) (2.3) 8.2 N/A N/A N/A 4.5
(9 MONTHS)
- -----------------------------------------------------------------------------------------------------------------------------------
SEE ADDITIONAL NOTE ON P. 53.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
-43-
JWH PROGRAMS
PERFORMANCE SUMMARIES
OTHER JWH PROGRAMS
NAME OF PROGRAM: GLOBAL DIVERSIFIED PORTFOLIO
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JUNE 1988
NUMBER OF OPEN ACCOUNTS: 17
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $145 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $145 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (16.8)% (7/91)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (20.3)% (7/91)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (29.1)% (12/91-5/92)
1996 COMPOUND RATE OF RETURN: 2.6% (9 MONTHS)
1995 COMPOUND RATE OF RETURN: 19.6%
1994 COMPOUND RATE OF RETURN: 10.1%
1993 COMPOUND RATE OF RETURN: 59.8%
1992 COMPOUND RATE OF RETURN: (12.6)%
1991 COMPOUND RATE OF RETURN: 40.4%
SEE ADDITIONAL NOTES ON PP. 53 & 55.
NAME OF PROGRAM: G-7 CURRENCY PORTFOLIO
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: FEBRUARY 1991
NUMBER OF OPEN ACCOUNTS: 9
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $107 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $107 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (10.7)% (1/92)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (12.3)% (1/92)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (19.5)% (7/93-1/95)
1996 COMPOUND RATE OF RETURN: (2.6)% (9 MONTHS)
1995 COMPOUND RATE OF RETURN: 32.2%
1994 COMPOUND RATE OF RETURN: (4.9)%
1993 COMPOUND RATE OF RETURN: (6.3)%
1992 COMPOUND RATE OF RETURN: 14.6%
1991 COMPOUND RATE OF RETURN: 48.5% (11 MONTHS)
SEE ADDITIONAL NOTE ON P. 54.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52.
-44-
JWH PROGRAMS
PERFORMANCE SUMMARIES
NAME OF PROGRAM: INTERNATIONAL FOREIGN EXCHANGE
PROGRAM
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: AUGUST 1986
NUMBER OF OPEN ACCOUNTS: 7
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $67 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $67 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (12.0)% (1/92)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (13.6)% (1/92)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (24.1)% (12/91-4/92)
1996 COMPOUND RATE OF RETURN: (5.8)% (9 MONTHS)
1995 COMPOUND RATE OF RETURN: 16.9%
1994 COMPOUND RATE OF RETURN: (6.3)%
1993 COMPOUND RATE OF RETURN: (4.5)%
1992 COMPOUND RATE OF RETURN: 4.5%
1991 COMPOUND RATE OF RETURN: 38.7%
NAME OF PROGRAM: DELEVERED YEN DENOMINATED FINANCIAL
AND METALS PROFILE
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: OCTOBER 1995
NUMBER OF OPEN ACCOUNTS: 1
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: Y963 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: Y963 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (3.2)% (2/96)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (3.2)% (2/96)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (5.1)% (1/96-8/96)
1996 COMPOUND RATE OF RETURN: (1.3)% (9 MONTHS)
1995 COMPOUND RATE OF RETURN: 0.2% (3 MONTHS)
1994 COMPOUND RATE OF RETURN: N/A
1993 COMPOUND RATE OF RETURN: N/A
1992 COMPOUND RATE OF RETURN: N/A
1991 COMPOUND RATE OF RETURN: N/A
NAME OF PROGRAM: GLOBAL FINANCIAL PORTFOLIO
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JUNE 1994
NUMBER OF OPEN ACCOUNTS: 5
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $66 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $66 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (17.4)% (11/94)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (19.5)% (11/94)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (46.0)% (6/94-1/95)
1996 COMPOUND RATE OF RETURN: 13.5% (9 MONTHS)
1995 COMPOUND RATE OF RETURN: 86.2%
1994 COMPOUND RATE OF RETURN: (37.7)% (7 MONTHS)
1993 COMPOUND RATE OF RETURN: N/A
1992 COMPOUND RATE OF RETURN: N/A
1991 COMPOUND RATE OF RETURN: N/A
SEE ADDITIONAL NOTE ON P. 54.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52.
-45-
NAME OF PROGRAM: THE WORLD FINANCIAL PERSPECTIVE
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: APRIL 1987
NUMBER OF OPEN ACCOUNTS: 5
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $19 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $19 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (21.6)% (1/92)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (25.5)% (1/92)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (41.1)% (9/90-10/92)
1996 COMPOUND RATE OF RETURN: 18.8% (9 MONTHS)
1995 COMPOUND RATE OF RETURN: 32.2%
1994 COMPOUND RATE OF RETURN: (15.2)%
1993 COMPOUND RATE OF RETURN: 13.7%
1992 COMPOUND RATE OF RETURN: (23.2)%
1991 COMPOUND RATE OF RETURN: 14.6%
NAME OF PROGRAM: INTERNATIONAL CURRENCY AND BOND PORTFOLIO
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JANUARY 1993
NUMBER OF OPEN ACCOUNTS: 1
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $2 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $2 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (6.7)% (7/94)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (7.8)% (7/94)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (20.1)% (6/94-1/95)
1996 COMPOUND RATE OF RETURN: 0.7% (9 MONTHS)
1995 COMPOUND RATE OF RETURN: 36.5%
1994 COMPOUND RATE OF RETURN: (2.3)%
1993 COMPOUND RATE OF RETURN: 14.8%
1992 COMPOUND RATE OF RETURN: N/A
1991 COMPOUND RATE OF RETURN: N/A
BEGINNING IN OCTOBER 1995, THIS PROGRAM IS COMPRISED OF ONE
PROPRIETARY ACCOUNT.
SEE ADDITIONAL NOTE ON P. 54.
NAME OF PROGRAM: DOLLAR PROGRAM
INCEPTION OF CLIENT ACCOUNT TRADING: JULY 1994
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JULY 1996
NUMBER OF OPEN ACCOUNTS: 2
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $9 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $9 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (2.3)% (8/96)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (2.3)% (9/96)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (3.4)% (7/96-9/96)
1996 COMPOUND RATE OF RETURN: (3.4)% (3 MONTHS)
1995 COMPOUND RATE OF RETURN: N/A
1994 COMPOUND RATE OF RETURN: N/A
1993 COMPOUND RATE OF RETURN: N/A
1992 COMPOUND RATE OF RETURN: N/A
1991 COMPOUND RATE OF RETURN: N/A
NAME OF PROGRAM: WORLDWIDE BOND PROGRAM
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1994
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JULY 1996
NUMBER OF OPEN ACCOUNTS: 2
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $10 MILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: $10 MILLION
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: N/A
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: N/A
LARGEST PEAK-TO-VALLEY DRAWDOWN: N/A
1996 COMPOUND RATE OF RETURN: 6.6 (3 MONTHS)
1995 COMPOUND RATE OF RETURN: N/A
1994 COMPOUND RATE OF RETURN: N/A
1993 COMPOUND RATE OF RETURN: N/A
1992 COMPOUND RATE OF RETURN: N/A
1991 COMPOUND RATE OF RETURN: N/A
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52.
-46-
JWH PROGRAMS
PERFORMANCE SUMMARIES
NAME OF PROGRAM: INTERRATE-TM-
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: DECEMBER 1988,
CEASED TRADING JULY 1996
NUMBER OF OPEN ACCOUNTS: 0
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: N/A
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: N/A
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (9.7)% (9/92)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (10.2)% (9/92)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (17.8)% (8/92-2/94)
1996 COMPOUND RATE OF RETURN: 5.8% (7 MONTHS)
1995 COMPOUND RATE OF RETURN: 5.2%
1994 COMPOUND RATE OF RETURN: 3.4%
1993 COMPOUND RATE OF RETURN: (5.4)%
1992 COMPOUND RATE OF RETURN: (0.7)%
1991 COMPOUND RATE OF RETURN: 8.7%
NAME OF PROGRAM: KT DIVERSIFIED PROGRAM
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JANUARY 1984,
CEASED TRADING FEBRUARY 1994
NUMBER OF OPEN ACCOUNTS: 0
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 BILLION
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: N/A
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY)
IN PROGRAM: N/A
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (19.2)% (7/91)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (28.6)% (1/92)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (46.8)% (9/90-3/92)
1996 COMPOUND RATE OF RETURN: N/A
1995 COMPOUND RATE OF RETURN: N/A
1994 COMPOUND RATE OF RETURN: (14.0)% (2 MONTHS)
1993 COMPOUND RATE OF RETURN: 20.6%
1992 COMPOUND RATE OF RETURN: (11.9)%
1991 COMPOUND RATE OF RETURN: (21.)%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52.
-47-
JWH INVESTMENTS, INC. PROGRAMS
PERFORMANCE SUMMARIES
NAME OF PROGRAM: FINANCIAL AND METALS PORTFOLIO*
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM:
SEPTEMBER 1991; CEASED TRADING JULY 1995
NUMBER OF OPEN ACCOUNTS: 0
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: N/A
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: N/A
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (16.6)% (1/92)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (16.6)% (1/92)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (34.4)% (12/91-5/92)
1996 COMPOUND RATE OF RETURN: N/A
1995 COMPOUND RATE OF RETURN: 30.3% (7 MONTHS)
1994 COMPOUND RATE OF RETURN: (0.8)%
1993 COMPOUND RATE OF RETURN: 46.1%
1992 COMPOUND RATE OF RETURN: (4.0)%
1991 COMPOUND RATE OF RETURN: 58.5% (4 MONTHS)
SEE ADDITIONAL NOTE ON P. 53.
*THIS STRATEGY WAS MANAGED BY JWH'S AFFILIATE,
JWH INVESTMENTS, INC.
NAME OF PROGRAM: INTERRATE-TM-*
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM:
FEBRUARY 1992; CEASED TRADING NOVEMBER 1993
NUMBER OF OPEN ACCOUNTS: 0
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: N/A
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: N/A
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: N/A
LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS: (9.30)% (9/92)
LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL
ACCOUNT BASIS: (9.3)% (9/92)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (20.6)% (8/92-11/93)
1996 COMPOUND RATE OF RETURN: N/A
1995 COMPOUND RATE OF RETURN: N/A
1994 COMPOUND RATE OF RETURN: N/A
1993 COMPOUND RATE OF RETURN: (9.9)% (11 MONTHS)
1992 COMPOUND RATE OF RETURN: 2.8% (11 MONTHS)
1991 COMPOUND RATE OF RETURN: N/A
SEE ADDITIONAL NOTE ON P. 55.
*THIS STRATEGY WAS MANAGED BY JWH'S AFFILIATE,
JWH INVESTMENTS, INC.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52.
-48-
JWH PROGRAMS
PERFORMANCE SUMMARIES
YEN FINANCIAL PORTFOLIO
(continued on page 50)
NAME OF CTA: John W. Henry & Company, Inc.
INCEPTION OF CLIENT ACCOUNT TRADING: October 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: January 1992
NUMBER OF OPEN ACCOUNTS: 7
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 billion
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL: $1.6 billion
AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $38 million
AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM: $38 million
LARGEST MONTHLY DRAWDOWN: (14.4)% (2/92)
LARGEST PEAK-TO-VALLEY DRAWDOWN: (35.5)% (4/95-7/96)
See Additional Note on p. 54.
- -----------------------------------------------------------------------------------------------------------------------
AGGREGATE LARGEST LARGEST
ACCOUNT NO. INCEPTION OF ASSETS COMPOUND RATE MONTHLY PEAK-TO-VALLEY
TRADING SEPTEMBER 30, 1996 OF RETURN (%) DRAWDOWN % DRAWDOWN %
- -----------------------------------------------------------------------------------------------------------------------
1 1/92 $6 million 1996: (14.8) (9 months) (14.4)-2/92 (30.5) - 4/95-7/95
1995: 20.6
1994: (13.0)
1993: 76.4
1992: 20.1
- -----------------------------------------------------------------------------------------------------------------------
2 1/93 $1 million 1996: (14.6) (9 months) (6.9)-7/95 (29.0) - 4/95-7/96
1995: 21.0
1994: (8.8)
1993: 71.4
- -----------------------------------------------------------------------------------------------------------------------
3 1/94 $0.9 million 1996: (14.4) (9 months) (6.0)-8/95 (26.6) - 4/95-7/96
1995: 22.4
1994: (7.5)
- -----------------------------------------------------------------------------------------------------------------------
4 6/94 $22 million 1996: (8.8) (9 months) (6.5)-7/95 (22.3) - 4/95-7/96
1995: 24.2
1994: (1.6) (6 months)
- -----------------------------------------------------------------------------------------------------------------------
5 8/94 $4 million 1996: (12.5) (9 months) (7.1)-7/95 (30.4) - 4/95-7/96
1995: 21.1
1994: (4.3) (5 months)
- -----------------------------------------------------------------------------------------------------------------------
6 1/95 $2 million 1996: (17.9) (9 months) (7.5)-7/95 (35.5) - 5/95-7/96
1995: 13.2
- -----------------------------------------------------------------------------------------------------------------------
7 3/94 Y182 million 1996: (3.4) (9 months) (6.7)-7/96 (15.9) - 2/96-7/96
1995: 28.1
1994: (11.2) (10 months)
- -----------------------------------------------------------------------------------------------------------------------
8 4/92 closed - 9/93 1993: 62.6 (9 months) (11.7)-5/92 (11.7) - 4/92-5/92
1992: 27.0 (9 months)
- -----------------------------------------------------------------------------------------------------------------------
9 2/92 closed - 12/92 1992: 32.7 (11 months) (11.5)-2/92 (11.5) - 2/92
- -----------------------------------------------------------------------------------------------------------------------
10 3/94 closed - 12/94 1994: (7.4) (10 months) (5.4)-5/94 (10.5) - 4/94-12/94
- -----------------------------------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52.
-49-
JWH PROGRAMS
PERFORMANCE SUMMARIES
YEN FINANCIAL PORTFOLIO (cont'd)
11 11/93 closed - 8/95 1995: 20.0 (8 months) (9.0) - 8/95 (18.8) - 4/95-8/95
1994: (13.4)
1993: 5.2 (2 months)
- -----------------------------------------------------------------------------------------------------------------------
12 11/93 closed - 1/95 1995: (0.6) (1 month) (6.3) - 5/94 (16.5) - 4/94-1/95
1994: (15.1)
1993: 4.8 (2 months)
- -----------------------------------------------------------------------------------------------------------------------
13 12/92 closed - 3/96 1996: (4.1) (3 months) (4.9) - 7/95 (15.8) - 12/93-1/95
1995: 31.4
1994: (14.1)
1993: 69.2
1992: 0.1 (1 month)
- -----------------------------------------------------------------------------------------------------------------------
14 1/93 closed - 12/95 1995: 10.9 (6.2) - 6/95 (15.8) - 4/95-12/95
1994: (4.1)
1993: 43.6
- -----------------------------------------------------------------------------------------------------------------------
15 4/93 closed - 9/94 1994: (19.0) (9 months) (5.8) - 5/94 (19.9) - 11/93-9/94
1993: 25.3 (9 months)
- -----------------------------------------------------------------------------------------------------------------------
16 1/94 closed - 8/94 1994: (6.7) (8 months) (5.5) - 5/94 (11.0) - 4/94-8/94
- -----------------------------------------------------------------------------------------------------------------------
17 12/92 closed - 1/96 1996: 0.3 (1 month) (6.0) - 7/95 (12.4) - 4/95-10/95
1995: 26.6
1994: (5.1)
1993: 73.9
1992: (1.0) (1 month)
- -----------------------------------------------------------------------------------------------------------------------
18 3/94 closed - 4/96 1996: (6.3) (4 months) (6.2) - 7/95 (18.5) - 4/95-4/96
1995: 18.5
1994: (10.1) (10 months)
- -----------------------------------------------------------------------------------------------------------------------
19 12/94 closed - 4/96 1996: (7.8) (4 months) (6.6) - 7/95 (21.1) - 4/95-4/96
1995: 18.3
1994: 0.2 (1 month)
- -----------------------------------------------------------------------------------------------------------------------
20 6/94 closed - 12/94 1994: (7.9) (7 months) (5.1) - 7/94 (10.4) - 6/94-11/94
- -----------------------------------------------------------------------------------------------------------------------
21 6/94 closed - 3/95 1995 48.1 (3 months) (3.6) - 7/94 (9.9) - 6/94-1/95
1994: (6.6) (7 months)
- -----------------------------------------------------------------------------------------------------------------------
22 4/94 closed - 9/94 1994: (4.6) (6 months) (4.7) - 5/94 (7.0) - 4/94-9/94
- -----------------------------------------------------------------------------------------------------------------------
23 3/94 closed - 9/94 1994: (9.7) (7 months) (6.3) - 5/94 (11.0) - 4/94-9/94
- -----------------------------------------------------------------------------------------------------------------------
24 4/94 closed - 9/94 1994: (9.8) (6 months) (9.1) - 5/94 (12.9) - 4/94-9/94
- -----------------------------------------------------------------------------------------------------------------------
25 4/93 closed - 12/94 1994: (16.6) (6.1) - 5/94 (17.9) - 11/93-12/94
1993: 26.5 (9 months)
- -----------------------------------------------------------------------------------------------------------------------
26 9/93 closed - 12/94 1994: (12.4) (6.0) - 5/94 (14.1) - 4/94-12/94
1993: 3.2 (4 months)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
SEE "NOTES TO JWH PROGRAMS PERFORMANCE SUMMARIES" AT PAGES 51-52.
-50-
NOTES TO JWH PROGRAMS
PERFORMANCE SUMMARIES
1. NAME OF PROGRAM is the name of the JWH trading program used in directing
the accounts included in the performance summary.
2. INCEPTION OF CLIENT ACCOUNT TRADING is October 1982, the date on which
JWH began directing client accounts (pursuant to the Original Investment
Program). This date is the same in each performance summary.
3. INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM is the date on which JWH
began directing client accounts pursuant to the program shown.
4. NUMBER OF OPEN ACCOUNTS is the number of accounts directed by JWH
pursuant to the program shown as of September 30, 1996.
5. AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) OVERALL is the aggregate
amount of actual assets under the management of JWH in all programs as of
September 30, 1996. These numbers also include proprietary funds; however,
all proprietary funds included in the aggregate amount are traded in the
same manner and charged the same fees as client funds, and the proprietary
funds are, in any event, not material in terms of the overall assets
managed by JWH.
6. AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) OVERALL is the aggregate
amount of total equity, including "notional" equity, under the management
of JWH in all programs being operated as of September 30, 1996. These
numbers also include proprietary funds; however, all proprietary funds
included in the aggregate amount are traded in the same manner and charged
the same fees as client funds, and the proprietary funds are, in any event,
not material in terms of the overall assets managed by JWH.
7. AGGREGATE ASSETS (EXCLUDING "NOTIONAL" EQUITY) IN PROGRAM is the
aggregate amount of actual assets under the management of JWH in the
program shown as of September 30, 1996. These numbers may also include
proprietary funds; however, all proprietary funds included in the
aggregate amount are traded in the same manner and charged the same fees
as client funds, and the proprietary funds are, in any event, not
material in terms of the overall assets managed by JWH pursuant to the
program.
8. AGGREGATE ASSETS (INCLUDING "NOTIONAL" EQUITY) IN PROGRAM is the
aggregate amount of total equity, including "notional" equity, under the
management of JWH in the program shown as of September 30, 1996. These
numbers may also include proprietary funds; however, all proprietary
funds included in the aggregate amount are traded in the same manner and
charged the same fees as client funds, and the proprietary funds are, in
any event, not material in terms of the overall assets managed by JWH
pursuant to the program.
9. LARGEST MONTHLY DRAWDOWN ON A COMPOSITE BASIS is the largest
monthly loss experienced by the program shown on a composite basis in
any calendar month covered by the performance summary. "Loss" for these
purposes is calculated on the basis of the loss experienced by the
program as a composite, expressed as a percentage of the total equity
(including "notional" equity) in the program. Individual accounts may
have experienced larger monthly drawdowns. Largest monthly drawdown
information includes the month and year of such drawdown.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
-51-
NOTES TO JWH PROGRAMS
PERFORMANCE SUMMARIES (Cont'd)
10. LARGEST MONTHLY DRAWDOWN ON AN INDIVIDUAL ACCOUNT BASIS is the
largest monthly loss within a program shown on an individual account
basis. "Loss" for these purposes is calculated on the basis of the loss
experienced by the individual account, expressed as a percentage of the
total equity in the account. The largest monthly drawdown for an
individual account within a program was determined after identification
of the three largest monthly drawdowns on a composite basis for each
investment program. Within the three months in which the largest
composite monthly drawdowns occurred, individual accounts were reviewed
for each program. The individual account which experienced the largest
loss in those months is the account shown above as having the largest
individual monthly drawdown for the investment program. Some individual
accounts were excluded from review if they were being phased in or out,
opened or closed during the month, or if material mid-month additions or
redemptions were made. Largest monthly drawdown on an individual
account basis includes the month and year of such drawdown.
Differences between the largest monthly drawdown for an individual
account and the largest monthly drawdown on a composite basis for a
program are due to, among other factors, the reasons noted on pages 37 to
38 and page 54.
11. LARGEST PEAK-TO-VALLEY DRAWDOWN is the largest percentage decline
(after eliminating the effect of additions and withdrawals) during the
period covered by the performance summaries from any month-end net asset
value, without such month-end net asset value being equalled or exceeded
as of a subsequent month-end. (In the case of The World Financial
Perspective and KT Diversified Program, the largest peak-to-valley
drawdown began in October 1990 and continued into the period covered by
the performance summaries.) Largest peak-to-valley drawdown is
calculated on the basis of the loss experienced by the program as a
composite, expressed as a percentage of the total equity (including
"notional" equity) in the program.
12. MONTHLY RATES OF RETURN (used in calculating the Compound Rate of
Return) are calculated by dividing net performance by the sum of
beginning total equity (including "notional" equity) plus additions
minus withdrawals. For such purposes, all additions and withdrawals are
effectively treated as if they had been made on the first day of the
month even if, in fact, they occurred later, unless, beginning in
December 1991, they are material to the performance of a program, in
which case they are time-weighted.
13. COMPOUND RATE OF RETURN is calculated by compounding the monthly
rates of return over the number of months in a given year. Each month's
rate of return (positive or negative) in hundredths is added to one (1)
and the result is multiplied by the previous month's monthly rate of
return similarly expressed. One (1) is then subtracted from the
product. For periods of less than one year, the results are
year-to-date. For example, if a program recorded monthly rates of
return of 5, (3) and 1 for three consecutive months, the compound rate
of return for those three months would equal 1.05 x 0.97 x 1.01 = 1.029
or 2.9% (approximately).
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
-52-
ADDITIONAL NOTES
TO JWH PROGRAMS PERFORMANCE SUMMARIES
ADDITIONAL NOTE TO THE ORIGINAL INVESTMENT PROGRAM PERFORMANCE SUMMARY AND
MONTHLY RATES OF RETURN TABLE
The original investment program began trading client capital in October
1982. During certain periods covered in the original investment program
performance information, proprietary funds are included. The absence of
management and incentive fees and reduced brokerage commissions during these
periods may have had a material effect on rates of return. However, this
potentially material effect has decreased as client funds comprised the
entire performance record from July 1988 through October 1994. Beginning in
November 1994, one proprietary account has been traded pursuant to an
investment in a fund. This proprietary account is traded in exactly the same
manner that client funds would be traded, and has been subject to all of the
same fees and expenses that would be charged to a client investment in the
fund; therefore, there is no material impact on the rates of return presented.
ADDITIONAL NOTE TO THE FINANCIAL AND METALS PORTFOLIO PERFORMANCE
SUMMARY AND MONTHLY RATES OF RETURN TABLE
The Financial and Metals Portfolio began trading client capital in
October 1984. During certain periods covered in the performance information,
proprietary funds are included. The absence of management and incentive fees
and reduced commissions during these periods may have had a material effect
on the rates of return achieved. This potentially material effect, however,
has decreased as client funds have comprised the entire performance record
since July 1987 (except as described below).
The timing of additions and withdrawals materially inflated the 1987
annual rate of return. The three accounts that were open for the entire year
of 1987 achieved annual rates of return of 138%, 163% and 259%, respectively.
In May 1991 one proprietary account, and in March 1992 a second
proprietary account began trading in the Financial and Metals Portfolio.
Both accounts are included in the performance information from their
inception until August 1995. The maximum percentage of proprietary funds
during this time was less than 0.5%.
In May 1992, 35% of the assets in the Financial and Metals Portfolio was
deleveraged 50% at the request of a client. This deleveraging materially
affected the rates of return. The 1992 compound rate of return for these
deleveraged accounts was (24.3)%. The 1992 compound rate of return for the
Financial and Metals Portfolio was (10.8)%. If these accounts were excluded
from the Financial and Metals Portfolio performance information, the 1992
compound rate of return would have been (4)%. The effect of this
deleveraging was eliminated in September 1992.
Additionally, the Financial and Metals Portfolio performance information
includes the performance of several accounts that do not participate in
global markets due to their smaller account equities which do not meet the
minimums established for this Trading Program. Accounts not meeting such
minimums can experience performance materially different from the performance
of an account which meets the minimum account size. The performance of such
accounts has no material effect on the overall Financial and Metals Portfolio
performance information.
ADDITIONAL NOTE TO THE GLOBAL DIVERSIFIED PORTFOLIO PERFORMANCE SUMMARY
The Global Diversified Portfolio began trading client capital in June
1988. From July 1995 through February 1996, one proprietary account has been
traded pursuant to an investment in a fund. This proprietary account is
traded in exactly the same manner that client funds would be traded, and has
been subject to all of the same fees and expenses that would be charged to a
client investment in the fund; therefore, there is no material impact on the
rates of return presented.
See "Additional Note to the Performance Summaries Which Utilize the
Fully-Funded Subset Method -- I.E., the Global Diversified Portfolio and JWH
Investments, Inc. InterRate-TM-."
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
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ADDITIONAL NOTES
TO JWH PROGRAMS PERFORMANCE SUMMARIES (CONT'D)
ADDITIONAL NOTE TO THE G-7 CURRENCY PORTFOLIO PERFORMANCE SUMMARY
The G-7 Currency Portfolio began trading client capital in February
1991. From July 1995 through December 1995, one proprietary account has been
traded pursuant to an investment in a fund, and in August 1996 an additional
proprietary account began trading pursuant to the same fund. These
proprietary accounts have been traded in exactly the same manner that client
funds would be traded, and have been subject to all of the same fees and
expenses that would be charged to a client investment in the fund; therefore,
there is no material impact on the rates of return presented.
ADDITIONAL NOTE TO THE GLOBAL FINANCIAL PORTFOLIO PERFORMANCE SUMMARY
The Global Financial Portfolio began trading client capital in June
1994. Beginning in July 1995, one proprietary account has been traded
pursuant to an investment in a fund. This proprietary account is traded in
exactly the same manner that client funds would be traded, and has been
subject to all of the same fees and expenses that would be charged to a
client investment in the fund; therefore, there is no material impact on the
rates of return presented.
Since the inception of the Global Financial Portfolio, the timing of
individual account openings has had a material impact on rates of return.
Based on the account start-up methodology used by JWH, the performance of
individual accounts comprising the Global Financial Portfolio performance
information has varied. In 1994, the two accounts that were open had rates
of return of (44)% and (17)%, respectively. For the period January 1995
through June 1995, the three open accounts achieved rates of return of 101%,
75% and 67%, respectively. Since July 1995, these accounts have maintained
mature positions and have been performing consistently with each other. Due
to the six-month period in 1995 of differential performance, however, these
three accounts had annual rates of return of 122%, 92% and 78%, respectively,
for such year.
ADDITIONAL NOTE TO THE INTERNATIONAL CURRENCY AND BOND PORTFOLIO PERFORMANCE
SUMMARY
The International Currency and Bond Portfolio began trading client
capital in January 1993. Beginning in October 1995, this program has been
comprised of a single proprietary account. This proprietary account has been
traded pursuant to an investment in a fund, is traded in exactly the same
manner that client funds would be traded, and has been subject to all of the
same fees and expenses that would be charged to a client investment in the
fund; therefore, there is no material impact on the rates of return presented.
ADDITIONAL NOTE TO THE YEN FINANCIAL PORTFOLIO PERFORMANCE SUMMARY
The Yen Financial Portfolio is traded from the Japanese yen perspective.
Accounts may be opened with either U.S. dollar or Japanese yen deposits.
Accounts originally opened with U.S. dollars establish additional interbank
positions in Japanese yen in an effort to enable such accounts to generate
returns similar to the returns generated by accounts with yen-denominated
balances. Over time, as profits and losses are recognized in yen-denominated
Japanese markets, accounts may hold varying levels of U.S. dollars and
Japanese yen. Additionally, the interbank positions are adjusted
periodically to reflect the actual portions of the account balances remaining
in U.S. dollars.
As the equity mix between U.S. dollars and Japanese yen varies, account
performance from the dollar and yen perspective does so also. Such
differences arise from exchange-rate movements, percentage of account
balances held in yen, and fee arrangements.
The performance summary of the Yen Financial Portfolio is presented on
an individual account by account basis due to material differences among
certain of the Yen Financial Portfolio accounts. Account performance has
varied historically due to a number of factors unique to this Program,
including whether an account was denominated in U.S. dollars or Japanese yen,
the extent of hedging currency exposure, the amounts and frequency of
currency conversions, and account size. Several of these factors that have
materially influenced performance depend on clients' specific instructions
that effectively result in customized client portfolios.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
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ADDITIONAL NOTES
TO JWH PROGRAMS PERFORMANCE SUMMARIES (CONT'D)
The Yen Financial Portfolio began trading client capital in January
1992. In June 1996, one proprietary account commenced trading pursuant to an
investment in a fund. This proprietary account is traded in exactly the same
manner that client funds would be traded, and is subject to all of the same
fees and expenses that would be charged to a client investment in the fund;
therefore, there is no material impact on the rates of return presented.
ADDITIONAL NOTE TO THE PERFORMANCE SUMMARIES WHICH UTILIZE THE FULLY-FUNDED
SUBSET METHOD -- I.E., THE GLOBAL DIVERSIFIED PORTFOLIO AND JWH INVESTMENTS,
INC. INTERRATE-TM- (THE "FULLY-FUNDED SUBSET DATA")
Actual funds are the amount of margin-qualifying assets on deposit.
Nominal account size is a dollar amount which clients have agreed to in
writing and which determines the level of trading in the account regardless
of the amount of actual funds. "Notional" funds are the amounts by which the
nominal account size exceeds the amount of actual funds. The amount of
"notional" funds in the accounts included in these summaries requires
additional disclosure under current CFTC policy. The Fully-Funded Subset
Data include "notional" funds in excess of the 10% disclosure threshold
established by the CFTC and reflects the adoption of a method of presenting
rate-of-return and performance disclosure authorized by the CFTC and referred
to as the "Fully-Funded Subset Method." This method permits "notional" and
fully-funded accounts to be included in a single performance summary.
To qualify for the use of the Fully-Funded Subset Method, the CFTC
requires that certain computations be made in order to arrive at the
Fully-Funded Subset, and that the accounts for which performance is so
reported meet two tests which are designed to provide assurance that the
Fully-Funded Subset and the rates of return of the accounts included in such
Subset are representative of the performance of the strategy in question.
These computations have been performed from January 1, 1992 to July 1996
for the Global Diversified Portfolio and from the inception of JWH
Investments, Inc.'s InterRate-TM- to its close in November 1993. These
computations were designed to provide assurance that the performance
presented in the Fully-Funded Subset Data and calculated using the
Fully-Funded Subset Method would be representative of such performance
calculated on a basis which includes "notional" funds in beginning equity.
The rates of return in the Fully-Funded Subset Data are calculated by
dividing net performance by the sum of beginning equity plus additions minus
withdrawals. JWH and JWH Investments, Inc. believe that this method yields
substantially the same adjusted rates of return as would be the Fully Funded
Subset method were there any "fully funded" accounts and that the rates of
return in the Fully-Funded Subset Data are representative of the performance
of the programs in question for the periods presented.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
NO ASSURANCE CAN BE MADE THAT ANY JWH PROGRAM OTHER THAN THE TRADING
PROGRAMS WILL BE USED FOR THE TRUST AT ANY ONE TIME OR FROM TIME TO TIME.
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THE TRADING ADVISORY AGREEMENT
The Trust has entered into a Trading Advisory Agreement with JWH. The
agreement provides that JWH will be the sole trading advisor for the Trust
and will have sole responsibility for determining transactions in commodity
interests with respect to Trust assets. The Managing Owner currently intends
that each Trading Program will be allocated an equal portion of the Trust's
assets raised in connection with this offering, and at the end of each
quarter after the Trust has commenced trading, the Trading Advisor will
automatically rebalance the allocation between the Trading Programs so that
the Trading Programs again will be allocated equal portions of Trust assets.
However, the Managing Owner, with the agreement of JWH, may reallocate assets
between the Trading Programs, delete a Trading Program or add one or more
other JWH programs. The Trading Advisory Agreement has an initial term
ending on the last day of the twelfth full calendar month after commencement
of trading by the Trust, with automatic renewal for three one-year periods on
the same terms unless the Managing Owner gives notice of termination to JWH
at least 45 days prior to the expiry of the then current term. The Trading
Advisory Agreement will terminate automatically if the Trust is terminated.
No assurance is given that, after the expiration or termination of the
Trading Advisory Agreement, the Trust will be able to retain the advisory
services of JWH or that if such services are available they will be on the
same terms as those of the initial Trading Advisory Agreement. The Managing
Owner may, in its sole discretion, employ additional trading advisors or
replace existing trading advisors; provided, however, if JWH ceases to be the
Trust's sole trading advisor, the Managing Owner will cause "JWH" to be
deleted from the Trust's name. Upon termination or expiration of the Trading
Advisory Agreement, the Trust may retain other advisors whose compensation
may be determined without regard to the previous performance of the Trust, or
it may renew its Trading Advisory Agreement with JWH on the same or different
terms. The compensation payable by the Trust to JWH for services provided by
JWH under the Trading Advisory Agreement is described under the caption
"Charges."
JWH, its principals and employees will not be liable to the Managing
Owner or its principals and employees, the Trust, the Unitholders, or any of
their successors or assigns except by reason of acts or omissions due to bad
faith, misconduct, negligence or not having acted in good faith in the
reasonable belief that its actions were taken in, or not opposed to, the best
interests of the Trust. The Trust and the Managing Owner will, jointly and
severally, indemnify JWH, its principals and employees to the full extent
permitted by law against any liability incurred or sustained by JWH in
connection with any acts or omissions of JWH relating to its management of
Trust assets or arising out of or in connection with the Trading Advisory
Agreement or arising out of JWH's management of Trust assets, provided that
there has been no judicial determination that such liability was the result
of negligence, misconduct, bad faith or a breach of the Trading Advisory
Agreement nor any judicial determination that the conduct which was the basis
for such liability was not done in good faith belief that it was in, or not
opposed to, the best interests of the Trust. Any such indemnification
involving a material amount, unless ordered or expressly permitted by a
court, will be made by the Trust only upon the opinion of mutually acceptable
independent legal counsel that JWH has met the applicable standard of conduct
described above. The Trading Advisory Agreement prohibits JWH from receiving
any commission, compensation, remuneration or payment whatsoever from any
broker with whom the Trust carries any account by reason of the Trust's
transactions.
JWH, its affiliates and Mr. John W. Henry may engage in discretionary
trading for their own accounts. Employees and principals of JWH (other than
Mr. Henry) are not permitted to trade on a discretionary basis in futures,
options on futures or forward contracts, although they may invest in
investment vehicles that trade such contracts. In addition, JWH and its
affiliates shall be free to manage other commodity accounts during the term
of the Trading Advisory Agreement and to use the same information and the
Trading Programs (or other JWH programs, if any) utilized in the performance
of services for the Trust so long as JWH's ability to carry out its
obligations and duties under the Trading Advisory Agreement is not materially
impaired thereby. See "Conflicts of Interests -- Other Commodity Pools and
Accounts." Unitholders will not be allowed to inspect the record of such
accounts in light of the confidential nature of such records. However, the
Trading Advisory Agreement provides that the Managing Owner may inspect all
the records of JWH related to commodity trading for the purposes of
confirming that the Fund has been treated equitably in light of JWH's trading
for other accounts during the term of the Trading Advisory Agreement.
FIDUCIARY OBLIGATIONS OF THE MANAGING OWNER
NATURE OF FIDUCIARY OBLIGATIONS; CONFLICTS OF INTEREST
As the Managing Owner of the Trust, CISI is subject to restrictions imposed
on "fiduciaries" under both statutory and common law. The Managing Owner has a
fiduciary responsibility to the Unitholders to exercise good faith, fairness and
loyalty in all dealings affecting the Trust, consistent with the terms of the
Trust's Declaration and Agreement of Trust ("Declaration and Agreement of
Trust") and the Trading Advisory Agreement between the Trust and JWH. The
scope of
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CISI's fiduciary obligations is defined and established, in large part, by
the consent of each Unitholder, in subscribing to the Units, to the business
terms of the Trust, as embodied in the Declaration and Agreement of Trust and
described in this Prospectus. Certain of the conflicts of interest involved
in the operation of the Trust may be impermissible under the fiduciary
principles applied in certain other investment contexts. In the case of the
Trust, such activities are authorized by disclosure and the informed consent
of subscribers. One of the purposes underlying the disclosures contained in
this Prospectus is to disclose to all prospective Unitholders these conflicts
of interest so that the Managing Owner may have the opportunity to obtain the
Unitholders' informed consent to such conflicts. Prospective investors who
are not willing to consent to the various conflicts of interest described
herein are ineligible to invest in the Trust. See "Conflicts of Interest."
The Managing Owner has selected CIS as the Trust's futures broker. JWH
is required to clear the Trust's futures trades through CIS, as well as to
transact the Trust's spot and forward trades on currencies and cash bullion
through CISFS. The Brokerage Fee paid to CIS by the Trust are assessed on a
flat-rate, not a per-trade, basis. Nevertheless, prospective investors must
recognize that by subscribing to the Trust they have consented to its basic
structure, in which affiliates of the Managing Owner, and the Managing Owner
itself, will, directly or indirectly receive substantial revenues from the
Trust and the Managing Owner does not negotiate on behalf of the Trust to
obtain fee or rate concessions from its affiliates which provide services to
the Trust.
The Trust, as a publicly-offered "commodity pool," is subject to the
Statement of Policy of the North American Securities Administrators
Association, Inc. ("NASAA") relating to the registration, for public
offering, of commodity pool interests (the "Blue Sky Guidelines"). The Blue
Sky Guidelines explicitly prohibit a sponsor of a commodity pool from
"contracting away the fiduciary obligation owed to [the Unitholders] under
the common law." Consequently, once the terms of a given commodity pool,
such as the Trust, are established, it is virtually impossible for the
Managing Owner to change such terms in a manner which disproportionately
benefits the Managing Owner, as any such change could constitute self-dealing
under common law fiduciary standards.
The Declaration and Agreement of Trust provides that CISI and its
affiliates shall have no liability to the Trust or to any Unitholder for any
loss suffered by the Trust which arises out of any action or inaction of CISI
or any of its affiliates if CISI or such affiliate, in good faith, determined
that such course of conduct was in the best interests of the Trust, and such
course of conduct did not constitute negligence or misconduct by CISI or such
affiliate. The Trust has agreed to indemnify CISI and certain of its
affiliates against claims, losses or liabilities based on their conduct
relating to the Trust, provided that the conduct resulting in the claims,
losses or liabilities for which indemnity is sought did not constitute
negligence or misconduct and was done in good faith and in a manner
reasonably believed to be in the best interests of the Trust. The Blue Sky
Guidelines prescribe the maximum permissible extent to which the Trust can
indemnify CISI and its affiliates and prohibit the Trust from purchasing
insurance to cover indemnification which the Trust could not give directly.
REMEDIES AVAILABLE TO THE UNITHOLDERS
Under Delaware law, a beneficial owner of a business trust may, under
certain circumstances, institute legal action on behalf of himself or herself
and all other similarly situated beneficial owners (a "class action") to recover
damages from a managing owner for violations of fiduciary duties, or on behalf
of a business trust (a "derivative action") to recover damages from a third
party where a managing owner has failed or refused to institute proceedings to
recover such damages. In addition, beneficial owners may have the right,
subject to applicable procedural, jurisdictional and substantive requirements,
to bring class actions in federal court to enforce their rights under the
federal securities laws and the rules and regulations promulgated thereunder by
the SEC. For example, beneficial owners who have suffered losses in connection
with the purchase or sale of their beneficial interests in a trust may be able
to recover such losses from a managing owner where the losses result from a
violation by the managing owner of the anti-fraud provisions of the federal
securities laws.
In certain circumstances, Unitholders also have the right to institute a
reparations proceeding before the CFTC against CISI (a registered commodity pool
operator), CIS (a registered futures commission merchant) and JWH (a registered
commodity trading advisor), as well as those of their respective employees who
are required to be registered under the CEA, and the rules and regulations
promulgated thereunder. There is a private right of action under the CEA.
Investors in commodities and in commodity pools may, therefore, invoke the
protections provided by such legislation.
In the case of most public companies, the management is required to make
numerous decisions in the course of the day-to-day operations of the company and
is protected in doing so by the so-called "business judgment rule." This rule
protects management from liability for decisions made in the course of operating
a business if the decisions are made
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on an informed basis and with the honest belief that the decision is in the
best interests of the corporation. The Managing Owner believes that similar
principles apply to it in its management of the Trust.
THE FOREGOING SUMMARY DESCRIBING IN GENERAL TERMS THE REMEDIES AVAILABLE TO
UNITHOLDERS UNDER FEDERAL AND STATE LAW IS BASED ON STATUTES, RULES AND
DECISIONS AS OF THE DATE OF THIS PROSPECTUS. THIS IS A DEVELOPING AND CHANGING
AREA OF THE LAW. THEREFORE, UNITHOLDERS SHOULD CONSULT THEIR OWN COUNSEL AS TO
THEIR EVALUATION OF THE STATUS OF THE APPLICABLE LAW SHOULD ANY ISSUES ARISE.
USE OF PROCEEDS
PROCEEDS OF SUBSCRIPTIONS
CIS will pay from its own funds all selling commissions incurred on the
sale of the Units. The organizational and initial offering costs advanced by
CISI will be reimbursed by the Trust to CISI on the initial closing date and
such reimbursed amount shall be capitalized and amortized over the first 60
months of the Trust's operations. At no month-end will the amount amortized
by the Trust exceed 1/60 of 2% of the Net Assets of the Trust as of such
month-end. If the Trust is terminated prior to the end of the amortization
period or the entire amount of the organizational and initial offering costs
is not amortized due to the 2% ceiling, CISI will return to the Trust any
unamortized amount. Ongoing offering costs of up to 0.5% of the Trust's
average month-end Net Assets during any fiscal year will be paid from the
general assets of the Trust, not from the proceeds of subscriptions. The
proceeds of the initial sale of the Units (I.E.,a minimum of $10,000,000 plus
the Managing Owner's required contribution in a minimum amount of 1% of the
Trust's total capitalization, or approximately $10,100,000) less
organizational and initial offering cost reimbursement, as well as the
proceeds of the additional Units sold during the Ongoing Offering Period (and
corresponding additional 1% contribution of the Managing Owner), will be
deposited in the Trust's trading account and available for speculative
trading. DESPITE THE FACT THAT CIS WILL PAY THE SELLING COMMISSIONS DUE ON
ALL UNIT SALES, THE TRUST IS NOT A "NO LOAD" INVESTMENT. THE 3% REDEMPTION
CHARGE IN EFFECT THROUGH THE END OF THE ELEVENTH FULL MONTH AFTER UNITS ARE
SOLD (I.E., AFTER THE TRUST COMMENCES TRADING IN THE CASE OF UNITS SOLD
DURING THE INITIAL OFFERING PERIOD; AFTER THE LAST DAY OF THE MONTH AS OF
WHICH UNITS ARE ISSUED DURING THE ONGOING OFFERING PERIOD) PROTECTS CIS FROM
PAYING SELLING COMMISSIONS IN RESPECT OF UNITS WHICH DO NOT REMAIN
OUTSTANDING LONG ENOUGH FOR CIS TO EARN BROKERAGE FEES CHARGED AGAINST THE
CAPITAL ATTRIBUTABLE TO SUCH UNITS.
SPECULATIVE TRADING
The primary use which the Trust will make of the proceeds of the
offering of the Units will be to support, both as actual margin and as funds
held in reserve, the speculative trading of JWH pursuant to the Trading
Programs. Initially the Trust will allocate Trust assets equally between the
Trading Programs. Thereafter at the end of each quarter, automatic
rebalancing of assets allocated to the Trading Programs will take place. The
Managing Owner intends to allocate the proceeds of sales of Units during the
Ongoing Offering Period equally between the two Trading Programs. However,
the Managing Owner may, with the agreement of JWH, alter the allocation
between the Trading Programs, eliminate a Trading Program or add one or more
other JWH programs.
The strategies implemented by JWH are described in general terms (these
strategies are proprietary and confidential and, accordingly, cannot be
described in detail) under "John W. Henry & Company, Inc. -- Trading
Techniques." JWH has the flexibility to alter, in its discretion, its
trading method (including technical trading systems, risk control overlays
and money management principles), as well as to change the futures and
forward markets traded for the Trust. JWH may modify the method used for the
Trust so as to include new methods of analysis and may utilize
non-trend-following systems or market-forecasting strategies. Unitholders
will not be notified of changes in the markets traded or modifications,
additions or deletions to JWH's methods unless such changes are considered by
the Managing Owner to be material.
MAINTENANCE OF ASSETS; INTEREST INCOME
Initially all of the Trust's assets will be deposited with CIS and
CISFS. Although currently not contemplated, CISI may deposit a portion of
Trust assets with a Custodian and engage a third-party cash manager to manage
such assets. Such assets will be invested on an unleveraged basis in
Treasury bills, notes and bonds as well as other securities issued or
guaranteed as to principal and/or interest by certain U.S. government
agencies or instrumentalities. The fees of such third-party cash manager
will be paid by the Trust. CIS has agreed to credit to the account of the
Trust at each month-end the amount, if any, by which returns (net of fees of
the cash manager) for such month on Trust assets held by a Custodian are less
than the return that would have been realized by the Trust had such assets
been deposited with CIS.
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The Trust's assets will be used either as margin to secure the Trust's
obligations under the open positions which it holds in the markets or as a
reserve to support further trading in the event of market losses. The assets
deposited as margin with and held by the Futures Broker will be held in
"customer segregated funds accounts" or "foreign futures and foreign options
secured amount accounts" (in the case of futures and options traded on
non-U.S. exchanges), as prescribed by the CEA and applicable CFTC
regulations. Assets deposited as margin with and held by the Foreign
Currency Broker will be held in unregulated accounts. In general,
approximately 80% to 94% of the Trust's assets will be held in customer
segregated funds accounts or with a Custodian, approximately 5% to 15% in
foreign futures and options secured amount accounts and approximately 1% to
5% in unregulated accounts. Assets held in "customer segregated funds
accounts" may be held in cash or invested in United States Treasury bills or
notes. Assets held at a Custodian may be held in cash or invested on an
unleveraged basis in Treasury bills, notes and bonds as well as other
securities issued or guaranteed as to principal and/or interest by certain
U.S. government agencies or instrumentalities. On the 5th business day of
each month, CIS and CISFS will credit the Trust with interest on 100% of the
Trust's average daily balances on deposit with CIS or CISFS, as the case may
be, in the previous month at the average 91-day Treasury bill rate for such
previous month in respect of deposits denominated in dollars. CIS has agreed
to credit the account of the Trust at each month-end the amount, if any, by
which returns (net of fees of the investment adviser) for such month on Trust
assets held by a Custodian are less than the return that would have been
realized by the Trust had such assets been deposited with CIS.
On Trust assets held in a foreign currency (for purposes of making
margin deposits with respect to positions on an exchange outside the United
States on which JWH currently trades), CIS and CISFS will credit the Trust
with interest on the 5th business day of each month on the average daily
balance of Trust assets held in such currency during the previous month at a
rate equal to 0.75% below the average rate paid with respect to deposits in
such currency by the relevant clearing association for such previous month
(which is zero in certain cases) except that the rate of interest at which
CIS will credit the Trust for deposits in Spanish Pesetas will be 2.75% below
the average Madrid interbank offered rate for the month in question. With
respect to currencies required for margin on markets not currently traded by
JWH, CIS will credit the Trust with interest at the rates paid by CIS to
other accounts similar in size and character to that of the Trust.
Interest income exceeding the amount credited by CIS and CISFS to the
Trust's account will be retained by CIS and CISFS, respectively.
To the extent that the Trust participates in the spot and forward
currency and precious metals markets, the Trust will be required to deposit
margin with CISFS. CIS will satisfy such margin requirements by transferring
Trust assets from the Trust's account at CIS to CISFS. Amounts transferred
to CISFS as margin on spot and forward currency and precious metals positions
will not be held by CISFS as customer segregated funds under the CEA and the
rules of the CFTC but will be included in determining the interest to be
credited to the Trust as described above.
The Declaration and Agreement of Trust strictly prohibits the Trust
from lending any of its assets to any person or entity. The Managing Owner
will not commingle the property of the Trust with the property of any other
person or entity (deposit of Trust assets with the Futures Broker or CISFS
does not constitute commingling for these purposes).
CHARGES
CHARGES PAID BY THE TRUST
The Trust will be subject to the following charges and fees.
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
CISI Organizational and CISI will advance these costs, estimated at
initial offering costs approximately $500,000-$600,000, which will
be reimbursed to CISI by the Trust at the
initial closing and amortized over the first
60 months of the Trust's operations, up to a
limit at each month-end of 1/60 of 2% of Net
Assets as of such month-end. CISI will
return any unamortized amount to the trust
at the end of the amortization period or
earlier termination of the Trust.
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RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
- --------- ----------------- -----------------
Third Parties Ongoing offering costs Actual; up to the maximum of
0.5% of the Trust's average
month-end Net Assets in each
fiscal year.
CIS Brokerage Fee A flat-rate monthly Brokerage
Fee equal to 6.5% (or
approximately 0.542% per month)
of the Trust's month-end
assets (after deduction of the
Management Fee payable to JWH)
will be paid to CIS. Such
Brokerage Fee will cover all
brokerage, exchange, clearing
and NFA fees incurred in the
Trust's trading (including
brokerage fees payable to CISFS
on spot and forward currency
and precious metals trading).
Certain large investors are
eligible to be charged the
Special Brokerage Fee Rate as
described under Charges
-- Brokerage Fee -- Special
Brokerage Fee Rate.
CIS and CISFS Interest income earned CIS and CISFS will credit the
above amount credited Trust with interest on 100% of
to the Trust, if any the Trust's average daily
balances on deposit with CIS
during each month at the
average 91-day Treasury bill
rate for that month in respect
of deposits denominated in
dollars or at the applicable
rates in respect of deposits
denominated in currencies
other than dollars (which may
be zero in some cases). See
Use of Proceeds -- Maintenance
of Assets; Interest Income.
Interest income exceeding the
amount credited by CIS and
CISFS to the Trust's account
will be retained by CIS and
CISFS, respectively.
Third Parties Administrative expenses Actual; currently estimated to
be approximately 0.6% of the
Trust's average month-end Net
Assets annually, based on the
$10,000,000 minimum Trust size.
JWH Management Fee 4% annually (orapproximately
0.333% per month) of the
Trust's month-end assets
after deduction of a portion
of the Brokerage Fee at a 1.25%
annual rate (rather than 6.5%
annual rate); payable monthly.
JWH Incentive Fee 15% of any New Trading Profit,
I.E., the sum of (i) the net
of any profits and losses
realized on all trades closed
out during a period, (ii) the
net of any unrealized profits
and losses on open positions
as of the end of such period
less the net of any unrealized
profits and losses on open
positions as of the end of the
immediately preceding period
and (iii) the cumulative
trading loss since the most
recent period for which an
Incentive Fee was payable
(or, if no Incentive Fee has
been paid, $0) (the "High
Water Mark"), minus (iv) the
Brokerage Fee at the annual
rate of 1.25% (rather than
6.5% annual rate) of the
Trust's month-end assets,
the Management Fee and any
execution charges paid by
the Trust during such period
with respect to trades
executed by a futures broker
other than CIS.
Trading Profit does not
include interest income.
-60-
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
- --------- ----------------- -----------------
Trading Profit will be
calculated on the basis of
the overall performance of
the Trust, not the
performance of each Trading
Program considered
individually.
BECAUSE THE INCENTIVE FEE
WILL BE CALCULATED ON THE
BASIS OF ANY TRADING PROFIT
ACHIEVED BY THE TRUST IN
EXCESS OF THE HIGHEST LEVEL
OF CUMULATIVE TRADING PROFIT
ACHIEVED BY THE TRUST AS OF
ANY PREVIOUS CALENDAR
QUARTER-END, RATHER THAN ON
THE BASIS OF INCREASES IN
THE NET ASSET VALUE PER UNIT
OVER THE HIGHEST NET ASSET
VALUE AS OF ANY PREVIOUS
CALENDAR QUARTER-END, THE
INCENTIVE FEES PAID TO JWH
MAY NOT REFLECT THE
INVESTMENT EXPERIENCE OF ANY
PARTICULAR UNITHOLDER. IN
FACT, JWH MAY BE PAID
SUBSTANTIAL INCENTIVE FEES
(ALLOCATED EQUALLY AMONG ALL
OUTSTANDING UNITS) EVEN
THOUGH SOME UNITS HAVE
DECLINED SIGNIFICANTLY IN
VALUE FROM THEIR INITIAL
PURCHASE PRICE.
AS INCENTIVE FEES ARE
CALCULATED ON THE BASIS OF
QUARTER-END HIGHS IN
CUMULATIVE TRADING PROFIT,
SUBSTANTIAL INCENTIVE FEES
MAY (IRRESPECTIVE OF THE
FACT THAT UNITS ARE
PURCHASED AT DIFFERENT TIMES
AND PRICES, AND MAY HAVE
MATERIALLY DIFFERENT
INVESTMENT EXPERIENCES
DURING A YEAR) ACCRUE IN A
CALENDAR YEAR EVEN THOUGH
THE TRUST HAS AN OVERALL
LOSS FOR SUCH YEAR.
Third Parties Reimbursement of Actual payments to third
delivery, insurance, parties; not subject to
storage and any estimate.
other extraordinary
charges; taxes (if
any)
________________________
Organizational and Initial Offering Costs
The Trust's organizational and initial offering costs, estimated at
approximately $500,000-$600,000, will be advanced by CISI and reimbursed,
without interest, to CISI by the Trust at the initial closing and the amount
of such organizational and initial offering cost reimbursement shall be
amortized over 60 months commencing with the end of the calendar month in
which the initial closing occurs (irrespective of whether such month is a
full month). At no month-end will the amount amortized by the Trust exceed
1/60 of 2% of the Net Assets of the Trust as of such month-end. The amount
amortized each month-end shall be the lesser of (i) the product of (x) one
divided by the number of months remaining in the amortization period times
(y) the unamortized balance of the capitalized organizational and initial
offering costs, or (ii) 1/60 of 2% of Net Assets at that month-end. If (i)
the Trust is terminated prior to the end of such 60-month period, or (ii) the
entire amount of the organizational and initial offering costs reimbursed to
CISI is not amortized at the end of the 60-month period due to the 2%
limitation, CISI shall return to the Trust, without interest, an amount equal
to the unamortized balance of the capitalized organizational and initial
offering costs.
Organizational and initial offering costs (not including selling
commissions) are currently estimated as follows: printing -- $100,000; filing
fees -- $20,652; escrow fees -- $20,000; "Blue Sky" expenses -- $15,470;
accounting fees -- $20,000; counsel fees -- $290,000; sales literature --
$60,000; and miscellaneous -- $55,078; a total of $581,200.
-61-
BROKERAGE FEE
BROKERAGE FEE RATE
Commodity brokerage commissions are typically paid upon the completion
or liquidation of a trade and are referred to as "round-turn commissions,"
which cover both the initial purchase (or sale) and the subsequent offsetting
sale (or purchase) of a commodity futures contract. The Trust will not pay
commodity brokerage commissions on a per-trade basis but rather will pay
monthly flat-rate Brokerage Fees at the annual rate of 6.5% (or a monthly
rate of approximately 0.542%) of the Trust's month-end assets after deduction
of the Management Fee. CIS will receive such Brokerage Fee, irrespective of
the number of trades executed on the Trust's behalf.
SPECIAL BROKERAGE FEE RATE
All or a portion of the Units held by certain large investors are
eligible to be charged a lower Brokerage Fee rate as described below (such
Unitholders are referred to as "Eligible Unitholders"). A Unitholder who
purchases at least $5,000,000 of Units as of the initial closing date or any
subsequent month-end will effectively be charged the Brokerage Fee at the
flat rate of 4.5% per annum (or 0.375% per month) of the Trust's assets
(after deduction of the Management Fee) attributable to such Units (such
reduced Brokerage Fee rate is referred to as the "Special Brokerage Fee
Rate"). So long as such Eligible Unitholder holds Units of an aggregate
issue price of at least $5,000,000 through each subsequent month-end, the
Eligible Unitholder will be eligible for the Special Brokerage Fee Rate at
each such month-end, regardless of the then aggregate Net Asset Value of such
Units. If, however, such Eligible Unitholder redeems any Units at any
month-end resulting in such Eligible Unitholder's holding Units of an
aggregate issue price of less than $5,000,000, then the Eligible Unitholder
will no longer be eligible for the Special Brokerage Fee Rate assessed for
such month, even if the aggregate Net Asset Value of the unredeemed Units
exceeds $5,000,000 at such month-end.
If investors acquire Units at more than one time, their Units will be
treated on a "first-in, first-out" basis for purposes of determining which of
their Units will be charged the Special Brokerage Fee Rate. An investor who
makes an incremental purchase of Units on a closing date that causes the
aggregate issue price of all of such investor's Units to equal at least
$5,000,000 will be charged the Special Brokerage Fee Rate with respect to
such incrementally purchased Units as of the next month-end but with respect
to earlier purchased Units only after such Units have been outstanding for at
least twelve full months. For example, if an investor makes an initial
investment of $3,000,000 as of March 31, 1997 ("Initial Purchase Date") and
an incremental investment of $3,000,000 as of September 30, 1997 ("Subsequent
Purchase Date"), such Eligible Unitholder will be eligible to be charged the
Special Brokerage Fee Rate (i) immediately with respect to Units acquired as
of the Subsequent Purchase Date and (ii) as of As of April 30, 1998 with
respect to Units acquired as of the Initial Purchase Date. If the Eligible
Unitholder redeems Units of an aggregate initial issue price of $1,000,000 as
of January 31, 1998, the Eligible Unitholder will be deemed to have redeemed
Units issued on the Initial Purchase Date and, therefore, will remain
eligible to be charged the Special Brokerage Fee Rate with respect to all
$3,000,000 of Units acquired as of the Subsequent Purchase Date and,
commencing April 30, 1998, will be eligible to be charged the Special
Brokerage Fee Rate with respect to the Units of an aggregate initial issue
price of $2,000,000 acquired as of the Initial Purchase Date that remain
outstanding as of such date. If, however, the Eligible Unitholder redeems
Units of an aggregate initial issue price of $4,000,000 as of January 31,
1998, the Eligible Unitholder will no longer be eligible to be charged the
Special Brokerage Fee Rate as of the redemption date on any of the
investors's unredeemed Units. Moreover, the Eligible Unitholder will be
assessed the 3% early redemption charge on the redeemed Units because they
have been outstanding for less than eleven full months. If the Eligible
Unitholder redeems (for the first time) Units of an aggregate initial issue
price of $4,000,000 as of January 31, 1999, the Eligible Unitholder again
will no longer be eligible to be charged the Special Brokerage Fee Rate as of
the redemption date on any of the investors's unredeemed Units. However, in
this case, the Eligible Unitholder will be assessed the 3% early redemption
charge only on Units of an aggregate initial issue price of $1,000,000 -- as
Units are also treated on a "first-in, first-out" basis for purposes of
assessing the 3% redemption charge, the investor will not have to pay any
redemption charge on Units of an aggregate initial issue price of $3,000,000
because Units acquired as of the Initial Purchase Date are considered to have
been redeemed first.
In order to maintain a uniform Net Asset Value per Unit, the Managing
Owner will determine the capital account with respect to each Unitholder as
of the end of each month as though every Unit outstanding were charged an
allocable share of the Brokerage Fee at the standard 6.5% annual rate. The
Managing Owner will then calculate the difference between allocable share of
the Brokerage Fee at the standard rate and at the Special Brokerage Fee Rate
("Brokerage Fee Excess") for Units held by each Eligible Unitholder that are
eligible for the Special Brokerage Fee Rate and will invest such difference
in additional Units to be owned by the Eligible Unitholder (deemed to be
issued as of such month-end) to the extent Units are available for sale. To
the extent Units are not available to be purchased with the Brokerage Fee
Excess as of such month-end, the Brokerage Fee Excess will be distributed to
the Eligible Unitholder in cash. See
-62-
"Federal Income Tax Aspects -- Cash Distributions and Redemptions of Units"
for federal income tax consequences of such distribution. Eligible
Unitholders that receive additional Units in respect of a Brokerage Fee
Excess will bear a proportionally greater share of the amortization of
organizational and initial offering expenses.
GENERAL
STATE SECURITIES ADMINISTRATORS REQUIRE THE MANAGING OWNER TO STATE THAT
THE BROKERAGE COMMISSIONS PAID BY THE TRUST WILL NOT BE INCREASED DURING ANY
PERIOD IN WHICH EARLY REDEMPTION CHARGES ARE IN EFFECT (WHICH PERIOD MIGHT
WELL REPRESENT THE ENTIRE LIFE OF THE TRUST, AS REDEMPTION CHARGES CONTINUE
TO BE PAYABLE, IN RESPECT OF THE UNITS MOST RECENTLY SOLD, UNTIL THE END OF
THE ELEVENTH FULL MONTH AFTER THEIR SALE).
CIS will pay from the Brokerage Fees received from the Trust all costs
of executing and clearing the Trust's trades, including NFA transaction fees
assessed on the Trust's trading on United States exchanges, exchange and
clearing fees, and brokerage fees charged by CISFS on spot and forward
contracts on currencies and precious metals. NFA transaction fees currently
equal $0.14 per round-turn trade of a futures contract and $0.07 for each
trade of a commodity option (a $0.07 fee is charged upon the purchase, sale
or exercise of an option; if an option is exercised, an additional $0.14 fee
will be payable upon the liquidation of the futures position acquired upon
such exercise; no fee is assessed upon the expiration of an option).
In addition, CIS and CISFS receive and retain as part of their
compensation for providing brokerage services to the Trust the interest
income earned on the assets of the Trust on deposit with CIS which exceeds
the amount of interest credited by CIS and CISFS, respectively, to the
Trust's account. See "Use of Proceeds -- Maintenance of Assets; Interest
Income."
Other brokerage firms may charge less for brokerage services similar to
those to be provided by CIS to the Trust. The round-turn equivalent of the
Trust's flat-rate Brokerage Fee will vary, perhaps materially, depending on
the frequency with which JWH places orders for the Trust. The frequency with
which JWH trades will, in turn, be materially affected by market conditions
as well as by the programs used from time to time for the Trust. However, as
of the date of this Prospectus, the Managing Owner estimates that, based on
the recent trading experience of JWH, the Trust's flat-rate Brokerage Fee
should be the equivalent to a round-turn brokerage commission of
approximately $76.50 per round-turn trade (including the Trust's spot and
forward trades on a futures-equivalent basis in the denominator used in
calculating the per-trade cost of the 6.5% annual Brokerage Fee). The
Managing Owner will report, in the annual reports it distributes to
Unitholders, the approximate round-turn equivalent rate paid by the Trust on
its futures and spot and forward trading during the previous year.
JWH may execute trades through brokers other than CIS, in which case the
trades will be given up to be cleared by CIS. Any additional costs involved
in such "away" executions will be paid by the Trust.
CIS will pay selling commissions and ongoing compensation from its own
funds to Selling Agents. See "-- Selling Commissions and Ongoing
Compensation."
ONGOING OFFERING COSTS
The Trust will pay all routine costs incurred in the ongoing offering of
the Units. Such costs include the costs of updating this Prospectus and
regulatory compliance, escrow fees and registration fees if additional Units
are registered. It is difficult to predict the amount of the ongoing
offering costs which will be incurred by the Trust as (i) the Managing Owner
may suspend or terminate the offering at any time, (ii) registration fees
will vary depending upon how many Units are sold, (iii) processing expenses
are materially affected by the amount of time and expenses necessary to
complete all required regulatory procedures (and there is no certainty, from
one filing to the next, as to the amount of time that will be required to
obtain regulatory clearance), and (iv) a variety of other factors. The
Managing Owner believes that ongoing offering costs could range from
approximately $50,000 to approximately $250,000 or more per year. However,
the Managing Owner will absorb all such costs to the extent that they exceed
0.5% of the Trust's average month-end Net Assets during any fiscal year.
MANAGEMENT FEE
Each month, the Trust will pay JWH a Management Fee at the annual rate
4% (or a monthly rate of approximately 0.333%) of the Trust's month-end
assets after deduction of a portion of the Brokerage Fee at the annual rate
of 1.25% (rather than 6.5%) of month-end Trust assets but before deduction of
any Management Fees, distributions, redemptions or Incentive Fee accrued or
payable as of the relevant month-end.
-63-
INCENTIVE FEE
CALCULATION OF THE INCENTIVE FEE
The Trust will pay to JWH an Incentive Fee equal to 15% of New Trading
Profit, I.E., the sum of (i) the net of any profits and losses realized on
all trades closed out during a period, (ii) the net of any unrealized profits
and losses on open positions as of the end of such period less the net of any
unrealized profits and losses on open positions as of the end of the
immediately preceding period and (iii) the cumulative trading loss since the
most recent period for which an Incentive Fee was payable (or, if no
Incentive Fee has been paid, $0) (the "High Water Mark"), minus (iv) the
Brokerage Fee at the annual rate of 1.25% (rather than 6.5% annual rate) of
the Trust's month-end assets, the Management Fee and any execution charges
paid by the Trust during such period with respect to trades executed by a
futures broker other than CIS.
Trading Profit does not include any interest income. Incentive Fees will
accrue monthly but will be paid at the end of each calendar quarter. Accrued
but unpaid Incentive Fees will reduce (or, in the event that a previous
accrual is reversed, increase) the month-end Net Asset Value of Units.
The Incentive Fee is calculated based on the overall performance of the
Trust, not individually in respect of the performance of the individual
programs utilized by the Trust.
If Trust assets under JWH's management are reduced by redemptions,
distributions or reallocations at any month-end other than a calendar
quarter-end when New Trading Profit exists, the accrued Incentive Fee on the
New Trading Profit attributable to the amount so reduced ("Withdrawn
Profits") shall be deducted from the redemption proceeds, distributions or
reallocations, as the case may be and paid to JWH, and Withdrawn Profits
shall not be included in New Trading Profit for the calculation of Incentive
Fee payable to JWH at the end of that calendar quarter. In the event there is
a cumulative loss when Units are redeemed, the amount of such cumulative loss
will be reduced as of the date of redemption in the same proportion that the
aggregate number of Units redeemed bears to the total number of Units
outstanding immediately prior to such redemption. The Incentive Fee (if any)
allocable to Units redeemed on or prior to the end of the first eleven full
months after their issuance is not affected by the 3% redemption charge from
the redemption proceeds of such Units.
For example, assume that the Trust's Net Asset Value at the commencement
of trading on March 31, 1997 is $10,000,000. If at the end of the first
month of trading, Trading Profit recognized on both open and closed futures
positions, less the Management Fee and a portion of the Brokerage Fee at the
annual rate of 1.25% (rather than 6.5%) of Trust assets, equalled $100,000,
all of such Trading Profit would constitute New Trading Profit. $100,000 of
New Trading Profit would result in a $15,000 Incentive Fee. Consequently,
while no Incentive Fee would be due from the Trust as a whole because such
month-end was not a quarter-end, Unitholders who redeemed their Units as of
the end of the first month of trading would receive redemption proceeds
(prior to reduction for the redemption charge then due) reflecting a Net
Asset Value for the Trust of approximately $10,085,000. Assume that by the
end of the next month, subsequent losses have reduced the initial $100,000
gain to a loss of $(80,000). A cumulative trading loss of $(80,000) would
exist (irrespective of the fact that $180,000 had been lost since the
previous month-end -- as opposed to quarter-end -- high). If Unitholders
thereupon withdrew 50% of their interest in the Trust (net of the proceeds of
any new Units then sold), such trading loss would, for purposes of future
Incentive Fee calculations, itself be reduced by 50% to $40,000. If, during
the following month, Trading Profit recognized on both open and closed
positions equalled $100,000, New Trading Profit of $60,000 would be accrued
as of the end of such quarter, and JWH would be entitled to an Incentive Fee
equal to 15% of $60,000, or $9,000.
POSSIBLE MISALLOCATION OF THE INCENTIVE FEES AMONG INVESTORS
The Incentive Fee payable to JWH is calculated on the basis of the
cumulative Trading Profit (if any) achieved by the Trust over the High Water
Mark. However, cumulative Trading Profit may be generated even though the
Net Asset Value per Unit has declined, perhaps substantially, below the
purchase price of many outstanding Units, because Trading Profit is
calculated on the basis of the overall gains achieved by the Trust,
irrespective of the number of Units among which such gains are distributed.
For example, if (i) 100,000 Units are initially sold for $100 per Unit, (ii)
the Trust incurs a $1,000,000 loss in the first month of trading, (iii) an
additional 100,000 Units are sold as of the end of the first month at the
current Net Asset Value per Unit of $90, and (iv) the Trust recognizes a gain
(after deduction of the Brokerage Fee at a 1.25% annual rate and the
Management Fee) of $1,500,000 through the end of the first quarter of
trading, an Incentive Fee would be payable to JWH in respect of the $500,000
of cumulative Trading Profit recorded as of the end of such quarter even
though the Net Asset Value per Unit would be less than $100 (in fact, $97.50
per Unit,
-64-
prior to deduction of a $0.375 per Unit Incentive Fee). IT IS POSSIBLE THAT
CERTAIN UNITS WILL PAY SUBSTANTIAL INCENTIVE FEES DESPITE THE NET ASSET VALUE
PER UNIT HAVING DECLINED SIGNIFICANTLY BELOW THE PURCHASE PRICE OF SUCH UNITS.
If Units are purchased during a calendar quarter at a Net Asset Value
reduced by an accrued Incentive Fee and subsequent losses during such quarter
result in reversals of such Incentive Fee accruals, such reversals will
mitigate the losses incurred by all Units, including the newly purchased
Units, whereas such reversals should properly be allocated entirely to the
Units outstanding when the new Units were purchased at a Net Asset Value
already fully reduced by the subsequently reversed Incentive Fee accruals.
ADMINISTRATIVE EXPENSES
The Trust will pay actual periodic legal, accounting, auditing,
printing, recording and filing fees, postage charges and Trustee's fees,
which together are currently estimated at approximately 0.6% of the Trust's
average month-end Net Assets annually, based on aggregate Trust assets of
$10,000,000.
EXTRAORDINARY EXPENSES
The Trust will be required to pay any extraordinary charges (such as
taxes) incidental to its trading, including delivery, insurance and storage
charges. These charges and not susceptible to estimate. Extraordinary
expenses, if any, will not reduce Trading Profits for purposes of Incentive
Fee calculations.
CISI WILL SEND EACH UNITHOLDER A MONTHLY STATEMENT WHICH WILL INCLUDE A
DESCRIPTION OF THE TRUST'S PERFORMANCE DURING THE PRIOR MONTH AND SET FORTH,
AMONG OTHER THINGS, THE BROKERAGE FEE, MANAGEMENT FEE, ORGANIZATIONAL AND
INITIAL OFFERING COST AMORTIZATION, ADMINISTRATIVE EXPENSES, ONGOING OFFERING
COSTS AND ANY EXTRAORDINARY EXPENSES PAID, AS WELL AS ANY INCENTIVE FEE
ALLOCATED WITH RESPECT TO SUCH MONTH.
CHARGES PAID BY OTHERS
The following costs relating to the sale of the Units and the operation
of the Trust will be paid by the entities indicated below.
BROKERAGE FEE FOR CURRENCY AND PRECIOUS METALS TRADING
CIS will pay CISFS, from CIS's own funds, brokerage fees on a per trade
basis and at a rate equal to a round-turn on a Chicago Mercantile Exchange's
International Monetary Market (IMM) equivalent basis for the Trust's trading
of spot and forward contracts on currencies and precious metals.
SELLING COMMISSIONS AND ONGOING COMPENSATION
CIS will pay the Selling Agents, from its own funds, up to 4% selling
commissions due in respect of Units sold, up to 2% in respect of Units sold
to Eligible Unitholders. Furthermore, CIS will pay the Selling Agents
ongoing compensation -- up to 4% per annum of the average month-end Net Asset
Value per Unit for all Units which remain outstanding for longer than twelve
months (up to 2% per annum in respect of Units owned by Eligible
Unitholders), beginning in the thirteenth month after sale and continuing
until redemption -- in respect of Units sold by eligible Selling Agents.
Selling Agents ineligible to receive ongoing compensation may receive
installment selling commissions which, when added to the initial selling
commission, may not exceed 9% of the initial subscription price of each Unit
sold by any such Selling Agent. Such ongoing compensation may be deemed to
constitute underwriting compensation. See "Federal Income Tax Aspects --
Syndication Expenses."
Wholesalers who introduce Additional Selling Agents to CIS will share
the selling commissions and ongoing compensation (or installment selling
commissions) with their respective Additional Selling Agents. Additional
Selling Agents who distribute Units through correspondents will also share
the selling commissions and ongoing compensation (or installment selling
commissions) with their respective correspondents. See "Plan of Distribution
- -- Selling Agents."
REDEMPTION CHARGES
Units redeemed on or prior to the end of the eleventh full month after
such Units are sold are subject to redemption charges of 3% of the Net Asset
Value at which they are redeemed. Such charges will be deducted from
redemption proceeds and paid to CIS. In the event that an investor acquires
Units at more than one time, such Units will
-65-
be treated on a "first-in, first-out" basis for purposes of determining
whether redemption charges are applicable. For an example of application of
"first-in, first-out" treatment, see "Charges -- Brokerage Fee -- Special
Brokerage Fee Rate."
Units sold during the Initial Offering Period are deemed to be sold, for
purposes of determining whether redemption charges are applicable, as of the
date that subscription funds are released from escrow (I.E., on the day the
Trust commences trading in the case of Units sold during the Initial Offering
Period and on the last day of a calendar month in the case of Units sold
during the Ongoing Offering Period) and not the date that investors'
subscriptions are accepted or the subscription funds deposited into escrow.
See also "Redemptions; Net Asset Value."
Redemptions will be made at a Net Asset Value per Unit reduced by any
accrued Incentive Fee allocable (equally to all outstanding Units) to Units
when redeemed. Any such accrued Incentive Fee will be paid to JWH.
BROKERAGE ARRANGEMENT
THE FUTURES BROKER
Cargill Investor Services, Inc., the Lead Selling Agent, is also the
Trust's Futures Broker. CIS will execute and clear the Trust's futures
transactions and provide other brokerage-related services. CIS is a Delaware
corporation. Its principal office is located at 233 South Wacker Drive,
Suite 2300, Chicago, Illinois 60606. It has offices and affiliated offices
at numerous other locations in the United States as well as in England,
France, Switzerland, Australia and the Far East. The clients of CIS include
commercial and financial institutions that use the futures markets for risk
management purposes as well as private investors. CIS has more than 575
employees. CIS is a wholly-owned, but separately managed, subsidiary of
Cargill, Incorporated, a privately-owned international merchant, warehouser,
processor and transporter of agricultural and other bulk commodities that was
founded in 1865.
CIS is a clearing member of all of the principal futures exchanges in
the United States and is a clearing broker or has clearing relationships on
all major world futures exchanges. It is registered with the CFTC as a
futures commission merchant and is a member of NFA in such capacity. Certain
employees of CIS are members of U.S. futures exchanges and may serve on the
governing bodies and standing committees of those exchanges, their clearing
houses and NFA. In that capacity, these employees have a fiduciary duty to
the exchanges and would be required to act in the best interests of such
exchanges, even if that action might be adverse to the interests of the Trust.
Cargill, Incorporated owns and operates grain elevators and soybean
processing plants that are designated as regular warehouses for delivery of
certain physical commodities in satisfaction of futures contracts under the
rules of the Chicago Board of Trade and similar rules of other U.S. futures
exchanges. If the Trust makes or accepts delivery of grain or soybean
products pursuant to a futures contract, it is possible that, under exchange
rules governing settlement of the contract, the Trust may tender or receive
negotiable warehouse receipts issued by Cargill, Incorporated.
Cargill, Incorporated and its affiliates are substantial users of
virtually all futures contracts for hedging purposes. Such hedging
transactions are generally implemented by employees of Cargill, Incorporated
and CIS generally executes or clears those transactions. The volume of
trading by Cargill, Incorporated and its affiliates is likely to result in
their competing with the Trust for futures market positions. Thus, in
certain instances, CIS may have orders for trades from the Trust and from
Cargill, Incorporated or its affiliates, and CIS might be deemed to have a
conflict of interest between the sequence in which such orders will be
transmitted to the trading floors of futures exchanges. In order to assure
impartial treatment for such orders, CIS has an operating policy of
transmitting orders to the trading floors in the sequence received regardless
of which entity has placed the order. The Trust might enter into trades in
which the other party is Cargill, Incorporated or one of its affiliates. It
is possible that the hedging and cash operations of Cargill, Incorporated or
trading by its affiliates may adversely affect the Trust. Records of such
trading will not be made available to Unitholders. It is possible that these
entities may compete for similar positions in the futures markets. No
officers, directors or employees of CIS or its affiliates will trade futures
speculatively for their own accounts.
In the ordinary course of its business, CIS is engaged in civil
litigation and subject to administrative proceedings which, in the aggregate,
are not expected to have a material effect upon its condition, financial or
otherwise, or the services it will render to the Trust.
The Trust and CIS will enter into a Customer Agreement that provides
that, for as long as the Trust maintains an account with CIS, CIS will
execute trades for the Trust upon instruction of JWH, and will receive
monthly flat-rate Brokerage Fees. The Customer Agreement has an initial term
ending on the last day of the twelfth full calendar month following
commencement of trading by the Trust and is terminable on 60 days' notice by
either party. If for any reason
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the Trust elects to terminate the Customer Agreement with CIS, no assurance
may be given that the Trust will be able to retain the brokerage services of
another futures broker at the same commission rate. In addition, under the
Declaration and Agreement of Trust, Unitholders owning more than 50% of the
outstanding Units may cause the Trust to terminate the Customer Agreement.
CIS is responsible for execution and clearance of futures contracts (and
options, if traded) as well as for certain administrative duties such as
recordkeeping, transmittal of confirmation statements and calculating equity
balance and margin requirements for the Trust's account. The agreement
provides that CIS will not be liable to the Trust except for bad faith or
negligence.
The Trust's assets will be deposited with CIS in its capacity as the
Trust's Futures Broker. CIS credits monthly to the Trust's account interest
on substantially all of the Trust's average daily balances on deposit at CIS,
as described under "Use of Proceeds -- Maintenance of Assets; Interest
Income." CIS receives and retains any increment of interest earned on the
assets of the Trust in excess of the amount credited to the Trust's account.
THE FOREIGN CURRENCY BROKER
CIS Financial Services, Inc. will act as the Trust's counterparty in the
Trust's spot and forward contracts trades. CISFS is a Delaware corporation
that is a wholly-owned subsidiary of CIS Holdings, Inc. Under most normal
circumstances, CISFS will contact at least two counterparties for a quote on
each of the Trust's currency and precious metals trades. CISFS will enter a
spot or forward contract with the selected counterparty and will enter into a
back-to-back spot or forward contract with the Trust at the same price CISFS
buys from (or sells to) the selected counterparty.
REDEMPTIONS; NET ASSET VALUE
REDEMPTIONS
THE TRUST IS INTENDED AS A MEDIUM- TO LONG-TERM, "BUY AND HOLD"
INVESTMENT. THE TRUST'S OBJECTIVES ARE TO ACHIEVE SUBSTANTIAL CAPITAL
APPRECIATION OVER TIME. THE TRUST IS NOT INTENDED TO ACHIEVE, NOR TO ATTEMPT
TO ACHIEVE, SIGNIFICANT APPRECIATION OVER THE SHORT TERM.
A Unitholder may cause the Trust to redeem any or all of such
Unitholder's Units at Net Asset Value as of the close of business on the last
business day of any calendar month. Redemption requests must be received by
CISI on or before the 20th of a month (or, if the 20th is not a business day,
the next business day) to effect redemption as of such month-end.
Redemption proceeds will generally be paid within ten calendar days
after redemption. However, in special circumstances, including, but not
limited to, default or delay in payments due to the Trust from banks or other
persons, the Trust may, in turn, delay payment to persons requesting
redemption of Units of the proportionate part of the redemption value of
their Units equal to the proportionate part of the Net Assets of the Trust
represented by the sums that are the subject of such default or delay. See
"Section 12. Redemptions" in Exhibit A -- Declaration and Agreement of Trust.
A Unit which is redeemed at or prior to the end of the eleventh full
month after its sale will be assessed a redemption charge of 3% of the Net
Asset Value per Unit as of the date of redemption. In the case of Units sold
during the Initial Offering Period, the date of sale for purposes of
determining whether redemption charges apply will be the date subscription
funds held in escrow are released to the Trust and the Trust begins trading,
not the date that investors subscribe for Units, have their subscriptions
accepted or have their customer securities accounts debited into escrow in
the amount of their subscriptions. During the Ongoing Offering Period,
Units are considered "sold" for purposes of determining whether redemption
charges apply as of the last day of the calendar month as of which such Units
are issued (not as orders for Units are submitted or accepted). The
redemption charge will be subtracted from the redemption price of the Unit
and paid to CIS. In the event that an investor acquires Units at more than
one time, such investor's Units will be treated on a "first-in, first-out"
basis for purposes of determining whether redemption charges apply.
Applicable state "Blue Sky" policies require that redemption charges not
be assessed on any Unitholder who redeems because the Trust's expenses have
increased.
The Managing Owner may declare additional redemption dates, including
Special Redemption Dates under certain circumstances. If as of the close of
business on any day the Net Asset Value of a Unit has decreased to less than
50% of the Net Asset Value per Unit as of the previous month-end or to $50 or
less, after adding back all distributions, the Managing Owner shall liquidate
all of the Trust's open positions, suspend trading and within ten business
days after
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the suspension of trading declare a Special Redemption Date by notice to
Unitholders and otherwise in accordance with the Declaration of Trust.
Unitholders may not transfer or assign Units without providing prior
written notice to the Managing Owner. No assignee may become a substitute
Unitholder except with the consent of the Managing Owner (which may be
withheld in the absolute discretion of the Managing Owner).
NOTICES OF REDEMPTION ARE IRREVOCABLE ONCE SUBMITTED. THE NET ASSET
VALUE PER UNIT AS OF THE DATE OF REDEMPTION MAY DIFFER SUBSTANTIALLY FROM THE
NET ASSET VALUE PER UNIT AS OF THE DATE THAT IRREVOCABLE NOTICE OF REDEMPTION
MUST BE SUBMITTED.
UNITHOLDERS NEED NOT REDEEM ALL THEIR UNITS IN ORDER TO REDEEM ANY SUCH
UNITS, PROVIDED THAT AT LEAST $1,000 OF UNITS ARE REDEEMED AND THAT THE
MINIMUM INVESTMENT OF $1,000 IS MAINTAINED AFTER ANY PARTIAL REDEMPTION.
NET ASSET VALUE
The Net Assets of the Trust are its assets less its liabilities
determined in accordance with generally accepted accounting principles. The
Net Asset Value per Unit is the Net Assets of the Trust divided by the number
of Units outstanding.
A futures or option contract traded on a United States commodity
exchange will be valued at the settlement price on the date of valuation. If
an open position cannot be liquidated on the day with respect to which Net
Assets are being determined, the settlement price on the first subsequent day
on which the position can be liquidated shall be the basis for determining
the liquidating value of such position for such day, or such other value as
the Managing Owner may deem fair and reasonable. The liquidating value of a
commodity futures or option contract not traded on a United States commodity
exchange shall mean its liquidating value as determined by the Managing Owner
on a basis consistently applied for each different variety of contract.
Accrued Incentive Fee liabilities reduce Net Asset Value (subject, however,
to possible whole or partial reversal if the Trust incurs subsequent losses)
even if such accrued Incentive Fees may never, in fact, be finally paid to
JWH.
Organizational and initial offering cost reimbursement will not reduce
Net Asset Value for any purpose, including calculating the redemption value
of Units; however, the amount of organizational and initial offering costs
amortized at each month-end during the amortization period will reduce Net
Asset Value as of each such month-end.
THE TRUST AND THE TRUSTEE
THE FOLLOWING SUMMARY DESCRIBES IN BRIEF CERTAIN ASPECTS OF THE
OPERATION OF THE TRUST AND THE TRUSTEE'S AND MANAGING OWNER'S RESPECTIVE
RESPONSIBILITIES CONCERNING THE TRUST. PROSPECTIVE INVESTORS SHOULD
CAREFULLY REVIEW THE DECLARATION AND AGREEMENT OF TRUST ATTACHED HERETO AS
EXHIBIT A AND CONSULT WITH THEIR OWN ADVISERS CONCERNING THE IMPLICATIONS TO
SUCH PROSPECTIVE SUBSCRIBERS OF INVESTING IN A DELAWARE BUSINESS TRUST. THE
SECTION REFERENCES BELOW ARE TO SECTIONS IN THE DECLARATION AND AGREEMENT OF
TRUST.
PRINCIPAL OFFICE; LOCATION OF RECORDS
The Trust is organized under the Delaware Business Trust Act. The Trust
is administered by the Managing Owner, whose office is located at 233 South
Wacker Drive, Suite 2300, Chicago, Illinois (telephone: (312) 460-4000). The
records of the Trust, including a list of the Unitholders and their addresses
but excluding detailed trading records of JWH, is located at the foregoing
address, and available for inspection and copying (upon payment of reasonable
reproduction costs) by Unitholders or their representatives during regular
business hours as provided in the Declaration and Agreement of Trust.
(Section 10). There is a limitation to non-commercial purposes. Transfer
agent services will be provided by CIS at 233 South Wacker Drive, Suite 2300,
Chicago, Illinois at no additional cost to the Trust. The Managing Owner
will maintain and preserve the books and records of the Trust for a period of
not less than six years.
CERTAIN ASPECTS OF THE TRUST
THE TRUST IS THE FUNCTIONAL EQUIVALENT OF A LIMITED PARTNERSHIP;
PROSPECTIVE INVESTORS SHOULD NOT ANTICIPATE ANY LEGAL OR PRACTICAL
PROTECTIONS UNDER THE DELAWARE BUSINESS TRUST ACT GREATER THAN THOSE
AVAILABLE TO LIMITED PARTNERS OF A LIMITED PARTNERSHIP.
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No special custody arrangements are applicable to the Trust which would
not be applicable to a limited partnership, and the existence of a trustee
should not be taken as an indication of any additional level of management or
supervision over the Trust. To the greatest extent permissible under Delaware
law, the Trustee acts in an entirely passive role, delegating all authority
over the operation of the Trust to the Managing Owner. The Managing Owner is
the functional equivalent of the general partner in a limited partnership.
(Sections 5(a), 9 and 19).
Although units of beneficial interest in a trust need not carry any
voting rights, the Declaration and Agreement of Trust gives Unitholders
voting rights comparable to those typically extended to limited partners in
publicly-offered futures funds. (Section 19).
The Delaware Business Trust Act under which the Trust is formed is filed
as an exhibit to the Registration Statement of which this Prospectus is a
part.
THE TRUSTEE
Wilmington Trust Company, a Delaware banking corporation, is the sole
Trustee of the Trust. The Trustee's principal offices are located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001. The
Trustee is unaffiliated with either the Managing Owner or the Selling Agents.
The Trustee's duties and liabilities with respect to the offering of the
Units and the administration of the Trust are limited to its express
obligations under the Declaration and Agreement of Trust.
The rights and duties of the Trustee, the Managing Owner and the
Unitholders are governed by the provisions of the Delaware Business Trust Act
and by the Declaration and Agreement of Trust.
The Trustee serves as the Trust's sole trustee in the State of Delaware.
The Trustee will accept service of legal process on the Trust in the State
of Delaware and will make certain filings under the Delaware Business Trust
Act. The Trustee does not owe any other duties to the Trust, the Managing
Owner or the Unitholders. The Trustee is permitted to resign upon at least
60 days' notice to the Trust, provided that any such resignation will not be
effective until a successor Trustee is appointed by the Managing Owner. The
Declaration and Agreement of Trust provides that the Trustee is compensated
by the Trust, and is indemnified by the Managing Owner against any expenses
it incurs relating to or arising out of the formation, operation or
termination of the Trust or the performance of its duties pursuant to the
Declaration and Agreement of Trust, except to the extent that such expenses
result from the gross negligence or willful misconduct of the Trustee. The
Managing Owner has the discretion to replace the Trustee.
Only the Managing Owner has signed the Registration Statement of which
this Prospectus is a part, and only the assets of the Trust and the Managing
Owner are subject to issuer liability under the federal securities laws for
the information contained in this Prospectus and under federal and state laws
with respect to the issuance and sale of the Units. Under such laws, neither
the Trustee, either in its capacity as Trustee or in its individual capacity,
nor any director, officer or controlling person of the Trustee is, or has any
liability as, the issuer or a director, officer or controlling person of the
issuer of the Units. The Trustee's liability in connection with the issuance
and sale of the Units is limited solely to the express obligations of the
Trustee set forth in the Declaration and Agreement of Trust.
Under the Declaration and Agreement of Trust, the Trustee has delegated
to the Managing Owner the exclusive management and control of all aspects of
the business of the Trust. The Trustee has no duty or liability to supervise
or monitor the performance of the Managing Owner, nor shall the Trustee have
any liability for the acts or omissions of the Managing Owner. In addition,
the Managing Owner has been designated as the "tax matters partner" of the
Trust for purposes of the Internal Revenue Code of 1986, as amended (the
"Code"). The Unitholders have no voice in the operations of the Trust, other
than certain limited voting rights as set forth in the Declaration and
Agreement of Trust. In the course of its management, the Managing Owner may,
in its sole and absolute discretion, retain such persons (except where the
Managing Owner has been notified by the Unitholders that the Managing Owner
is to be replaced as the managing owner), including an affiliate or
affiliates of the Managing Owner, as the Managing Owner deems necessary for
the efficient operation of the Trust. (Sections 2 and 9).
Because the Trustee has delegated substantially all of its authority
over the operation of the Trust to the Managing Owner, the Trustee itself is
not registered in any capacity with the CFTC.
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MANAGEMENT OF TRUST AFFAIRS; VOTING BY UNITHOLDERS
The Unitholders take no part in the management or control, and have no
voice in the operations of the Trust or its business. (Section 9(a)).
Unitholders may, however, remove and replace the Managing Owner as the
managing owner of the Trust, and may amend the Declaration and Agreement of
Trust, except in certain limited respects, by the affirmative vote of a
majority of the outstanding Units then owned by Unitholders (as opposed to by
the Managing Owner and its affiliates). The owners of a majority of the
outstanding Units then owned by Unitholders may also compel dissolution of
the Trust. (Section 19(b)). The owners of 10% of the outstanding Units then
owned by Unitholders have the right to bring a matter before a vote of the
Unitholders. (Section 19(c)). The Managing Owner has no power under the
Declaration and Agreement of Trust to restrict any of the Unitholders' voting
rights. (Section 19(c)). Any Units purchased by the Managing Owner or its
affiliates, as well as the Managing Owner's general liability interest in the
Trust are non-voting. (Section 7).
The Managing Owner has the right unilaterally to amend the Declaration
and Agreement of Trust provided that any such amendment is for the benefit of
and not adverse to the Unitholders or the Trustee and also in certain unusual
circumstances -- for example, if doing so is necessary to effect the intent
of the Trust's tax allocations or to comply with certain regulatory
requirements. (Section 19(a)).
In the event that the Managing Owner or the Unitholders vote to amend
the Declaration and Agreement of Trust in any material respect, the amendment
will not become effective prior to all Unitholders having an opportunity to
redeem their Units. (Section 19(c)).
RECOGNITION OF THE TRUST IN CERTAIN STATES
A number of states do not have "business trust" statutes such as that
under which the Trust has been formed in the State of Delaware. It is
possible, although unlikely, that a court in such a state could hold that,
due to the absence of any statutory provision to the contrary in such
jurisdiction, the Unitholders, although entitled under Delaware law to the
same limitation on personal liability as stockholders in a private
corporation for profit organized under the laws of the State of Delaware, are
not so entitled in such state. In order to protect Unitholders against any
loss of limited liability, the Declaration and Agreement of Trust provides
that no written obligation may be undertaken by the Trust unless such
obligation is explicitly limited so as not to be enforceable against any
Unitholder personally. Furthermore, the Trust itself indemnifies all
Unitholders against any liability which such Unitholders might incur in
addition to that of a limited partner. The Managing Owner is generally
liable for all obligations of the Trust and would use its assets to satisfy
any such liability before such liability would be enforced against any
Unitholder individually.
POSSIBLE REPAYMENT OF DISTRIBUTIONS RECEIVED BY UNITHOLDERS; INDEMNIFICATION
OF THE TRUST BY UNITHOLDERS
The Units are limited liability investments; investors may not lose more
than the amount which they invest plus any profits recognized on their
investment. (Section 8(d)). However, Unitholders could be required, as a
matter of bankruptcy law, to return to the Trust's estate any distribution
which they received at a time when the Trust was in fact insolvent or in
violation of the Declaration and Agreement of Trust. In addition, although
the Managing Owner is not aware of this provision ever having been invoked in
the case of any public futures fund, Unitholders agree in the Declaration and
Agreement of Trust that they will indemnify the Trust for any harm suffered
by it as a result of (i) Unitholders' actions unrelated to the business of
the Trust or (ii) transfers of their Units in violation of the Declaration
and Agreement of Trust. (Section 18(c)).
TRANSFERS OF UNITS RESTRICTED
A Unitholder may, subject to compliance with applicable federal and
state securities laws, assign his or her Units upon notice to the Trust and
the Managing Owner. No assignment will be effective in respect of the Trust
or the Managing Owner until the first day of the month succeeding the month
in which such notice is received. No assignee may become a substituted
Unitholder except with the consent of the Managing Owner (which consent may
be withheld in the absolute discretion of the Managing Owner) and upon
execution and delivery of an instrument of transfer in form and substance
satisfactory to the Managing Owner. (Section 11).
There will be no certificates for the Units. (Section 7(a)). Any
transfers of Units are reflected on the books and records of the Trust.
Transferors and transferees of Units will each receive notification from the
Managing Owner to the effect that such transfers have been duly reflected as
notified to the Managing Owner. (Section 11).
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REPORTS TO UNITHOLDERS
Each month the Managing Owner will report such information as the CFTC
may require to be given to the participants in "commodity pools" such as the
Trust and any such other information as the Managing Owner may deem
appropriate. There are similarly distributed to Unitholders, not later than
March 15 of each year, certified financial statements and the tax information
related to the Trust necessary for the preparation of their annual federal
income tax returns. (Section 10).
The Managing Owner will notify Unitholders within seven business days of
any decline in the Net Asset Value per Unit to less than 50% of such Net
Asset Value as of the previous month-end valuation date. In addition, the
Managing Owner will notify Unitholders of any change in the fees paid by the
Trust or of any material changes in the basic investment policies or
structure of the Trust. Any such notifications shall include a description
of Unitholders' voting rights. The cost of any such notifications to
Unitholders will be paid by the Trust. (Section 10).
GENERAL
In compliance with the Blue Sky Guidelines of the NASAA, the Declaration
and Agreement of Trust provides that: (i) the executing and clearing
commissions paid by the Trust shall be competitive (Section 9(d)), and the
Managing Owner shall include in the annual reports containing the Trust's
certified financial statements distributed to Unitholders each year the
approximate round-turn equivalent rate paid on the Trust's trades during the
preceding year (Section 10); (ii) no rebates or give-ups, among other things,
may be received from the Trust by any of the Selling Agents, and such
restriction may not be circumvented by any reciprocal business arrangements
among any Selling Agents or any of their respective affiliates and the Trust
(Section 9(d)); (iii) no trading advisor of the Trust may participate
directly or indirectly in any per-trade commodity brokerage commissions
generated by the Trust (Section 9(d)); (iv) any agreements between the Trust
and the Managing Owner or any of its affiliates must be terminable by the
Trust upon no more than 60 days' written notice (Section 9(e)); (v) the Trust
may make no loans, and the funds of the Trust will not be commingled with the
funds of any other person (deposit of Trust assets with a commodity broker,
clearinghouse or currency dealer does not constitute commingling for these
purposes) (Section 9(b)); and (vi) the Trust will not employ the trading
technique commonly known as "pyramiding." (Section 9(f)).
CONFLICTS OF INTEREST
GENERAL
THE MANAGING OWNER HAS NOT ESTABLISHED ANY FORMAL PROCEDURES TO RESOLVE
THE CONFLICTS OF INTEREST DESCRIBED BELOW. PROSPECTIVE INVESTORS SHOULD BE
AWARE THAT NO SUCH PROCEDURES HAVE BEEN ESTABLISHED, AND THAT, CONSEQUENTLY,
INVESTORS WILL BE DEPENDENT ON THE GOOD FAITH OF THE RESPECTIVE PARTIES
SUBJECT TO SUCH CONFLICTS TO RESOLVE SUCH CONFLICTS EQUITABLY. ALTHOUGH THE
MANAGING OWNER WILL ATTEMPT TO MONITOR AND RESOLVE THESE CONFLICTS IN GOOD
FAITH, IT WILL BE EXTREMELY DIFFICULT, IF NOT IMPOSSIBLE, FOR THE MANAGING
OWNER TO ENSURE THAT THESE CONFLICTS WILL NOT, IN FACT, RESULT IN ADVERSE
CONSEQUENCES TO THE TRUST.
PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THE MANAGING OWNER INTENDS TO
ASSERT THAT UNITHOLDERS HAVE, BY SUBSCRIBING TO THE TRUST, CONSENTED TO THE
FOLLOWING CONFLICTS OF INTEREST IN THE EVENT OF ANY PROCEEDING ALLEGING THAT
SUCH CONFLICTS VIOLATED ANY DUTY OWED BY THE MANAGING OWNER TO INVESTORS.
RELATIONSHIP OF THE MANAGING OWNER, THE FUTURES BROKER AND THE FOREIGN
CURRENCY BROKER
The Managing Owner is an affiliate of both the Futures Broker and the
Foreign Currency Broker of the Trust. The Managing Owner will, directly or
indirectly, benefit financially from the fact that CIS and CISFS will receive
compensation from the Trust on an ongoing basis in the form of Brokerage
Fees. The affiliation between the Managing Owner and the Futures Broker and
the Foreign Currency Broker creates a conflict of interest between the
Managing Owner's duty to perform certain services for the Unitholders in
their best interests and the Managing Owner's interest in its affiliates
continuing to receive ongoing compensation which is dependent on continued
participation in the Trust by such Unitholders. The Managing Owner does not
intend to negotiate with any other brokerage firms for brokerage services for
the Trust so long as the brokerage agreements with CIS and CISFS are in
effect.
The responsibilities of the Managing Owner include selecting brokers to
act on behalf of the Trust and obtaining appropriate commission rates for the
Trust. CIS and CISFS act as the futures broker and foreign currency and cash
bullion broker, respectively, for the Trust. In such capacities, they
receive brokerage fees for commodity and foreign currency and cash bullion
transactions effected by the Trust. CISI has a conflict of interest between
its duty to select
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futures and foreign currency and cash bullion brokers for the Trust in the
best interests of the Trust and Unitholders and its disinclination to replace
CIS and CISFS as the Trust's futures broker and foreign currency and cash
bullion broker.
CIS may charge other customers, including other commodity accounts,
brokerage commissions at rates which are higher or lower than those to be
paid by the Trust. Taking into consideration the services to be provided to
the Trust by CIS and CISFS, the Managing Owner believes that the brokerage
fee arrangements are fair to the Trust. Accordingly, the Managing Owner does
not intend to seek lower commission rates for the Trust. The Managing Owner
will seek to assure that the Trust's brokerage charges are within the range
of those generally charged to public commodity funds of comparable size and
structure in view of the nature and quality of the brokerage services to be
rendered.
CIS may receive more brokerage fee revenue from the Trust if no
distributions are made to the Unitholders since such fees are based on the
Trust's assets. All decisions as to distributions will be made by the
Managing Owner; the Managing Owner has no current intentions to declare
distributions to Unitholders. The Managing Owner may, therefore, have a
conflict of interest between its obligation to make decisions about
distributions in the best interests of the Trust and its Unitholders and its
interest in maximizing the assets of the Trust which are available for the
generation of Brokerage Fee payable to its affiliate.
The Trust receives interest on substantially all of its average daily
assets on deposit at CIS each month at a rate of interest equal to the
average 91-day Treasury bill rate for that month in respect of deposits
denominated in dollars and at the applicable rates in respect of deposits
denominated in currencies other than dollars (which may be zero in certain
cases) as described in "Use of Proceeds -- Maintenance of Assets; Interest
Income." CIS and CISFS receive and retain any interest earned on the assets
of the Trust in excess of the amount paid to the Trust. Since CIS and CISFS
are affiliated with CISI, CISI's conflict of interest (described immediately
above) between making decisions related to distributions in the best
interests of the Trust and its Unitholders extends to its interest in
maintaining the Trust's assets at higher levels and minimizing the amounts of
distributions in order also to maximize the amount of interest income
generated by assets of the Trust and payable to CIS and CISFS.
In addition, since the Trust does not pay Brokerage Fees on a per trade
basis, CISI may have a conflict between its obligation to choose the best
trading advisor for the Trust and its interest in selecting a trading advisor
with low trading "velocity" thereby enabling CIS to realize cost savings.
OTHER COMMODITY POOLS AND ACCOUNTS
CIS currently acts as commodity broker for commodity pools other than
the Trust, including one private and two other public commodity pools of
which CISI is a co-general partner. The Managing Owner may in the future
establish and operate additional commodity pools, either jointly or
individually, which may vary in structure and in compensation arrangements
from the Trust. CISFS trades spot and forward contracts on currencies and
precious metals for accounts other than the Trust's. CIS, CISFS and the
Managing Owner will not knowingly or deliberately favor any such commodity
pool or account over the Trust with respect to the execution of commodity
trades or spot and forward trades. In addition, JWH and its affiliates
operate commodity pools and will manage accounts other than the Trust's,
including commodity pools and proprietary accounts. (However, employees and
principals of JWH, other than Mr. John W. Henry, are not permitted to trade
on a discretionary basis in futures, options on futures or forward contracts.
See "John W. Henry & Company, Inc. -- Legal and Ethical Concerns.") JWH has
represented to the Trust that it will treat the Trust equitably and will not
knowingly or deliberately favor on an overall basis any other client over the
Trust with respect to advice relating to commodity interest transactions.
COMMODITY TRANSACTIONS OF AFFILIATES AND CUSTOMERS OF THE FUTURES BROKER
Corporate affiliates of CIS, including Cargill, Incorporated, the parent
company of CIS, and their affiliates, trade in commodity interests from time
to time for their own accounts. In addition, CIS is a substantial futures
commission merchant handling transactions in commodities and commodity
futures contracts for a large number of customers, including commodity pools,
other than the Trust. CIS may effect transactions for the accounts of the
Trust in which other parties to the transaction may be affiliates, or other
commodity pools operated by affiliates, of CIS. In addition, it is likely
that the volume of trading by such other parties will result in the Trust
competing with such other parties from time to time in bidding on similar
purchases or sales of commodities and commodity futures contracts.
Transactions for such other parties might be effected when similar trades for
the Trust are not executed or are executed at less favorable prices. The
operating policies of CIS require that orders be transmitted to the trading
floor of the commodity exchanges in the sequence received, regardless of
customer size or identity. Unitholders will not be permitted to inspect the
trading records of CIS in light of the proprietary and confidential nature of
such trading records.
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OTHER ACTIVITIES OF CIS, THE MANAGING OWNER, JWH AND THEIR OFFICERS AND
EMPLOYEES
CIS makes, on a daily basis, both fundamental and technical information
available to its account executives and certain customers. However, CIS, its
employees and its affiliates will perform no advisory services for the Trust.
Since the Trust will be advised by JWH, which is not affiliated with CIS,
the Trust may take positions similar to or opposite to the commodity research
recommendations of CIS. Certain of the officers and employees of CIS may be
members of various exchanges and may from time to time serve on the governing
bodies and standing committees of such exchanges and their clearing houses.
In addition, certain of the officers and employees of JWH, CIS and the
Managing Owner may also be members of the committees of NFA. In such
capacities these individuals have a fiduciary duty to the exchanges or
organizations in which they serve and they are required to act in the best
interests of such exchanges or organizations, even if such actions were to be
adverse to the interest of the Trust. In addition, principals of such firms
may devote portions of their time to other business activities unrelated to
the business of those firms.
THE SELLING AGENTS
The Selling Agents may receive substantial selling commissions on the
sale of Units. Consequently, the Selling Agents have a conflict of interest
in advising the clients whether to invest in the Units.
The Selling Agents may receive, beginning in the thirteenth month after
each month-end sale of Units, ongoing compensation based on the Net Asset
Value of Units sold by them which remain outstanding. Consequently, in
advising clients whether to redeem their Units the Selling Agents will have a
conflict of interest between their interest in maximizing the compensation
which they will receive from the Trust and giving their clients the financial
advice which the Selling Agents believe to be in such clients' best
interests. The same conflict of interest extends to the Wholesalers and
correspondents who distribute Units.
INDEMNIFICATION AND STANDARD OF LIABILITY
The Managing Owner and certain of its affiliates, officers, directors
and controlling persons may not be liable to the Trust or any Unitholder for
errors in judgment or other acts or omissions not amounting to misconduct or
negligence, as a consequence of the indemnification and exculpatory
provisions described in the following paragraph. Purchasers of Units may
have more limited rights of action than they would absent such provisions.
The Managing Owner and its affiliates shall not have any liability to
the Trust or to any Unitholder for any loss suffered by the Trust which
arises out of any action or inaction of the Managing Owner or any such
affiliate if the Managing Owner or its affiliates, in good faith, determined
that such course of conduct was in the best interests of the Trust, and such
course of conduct did not constitute negligence or misconduct. The Trust has
agreed to indemnify the Managing Owner and its affiliates, officers,
directors and controlling persons against claims, losses or liabilities based
on their conduct relating to the Trust, provided that the conduct resulting
in the claims, losses or liabilities for which indemnity is sought did not
constitute negligence, misconduct or breach of any fiduciary obligation to
the Trust and was done in good faith and in a manner the Managing Owner, in
good faith, determined to be in the best interests of the Trust. Affiliates
of the Managing Owner are entitled to indemnity only for losses resulting
from claims against such affiliates due solely to their relationship with the
Managing Owner or for losses incurred by such affiliates in performing the
duties of the Managing Owner.
The Managing Owner, not the Trust, has agreed to indemnify the Selling
Agents, Wholesalers and correspondents against claims, losses or liabilities
arising out of the Managing Owner's breach of any representation or warranty
contained in the Selling Agreement, or out of any untrue statement of
material fact or omission to state a material fact in this Prospectus or any
related promotional material.
The Declaration and Agreement of Trust provides that the Managing Owner,
its affiliates, the Selling Agents, Wholesalers and correspondents shall not
be indemnified for any losses, liabilities or expenses arising from or out of
an alleged violation of federal or state securities laws unless (1) there has
been a successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee and the court
approves indemnification of the litigation costs, or (2) such claims have
been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee and the court approves
indemnification of the litigation costs, or (3) a court of competent
jurisdiction approves a settlement of the claims against a particular
indemnitee and finds that indemnification of the settlement and related costs
should be made.
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The Declaration and Agreement of Trust also provides that in any claim
for indemnification for federal or state securities law violations, the party
seeking indemnification is required to place before the court the position of
the SEC and various state regulatory authorities that indemnification for
securities law violations is void as against public policy.
THE MANAGING OWNER MAY, DUE TO THE EXCULPATORY AND INDEMNITY PROVISIONS
OF THE DECLARATION AND AGREEMENT OF TRUST, HAVE MORE FLEXIBILITY THAN THE
MANAGING OWNER OTHERWISE WOULD TO RESOLVE THE FOREGOING CONFLICTS OF INTEREST
IN A MANNER MORE FAVORABLE TO THE MANAGING OWNER THAN TO THE TRUST.
FEDERAL INCOME TAX ASPECTS
IN THE OPINION OF SIDLEY & AUSTIN, THE FOLLOWING SUMMARY CORRECTLY
DESCRIBES THE MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES, AS OF
THE DATE HEREOF, TO A UNITED STATES INDIVIDUAL TAXPAYER WHO INVESTS IN THE
TRUST. THE OPINION OF SIDLEY & AUSTIN IS BASED, IN CERTAIN CASES, ON THE
DESCRIPTION OF THE PROPOSED OPERATION OF THE TRUST CONTAINED IN THIS
PROSPECTUS AND, IN CERTAIN CASES, IS SUBJECT TO THE UNCERTAINTIES DESCRIBED
BELOW.
THE TRUST'S TAX STATUS
In the opinion of Sidley & Austin, the Trust will be classified as a
partnership for federal income tax purposes assuming that, when the Units are
sold to the public, the Managing Owner maintains a capitalization no less
than that indicated in the audited financial statements included herein and
that the Managing Owner makes capital contributions to the Trust in at least
the amounts contemplated by this Prospectus -- which the Managing Owner
intends to do. Consequently, the Unitholders individually, not the Trust
itself, are subject to tax.
The Managing Owner believes that all of the income expected to be
generated by the Trust will constitute "qualifying income" and has so advised
Sidley & Austin. As a result, in the opinion of Sidley & Austin, the Trust
will not be subject to tax as a corporation under the provisions applicable
to "publicly-traded partnerships."
If the Trust were not treated as a partnership or if the Trust were
subject to tax as a "publicly-traded partnership," the Trust as an entity
would be subject to tax at the same tax rates applicable to corporations,
distributions to Unitholders would be taxable to them as dividends to the
extent of the current and accumulated earnings and profits of the Trust, and
Unitholders would not be entitled to report their share of any deductions or
loss of the Trust on their federal income tax returns.
The remainder of this summary assumes that the Trust will be treated as
a partnership and not as a "publicly-traded partnership."
TAXATION OF UNITHOLDERS ON PROFITS AND LOSSES OF THE TRUST
The Trust, as an entity, is not subject to federal income tax in the
opinion of Sidley & Austin as described above. Consequently, with the
exception of Unitholders who are not citizens or residents of the United
States, each Unitholder is required for federal income tax purposes to take
into account, in his or her taxable year with which or within which a taxable
year of the Trust ends, his or her allocable share of all items of the
Trust's income, gain (including unrealized gain from open futures and forward
contracts and options "marked-to-market"), loss, deduction and other items
for such taxable year of the Trust. A Unitholder must take such items into
account even if the Trust does not make any distributions of cash or other
property to such Unitholder.
A Unitholder's share of such items for federal income tax purposes
generally is determined by the allocations made pursuant to the Declaration
and Agreement of Trust unless such items so allocated do not have
"substantial economic effect" or are not in accordance with the Unitholders'
interests in the Trust. Under the Declaration and Agreement of Trust,
allocations are generally made in proportion to Unitholders' capital accounts
(each Unit sharing equally in the Net Assets of the Trust), and therefore
such allocations should have substantial economic effect. However, in cases
in which a Unitholder redeems part or all of his or her interest in the
Trust, the allocations of capital gain or loss specified in the Declaration
and Agreement of Trust are not in proportion to capital accounts. Because
such allocations are consistent with the economic effect of the Declaration
and Agreement of Trust that bases the amount to be paid to a redeeming
Unitholder upon his or her share of the realized and unrealized gains and
losses at the time his or her Units are redeemed, the Managing Owner intends
to file the Trust's tax return based upon the allocations specified in the
Declaration and Agreement of Trust. In the opinion of Sidley & Austin, the
foregoing allocations should be upheld if audited. Nevertheless, it is not
certain that the IRS would agree that such allocations have substantial
economic effect or are determined in accordance with the Unitholders'
interests in the Trust. If such tax allocations were challenged and not
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sustained, some or all of a redeeming Unitholder's capital gain or loss could
be converted from short-term to long-term and each remaining Unitholder's
share of the capital gain or loss that is the subject of such allocations
would be increased (solely for tax purposes).
LIMITATIONS ON DEDUCTIBILITY OF TRUST LOSSES BY UNITHOLDERS
The amount of any loss (including capital loss) incurred by the Trust
that a Unitholder is entitled to include in his or her personal income tax
return is limited to his or her tax basis for his or her interest in the
Trust as of the end of the Trust's taxable year in which such loss occurred.
Generally, a Unitholder's tax basis for his or her interest in the Trust is
the amount paid for such interest reduced (but not below zero) by his or her
share of any distributions by the Trust, losses realized and expenses and
increased by his or her share of the Trust's realized income, including gains.
Similarly, a Unitholder that is subject to the "at risk" limitations
(generally, non-corporate taxpayers and closely-held corporations) may not
deduct losses of the Trust (including capital losses) to the extent that they
exceed the amount he or she has "at risk" with respect to his or her interest
in the Trust at the end of the year. The amount that a Unitholder has at
risk will generally be the same as his or her adjusted basis as described
above, except that it will not include any amount that he or she has borrowed
on a nonrecourse basis or from a person who has an interest in the Trust or a
person related to such person.
Losses denied under the basis or at risk limitations are suspended and
may be deducted in subsequent years, subject to these and other applicable
limitations.
Because of the limitations imposed upon the deductibility of capital
losses (see "-- Tax on Capital Gains and Losses" below), a Unitholder's
distributive share of any capital losses of the Trust will not materially
reduce the federal income tax payable on his or her ordinary income
(including his or her allocable share of the Trust's interest income).
TREATMENT OF INCOME AND LOSS UNDER THE "PASSIVE ACTIVITY LOSS RULES"
The Code contains rules (the "Passive Activity Loss Rules") designed to
prevent the deduction of losses from "passive activities" against income not
derived from such activities, including income from investment activities not
constituting a trade or business, such as interest and dividends ("Portfolio
Income"), and salary. The trading activities of the Trust will not
constitute a "passive activity," with the result that income derived from
such activities will constitute Portfolio Income or other income not from a
passive activity. Thus, losses resulting from a Unitholder's "passive
activities" cannot be offset against such income, and net losses from the
Trust's operations will be deductible in computing the taxable income of such
Unitholder (subject to other limitations on the deductibility of such losses,
in particular the annual limitation applicable to non-corporate investors
that no more than $3,000 of capital losses can be deducted against ordinary
income).
CASH DISTRIBUTIONS AND REDEMPTIONS OF UNITS
Cash received from the Trust by a Unitholder as a distribution with
respect to his or her Units (including distributions of any Brokerage Fee
Excess) or in redemption of less than all of his or her Units generally is
not reportable as taxable income by such Unitholder, except as described
below. Rather, such distribution or redemption reduces (but not below zero)
the total tax basis of all of the Units held by the Unitholder after the
distribution or redemption. Any cash distribution in excess of a
Unitholder's adjusted tax basis for all of his or her Units is taxable to him
or her as gain from the sale or exchange of such Units and, assuming that the
Unitholder has held his or her Units for more than one year, will be
long-term capital gain.
Redemption for cash of the entire interest held by a Unitholder will
result in the recognition of gain or loss for federal income tax purposes.
Such gain or loss will be equal to the difference, if any, between the amount
of the cash distribution and the Unitholder's adjusted tax basis for his or
her Units. Assuming that the Unitholder has held his or her Units for more
than one year, any gain or loss on their redemption will be long-term capital
gain or loss.
GAIN OR LOSS ON SECTION 1256 CONTRACTS
Under the "mark-to-market" system of taxing futures and futures options
contracts traded on United States exchanges and certain foreign currency
forward contracts ("Section 1256 Contracts"), any unrealized profit or loss
on positions in such Section 1256 Contracts which are open as of the end of a
taxpayer's fiscal year is treated as if such profit or loss had been realized
for tax purposes as of such time. If an open position on which profit or
loss has been realized as of the end of a fiscal year declines in value after
such year-end and before the position is in fact offset, a loss is
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recognized for tax purposes at the end of the fiscal year in which the value
declines (irrespective of the fact that the taxpayer may actually have
realized a gain on the position considered from the time that such position
was initiated). The converse is the case with an open position on which a
"mark-to-market" loss was recognized for tax purposes as of the end of a
fiscal year but which subsequently increases in value prior to being offset.
In general, 60% of the net gain or loss which is generated as a result of the
"mark-to-market" system is treated as long-term capital gain or loss, and the
remaining 40% of such net gain or loss is treated as short-term capital gain
or loss.
GAIN OR LOSS ON NON-SECTION 1256 CONTRACTS
Except as described below with respect to Section 988 transactions
entered into by a qualified fund, gain or loss with respect to contracts that
are non-Section 1256 Contracts will generally be taken into account for tax
purposes only when realized.
TAXATION OF FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions ("Section 988 transactions") include
entering into or acquiring any forward contract, futures contract or similar
instrument if the amount paid or received is denominated in terms of a
nonfunctional currency or determined by reference to the value of one or more
nonfunctional currencies. In general, foreign currency gain or loss on
Section 988 transactions is characterized as ordinary income or loss except
that gain or loss on regulated futures contracts or non-equity options on
foreign currencies which are Section 1256 Contracts is characterized as
capital gain or loss. If the Trust is eligible, the Trust will make a
qualified fund election. Pursuant to such qualified fund election, gain or
loss with respect to certain Section 988 transactions, other than those
described in Section 1256 which would be taxed as described above under
"-- Gain or Loss on Section 1256 Contracts," would be short-term capital gain
or loss. In addition, all such transactions would be subject to the
"mark-to-market" rules (see "-- Gain or Loss on Section 1256 Contracts,"
above). If the Trust so elects but fails to meet the requirements of
electing qualified fund status in a taxable year, (i) net loss recognized by
the Trust in such taxable year with respect to certain forward contracts,
futures contracts and options with respect to foreign currency trades by the
Trust will be characterized as a capital loss, and (ii) net gain recognized
by the Trust in such taxable year with respect to certain contracts will be
characterized as ordinary income.
TAX ON CAPITAL GAINS AND LOSSES
Net capital gains (I.E., the excess of net long-term capital gain over
net short-term capital loss) will be taxed for non-corporate taxpayers at a
maximum rate of 28% and for corporate taxpayers at the same rates as other
income. See "-- Limitation on Deductibility of Interest on Investment
Indebtedness" below (for a discussion of the reduction in the amount of a
non-corporate taxpayer's net capital gain for a taxable year to the extent
such gain is taken into account by such taxpayer as investment income).
Capital losses are deductible by non-corporate taxpayers only to the extent
of capital gains for the taxable year plus $3,000. See "Risk Factor (28) --
Taxation of Interest Income Irrespective of Trading Losses."
If a non-corporate taxpayer incurs a net capital loss for a year, the
portion thereof, if any, which consists of a net loss on Section 1256
Contracts may, at the election of the taxpayer, be carried back three years.
Losses so carried back may be deducted only against net capital gain for such
year to the extent that such gain includes gains on Section 1256 Contracts.
Losses so carried back will be deemed to consist of 60% long-term capital
loss and 40% short-term capital loss (see "-- Gain or Loss on Section 1256
Contracts" above). To the extent that such losses are not used to offset
gains on Section 1256 Contracts in a carryback year, they will carry forward
indefinitely as losses on Section 1256 Contracts in future years.
LIMITED DEDUCTION FOR CERTAIN EXPENSES
The Code provides that, for non-corporate taxpayers who itemize
deductions when computing taxable income, expenses of producing income,
including "investment advisory fees," are aggregated with unreimbursed
employee business expenses, other expenses of producing income and certain
other deductions (collectively, "Aggregate Investment Expenses"), and that
the aggregate amount of such expenses is deductible only to the extent that
such amount exceeds 2% of a non-corporate taxpayer's adjusted gross income
(the "2% Floor"). In addition, Aggregate Investment Expenses in excess of
the 2% Floor, when combined with certain of a taxpayer's other miscellaneous
deductions, are subject to a reduction equal to, generally, 3% of the
taxpayer's adjusted gross income in excess of a certain threshold amount (the
"3% Phase Out"). Moreover, such Aggregate Investment Expenses are
miscellaneous itemized deductions which are not deductible by a non-corporate
taxpayer in calculating its alternative minimum tax.
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The Managing Owner intends to treat the ordinary expenses of the Trust
as ordinary business deductions not subject to the 2% Floor or the 3% Phase
Out. It is the standard practice in the managed futures industry to treat
such charges as not being subject to the 2% Floor or the 3% Phase Out, and
the Managing Owner will not treat any of such charges as being subject to
such Floor or Phase Out.
Based on the trading activities of the Trust, in the opinion of Sidley &
Austin, the Trust should be treated as engaged in the conduct of a trade or
business for federal income tax purposes, and, as a result, the ordinary and
necessary business expenses incurred by the Trust in conducting its commodity
futures trading business should not be subject to the 2% Floor or the 3%
Phase-Out.
Investors should be aware that an opinion of counsel is not binding on
the IRS or on any court and it is possible that the IRS could contend, or
that a court could decide, that the contemplated trading activities of the
Trust do not constitute a trade or business for federal income tax purposes.
To the extent the characterization of certain of the Trust's expenses as
"investment advisory fees" were to be sustained, each non-corporate
Unitholder's PRO RATA share of the amounts so characterized would be
deductible only to the extent that such non-corporate Unitholder's Aggregate
Investment Expenses exceeded the 2% Floor and, when combined with certain
other itemized deductions, exceeded the 3% Phase-Out. In addition, each
non-corporate Unitholder's distributive share of the Trust's income would be
increased (solely for tax purposes) by such Unitholder's PRO RATA share of
the amounts so recharacterized. Any such recharacterization could require
Unitholders to pay additional taxes, interest and penalties. (See "-- IRS
Audits of the Trust and Its Unitholders.")
INTEREST INCOME
Interest received by the Trust, as well as on subscriptions while held
in escrow, will be taxed as ordinary income.
The trading by the Trust is expected to generate almost exclusively
capital gain or loss. Capital losses can be deducted against ordinary
income, in the case of non-corporate taxpayers, only to the extent of $3,000
per year. Accordingly, the Trust could incur significant capital losses but
an investor, nevertheless, could be required to pay substantial taxes in
respect of such investor's allocable share of the Trust's interest income and
other ordinary income. See "Risk Factor (28) -- Taxation of Interest Income
Irrespective of Trading Losses."
SYNDICATION EXPENSES
Neither the Trust nor any Unitholder will be entitled to any deduction
for syndication expenses, nor can these expenses be amortized by the Trust or
any Unitholder, even though the payment of such expenses will reduce Net
Asset Value.
All of the initial offering costs for which CISI is being reimbursed by
the Trust and the redemption charge of 3% of the Net Asset Value per Unit
assessed on Units redeemed at or prior to the end of the eleventh full month
after issuance constitute non-deductible, non-amortizable, syndication
expenses. The Trust will elect to amortize its organizational costs for tax
purposes over a 60-month period. The amount of such costs which are
permitted to be amortized for tax purposes is expected to be de minimis.
The IRS could take the position that a portion of the Brokerage Fee paid
to CIS constitutes non-deductible syndication expenses.
LIMITATION ON DEDUCTIBILITY OF INTEREST ON INVESTMENT INDEBTEDNESS
Interest paid or accrued on indebtedness properly allocable to property
held for investment constitutes "investment interest." Interest expense
incurred by a Unitholder to acquire or carry his or her Units (as well as
other investments) will constitute "investment interest." Such interest is
generally deductible by non-corporate taxpayers only to the extent that it
does not exceed net investment income (that is, generally, the excess of (i)
gross income from interest, dividends, rents and royalties, which would
include a Unitholder's share of the Trust's interest income, and (ii) certain
gains from the disposition of investment property, over the expenses directly
connected with the production of such investment income). Any investment
interest expense disallowed as a deduction in a taxable year solely by reason
of the above limitation is treated as investment interest paid or accrued in
the succeeding taxable year. A non-corporate taxpayer's net capital gain
from the disposition of investment property is included in clause (ii) of the
second preceding sentence only to the extent such taxpayer elects to make a
corresponding reduction in the amount of net capital gain that is subject to
tax at the maximum 28% rate described above. (See "--Tax on Capital Gains
and Losses" above.)
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TAXATION OF FOREIGN INVESTORS
A Unitholder who is a non-resident alien individual, foreign
corporation, foreign partnership, foreign trust or foreign estate (a "Foreign
Unitholder") generally is not subject to taxation by the United States on
capital gains from commodity trading, provided that such Foreign Unitholder
(in the case of an individual) does not spend more than 182 days in the
United States during his or her taxable year, and provided further, that such
Foreign Unitholder is not engaged in a trade or business within the United
States during a taxable year to which income, gain, or loss is treated as
"effectively connected." An investment in the Trust should not, by itself,
cause a Foreign Unitholder to be engaged in a trade or business within the
United States for the foregoing purposes, assuming that the trading
activities of the Trust will be conducted as described in this Prospectus.
Pursuant to a "safe harbor" in the Code, an investment fund which trades
commodities for its own account should not be treated as engaged in a trade
or business within the United States provided that such investment fund is
not a dealer in commodities and that the commodities traded are of a kind
customarily dealt in on an organized commodity exchange. The Managing Owner
has advised Sidley & Austin of the contracts that the Trust will trade.
Based on a review of such contracts as of the date of this Prospectus, the
Trust has been advised by its counsel, Sidley & Austin, that such contracts
should satisfy the safe harbor. If the contracts traded by the Trust in the
future were not covered by the safe harbor, there is a risk that the Trust
would be treated as engaged in a trade or business within the United States.
In the event that the Trust were found to be engaged in a United States trade
or business, a Foreign Unitholder would be required to file a United States
federal income tax return for such year and pay tax at full United States
rates. In the case of a Foreign Unitholder which is a foreign corporation,
an additional 30% "branch profits" tax might be imposed. Furthermore, in
such event the Trust would be required to withhold taxes from the income or
gain allocable to such a Unitholder under Section 1446 of the Code.
A Foreign Unitholder is not subject to United States tax on certain
interest income, including income attributable to (i) original issue discount
on Treasury bills having a maturity of 183 days or less or (ii) commercial
bank deposits, provided, in either case, that such Foreign Unitholder is not
engaged in a trade or business within the United States during a taxable
year. Additionally, a Foreign Unitholder, not engaged in a trade or business
within the United States, is not subject to United States tax on interest
income (other than certain so-called "contingent interest") attributable to
obligations issued after July 18, 1984 that are in registered form if the
Foreign Unitholder provides the Trust with a Form W-8.
"UNRELATED BUSINESS TAXABLE INCOME"
Income earned by the Trust does not constitute "unrelated business
taxable income" under Section 511 of the Code to employee benefit plans and
other tax-exempt entities which purchase Units, provided that the Units
purchased by such plans and entities are not "debt-financed" and provided
further that the assets acquired by the Trust are not debt financed.
IRS AUDITS OF THE TRUST AND ITS UNITHOLDERS
The tax treatment of Trust-related items is determined at the Trust
level rather than at the Unitholder level. CISI is the Trust's "tax matters
partner" with the authority to determine the Trust's responses to an audit,
except that CISI does not have the authority to settle tax controversies on
behalf of any Unitholder who files a statement with the IRS stating that CISI
has no authority to do so. The limitations period for assessment of
deficiencies and claims for refunds with respect to items related to the
Trust is three years after the Trust's return for the taxable year in
question is filed, and CISI has the authority to, and may, extend such period
with respect to all Unitholders.
If an audit results in an adjustment, Unitholders may be required to pay
additional taxes, plus interest, and possibly tax penalties. There can be no
assurance that the Trust's or a Unitholder's tax return will not be audited
by the IRS or that no adjustments to such returns will be made as a result of
such an audit.
STATE AND OTHER TAXES
In addition to the federal income tax consequences described above, the
Trust and the Unitholders may be subject to various state and other taxes.
Certain of such taxes could, if applicable, have a significant effect on the
amount of tax payable in respect of an investment in the Trust. For example,
the Trust may be subject to a 1.5% Personal Property Replacement Tax in
Illinois. Such tax is imposed on the net income of the Trust allocable to
Illinois. Unitholders must consult their own advisers regarding the possible
applicability of state, local or municipal taxes to an investment in the
Trust.
_____________________
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Except as otherwise set forth, the foregoing statements regarding the
federal income tax consequences to Unitholders of an investment in the Trust
are based upon the provisions of the Code as currently in effect and the
existing administrative and judicial interpretations thereunder. No
assurance can be given that administrative, judicial or legislative changes
will not occur that would make the foregoing statements incorrect.
THE FOREGOING DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX
PLANNING, PARTICULARLY SINCE CERTAIN OF THE INCOME TAX CONSEQUENCES OF AN
INVESTMENT IN THE TRUST MAY NOT BE THE SAME FOR ALL TAXPAYERS. ACCORDINGLY,
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS WITH SPECIFIC
REFERENCE TO THEIR OWN TAX SITUATION UNDER FEDERAL LAW AND THE PROVISIONS OF
APPLICABLE STATE AND OTHER LAWS BEFORE DETERMINING WHETHER TO SUBSCRIBE FOR
UNITS.
PURCHASES BY EMPLOYEE BENEFIT PLANS
ALTHOUGH THERE CAN BE NO ASSURANCE THAT AN INVESTMENT IN THE TRUST, OR
ANY OTHER MANAGED FUTURES PRODUCT, WILL ACHIEVE THE INVESTMENT OBJECTIVES OF
AN EMPLOYEE BENEFIT PLAN, SUCH INVESTMENTS HAVE CERTAIN FEATURES WHICH MAY BE
OF INTEREST TO SUCH PLANS.
AS A MATTER OF POLICY, THE MANAGING OWNER LIMITS SUBSCRIPTIONS TO THE
TRUST FROM ANY EMPLOYEE BENEFIT PLAN TO NO MORE THAN 10% OF THE "LIQUID" NET
ASSETS OF SUCH PLAN AT THE TIME OF INVESTMENT (IRRESPECTIVE OF THE NET WORTH
OF THE BENEFICIARY OR BENEFICIARIES OF SUCH PLAN).
GENERAL
The following section sets forth certain consequences under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code,
which a fiduciary of an "employee benefit plan" as defined in and subject to
ERISA or of a "plan" as defined in Section 4975 of the Code who has
investment discretion should consider before deciding to invest any of the
plan's assets in the Trust (such "employee benefit plans" and "plans" being
referred to herein as "Plans," and such fiduciaries with investment
discretion being referred to herein as "Plan Fiduciaries"). The following
summary is not intended to be complete, but only to address certain questions
under ERISA and the Code which are likely to be raised by the Plan
Fiduciary's own counsel.
In general, the terms "employee benefit plan" as defined in ERISA and
"plan" as defined in Section 4975 of the Code together refer to any plan or
account of various types which provide retirement benefits or welfare
benefits to an individual or to an employer's employees and their
beneficiaries. Such plans and accounts include, but are not limited to,
corporate pension and profit sharing plans, "simplified employee pension
plans," KEOGH plans for self-employed individuals (including partners),
individual retirement accounts described in Section 408 of the Code and
medical benefit plans.
Each Plan Fiduciary must give appropriate consideration to the facts and
circumstances that are relevant to an investment in the Trust, including the
role that an investment in the Trust plays in the Plan's overall investment
portfolio. Each Plan Fiduciary, before deciding to invest in the Trust, must
be satisfied that investment in the Trust is prudent for the Plan, that the
investments of the Plan, including the investment in the Trust, are
diversified so as to minimize the risk of large losses and that an investment
in the Trust complies with the terms of the Plan and the related trust.
EACH PLAN FIDUCIARY CONSIDERING ACQUIRING UNITS MUST CONSULT
WITH ITS OWN LEGAL AND TAX ADVISERS BEFORE DOING SO. AN
INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES
A HIGH DEGREE OF RISK. THE TRUST IS NOT INTENDED
AS A COMPLETE INVESTMENT PROGRAM.
"PLAN ASSETS"
A regulation issued under ERISA (the "ERISA Regulation") contains rules
for determining when an investment by a Plan in an equity interest of an
entity will result in the underlying assets of the entity being assets of the
Plan for purposes of ERISA and Section 4975 of the Code (I.E., "plan
assets"). Those rules provide that assets of an entity will not be
considered assets of a Plan which purchases an equity interest in the entity
if certain exceptions apply, including an exception applicable if the equity
interest purchased is a "publicly-offered security" (the "Publicly-Offered
Security Exception").
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The Publicly-Offered Security Exception applies if the equity interest
is a security that is (1) "freely transferable," (2) part of a class of
securities that is "widely held" and (3) either (a) part of a class of
securities registered under Section 12(b) or 12(g) of the Securities Exchange
Act of 1934, or (b) sold to the Plan as part of a public offering pursuant to
an effective registration statement under the Securities Act of 1933 and the
class of which such security is a part is registered under the Securities
Exchange Act of 1934 within 120 days (or such later time as may be allowed by
the Securities and Exchange Commission) after the end of the fiscal year of
the issuer in which the offering of such security occurred. The ERISA
Regulation states that the determination of whether a security is "freely
transferable" is to be made based on all relevant facts and circumstances.
The ERISA Regulation specifies that, in the case of a security that is part
of an offering in which the minimum investment is $10,000 or less, the
following requirements, alone or in combination, ordinarily will not affect a
finding that the security is freely transferable: (i) a requirement that no
transfer or assignment of the security or rights in respect thereof be made
that would violate any federal or state law; (ii) a requirement that no
transfer or assignment be made without advance written notice given to the
entity that issued the security; and (iii) any restriction on substitution of
an assignee as "a limited partner of a partnership, including a general
partner consent requirement, provided that the economic benefits of ownership
of the assignor may be transferred or assigned without regard to such
restriction or consent" (other than compliance with any of the foregoing
restrictions). Under the ERISA Regulation, a class of securities is "widely
held" only if it is of a class of securities owned by 100 or more investors
independent of the issuer and of each other. A class of securities will not
fail to be widely held solely because subsequent to the initial offering the
number of independent investors falls below 100 as a result of events beyond
the issuer's control.
The Managing Owner expects that the Publicly Offered Security Exception
will apply with respect to the Units. First, the Units are being sold only
as part of a public offering pursuant to an effective registration statement
under the Securities Act of 1933, and the Units will be timely registered
under the Securities Exchange Act of 1934. Second, it appears that the Units
are freely transferable because the minimum investment is not more than
$5,000 and Unitholders may assign their Units by giving written notice to the
Managing Owner, provided such assignment would not violate any federal or
state securities laws and would not adversely affect the tax status of the
Trust. If the Managing Owner withholds consent, a Unitholder may assign such
Unitholder's share of capital and profits and rights of redemption. As
described in the preceding paragraph, the ERISA Regulation provides that if a
security is part of an offering in which the minimum investment is $10,000 or
less, a restriction on substitution of a limited partner in a partnership,
including a general partner consent requirement, will not prevent a finding
that the security is freely transferable, provided that the economic benefit
of ownership can be transferred without such consent. Although this
provision, read literally, applies only to partnerships, the Managing Owner
believes that because the determination as to whether a security is freely
transferable is based on the facts and circumstances, the fact that the
Units, which are issued by a trust rather than a partnership, have an
identical restriction should not affect a finding that the Units are freely
transferable. Third, the Managing Owner expects that immediately after the
initial offering, the Units will be owned by at least 100 investors
independent of the Trust and of each other. Therefore, the underlying assets
of the Trust should not be considered to constitute assets of any Plan which
purchases Units.
INELIGIBLE PURCHASERS
Units may not be purchased with the assets of a Plan if the Managing
Owner, the Trustee, JWH, CIS, CISFS, any Selling Agent (including any
wholesaler or correspondent), any Futures Broker, The First National Bank of
Chicago or any of their respective affiliates or any of their respective
agents or employees: (a) has investment discretion with respect to the
investment of such Plan assets; (b) has authority or responsibility to give
or regularly gives investment advice with respect to such Plan assets, for a
fee, and pursuant to an agreement or understanding that such advice will
serve as a primary basis for investment decisions with respect to such Plan
assets and that such advice will be based on the particular investment needs
of the Plan; or (c) is an employer maintaining or contributing to such Plan.
A party that is described in clause (a) or (b) of the preceding sentence is a
fiduciary under ERISA and the Code with respect to the Plan, and any such
purchase might result in a "prohibited transaction" under ERISA and the Code.
Except as otherwise set forth, the foregoing statements regarding the
consequences under ERISA and the Code of an investment in the Trust are based
on the provisions of the Code and ERISA as currently in effect, and the
existing administrative and judicial interpretations thereunder. No
assurance can be given that administrative, judicial or legislative changes
will not occur that will not make the foregoing statements incorrect or
incomplete.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF PLANS IS IN NO RESPECT A
REPRESENTATION BY THE TRUST, CISI, JWH, CIS, CISFS, ANY SELLING AGENT OR ANY
OTHER PARTY THAT THIS INVESTMENT MEETS SOME OR ALL OF THE RELEVANT LEGAL
REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR PLAN OR THAT THIS
INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR PLAN. THE PERSON WITH
INVESTMENT DISCRETION SHOULD CONSULT WITH HIS OR HER ATTORNEY AND FINANCIAL
ADVISERS AS TO THE PROPRIETY OF AN
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INVESTMENT IN THE TRUST IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR PLAN
AND CURRENT TAX LAW.
THE FUTURES AND FORWARD MARKETS
FUTURES AND FORWARD CONTRACTS
Commodity futures contracts in the United States are required to be made
on approved commodity exchanges and call for the future delivery of various
commodities at a specified time and place. These contractual obligations,
depending on whether one is a buyer or a seller, may be satisfied either by
taking or making physical delivery of an approved grade of the particular
commodity (or, in the case of some contracts, by cash settlement) or by
making an offsetting sale or purchase of an equivalent commodity futures
contract on the same exchange prior to the designated date of delivery.
Currencies and cash bullion and other precious metals may be purchased
or sold for future delivery through banks or dealers pursuant to what are
commonly referred to as "forward contracts." In such instances, the bank or
dealer generally acts as principal in the transaction and includes its
anticipated profit and the costs of the transaction in the prices it quotes
for such contract; such mark-ups are known as "bid-ask" spreads. Brokerage
commissions are typically not charged in forward trading. (The level of the
Trust's Brokerage Fee is, however, unaffected by the number of forward trades
it executes.)
HEDGERS AND SPECULATORS
The two broad classifications of persons who trade in commodity futures
are "hedgers" and "speculators." Commercial interests that market or process
commodities use the futures markets to a significant extent for hedging.
Hedging is a protective procedure designed to minimize losses that may occur
because of price fluctuations, for example, between the time a merchandiser
or processor makes a contract to sell a raw or processed commodity and the
time he or she must perform the contract. The commodity markets enable the
hedger to shift the risk of price fluctuations to the speculator. The
speculator, unlike the hedger, generally expects neither to deliver nor
receive the physical commodity; rather, the speculator risks his or her
capital with the hope of making profits from price fluctuations in commodity
futures contracts. Speculators rarely take delivery of physical commodities
but rather close out their futures positions by entering into offsetting
purchases or sales of futures contracts.
COMMODITY EXCHANGES
Commodity exchanges provide centralized market facilities for trading in
futures contracts relating to specified commodities. Each of the commodity
exchanges in the United States has an associated "clearinghouse." Once
trades made between members of an exchange have been confirmed, the
clearinghouse becomes substituted for the clearing member acting on behalf of
each buyer and each seller of contracts traded on the exchange and in effect
becomes the other party to the trade. Thereafter, each clearing member firm
party to the trade looks only to the clearinghouse for performance.
Clearinghouses do not deal with customers, but only with member firms, and
the "guarantee" of performance under open positions provided by the
clearinghouse does not run to customers. If a customer's commodity broker
becomes bankrupt or insolvent, or otherwise defaults on such broker's
obligations to such customer, the customer in question may not receive all
amounts owing to such customer in respect of his or her trading, despite the
clearinghouse fully discharging all of its obligations.
The Trust will trade on foreign commodity exchanges. Foreign commodity
exchanges differ in certain respects from their United States counterparts
and are not subject to regulation by any United States governmental agency.
Therefore, the protections afforded by such regulation will not be available
to the Trust in its trading on such exchanges. For example, in contrast to
United States exchanges, many foreign exchanges are "principals' markets,"
where trades remain the liability of the traders involved and the exchange or
clearinghouse does not become substituted for any party. Certain foreign
exchanges also have no position limits, with each dealer, acting
individually, establishing the size of the positions it will permit traders
to hold.
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The Trust will engage, to a substantial extent, in transactions on
foreign exchanges, and in doing so will be subject to the risks of trading in
principals' markets as well as the risk of fluctuations in the exchange rates
between the currencies in which the contracts traded on such foreign
exchanges are denominated and United States dollars (as well as the
possibility that exchange controls could be imposed in the future).
SPECULATIVE POSITION AND DAILY LIMITS
The CFTC and the United States exchanges have established limits,
referred to as "speculative position limits," on the maximum net long or net
short position that any person (other than a hedger) may hold or control in
futures contracts or options on particular commodities. These limits may
restrict JWH's ability to acquire positions which it otherwise would acquire
on behalf of the Trust, particularly in certain non-financial commodities,
such as energy, metals and agriculture.
Most United States exchanges limit by regulations the maximum
permissible fluctuation in commodity futures contract prices during a single
trading day. These regulations specify what are commonly referred to as
"daily limits." Daily limits establish the maximum amount by which the price
of a futures contract may vary either up or down from the previous day's
settlement price at the end of the trading session. Because daily limits
apply only on a day-to-day basis, they do not limit ultimate losses, and may
cause illiquidity in certain markets which results in substantial losses to
the Trust which JWH is powerless to limit or prevent.
MARGIN
Margin represents a security deposit to assure futures traders'
performance under their open positions. When a position is established,
"initial margin" is deposited and at the close of each trading day "variation
margin" is either credited or debited from a trader's account, representing
the unrealized gain or loss on open positions during the day. If "variation
margin" payments cause a trader's "initial margin" to fall below "maintenance
margin" levels, a "margin call" will be made requiring the trader to deposit
additional margin or have his or her position closed out.
FUTURES TRADING METHODS IN GENERAL
SYSTEMATIC AND DISCRETIONARY TRADING APPROACHES
Speculative futures strategies may generally be classified as either
systematic or discretionary.
A systematic trader will generally rely to some degree on judgmental
decisions concerning, for example, what markets to follow and commodities to
trade, when to liquidate a position in a contract which is about to expire
and how large a position to take in a particular commodity. However,
although these judgmental decisions may have a substantial effect on a
systematic trading advisor's performance, his or her primary reliance is on
trading programs or models which generate trading signals. The systems
utilized to generate trading signals are changed from time to time (although
generally infrequently), but the trading instructions generated by the
systems being used are followed without significant additional analysis or
interpretation. Discretionary traders, on the other hand, while they may
utilize market charts, computer programs and compilations of quantifiable
fundamental information to assist them in making trading decisions, make such
decisions on the basis of their own judgment and "trading instinct," not on
the basis of trading signals generated by any program or model.
Each approach involves certain inherent risks. For example, systematic
traders may incur substantial losses when fundamental or unexpected forces
dominate the markets, while discretionary traders may overlook price trends
which would have been clearly signaled by a trading system. Any trading
system or trader may suffer substantial losses by misjudging the market,
whether as a result of systematic or discretionary analysis. Systematic
traders tend to rely more on computerized programs than do discretionary
traders, and some consider the discipline of systematic trading, which
largely removes the emotion of the individual trader from the trading
process, advantageous. In addition, due to their use of computers,
systematic traders are generally able to incorporate more data into a
particular trading decision than can discretionary traders. On the other
hand, trading systems may suffer rapid and severe losses due to their
inability to respond to actual or anticipated events directly influencing
market prices until such events have had a sufficient effect on the market to
create a trend of sufficient magnitude to cause their trading systems to
generate trading signals, by which time a precipitous price change may
already be in progress, resulting in substantial losses or missed profit
opportunities.
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TECHNICAL AND FUNDAMENTAL ANALYSIS
In addition to being distinguished from one another by the criterion of
whether they trade systematically or on the basis of their discretionary
evaluations of the markets, commodity trading advisors are also distinguished
as relying on either "technical" or "fundamental" analysis, or on a
combination of the two.
Technical analysis is not based on anticipated supply and demand factors
but instead on the theory that the study of the commodities markets
themselves will provide a means of anticipating future prices. Technical
analysis operates on the theory that market prices and momentum at any given
point in time reflect all known factors affecting the supply and demand for a
particular commodity. Consequently, technical analysis focuses not on
evaluating those factors directly but on an analysis of price histories,
movements and patterns, theorizing that a detailed analysis of, among other
things, actual daily, weekly and monthly price fluctuations, volume
variations and changes in open interest is the most effective means of
attempting to predict the future course of prices.
Fundamental analysis, in contrast, focuses on the study of factors
external to the trading markets that affect the supply and demand of a
particular commodity in an attempt to predict future price levels. Such
factors might include weather, the economy of a particular country,
government policies, domestic and foreign political and economic events, and
changing trade prospects. Fundamental analysis theorizes that by monitoring
relevant supply and demand factors for a particular commodity, a state of
current or potential disequilibrium of market conditions may be identified
that has yet to be reflected in the price level of that commodity.
Fundamental analysis assumes that markets are imperfect, that information is
not instantaneously assimilated or disseminated and that econometric models
can be constructed that generate equilibrium prices that may indicate that
current prices are inconsistent with underlying economic conditions and will,
accordingly, change in the future.
Systematic traders tend to rely on technical analysis, because the data
relevant to such analysis is more susceptible to being isolated and
quantified to the extent necessary to be successfully incorporated into a
program or mathematical model than is most "fundamental" information, but
there is no inconsistency in attempting to trade systematically on the basis
of fundamental analysis. The fundamental information which can be evaluated
by a formalized trading system is, however, limited to some extent in that it
generally must be quantifiable in order to be processed by such a system.
TREND-FOLLOWING
"Trend-following" advisors gear their trading approaches towards
positioning themselves to take advantage of major price movements, as opposed
to traders who seek to achieve overall profitability by making numerous small
profits on short-term trades, or through arbitrage techniques.
"Trend-following" traders assume that most of their trades will be
unprofitable. Their objective is to make a few large profits, more than
offsetting their more numerous but (hopefully) smaller losses, from
capitalizing on major trends. Consequently, during periods when no major
price trends develop in a market, a "trend-following" trading advisor is
likely to incur substantial losses. JWH is a "trend-follower," and
historically only approximately 30% to 40% of JWH's trades have been
profitable. See "John W. Henry & Company, Inc. -- Trading Techniques."
THE TRADING PROGRAMS ARE TECHNICAL, TREND-FOLLOWING SYSTEMS
The Trading Programs are each highly systematic and technical and rely
on trend-following strategies. Although the markets traded by the two
Trading Programs vary somewhat, as do the Trading Programs themselves, the
same general principles underlie these trading systems, and there is a
significant overlap in the markets traded by such Trading Programs. See
"John W. Henry & Company, Inc. -- Trading Techniques."
Trading methods are both confidential and continually evolving.
Prospective investors as well as existing Unitholders will generally not be
informed of any change in a Trading Program, unless the Managing Owner is
informed of such change, which will only occur (if at all) if JWH considers
such change to be material.
In addition to the continually evolving character of trading methods,
the commodity markets themselves are continually changing. JWH may, in its
sole discretion, elect to trade any available futures, forward or commodity
options -- both on United States markets and abroad -- even if JWH has never
previously traded in that particular market.
-83-
PLAN OF DISTRIBUTION
SUBSCRIPTION PROCEDURE
The Units are offered to the public -- on a "best efforts,"
minimum/maximum basis -- for an Initial Offering Period ending on or before
______ __, 1997, subject to extension until up to ________ __, 1997 in the
discretion of the Managing Owner. If subscriptions for at least 100,000
Units are not accepted during the Initial Offering Period, no Units will be
sold, all subscriptions will be promptly returned to investors (or, if
applicable, to the appropriate Selling Agent for credit to an investor's
customer securities account) with all interest earned thereon while held in
escrow and the Trust will dissolve. In a best efforts, minimum/maximum
offering there is no assurance that the minimum amount of capital necessary
to begin operations will be raised, so that subscribers during the Initial
Offering Period may commit their subscriptions to escrow without ultimately
having an opportunity to invest.
During the Initial Offering Period, Units are offered to subscribers at
$100 per Unit. During the Ongoing Offering Period after the Trust commences
trading, Units will be sold at Net Asset Value as of the close of business on
the last business day of each calendar month. The minimum initial investment
is $5,000; $2,000 for trustees or custodians of eligible employee benefit
plans and individual retirement accounts. Subscriptions in excess of these
minimums are permitted in $100 increments. Additional subscriptions by
existing Unitholders are permitted in $1,000 minimums with $100 increments.
Units are sold in fractions calculated to five decimal places.
In order to purchase Units, an investor must complete, execute and
deliver to a Selling Agent an original of the Subscription Agreement and
Power of Attorney Signature Page which accompanies this Prospectus, together
with a check for the amount of his or her subscription. Checks should be
made payable to "FNBC, ESCROW AGENT FOR JWH GLOBAL PORTFOLIO TRUST"
Subscription payments by clients of certain Selling Agents may be made
by authorizing the Selling Agents to debit a subscriber's customer securities
account with the amount of the subscription. When a subscriber authorizes
such a debit, the subscriber will be required to have the amount of his or
her subscription payment on deposit in his or her account on a settlement
date specified by such Selling Agent. The account will be debited, and
amounts so debited will be transmitted directly to The First National Bank of
Chicago by such Selling Agent via Selling Agent check or wire transfer made
payable to "FNBC, ESCROW AGENT FOR JWH GLOBAL PORTFOLIO TRUST" on such
settlement date for deposit in the escrow account of the Trust.
The Managing Owner will determine, in its sole discretion, whether to
accept or reject a subscription in whole or in part. Such determination is
made within five business days of the submission of a subscription to the
Managing Owner. Settlement of the subscription payments on accepted
subscriptions is made within three business days of acceptance of the related
subscription.
Subscription documents must generally be received at least ten business
days before the termination of the Initial Offering Period and, during the
Ongoing Offering Period, on or before the 20th of a month (or, if the 20th is
not a business day, the next business day) in order to be accepted as of the
last day of the month.
Subscription funds are invested in short-term United States Treasury
bills or comparable authorized instruments while held in escrow pending
investment in the Units and will earn interest at the applicable rates paid
on these instruments. Escrow interest is allocated PRO RATA among all
subscribers during a particular escrow period based on the amount of their
respective subscriptions and the length of time on deposit in escrow.
Interest actually earned on subscriptions while held in escrow will be
invested in the Fund, and investors will be issued additional Units
reflecting each investor's allocable share of such interest.
No fees are charged on any subscriptions while held in escrow.
Subscribers are notified prior to any return of their subscriptions, and the
amounts returned to them shall in no event be reduced by any deductions for
fees or expenses.
Subscriptions, if rejected, will be promptly returned to investors
directly or, if applicable, to the appropriate Selling Agent for credit to an
investor's customer securities account, together with all interest earned
thereon while held in escrow.
No subscriptions are final or binding on a subscriber until the close of
business on the fifth business day following such subscriber's receipt of a
final Prospectus.
-84-
CISI will advance the Trust's organizational and initial offering costs
(estimated at approximately $500,000-$600,000), for which CISI will be
reimbursed by the Trust at the initial closing. The Trust will amortize such
costs over the first 60 months of its operations, up to a limit at each
month-end of 1/60 of 2% of the Trust's Net Assets as of such month-end. CISI
will return to the Trust any unamortized amount at the end of the
amortization period or earlier termination of the Trust. See "Charges --
Organizational and Initial Offering Costs."
SUBSCRIBERS' REPRESENTATIONS AND WARRANTIES
By executing a Subscription Agreement and Power of Attorney Signature
Page, such subscriber is representing and warranting, among other things,
that: (i) the subscriber is of legal age to execute and deliver the
Subscription Agreement and Power of Attorney and has full power and authority
to do so; (ii) the subscriber has read and understands "Exhibit B --
Subscription Requirements" of this Prospectus and meets or exceeds the
applicable suitability criteria of net worth and annual income set forth
therein; and (iii) the subscriber has received a copy of this Prospectus.
These representations and warranties might be used by the Managing Owner or
others against a subscriber in the event that the subscriber were to take a
position inconsistent therewith.
While the foregoing representations and warranties will be binding on
subscribers, the Managing Owner believes that to a large extent such
representations and warranties would be implied from the fact that an
investor has subscribed for Units. NONETHELESS, NO PROSPECTIVE SUBSCRIBER WHO
IS NOT PREPARED TO MAKE SUCH REPRESENTATIONS AND WARRANTIES, AND TO BE BOUND
BY THEM, SHOULD CONSIDER INVESTING IN THE UNITS.
THE SELLING AGENTS
No selling commissions are paid from the proceeds of this offering. The
Selling Agents are paid selling commissions by CIS of up to 4% of the
subscription price of all Units sold by each Selling Agent. In addition to
selling commissions, CIS will also pay ongoing compensation to the Selling
Agents which are registered with the CFTC as "futures commission merchants"
or "introducing brokers" in the amount of up to 0.333% (a 4.0% annual rate)
of the month-end Net Asset Value of all Units sold by them which remain
outstanding, beginning with the end of the thirteenth full month after the
date such Units were first issued (not the date that the related subscription
was deposited into escrow during the Initial Offering Period or the date the
subscription was accepted during the Ongoing Offering Period); provided that
such ongoing compensation may only be paid on Units sold by Registered
Representatives who are registered with the CFTC. Such ongoing compensation
may be deemed to constitute underwriting compensation. See "Federal Income
Tax Aspects -- Syndication Expenses."
In the event that either a Selling Agent or a Selling Agent's Registered
Representative is not duly registered with the CFTC, no ongoing compensation
may be paid either to such Selling Agent or to such Registered Representative
by CIS. Rather, pursuant to applicable rules of the National Association of
Securities Dealers, Inc., such Selling Agent and such Registered
Representatives are restricted to receiving installment selling commissions.
The total amount of installment selling commissions and initial selling
commission received by any such Registered Representative on each Unit sold
by him or her may not exceed 9% of the initial subscription price of the Unit.
Selling Commissions and ongoing compensation payable in respect of Units
sold to any Eligible Investor as described under "Charges -- Brokerage Fee --
Special Brokerage Fee Rate" shall be up to 2% of the subscription amount and
up to 2% of the average month-end Net Asset Value.
The Lead Selling Agent may engage Wholesalers who are registered or
exempt broker-dealers and who will introduce Additional Selling Agents to the
Lead Selling Agent and assist such Additional Selling Agent in the offering
and sale of Units. Each such Wholesaler will share with an Additional Selling
introduced by the Wholesaler (i) the up to 4% (in the case of sales to
Eligible Unitholders, up to 2%) initial selling commissions and (ii) the up
to 4% (in the case of sales to Eligible Unitholders, up to 2%) ongoing
compensation payable in respect of Units sold by such Additional Selling
Agent.
Certain Additional Selling Agents may select certain correspondent
"introducing brokers" to distribute Units. On Units sold through each such
correspondents, each of whom must be registered as a broker-dealer or exempt
from such registration, the relevant Additional Selling Agent will receive
(i) up to __% of the 4% (in the case of sales to Eligible Unitholders, up to
__% of the 2%) initial selling commissions and (ii) up to __% of the 4% (in
the case of sales to Eligible Unitholders, up to __% of the 2%) ongoing
compensation to be received by such Additional Selling Agent in respect of
Units sold by such correspondents, in each case pass on the remainder initial
selling commission and ongoing compensation to the correspondents.
-85-
Wholesalers and correspondents must meet the same eligibility
requirements applicable to Selling Agents in order to receive ongoing
compensation.
Other than as described above, no commissions or other fees are paid,
directly or indirectly, by the Trust, the Managing Owner, any affiliate of
the foregoing or any principal or officer of any of the foregoing, to any
person in connection with the solicitation of purchasers for Units.
Units may be sold in each State only by persons appropriately registered
(or exempt from registration) as broker-dealer in such State and such
persons' Registered Representatives.
See "Conflict of Interests -- Indemnification and Standard of Liability"
for information relating to certain indemnification arrangements with respect
to the Selling Agents.
LEGAL MATTERS
Sidley & Austin, Chicago, Illinois, will pass upon legal matters for
CISI in connection with the Units being offered hereby. Except with respect
to certain issues, Sidley & Austin will rely as to matter of Delaware law
upon the opinion of Richards, Layton & Finger, Wilmington, Delaware. In the
future, Sidley & Austin may advise CISI (and its affiliates) with respect to
its responsibilities as a managing owner of, and with respect to matters
relating to, the Trust. Sidley & Austin has also reviewed the statements
under "Federal Income Tax Aspects" and given its opinion as to certain
matters as described therein.
EXPERTS
The statement of financial condition of JWH Global Portfolio Trust as of
November 21, 1996 and the financial statements of CIS Investments, Inc. as of
May 31, 1996 included in this Prospectus have been audited by KPMG Peat
Marwick, LLP, independent auditors, as stated in their reports appearing
herein and have been so included in reliance upon such reports given upon the
authority of that firm as experts in auditing and accounting.
REPORTS
Pursuant to applicable CFTC regulations, prospective subscribers must
(once the Trust has begun operating) receive recent Account Statement or
performance information relating to the Trust, current within 60 calendar
days, as well as the Trust's most recent Annual Report (unless the
information in such Annual Report has been included in this Prospectus by
amendment or supplement), together with the Prospectus.
PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW THE SUMMARY FINANCIAL
INFORMATION RELATING TO THE TRUST WHICH (IF THE TRUST HAS BEGUN OPERATING)
MUST ACCOMPANY THIS PROSPECTUS. SUCH SUMMARY FINANCIAL INFORMATION WILL
INDICATE THE PERFORMANCE RECOGNIZED AND THE EXPENSES PAID BY THE TRUST DURING
A RECENT MONTH.
ADDITIONAL INFORMATION
This Prospectus constitutes part of the Registration Statement filed by
the Trust with the SEC in Washington, D.C. This Prospectus does not contain
all of the information set forth in such Registration Statement, certain
portions of which have been omitted pursuant to the rules and regulations of
the SEC including, without limitation, certain exhibits thereto (for example,
the Selling Agreement, the Escrow Agreement and the Customer Agreement). The
descriptions contained herein of agreements included as exhibits to the
Registration Statement are necessarily summaries, and the exhibits themselves
may be inspected without charge at the public reference facilities maintained
by the SEC in Washington, D.C., and copies of all or part thereof may be
obtained from the SEC upon payment of the prescribed fees.
-86-
INDEX OF FINANCIAL STATEMENTS
Page
----
JWH GLOBAL PORTFOLIO TRUST
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . 88
Statements of Financial Condition as of _________, 1996 (unaudited) . . 89
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 90
CIS INVESTMENTS, INC.
Unaudited Balance Sheet as of September 30, 1996. . . . . . . . . . . . 91
Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . . 92
Statement of Financial Condition as of May 31, 1996 . . . . . . . . . . 93
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 97
____________________
Schedules are omitted for the reason that they are not required or are
not applicable or that equivalent information has been included in the
financial statements or notes thereto.
-87-
INDEPENDENT AUDITORS' REPORT
The Trustees
JWH Global Portfolio Trust:
We have audited the accompanying statement of financial condition of JWH Global
Portfolio Trust as of November 21, 1996. This financial statement is the
responsibility of the Trust's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of financial condition is free of material
misstatement. An audit of a statement of financial condition includes
examining, on a test basis, evidence supporting the amounts and disclosures in
that statement of financial condition. An audit of a statement of financial
condition also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement of
financial condition presentation. We believe that our audit of the statement of
financial condition provides a reasonable basis for our opinion.
In our opinion, the statement of financial condition referred to above presents
fairly, in all material respects, the financial position of JWH Global Portfolio
Trust as of November 21, 1996 in conformity with generally accepted accounting
principles.
November 22, 1996
-88-
JWH GLOBAL PORTFOLIO TRUST
Statement of Financial Condition
November 21, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Assets - cash $ 1,000
- --------------------------------------------------------------------------------
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UNITHOLDERS' CAPITAL
- --------------------------------------------------------------------------------
Unitholders' capital:
Initial beneficial owners (8.17 units of beneficial interest
outstanding at November 21, 1996) 817
Managing Owner (1.83 units of beneficial interest
outstanding at November 21, 1996) 183
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Total unitholders' capital 1,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net asset value per unit ($1,000 divided by 10 units
of beneficial interest outstanding) $ 100
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See accompanying notes to statement of financial condition.
-89-
JWH GLOBAL PORTFOLIO TRUST
Statement of Financial Corporation
Novemeber 21, 1996
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GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
JWH Global Portfolio Trust (the Trust), a Delaware business trust was
organized on November 12, 1996 to engage in the speculative trading of
futures contracts on currencies, interest rates, energy and agricultural
products, metals and stock indices, options on such futures contracts, and
spot and forward contracts on currencies and precious metals. CIS
Investments, Inc. (CISI or Managing Owner) will serve as Managing Owner of
the Trust. John W. Henry & Company, Inc. (JWH) will serve as the sole
trading advisor to the Trust. Cargill Investor Services, Inc., (CIS) an
affiliate of CISI will act as the Trust's clearing broker and lead selling
agent. CIS Financial Services, Inc., an affiliate of CISI, will act as the
Trust's counterparty in the Trust's spot and forward currency and precious
metal trades. As of November 21, 1996 the Trust has had no operations
other than relating to organizational matters and the issuance of 10 units
of beneficial interest for $1,000 to the Managing Owner and the initial
beneficial owners. The maximum amount of the initial offering is
$50,000,000. Investors purchase units at the current net asset value per
unit after the initial closing. Therefore, the total number of units
authorized for the Trust is not determinable and therefore is not disclosed
in the statement of financial condition.
ORGANIZATIONAL AND INITIAL OFFERING COSTS
The Managing Owner of the Trust will incur approximately $600,000 of
expenses in connection with the offering of units and the organization of
the Trust. These expenses will be reimbursed by the Trust to the Managing
Owner and be charged against operations of the Trust over a period of 60
months from the commencement of operations at a maximum rate of 0.4% of
average month-end net assets per year. If the Trust is terminated prior to
the end of such 60-month period or the entire amount of the organizational
and initial offering costs reimbursed to CISI is not amortized at the end
of the 60-month period, CISI shall return to the Trust, without interest,
an amount equal to the umamortized balance of the capitalized
organizational and initial offering costs.
AGREEMENTS
The Trust will pay CIS a monthly flat-rate brokerage fee at an annual rate
of 6.5% of the Trust's month-end assets after deduction of the management
fee. JWH will receive a monthly management fee of 4% of the Trust's month-
end assets after deduction of a portion of the brokerage fee at the annual
rate of 1.25% (rather than 6.5%) of month-end assets. JWH will also be paid
a quarterly incentive fee equal to 15% of new trading profit after deduction
of the brokerage fee at 1.25% of month-end assets and the management fee.
USE OF ESTIMATES
The preparation of a statement of financial condition in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the statement of financial condition. Actual results could differ from
those estimates.
-90-
CIS Investments, Inc.
Unaudited Balance Sheet
As Of September 30, 1996
ASSETS
Accounts Receivable $ 0
Investment in IDS Managed Futures, L.P. 326,681
Investment in IDS Managed Futures II, L.P. 161,461
Investment in Everest Futures Fund II, L.P. 103,818
Accrued Income 387
-----------
Total Assets $ 592,347
-----------
-----------
LIABILITIES AND EQUITY
Unearned Management Fees $ 20,572
Intercompany Payable 170,457
Income Taxes Payable 3,127
-----------
Total Accounts Payable 194,156
Common Stock $100 par value, 30,000 Authorized, 10 issued 1,000
Subscribed Stock 29,990 shares 2,999,000
Paid-in-Capital 250,000
Retained Earnings 147,191
-----------
Total Stockholders Equity 3,397,191
Less - subscriptions receivable (2,999,000)
-----------
TOTAL LIABILITIES AND EQUITY $ 592,347
-----------
-----------
UNAUDITED
This Balance Sheet, in the opinion of management, reflects all adjustments
necessary to fairly state the financial condition of CIS Investments, Inc. at
September 30, 1996.
-91-
KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601-9973
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CIS Investments, Inc.:
We have audited the accompanying statements of financial condition of CIS
Investments, Inc. (a wholly owned subsidiary of Cargill Investor Services,
Inc.) (the Company) as of May 31, 1996 and 1995, and the related statements
of income, changes in stockholder's equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CIS Investments, Inc. as of
May 31, 1996 and 1995, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
July 17, 1996
-92-
CIS INVESTMENTS, INC.
Statements of Financial Condition
May 31, 1996 and 1995
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ASSETS 1996 1995
- ------------------------------------------------------------------------------
Investments in limited partnerships $ 572,721 409,876
- ------------------------------------------------------------------------------
$ 572,721 409,876
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------------------------------------------------
Liabilities:
Deferred management fees 47,665 34,925
Due to Parent 161,955 57,791
Accrued taxes payable 3,347 10,802
- ------------------------------------------------------------------------------
Total liabilities 212,967 103,518
Stockholder's equity:
Common stock, $100 par value. Authorized
30,000 shares; issued 10 shares 1,000 1,000
Common stock subscribed, 27,437 and 17,431
shares outstanding at the years ended 1996
and 1995, respectively 2,743,700 1,743,700
Paid-in capital 250,000 250,000
Retained earnings 108,754 55,358
- ------------------------------------------------------------------------------
3,103,454 2,050,058
Less subscriptions receivable (note 4) (2,743,700) (1,743,700)
- ------------------------------------------------------------------------------
Total stockholder's equity 359,754 306,358
- ------------------------------------------------------------------------------
$ 572,721 409,876
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
-93-
CIS INVESTMENTS, INC.
Statements of Income
Years ended May 31, 1996 and 1995
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------
Revenues:
Management fees $74,472 50,148
Unrealized gain on investments in
limited partnerships 14,345 44,887
- ---------------------------------------------------------------------------
Total revenues 88,817 95,035
Expenses - operating 5,674 2,533
- ---------------------------------------------------------------------------
Income before income taxes 83,143 92,502
Income tax expense 29,747 32,100
- ---------------------------------------------------------------------------
Net income $53,396 60,402
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
See accompanying notes to financial statements.
-94-
CIS INVESTMENTS, INC.
Statements of Changes in Stockholder's Equity
Years ended May 31, 1996 and 1995
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Retained
Common earnings
Common Paid-in stock (accumulated Subscriptions
stock capital subscribed deficit) receivable Total
- ----------------------------------------------------------------------------------------------------------------
Balance at May 31, 1994 $1,000 250,000 1,243,700 (5,044) (1,243,700) 245,956
Common stock subscription -- -- 500,000 -- (500,000) --
Net income -- -- -- 60,402 -- 60,402
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Balance at May 31, 1995 1,000 250,000 1,743,700 55,358 (1,743,700) 306,358
Common stock subscription -- -- 1,000,000 -- (1,000,000) --
Net income -- -- -- 53,396 -- 53,396
- ----------------------------------------------------------------------------------------------------------------
Balance at May 31, 1996 $1,000 250,000 2,743,700 108,754 (2,743,700) 359,754
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
-95-
CIS INVESTMENTS, INC.
Statements of Cash Flows
Years ended May 31, 1996 and 1995
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 53,396 60,402
Adjustment to reconcile net income to net cash
provided by operating activities:
Unrealized gain on investments in
limited partnerships (14,345) (44,887)
Decrease in assets:
Accounts receivable from limited partnerships -- 177,484
Increase (decrease) in liabilities:
Deferred management fees 12,741 13,143
Due to parent 104,164 (181,026)
Accrued taxes payable (7,456) 3,085
- --------------------------------------------------------------------------------------
Net cash provided by operating activities 148,500 28,201
- --------------------------------------------------------------------------------------
Net cash used in investing activities -
purchase of limited partnership units (148,500) (28,201)
- --------------------------------------------------------------------------------------
Net change in cash -- --
Cash at beginning of year -- --
- --------------------------------------------------------------------------------------
Cash at end of year $ -- --
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information -
cash paid during the year for income taxes $ 37,202 29,015
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
See accompanying notes to financial statements.
-96-
CIS INVESTMENTS, INC.
Notes to Financial Statements
May 31, 1996 and 1995
- --------------------------------------------------------------------------------
(1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies which have been followed
in preparing the accompanying financial statements is set forth below.
NATURE OF BUSINESS
CIS Investments, Inc. (the Company), a wholly-owned subsidiary of Cargill
Investor Services, Inc., (the Parent) is the general partner in various
limited partnerships organized for the purpose of engaging in the
speculative trading of commodity interests, including futures contracts,
physical commodities. and related options.
MANAGEMENT FEES
Unearned management fees are amortized over one year using the
straight-line method.
INVESTMENTS IN LIMITED PARTNERSHIPS
Investments in limited partnerships are recorded at a value which
approximates the Company's proportionate share of the limited
partnership's net asset value.
INCOME TAXES
The Company is included in the consolidated Federal income tax return of
the Parent.
The Company follows Statement of Financial Accounting Standards No. 109
(Statement 109). Under Statement 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
EXPENSES
General and administrative overhead costs of the Company are expensed and
paid by the Parent. As such, they are not reflected in these financial
statements. During fiscal year 1996 the Parent stopped charging interest
on amounts due to Parent.
(Continued)
-97-
CIS INVESTMENTS, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
USE OF ESTIMATES
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of
the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual amounts could differ
from such estimates.
(2) INVESTMENTS IN LIMITED PARTNERSHIPS
Investments in limited partnerships at May 31, 1996 and 1995 are as
follows:
- -------------------------------------------------------------------------------
1996 1995
--------------- --------------
Units Amount Units Amount
- -------------------------------------------------------------------------------
IDS Managed Futures, L.P. 1,151 $314,053 960 $254,451
IDS Managed Futures, L.P. 322 157,974 322 155,425
Everest Futures Trust 100 100,694 -- --
- -------------------------------------------------------------------------------
$572,721 $409,876
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
All investments are in general partnership units.
(3) NET WORTH REQUIREMENTS
The Company is required to maintain net worth, as defined, of not less
than (i) the lesser of $250,000 or 15% of the aggregate capital
contributions of any limited partnership for which it shall act as a
general partner if such contributions are less than $2,500,000; and
(ii) 10% of the aggregate capital contributions of any limited partnership
for which it shall act as a general partner, if such contributions are
equal to or exceed $2,500,000. At May 31, 1996, the Company is in
compliance with its net worth requirements.
(4) COMMON STOCK SUBSCRIPTIONS
The Company and its Parent entered into stock subscription agreements
whereby the Parent subscribed to purchase up to 27,437 shares of the
Company's stock at $100 per share in order to ensure the Company's
continued compliance with its net worth requirements. No subscribed
stock was issued, nor is it known when and if any will be issued in the
future. As such, the subscribed stock receivable amount is shown as a
deduction from stockholder's equity.
(Continued)
-98-
CIS INVESTMENTS, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
(5) INCOME TAXES
The Company adopted Statement 109 as of June 1, 1994. There were no
significant temporary differences that gave rise to deferred tax assets
and/or deferred tax liabilities; therefore, the implementation of
Statement 109 had no effect on the financial statements of the Company.
(6) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Limited Partnerships (the Partnerships) hold futures contracts and
options. A futures contract is defined as an agreement to buy or sell a
specific amount of a commodity or financial instrument at a particular
price on a stipulated future date. If the markets should move against all
of the futures positions held by the Partnerships at the same time, and
if the Partnerships are unable to offset the futures positions of the
Partnerships, the Partnerships could lose all of their assets and the
partners would realize a 100% loss of their investment.
-99-
APPENDIX I
PERFORMANCE OF OTHER CISI-SPONSORED FUNDS
PERFORMANCE OF OTHER CISI-SPONSORED FUNDS
The following performance tables are included herein per CFTC requirements
and may make possible certain performance comparisons which may be helpful to
prospective investors in determining whether to acquire Units. However, the
difference in the performance of these funds indicates that the performance of
one CISI-sponsored fund may have very little significance in terms of the
performance of other CISI-sponsored funds employing different portfolios.
The following performance information has been calculated on the accrual
basis of accounting in accordance with generally accepted accounting principles.
THE FOLLOWING FUNDS HAVE TRADED PURSUANT TO THE SYSTEMS THAT ARE MATERIALLY
DIFFERENT FROM THE TRADING PROGRAMS. THEREFORE, THE PERFORMANCE OF SUCH CISI
POOLS IS NOT REPRESENTATIVE OF HOW THE TRUST HAS OR WILL PERFORM.
INVESTORS SHOULD NOTE THAT INTEREST INCOME MAY CONSTITUTE A SIGNIFICANT
PORTION OF A COMMODITY POOL'S INCOME AND, IN CERTAIN INSTANCES, MAY GENERATE
PROFITS WHERE THERE HAVE BEEN REALIZED AND UNREALIZED LOSSES FROM COMMODITY
TRADING.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE. INVESTORS MAY LOSE ALL
OR SUBSTANTIALLY ALL OF THEIR INVESTMENT.
APPI-1
PERFORMANCE OF OTHER CISI-SPONSORED FUNDS
IDS MANAGED FUTURES, L.P.
TYPE OF POOL: Publicly offered, multi-advisor
INCEPTION OF TRADING: June 1987
AGGREGATE SUBSCRIPTIONS: $37.0 million
CURRENT CAPITALIZATION: $35.0 million
WORST MONTHLY DRAWDOWN: (13.95)% (1/92)
WORST PEAK-TO-VALLEY DRAWDOWN: (27.7)% (1/92-5/92)
1996 COMPOUND RATE OF RETURN: 4.54% (9 months)
1995 COMPOUND RATE OF RETURN: 23.03%
1994 COMPOUND RATE OF RETURN: (6.93)%
1993 COMPOUND RATE OF RETURN: 38.32%
1992 COMPOUND RATE OF RETURN: (3.47)%
1991 COMPOUND RATE OF RETURN: 26.22%
_____________
SEPTEMBER 30, 1996 VALUE OF INITIAL $1,000 UNIT: $3,642.77
______________________________
IDS MANAGED FUTURES II, L.P.
TYPE OF POOL: Publicly offered, multi-advisor
INCEPTION OF TRADING: March 1988
AGGREGATE SUBSCRIPTIONS: $15.6 million
CURRENT CAPITALIZATION: $10.8 million
WORST MONTHLY DRAWDOWN: (13.53)% (1/92)
WORST PEAK-TO-VALLEY DRAWDOWN: (27.07)% (1/92-5/92)
1996 COMPOUND RATE OF RETURN: 4.14% (9 months)
1995 COMPOUND RATE OF RETURN: 29.80%
1994 COMPOUND RATE OF RETURN: (13.96)%
1993 COMPOUND RATE OF RETURN: 37.01%
1992 COMPOUND RATE OF RETURN: (5.77)%
1991 COMPOUND RATE OF RETURN: 30.35%
___________
SEPTEMBER 30, 1996 VALUE OF INITIAL $1,000 UNIT: $2,166.43
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS
WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
APPI-2
PERFORMANCE OF OTHER CISI-SPONSORED FUNDS
OYSTER BAY FUTURES FUND LIMITED PARTNERSHIP
TYPE OF POOL: Privately offered, multi-advisor
INCEPTION OF TRADING: August 1988
AGGREGATE SUBSCRIPTIONS: $0.8 million
CURRENT CAPITALIZATION: N/A
WORST MONTHLY DRAWDOWN: (13.12)% (10/89)
WORST PEAK-TO-VALLEY DRAWDOWN: (35.65)% (6/89-2/90)
1992 COMPOUND RATE OF RETURN: (12.25)% (6 months)
1991 COMPOUND RATE OF RETURN: 8.27%
__________
THIS FUND WAS TERMINATED IN JUNE 1992.
______________________________
EVEREST FUTURES FUND II, L.P.
TYPE OF POOL: Privately offered, single-advisor
INCEPTION OF TRADING: April 1996
AGGREGATE SUBSCRIPTIONS: $8.4 million
CURRENT CAPITALIZATION: $8.4 million
WORST MONTHLY DRAWDOWN: (1.90)% (7/96)
WORST PEAK-TO-VALLEY DRAWDOWN: (2.66)% (7/96-8/96)
1996 COMPOUND RATE OF RETURN: 3.83% (6 months)
_________
SEPTEMBER 30, 1996 VALUE OF INITIAL $1,000 UNIT: $1,038.33
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS
WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
APPI-3
NOTES TO PERFORMANCE OF
OTHER CISI-SPONSORED FUNDS
NOTES TO PERFORMANCE OF OTHER CISI-SPONSORED FUNDS
1. TYPE OF POOL. The CFTC specifies that pools should be categorized as:
(i) either publicly or privately offered; (ii) "principal protected" (i.e.,
generally assuring the return of some or all of an initial investment at a
date certain in the future), if applicable; and (iii) either multi-advisor
or single-advisor.
2. INCEPTION OF TRADING is the date of inception of trading by the fund.
3. AGGREGATE SUBSCRIPTIONS is the aggregate gross capital subscriptions
(without regard to redemptions).
4. CURRENT CAPITALIZATION is the net asset value of the fund at the end
of the period indicated.
5. WORST MONTHLY DRAWDOWN is the largest net asset loss experienced in
any calendar month expressed as a percentage of net asset value and includes
the month and year of such drawdown.
6. WORST PEAK-TO-VALLEY DRAWDOWN is the largest calendar month-end to
calendar month-end net asset loss (regardless of whether such loss is
continuous) experienced during the period January 1, 1991 (or inception)
through September 30, 1996, expressed as a percentage of total equity in the
program, and includes the months and years in which it occurred. For
example, a Worst Peak-to-Valley Drawdown of (27.7)% (1/92-5/92) (see "IDS
Managed Futures, L.P." at page APPI-2) means that the peak-to-valley
drawdown lasted from January 1992 through May 1992 and resulted in a (27.7)%
drawdown.
7. COMPOUND RATE OF RETURN is calculated on the basis of the actual rate
of return recognized by an initial $1,000 investment in the fund.
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS
WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
APPI-4
MONTHLY RATES OF RETURN SINCE INCEPTION
OF OTHER CISI-SPONSORED FUNDS
IDS MANAGED FUTURES, L.P.
- -------------------------------------------------------------------------------------------------------------------------------
MONTHLY RATES OF RETURN (%)
COMPOUND
Year January February March April May June July August September October November December ANNUAL ROR
- -------------------------------------------------------------------------------------------------------------------------------
1987 N/A N/A N/A N/A N/A (0.08)* 0.84 0.09 (2.35) 15.50 8.53 4.31 28.78*
(7 MONTHS)
- -------------------------------------------------------------------------------------------------------------------------------
1988 (4.36) 1.28 (7.93) (3.28) (0.34) 11.61 (9.41) 1.76 3.66 0.20 (0.12) (3.99) (14.96)
- -------------------------------------------------------------------------------------------------------------------------------
1989 3.35 (5.06) 2.98 (3.83) 19.24 (5.20) 6.00 (7.67) (6.55) (5.97) 12.57 (0.70) 5.61
- -------------------------------------------------------------------------------------------------------------------------------
1990 24.84 12.64 3.61 5.79 (16.81) 2.69 8.95 9.90 5.64 (2.42) 0.49 (1.62) 60.65
- -------------------------------------------------------------------------------------------------------------------------------
1991 (1.55) 1.76 0.59 (1.85) (2.03) 3.60 (11.27) 4.12 13.37 (3.94) 3.51 20.71 26.22
- -------------------------------------------------------------------------------------------------------------------------------
1992 (13.95) (9.43) 0.69 (6.30) (1.74) 15.58 18.09 7.92 (3.29) (3.60) (2.02) (0.64) (3.47)
- -------------------------------------------------------------------------------------------------------------------------------
1993 1.19 10.80 (0.82) 6.54 1.34 1.44 8.35 3.09 (0.29) (0.04) (0.03) 2.03 38.32
- -------------------------------------------------------------------------------------------------------------------------------
1994 (4.48) (3.29) 5.76 (0.67) 3.98 2.72 (2.87) (2.15) (0.45) 0.03 (3.51) (1.68) (6.93)
- -------------------------------------------------------------------------------------------------------------------------------
1995 (3.05) 8.41 7.90 4.71 1.86 (2.84) 0.27 (0.05) (1.14) (0.26) 2.43 3.42 23.03
- -------------------------------------------------------------------------------------------------------------------------------
1996 4.07 (3.48) (0.16) 3.50 ( 2.44) 0.51 (1.09) 0.47 3.34 N/A N/A N/A 4.54
(9 MONTHS)
- -------------------------------------------------------------------------------------------------------------------------------
* This return is not reduced by organizational and offering expenses of
$639,102.
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS
WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
APPI-5
MONTHLY RATES OF RETURN SINCE INCEPTION
OF OTHER CISI-SPONSORED FUNDS
IDS MANAGED FUTURES II, L.P.
- -------------------------------------------------------------------------------------------------------------------------------
MONTHLY RATES OF RETURN (%)
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Year January February March April May June July August September October November December COMPOUND
ANNUAL ROR
- -------------------------------------------------------------------------------------------------------------------------------
1988 N/A N/A (9.51) (9.54) 2.86 7.06 (3.69) (1.37) 2.48 (1.14) 0.31 (2.77) 4.32
(10 MONTHS)
- -------------------------------------------------------------------------------------------------------------------------------
1989 0.57 (7.26) 0.07 (3.20) 5.85 (5.39) 0.83 (4.48) (3.79) (4.54) 6.84 1.54 (13.04)
- -------------------------------------------------------------------------------------------------------------------------------
1990 11.27 4.26 0.86 5.00 (12.01) 2.02 6.82 7.18 3.82 (1.64) (0.73) (1.87) 25.60
- ------------------------------------------------------------------------------------------------------------------------------
1991 (2.31) (0.45) 0.80 (0.91) (1.22) 2.33 (7.19) 1.72 15.32 (5.14) 7.10 20.03 30.35
- -------------------------------------------------------------------------------------------------------------------------------
1992 (13.53) (11.22) 0.76 (5.75) 0.04 13.86 14.25 7.24 (1.81) (2.44) (2.49) (0.84) (5.77)
- -------------------------------------------------------------------------------------------------------------------------------
1993 0.33 11.51 (1.27) 6.40 0.93 3.13 8.53 1.57 (0.82) (0.20) (0.44) 3.10 37.01
- -------------------------------------------------------------------------------------------------------------------------------
1994 (4.48) (4.81) 4.56 (0.61) 3.19 4.25 (3.20) (4.62) (0.76) (0.61) (4.55) (2.62) (13.96)
- -------------------------------------------------------------------------------------------------------------------------------
1995 (3.11) 11.01 11.35 4.98 1.85 (2.20) (0.59) 0.86 (1.63) (0.01) 2.39 2.66 29.80
- -------------------------------------------------------------------------------------------------------------------------------
1996 4.81 (4.46) (0.20) 2.87 (2.46) 1.43 (1.64) 0.83 3.26 N/A N/A N/A 4.14
(9 MONTHS)
- -------------------------------------------------------------------------------------------------------------------------------
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS
WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
APPI-6
MONTHLY RATES OF RETURN SINCE INCEPTION
OF OTHER CISI-SPONSORED FUNDS
OYSTER BAY FUTURES FUND LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------------------------------------------------------
MONTHLY RATES OF RETURN (%)
- -------------------------------------------------------------------------------------------------------------------------------
Year January February March April May June July August September October November December COMPOUND
ANNUAL ROR
- -------------------------------------------------------------------------------------------------------------------------------
1988 N/A N/A N/A N/A N/A N/A N/A (4.71) (3.69) 1.67 0.28 0.10 (6.33)
(5 MONTHS)
- -------------------------------------------------------------------------------------------------------------------------------
1989 1.98 (6.31) 1.82 (8.08) 14.08 (7.27) (2.86) (8.07) (8.72) (13.12) (0.40) (0.57) (33.67)
- -------------------------------------------------------------------------------------------------------------------------------
1990 1.34 (2.35) 4.10 5.66 (2.32) (1.80) 6.60 (2.45) (2.06) (0.57) (1.69) (2.62) 1.23
- -------------------------------------------------------------------------------------------------------------------------------
1991 3.41 (0.38) 1.29 (0.08) (2.15) 0.89 (3.23) 4.70 1.00 (4.07) (2.03) 9.37 8.27
- -------------------------------------------------------------------------------------------------------------------------------
1992 (5.73) 1.14 (5.23) (4.15) 1.32 0.06 N/A N/A N/A N/A N/A N/A (12.25)
(6 MONTHS)
- -------------------------------------------------------------------------------------------------------------------------------
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS
WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
APPI-7
MONTHLY RATES OF RETURN SINCE INCEPTION
OF OTHER CISI-SPONSORED FUNDS
EVEREST FUTURES FUND II, L.P.
- -------------------------------------------------------------------------------------------------------------------------------
MONTHLY RATES OF RETURN (%)
- -------------------------------------------------------------------------------------------------------------------------------
Year January February March April May June July August September October November December COMPOUND
ANNUAL ROR
- -------------------------------------------------------------------------------------------------------------------------------
1996 N/A N/A N/A 2.49 (1.75) 2.39 (1.90) (0.78) 3.47 N/A N/A N/A 3.83
(6 MONTHS)
- -------------------------------------------------------------------------------------------------------------------------------
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS
WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
APPI-8
APPENDIX II
"BLUE SKY" GLOSSARY
PROSPECTIVE INVESTORS SHOULD BE AWARE OF THE FOLLOWING DEFINITIONS WHICH
ARE APPLIED BY THE STATE SECURITIES ADMINISTRATORS WHEN REVIEWING A PUBLIC
FUTURES FUND OFFERING FOR COMPLIANCE WITH THE "GUIDELINES FOR THE
REGISTRATION OF COMMODITY POOL PROGRAMS" STATEMENT OF POLICY PROMULGATED BY
THE NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION, INC. A COPY OF
SAID "GUIDELINES" IS FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF
WHICH THE PROSPECTUS IS A PART. THE FOLLOWING DEFINITIONS ARE REPRINTED
VERBATIM FROM SAID GUIDELINES AND MAY, ACCORDINGLY, NOT IN ALL CASES BE
RELEVANT TO AN INVESTMENT IN THE TRUST. FOR AN INDEX OF DEFINED TERMS THAT
APPEAR IN THE PROSPECTUS, SEE "INDEX OF DEFINED TERMS" AT PAGE 5.
DEFINITIONS -- As used in the Guidelines, the following terms have
the following meanings:
ADMINISTRATOR -- The official or agency administering the security
laws of a state.
ADVISOR -- Any Person who for any consideration engages in the
business of advising others, either directly or indirectly, as to the
value, purchase, or sale of Commodity Contracts or commodity options.
AFFILIATE -- An Affiliate of a Person means: (a) any Person
directly or indirectly owning, controlling or holding with power to vote
10% or more of the outstanding voting securities of such Person; (b) any
Person 10% or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held with power to vote, by such Person;
(c) any Person, directly or indirectly, controlling, controlled by, or
under common control of such Person; (d) any officer, director or partner
of such Person; or (e) if such Person is an officer, director or partner,
any Person for which such Person acts in any such capacity.
CAPITAL CONTRIBUTIONS -- The total investment in a Program by a
Participant or by all Participants, as the case may be.
COMMODITY BROKER -- Any Person who engages in the business of
effecting transactions in Commodity Contracts for the account of others or
for his or her own account.
COMMODITY CONTRACT -- A contract or option thereon providing for
the delivery or receipt at a future date of a specified amount and grade
of a traded commodity at a specified price and delivery point.
CROSS-REFERENCE SHEET -- A compilation of the Guideline sections,
referenced to the page of the prospectus, Program agreement, or other
exhibits, and justification of any deviation from the Guidelines.
NET ASSETS -- The total assets, less total liabilities, of the
Program determined on the basis of generally accepted accounting
principles. Net Assets shall include any unrealized profits or losses
on open positions, and any fee or expense including Net Asset fees
accruing to the program.
NET ASSET VALUE PER PROGRAM INTEREST -- The Net Assets divided by
the number of Program Interests outstanding.
NET WORTH -- The excess of total assets over total liabilities as
determined by generally accepted accounting principles. Net Worth shall
be determined exclusive of home, home furnishings and automobiles.
NEW TRADING PROFITS -- The excess, if any, of Net Assets at the end
of the period over Net Assets at the end of the highest previous period or
Net Assets at the date trading commences, whichever is higher, and as
further adjusted to eliminate the effect on Net Assets resulting from new
Capital Contributions, redemptions, or capital distributions, if any, made
during the period
APPII-1
decreased by interest or other income not directly related to trading
activity, earned on Program assets during the period, whether the assets
are held separately or in a margin account.
ORGANIZATIONAL AND OFFERING EXPENSES -- All expenses incurred by
the Program in connection with and in preparing a Program for registration
and subsequently offering and distributing it to the public, including,
but not limited to, total underwriting and brokerage discounts and
commissions (including fees of the underwriter's attorneys), expenses for
printing, engraving, mailing, salaries of employees while engaged in sales
activity, charges of transfer agents, registrars, trustees, escrow holders
, depositories, experts, expenses of qualification of the sale of its
Program interest under federal and state law, including taxes and fees,
accountants' and attorneys' fees.
PARTICIPANT -- The holder of a Program interest.
PERSON -- Any natural Person, partnership, corporation, association
or other legal entity.
PIT BROKERAGE FEE -- Pit Brokerage Fee shall include floor
brokerage, clearing fees, National Futures Association Fees, and exchange
fees.
PROGRAM -- A limited partnership, joint venture, corporation, trust
or other entity formed and operated for the purpose of investing in
Commodity Contracts.
PROGRAM BROKER -- A Commodity broker that effects trades in
Commodity Contracts for the account of a Program.
PROGRAM INTEREST -- A limited partnership interest or other
security representing ownership in a Program.
PYRAMIDING -- A method of using all or a part of an unrealized
profit in a Commodity Contract position to provide margin for any
additional Commodity Contracts of the same or related commodities.
SPONSOR -- Any Person directly or indirectly instrumental in
organizing a Program or any Person who will manage or participate in the
management of a Program, including a Commodity broker who pays any portion
of the Organizational Expenses of the Program, and the general partner(s)
and any other Person who regularly performs or selects the Persons who
perform services for the Program. Sponsor does not include wholly
independent third parties such as attorneys, accountants, and underwriters
whose only compensation is for professional services rendered in
connection with the offering of the units. The term "Sponsor" shall be
deemed to include its Affiliates.
VALUATION DATE -- The date as of which the Net Assets of the
Program are determined.
VALUATION PERIOD -- A regular period of time between Valuation
Dates.
APPII-2
JWH GLOBAL PORTFOLIO TRUST
AMENDED AND RESTATED
DECLARATION AND AGREEMENT OF TRUST
DATED AS OF _____, 1997
JWH GLOBAL PORTFOLIO TRUST
AMENDED AND RESTATED
DECLARATION AND AGREEMENT OF TRUST
TABLE OF CONTENTS
PAGE
1. Declaration of Trust. . . . . . . . . . . . . . . . . . . . . . . . A-1
2. The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
(a) Term; Resignation. . . . . . . . . . . . . . . . . . . . . . . A-2
(b) Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
(c) Compensation and Expenses of the Trustee . . . . . . . . . . . A-2
(d) Indemnification. . . . . . . . . . . . . . . . . . . . . . . . A-2
(e) Successor Trustee. . . . . . . . . . . . . . . . . . . . . . . A-3
(f) Liability of the Trustee . . . . . . . . . . . . . . . . . . . A-3
(g) Reliance by the Trustee and the Managing Owner; Advice
of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . A-4
(h) Not Part of Trust Estate . . . . . . . . . . . . . . . . . . . A-4
3. Principal Office. . . . . . . . . . . . . . . . . . . . . . . . . . A-4
4. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
5. Term, Dissolution, Fiscal Year and Net Asset Value. . . . . . . . . A-5
(a) Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
(b) Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . A-5
(c) Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . A-5
(d) Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . A-5
6. Net Worth of Managing Owner . . . . . . . . . . . . . . . . . . . . A-6
7. Capital Contributions; Units; Managing Owner's Liability . . . . . A-6
(a) Capital Contributions; Units . . . . . . . . . . . . . . . . . A-6
(b) Managing Owner's Liability . . . . . . . . . . . . . . . . . . A-6
8. Allocation of Profits and Losses. . . . . . . . . . . . . . . . . . A-7
(a) Capital Accounts and Allocations . . . . . . . . . . . . . . . A-7
(b) Allocation of Profit and Loss for Federal Income
Tax Purposes. . . . . . . . . . . . . . . . . . . . . . . . A-7
(c) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
(d) Limited Liability of Unitholders . . . . . . . . . . . . . . . A-10
(e) Return of Capital Contributions. . . . . . . . . . . . . . . . A-10
9. Management of the Trust . . . . . . . . . . . . . . . . . . . . . . A-10
(a) Authority of the Managing Owner. . . . . . . . . . . . . . . . A-10
(b) Fiduciary Duties . . . . . . . . . . . . . . . . . . . . . . . A-11
(c) Loans; Investments . . . . . . . . . . . . . . . . . . . . . . A-11
(d) Certain Conflicts of Interest Prohibited . . . . . . . . . . . A-12
(e) Certain Agreements . . . . . . . . . . . . . . . . . . . . . . A-12
(f) Prohibition on "Pyramiding". . . . . . . . . . . . . . . . . . A-12
(g) Freedom of Action. . . . . . . . . . . . . . . . . . . . . . . A-13
10. Audits and Reports to Unitholders . . . . . . . . . . . . . . . . . A-13
11. Assignability of Units. . . . . . . . . . . . . . . . . . . . . . . A-14
12. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
13. Offering of Units . . . . . . . . . . . . . . . . . . . . . . . . . A-16
14. Additional Offerings. . . . . . . . . . . . . . . . . . . . . . . . A-16
15. Special Power of Attorney . . . . . . . . . . . . . . . . . . . . . A-16
16. Withdrawal of a Unitholder. . . . . . . . . . . . . . . . . . . . . A-17
17. Benefit Plan Investors. . . . . . . . . . . . . . . . . . . . . . . A-17
PAGE
18. Standard of Liability; Indemnification. . . . . . . . . . . . . . . A-18
(a) Standard of Liability for the Managing Owner . . . . . . . . . A-18
(b) Indemnification of the Managing Owner by the Trust . . . . . . A-18
(c) Indemnification by the Unitholders . . . . . . . . . . . . . . A-19
19. Amendments; Meetings. . . . . . . . . . . . . . . . . . . . . . . . A-19
(a) Amendments with Consent of the Managing Owner. . . . . . . . . A-19
(b) Amendments and Actions without Consent of the Managing Owner . A-19
(c) Meetings; Other. . . . . . . . . . . . . . . . . . . . . . . . A-20
(d) Consent by Trustee . . . . . . . . . . . . . . . . . . . . . . A-20
20. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
21. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
(a) Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
(b) Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . A-21
(c) Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
22. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . A-21
23. No Legal Title to Trust Estate. . . . . . . . . . . . . . . . . . . A-22
24. Legal Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
25. Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
Testimonium
Signatures
JWH GLOBAL PORTFOLIO TRUST
AMENDED AND RESTATED
DECLARATION AND AGREEMENT OF TRUST
This AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST ("Declaration
and Agreement of Trust") of JWH GLOBAL PORTFOLIO TRUST (the "Trust") is made and
entered into as of this ___ day of _________, 1997 by and among CIS INVESTMENTS,
INC., a Delaware corporation, as a managing owner (the "Managing Owner"),
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (the
"Trustee"), each other party who shall execute a counterpart of this Declaration
and Agreement of Trust as an owner of a unit of beneficial interest of the Trust
("Units") or who becomes a party to this Declaration and Agreement of Trust as a
Unitholder by execution of a Subscription Agreement and Power of Attorney
Signature Page or otherwise and who is shown in the books and records of the
Trust as a Unitholder (individually, a "Unitholder" and, collectively, the
"Unitholders") and the Initial Beneficial Owners (as hereinafter defined)
(solely to reflect their withdrawal from the Trust).
W I T N E S S E T H:
WHEREAS, the Managing Owner, the Trustee and the initial beneficial owners
whose names are set forth in Exhibit A to the Original Declaration and Agreement
of Trust referred to below (each an "Initial Beneficial Owner"), have hereto
formed a business trust pursuant to and in accordance with the Delaware Business
Trust Act, 12 DEL. C. Section 3801, ET SEQ., as amended from time to time (the
"Act"), by filing a Certificate of Trust with the office of the Secretary of
State of the State of Delaware on November 12, 1996, and entering into a
Declaration and Agreement of Trust, dated as of November 12, 1996 (the "Original
Declaration and Agreement of Trust"); and
WHEREAS, the parties hereto desire to continue the Trust for the business
and purpose of issuing Units, the capital of which shall be used to engage in
speculative trading, buying, selling or otherwise acquiring, holding or
disposing of futures and forward contracts on currencies, interest rate, energy
and agricultural products, metals and stock indices, hybrid instruments, swaps,
any rights pertaining thereto and any options thereon or on physical
commodities, with the objective of capital appreciation through speculative
trading, and to amend and restate the Original Declaration and Agreement of
Trust of the Trust in its entirety.
NOW THEREFORE, the parties hereto agree as follows:
1. DECLARATION OF TRUST.
The Trustee hereby declares that it holds the investments in the Trust in
trust upon and subject to the conditions set forth herein for the use and
benefit of the Unitholders. It is the intention of the parties hereto that the
Trust shall be a business trust under the Act, and that this Declaration and
Agreement of Trust shall constitute the governing instrument of the Trust. The
Trustee has filed the Certificate of Trust required by Section 3810 of the Act.
Nothing in this Declaration and Agreement of Trust shall be construed to
make the Unitholders partners or members of a joint stock association except to
the extent that such Unitholders, as constituted from time to time, are deemed
to be partners under the Internal Revenue Code of 1986, as amended (the "Code"),
and applicable state and local tax laws. Notwithstanding the foregoing, it is
the intention of the parties hereto that the Trust be treated as a partnership
for purposes of taxation under the Code and applicable state and local tax laws.
Effective as of the date hereof, the Trustee shall have all of the rights,
powers and duties set forth herein and in the Act with respect to accomplishing
the purposes of the Trust.
A-1
2. THE TRUSTEE.
(a) TERM; RESIGNATION. (i) Wilmington Trust Company has been appointed
and has agreed to serve as the Trustee of the Trust. The Trust shall have only
one trustee unless otherwise determined by the Managing Owner. The Trustee
shall serve until such time as the Managing Owner removes the Trustee or the
Trustee resigns and a successor Trustee is appointed by the Managing Owner in
accordance with the terms of Section 2(e) hereof.
(ii) The Trustee may resign at any time upon the giving of at least 60
days' advance written notice to the Trust; provided, that such resignation shall
not become effective unless and until a successor Trustee shall have been
appointed by the Managing Owner in accordance with Section 2(e) hereof. If the
Managing Owner does not act within such 60 day period, the Trustee may apply to
the Court of Chancery of the State of Delaware for the appointment of a
successor Trustee.
(b) POWERS. Except to the extent expressly set forth in this Section 2
and Sections 3 and 24, the duty and authority of the Trustee to manage the
business and affairs of the Trust are hereby delegated to the Managing Owner.
The Trustee shall have only the rights, obligations or liabilities specifically
provided for herein and in the Act and shall have no implied rights, obligations
or liabilities with respect to the business or affairs of the Trust. The
Trustee shall have the power and authority to execute, deliver, acknowledge and
file all necessary documents, including any amendments to or cancellation of the
Certificate of Trust, and to maintain all necessary records of the Trust as
required by the Act. The Trustee shall provide prompt notice to the Managing
Owner of the Trustee's performance of any of the foregoing. The Managing Owner
shall keep the Trustee informed of any actions taken by the Managing Owner with
respect to the Trust that affect the rights, obligations or liabilities of the
Trustee hereunder or under the Act.
(c) COMPENSATION AND EXPENSES OF THE TRUSTEE. The Trustee shall be
entitled to receive from the Trust or, if the assets of the Trust are
insufficient, from the Managing Owner reasonable compensation for its services
hereunder in accordance with the Trustee's standard fee schedule, and shall be
entitled to be reimbursed by the Trust or, if the assets of the Trust are
insufficient, by the Managing Owner for reasonable out-of-pocket expenses
incurred by the Trustee in the performance of its duties hereunder, including
without limitation, the reasonable compensation, out-of-pocket expenses and
disbursements of counsel and such other agents as the Trustee may employ in
connection with the exercise and performance of its rights and duties hereunder,
to the extent attributable to the Trust.
(d) INDEMNIFICATION. The Managing Owner agrees, whether or not any of
the transactions contemplated hereby shall be consummated, to assume liability
for, and do hereby indemnify, protect, save and keep harmless the Trustee and
its successors, assigns, legal representatives, officers, directors, agents and
servants (the "Indemnified Parties") from and against any and all liabilities,
obligations, losses, damages, penalties, taxes (excluding any taxes payable by
the Trustee on or measured by any compensation received by the Trustee for its
services hereunder or as indemnity payments pursuant to this Section 2(d)),
claims, actions, suits, costs, expenses or disbursements (including legal fees
and expenses) of any kind and nature whatsoever (collectively, "Expenses"),
which may be imposed on, incurred by or asserted against the Indemnified Parties
in any way relating to or arising out of the formation, operation or termination
of the Trust, the execution, delivery and performance of any other agreements to
which the Trust is a party or the action or inaction of the Trustee hereunder or
thereunder, except for Expenses resulting from the gross negligence or willful
misconduct of the Indemnified Parties. The indemnities contained in this
Section 2(d) shall survive the termination of this Declaration and Agreement of
Trust or the removal or resignation of the Trustee. In addition, the
Indemnified Parties shall be entitled to indemnification from any cash, net
equity in any commodity futures, forward and option contracts, all funds on
deposit in the accounts of the Trust, any other property held by the Trust, and
all proceeds therefrom, including any rights of the Trust pursuant to any
agreements to which the Trust is a party (the "Trust Estate") to the extent such
expenses are attributable to the formation, operation or termination of the
Trust as set forth above, and to secure the same the Trustee shall have a lien
against the Trust Estate which shall be prior to the rights of the Managing
Owner and the Unitholders to receive distributions from the Trust Estate. The
Trustee nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any liens on any part of the
Trust Estate which result from claims against the Trustee personally that are
not related to the ownership or the administration of the Trust Estate or the
transactions contemplated by any documents to which the Trust is a party.
A-2
(e) SUCCESSOR TRUSTEE. Upon the resignation or removal of the Trustee,
the Managing Owner shall appoint a successor Trustee by delivering a written
instrument to the outgoing Trustee. Any successor Trustee must satisfy the
requirements of Section 3807 of the Act. Any resignation or removal of the
Trustee and appointment of a successor Trustee shall not become effective until
a written acceptance of appointment is delivered by the successor Trustee to the
outgoing Trustee and the Managing Owner and any fees and expenses due to the
outgoing Trustee are paid. Following compliance with the preceding sentence,
the successor Trustee shall become fully vested with all of the rights, powers,
duties and obligations of the outgoing Trustee under this Declaration and
Agreement of Trust, with like effect as if originally named as Trustee, and the
outgoing Trustee shall be discharged of its duties and obligations under this
Declaration and Agreement of Trust.
(f) LIABILITY OF THE TRUSTEE. Except as otherwise provided in this
Section 2, in accepting the trust created hereby, Wilmington Trust Company acts
solely as Trustee hereunder and not in its individual capacity, and all persons
having any claim against the Trustee by reason of the transactions contemplated
by this Declaration and Agreement of Trust and any other agreement to which the
Trust is a party shall look only to the Trust Estate for payment or satisfaction
thereof. The Trustee shall not be liable or accountable hereunder or under any
other agreement to which the Trust is a party, except for the Trustee's gross
negligence or willful misconduct. In particular, but not by way of limitation:
(i) the Trustee shall have no liability or responsibility for
the validity or sufficiency of this Declaration and Agreement of Trust
or for the form, character, genuineness, sufficiency, value or
validity of the Trust Estate;
(ii) the Trustee shall not be liable for any actions taken or
omitted to be taken by it in accordance with the instructions of the
Managing Owner;
(iii) the Trustee shall not have any liability for the acts or
omissions of the Managing Owner;
(iv) the Trustee shall not be liable for its failure to
supervise the performance of any obligations of the Managing Owner,
any commodity broker, any selling agent, any additional selling agent,
"wholesaler" selling agent or "correspondent" selling agent;
(v) no provision of this Declaration and Agreement of Trust
shall require the Trustee to expend or risk funds or otherwise incur
any financial liability in the performance of any of its rights or
powers hereunder if the Trustee shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;
(vi) under no circumstances shall the Trustee be liable for
indebtedness evidenced by or other obligations of the Trust arising
under this Declaration and Agreement of Trust or any other agreements
to which the Trust is a party;
(vii) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration and Agreement
of Trust, or to institute, conduct or defend any litigation under this
Declaration and Agreement of Trust or any other agreements to which
the Trust is a party, at the request, order or direction of the
Managing Owner or any Unitholders unless the Managing Owner or such
Unitholders have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Trustee (including, without limitation, the
reasonable fees and expenses of its counsel) therein or thereby; and
(viii) notwithstanding anything contained herein to the
contrary, the Trustee shall not be required to take any action in any
jurisdiction other than in the State of Delaware if the taking of such
action will (a) require the consent or approval or authorization or
order of or the giving of notice to, or the registration with or
taking of any action in respect of, any state or other governmental
authority or agency of any jurisdiction other than the State of
Delaware, (b) result in any fee, tax or other governmental charge
under the laws of any jurisdiction or any political subdivision
thereof in existence as of the date hereof other than the State of
Delaware becoming payable by the Trustee or (c) subject
A-3
the Trustee to personal jurisdiction other than in the State of Delaware
for causes of action arising from personal acts unrelated to the
consummation by the Trustee of the transactions contemplated hereby.
(g) RELIANCE BY THE TRUSTEE AND THE MANAGING OWNER; ADVICE OF COUNSEL.
(i) In the absence of bad faith, the Trustee and the Managing Owner may
conclusively rely upon certificates or opinions furnished to the Trustee or the
Managing Owner and conforming to the requirements of this Declaration and
Agreement of Trust in determining the truth of the statements and the
correctness of the opinions contained therein, and shall incur no liability to
anyone in acting on any signature, instrument, notice, resolution, request,
consent, order, certificate, report, opinion, bond or other document or paper
which is believed to be genuine and believed to be signed by the proper party or
parties, and need not investigate any fact or matter pertaining to or in any
such document; provided, however, that the Trustee or the Managing Owner shall
have examined any certificates or opinions so as to determine compliance of the
same with the requirements of this Declaration and Agreement of Trust. The
Trustee or the Managing Owner may accept a certified copy of a resolution of the
board of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the
same is in full force and effect. As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the Trustee or the
Managing Owner may for all purposes hereof rely on a certificate, signed by the
president or any vice-president or by the treasurer or other authorized officers
of the relevant party, as to such fact or matter, and such certificate shall
constitute full protection to the Trustee or the Managing Owner for any action
taken or omitted to be taken by either of them in good faith in reliance
thereon.
(ii) In the exercise or administration of the trust hereunder and in the
performance of its duties and obligations under this Declaration and Agreement
of Trust, the Trustee, at the expense of the Trust, (i) may act directly or
through its agents, attorneys, custodians or nominees pursuant to agreements
entered into with any of them, and the Trustee shall not be liable for the
conduct or misconduct of such agents, attorneys, custodians or nominees if such
agents, attorneys, custodians or nominees shall have been selected by the
Trustee with reasonable care and (ii) may consult with counsel, accountants and
other skilled professionals to be selected with reasonable care by the Trustee;
provided that the Trustee shall not allocate any of its internal expenses or
overhead to the account of the Trust. The Trustee shall not be liable for
anything done, suffered or omitted in good faith by it in accordance with the
opinion or advice of any such counsel, accountant or other such persons.
(h) NOT PART OF TRUST ESTATE. Amounts paid to the Trustee from the Trust
Estate, if any, pursuant to this Section 2 shall not be deemed to be part of the
Trust Estate immediately after such payment.
3. PRINCIPAL OFFICE.
The address of the principal office of the Trust is c/o CIS Investments,
Inc., 233 South Wacker Drive, Suite 2300, Chicago, IL 60606. The Trustee is
located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Corporate Trust Administration. The Trustee shall receive
service of process on the Trust in the State of Delaware at the foregoing
address. In the event Wilmington Trust Company resigns or is removed as the
Trustee, the Trustee of the Trust in the State of Delaware shall be the
successor Trustee.
4. BUSINESS.
The Trust's business and purpose is to trade, buy, sell or otherwise
acquire, hold or dispose of all futures contracts including, but not limited to,
those on currencies, interest rates, energy and agricultural products, metals
and stock indices; spot and forward contracts in currencies and precious metals;
any rights pertaining thereto and any options thereon or on physical
commodities; as well as securities and any rights pertaining thereto and any
options thereon, and to engage in all activities necessary, convenient or
incidental thereto. The Trust may also engage in "hedge," arbitrage and cash
trading of any of the foregoing instruments. The Trust may engage in such
business and purpose either directly or through joint ventures, entities or
partnerships, provided that the Trust's participation in any of the foregoing
has no adverse economic or liability consequences for the Unitholders, which
consequences would not be present had the Trust engaged in that same business or
purpose directly.
The objective of the Trust's business is appreciation of its assets through
speculative trading. The Trust shall have the power to engage in all activities
which are necessary, suitable, desirable, convenient or incidental to the
accomplishment to the foregoing business and purpose. The Trust shall do so
under the direction of the Managing Owner.
A-4
5. TERM, DISSOLUTION, FISCAL YEAR AND NET ASSET VALUE.
(a) TERM. The term of the Trust commenced on the day on which the
Certificate of Trust was filed with the Secretary of State of the State of
Delaware pursuant to the provisions of the Act and shall end upon the first to
occur of the following: (1) December 31, 2026; (2) receipt by the Managing
Owner of the determination by Unitholders owning more than 50% of the Units then
owned by Unitholders to dissolve the Trust, notice of which is sent by certified
mail, return receipt requested, to the Managing Owner not less than 90 days
prior to the effective date of such dissolution; (3) the bankruptcy, retirement,
resignation, expulsion, withdrawal, insolvency or dissolution of the Managing
Owner, or any other event that causes the Managing Owner to cease to be managing
owner of the Trust unless within 90 days after such event all Unitholders agree
in writing to continue the business of the Trust and to the appointment,
effective as of the date of such event, of one or more managing owners of the
Trust; (4) the insolvency or bankruptcy of the Trust; (5) a decline in the
aggregate Net Assets of the Trust to less than $2,500,000 (except as provided in
Section 12); (6) a decline in the Net Asset Value per Unit to $50 or less
(except as provided in Section 12); (7) dissolution of the Trust pursuant
hereto; or (8) any other event which shall make it unlawful for the existence of
the Trust to be continued or require dissolution of the Trust.
(b) DISSOLUTION. Upon the occurrence of an event causing the dissolution
of the Trust, the Trust shall be dissolved and its affairs wound up. Upon the
dissolution of the Trust, the Managing Owner or, in the event that dissolution
of the Trust pursuant to Section 5(a)(3) has caused the Managing Owner to cease
to be managing owner of the Trust, a person or persons approved by the
affirmative vote of more than 50% of the Units then owned by Unitholders, shall
wind up the Trust's affairs and, in connection therewith, shall distribute the
Trust's assets in the following manner and order:
(i) FIRST TO payment and discharge of all claims of creditors
of the Trust (including, to the extent otherwise permitted by law,
creditors who are Unitholders), including by the creation of any
reserve that the Managing Owner (or its successor), in its sole
discretion, may consider reasonably necessary for any losses,
contingencies, liabilities or other matters of or relating to the
Trust; provided, however, that if and when the cause for such reserve
ceases to exist, the monies, if any, then in such reserve shall be
distributed in the manner hereinafter provided; and
(ii) SECOND TO distribution in cash of the remaining assets to
the Unitholders in proportion to their capital accounts, after giving
effect to the allocations pursuant to Section 8 hereof as if the date
of distribution were the end of a calendar year.
(c) FISCAL YEAR. The fiscal year of the Trust shall begin on January 1
of each year and end on the following December 31; provided, however, that the
first fiscal year of the Trust shall commence on the date its Certificate of
Trust is filed.
(d) NET ASSET VALUE. The Net Assets of the Trust are its assets less its
liabilities determined in accordance with generally accepted accounting
principles. The Net Asset Value per Unit is the Net Assets of the Trust divided
by the number of Units outstanding, subject to the provision of Section 8(a)
hereof.
A futures or futures option contract traded on a United States commodity
exchange shall be valued at the settlement price on the date of valuation. If
such a contract held by the Trust cannot be liquidated on the day with respect
to which Net Assets are being determined, the settlement price on the first
subsequent day on which the contract can be liquidated shall be the basis for
determining the liquidating value of such contract for such day, or such other
value as the Managing Owner may deem fair and reasonable. The liquidating value
of a futures, forward or option contract not traded on a United States commodity
exchange shall mean its liquidating value as determined by the Managing Owner on
a basis consistently applied for each different variety of such contract.
The Managing Owner may only cause the Trust to invest in joint ventures,
entities or partnerships which conform to the foregoing valuation principles.
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Organizational and initial offering cost reimbursement shall not reduce Net
Asset Value for any purpose, including calculating the redemption value of
Units; however, the amount of organizational and initial offering costs
amortized at each month-end during the amortization period will reduce Net Asset
Value as of each such month-end.
Net Asset Value may, in the discretion of the Managing Owner, be calculated
differently for purposes of determining the redemption value of Units than it is
for purposes of determining certain fees and charges due from the Trust.
Accrued Incentive Fee (as described in the Prospectus as defined in
Section 9(a)) payable to John W. Henry & Company, Inc., the Trust's trading
advisor ("JWH") (including the portion paid to JWH upon intra-calendar quarter
redemption of certain Units) shall reduce the Net Asset Value of the Trust.
6. NET WORTH OF MANAGING OWNER.
The Managing Owner agrees that at all times so long as it remains the
managing owner of the Trust, it will maintain a Net Worth at an amount not less
than 5% of the total contributions by all Unitholders to the Trust and all
entities of which the Managing Owner is general partner or managing owner. In
no event shall the Managing Owner be required to maintain a net worth in excess
of the greater of (i) $1,000,000 or (ii) the amount which the Managing Owner is
advised by counsel as necessary or advisable to ensure that the Trust is taxed
as a partnership for federal income tax purposes.
The requirements of the first sentence of the preceding paragraph may be
modified if the Managing Owner obtains an opinion of counsel for the Trust to
the effect that the proposed modification will not adversely affect the
classification of the Trust as a partnership for federal income tax purposes,
and if such modification will reflect or exceed applicable state securities and
Blue Sky law requirements and qualify under any guidelines or statements of
policy promulgated by any body or agency constituted by the various state
securities administrators having jurisdiction in the premises (including,
without limitation, the NASAA Guidelines, as defined in Section 9(a)).
7. CAPITAL CONTRIBUTIONS; UNITS; MANAGING OWNER'S LIABILITY.
(a) CAPITAL CONTRIBUTIONS; UNITS. The beneficial interests in the Trust
shall consist of two types: a general liability interest and limited liability
Units. The Managing Owner shall acquire the general liability interest, and
investors shall all acquire limited liability Units.
Upon the initial contribution by the Managing Owner to the Trust, the
Managing Owner became the holder of the general liability interest of the Trust.
Upon his or her contribution to the Trust, each Initial Beneficial Owner became
the holder of a limited liability Unit of the Trust. Upon the Initial Closing
Date (as herein defined), the Trust shall return the capital contribution of
each Initial Beneficial Owner and reacquire and cancel his or her Unit.
No certificates or other evidences of beneficial ownership of the Units
will be issued. The Unitholders' respective capital contributions to the Trust
shall be as shown on the books and records of the Trust.
Every Unitholder, by virtue of having purchased or otherwise acquired
Units, shall be deemed to have expressly consented and agreed to be bound by the
terms of this Declaration and Agreement of Trust.
Any Units acquired by the Managing Owner or any of its affiliates will be
non-voting, and will not be considered outstanding for purposes of determining
whether the majority approval of the outstanding Units has been obtained.
The general liability interest in the Trust held by the Managing Owner will
be non-voting.
(b) MANAGING OWNER'S LIABILITY. The Managing Owner shall have unlimited
liability for the repayment, satisfaction and discharge of all debts,
liabilities and obligations of the Trust to the full extent, and only to the
extent, of the Managing Owner's assets.
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The Managing Owner shall be liable for the acts, omissions, obligations and
expenses of the Trust, to the extent not paid out of the assets of the Trust, to
the same extent that the Managing Owner would be so liable if the Trust were a
partnership under the Delaware Revised Uniform Limited Partnership Act and the
Managing Owner were the general partner of such partnership. The obligations of
the Managing Owner under this paragraph shall be evidenced by its ownership of
the general liability interest.
The Managing Owner, so long as it is generally liable for the obligations
of the Trust, shall invest in the Trust, as a general liability interest, no
less than 1% of the total capital contributions to the Trust (including the
Managing Owner's contributions). The Managing Owner may (i) withdraw any
interest it may have in excess of such requirement as of any month-end or (ii)
redeem any Units which it may acquire, in each case on the same terms as any
Unitholder (although without early redemption charges). The foregoing
requirements of this paragraph may be modified if the Managing Owner obtains an
opinion of counsel for the Trust that a proposed modification will not adversely
affect the classification of the Trust as a partnership for federal income tax
purposes, and if such modification will reflect or exceed applicable state
securities and Blue Sky law requirements and qualify under any guidelines or
statements of policy promulgated by any body or agency constituted by the
various state securities administrators having jurisdiction in the premises
(including, without limitation, the NASAA Guidelines, as defined in
Section 9(a)).
8. ALLOCATION OF PROFITS AND LOSSES.
(a) CAPITAL ACCOUNTS AND ALLOCATIONS. A capital account shall be
established for each Unit and for the Managing Owner. The initial balance of
each capital account shall be the aggregate amount contributed to the Trust with
respect to a Unit, which amount shall be equal to the Net Asset Value per Unit
on the date each Unit is purchased after all accrued fees, expenses and
Incentive Fee allocations (other than unamortized organizational and initial
offering costs). The Net Asset Value per Unit prior to the Trust commencing
operations has been arbitrarily established by the Managing Owner as $100 per
Unit.
As of the close of business (as determined by the Managing Owner) on the
last business day of each month, any increase or decrease in the Trust's Net
Assets as compared to the last such determination of Net Assets shall be
credited or charged equally to the Units of all Unitholders.
In making the month-end adjustments to the capital accounts described in
the preceding paragraph, capital accounts of all Units shall be adjusted to
reflect the Brokerage Fee at the Primary Brokerage Fee Rate, as defined in
Section 8(c). Each Unitholder eligible for a Special Brokerage Fee Rate
pursuant to Section 8(c) shall, to the extent Units are available for sale, be
credited with additional Units at the their applicable Net Asset Value in an
amount equal to the difference between the adjustment to the such Unitholder's
Units at the Primary Brokerage Fee Rate and the adjustment to the such
Unitholder's Units that would have been made under the applicable Special
Brokerage Fee Rate (the "Brokerage Fee Excess"). The foregoing allocation of
additional Units shall be used solely as a means of efficiently accounting for
the Special Brokerage Fee Rate while preserving a uniform Net Asset Value per
Unit. To the extent Units are not available to be purchased with the Brokerage
Fee Excess as of such date, the Brokerage Fee Excess shall be distributed to the
Unitholder no later than 15 days after such month-end.
(b) ALLOCATION OF PROFIT AND LOSS FOR FEDERAL INCOME TAX PURPOSES. As of
the end of each fiscal year, the Trust's income and expense and capital gain or
loss shall be allocated among the Unitholders (including the Managing Owner on a
Unit-equivalent basis) pursuant to the following provisions of this Section 8(b)
for federal income tax purposes. Allocations of profit and loss shall be PRO
RATA from net capital gain or loss and net ordinary income or loss realized by
the Trust unless allocation of items of gain or income or loss or expense are
necessary to satisfy the requirements in Sections 8(b)(1)(B) and 8(b)(1)(D) that
sufficient profit and loss be allocated to tax accounts such that tax accounts
attributable to redeemed Units equal distributions in redemption of such Units.
Notwithstanding the foregoing requirement that annual allocations of profit and
loss be PRO RATA from capital and ordinary income, gain, loss and expense,
adjustments to such allocations shall be made to reflect the extent to which
income or expense is otherwise determined and periodically allocated to the
Unitholders, and such periodic allocations and adjustment shall be determined in
a manner that in the judgment of the Managing Owner is consistent with the
intent of this Section 8(b).
(1) Trust profit and loss shall be allocated as follows:
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(A) For the purpose of allocating profit or loss among
the Unitholders, there shall be established a tax account
with respect to each outstanding Unit and with respect to
the Managing Owner. The initial balance of each tax account
shall be the amount contributed to the Trust for each Unit
and the amount contributed by the Managing Owner. As of the
end of each of the first sixty months after the Trust begins
operations, the balance of such tax account shall be reduced
by each Unit's allocable share of the amount of
organizational and initial offering cost reimbursements
amortized as of the end of such month by the Trust, as
provided in Section 8(c). As of the end of each month after
the Trust begins operations, the balance of such tax account
shall be further reduced by each Unit's allocable share of
any amount payable by the Trust in respect of that month for
the costs of the ongoing offering of Units. The adjustment
to reflect the amortization of organizational and initial
offering cost reimbursements as well as ongoing offering
costs shall be made prior to the following allocations of
Trust profit and loss (and shall be taken into account in
making such allocations). Tax accounts shall be adjusted as
of the end of each fiscal year and as of the date a
Unitholder redeems any Units as follows:
(i) Each tax account shall be increased by the
amount of profit allocated to the Unitholder pursuant
to Section 8(b)(1)(B) and 8(b)(1)(C) below.
(ii) Each tax account shall be decreased by the
amount of loss allocated to the Unitholder pursuant to
Section 8(b)(1)(D) and 8(b)(1) (E) below and by the
amount of any distributions the Unitholder has received
with respect to such Unit.
(iii) When a Unit is redeemed, the tax
account attributable to such Unit (determined
after making all allocations set forth in Section
8(b)) shall be eliminated.
(B) Profits shall be allocated first to each
Unitholder who has redeemed any Units during the fiscal year
up to the excess, if any, of the amount received upon
redemption of the Units over the amount in the Unitholder's
tax account attributable to the redeemed Units.
(C) Profit remaining after the allocation thereof
pursuant to Section 8(b)(1)(B) shall be allocated next among
all Unitholders who hold Units outstanding at the end of the
applicable fiscal year whose capital accounts with respect
to such Units are in excess of their tax accounts in the
ratio that each such Unitholder's excess bears to all such
Unitholders' excesses. Profit remaining after the
allocation described in the preceding sentence shall be
allocated among all Unitholders in proportion to their
holdings of outstanding Units.
(D) Loss shall be allocated first to each Unitholder
who has redeemed any Units during the fiscal year up to the
excess, if any, of the amount in such Unitholder's tax
account attributable to the redeemed Units over the amount
received upon redemption of the Units.
(E) Loss remaining after the allocation thereof
pursuant to Section 8(b)(1)(D) shall be allocated next among
all Unitholders who hold Units outstanding at the end of the
applicable fiscal year whose tax accounts with respect to
such Units are in excess of their capital accounts in the
ratio that each such Unitholder's excess bears to all such
Unitholders' excesses. Loss remaining after the allocation
pursuant to the preceding sentence shall be allocated among
all Unitholders in proportion to their holding of
outstanding Units.
(2) In the event that a Unit has been assigned, the allocations
prescribed by this Section 8(b) shall be made with respect to such
Unit without regard to the assignment, except that in the year of
assignment the allocations prescribed by this Section 8(b) shall, to
the extent permitted for federal income tax purposes, be allocated
between the assignor and assignee using the interim closing of the
books method.
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(3) The allocation for federal income tax purposes of profit and
loss, as set forth herein, is intended to allocate taxable profit and
loss among Unitholders generally in the ratio and to the extent that
net profit and net loss are allocated to such Unitholders under
Section 8(a) hereof so as to eliminate, to the extent possible, any
disparity between a Unitholder's capital account and his tax account
with respect to each Unit then outstanding, consistent with the
principles set forth in Section 704(c) of the Code.
(4) Notwithstanding anything herein to the contrary, in the
event that at the end of any Trust taxable year any Unitholder's
capital account is adjusted for, or such Unitholder is allocated, or
there is distributed to such Unitholder any item described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) in an amount
not reasonably expected at the end of such year, and such treatment
creates a deficit balance in such Unitholder's capital account, then
such Unitholder shall be allocated all items of income and gain of the
Trust for such year and for all subsequent taxable years of the Trust
until such deficit balance has been eliminated. In the event that any
such unexpected adjustments, allocations or distributions create a
deficit balance in the capital accounts of more than one Unitholder in
any Trust taxable, all items of income and gain of the Trust for such
taxable year and all subsequent taxable years shall be allocated among
all such Unitholders in proportion to their respective deficit
balances until such deficit balances have been eliminated.
(5) The allocations of profit and loss to the Unitholders shall
not exceed the allocations permitted under Subchapter K of the Code,
as determined by the Managing Owner, whose determination shall be
binding.
The Managing Owner may adjust the allocations set forth in this Section
8(b), in the Managing Owner's discretion, if the Managing Owner believes that
doing so will achieve more equitable allocations or allocations more consistent
with the Code.
(c) EXPENSES. The Managing Owner shall advance all organizational and
initial offering costs incurred in connection with the initial public offering
of Units, for which the Managing Owner shall be reimbursed by the Trust on the
date closing of the initial public offering of Units (the "Initial Closing
Date") and such costs shall be amortized over 60 months beginning with the end
of the calendar month in which the Initial Closing Date occurs. At no month-end
will the amount amortized by the Trust exceed 1/60 of 2% of the month-end Net
Assets of the Trust. The amount amortized each month-end shall be the lesser of
(i) the product of (x) one divided by the number of months remaining in the
amortization period times (y) the unamortized balance of the capitalized
organizational and initial offering costs, or (ii) 1/60 of 2% of such month-end
Net Assets at that month-end. The amount of such expenses amortized each month
shall be allocated on a pro rata basis to each Unit outstanding at such month-
end (determined prior to any redemptions). If (i) the Trust is terminated
prior to the end of such 60-month period, or (ii) the entire amount of the
organizational and initial offering costs reimbursed to the Managing Owner is
not amortized at the end of the 60-month period due to the 2% limitation, the
Managing Owner shall return to the Trust, without interest, an amount equal to
the unamortized balance of the capitalized organizational and initial offering
costs.
The Trust shall pay no later than the fifth day of each month to Cargill
Investor Services, Inc., the Trust's clearing broker ("CIS"), the monthly
Brokerage Fee at an annual rate of 6.5% (or approximately 0.542%per month) of
the Trust's assets (after deduction of the Management Fee payable to the Trust's
trading advisor) as of the immediately preceding month-end (the "Brokerage Fee
Rate"); provided that, with respect to the month-end assets of the Trust
attributable to Units held by any Unitholder holding as of such month-end Units
originally issued at an aggregate Net Asset Value of at least $5,000,000, CIS
shall be paid a Brokerage Fee at an annual rate equal to 4.5% (or a monthly rate
of approximately 0.375%) of the assets (after deduction of the Management Fee)
attributable to such Units ("Special Brokerage Fee Rate"), as described in the
Prospectus. In the event of Unitholders acquiring Units at more than one time,
their Units will be treated on a "first-in, first-out" basis, as described in
the Prospectus, for purposes of determining whether the Special Brokerage Fee
Rate is applicable.
Any goods and services provided to the Trust by the Managing Owner shall be
provided at rates and terms at least as favorable as those which may be obtained
from third parties in arm's-length negotiations. All of the expenses which are
for the Trust's account shall be billed directly to the Trust, as appropriate.
Appropriate reserves may be
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created, accrued and charged against Net Assets for contingent liabilities,
if any, as of the date any such contingent liability becomes known to the
Managing Owner.
The Trust shall bear the costs of the continuous offering of the Units
(other than selling commissions and ongoing compensation), as incurred; provided
that the Managing Owner shall absorb, without reimbursement from the Trust, all
such costs to the extent that such costs exceed 0.5% of the Trust's average
month-end Net Assets in any fiscal year. The amount of any such costs borne by
the Trust shall be allocated on a pro rata basis to each Unit outstanding at any
month-end (determined prior to any redemptions).
Net Assets, for purposes of calculating the 2% and 0.5% limitations on
organizational and initial offering cost amortization and continuous offering
costs set forth in this Section 8(c), shall be calculated in the same manner as
calculation of the redemption value of a Unit, i.e., net of all accrued fees and
expenses including any accrued Incentive Fee (but prior to redemption charges).
(d) LIMITED LIABILITY OF UNITHOLDERS. Each Unit, when purchased in
accordance with this Declaration and Agreement of Trust, shall, except as
otherwise provided by law, be fully-paid and nonassessable. Any provisions of
this Declaration and Agreement of Trust to the contrary notwithstanding,
Unitholders (including the Managing Owner, except to the extent otherwise
provided herein) shall be entitled to the same limitation on personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware.
The Trust will indemnify, to the full extent permitted by law, each
Unitholder (other than the Managing Owner in the event that the Managing Owner
acquires Units) against any claims of liability asserted against such Unitholder
solely because such Unitholder is a beneficial owner of the Trust (other than in
respect of taxes due from such Unitholder as such a beneficial owner).
Every written note, bond, contract, instrument, certificate or undertaking
made or issued by the Managing Owner shall give notice to the effect that the
same was executed or made by or on behalf of the Trust and that the obligations
of any of the foregoing are not binding upon the Unitholders individually but
are binding only upon the assets and property of the Trust, and that no resort
shall be had to the Unitholders' personal property for the satisfaction of any
obligation or claim thereunder, and appropriate references may be made to this
Declaration and Agreement of Trust and may contain any further recital which the
Managing Owner deems appropriate, but the omission thereof shall not operate to
bind the Unitholders individually or otherwise invalidate any such note, bond,
contract, instrument, certificate or undertaking.
(e) RETURN OF CAPITAL CONTRIBUTIONS. No Unitholder or subsequent
assignee shall have any right to demand the return of its capital contribution
or any profits added thereto, except through redeeming Units or upon dissolution
of the Trust, in each case as provided herein. In no event shall a Unitholder
or subsequent assignee be entitled to demand or receive property other than
cash.
9. MANAGEMENT OF THE TRUST.
(a) AUTHORITY OF THE MANAGING OWNER. Pursuant to Section 3806 of the
Act, the Trust shall be managed by the Managing Owner, and the conduct of the
Trust's business shall be controlled and conducted solely by the Managing Owner
in accordance with this Declaration and Agreement of Trust.
The Managing Owner, to the exclusion of all other Unitholders, shall
control, conduct and manage the business of the Trust. The Managing Owner shall
have sole discretion in determining what distributions of profits and income, if
any, shall be made to the Unitholders (subject to the allocation provisions
hereof), shall execute various documents on behalf of the Trust and the
Unitholders pursuant to powers of attorney and shall supervise the liquidation
of the Trust if an event causing dissolution of the Trust occurs.
The Managing Owner may, in furtherance of the business of the Trust, cause
the Trust to buy, sell, hold or otherwise acquire or dispose of commodities,
futures contracts, options on futures contracts, and spot and forward contracts
traded on exchanges or otherwise, arbitrage positions, repurchase agreements,
interest-bearing securities, deposit accounts and similar instruments and other
assets, and cause the trading of the Trust to be limited to only certain of the
foregoing instruments. The Managing Owner is specifically authorized to enter
into brokerage, custodial and margining
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arrangements as described in the prospectus relating to the public offering
of the Units, as it may be supplemented or updated from time to time (the
"Prospectus"). The Managing Owner may engage, and compensate on behalf of
the Trust from funds of the Trust, or agree to share profits and losses with,
such persons, firms or corporations, including (except as described in this
Declaration and Agreement of Trust) the Managing Owner and any affiliated
person or entity, as the Managing Owner in its sole judgment shall deem
advisable for the conduct and operation of the business of the Trust;
provided, that no such arrangement shall allow brokerage commissions paid by
the Trust in excess of such amount as permitted under the North American
Securities Administrators Association, Inc. Guidelines for the Registration
of Commodity Pool Programs (the "NASAA Guidelines") in effect as of the date
of the Prospectus (I.E., 14% annually -- including pit brokerage and service
fees -- of the Trust's average Net Assets, excluding the assets, if any, not
directly related to trading activity). The Managing Owner shall reimburse
the Trust, on an annual basis, to the extent that the Trust's brokerage
commissions have exceeded 14% of the Trust's average Net Assets during the
preceding year.
The Managing Owner may take such other actions on behalf of the Trust as
the Managing Owner deems necessary or desirable to manage the business of the
Trust.
Any material change in the Trust's basic investment policies or structure
shall require the approval of Unitholders owning more than 50% of the Units then
outstanding. In addition, the Managing Owner shall notify Unitholders of any
material changes relating to the Trust as provided in Section 10 hereof.
The Managing Owner is hereby authorized to perform all duties imposed by
Sections 6221 through 6232 of the Code on the Managing Owner as the "tax matters
partner" of the Trust.
All Unitholders, by subscribing to the Units, will be deemed to have
consented to the Managing Owner's selection of: (i) John W. Henry & Company,
Inc. as the Trust's trading advisor; (ii) Cargill Investor Services, Inc. as the
Trust's clearing broker, with whom the Trust's trading assets will be maintained
(it being understood that CIS may place certain Trust assets with a sub-
custodian depository bank and employ the services of a third-party cash manager
solely for purposes of cash management and further that the Managing Owner may
place certain Trust assets in one or more bank accounts in the name of the Trust
and engage a third-party cash manager to manage such assets with the goal of
enhancing the net return on such assets), (iii) CIS Financial Services, Inc. as
the Trust's foreign currency and precious metals counterparty ("CISFS") and (iv)
Cargill Investor Services, Inc. as the Trust's transfer agent. The Managing
Owner is hereby specifically authorized to enter into, on behalf of the Trust,
the Trading Advisory Agreement, the Customer Agreement, Foreign Exchange Account
Agreement, Cash Bullion Account Agreement, the Escrow Agreement, the Selling
Agreement and the Transfer Agent Agreement referred to in the Prospectus.
(b) FIDUCIARY DUTIES. The Managing Owner shall be under a fiduciary
duty to conduct the affairs of the Trust in the best interests of the Trust,
provided that the Managing Owner shall not be obligated to engage in any conduct
on behalf of the Trust to the detriment of any other commodity pool to which the
Managing Owner owes similar fiduciary duties. Except as otherwise provided
herein or disclosed in the Prospectus, the Unitholders will under no
circumstances be deemed to have contracted away the fiduciary obligations owed
them by the Managing Owner under the common law. The Managing Owner's fiduciary
duty includes, among other things, the safekeeping of all funds and assets of
the Trust and the use thereof for the benefit of the Trust. The funds of the
Trust will not be commingled with the funds of any other person or entity
(deposit of funds with a commodity or securities broker, clearinghouse or
forward dealer shall not be deemed to constitute "commingling" for these
purposes). The Managing Owner will take no actions with respect to the property
of the Trust which do not benefit the Trust. The Managing Owner shall at all
times act with integrity and good faith and exercise due diligence in all
activities relating to the conduct of the business of the Trust and in resolving
conflicts of interest.
(c) LOANS; INVESTMENTS. Except as otherwise provided in Section 8(c),
the Trust shall not make loans to any party. The Managing Owner shall make
no loans to the Trust unless approved by the Unitholders in accordance with
Section 19(a). If the Managing Owner makes a loan to the Trust, the Managing
Owner shall not receive interest in excess of its interest costs, nor may the
Managing Owner receive interest in excess of the amounts which would be
charged to the Trust (without reference to the Managing Owner's financial
resources or guarantees) by unrelated banks on comparable loans for the same
purpose. The Managing Owner shall not receive "points" or other financing
charges or fees regardless of the amount. The Trust shall not invest in any
debt instruments other than Government Securities and
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other Commodity Futures Trading Commission ("CFTC")-authorized
investments, or invest in any equity security without prior notice to
Unitholders.
(d) CERTAIN CONFLICTS OF INTEREST PROHIBITED. No person or entity may
receive, directly or indirectly, any advisory or management fees, profit shares
or any profit-sharing allocation, from joint ventures, partnerships or similar
arrangements in which the Trust participates, for investment advice or
management who shares or participates in any commodity brokerage commissions
paid by the Trust; no broker may pay, directly or indirectly, rebates or
give-ups to any trading advisor, manager or joint venturer, or to the Managing
Owner or any of its affiliates; and such prohibitions may not be circumvented by
any reciprocal business arrangements; provided, however, that the foregoing
shall not prohibit the payment, from the commodity brokerage commissions paid by
the Trust, of fees for investment advisory services provided in respect of
assets of the Trust. No trading advisor shall be affiliated with the Trust's
commodity broker or any of its affiliates.
(e) CERTAIN AGREEMENTS. Any agreements between the Trust and the Managing
Owner or any affiliate of the Managing Owner shall be terminable by the Trust on
no more than 60 days' written notice.
In addition to any specific contract or agreements described herein, the
Trust and the Managing Owner on behalf of the Trust may enter into any other
contracts or agreements specifically described in or contemplated by the
Prospectus without any further act, approval or vote of the Unitholders,
notwithstanding any other provisions of this Declaration and Agreement of Trust,
the Act or any applicable laws, rules or regulations.
The Managing Owner shall not enter into any advisory agreement with any
trading advisor that does not satisfy the relevant experience requirements under
the NASAA Guidelines (i.e., a minimum of three years' experience in the managed
futures industry).
The maximum period covered by any contract entered into by the Trust,
except for the various provisions of the Selling Agreement which survive the
final closing of the sale of the Units, shall not exceed one year.
The Managing Owner is hereby specifically authorized (i) to enter into,
deliver and perform on behalf of the Trust the Trading Advisory Agreement,
Selling Agreement on the terms described in the Prospectus, (ii) to enter into,
deliver and perform on behalf of the Trust, as the case may be, the Escrow
Agreement, the Customer Agreement, the Foreign Exchange Account Agreement, the
Cash Bullion Account Agreement and the Transfer Agent Agreement as referred to
in the Prospectus, (iii) to consent, at its sole discretion, to the selection
and appointment by CIS, in its capacity as the Trust Lead Selling Agent, of one
or more Wholesalers, Additional Selling Agents and Correspondents as described
in the Prospects and in accordance with the terms of the Selling Agreement and
(iv) in the event that the Managing Owner determines to deposit Trust assets in
one or more bank accounts in the name of the Trust at a bank ("Custodian") and
engage the services of a third-party cash manager to manage such assets, to
enter into and deliver an appropriate cash management agreement and any related
agreement.
The brokerage commissions paid by the Trust shall be competitive. The
Trust shall seek the best price and services available for its commodity
transactions.
Initially all of the Trust's assets will be deposited in the Trust's
account with CIS and CISFS. CIS and CISFS will credit the Trust on the fifth
business day of each month with interest income on 100% of the Trust's average
daily assets on deposit with CIS and CISFS, respectively, during the previous
month at the average 90-day U.S. Treasury bill rate for that month in respect of
deposits denominated in dollars and at applicable rates described in the
Prospectus in respect of deposits denominated in currencies other than dollars
(which may be zero in certain cases). The Trust and the Managing Owner
reserve the right to deposit, at any time, a portion of Trust assets with a
Custodian and engage the services of a third-party cash manager to manage such
assets with the goal of enhancing net return on such assets.
(f) PROHIBITION ON "PYRAMIDING." The Trust is prohibited from employing
the trading technique commonly known as "pyramiding." A trading manager or
advisor of the Trust taking into account the Trust's open-trade equity on
existing positions in determining generally whether to acquire additional
commodity positions on behalf of the Trust will not be considered to be engaging
in "pyramiding."
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(g) FREEDOM OF ACTION. The Managing Owner is engaged, and may in the
future engage, in other business activities and shall not be required to refrain
from any other activity nor forgo any profits from any such activity, whether or
not in competition with the Trust. Neither the Trust nor any of the Unitholders
shall have any rights by virtue of this Declaration and Agreement of Trust in
and to such independent ventures or the income or profits derived therefrom.
Unitholders may similarly engage in any such other business activities. The
Managing Owner shall devote to the Trust such time as the Managing Owner may
deem advisable to conduct the Trust's business and affairs.
10. AUDITS AND REPORTS TO UNITHOLDERS.
The Trust's books shall be audited annually by an independent certified
public accountant. The Trust will use its best efforts to cause each Unitholder
to receive (i) within 90, but in no event later than 120 days, after the close
of each fiscal year certified financial statements for the fiscal year then
ended, (ii) within 90 days of the end of each fiscal year (but in no event later
than March 15 of each year) such tax information as is necessary for a
Unitholder to complete its federal income tax return and (iii) such other annual
and monthly information as the CFTC may by regulation require. The Managing
Owner shall include in the annual reports sent to Unitholders an approximate
estimate (calculated as accurately as may be reasonably practicable) of the
round-turn equivalent brokerage commission rate paid by the Trust during the
preceding year (including forward contracts on a futures-equivalent basis for
purposes of such calculation).
Unitholders or their duly authorized representatives may inspect the books
and records of the Trust, (which do not include records of the Trust's trades)
during normal business hours upon reasonable written notice to the Managing
Owner and obtain copies of such records upon payment of reasonable reproduction
costs; provided, however, that upon request by the Managing Owner, the
requesting Unitholder shall represent that the inspection and/or copies of such
records will not be used for commercial purposes unrelated to such Unitholder's
interest as an investor in the Trust.
The Managing Owner shall calculate the Net Asset Value per Unit on a
monthly basis and sell and redeem Units at Net Asset Value.
The Managing Owner shall notify the Unitholders of (i) changes to the
trading method of the Trust's trading advisor which the Managing Owner believes
to be material, (ii) changes in Brokerage Fees, Incentive Fee or other fees paid
by the Trust or (iii) material changes in the basic investment policies or
structure of the Trust. The Managing Owner shall so notify Unitholders, by
certified mail or other means of notification providing for evidence of
delivery, prior to any such change. Such notification shall set forth the
Unitholders' voting and redemption rights. The Managing Owner will send written
notice to each Unitholder within seven days of any decline in the Net Asset
Value per Unit to 50% or less of such value as of the previous month-end. Any
such notice shall contain a description of the Unitholders' voting and
redemption rights. The Trust shall pay the cost of any notification delivered
pursuant to this paragraph.
The Managing Owner shall prepare or cause to be prepared and shall file on
or before the due date (or any extension thereof) any federal, state or local
tax returns required to be filed by the Trust. The Managing Owner shall cause
the Trust to pay any taxes payable by the Trust; provided, however, that such
taxes need not be paid if the Managing Owner or the Trust is in good faith and
by appropriate legal proceedings contesting the validity, applicability or
amount thereof, and such contest does not materially endanger any right or
interest of the Trust.
The Managing Owner shall maintain and preserve all required records
relating to the Trust for a period of not less than six years from the receipt
of such records.
In particular, and not by way of limitation, the Managing Owner will retain
all Subscription Agreement and Power of Attorney Signature Pages submitted by
persons admitted as Unitholders, and all other records necessary to substantiate
that Units are sold only to purchasers for whom the Units are a suitable
investment, for at least six years after Units are sold to such persons.
The Managing Owner shall seek the best price and services for the Trust's
trading, and will, with the assistance of the Trust's commodity broker(s), make
an annual review of the commodity brokerage arrangements applicable to the
Trust. In connection with such review, the Managing Owner will ascertain, to
the extent practicable, the commodity brokerage rates charged to other major
commodity pools whose trading and operations are, in the opinion of the Managing
Owner, comparable to those of the Trust, in order to assess whether the rates
charged the Trust are reasonable in light
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of the services it receives and the terms upon which the Trust was promoted
to subscribers. If, as a result of such review, the Managing Owner
determines that such rates are unreasonable in light of the services provided
to the Trust and the terms upon which the Trust was promoted, the Managing
Owner will notify the Unitholders, setting forth the rates charged to the
Trust and several funds which are, in the Managing Owner's opinion,
comparable to the Trust. The Managing Owner shall also make an annual review
of the spot and forward trading arrangements for the Trust in an attempt to
determine whether such arrangements are competitive with those of other
comparable pools in light of the circumstances.
11. ASSIGNABILITY OF UNITS.
Each Unitholder expressly agrees that it will not assign, transfer or
dispose of, by gift or otherwise, any of its Units or any part or all of its
right, title and interest in the capital or profits of the Trust in violation of
any applicable federal or state securities laws or, except by involuntary
operation of law, without giving written notice to the Managing Owner. No
assignment, transfer or disposition by an assignee of Units or of any part of
its right, title and interest in the capital or profits of the Trust shall be
effective against the Trust, the Trustee or the Managing Owner until the
Managing Owner has received the written notice of the assignment; the Managing
Owner shall not be required to give any assignee any rights hereunder prior to
receipt of such notice. The Managing Owner may, in its sole discretion, waive
any such notice. No such assignee, except with the consent of the Managing
Owner (such consent may be withheld in the absolute discretion of the Managing
Owner), may become a substituted Unitholder, nor will the estate or any
beneficiary of a deceased Unitholder or assignee have any right to redeem Units
from the Trust except by redemption as provided in Section 12 hereof. The
Managing Owner's consent is required for the admission of a substituted
Unitholder, and the Managing Owner intends to so consent; provided, that the
Managing Owner and the Trust receive an opinion of counsel to the Managing Owner
and of counsel to the Trust that such admission will not adversely affect the
classification of the Trust as a partnership for federal income tax purposes;
and provided further, that an assignee shall not become a substituted Unitholder
without first having executed an instrument reasonably satisfactory to the
Managing Owner accepting and adopting the terms and provisions of this
Declaration and Agreement of Trust, including a Subscription Agreement and Power
of Attorney Signature Page, a counterpart signature page to this Declaration and
Agreement of Trust or other comparable document, and without having paid to the
Trust a fee sufficient to cover all reasonable expenses of the Trust in
connection with its admission as a substituted Unitholder. Each Unitholder
agrees that with the consent of the Managing Owner any assignee may become a
substituted Unitholder without need of the further act or approval of any
Unitholder. If the Managing Owner withholds consent, an assignee shall not
become a substituted Unitholder, and shall not have any of the rights of a
Unitholder, except that the assignee shall be entitled to receive that share of
capital and profits and shall have that right of redemption to which its
assignor would otherwise have been entitled. No assignment, transfer or
disposition of Units shall be effective against the Trust or the Managing Owner
until the last day of the month in which the Managing Owner receives notice of
such assignment, transfer or disposition.
12. REDEMPTIONS.
A Unitholder (including the Managing Owner except to the extent that its
power to redeem is limited by any other provision of this Declaration and
Agreement of Trust) to the extent that it owns Units or any assignee of Units of
whom the Managing Owner has received written notice as described above, may
redeem all or part of its Units, effective as of the close of business (as
determined by the Managing Owner) on the last day of any month, provided, that
(i) all liabilities, contingent or otherwise, of the Trust, except any liability
to Unitholders on account of their capital contributions, have been paid or
there remains property of the Trust sufficient to pay them, (ii) the Unitholder
redeems at least $1,000 of Units, (iii) in the case of partial redemption, such
Unitholder's investment in the Trust after the partial redemption will be at
least $1,000, and (iv) the Managing Owner shall have timely received a request
for redemption (as provided below). If Units are redeemed by a Unitholder at a
time when there is an accrued incentive fee due to the Trust's trading advisor,
the amount of such accrual attributable to the Units being redeemed will be
deducted from the redemption proceeds payable to the redeeming Unitholder and
paid to the Trust's trading advisor. Units redeemed on or before the end of the
eleventh full calendar month after such Units are issued by the Trust are
subject to early redemption charges of 3% of the Net Asset Value at which they
are redeemed. Such charges will be deducted from redemption proceeds due to the
Unitholder making the redemption and will be paid to CIS. Units are issued, for
purposes of determining whether an early redemption charge is due, as of the
date as of which the subscription price of such Units is invested in the Trust,
not when subscriptions are submitted by Unitholders or accepted by the Managing
Owner or
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subscription funds are accepted into escrow. No redemption charges shall be
applicable to Unitholders who redeem because the Trust's expenses have been
increased.
In the event that a Unitholder acquires Units as of the end of more than
one month, such Units will be treated on a "first-in, first-out" basis for
purposes of identifying which of such Units are being redeemed so as to
determine whether early redemption charges apply.
Requests for redemption as of any month-end must be received by the
Managing Owner on or before the 20th of such month (or, if the 20th is not a
business day, the next business day), or such later date as shall be acceptable
to the Managing Owner.
If as of the close of business (as determined by the Managing Owner) on any
day, the Net Asset Value of a Unit has decreased to less than 50% of the Net
Asset Value per Unit as of the previous month-end or to $50 or less, after
adding back all distributions, the Managing Owner shall cause the Trust to
liquidate all open positions as expeditiously as possible and suspend trading.
Within ten business days after the suspension of trading, the Managing Owner
shall declare a Special Redemption Date. Such Special Redemption Date shall be
a business day within 30 business days from the suspension of trading by the
Trust, and the Managing Owner shall mail notice of such date to each Unitholder
and assignee of Units of whom it has received written notice as described above,
by first-class mail, postage prepaid, not later than ten business days prior to
such Special Redemption Date, together with instructions as to the procedure
such Unitholder or assignee must follow to have its Units redeemed on such Date
(only entire, not partial, interests in the Trust may be redeemed on a Special
Redemption Date, unless otherwise determined by the Managing Owner). Upon
redemption pursuant to a Special Redemption Date, a Unitholder or any other
assignee of whom the Managing Owner has received written notice as described
above, shall receive from the Trust an amount equal to the Net Asset Value of
its Units, determined as of the close of business (as determined by the Managing
Owner) on such Special Redemption Date. No redemption charges shall be assessed
on any such Special Redemption Date. As in the case of a regular redemption, an
assignee shall not be entitled to redemption until the Managing Owner has
received written notice as described above of the assignment, transfer or
disposition under which the assignee claims an interest in the Units to be
redeemed. If, after a Special Redemption Date, the Net Assets of the Trust are
at least $1,000,000 and the Net Asset Value per Unit is in excess of $25, the
Trust may, in the discretion of the Managing Owner, resume trading.
The Managing Owner may at any time and in its discretion declare a Special
Redemption Date, should the Managing Owner determine that it is in the best
interests of the Trust to do so. If the Managing Owner declares a Special
Redemption Date, the Managing Owner shall not be required to again call a
Special Redemption Date (whether or not a Special Redemption Date would
otherwise be required to be called as described above); and the Managing Owner
in its notice of a Special Redemption Date may, at its discretion, establish the
conditions, if any, under which other Special Redemption Dates must be called,
which conditions may be determined in the sole discretion of the Managing Owner,
irrespective of the provisions of the preceding paragraph. The Managing Owner
may also, in its discretion, declare additional regular redemption dates for
Units, permit certain Unitholders to redeem at other than at month-end and waive
the notice period otherwise required to effect redemptions.
Redemption payments will be made within ten calendar days after the
month-end of redemption, except that under special circumstances, including, but
not limited to, inability to liquidate commodity positions as of a redemption
date or default or delay in payments due the Trust from commodity brokers, banks
or other persons or entities, the Trust may in turn delay payment to Unitholders
or assignees requesting redemption of their Units of the proportionate part of
the Net Asset Value of such Units equal to the proportionate part of the Trust's
aggregate Net Asset Value represented by the sums which are the subject of such
default or delay.
The Managing Owner may require a Unitholder to redeem all or a portion of
such Unitholder's Units if the Managing Owner considers doing so to be desirable
for the protection of the Trust, and will use best efforts to do so to the
extent necessary to prevent the Trust from being deemed to hold "plan assets"
under the provisions of the Employee Retirement Income Security Act of 1974
("ERISA") or the Code, with respect to any "employee benefit plan" subject to
ERISA or with respect to any "plan" or "account" subject to Section 4975 of the
Code.
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13. OFFERING OF UNITS.
The Managing Owner, on behalf of the Trust shall (i) cause to be filed a
Registration Statement or Registration Statements, and such amendments thereto
as the Managing Owner may deem advisable or necessary, with the Securities and
Exchange Commission for the registration and continuous public offering of the
Units, (ii) use its best efforts to qualify the Units for sale under the
securities laws of such States of the United States or other jurisdictions as
the Managing Owner may deem advisable and (iii) take such action with respect to
the matters described in (i) and (ii) as the Managing Owner may deem advisable
or necessary.
Fractional Units, calculated to five decimal places, may be sold.
All sales of Units in the United States will be conducted by registered (or
exempt) brokers.
The Managing Owner shall not accept any subscriptions for Units if doing so
would cause the Trust to hold "plan assets" under ERISA or the Code with respect
to any "employee benefit plan" subject to ERISA or with respect to any "plan" or
"account " subject to Section 4975 of the Code. If a subscriber has its
subscription reduced for such reason, such subscriber shall be entitled to
rescind its subscription in its entirety even though subscriptions are otherwise
irrevocable.
All subscriptions will be held in escrow by The First National Bank of
Chicago (the "Escrow Agent"). The Trust shall not commence trading operations
unless and until the Managing Owner has accepted subscriptions for Units
representing an aggregate offering price of $10,000,000 pursuant to the Trust's
initial public offering of Units. The interest actually earned on subscriptions
funds while held in escrow will be invested in the Trust, and each subscriber
will be issued additional Units reflecting the subscriber's attributable share
of such interest. The Managing Owner may terminate any offering of Units at any
time. The aggregate of all capital contributions shall be available to the
Trust to carry on its business, and no interest shall be paid by the Trust on
any such contributions after such contributions are released by the Escrow
Agent.
14. ADDITIONAL OFFERINGS.
The Managing Owner may, in its discretion, continue, suspend or discontinue
the public offering of the Units, as well as make additional public or private
offerings of Units, provided that the net proceeds to the Trust of any such
sales shall in no event be less than the Net Asset Value per Unit (as defined in
Section 5(d)) at the time of sale (unless the new Unit's participation in the
profits and losses of the Trust is appropriately adjusted). No Unitholder shall
have any preemptive, preferential or other rights with respect to the issuance
or sale of any additional Units, other than as set forth in the preceding
sentence.
15. SPECIAL POWER OF ATTORNEY.
Each Unitholder by virtue of having purchased or otherwise acquired Units
does hereby irrevocably constitute and appoint the Managing Owner and each
officer of the Managing Owner, with full power of substitution, as its true and
lawful attorney-in-fact, in its name, place and stead, to execute, acknowledge,
swear to (and deliver as may be appropriate) on its behalf and file and record
in the appropriate public offices and publish (as may in the reasonable judgment
of the Managing Owner be required by law): (i) this Declaration and Agreement
of Trust, including any amendments and/or restatements hereto duly adopted as
provided herein; (ii) certificates in various jurisdictions, and amendments
and/or restatements thereto; (iii) all conveyances and other instruments which
the Managing Owner deems appropriate to qualify or continue the Trust in the
State of Delaware and the jurisdictions in which the Trust may conduct business,
or which may be required to be filed by the Trust or the Unitholders under the
laws of any jurisdiction or under any amendments or successor statutes to the
Act, to reflect the dissolution or termination of the Trust or the Trust being
governed by any amendments or successor statutes to the Act or to reorganize or
refile the Trust in a different jurisdiction; and (iv) to file, prosecute,
defend, settle or compromise litigation, claims or arbitrations on behalf of the
Trust. The Power of Attorney granted herein shall be irrevocable and deemed to
be a power coupled with an interest (including, without limitation, the interest
of the other Unitholders in the Managing Owner being able to rely on its
authority to act as contemplated by this Section 15) and shall survive and shall
not be affected by the subsequent incapacity, disability or death of a
Unitholder.
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16. WITHDRAWAL OF A UNITHOLDER.
The Trust shall be dissolved upon the death, insanity, bankruptcy,
retirement, resignation, expulsion, withdrawal, insolvency or dissolution of the
Managing Owner, or any other event that causes the Managing Owner to cease to be
the managing owner of the Trust, unless the Trust is continued pursuant to the
terms of Section 5(a)(3). In addition, the Managing Owner may withdraw from the
Trust, without any breach of this Declaration and Agreement of Trust, at any
time upon 120 days' written notice by first class mail, postage prepaid, to the
Trustee, each Unitholder and each assignee of whom the Managing Owner has
notice. If the Managing Owner withdraws from the Trust and all Unitholders
agree in writing to continue the business of the Trust and to the appointment,
effective as of the date of withdrawal of the Managing Owner, of one or more
managing owners, the Managing Owner shall pay all expenses incurred as a result
of its withdrawal. Upon removal or withdrawal, the Managing Owner shall be
entitled to redeem its interest in the Trust at its Net Asset Value on the next
valuation date following the date of removal or withdrawal.
The Managing Owner may not assign its general liability interest or its
obligation to manage the Trust without the consent of each Unitholder; provided,
however, that the consent of Unitholders is not required if the Managing Owner
assigns its general liability interest and its obligation to manage the Trust to
an entity controlling, controlled by or under common control with the Managing
Owner, provided that such entity (i) expressly assumes all obligations of the
Managing Owner under this Declaration and Agreement of Trust and (ii) is
entitled to act in the capacity of managing owner for the benefit of the Trust.
The Managing Owner shall notify all Unitholders of such assignment. The
Managing Owner will notify all Unitholders of any change in the principals of
the Managing Owner.
The death, incompetency, withdrawal, insolvency or dissolution of a
Unitholder or any other event that causes a Unitholder to cease to be a
beneficial owner (within the meaning of the Act) in the Trust shall not
terminate or dissolve the Trust, and a Unitholder, the Unitholder's estate,
custodian or personal representative shall have no right to redeem or value such
Unitholder's interest except as provided in Section 12 hereof. Each Unitholder
that is a natural person expressly agrees that in the event of his or her death,
he or she waives on behalf of himself or herself and his or her estate, and
directs the legal representatives of his or her estate and any person interested
therein to waive, the furnishing of any inventory, accounting or appraisal of
the assets of the Trust and any right to an audit or examination of the books of
the Trust. Nothing in this Section 16 shall, however, waive any right given
elsewhere in this Declaration and Agreement of Trust for Unitholders to be
informed of the Net Asset Value of their Units, to receive periodic reports,
audited financial statements and other information from the Managing Owner or
the Trust or to redeem or transfer Units.
17. BENEFIT PLAN INVESTORS.
Each Unitholder or assignee that is an "employee benefit plan" as defined
in and subject to ERISA, or a "plan" as defined in Section 4975 of the Code
(each such employee benefit plan and plan, a "Plan"), and each fiduciary thereof
who has caused the Plan to become a Unitholder or assignee (a "Plan Fiduciary"),
represents and warrants that: (a) the Plan Fiduciary has considered an
investment in the Trust by such Plan in light of the risks relating thereto; (b)
the Plan Fiduciary has determined that, in view of such considerations, the
investment in the Trust by the Plan is consistent with the Plan Fiduciary's
responsibilities under ERISA; (c) the investment in the Trust by the Plan does
not violate, and is not otherwise inconsistent with, the terms of any legal
document constituting the Plan or any trust agreement thereunder; (d) the Plan's
investment in the Trust has been duly authorized and approved by all necessary
parties; (e) none of the Managing Owner, the Trustee, JWH, CIS, CISFS, any
Selling Agent, Wholesaler, Correspondent, the Escrow Agent, any of their
respective affiliates or any of their respective agents or employees: (i) has
investment discretion with respect to the investment of assets of the Plan used
to purchase Units; (ii) has authority or responsibility to or regularly gives
investment advice with respect to the assets of the Plan used to purchase Units
for a fee and pursuant to an agreement or understanding that such advice will
serve as a primary basis for investment decisions with respect to the Plan and
that such advice will be based on the particular investment needs of the Plan;
or (iii) is an employer maintaining or contributing to the Plan; and (f) the
Plan Fiduciary: (i) is authorized to make, and is responsible for, the decision
of the Plan to invest in the Trust, including the determination that such
investment is consistent with the requirement imposed by Section 404 of ERISA
that Plan investments be diversified so as to minimize the risks of large
losses; (ii) is independent of the Managing Owner, the Trustee, JWH, CIS, CISFS,
any Selling Agent, Wholesaler, Correspondent, the Escrow Agent, and any of their
respective affiliates; and (iii) is qualified to make such investment decision.
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18. STANDARD OF LIABILITY; INDEMNIFICATION.
(a) STANDARD OF LIABILITY FOR THE MANAGING OWNER. The Managing Owner and
its Affiliates, as defined below, shall have no liability to the Trust or to any
Unitholder for any loss suffered by the Trust which arises out of any action or
inaction of the Managing Owner or its Affiliates, if the Managing Owner, in good
faith, determined that such course of conduct was in the best interests of the
Trust, and such course of conduct did not constitute negligence or misconduct of
the Managing Owner or its Affiliates.
(b) INDEMNIFICATION OF THE MANAGING OWNER BY THE TRUST. To the fullest
extent permitted by law, subject to this Section 18, the Managing Owner and its
Affiliates shall be indemnified by the Trust against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims sustained by
them in connection with the Trust; provided that such claims were not the result
of negligence or misconduct on the part of the Managing Owner or its Affiliates,
and the Managing Owner, in good faith, determined that such conduct was in the
best interests of the Trust; and provided further that Affiliates of the
Managing Owner shall be entitled to indemnification only for losses incurred by
such Affiliates in performing the duties of the Managing Owner and acting wholly
within the scope of the authority of the Managing Owner.
Notwithstanding anything to the contrary contained in the preceding two
paragraphs, the Managing Owner and its Affiliates and any persons acting as
selling agent for the Units shall not be indemnified for any losses, liabilities
or expenses arising from or out of an alleged violation of federal or state
securities laws unless (1) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee and the court approves indemnification of the litigation
costs, or (2) such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee and the court
approves indemnification of the litigation costs, or (3) a court of competent
jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that indemnification of the settlement and related costs should be
made.
In any claim for indemnification for federal or state securities law
violations, the party seeking indemnification shall place before the court the
position of the Securities and Exchange Commission, the California Department of
Corporations, the Massachusetts Securities Division, the Pennsylvania Securities
Commission, the Tennessee Securities Division, the Texas Securities Board and
any other state or applicable regulatory authority with respect to the issue of
indemnification for securities law violations.
The Trust shall not bear the cost of that portion of any insurance which
insures any party against any liability the indemnification of which is herein
prohibited.
For the purposes of this Section 18, the term "Affiliates" shall mean any
person acting on behalf of or performing services on behalf of the Trust who:
(1) directly or indirectly controls, is controlled by, or is under common
control with the Managing Owner; or (2) owns or controls 10% or more of the
outstanding voting securities of the Managing Owner; or (3) is an officer or
director of the Managing Owner; or (4) if the Managing Owner is an officer,
director, partner or trustee, is any entity for which the Managing Owner acts in
any such capacity.
Advances from the funds of the Trust to the Managing Owner or its
Affiliates for legal expenses and other costs incurred as a result of any legal
action initiated against the Managing Owner by a Unitholder are prohibited.
Advances from the funds of the Trust to the Managing Owner or its
Affiliates for legal expenses and other costs incurred as a result of a legal
action will be made only if the following three conditions are satisfied:
(1) the legal action relates to the performance of duties or services by the
Managing Owner or its Affiliates on behalf of the Trust; (2) the legal action is
initiated by a third party who is not a Unitholder; and (3) the Managing Owner
or its Affiliates undertake to repay the advanced funds, with interest from the
initial date of such advance, to the Trust in cases in which they would not be
entitled to indemnification under the standard of liability set forth in Section
18(a).
In no event shall any indemnity or exculpation provided for herein be more
favorable to the Managing Owner or any Affiliate than that contemplated by the
NASAA Guidelines as in effect on the date of this Declaration and Agreement of
Trust.
A-18
In no event shall any indemnification permitted by this subsection (b) of
Section 18 be made by the Trust unless all provisions of this Section for the
payment of indemnification have been complied with in all respects.
Furthermore, it shall be a precondition of any such indemnification that the
Trust receive a determination of qualified independent legal counsel in a
written opinion that the party which seeks to be indemnified hereunder has met
the applicable standard of conduct set forth herein. Receipt of any such
opinion shall not, however, in itself, entitle any such party to indemnification
unless indemnification is otherwise proper hereunder. Any indemnification
payable by the Trust hereunder shall be made only as provided in the specific
case.
In no event shall any indemnification obligations of the Trust under this
subsection (b) of Section 18 subject a Unitholder to any liability in excess of
that contemplated by subsection (d) of Section 8 hereof.
(c) INDEMNIFICATION BY THE UNITHOLDERS. In the event that the Trust is
made a party to any claim, dispute or litigation or otherwise incurs any loss or
expense as a result of or in connection with any activities of a Unitholder,
obligations or liabilities unrelated to the business of the Trust or as a result
of or in connection with a transfer, assignment or other disposition or an
attempted transfer, assignment or other disposition by a Unitholder or an
assignee of its Units or of any part of its right, title and interest in the
capital or profits of the Trust in violation of this Declaration and Agreement
of Trust, such Unitholder shall indemnify and reimburse the Trust for all loss
and expense incurred, including reasonable attorneys' fees.
The Managing Owner shall indemnify and hold the Trust harmless from all
loss or expense which the Trust may incur (including, without limitation, any
indemnify payments) as a result of the difference between the standard of
liability and indemnity under the Trading Advisory Agreement, the Customer
Agreement, the Foreign Exchange Account Agreement or the Cash Bullion Account
Agreement, on the one hand, and the Managing Owner's standards of liability as
set forth herein, on the other hand.
19. AMENDMENTS; MEETINGS.
(a) AMENDMENTS WITH CONSENT OF THE MANAGING OWNER. If at any time during
the term of the Trust the Managing Owner shall deem it necessary or desirable to
amend this Declaration and Agreement of Trust, the Managing Owner may proceed to
do so, provided that such amendment shall be effective only if embodied in an
instrument approved by the Managing Owner and, pursuant to a vote called by the
Managing Owner, by the holders of Units representing a majority of the
outstanding Units. Such vote shall be taken at least 30 but not more than 60
days after delivery by the Managing Owner to each Unitholder of record by
certified mail of notice of the proposed amendment and voting procedures.
Notwithstanding the foregoing, the Managing Owner may amend this Declaration and
Agreement of Trust without the consent of the Unitholders in order (i) to
clarify any clerical inaccuracy or ambiguity or reconcile any inconsistency
(including any inconsistency between this Declaration and Agreement of Trust and
the Prospectus), (ii) to effect the intent of the allocations proposed herein to
the maximum extent possible in the event of a change in the Code or the
interpretations thereof affecting such allocations, (iii) to attempt to ensure
that the Trust is not treated as an association taxable as a corporation for
federal income tax purposes, (iv) to qualify or maintain the qualification of
the Trust as a trust in any jurisdiction, (v) to delete or add any provision of
or to this Declaration and Agreement of Trust required to be deleted or added by
the Staff of the Securities and Exchange Commission or any other federal agency
or any state "Blue Sky" or similar official or in order to opt to be governed by
any amendment or successor statute to the Act, (vi) to make any amendment to
this Declaration and Agreement of Trust which the Managing Owner deems
advisable, provided that such amendment is for the benefit of and not adverse to
the Unitholders or the Trustee, or that is required by law, (vii) to make any
amendment that is appropriate or necessary, in the opinion of the Managing
Owner, to prevent the Trust or the Managing Owner or its directors, officers or
controlling persons from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, or to avoid causing the assets of
the Trust from being considered for any purpose of ERISA or Section 4975 of the
Code to constitute assets of any "employee benefit plan," as defined in and
subject to ERISA, or of a "plan," as defined in and subject to Section 4975 of
the Code.
In the event that JWH shall cease to be the sole trading advisor of the
Trust, the Managing Owner shall cause "JWH" to be deleted from the Trust's name
and take all such other actions as shall be necessary or appropriate.
(b) AMENDMENTS AND ACTIONS WITHOUT CONSENT OF THE MANAGING OWNER. In any
vote called by the Managing Owner or pursuant to subsection (c) of this Section
19, upon the affirmative vote (which may be in person or by proxy)
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of more than 50% of the Units then owned by Unitholders, the following
actions may be taken with respect to the Trust, irrespective of whether the
Managing Owner concurs: (i) this Declaration and Agreement of Trust may be
amended, provided, however, that approval of all Unitholders shall be
required in the case of amendments changing or altering this Section 19,
extending the term of the Trust, or materially changing the Trust's basic
investment policies or structure; in addition, reduction of the capital
account of any Unitholder or assignee or modification of the percentage of
profits, losses or distributions to which a Unitholder or an assignee is
entitled hereunder shall not be effected by any amendment or supplement to
this Declaration and Agreement of Trust without such Unitholder's or
assignee's written consent; (ii) the Trust may be dissolved; (iii) the
Managing Owner may be removed and replaced; (iv) a new managing owner or
managing owners may be elected if the Managing Owner withdraws from the
Trust; (v) the sale of all or substantially all of the assets of the Trust
may be approved; and (vi) any contract with the Managing Owner or any
affiliate thereof may be disapproved and, as a result, terminated upon 60
days' notice.
(c) MEETINGS; OTHER. Any Unitholder upon request addressed to the
Managing Owner shall be entitled to obtain from the Managing Owner, upon payment
in advance of reasonable reproduction and mailing costs, a list of the names and
addresses of record of all Unitholders and the number of Units held by each
(which shall be mailed by the Managing Owner to the Unitholder within ten days
of the receipt of the request); provided, that the Managing Owner may require
any Unitholder requesting such information to submit written confirmation that
such information will not be used for commercial purposes. Upon receipt of a
written proposal, signed by Unitholders owning Units representing at least 10%
of all Units then owned by Unitholders, that a meeting of the Trust be called to
vote upon any matter upon which the Unitholders may vote pursuant to this
Declaration and Agreement of Trust, the Managing Owner shall, by written notice
to each Unitholder of record sent by certified mail within 15 days after such
receipt, call a meeting of the Trust. Such meeting shall be held at least 30
but not more than 60 days after the mailing of such notice, and such notice
shall specify the date of, a reasonable place and time for, and the purpose of
such meeting. Such notice shall establish a record date for Units entitled to
vote at the meeting, which shall be not more than 15 days prior to the date
established for such meeting.
The Managing Owner may not restrict the voting rights of Unitholders as set
forth herein.
In the event that the Managing Owner or the Unitholders vote to amend this
Declaration and Agreement of Trust in any material respect, the amendment will
not become effective prior to all Unitholders having an opportunity to redeem
their Units.
(d) CONSENT BY TRUSTEE. The Trustee's written consent to any amendment
of this Declaration and Agreement of Trust shall be required, such consent not
to be unreasonably withheld; provided, however, that the Trustee may, in its
sole discretion, withhold its consent to any such amendment that would adversely
affect any right, duty or liability of, or immunity or indemnity in favor of,
the Trustee under this Declaration and Agreement of Trust or any of the
documents contemplated hereby to which the Trustee is a party, or would cause or
result in any conflict with or breach of any terms, conditions or provisions of,
or default under, the charter documents or by-laws of the Trustee or any
document contemplated hereby to which the Trustee is a party; provided further,
that the Trustee may not withhold consent for any action listed in subsections
19(b)(ii)-(vi). Notwithstanding anything to the contrary contained in this
Declaration and Agreement of Trust, the Trustee may immediately resign if, in
its sole discretion, the Trustee determines that the Unitholders' actions
pursuant to subsections 19(b)(i)-(vi) would adversely affect the Trustee in any
manner.
20. GOVERNING LAW.
The validity and construction of this Declaration and Agreement of Trust
shall be determined and governed by the laws of the State of Delaware without
regard to principles of conflicts of law; provided, that causes of action for
violations of federal or state securities laws shall not be governed by this
Section 20.
21. MISCELLANEOUS.
(a) NOTICES. All notices under this Declaration and Agreement of Trust
shall be in writing and shall be effective upon personal delivery, or if sent by
first class mail, postage prepaid, addressed to the last known address of the
party to whom such notice is to be given, upon the deposit of such notice in the
United States mails.
A-20
(b) BINDING EFFECT. This Declaration and Agreement of Trust shall inure
to and be binding upon all of the parties, their successors and assigns,
custodians, estates, heirs and personal representatives. For purposes of
determining the rights of any Unitholder or assignee hereunder, the Trust and
the Managing Owner may rely upon the Trust records as to who are Unitholders and
assignees, and all Unitholders and assignees agree that their rights shall be
determined and they shall be bound thereby.
(c) CAPTIONS. Captions in no way define, limit, extend or describe the
scope of this Declaration and Agreement of Trust nor the effect of any of its
provisions. Any reference to "persons" in this Declaration and Agreement of
Trust shall also be deemed to include entities, unless the context otherwise
requires.
22. CERTAIN DEFINITIONS.
This Declaration and Agreement of Trust contains certain provisions
required by the NASAA Guidelines. The terms used in such provisions are defined
as follows (the following definitions are included VERBATIM from such Guidelines
and, accordingly, may not in all cases be relevant to this Declaration and
Agreement of Trust):
ADMINISTRATOR. The official or agency administering the securities
laws of a state.
ADVISOR. Any Person who for any consideration engages in the
business of advising others, either directly or indirectly, as to the
value, purchase, or sale of Commodity Contracts or commodity options.
AFFILIATE. An Affiliate of a Person means: (a) any Person directly
or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities of such Person; (b) any
Person 10% or more of whose outstanding voting securities are directly
or indirectly owned, controlled or held with power to vote, by such
Person; (c) any Person, directly or indirectly, controlling,
controlled by, or under common control of such Person; (d) any
officer, director or partner of such Person; or (e) if such Person is
an officer, director or partner, any Person for which such Person acts
in any such capacity.
CAPITAL CONTRIBUTIONS. The total investment in a Program by a
Participant or by all Participants, as the case may be.
COMMODITY BROKER. Any Person who engages in the business of
effecting transactions in Commodity Contracts for the account of
others or for his or her own account.
COMMODITY CONTRACT. A contract or option thereon providing for the
delivery or receipt at a future date of a specified amount and grade
of a traded commodity at a specified price and delivery point.
CROSS REFERENCE SHEET. A compilation of the NASAA Guidelines
sections, referenced to the page of the prospectus, Program agreement,
or other exhibits, and justification of any deviation from the NASAA
Guidelines.
NET ASSETS. The total assets, less total liabilities, of the Program
determined on the basis of generally accepted accounting principles.
Net Assets shall include any unrealized profits or losses on open
positions, and any fee or expense including Net Asset fees accruing to
the Program.
NET ASSET VALUE PER PROGRAM INTEREST. The Net Assets divided by the
number of Program Interests outstanding.
NET WORTH. The excess of total assets over total liabilities as
determined by generally accepted accounting principles. Net Worth
shall be determined exclusive of home, home furnishings and
automobiles.
NEW TRADING PROFITS. The excess, if any, of Net Assets at the end of
the period over Net Assets at the end of the highest previous period
or Net Assets at the date trading commences, whichever is
A-21
higher, and as further adjusted to eliminate the effect on Net Assets
resulting from new Capital Contributions, redemptions, or capital
distributions, if any, made during the period decreased by interest or
other income, not directly related to trading activity, earned on Program
assets during the period, whether the assets are held separately or in a
margin account.
ORGANIZATIONAL AND OFFERING EXPENSES. All expenses incurred by the
Program in connection with and in preparing a Program for registration
and subsequently offering and distributing it to the public,
including, but not limited to, total underwriting and brokerage
discounts and commissions (including fees of the underwriters'
attorneys), expenses for printing, engraving, mailing, salaries of
employees while engaged in sales activity, charges of transfer agents,
registrars, trustees, escrow holders, depositories, experts, expenses
of qualification of the sale of its Program Interest under federal and
state law including taxes and fees, accountants' and attorneys' fees.
PARTICIPANT. The holder of a Program Interest.
PERSON. Any natural Person, partnership, corporation, association or
other legal entity.
PIT BROKERAGE FEE. Pit Brokerage Fee shall include floor brokerage,
clearing fees, National Futures Association fees, and exchange fees.
PROGRAM. A limited partnership, joint venture, corporation, trust or
other entity formed and operated for the purpose of investing in
Commodity Contracts.
PROGRAM BROKER. A Commodity Broker that effects trades in Commodity
Contracts for the account of a Program.
PROGRAM INTEREST. A limited partnership interest or other security
representing ownership in a Program.
PYRAMIDING. A method of using all or a part of an unrealized profit
in a Commodity Contract position to provide margin for any additional
Commodity Contracts of the same or related commodities.
SPONSOR. Any Person directly or indirectly instrumental in
organizing a Program or any Person who will manage or participate in
the management of a Program, including a Commodity Broker who pays any
portion of the Organizational and Offering Expenses of the Program,
and the general partner(s) and any other Person who regularly performs
or selects the Persons who perform services for the Program. Sponsor
does not include wholly independent third parties such as attorneys,
accountants and underwriters whose only compensation is for
professional services rendered in connection with the offering of the
units. The term "Sponsor" shall be deemed to include its Affiliates.
VALUATION DATE. The date as of which the Net Assets of the Program
are determined.
VALUATION PERIOD. A regular period of time between Valuation Dates.
Certain terms not defined herein are used with the respective meanings set forth
in the Prospectus.
23. NO LEGAL TITLE TO TRUST ESTATE.
The Unitholders shall not have legal title to any part of the Trust Estate.
24. LEGAL TITLE.
Legal title to all the Trust Estate shall be vested in the Trust as a
separate legal entity; except where applicable law in any jurisdiction requires
any part of the Trust Estate to be vested otherwise, the Managing Owner (or the
Trustee,
A-22
if required by law) may cause legal title to the Trust Estate of any portion
thereof to be held by or in the name of the Managing Owner or any other
person as nominee.
25. CREDITORS.
No creditors of any Unitholders shall have any right to obtain possession
of, or otherwise exercise legal or equitable remedies with respect to, the Trust
Estate.
IN WITNESS WHEREOF, the undersigned have duly executed this Amended and
Restated Declaration and Agreement of Trust and Trust Agreement as of the day
and year first above written.
WILMINGTON TRUST COMPANY
as Trustee
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
CIS INVESTMENTS, INC.
as Managing Owner
By:
--------------------------------
L. Carlton Anderson
Vice President
All Unitholders now and hereafter admitted as
Unitholders of the Trust, pursuant to powers of
attorney now and hereafter executed in favor of,
and granted and delivered to, the Managing Owner.
By: CIS INVESTMENTS, IN.
as Attorney-in-Fact
By:
--------------------------------
L. Carlton Anderson
Vice President
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
A-23
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
-----------------------------------------
as withdrawing Initial Beneficial Owner
A-24
-----------------------------------------
as withdrawing Initial Beneficial Owner
A-25
EXHIBIT B
JWH GLOBAL PORTFOLIO TRUST
SUBSCRIPTION REQUIREMENTS
By executing a Subscription Agreement and Power of Attorney Signature
Page for JWH GLOBAL PORTFOLIO TRUST (THE "TRUST"), each PURCHASER
("PURCHASER") of UNITS OF BENEFICIAL INTEREST ("UNITS") in the Trust
irrevocably subscribes for Units at the Net Asset Value per Unit ($100 during
the Initial Offering Period), as described in the Trust's PROSPECTUS DATED
______ __, 1996 (THE "PROSPECTUS"). The minimum initial subscription is
$5,000; $2,000 for trustees or custodians of eligible employee benefit plans
and individual retirement accounts. Incremental subscriptions will be
accepted in multiples of $100 in excess of such minimums. Existing
Unitholders may make additional investments in the Trust in $1,000 minimums,
also with $100 increments. Units are sold in fractions calculated to five
decimal places.
Purchaser is herewith delivering to Purchaser's selling agent
(hereinafter, "Selling Agent") an executed Subscription Agreement and Power
of Attorney Signature Page and either (i) delivering a check in the full
amount of the Purchaser's subscription or (ii) hereby authorizing such
Selling Agent to debit Purchaser's customer securities account maintained
with such Selling Agent for the full amount of Purchaser's subscription in
accordance with the procedures described under "Plan of Distribution --
Subscription Procedure" in the Prospectus. If Purchaser's Subscription
Agreement and Power of Attorney is accepted by CIS INVESTMENTS, INC., the
managing owner of the Trust (the "Managing Owner"), Purchaser agrees to
contribute Purchaser's subscription to the Trust and to be bound by the terms
of the Trust's Declaration and Agreement of Trust (Exhibit A to the
Prospectus). Purchaser agrees to reimburse the Trust and the Managing Owner
for any expense or loss incurred by either as a result of the cancellation of
Purchaser's Units due to a failure of the Purchaser to deliver good funds in
the amount of the subscription price of any or all of such Units.
If the undersigned is acting on behalf of an "employee benefit plan," as
defined in and subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or any "plan," as defined in Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code") (each such employee
benefit plan and plan, a "Plan"), the individual signing this Subscription
Agreement and Power of Attorney on behalf of the undersigned, in addition to
the representations and warranties set forth above, hereby further represents
and warrants as, or on behalf of the fiduciary of the Plan responsible for
purchasing a Unit (the "Plan Fiduciary") that: (a) the Plan Fiduciary has
considered an investment in the Trust for such Plan in light of the risks
relating thereto; (b) the Plan Fiduciary has determined that, in view of such
considerations, the investment in the Trust for such Plan is consistent with
the Plan Fiduciary's responsibilities under ERISA; (c) the Plan's investment
in the Trust does not violate and is not otherwise inconsistent with the
terms of any legal document constituting the Plan or any trust agreement
thereunder; (d) the Plan's investment in the Trust has been duly authorized
and approved by all necessary parties; (e) none of the Managing Owner, John
W. Henry & Company, Inc. ("JWH"), Cargill Investor Services, Inc. ("CIS"),
CIS Financial Services, Inc. ("CISFS"), any Selling Agent, wholesaler or
correspondent, The First National Bank of Chicago (the "Escrow Agent"),
Wilmington Trust Company (the "Trustee"), any of their respective affiliates
or any of their respective agents or employees (i) has investment discretion
with respect to the investment of assets of the Plan used to purchase Units;
(ii) has authority or responsibility to or regularly gives investment advice
with respect to the assets of the Plan used to purchase Units for a fee and
pursuant to an agreement or understanding that such advice will serve as a
primary basis for investment decisions with respect to the Plan and that such
advice will be based on the particular investment needs of the Plan; or (iii)
is an employer maintaining or contributing to the Plan; and (f) the Plan
Fiduciary (i) is authorized to make, and is responsible for, the decision to
invest in the Trust, including the determination that such investment is
consistent with the requirement imposed by Section 404 of ERISA that Plan
investments be diversified so as to minimize the risk of large losses, (ii)
is independent of the Managing Owner, JWH, CIS, CISFS, any Selling Agent,
wholesaler or correspondent, the Escrow Agent, the Trustee, and any of their
respective affiliates, and (iii) is qualified to make such investment
decision. The undersigned will, at the request of the Managing Owner,
furnish the Managing Owner with such information as the Managing Owner may
reasonably require to establish that the purchase of Units by the Plan does
not violate any provision of ERISA or the Code, including, without
limitation, those provisions relating to "prohibited transactions" by
"parties in interest" or "disqualified persons" as defined therein.
INVESTOR SUITABILITY
PURCHASER UNDERSTANDS THAT THE PURCHASE OF UNITS MAY BE MADE ONLY BY
PERSONS WHO, AT A MINIMUM, HAVE (I) A NET WORTH OF AT LEAST $150,000
(EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES) OR (II) AN ANNUAL GROSS
INCOME OF AT LEAST $45,000 AND A NET WORTH (SIMILARLY CALCULATED) OF AT LEAST
$45,000. RESIDENTS OF THE FOLLOWING STATES MUST MEET THE SPECIFIC
REQUIREMENTS SET FORTH BELOW (NET WORTH IS, IN ALL CASES, TO BE CALCULATED
EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES). IT IS RECOMMENDED THAT NO
INDIVIDUAL PURCHASER SHOULD INVEST MORE THAN 10% OF HIS
B-1
OR HER NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES) IN THE
UNITS AND NO ENTITY PURCHASER, INCLUDING ERISA PLANS, SHOULD INVEST MORE THAN
10% OF ITS LIQUID NET WORTH (READILY MARKETABLE SECURITIES) IN THE UNITS.
1. Arizona -- Net worth of at least $225,000 or a net worth of at
least $60,000 and annual taxable income of at least $60,000.
2. California -- Liquid net worth of at least $100,000 and an annual
taxable income of at least $50,000.
3. Iowa -- Net worth of at least $225,000 or a net worth of at least
$60,000 and an annual taxable income of at least $60,000. Minimum purchase
for individual retirement accounts and employee benefit plans in Iowa is
$2,500.
4. Maine -- Minimum subscription per investment, both initial and
subsequent, of $5,000; net worth of at least $200,000 or a net worth of at
least $50,000 and an annual income of at least $50,000. All Maine resident,
including existing Unitholders in the Trust subscribing for additional Units,
must execute a Subscription Agreement and Power of Attorney Signature Page.
Maine residents must sign a Subscription Agreement and Power of Attorney
Signature Page specifically prepared for Maine residents, a copy of which
shall accompany this Prospectus and delivered to all Maine residents.
5. Massachusetts -- Net worth of at least $225,000 or a net worth of
at least $60,000 and annual taxable income of at least $60,000.
6. Michigan -- Net worth of at least $225,000 or a net worth of at
least $60,000 and taxable income during the preceding year of at least
$60,000.
7. Minnesota -- Net worth of at least $225,000 or a net worth of at
least $60,000 and an annual income of at least $60,000.
8. Mississippi -- Net worth of at least $225,000 or a net worth of at
least $60,000 and annual taxable income of at least $60,000.
9. Missouri -- Net worth of at least $225,000 or a net worth of at
least $60,000 and annual taxable income of at least $60,000.
10. New Hampshire -- Net worth of at least $250,000 or a net worth of
at least $125,000 and an annual taxable income of at least $50,000.
11. North Carolina -- Net worth of at least $225,000 or a net worth of
at least $60,000 and annual taxable income of at least $60,000.
12. Oklahoma -- Net worth of at least $225,000 or a net worth of
%60,000 and an annual income of at least $60,000.
13. Oregon -- Net worth of at least $225,000 or a net worth of at least
$60,00 and an annual income of at least $60,000.
14. Pennsylvania -- Net worth of at least $175,000 or a net worth of at
least $100,000 and an annual income of at least $50,000.
15. South Carolina -- Net worth of at least $100,000 or a net income in
the preceding year some portion of which was subject to maximum federal and
state income tax.
16. South Dakota -- Net worth of at least $225,000 or a net worth of at
least $60,000 and annual taxable income of at least $60,000.
17. Tennessee -- Net worth of at least $250,000 or a net worth of at
least $65,000 and annual taxable income of at least $65,000.
18. Texas -- Net worth of at least $225,000 or a net worth of at least
$60,000 and annual taxable income of at least $60,000.
B-2
_________________________
In the case of IRA and SEP plans, the foregoing suitability standards
are applicable to the beneficiary of the plan for whose account the Units are
being acquired.
THE FOREGOING SUITABILITY STANDARDS ARE REGULATORY MINIMUMS ONLY.
MERELY BECAUSE PURCHASER MEETS SUCH REQUIREMENTS DOES NOT NECESSARILY MEAN
THAT A HIGH RISK, SPECULATIVE AND ILLIQUID INVESTMENT SUCH AS THE TRUST IS,
IN FACT, SUITABLE FOR PURCHASER.
B-3
ANNEX
JWH GLOBAL PORTFOLIO TRUST
REQUEST FOR REDEMPTION
JWH GLOBAL PORTFOLIO TRUST ________________________________
C/O CIS INVESTMENTS, INC. DATE
MANAGING OWNER
233 SOUTH WACKER DRIVE, SUITE 2300
CHICAGO, ILLINOIS 60606
Dear Sirs:
The undersigned (account number _________) hereby requests redemption
subject to all the terms and conditions of the Amended and Restated
Declaration and Agreement of Trust (the "Declaration and Agreement of Trust")
of JWH GLOBAL PORTFOLIO TRUST (the "Trust") of _____ Units of Beneficial
Interest ("Units"), or $_____, of Units in the Trust. (INSERT NUMBER OF
WHOLE UNITS TO BE REDEEMED. UNITHOLDERS NEED NOT REDEEM ALL OF THEIR UNITS
IN ORDER TO REDEEM CERTAIN OF THEIR UNITS PROVIDED THEY MUST REDEEM AT LEAST
$1,000 OF UNITS AND THEY MUST HOLD MINIMUM INVESTMENT OF $1,000 AFTER ANY
PARTIAL REDEMPTION. IF NO NUMBER OR DOLLAR AMOUNT IS INDICATED, ALL UNITS
HELD OF RECORD BY THE UNDERSIGNED WILL BE REDEEMED.) Units are redeemed at
the Net Asset Value per Unit, as defined in the Declaration and Agreement of
Trust, less any applicable redemption charge (see below). Redemption shall
be effective as of the end of the current calendar month; provided that this
Request for Redemption is received on or before the 20th of such month (or,
if the 20th is not a business day, the next business day). Payment of the
redemption price of Units will generally be made within ten calendar days of
the date of redemption.
The undersigned hereby represents and warrants that the undersigned is
the true, lawful and beneficial owner of the Units to which this Request for
Redemption relates, with full power and authority to request redemption of
such Units. Such Units are not subject to any pledge or otherwise encumbered
in any fashion.
Redemption charges of 3% of the Net Asset Value of Units redeemed on or
before the end of the eleventh full calendar months after the undersigned has
purchased the Units being redeemed will be deducted from the redemption price
of all such Units and paid to Cargill Investor Services, Inc, the Trust's
Futures Broker. If the undersigned has purchased Units at more than one
closing, such Units will be treated on a first-in/first-out basis for
purposes of determining whether redemption charges continue to be applicable
to such Units.
___________________
UNITED STATES UNITHOLDERS ONLY:
Under the penalties of perjury, the undersigned hereby certifies that
the Social Security Number or Taxpayer ID Number indicated on this Request
for Redemption is the undersigned's true, correct and complete Social
Security Number or Taxpayer ID Number and that the undersigned is not subject
to backup withholding under the provisions of Section 3406(a)(1)(C) of the
Internal Revenue Code.
NON-UNITED STATES UNITHOLDERS ONLY:
Under the penalties of perjury, the undersigned hereby certifies that
(a) the undersigned is not a citizen or resident of the United States or (b)
(in the case of an investor which is not an individual) the undersigned is
not a United States corporation, partnership, estate or trust.
ANN-1
SIGNATURES MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED
/ / Credit my customer securities account at:
Name of Broker-Dealer:___________________________
Account Name:__________________________________
Account Number:________________________________
/ / Send to the address below
__________________________________________________________________________
Name Street City, State and Zip Code
ENTITY UNITHOLDER
(or assignee)
______________________________________________________
(Name of Entity)
By:___________________________________________________
(Authorized corporate officer, partner or trustee)
Taxpayer ID Number _________________________
INDIVIDUAL UNITHOLDER(S)
(or assignee(s))
Name Signature Social Security Number
---- ---------- ----------------------
(Please print)
- ------------------------ --------------------- ----------------------
- ------------------------ --------------------- ----------------------
- ------------------------ --------------------- ----------------------
ANN-2
EXHIBIT C
THE EXECUTION COPY OF THE SUBSCRIPTION AGREEMENT AND POWER
OF ATTORNEY ACCOMPANIES THIS PROSPECTUS AS A SEPARATE DOCUMENT
JWH GLOBAL PORTFOLIO TRUST
UNITS OF BENEFICIAL INTEREST
------------
BY EXECUTING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
SUBSCRIBERS ARE NOT WAIVING ANY RIGHTS UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES EXCHANGE ACT OF 1934
------------
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
JWH GLOBAL PORTFOLIO TRUST
C/O CIS INVESTMENTS, INC., MANAGING OWNER
233 SOUTH WACKER DRIVE, SUITE 2300
CHICAGO, ILLINOIS 60606
Dear Sirs:
1. SUBSCRIPTION FOR UNITS. I hereby subscribe for the dollar
amount of UNITS OF BENEFICIAL INTEREST ("UNITS") in JWH GLOBAL PORTFOLIO TRUST
(the "Trust") set forth in the Subscription Agreement and Power of Attorney
Signature Page attached hereto (minimum $5,000; $2,000 for trustees or
custodians of eligible employee benefit plans and individual retirement
accounts), at a purchase price per Unit of $100 during the Initial Offering
Period or Net Asset Value during the Ongoing Offering Period. Incremental
subscriptions in excess of the foregoing minimums are permitted in $100
multiples. Existing investors may subscribe for additional Units in $1,000
minimums, also with $100 increments. Fractional Units will be issued to five
decimal places. The terms of the offering of the Units are described in the
Prospectus of the Trust dated _________, 1996 (the "Prospectus"). I have either
(i) authorized my selling agent to debit my customer securities account in the
amount of my subscription or (ii) delivered a check to my selling agent made out
to "FNBC, ESCROW AGENT FOR JWH GLOBAL PORTFOLIO TRUST." If I have chosen to
subscribe by account debit, I acknowledge that I must have my subscription
payment in such account on but not before the settlement date for my purchase of
Units, which will occur no later than three business days after the acceptance
of my subscription. My Registered Representative shall inform me of such
settlement date, on which date my account will be debited and the amounts so
debited will be transmitted directly to the Escrow Agent. CIS INVESTMENTS, INC.
(THE "MANAGING OWNER") may, in its sole and absolute discretion, accept or
reject this subscription in whole or in part. SUBSCRIPTIONS ARE REVOCABLE FOR
FIVE BUSINESS DAYS AFTER SUBMISSION. ALL UNITS ARE OFFERED SUBJECT TO PRIOR
SALE.
Subscriptions generally must be received by the Managing Owner no
later than the 20th of a month (or the next business day if the 20th is not a
business day) in order to be invested in the Units as of the end of the month.
2. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. I have received
the Prospectus and, if applicable, an account statement (current within 60 days,
relating to the Trust) and the Trust's most current annual report. I understand
that certain investor suitability standards must be met as a condition of my
investment in the Units. I acknowledge that I satisfy the applicable
requirements relating to net worth and annual income as set forth in
"Exhibit B -- Subscription Requirements" to the Prospectus. If subscriber is an
employee benefit plan, the investment in the Units by such employee benefit plan
is in compliance with all federal laws relating to such plans. If the
Subscriber is a trust under an employee benefit plan, none of the Trustee, the
Managing Owner, the Trading Advisor, the Futures Broker, the Foreign Currency
Broker, any Selling Agent, Wholesaler or correspondent, or the Escrow Agent, any
of their respective affiliates or any of their respective agents or employees:
(i) has investment discretion with respect to the investment of the assets of
such trust being used to purchase Units; (ii) has authority or responsibility to
give or regularly gives investment advice with respect to such trust assets for
a fee and pursuant to an agreement or understanding that such advise will be
based on the particular investment needs of the trust; or (iii) is an employer
maintaining or contributing to the Trust. If subscriber is not an individual,
the person signing the Subscription Agreement and Power of Attorney Signature
Page on behalf of the subscriber is duly authorized to execute such Signature
Page.
3. POWER OF ATTORNEY. In connection with my purchase of Units, I
do hereby irrevocably constitute and appoint the Managing Owner and its
successors and assigns, as my true and lawful Attorney-in-Fact, with full power
of substitution, in my name, place and stead, to (i) file, prosecute, defend,
settle or compromise litigation, claims or arbitrations on behalf of the Trust
and (ii) make, execute, sign, acknowledge, swear to, deliver, record and file
any documents or instruments which may be considered necessary or desirable by
the Managing Owner to carry out fully the provisions of the Declaration and
Agreement of Trust of the Trust, including, without limitation, the execution of
the said Agreement itself and the execution of all amendments permitted by the
terms thereof. The Power of Attorney granted hereby shall be deemed to be
coupled with an interest, shall be irrevocable, shall survive, and shall not be
affected by, my subsequent death, incapacity, disability, insolvency or
dissolution or any delivery by me of an assignment of the whole or any portion
of my Units.
4. GOVERNING LAW. Subscriber hereby acknowledges and agrees that
this Subscription Agreement and Power of Attorney shall be governed by and be
interpreted in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of laws thereof.
5. RISKS. These securities are speculative and involve a high
degree of risk. Risk factors relating to the Units include the following:
(I) INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT;
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS; AN INVESTMENT
IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK; (II) FUTURES AND
FORWARD TRADING IS SPECULATIVE, VOLATILE AND LEVERAGED, AND INVOLVES A HIGH
DEGREE OF RISK; TRADING ON FOREIGN FUTURES AND INTERBANK FORWARD MARKETS MAY
INVOLVE ADDITIONAL RISKS; (III) THE PERFORMANCE OF THE TRUST'S TRADING ADVISOR
HAS TO DATE EXHIBITED AND IS EXPECTED TO CONTINUE TO EXHIBIT CONSIDERABLE
PERFORMANCE VOLATILITY; THE UNITS ARE SUITABLE ONLY FOR A LIMITED PORTION OF THE
RISK SEGMENT OF AN INVESTMENT PORTFOLIO; (IV) SINGLE-ADVISOR FUNDS SUCH AS THE
TRUST ARE TYPICALLY CONSIDERED -- EVEN AMONG SPECULATIVE MANAGED FUTURES
FUNDS -- UNUSUALLY HIGH RISK AND VOLATILE INVESTMENTS; MOREOVER, THE TRUST IS
VULNERABLE TO ADVERSE CHANGES AFFECTING THE TRADING ADVISOR WHICH COULD DIRECTLY
IMPACT THE TRUST'S ABILITY TO CONTINUE TRADING; (V) THE TRUST IS SUBJECT TO
SUBSTANTIAL CHARGES, PAYABLE IRRESPECTIVE OF PROFITABILITY, AS WELL AS TO
QUARTERLY INCENTIVE FEE; THE MANAGING OWNER ESTIMATES THAT, ASSUMING THE TRUST
WILL EARN INTEREST INCOME EQUIVALENT TO THE 91-DAY TREASURY BILL RATE PREVAILING
ON OR ABOUT THE DATE OF THE PROSPECTUS, THE TRUST WILL NEED TO ACHIEVE TRADING
PROFITS OF APPROXIMATELY 7.92% IN ITS FIRST TWELVE MONTHS OF TRADING TO OFFSET
EXPENSES; (VI) THE TRUST MAY BE ADVERSELY AFFECTED BY INCREASES IN THE AMOUNT OF
FUNDS MANAGED BY THE TRADING ADVISOR; (VII) THE TRADING ADVISOR IS ALMOST
EXCLUSIVELY A SYSTEMATIC, TREND-FOLLOWING TRADER; MARKET CONDITIONS IN WHICH
STRONG PRICE TRENDS DO NOT DEVELOP TYPICALLY RESULT IN SUBSTANTIAL LOSSES FOR
TREND-FOLLOWING TRADERS; THE NUMBER OF SYSTEMATIC TRADERS HAS INCREASED
SIGNIFICANTLY IN RECENT YEARS, INCREASING COMPETITION AND LOWERING PROFIT
MARGINS.
See "Risk Factors" in the Prospectus beginning at page 16 of the Prospectus.
PLEASE COMPLETE THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
SIGNATURE PAGE WHICH ACCOMPANIES THIS PROSPECTUS CAREFULLY AND ENSURE THAT YOUR
REGISTERED REPRESENTATIVE KNOWS WHETHER YOU ARE RE SUBSCRIBING BY CHECK OR
ACCOUNT DEBIT.
JWH GLOBAL PORTFOLIO TRUST
UNITS OF BENEFICIAL INTEREST
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE
The investor named below, by executing and delivering this Signature Page, by
payment of the purchase price for units of beneficial interest ("Units") in
JWH GLOBAL PORTFOLIO TRUST (the "Trust") and by either (i) enclosing a check
payable to "FNBC, AS ESCROW AGENT FOR JWH GLOBAL PORTFOLIO TRUST" or
(ii) authorizing the Selling Agent (or Additional Selling Agent, as the case
may be) to debit investor's securities account in the amount set forth below,
hereby subscribes for the purchase of Units at a purchase price of $100 per
Unit during the Initial Offering Period; 100% of the Net Asset Value per Unit
during the Ongoing Offering Period.
The named investor acknowledges receipt of the Prospectus of Trust dated
_________ __, 1996 (the "Prospectus"), including the Declaration and
Agreement of Trust, the Subscription Requirements and the Subscription
Agreement and Power of Attorney set forth therein, the terms of which govern
the investment in the Units being subscribed for hereby, together with, if
applicable, recent Account Statements relating to the Trust (current within
60 calendar days) and the Trust's most recent Annual Report (unless the
information in such Annual Report has been included in this Prospectus by
amendment or supplement).
By my signature below, I represent that I satisfy the requirements relating
to new worth and annual income as set forth in Exhibit B to the Prospectus.
1) Investment Amount $|_|_|_|_|_|_|_|_|_|_|_| (minimum of $5,000, except
$2,000 minimum for IRAs and other qualified accounts; $1,000 minimum for
existing investors making an additional investment; incremental investments
of $100 multiples.)
2) Account #_____________________ (must be completed) / / Debit investor'
securities account / / Check attached
3) Social Security # |_|_|_|-|_|_|-|_|_|_|_|
Taxpayer ID # |_|_|_|-|_|_|-|_|_|_|_|
Taxable Investors (check one):
/ / Individual Investor / / Grantor or Other
/ / Joint Tenants with Right Revocable Trust
of Survivorship / / Estate
/ / Tenants in Common / / Community Property / / Partnership
/ / Trust other than Grantor or Revocable Trust
/ / UGMA/UTMA (Minor)
/ / Corporation
Non-Taxable Investors: Is this a Selling Agent Plan / / Yes / / No
(check one): / / IRA / / Pension / / Profit Sharing / / Other
___________________________ / / IRA Rollover / / SEP / / Define Benefit
4) Investor(s) Name(s):|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
5) |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Additional Information (For Estate, Partnerships, Trust and Corporations)
6) Resident Address |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Of Unitholder Street (P.O. Box numbers are not acceptable
for residence address)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
City State Zip Country Phone
7) Mailing Address |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(if different) Street
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
City State Zip Country Phone
8) Custodian Information |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name Tax ID
Mailing Address |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
City State Zip Country Phone
9) INVESTOR(S) MUST SIGN
-------------------------------- ----------------------------------
Signature Date Signature of Authorized Date
Fiduciary, Trustee, Partner or
Corporate Office
-------------------------------- ----------------------------------
Signature of Date Print Name of Authorized Date
Joint Investor (if any) Fiduciary, Trustee, Partner or
Corporate Office (specify title)
EXECUTING AND DELIVERING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
SHALL IN NO RESPECT BE DEEMED TO CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THE
SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF 1934.
JWH GLOBAL PORTFOLIO TRUST
UNITS OF BENEFICIAL INTEREST
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE
UNITED STATES INVESTORS ONLY
I have checked the following box if I am subject to backup withholding under
the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code: / /.
Under the penalties of perjury, by signature above I hereby certify that the
Social Security Number or Taxpayer ID Number set forth in Item 3 above is my
true, correct and complete Social Security Number or Taxpayer ID Number and
that the information given in the immediately preceding sentence is true,
correct and complete.
NON-UNITED STATES INVESTORS ONLY
Under the penalties of perjury, by signature above I hereby certify that (a)
I am not a citizen or resident of the United States or (b) (in the case of an
investor WHICH IS NOT an individual) the investor is not a United States
corporation, partnership, estate or trust: / /. See Form W-8 attached.
- --------------------------------------------------------------------------------
10) REGISTERED REPRESENTATIVE MUST SIGN
I hereby certify that I have informed the investor of all pertinent facts
relating to the : risks; tax consequences; liquidity and marketability;
management; and control of the Managing Owner with respect to an investment
in the Units, as set forth in the Prospectus. I have also informed the
investor of the unlikelihood of a public trading market developing for the
Units and the restrictions on the redemption of Units. I do not have
discretionary authority over the account of an investor.
I have reasonable grounds to believe, based on information obtained from the
investor concerning his/her investment objectives, other investments,
financial situation and needs and any other information known by me, that an
investment in the Trust is suitable for such investor in light of his/her
financial position, net worth and other suitable characteristics.
The Registered Representative MUST sign below in order to substantiate
compliance with Rule 2810 of the NASD (formerly Appendix F of the NASD's
Rules of Fair Practice).
X X
------------------------------------- --------------------------------------
Registered Representative Date Office Manager Signature Date
Signature (if required)
11) Selling Agent/Additional
Selling Agent |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Register Representative:
Name (Print)|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
First M.I. Last Reg. Rep. Number
Address |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street City State Zip
Phone Number|_|_|_|_|_|_|_|_|_|_|_|_| Fax Number|_|_|_|_|_|_|_|_|_|_|_|_|
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
CIS Investments, Inc., the managing owner of the Trust (the "Managing
Owner"), will advance all initial organization and offering costs (estimated
to be $500,000-$600,000), as described in the Prospectus, for which it will
be reimbursed by the Registrant on the initial closing date up to a maximum
of 2% of the Trust's average month-end Net Asset Value for the first 60
months of the Trust's operations. The Trust will amortize such
organizational and initial offering cost reimbursement over such 60-month
period. The following is an estimate of such costs:
Approximate
Amount
-----------
Securities and Exchange Commission Registration Fee*. . . . . . $ 15,152
National Association of Securities Dealers, Inc. Filing Fee*. . 5,500
Printing Expenses . . . . . . . . . . . . . . . . . . . . . . . 100,000
Fees of Certified Public Accountants. . . . . . . . . . . . . . 20,000
Blue Sky Expenses (Excluding Legal Fees). . . . . . . . . . . . 15,470
Fees of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 290,000
Escrow Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Advertising and Sales Literature. . . . . . . . . . . . . . . . 60,000
Miscellaneous Offering Costs. . . . . . . . . . . . . . . . . . 55,078
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $581,200
--------
--------
________________________
* Exact rather than estimated.
Item 14. Indemnification of Directors and Officers.
Section 18 of the Amended and Restated Declaration and Agreement of
Trust (attached as Exhibit A to the Prospectus which forms a part of this
Registration Statement) provides for the indemnification of the Managing
Owner, certain of its affiliates and certain of their respective directors,
officers and controlling persons by the Registrant in certain circumstances.
Such indemnification is limited to claims sustained by such persons in
connection with the Registrant; provided that such claims were not the result
of negligence or misconduct on the part of the Managing Owner or its
affiliates, directors, officers and controlling persons. The Registrant is
prohibited from incurring the cost of any insurance covering any broader
indemnification than that provided above. Advances of Registrant funds to
cover legal expenses and other costs incurred as a result of any legal action
initiated against the Managing Owner by a Unitholder are prohibited.
Item 15. On November 12, 1996, the Registrant sold one Unit of Beneficial
Interest each to certain individuals as initial beneficial owners in order to
permit the formation of the Registrant in preparation for the filing of this
Registration Statement. This transaction was exempt under Section 4(2) of
the Securities Act of the 1933, and no selling compensation was paid.
Item 16. Exhibits and Financial Statement Schedules.
The following documents are made a part of this Registration Statement:
(a) Exhibits.
S-1
Exhibit
Number Description of Document
------ -----------------------
1.01 Form of Selling Agreement among the Registrant, the Managing
Owner, John W. Henry & Company, Inc. ("JWH") and Cargill
Investor Services, Inc. ("CIS" or "Lead Selling Agent")
(including forms of Additional Selling Agent Agreement,
Wholesaling Agreement and Correspondent Selling Agent).
3.01 Certificate of Trust of the Registrant.
3.02 Declaration and Agreement of Trust.
3.03 Form of Amended and Restated Declaration and Agreement of Trust
of the Registrant (included as Exhibit A to the Prospectus).
5.01(a) Opinion of Sidley & Austin relating to the legality of the
Units.*
5.01(b) Opinion of Richards, Layton & Finger relating to the legality
of the Units*
8.01 Opinion of Sidley & Austin with respect to federal income tax
consequences.*
10.01 Form of Trading Advisory Agreement among the Registrant, the
Managing Owner, CIS and JWH.
10.02 Form of Customer Agreement between the Registrant and CIS.
10.03 Form of Foreign Exchange Account Agreement between the
Registrant and CIS Financial Services, Inc. ("CISFS").
10.04 Form of Cash Bullion Account Agreement between the Registrant
and CISFS.
10.05 Escrow Agreement among the Registrant, The First National Bank
of Chicago, the Managing Owner and the Lead Selling Agent.
10.06 Form of Transfer Agent Agreement.
10.07 Form of Subscription Agreement and Power of Attorney (included
as Exhibit C to the Prospectus).
23.01(a) Consent of Sidley & Austin (included in Exhibit 5.01(a)).
23.01(b) Consent of Richards, Layton & Finger (included in
Exhibit 5.01(b)).
23.02 Consent of KPMG Peat Marwick, LLP.
27 Financial Data Schedule
99.01 Securities and Exchange Commission Release No. 33-6815 --
Interpretation and Request for Public Comment -- Statement
of the Commission Regarding Disclosure by Issuers of Interests
in Publicly Offered Commodity Pools. (54 Fed. Reg. 5600;
February 6, 1989).
99.02 Commodity Futures Trading Commission -- Interpretive Statement
and Request for Comments -- Statement of the Commodity Futures
Trading Commission Regarding Disclosure by Commodity Pool
Operators of Past Performance Records and Pool Expenses and
Requests for Comments. (54 Fed. Reg. 5597; February 6, 1989).
99.03 North American Securities Administrators Association, Inc.
Guidelines for the Registration of Commodity Pool Programs.
99.04 Delaware Business Trust Act.
* To be filed by Amendment.
S-2
Item 17. Undertakings.
(a)(1) The undersigned registrant hereby undertakes to file, during
any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement which, individually or in
the aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) Insofar as indemnification for liabilities under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described in Item 14 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any such action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
S-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago
in the State of Illinois on the 26th day of November, 1996.
JWH GLOBAL PORTFOLIO TRUST
By: CIS Investments, Inc., Managing Owner
By: /s/ L. Carlton Anderson
------------------------------------
Name: L. Carlton Anderson
-----------------------------
Title: Vice President
----------------------------
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on
behalf of CIS Investments, Inc., the Managing Owner of the Registrant, in the
capacities indicated on November 26, 1996.
/s/ Hal T. Hansen President and Director
--------------------------- (Principal Executive Officer)
Hal T. Hansen
/s/ Donald Zyck Secretary and Treasurer
--------------------------- (Principal Financial and Accounting Officer)
Donald Zyck
/s/ L. Carlton Anderson Vice President and Director
---------------------------
L. Carlton Anderson
(Being the principal executive officer, the principal financial and
accounting officer and a majority of the directors of CIS Investments, Inc.)
CIS INVESTMENTS, INC., the Managing Owner of Registrant
By: /s/ Hal T. Hansen
---------------------------
Hal T. Hansen
President
S-4
JWH GLOBAL PORTFOLIO TRUST
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------- -----------------------
1.01 Form of Selling Agreement among the
Registrant, the Managing Owner, John W.
Henry & Company, Inc. ("JWH") and Cargill
Investor Services, Inc. ("CIS" or "Lead
Selling Agent") (including forms of
Additional Selling Agent Agreement,
Wholesaling Agreement and Correspondent
Selling Agent).
3.01 Certificate of Trust of the Registrant.
3.02 Declaration and Agreement of Trust.
3.03 Form of Amended and Restated Declaration
and Agreement of Trust of the Registrant
(included as Exhibit A to the Prospectus).
5.01(a) Opinion of Sidley & Austin relating to the
legality of the Units.*
5.01(b) Opinion of Richards, Layton & Finger
relating to the legality of the Units*
8.01 Opinion of Sidley & Austin with respect to
federal income tax consequences.*
10.01 Form of Trading Advisory Agreement among
the Registrant, the Managing Owner, CIS
and JWH.
10.02 Form of Customer Agreement between the
Registrant and CIS.
10.03 Form of Foreign Exchange Account Agreement
between the Registrant and CIS Financial
Services, Inc. ("CISFS").
10.04 Form of Cash Bullion Account Agreement
between the Registrant and CISFS.
10.05 Escrow Agreement among the Registrant, The
First National Bank of Chicago, the
Managing Owner and the Lead Selling Agent.
10.06 Form of Transfer Agent Agreement.
10.07 Form of Subscription Agreement and Power
of Attorney (included as Exhibit C to the
Prospectus).
23.01(a) Consent of Sidley & Austin (included in
Exhibit 5.01(a)).
23.01(b) Consent of Richards, Layton & Finger
(included in Exhibit 5.01(b)).
23.02 Consent of KPMG Peat Marwick, LLP.
27 Financial Data Schedule
99.01 Securities and Exchange Commission Release
No. 33-6815 -- Interpretation and Request
for Public Comment -- Statement of the
Commission Regarding Disclosure by Issuers
of Interests in Publicly Offered Commodity
Pools. (54 Fed. Reg. 5600; February 6,
1989).
99.02 Commodity Futures Trading Commission --
Interpretive Statement and Request for
Comments -- Statement of the Commodity
Futures Trading Commission Regarding
Disclosure by Commodity Pool Operators of
Past Performance Records and Pool Expenses
and Requests for Comments. (54 Fed. Reg.
5597; February 6, 1989).
99.03 North American Securities Administrators
Association, Inc. Guidelines for the
Registration of Commodity Pool Programs.
99.04 Delaware Business Trust Act.
* To be filed by Amendment.