SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File No. 333-16825
December 31, 1998
JWH GLOBAL TRUST
(Exact name of registrant as specified in its charter)
Delaware 36-4113382
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification #)
233 South Wacker Drive, Suite 2300, Chicago, IL 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312)460-4000
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Units of Beneficial Ownership
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K: [X]
The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the Registrant as of February
28, 1999: $95,636,575
Index to exhibits on page 26
Documents Incorporated by Reference
Incorporated by Reference in Part IV, Item 14 is Amendment No. 2
to Registration Statement No. 333-16825 of the Trust on Form S-1
under the Securities Act of 1933, declared effective on April
3, 1997.
Incorporated by Reference in Part IV, Item 14 is Registration
Statement No. 333-33937 of the Trust on Form S-1 under the
Securities Act of 1933, declared effective on September 24, 1997.
Incorporated by Reference in Part IV, Item 14 is Post-Effective
Amendment No. 1 to Registration Statement No. 333-33937 of the
Trust on Form S-1 under the Securities Act of 1933, declared
effective on June 26, 1998.
Incorporated by Reference in Part IV, Item 14 is Post-Effective
Amendment No. 2 to Registration Statement No. 333-33937 of the
Trust on Form S-1 under the Securities Act of 1933, declared
effective on March 26, 1999.
Part I
Item 1. Business
JWH Global Trust (the "Trust") is a Delaware business trust
organized on November 12, 1996 under the Delaware Business Trust
Act. The business of the Trust is the speculative trading of
commodity interests, including futures contracts on currencies,
interest rates, energy and agricultural products, metals and
stock indices, spot and forward contracts on currencies and
precious metals and exchanges for physicals ("Commodity
Interests") pursuant to the trading instructions of an
independent trading advisor. The managing owner of the Trust is
CIS Investments, Inc., a Delaware corporation organized in June
1983 ("CISI" or the "Managing Owner"). The Managing Owner is
registered as a commodity pool operator under the Commodity
Exchange Act, as amended, and is responsible for administering
the business and affairs of the Trust exclusive of trading
decisions. The Managing Owner is an affiliate of Cargill
Investor Services, Inc., the clearing broker for the Trust
("CIS" or the "Clearing Broker") and CIS Financial Services,
Inc., which acts as the Trust's currency dealer ("CISFS").
Trading decisions for the Trust are made by an independent
commodity trading advisor, John W. Henry & Company, Inc.
CIS is a "Futures Commission Merchant", the Managing Owner is a
"Commodity Pool Operator" and the trading advisor to the Trust
is a "Commodity Trading Advisor", as those terms are used in the
CE Act. As such, they are registered with and subject to
regulation by the Commodity Futures Trading Commission ("CFTC")
and the National Futures Association ("NFA"). CIS is also
registered as a broker-dealer with the National Association of
Securities Dealers, Inc. ("NASD") and the Securities and
Exchange Commission (the "SEC").
The initial public offering of the Trust's units of beneficial
interest ("Units") commenced on April 3, 1997 and concluded on
September 23, 1997. The initial offering price was $100 per
Unit until the initial closing of the Trust on May 30, 1997, and
thereafter at the current Net Asset Value of the Trust on the
last business day of the calendar month. The total amount of the
initial offering was $50,000,000. On September 24, 1997, a
registration statement was declared effective with the SEC to
register $155,000,000 of additional Units. A Post-Effective
Amendment was declared effective with the SEC on October 20,
1997 to deregister $3,120,048.99 of Units which remained unsold
upon the termination of the initial offering of the Units. On
June 26, 1998, Post-Effective Amendment No. 1 to the
registration statement was declared effective with the SEC and
the Units were offered pursuant to a Prospectus dated
June 26, 1998 until March 25, 1999. On March 26, 1999, Post-Effective
Amendment No. 2 to the registration statement was declared effective
with the SEC and the Units will be offered pursuant to a prospectus
dated March 26, 1999. As a result of the Units being offered at each
month-end's Net Asset Value, the total number of Units
authorized for the Trust is not determinable and therefore is
not disclosed in the financial statements.
The initial closing of the Trust was on May 30, 1997 and the
Trust commenced trading on June 2, 1997. The initial Beneficial
Owners of the Trust, representing ownership of $1,000, were
redeemed on May 30, 1997, prior to the commencement of trading.
Under the terms of the Fourth Amended and Restated Declaration
and Agreement of Trust, the Managing Owner may not select Trust
transactions involving the purchase or sale of any commodity
interests, but must select one or more advisors to direct the
Trust's trading with respect thereto. The Managing Owner has
chosen and caused the Trust to enter into a Trading Advisory
Agreement (the "Advisory Agreement") with John W. Henry and
Company, Inc. ("JWH" or the "Advisor"), the Trust's sole
commodity trading advisor. Commencing on June 2, 1997, after
the conclusion of the offering period with respect to the
Trust's Units, JWH began to provide commodity trading
instructions to CISI on behalf of the Trust.
The Managing Owner is responsible for the preparation of monthly
and annual reports to the Beneficial Owners; filing reports
required by the CFTC, the NFA, the SEC and any other Federal or
State agencies having jurisdiction over the Trust's operations;
calculation of the Net Asset Value (meaning the total assets
less total liabilities of the Trust) and directing payment of
the management and incentive fees payable to the Advisor under
the Advisory Agreement.
The Managing Owner provides suitable facilities and procedures
for handling redemptions, transfers, distributions of profits
(if any) and orderly liquidation of the Trust. Although CIS, an
affiliate of the Managing Owner, acts as the Trust's clearing
broker, the Managing Owner is responsible for selecting another
clearing broker in the event CIS is unable or unwilling to
continue in that capacity. The Managing Owner is further
authorized, on behalf of the Trust (i) to enter into a brokerage
clearing agreement and related customer agreements with CIS,
pursuant to which CIS will render clearing services to the
Trust; and (ii) to cause the Trust to pay brokerage commissions
at the rates provided for in the Prospectus; and to pay
delivery, insurance, storage, service and other fees and charges
incidental to the Trust's trading. The Managing Owner of the
Trust advanced organization and offering costs of $650,000. The
Trust reimbursed the Managing Owner for these costs at the
initial closing. The Trust is amortizing these costs over the
Trust's first 60 months of operations. The Managing Owner also
advances payment of ongoing offering expenses for which it
receives reimbursement of 0.5% of the Trust's net assets per
year. The Prospectus includes a complete discussion of the
Trust's fees and expenses.
The Advisory Agreement between the Trust and JWH provides that
JWH shall have sole discretion in and responsibility for the
selection of the Trust's commodity transactions with respect to
that portion of the Trust's assets allocated to it. As of
December 31, 1998, JWH was managing 100% of the Trust's assets.
The Advisory Agreement with JWH commenced on April 3, 1997 and
continued in effect until the close of business on the last day
of the 12th full calendar month following the commencement of
trading activities by the Trust, with automatic renewal for
three additional twelve-month terms, unless earlier terminated
in accordance with the termination provisions contained therein.
The Advisory Agreement shall terminate automatically in the
event that the Trust is terminated in accordance with the Fourth
Amended and Restated Declaration and Agreement of Trust. The
Advisory Agreement may be terminated by the Trust at any time,
upon 60 days' prior written notice to the Advisor. In addition,
the Advisory Agreement may be terminated by the Trust at any
time, upon written notice to the Advisor, in the event that (A)
the Net Asset Value of Trust funds allocated to the Advisor's
management decreases as of the close of trading on any business
day by more than 30% from the sum of the Net Asset Value of the
Trust's funds allocated to the Advisor on the date that Trust
commenced trading plus the Net Asset Value of any funds which
may be allocated to the Advisor thereafter (after adding back
all redemptions, distributions and reallocations made to any
additional trading advisors in respect of such assets); (B) the
Advisor is unable, to any material extent, to use the Trading
Programs (as defined in the Advisory Agreement attached hereto
as Exhibit 10.1), as the Trading Programs may be refined or
modified in the future in accordance with the terms of the
Advisory Agreement for the benefit of the Trust; (C) the
Advisor's registration as a commodity trading advisor under the
CE Act, or membership as a commodity trading advisor with NFA is
revoked, suspended, terminated or not renewed; (D) the Managing
Owner determines in good faith that the Advisor has failed to
conform to (i) the Trust's trading policies or limitations, as
they may be revised or modified, or (ii) a Trading Program; (E)
there is an unauthorized assignment of the Advisory Agreement by
the Advisor; (F) the Advisor dissolves, merges or consolidates
with another entity or sells a substantial portion of its
assets, any portion of the Trading Programs utilized by the
Trust or its business goodwill to any person or entity other
than one controlled, directly or indirectly, by John W. Henry,
in each instance without the consent of the Managing Owner; (G)
the Advisor becomes bankrupt or insolvent; (H) John W. Henry
ceases to be a principal of the Advisor; or (I) the Managing
Owner determines in good faith that such termination is
necessary for the protection of the Trust.
The Advisor has the right to terminate the Advisory Agreement at
any time, upon written notice to the Trust in the event (i) of
the receipt by the Advisor of an opinion of independent counsel
that solely by reason of the Advisor's activities with respect
to the Trust, the Advisor is required to register as an
investment adviser under the Investment Advisers Act of 1940;
(ii) that the registration of the Managing Owner as a commodity
pool operator under the CE Act, or its NFA membership as a
commodity pool operator is revoked, suspended, terminated or not
renewed; (iii) that the Managing Owner elects (pursuant to
Section 1 of the Advisory Agreement) to have the Advisor use a
different trading program in the Advisor's management of the
Trust's assets from that which the Advisor is then using to
manage such assets and the Advisor objects to using such
different trading program; (iv) that the Managing Owner
overrides a trading instruction of the Advisor pursuant to
Section 1 of the Advisory Agreement for reasons unrelated to a
determination by the Managing Owner that the Advisor has
violated the Trust's trading policies or limitations; (v) that
the Managing Owner imposes additional trading limitation(s)
pursuant to Section 1 of the Advisory Agreement which the
Advisor does not agree to follow in the Advisor's management of
its allocable share of Trust's assets; (vi) there is an
unauthorized assignment of the Advisory Agreement by the
Managing Owner of the Trust; or (vii) other good cause is shown
to which the written consent of the Managing Owner is obtained.
The Advisor may also terminate the Advisory Agreement on 60 days
written notice to the Managing Owner during any renewal term.
The Advisor will continue to advise other futures trading
accounts. The Advisor and its officers, directors and employees
also will be free to trade commodity interests for their own
accounts provided such trading is consistent with the Advisor's
obligations and responsibilities to the Trust. To the extent
that the Advisor recommends similar or identical trades to the
Trust and other accounts which they manage, the Trust may
compete with those accounts for the execution of the same or
similar trades.
Pursuant to the Advisory Agreement between the Trust and JWH,
the Trust receives 0.33% of the month-end assets under its
management after deduction of a portion of the brokerage
commissions at a 1.25% annual rate (rather than the full
brokerage commission at a 6.5% annual rate). The Trust pays JWH
a quarterly incentive fee of 15% of trading profits (after
deduction of a portion of the brokerage commissions at a 1.25%
annual rate, rather than the 6.5% annual rate) achieved on the
assets of the Trust allocated by the Managing Owner to JWH's
management. Trading profits are calculated on the basis of the
overall performance of the Trust, not the performance of each
Trading Program, utilized by JWH, considered individually. See
pages 6-8 of Exhibit 10.1 incorporated by reference herein for a
description of NAV and trading profits.
The Trust's net assets are deposited in the Trust's accounts
with CIS and CISFS, the Trust's clearing broker and currency
dealer, respectively. The Trust earns interest on 100 percent
of the Trust's average daily balances on deposit with CIS or
CISFS, as the case may be, during each month at the average
91-day Treasury bill rate for that month in respect of deposits
denominated in dollars or at the applicable rates in respect of
deposits denominated in currencies other than dollars (which may
be zero in some cases).
The Trust currently has no salaried employees and all
administrative services performed for the Trust are performed by
the Managing Owner. The Managing Owner has no employees other
than their officers and directors, all of whom are employees of
the affiliated companies of the Managing Owner.
The Trust's business constitutes only one segment for financial
reporting purposes; it is a Delaware business trust whose
purpose is to trade, buy, sell, spread or otherwise acquire,
hold or dispose of commodity interests including futures
contracts on currencies, interest rates, energy and agricultural
products, metals and stock indices, spot and forward contracts
on currencies and precious metals and exchanges for physicals.
The Trust does not engage in the production or sale of any goods
or services. The objective of the Trust business is
appreciation of its assets through speculative trading in such
commodity interests. Financial information about the Trust's
business, as of December 31, 1998, is set forth under Items 6
and 7 herein.
Competition
The Advisor and its principals, affiliates and employees are
free to trade for their own accounts and to manage other
commodity accounts during the term of the Advisory Agreement and
to use the same information and trading strategy which the
Advisor obtains, produces or utilizes in the performance of
services for the Trust. To the extent that the Advisor
recommends similar or identical trades to the Trust and other
accounts which it manages, the Trust may compete with those
accounts for the execution of the same or similar trades.
Other trading advisors who are not affiliated with the Trust may
utilize trading methods which are similar in some respects to
those methods used by the Trust's Advisor. These other trading
advisors could also be competing with the Trust for the same or
similar trades as requested by the Trust's Advisor.
Item 2. Properties
The Trust does not utilize any physical properties in the
conduct of its business. The Managing Owner use the offices of
CIS, at no additional charge to the Trust, to perform their
administration functions, and the Trust uses the offices of CIS,
again at no additional charge to the Trust, as its principal
administrative offices.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Part II
Item 5. Market for the Registrant's Units and Related Security
Holder Matters
(a) There is no established public market for the Units and
none is expected to develop.
(b) As of December 31, 1998, there were 817,899.61 Units held
by the Beneficial Owners for an investment of $94,386,640.
The Managing Owner held an investment of $1,085,906 (which
is the equivalent of 9,409.49 Units). A total of 120,556.32
Units had been redeemed by Beneficial Owners during the
period from January 1, 1998 to December 31, 1998. The
Trust's Fourth Amended and Restated Declaration and Agreement
of Trust (Exhibit 3.1 hereto) contains a full description of
redemption and distribution procedures.
(c) To date no distributions have been made to owners of
beneficial interest in the Trust.
The Fourth Amended and Restated Declaration and Agreement of Trust does not
provide for regular or periodic cash distributions, but gives the Managing
Owner sole discretion in determining what distributions, if any, the Trust
will make to its owners of beneficial interest. The Managing Owner has not
declared any such distributions to date, and do not currently intend to
declare such distributions.
Item 6. Selected Financial Data
(1997 was the Trust's first year of trading, so no data is
available prior to 1997)
Year ended December 31,
1997 1998
1. Operating Revenues(000) $6,988 $16,869
2. Income (Loss) From
Continuing Operations(000) 3,651 6,401
3. Income (Loss) Per Unit 9.70 5.70
4. Total Assets(000) 65,693 100,133
5. Long Term Obligations 0 0
6. Cash Dividend Per Unit 0 0
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Most United States commodity exchanges limit the amount of
fluctuation in commodity futures contract prices during a single
trading day by regulations. These regulations specify what are
referred to as "daily price fluctuation limits" or "daily
limits". The daily limits establish the maximum amount the
price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular
commodity, no trades may be made at a price beyond the limit.
Positions in the commodity could then be taken or liquidated
only if traders are willing to effect trades at or within the
limit during the period for trading on such day. Because the
"daily limit" rule only governs price movement for a particular
trading day, it does not limit losses. In the past, futures
prices have moved the daily limit for numerous consecutive
trading days and thereby prevented prompt liquidation of futures
positions on one side of the market, subjecting commodity
futures traders holding such positions to substantial losses for
those days.
It is also possible for an exchange or the CFTC to suspend
trading in a particular contract, order immediate settlement of
a particular contract, or direct that trading in a particular
contract be for liquidation only.
The Trust's net assets are held in brokerage accounts with CIS
and CISFS. The Trust earns interest on 100 percent of the
Trust's average daily balances on deposit with CIS or CISFS, as
the case may be, during each month at the average 91-day
Treasury bill rate for that month in respect of deposits
denominated in dollars or at the applicable rates in respect of
deposits denominated in currencies other than dollars (which may
be zero in some cases). For the calendar year ended December
31, 1998 CIS and CISFS had paid or accrued to pay interest of
$3,669,771 to the Trust. Similarly, for the calendar year ended
December 31, 1997 CIS and CISFS had paid or accrued to pay
interest of $1,042,648 to the Trust.
For the fiscal year ended December 31, 1998, investors redeemed
a total of 120,556.32 Units for $13,217,904. For the fiscal
year ended December 31, 1997 investors redeemed a total of
9,235.43 Units for $929,860.
During 1998, Beneficial Owners purchased 357,777.17 Units for
$37,576,922. The Managing Owner made a contribution of $361,483
in 1998, therefore, total contribution during 1998 equal
$37,938,405.
On December 31, 1998, the Trust had unrealized profits of
$3,078,002 and cash on deposit of $90,182,744. These positions
required margin deposits of $9,700,885. The total balance of
the Trust's accounts at CIS and CISFS was $97,741,899.
These figures compare to unrealized profits of $4,481,153, cash
on deposit of $56,278,134, margin requirements of $9,299,511 and
total balance of the Trust's accounts at CIS and CISFS of
$60,759,287 as of December 31, 1997.
During the fiscal year ended December 31, 1998, the Trust had no
credit exposure to a counterparty which is a foreign commodities
exchange which was material.
The Trust trades futures contracts on recognized global futures
exchanges through CIS. It also trades over the counter foreign
exchange forwards contracts through CISFS. At December 31,
1998, the Trust had assets of $1,418,697 on deposit at CISFS.
CISFS does not deal in foreign exchange forwards, but acts as a
broker, placing the trades immediately with large banks having
assets in excess of $100 million. At the settlement date all
transactions with each of the banks are netted and any excess or
deficit is received from or sent to the bank. All of the
Trust's foreign exchange transactions are transacted in US.
dollars.
See Footnote 5 of the Financial Statements for procedures
established by the Managing Owner to monitor and minimize market
and credit risks for the Trust. In addition to the procedures
set out in Footnote 5, the Managing Owner reviews on a daily
basis reports of the Trust's performance, including monitoring
of the daily net asset value of the Trust. The Managing Owner
also reviews the financial situation of the Trust's Clearing
Broker on a monthly basis. The Managing Owner relies on the
policies of the Clearing Broker to monitor specific credit
risks. The Clearing Broker does not engage in proprietary
trading and thus has no direct market exposure which provides
the Managing Owner assurance that the Trust will not suffer
trading losses through the Clearing Broker.
Year 2000 Readiness Disclosure
CIS surveyed major applications in 1996 to see if they were Year
2000 compliant. Systems identified with Year 2000 issues were
targeted for replacement or modification. Replacement and
modification projects are currently underway. In addition, CIS
has dedicated resources to assess our work processes and verify
that it will be able to handle the changes in the next
millennium. This process addresses software applications as
well as key vendor, bank and customer relationships.
During 1997, CIS participated in developing the industry-wide
test plan with the Futures Industry Association, with whom it
continues to work closely. CIS has participated in BETA
testing, which began in September 1998, and will participate
again with the FIA in "street wide" testing during the second
quarter of 1999.
In addition, CIS has begun developing various "contingency
plans" in the event that mission critical systems should fail.
This development is proceeding on schedule.
CIS is taking this issue seriously and has a goal of maintaining
reasonable procedures in order to eliminate as much risk as
possible to its customers (including the Trust), its
counterparties and itself. Despite the best efforts of CIS,
CISFS and CISI, there can be no assurance that the above steps
will be sufficient or that all potential problems have been
identified in order to avoid any adverse impact to the Trust.
CIS and its affiliates make no representations or warrants
related to Year 2000 readiness or compliance, including but not
limited to business interruption, whether from failures in their
own computer systems, those of the Advisors, or any other third
party.
Results of Operations
The Trust posted positive returns for 1998 and 1997 (1997 was
the Trust's first year of trading).
1998
The year 1998 was marked by declining global interest rates and
commodity prices and extremely volatile currency fluctuations.
The Trust produced a net gain of 8.55% for the calendar year.
One of the key markets that consistently reported profits during
the year was the energy sector, primarily crude oil. Short
crude oil prices throughout the year were beneficial to the
Trust. Additionally, coffee prices fell 28% during the year and
the Trust benefited from its short positions in coffee prices.
The first quarter was marked by a flight to quality in the bond
market, namely German bunds and U.S. bonds amidst turbulence in
the Asian markets. The U.S. dollar remained volatile for the
first two months of the year and strengthened during March,
primarily versus the German mark and Swiss franc. The
volatility in both these sectors produced overall losses for the
Trust. Warren Buffett was rumored and then confirmed to be
holding significant silver positions anticipating a rise in
silver prices. Long silver prices were beneficial to the Trust.
In the second quarter, the U.S. dollar strengthened against the
Japanese yen until the U.S. Government intervened to support the
Japanese yen, essentially selling the U.S. dollar and depressing
the value of the U.S. dollar relative to most major world
currencies. By July, the U.S. dollar was back at all-time highs
against the Japanese yen. Overall, the Trust gained as a result
of the fluctuation of the U.S. dollar. However, the ripple
effect created volatility for the U.S. dollar versus the
European currencies and the Trust lost on its positions in these
currencies. Precious metals, namely silver, reversed as prices
slumped. Gold prices seesawed up and down never settling on
direction. The volatility in these markets was unprofitable to
the Trust.
The third quarter was highlighted by a devaluation of the
Russian ruble which sent shock waves through the world equity
markets as traders liquated equities in favor of sovereign debt.
Even prior to the Russian crisis, the Trust was well positioned
to take advantage of rising bonds. The Trust was long the U.S.,
German and Japan bond markets. Interest rates on the U.S.
30-year long bond fell below 5%, the lowest level in over 30
years. In addition, the Trust was short the Nikkei and FTSE
equity indices. Gold and silver prices fell to 1998 lows, as
short positions in these precious metals were profitable.
The fourth quarter saw extremes in the currency sector as the
U.S. dollar again gyrated for the last three months of the year.
The long Japanese yen position that provided the only profit
for the Trust in October was the largest losing position in
November, yet by December, long Japanese yen positions were
providing profits. The Fed eased interest rates one quarter
point three times in seven weeks. However, long U.S. bond
positions reaped few rewards as these rate cuts had already been
factored in the market. Global stock indices rebounded
beginning in October and long positions in the S&P and German
DAX proved rewarding. The Trust ended the year with a profit of
$6,400,521.
1997
In 1997 the global futures markets showed a great deal of
volatility and the Advisors were well positioned to profit from
these moves. The Trust produced a net gain of 9.70% for the
calendar year. The year 1997 was marked by declining gold
prices and interest rates around the globe and a rising US.
dollar relative to the German mark and Japanese yen. The
strength of these market moves proved beneficial to the Trust.
The price of gold declined to the lowest level in over a decade
reflecting its declining value as an alternative monetary asset
as central banks increased their willingness to sell or lease
the precious metal. Solid gains were generated in the global
interest rate markets, particularly in the Japanese Government
bond where yields plummeted to historic lows as the nation sank
relentlessly into a recession. Strong gains were also recorded
in Australian 10-year bonds and 3-year notes and in German and
Italian bonds. Gains were realized in positions in the German
mark, which weakened in world markets as hopes for European
monetary union rose. The US dollar dominated the world
currencies reflecting sound economic fundamentals in the US.
The Trust benefited from the upward price movement in natural
gas during the summer and fall. However, energy markets were
disappointing as ample world inventories and mild weather kept
supply and demand in balance. In addition, losses were incurred
in agricultural markets, despite strong performance by coffee
futures earlier in the year. The Trust ended the year with a
profit of $3,651,248.
Since this is the first year of the Trust's trading, no
comparison can be made to earlier year's results.
Inflation
Inflation does have an effect on commodity prices and the
volatility of commodity markets; however, continued inflation is
not expected to have a material adverse effect on the Trust's
operations or assets.
Item 7(A). Quantitative and Qualitative Disclosures About Market Risk
Introduction
Past Results Are Not Necessarily
Indicative of Future Performance
The Trust is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading
purposes, and all or substantially all of the Trust's assets are
subject to the risk of trading loss. Unlike an operating
company, the risk of market sensitive instruments is integral,
not incidental, to the Trust's main line of business.
Market movements result in frequent changes in the fair market
value of the Trust's open positions and, consequently, in its
earnings and cash flow. The Trust's market risk is influenced
by a wide variety of factors, including the level and volatility
of interest rates, exchange rates, equity price levels, the
market value of financial instruments and contracts, the
diversification effects among the Trust's open positions and the
liquidity of the markets in which it trades.
The Trust can acquire and/or liquidate both long and short
positions in a wide range of different markets. Consequently,
it is not possible to predict how a particular future market
scenario will affect performance, and the Trust's past
performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Trust
could reasonably be expected to lose in a given market sector.
However, the inherent uncertainty of the Trust's speculative
trading and the recurrence in the markets traded by the Trust of
market movements far exceeding expectations could result in
actual trading or non-trading losses far beyond the indicated
Value at Risk or the Trust's experience to date (i.e., "risk of
ruin"). In light of the foregoing as well as the risks and
uncertainties intrinsic to all future projections, the inclusion
of the quantification included in this section should not be
considered to constitute any assurance or representation that
the Trust's losses in any market sector will be limited to Value
at Risk or by the Trust's attempts to manage its market risk.
Standard of Materiality
Materiality as used in this section, "Qualitative and
Quantitative Disclosures About Market Risk," is based on an
assessment of reasonably possible market movements and the
potential losses caused by such movements, taking into account
the leverage, optionality and multiplier features of the Trust's
market sensitive instruments.
Quantifying the Trust's Trading Value at Risk
Qualitative Forward-Looking Statements
The following quantitative disclosures regarding the Trust's
market risk exposures contain "forward-looking statements"
within the meaning of the safe harbor from civil liability
provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of
1934). All quantitative disclosures in this section are deemed
to be forward-looking statements for purposes of the safe
harbor, except for statements of historical fact.
The Trust's risk exposure in the various market sectors traded
by JWH is quantified below in terms of Value at Risk. Due to
the Trust's mark-to-market accounting, any loss in the fair
value of the Trust's open positions is directly reflected in the
Trust's earnings (realized or unrealized) and cash flow (at
least in the case of exchange-traded contracts in which profits
and losses on open positions are settled daily through variation
margin).
Exchange maintenance margin requirements have been used by the
Trust as the measure of its Value at Risk. Maintenance margin
requirements are set by exchanges to equal or exceed the maximum
losses reasonably expected to be incurred in the fair value of
any given contract in 95%-99% of any one-day intervals. The
maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an
assessment of current market volatility (including the implied
volatility of the options on a given futures contract) and
economic fundamentals to provide a probabilistic estimate of the
maximum expected near-term one-day price fluctuation.
Maintenance margin has been used rather than the more generally
available initial margin, because initial margin includes a
credit risk component which is not relevant to Value at Risk.
In the case of market sensitive instruments which are not
exchange traded (almost exclusively currencies in the case of
the Trust), the margin requirements for the equivalent futures
positions have been used as Value at Risk. In those rare cases
in which a futures-equivalent margin is not available, dealers'
margins have been used.
The fair value of the Trust's futures and forward positions does
not have any optionality component.
In quantifying the Trust's Value at Risk, 100% positive
correlation in the different positions held in each market risk
category has been assumed. Consequently, the margin
requirements applicable to the open contracts have simply been
aggregated to determine each trading category's aggregate Value
at Risk. The diversification effects resulting from the fact
that the Trust's positions are rarely, if ever, 100% positively
correlated have not been reflected.
The Trust's Trading Value at Risk in Different Market Sectors
The following table indicates the trading Value at Risk
associated with the Trust's open positions by market category as
of December 31, 1998. All open position trading risk exposures
of the Trust have been included in calculating the figures set
forth below. As of December 31, 1998, the Trust's total
capitalization was approximately $95.5 million.
December 31, 1998
% of Total
Market Sector Value at Risk Capitalization
Interest Rates $ 4.6 million 4.82%
Currencies $ 1.9 million 1.99%
Stock Indices $ 0.8 million 0.84%
Precious Metals $ 0.5 million 0.52%
Commodities $ 0.7 million 0.73%
Energies $ 0.5 million 0.52%
Total $ 9.0 million 9.42%
Material Limitations on Value at Risk
as an Assessment of Market Risk
The face value of the market sector instruments held by the
Trust is typically many times the applicable maintenance margin
requirement (maintenance margin requirements generally ranging
between approximately 1% and 10% of contract face value) as well
as many times the capitalization of the Trust. The magnitude of
the Trust's open positions creates a "risk of ruin" not
typically found in most other investment vehicles. Because of
the size of its positions, certain market conditions _ unusual,
but historically recurring from time to time _ could cause the
Trust to incur severe losses over a short period of time. The
foregoing Value at Risk table _ as well as the past performance
of the Trust _ give no indication of this "risk of ruin."
Non-Trading Risk
The Trust has non-trading market risk on its foreign cash
balances not needed for margin. However, these balances (as
well as any market risk they represent) are immaterial.
The Trust holds substantially all of its assets in cash on
deposit with CIS and CISFS. The Trust has cash flow risk on
these cash deposits because if interest rates decline, so will
the interest paid out by CIS and CISFS at the 91-day Treasury
bill rate. As of December 31, 1998, the Trust had approximately
$90,183,000 in cash on deposit with CIS and CISFS.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Trust's
market risk exposures _ except for (i) those disclosures that
are statements of historical fact and (ii) the descriptions of
how the Trust and JWH manage the Trust's primary market risk
exposures _ constitute forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act. The Trust's primary market risk
exposures as well as the strategies used and to be used by JWH
for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual
results of the Trust's risk controls to differ materially from the
objectives of such strategies. Government interventions, defaults
and expropriations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical price
relationships, an influx of new market participants, increased
regulation and many other factors could result in material losses
as well as in material changes to the risk exposures and the risk
management strategies of the Trust. There can be no assurance that
the Trust's current market exposure and/or risk management strategies
will not change materially or that any such strategies will be effective
in either the short- or long-term. Investors must be prepared to lose
all or substantially all of their investment in the Trust.
The following were the primary trading risk exposures of the
Trust as of December 31, 1998, by market sector.
Interest Rates. Interest rate risk is the principal market
exposure of the Trust. Interest rate movements directly affect
the price of the sovereign bond positions held by the Trust and
indirectly the value of its stock index and currency positions.
Interest rate movements in one country as well as relative
interest rate movements between countries materially impact the
Trust's profitability. The Trust's primary interest rate
exposure is to interest rate fluctuations in the United States
and the other G-7 countries. However, the Trust also takes
positions in the government debt of smaller nations _ e.g.,
Australia. The Managing Owner anticipates that G-7 interest
rates will remain the primary market exposure of the Trust for
the foreseeable future. The changes in interest rates which
have the most effect on the Trust are changes in long-term, as
opposed to short-term, rates. Most of the speculative positions
held by the Trust are in medium- to long-term instruments.
Consequently, even a material change in short-term rates would
have little effect on the Trust were the medium- to long-term
rates to remain steady.
Currencies. The Trust's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the
historical pricing relationships between different currencies
and currency pairs. These fluctuations are influenced by
interest rate changes as well as political and general economic
conditions. The Trust trades in a large number of currencies,
including cross-rates _ i.e., positions between two currencies
other than the U.S. dollar. However, the Trust's major
exposures have typically been in the dollar/yen, dollar/mark and
dollar/pound positions. The Managing Owner does not anticipate
that the risk profile of the Trust's currency sector will change
significantly in the future, although it is difficult at this
point to predict the effect of the introduction of the Euro on
JWH's currency trading strategies. The currency trading Value
at Risk figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Trust in
expressing Value at Risk in a functional currency other than
dollars.
Stock Indices. The Trust's primary equity exposure is to equity
price risk in the G-7 countries. The stock index futures traded
by the Trust are by law limited to futures on broadly based
indices. As of December 31, 1998, the Trust's primary exposures
were in the Nikkei (Japan) and All Ordinaries (Australia) stock
indices. The Managing Owner anticipates little, if any, trading
in non-G-7 stock indices. The Trust is primarily exposed to the
risk of adverse price trends or static markets in the major
U.S., European and Japanese indices. (Static markets would not
cause major market changes but would make it difficult for the
Trust to avoid being "whipsawed" into numerous small losses.)
Metals. The JWH programs currently used for the Trust trade
mainly precious, not base, metals, and the Trust's primary
metals market exposure is to fluctuations in the price of gold
and silver. However, silver prices have remained volatile over
this period, and JWH has from time to time taken substantial
positions as it has perceived market opportunities to develop.
The Managing Owner anticipates that gold and silver will remain
the primary metals market exposure for the Trust.
Commodities. The Trust's primary commodities exposure is to
agricultural price movements which are often directly affected
by severe or unexpected weather conditions. Grains, coffee,
sugar and cocoa accounted for the substantial bulk of the
Trust's commodities exposure as of December 31, 1998. In the
past, the Trust has had material market exposure to live cattle,
cotton and the soybean complex and may do so again in the
future. However, JWH and the Trust will maintain an emphasis on
grains, coffee, sugar and cocoa, in which the Trust has
historically taken its largest commodity positions.
Energy. The Trust's primary energy market exposure is to gas
and oil price movements, often resulting from political
developments in the Middle East. Although JWH trades natural
gas to a limited extent, oil is by far the dominant energy
market exposure of the Trust. Oil prices are currently
depressed, but they can be volatile and substantial profits and
losses have been and are expected to continue to be experienced
in this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the
Trust as of December 31, 1998.
Foreign Currency Balances. The Trust's primary foreign currency
balances are in Japanese yen, German marks, British pounds and
Australian dollars. The Trust controls the non-trading risk of
these balances by regularly converting these balances back into
dollars (no less frequently than twice a month).
Cash Position. The Trust holds substantially all its assets in
cash at CIS and CISFS, earning interest at the 91-day Treasury
bill rate (calculated daily).
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Manager Owner monitors the Trust's performance and the
concentration of its open positions, and consults with JWH
concerning the Trust's overall risk profile. If the Managing
Owner felt it necessary to do so, the Managing Owner could
require JWH to close out individual positions as well as enter
programs traded on behalf of the Trust. However, any such
intervention would be a highly unusual event. The Managing
Owner primarily relies on JWH's own risk control policies while
maintaining a general supervisory overview of the Trust's market
risk exposures.
Risk Management
JWH attempts to control risk in all aspects of the investment
process _ from confirmation of a trend to determining the
optimal exposure in a given market, and to money management
issues such as the startup or upgrade of investor accounts. JWH
double checks the accuracy of market data, and will not trade a
market without multiple price sources for analytical input. In
constructing a portfolio, JWH seeks to control overall risk as
well as the risk of any one position, and JWH trades only
markets that have been identified as having positive performance
characteristics. Trading discipline requires plans for the exit
of a market as well as for entry. JWH factors the point of exit
into the decision to enter (stop loss). The size of JWH's
positions in a particular market is not a matter of how large a
return can be generated but of how much risk it is willing to
take relative to that expected return.
To attempt to reduce the risk of volatility while maintaining
the potential for excellent performance, proprietary research is
conducted on an ongoing basis to refine the JWH investment
strategies. Research may suggest substitution of alternative
investment methodologies with respect to particular contracts;
this may occur, for example, when the testing of a new
methodology has indicated that its use might have resulted in
different historical performance. In addition, risk management
research and analysis may suggest modifications regarding the
relative weighting among various contracts, the addition or
deletion of particular contracts from a program, or a change in
position size in relation to account equity. The weighting of
capital committed to various markets in the investment programs
is dynamic, and JWH may vary the weighting at its discretion as
market conditions, liquidity, position limit considerations and
other factors warrant.
JWH may determine that risks arise when markets are illiquid or
erratic, such as may occur cyclically during holiday seasons, or
on the basis of irregularly occurring market events. In such
cases, JWH at its sole discretion may override
computer-generated signals and may at times use discretion in
the application of its quantitative models, which may affect
performance positively or negatively.
Adjustments in position size in relation to account equity have
been and continue to be an integral part of JWH's investment
strategy. At its discretion, JWH may adjust the size of a
position in relation to equity in certain markets or entire
programs. Such adjustments may be made at certain times for
some programs but not for others. Factors which may affect the
decision to adjust the size of a position in relation to account
equity include ongoing research, program volatility, assessments
of current market volatility and risk exposure, subjective
judgment, and evaluation of these and other general market
conditions.
Item 8. Financial Statements and Supplementary Data
Reference is made to the financial statements and the notes
thereto attached to this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
The Trust is managed by its Managing Owner, CIS Investments,
Inc. The officers and directors of the Managing Owner as of
December 31, 1998 were as follows:
CIS Investments, Inc.
Bernard W. Dan (born in December 1960), President and Director.
Mr. Dan has served as President and Director of CISI since June
1, 1998. He received a B.S. degree in accounting from St.
John's University, Collegeville, Minnesota. He joined Cargill
Investor Services, Inc. in 1985 and held various operational
positions. In 1986 Mr. Dan was assigned to Cargill Investor
Services, Ltd. in London as Administrative Manager for all
operational activities. In 1989 Mr. Dan was assigned to the CIS
New York Regional Office as the Administrative Manager. Mr. Dan
was named Director of Cargill Investor Services (Singapore) Pte
Ltd. at the formation of the company in November 1994 and
continued in that position until April 1997. Mr. Dan was named
President of Cargill Investor Services, Inc. on June 1, 1998.
Mr. Dan actively serves within the futures industry on exchange
committees and industry user groups.
Richard A. Driver (born in September 1947), Vice President,
Treasurer and Director. Mr. Driver has served as Vice President
and Director of CISI since June 1993 and was elected Treasurer
of CISI in August 1997. Mr. Driver graduated from the
University of North Carolina in 1969 and received a Masters
Degree from 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. Mr. Driver currently serves as Vice
President, Controller, Treasurer and Director of Cargill
Investor Services, Inc.
Barbara A. Pfendler (born in May 1953), Vice President and
Director. Ms. Pfendler was appointed Vice President of CISI in
May 1990 and Director of CISI in June 1998. Ms. Pfendler
graduated from the University of Colorado in 1975. She began
her career with Cargill, Incorporated in 1975, holding various
merchandising and management positions within Cargill
Incorporated's Oilseed Processing Division before transferring
to Cargill Investor Services, Inc. in 1986. She is currently
the manager responsible for all activities of the Fund Services
Group at Cargill Investor Services, Inc. She was appointed Vice
President of Cargill Investor Services, Inc. in June 1996 and
Director Cargill Investor Services, Inc. in June 1998.
Jan R. Waye (born in June 1948), Vice President. Mr. Waye was
appointed Vice President of CISI in June 1997. Mr. Waye
graduated from Concordia College, Moorhead, MN, with a B.A.
degree in Communications and Economics in 1970.
Mr. Waye assumed the position of Senior Vice President of
Cargill Investor Services, Inc. in September 1996, after
returning from London where he held various management positions
for Cargill Investor Services, Ltd. including most recently
Managing Director for CIS Europe. Mr. Waye joined Cargill,
Incorporated in 1970 and served in various commodity trading and
management positions in Chesapeake, VA; Winnipeg, Manitoba; and
Vancouver, BC. In 1978 he moved to New York and shortly
thereafter Minneapolis as head of Foreign Exchange for Cargill's
metals trading business. Mr. Waye served in various management
positions in the Financial Markets Group until 1988 when he
assisted in the management and sale of Cargill's life insurance
business in Akron, Ohio. He moved to London in late 1988. Mr.
Waye has served as a member of the Board of LIFFE, the London
International Financial Futures and Options Exchange, and as
Vice Chairman of its Membership and Rules Committee. He also
served on the Board of the London Commodity Exchange up to its
merger with LIFFE.
Christopher Malo (born in August 1956), Vice President. Mr.
Malo graduated from Indiana University in 1976 with a B.S. in
Accounting and further completed the University of Minnesota
Executive Program in 1993. He started working 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 and Controller from November
1983 until July 1991. He was elected Vice President,
Administration and Operations in July 1991. Mr. Malo was
Managing Director in Europe from 1996 until January 1999,
responsible for CIS activities and operations in Europe, the
Middle East and Russia. He was an active member of the FIA-UK
Chapter and LIFFE Membership and Rules Committee. He currently
serves on the Board of the FIA in Chicago.
Ronald L. Davis (born in September 1953), Vice President. Mr.
Davis was elected Vice President of CISI in June 1998. Mr.
Davis graduated from Illinois Institute of Technology, Chicago,
Illinois with a B.S. in 1975 and with an M.B.A in 1977. He
began his career in the futures industry with A.G. Becker,
Incorporated in 1980 and joined Cargill Investor Services, Inc.
in 1987 as the Administrative Manager of the Fund Services
Group. He is responsible for all administrative, accounting and
reporting functions of all CISI funds. In June 1998 Mr. Davis
became Business Development Manager of the Fund Services Group.
Rebecca S. Steindel (born in April 1965), Secretary. Ms.
Steindel was elected Secretary of CISI in September 1997. Ms.
Steindel graduated from the University of Illinois in 1987. She
began working at Cargill Investor Services, Inc. in August 1987.
She has held various financial and risk management positions at
Cargill Investor Services, Inc. and was elected Risk and
Compliance Officer and Secretary of Cargill Investor Services,
Inc. in August 1997. She currently serves on the Board of
Directors and Executive Committee of the FIA Financial
Management Division.
Bruce H. Barnett (born in June 1947), 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 LL.M. in 1973. He started working at
Cargill, Incorporated in 1990 as Vice President, Taxes. From
1987 to 1990, Mr. Barnett was employed in various positions at
Unilever, a European based multinational corporation.
Henry W. Gjersdal, Jr. (born in May 1954), Assistant Secretary.
Mr. Gjersdal was elected Assistant Secretary of CISI in June
1996. 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 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.
Patrice H. Halbach (born in August 1953), Assistant Secretary.
Ms. Halbach became Assistant Secretary of CISI in June 1996.
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. She
was named Assistant Vice President of Cargill, Incorporated's
Administrative Division in April 1994. In January 1999 she was
named Vice President, Tax, of Cargill, Incorporated. In her
current position as Vice President, Tax, Ms. Halbach oversees
Cargill, Incorporated's global tax function.
Each officer and director holds such office until the election
and qualification of his or her successor or until his or her
earlier death, resignation or removal.
Item 11. Executive Compensation
The Trust has no officers or directors. The Managing Owner
administers the business and affairs of the Trust (exclusive of
Trust trading decisions which are made by an independent
commodity trading advisor). The officers and directors of the
Managing Owner receive no compensation from the Trust for acting
in their respective capacities with the Managing Owner.
All operating and administrative expenses attributable to the
Trust are paid by the Managing Owner except for brokerage
commissions, advisory fees, legal, accounting, auditing,
printing, recording and filing fees, postage charges and Trustee
fees which are paid directly by the Trust.
CIS and CISFS, affiliates of the Managing Owner, are the Trust's
clearing broker and currency dealer, respectively. During the
year ended December 31, 1998, the Trust accrued and paid
$5,195,089 in brokerage commissions to CIS, as compared to
$1,441,635 in 1997.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) As of December 31, 1998, no person was known to the Trust
to own beneficially more than 5% of the outstanding Units.
(b) As of December 31, 1998, the Managing Owner beneficially
held an ownership of $1,085,906 (which is the equivalent of
9,409.49 Units) or approximately 1.14% of the ownership of the
Trust as of that date. At December 31, 1998, Rebecca S.
Steindel, Secretary of the Managing Owner, beneficially owned
49.94 Units in joint tenancy, or approximately .0060% of the
Units outstanding as of that date.
(c) As of December 31, 1998, no arrangements were known to
the registrant, including any pledges by any person of Units of
the Trust or shares of its Managing Owner or the parent of the
Managing Owner, such that a change in control of the Trust may
occur at a subsequent date.
Item 13. Certain Relationships and Related Transactions.
(a) None other than the compensation arrangements described
herein.
(b) None.
(c) None.
(d) Not Applicable.
Part IV
Item 14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K
(a) The following documents are included herein:
(1) Financial Statements:
a. Report of Independent Public Accountants.
b. Statements of Financial Condition as of
December 31, 1998 and 1997.
c. Statements of Operations, Statements of
Unitholders' Capital and Statements of Cash Flows
for the years ended December 31, 1998 and 1997.
d. Notes to Financial Statements.
(2) All financial statement schedules have been omitted
either because the information required by the schedules
is not applicable, or because the information required
is contained in the financial statements included herein
or the notes hereto.
(3) Exhibits:
See the Index to Exhibits annexed hereto.
(b) Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: March 26, 1999 JWH GLOBAL TRUST
By: CIS Investments, Inc.
(Managing Owner)
By: /s/ Bernard W. Dan
Bernard W. Dan
President
By: /s/ Richard A. Driver
Richard A. Driver
Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
date indicated.
Date: March 26, 1999
/s/ Bernard W. Dan
Bernard W. Dan
Director and President
/s/ Barbara A. Pfendler
Barbara A. Pfendler
Director and Vice President
/s/ Richard A. Driver
Richard A. Driver
Vice President and Treasurer
Index to Exhibits
Number Exhibit
3.1 Fourth Amended and Restated Declaration and Agreement of
Trust (Incorporated by Reference to Post-Effective
Amendment No. 1 to Registration Statement No. 333-33937
of the Trust on Form S-1 under the Securities Act of 1933,
declared effective on June 26, 1998).
10.1 Trading Advisory Agreement dated as of April 3, 1997
between JWH Global Trust and John W. Henry & Company, Inc.
(Incorporated by Reference to Amendment No. 2 to Registration
Statement No. 333-16825 of the Trust on Form S-1 under the
Securities Act of 1933, declared effective on April 3, 1997).
Index to Financial Statements
JWH GLOBAL TRUST
Report of Independent Public Accountants Page 28
Statements of Financial Condition as of
December 31, 1998 and 1997 Page 29
Statements of Operations, for the years ended
December 31, 1998 and 1997 Page 30
Statements of Unitholders' Capital, for the years
ended December 31, 1998 and 1997 Page 31
Statements of Cash Flows, for the years ended
December 31, 1998 and 1997 Page 32
Notes to Financial Statements Page 33
Acknowledgment Page 38
Independent Auditors' Report
The Unitholders JWH Global Trust:
We have audited the accompanying statements of financial
condition of JWH Global Trust (the Trust) as of December 31,
1998 and 1997, and the related statements of operations,
unitholders' capital, and cash flows for each of the years then
ended. These financial statements are the responsibility of the
Trust's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with 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 JWH Global Trust as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the
years then ended, in conformity with generally accepted
accounting principles.
KPMG LLP
Chicago, Illinois
February 5, 1999
<TABLE>
JWH GLOBAL TRUST
STATEMENTS OF FINANCIAL CONDITION
UNAUDITED
1998 1997
--------------- -------------
<S> <C>
ASSETS
Cash $1,601,405 $4,109,623
Equity in commodity futures
trading accounts:
Account balance 90,182,744 56,278,134
Unrealized gain on open futures
and forwards contracts 7,559,155 4,481,153
--------------- -------------
99,343,304 64,868,910
Interest receivable 338,264 240,745
Prepaid Initial O&O 451,589 583,762
--------------- -------------
Total assets $100,133,157 $65,693,417
=============== =============
LIABILITIES AND UNITHOLDERS' CAPITAL
Liabilities:
Accrued commissions due to CIS $528,885 $330,854
Accrued management fee 328,109 205,109
Accrued incentive fee 120,253 656,583
Accrued operating expenses 109,738 93,023
Redemptions payable 3,533,024 31,195
Selling and Offering Expenses Payable 40,602 25,129
--------------- -------------
Total liabilities 4,660,611 1,341,893
Unitholders' Capital:
Beneficial owners ( 817,899.61 units outstandi 94,386,640 63,702,878
at 12/31/98, 580,678.76 units outstanding at 12/31/97)
(see Note 1)
Managing owner (9,409.49 units outstanding at 1,085,906 648,646
12/31/98 and 5,912.68 at 12/31/97) (see Note 1)
--------------- -------------
Total unitholders' capital 95,472,546 64,351,524
--------------- -------------
Total liabilities and
unitholders' capital $100,133,157 $65,693,417
=============== =============
This Statement of Financial Condition, in the opinion of management, reflects all adjustments necessary
to fairly state the financial condition of JWH Global Trust. (See Note 6)
JWH GLOBAL TRUST
STATEMENTS OF OPERATIONS
UNAUDITED
1998 1997
--------------- -------------
<S> <C> <C>
REVENUES
Gains on trading of commodity futures
and forwards contracts, physical
commodities and related options:
Realized gain (loss) on closed positions $10,418,484 $1,761,637
Change in unrealized gain (loss)
on open positions 3,078,002 4,481,153
Interest income 3,669,771 1,042,648
Foreign currency transaction gain (loss) (296,969) (297,458)
--------------- -------------
Total revenues 16,869,288 6,987,980
EXPENSES
Commissions paid to CIS 5,195,089 1,441,635
Exchange fees 59,724 12,426
Management fees 3,239,007 896,312
Incentive fees 1,383,562 715,477
Organization & Offering Expenses 532,789 176,590
Operating expenses 58,596 94,292
--------------- -------------
Total expenses 10,468,767 3,336,732
--------------- -------------
Net profit (loss) $6,400,521 $3,651,248
=============== =============
PROFIT (LOSS) PER UNIT OF
OWNERSHIP INTEREST $5.70 $9.70
=============== =============
(see Note 1) (see Note 1)
* Commencement of Operations was June 2, 1997
This Statement of Operations, in the opinion of management, reflects all adjustments
necessary to fairly state the financial condition of JWH Global Trust. (See Note 6)
JWH GLOBAL TRUST
STATEMENTS OF CHANGES IN UNITHOLDERS' CAPITAL
From January 1, 1998 through December 31, 1998
UNAUDITED
<S> <C> <C> <C> <C>
Additional Units Sold Beneficial Managing
(see Note 1) Units* Owners Owner Total
--------------- ------------- -------------- -------------
Unitholders' capital at January 1, 1998 580,678.76 $63,702,878 $648,646 $64,351,524
Additional Units Sold 357,777.17 37,576,922 361,483 37,938,405
(see Note 1)
Net profit (loss) 6,324,744 75,777 6,400,521
Redemptions (see Note 1) (120,556.32) (13,217,904) (13,217,904)
--------------- ------------- -------------- -------------
Unitholders' capital at December 31, 1998 817,899.61 $94,386,640 $1,085,906 $95,472,546
=============== ============= ============== =============
Net asset value per unit
January 1, 1998 (see Note 1) 109.70 109.70
Net profit (loss) per unit (see Note 1) 5.70 5.70
------------- --------------
Net asset value per unit
December 31, 1998 $115.40 $115.40
* Units of Beneficial Ownership.
This Statement of Changes in Unitholders' Capital, in the opinion of management, reflects all adjustments
necessary to fairly state the financial condition of JWH Global Trust. (See Note 6)
JWH GLOBAL TRUST
STATEMENTS OF CASH FLOWS
UNAUDITED
1998 1997
--------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) 6,400,521 3,651,248
Adjustments to reconcile net profit
(loss) to net cash provided by
(used in) operating activities:
Change in assets and liabilities:
Increase in unrealized gain on open futures contr (3,078,002) (4,481,153)
Increase in interest receivable (97,519) (240,745)
Decrease in prepaid initial organization & offeri 132,173 (583,762)
Increase in accrued liabilities (183,111) 1,310,698
--------------- -------------
Net cash provided by (used in)
operating activities 3,174,062 (343,714)
Cash flows from financing activities:
Additional Units Sold 40,446,623 57,521,513
Unitholder redemptions (9,716,075) (899,665)
--------------- -------------
Net cash provided by (used in)
financing activities 30,730,548 56,621,848
--------------- -------------
Net increase (decrease) in cash 33,904,610 56,278,134
Cash at beginning of period 56,278,134 0
--------------- -------------
Cash at end of period $90,182,744 $56,278,134
=============== =============
* Commencement of Operations was June 2, 1997
This Statement of Cash Flows, in the opinion of management, reflects all adjustments
necessary to fairly state the financial condition of JWH Global Trust. (See Note 6)
</TABLE>
(1) General Information and Summary
JWH Global Trust (the Trust), a Delaware business trust
organized on November 12, 1996, was formed to engage in the
speculative trading of futures contracts on currencies, interest
rates, energy and agricultural products, metals and stock
indices, spot and forward contracts on currencies and precious
metals, and exchanges for physicals pursuant to the trading
instructions of independent trading advisors. The Managing
Owner of the Trust is CIS Investments, Inc. (CISI). The
clearing broker is Cargill Investor Services, Inc. (Clearing
Broker or CIS), the parent company of CISI. The forwards broker
is CIS Financial Services, Inc. (CISFS or Forwards Currency
Broker), an affiliate of CISI.
Units of beneficial ownership of the Trust commenced selling on
April 3, 1997. The initial amount offered for investment was
$50,000,000. Trading began on June 2, 1997 with initial
capitalization of $13,027,103. On September 26, 1997, the Trust
registered an additional $155,000,000 for further investment and
continued the offering. By December 31, 1998, a total of
947,699.53 units representing an investment for $84,449,294 of
beneficial ownership interest had been sold in the combined
offerings. In addition, during the offerings, the Managing
Owner purchased a total of 9,409.49 units, representing a total
investment of $971,483. See the JWH Global Trust prospectus for
further details of the offering.
The Trust will be terminated on December 31, 2026, if none of
the following occur prior to that date: (1) beneficial owners
holding more than 50% of the outstanding units notify the
Managing Owner to dissolve the Trust as of a specific date; (2)
disassociation of the Managing Owner with the Trust; (3)
bankruptcy of the Trust; (4), a decrease in the net asset value
to less than $2,500,000; (5) a decline in the net asset value
per unit to $50 or less; (6) dissolution of the Trust; or (7)
any event that would make it unlawful for the existence of the
Trust to be continued or require dissolution of the Trust.
(2) Summary of Significant Accounting Policies
The accounting and reporting policies of the Trust conform to
generally accepted accounting principles and to general
practices in the commodities industry. The following is a
description of the more significant of those policies which the
Trust follows in preparing its financial statements.
Revenue Recognition
Commodity futures contracts, forward contracts, and physical
commodities are recorded on the trade date. All such
transactions are reported on an identified cost basis.
Unrealized gains and losses reflected in the statements of
financial condition represent the difference between original
contract amount and market value (as determined by exchange
settlement prices for futures contracts and cash dealer prices
at a pre-determined time for forward contracts and physical
commodities) as of the last business day of the year or as of
the last date of the financial statements.
The Trust earns interest on its assets on deposit at CIS and
CISFS at 100% of the 91-day Treasury bill rate for deposits
denominated in U.S. dollars, and at the rates agreed between the
Trust and CIS and CISFS for deposits denominated in other
currencies.
Redemptions
A beneficial owner may cause any or all of his or her units to
be redeemed by the Trust effective as of the last trading day of
any month of the Trust based on the Net Asset Value per unit on
five days' written notice to the Managing Owner. Payment will
be made within 10 business days of the effective date of the
redemption. Any redemption made during the first 11 months of
investment is subject to a 3% redemption penalty. Any
redemption made in the 12th month of investment or later will
not be subject to any penalty. The Trust's Amended and Restated
Declaration and Agreement of Trust contains a full description
of redemption and distribution policies.
Commissions
Commodity brokerage commissions are typically paid for each
trade transacted and are referred to as "round-turn
commissions". These commissions cover both the initial purchase
(or sale) and the subsequent offsetting sale (or purchase) of a
commodity futures contract. The Trust does not pay commodity
brokerage commissions on a per-trade basis, but rather pays
monthly flat-rate Brokerage Fees at the annual rate of 6.5% (or
a monthly rate of approximately 0.542%) of the Trust's month-end
assets after reduction of the Management Fee. CIS receives
these Brokerage Fees irrespective of the number of trades
executed on the Trust's behalf. The amount paid to CIS is
reduced by exchange fees paid by the Trust. The round-turn
equivalent rate for commissions paid by the Trust for the year
ended December 31, 1998 was $61.
Certain large investors are eligible for a "Special Brokerage
Fee Rate" of 5% per year. As of December 31, 1998, there were
no such eligible investors in the Trust.
Foreign Currency Transactions
Trading accounts in foreign currency denominations are
susceptible to both movements in the underlying contract markets
as well as fluctuation in currency rates. Translation of
foreign currencies into U.S. dollars for closed positions are
translated at an average exchange rate for the year, while
year-end balances are translated at the year-end currency rates.
The impact of the translation is reflected in the statements of
operations.
Statements of Cash Flows
For purposes of the statements of cash flows, cash includes cash
on deposit with the Clearing Broker in the equity in commodity
futures trading accounts.
Use of Estimates
The preparation of financial statements 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 financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
(3) Fees
Management fees are accrued and paid monthly, incentive fees are
accrued monthly and paid quarterly. Trading decisions for the
period of these financial statements were made by John W. Henry
& Company, Inc. (JWH) utilizing three of its trading programs,
the Original Investment Program, the Financial and Metals
Portfolio and the G-7 Currency Portfolio.
Under signed agreement, JWH receives a monthly management fee of
1/12 of 4% of the Trust's month-end assets after deduction of a
portion of the Brokerage Fee at the annual rate of 1.25% (rather
than 6.5%) of month-end Trust assets but before deduction of any
management fees, redemptions, distributions, or incentive fee
accrued or payable as of the relevant month end.
In addition, the Trust pays to JWH, a quarterly incentive fee
equal to 15% of the new trading profits of the Trust. The
incentive fee is based on the overall performance of the Trust,
not individually in respect of the performance of the individual
programs utilized by the Trust. This fee is also calculated by
deducting Brokerage Fee at a rate of 1.25% (rather than the 6.5%
rate).
(4) Income Taxes
No provision for Federal income taxes has been made in the
accompanying financial statements as each beneficial owner is
responsible for reporting income (loss) based on the pro rata
share of the profits or losses of the Trust. Generally, for
both Federal and state tax purposes, trusts, such as the JWH
Global Trust, are treated as partnerships. The Trust is
responsible for the Illinois State Partnership Information and
Replacement Tax based on the operating results of the Trust.
Such tax amounted to $41,242 for the year ended December 31,
1998 and is included in operating expenses in the statement of
operations.
(5) Financial Instruments with Off-balance Sheet Risk
The Trust was formed to speculatively trade commodity interests.
The Trust's commodity interest transactions and its related
cash balance are on deposit with the Clearing Broker or the
Forward Currency Broker (Brokers) at all times. In the event
that volatility of trading of other customers of the Brokers
impaired the ability of the Brokers to satisfy the obligations
to the Trust, the Trust would be exposed to off-balance sheet
risk. Such risk is defined in Statement of Financial Accounting
Standards No. 105 (SFAS 105) as a credit risk. To mitigate this
risk, the Clearing Broker, pursuant to the mandates of the
Commodity Exchange Act, is required to maintain funds deposited
by customers relating to futures contracts in regulated
commodities in separate bank accounts which are designated as
segregated customers' accounts. In addition, the Clearing
Broker has set aside funds deposited by customers relating to
foreign futures and options in separate bank accounts which are
designated as customer-secured accounts. Lastly, the Clearing
Broker is subject to the Securities and Exchange Commission's
Uniform Net Capital Rule, which requires the maintenance of
minimum net capital at least equal to 4% of the funds required
to be segregated pursuant to the Commodity Exchange Act. The
Clearing Broker and Forwards Currency Broker both have controls
in place to make certain that all customers maintain adequate
margin deposits for the positions in which they maintain at each
Broker. Such procedures should protect the Trust from the
off-balance sheet risk as mentioned earlier. Neither the
Clearing Broker nor the Forwards Currency Broker engage in
proprietary trading and thus has no direct market exposure.
The contractual amounts of commitments for the Trust to purchase
and sell exchange traded futures contracts and foreign currency
forwards contracts was $570,328,165 and $1,063,876,786,
respectively on December 31, 1998, and $368,276,971 and
$240,130,546, respectively on December 31, 1997. The
contractual amounts of these instruments reflect the extent of
the Trusts' involvement in the related futures and forwards
contracts and do not reflect the risk of loss due to
counterparty performance. Such risk is defined by SFAS 105 as
credit risk. The counterparty of the Trust for futures
contracts traded in the United States and most non-U.S.
exchanges on which the fund trades is the Clearing House
associated with the exchange. In general, Clearing Houses are
backed by their membership and will act in the event of
nonperformance by one of their members or one of the members'
customers and as such should significantly reduce this credit
risk. In cases where the Trust trades on exchanges on which the
Clearing House is not backed by the membership, the sole
recourse of the Trust for nonperformance will be the Clearing
House. The Forwards Currency Broker is the counterparty for the
Trust's forwards transactions. CISFS policies require that they
execute transactions only with top rated financial institutions
with assets in excess of $100,000,000.
The average fair value of commodity interests was $4,860,965
during 1998. Fair value as of December 31, 1998 was $7,559,155.
The net gains or losses arising from the trading of commodity
interests are presented in the statement of operations.
The Trust holds futures positions on various exchanges
throughout the world and forwards positions with CISFS which
transacts with various top rated banks throughout the world. As
defined by SFAS 105, futures and forward currency contracts are
classified as financial instruments. SFAS 105 requires that the
Partnership disclose the market risk of loss from all of its
financial instruments. Market risk is defined as the
possibility that future changes in market prices may make a
financial instrument less valuable or more onerous. If the
markets should move against all of the futures and forwards
positions of the Trust at the same time (both long positions and
short positions), and if the markets moved such that the CTA was
unable to offset the futures positions of the Trust, the Trust
could lose all of its assets and the beneficial owners would
realize a 100% loss. The Trust utilizes three of the trading
programs of the CTA. One trading program is diversified among
all commodity groups, while the other two are diversified among
the various futures contracts and forwards contracts in the
financial and metals group. All three programs trade in the
U.S. and outside of the U.S. Such diversification should
greatly reduce this market risk.
At December 31, 1998, the cash requirement of the commodity
interests of the Trust was $9,700,885. This cash requirement is
met by $85,532,262 held in segregated funds, $10,790,940 held in
secured funds and $1,418,697 held in nonregulated funds. At
December 31, 1997, the cash requirement of the commodity
interests of the Trust was $9,299,511. This cash requirement
was met by $48,132,040 held in segregated funds, $6,027,922 held
in secured funds and $6,599,325 held in nonregulated funds. At
December 31, 1998 and 1997, cash was on deposit with the
Clearing Broker and the Forwards Currency Broker which exceeded
the cash requirement amount.
The following chart discloses the dollar amount of the
unrealized gain or loss on open contracts of the Trust at
December 31, 1998 and 1997:
Commodity Group 1998 1997
Agricultural $283,099 99,960
Currency 337,027 720,970
Stock Indices (275,499) 321,503
Energies 325,869 490,370
Metals 111,650 1,955,345
Interest 6,777,009 893,005
Total 7,559,155 4,481,153
The expiration dates of these open contracts is February 1999
to December 1999.
Acknowledgment
To the best of my knowledge and belief, the information
contained herein is accurate and complete.
/s/ Richard A. Driver
Richard A. Driver
Treasurer, CIS Investments, Inc.,
the Managing Owner and Commodity Pool Operator of
JWH Global Trust
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from JWH Global
Trust for the fiscal year of 1998 and is qualified in its entirety by reference
to such 10-K.
</LEGEND>
<CIK> 0001027099
<NAME> JWH GLOBAL TRUST
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1998
<CASH> 99,343,304
<SECURITIES> 0
<RECEIVABLES> 789,853
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100,133,157
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,133,157
<CURRENT-LIABILITIES> 4,660,611
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 95,472,546
<TOTAL-LIABILITY-AND-EQUITY> 100,133,157
<SALES> 0
<TOTAL-REVENUES> 16,869,288
<CGS> 0
<TOTAL-COSTS> 10,468,767
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,400,521
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,400,521
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,400,521
<EPS-PRIMARY> 5.70
<EPS-DILUTED> 5.70
</TABLE>
