<PAGE>
As Filed with the Securities and Exchange Commission on September 18, 2000
Registration No. 333-33937
-------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------------
JWH GLOBAL TRUST
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6793 36-4113382
(State of Organization) (Primary Standard Industrial (IRS Employer
Classification Code Number) Identification Number)
C/O CIS INVESTMENTS, INC.
233 SOUTH WACKER DRIVE
SUITE 2300
CHICAGO, ILLINOIS 60606
(312) 460-4000
</TABLE>
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
BARBARA A. PFENDLER
C/O 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)
---------------------------------
COPIES TO:
Joseph H. Harrison, Jr.
Scott M. Montpas
Sidley & Austin
Bank One Plaza
10 S. Dearborn Street
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 (the "Securities Act") check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
---------------------------------
PURSUANT TO THE PROVISIONS OF RULE 429 PROMULGATED UNDER THE SECURITIES
ACT, THE FORM OF PROSPECTUS SET FORTH HEREIN ALSO RELATES TO REGISTRANT'S
REGISTRATION STATEMENT ON FORM S-1 (REG. NO. 333-16825) DECLARED EFFECTIVE ON
APRIL 3, 1997.
---------------------------------
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PART ONE
DISCLOSURE DOCUMENT
--------------------------------------------------------------------------------
JWH GLOBAL TRUST
$85,600,000
UNITS OF BENEFICIAL INTEREST
THE TRUST
The Trust trades in the U.S. and international futures and forward markets in
currencies, interest rates, energy and agricultural products, metals and stock
indices.
The primary objective of the Trust is substantial capital appreciation over
time by applying trend-following strategies.
It seeks to reduce volatility and risk of loss by participating in broadly
diversified global markets and implementing risk control policies.
An investment in the Trust offers a potentially valuable means of diversifying a
traditional portfolio.
Investors have the opportunity to participate in markets which are typically not
represented in most investors' portfolios and which offer the potential to be
profitable in both rising and falling markets. It is as easy for the Trust to
take long as short positions, and in a wide range of u.s. and non-U.S. markets.
THE TRADING ADVISOR
John W. Henry & Company, Inc. (JWH-Registered Trademark-) is
one of the largest professional managed futures advisors in terms of assets
under management in the managed futures industry. As of July 31, 2000, JWH was
managing approximately $1.2 billion of client assets.
The Trust trades in the global futures and forward markets pursuant to the
Trading Advisor's proprietary trading strategies. The Trust utilizes the Trading
Advisor's Financial and Metals Portfolio, G-7 Currency Portfolio and JWH
GlobalAnalytics-Registered Trademark- Family of Programs.
MANAGING OWNER
CIS Investments, Inc. (CISI) is the Managing Owner and sponsor of the Trust.
The Managing Owner is a subsidiary of Cargill Investor Services, Inc. (CIS). CIS
is a subsidiary of Cargill, Incorporated, one of the largest private companies
in the United States.
The Managing Owner has the discretion, subject to JWH's agreement, to select the
JWH trading programs to be used for the Trust.
As of July 31, 2000, there was approximately $103 million invested in managed
futures funds sponsored (alone or jointly) by CISI.
The Trust is CISI's largest fund.
THE UNITS
The Units are available for subscription on the last day of each month at Net
Asset Value per Unit.
As of July 31, 2000, the Net Asset Value per Unit had decreased from $100 as of
June 2, 1997 when the Trust began trading to $88.97. PAST PERFORMANCE IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS.
Subscriptions as received will be deposited in escrow at Bank One until being
invested in the Units as of the last day of the month. All interest actually
earned on an investor's subscription while held in escrow will be used to
purchase additional Units for such investor.
The Units are offered on a best efforts basis. There is no minimum number of
Units which must be sold as of the beginning of any particular month.
THE RISKS
Before you decide whether to invest, read this entire prospectus carefully and
consider The Risks You Face beginning on page 9.
- You could lose all or substantially all of your investment in the Trust.
- The Trust is speculative and it takes positions with total values that are
bigger than the total amount of the Trust's assets. The face value of the
Trust's positions typically range from three to eight times its aggregate
Net Assets.
- Performance has been volatile. The Net Asset Value per Unit has fluctuated
almost 11% in a single month.
- The use of a single advisor applying a limited number of generally similar
trading programs decreases diversification relative to a fund using multiple
advisors and increases risk.
- Substantial expenses, totaling about 10.3% per annum, must be offset by
trading profits and interest income.
- There is no market for the Units. Units may only be redeemed as of the end
of a calendar month subject to a 3% redemption charge through the end of the
eleventh month after issuance.
- The Trust trades to a substantial degree on non-U.S. markets which are not
subject to the same degree of regulation as U.S. markets.
- Investors are required to make representations and warranties in connection
with their investment.
- Each prospective investor is encouraged to discuss the investment with
his/her individual financial, legal and tax adviser.
MINIMUM INVESTMENTS
FIRST-TIME INVESTORS: IRAS, OTHER TAX-EXEMPT ACCOUNTS: EXISTING INVESTORS:
$5,000 $2,000 $1,000
---------------------------------------------
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE DOCUMENT AND A STATEMENT OF
ADDITIONAL INFORMATION. THESE PARTS ARE BOUND TOGETHER, AND BOTH CONTAIN
IMPORTANT INFORMATION.
---------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE
MERITS OF PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED
ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
---------------------------------------------
CIS INVESTMENTS, INC.
JWH GLOBAL TRUST
MANAGING OWNER
OCTOBER __, 2000
<PAGE>
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS
YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS.
SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS
ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE
POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS
THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID
DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A
COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES 44 TO 47
AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAKEVEN, THAT IS, TO
RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 8.
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 9 TO 13.
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.
---------------------------------------------
THIS PROSPECTUS DOES NOT INCLUDE ALL OF THE INFORMATION OR EXHIBITS IN
THE TRUST'S REGISTRATION STATEMENT. YOU CAN READ AND COPY THE ENTIRE
REGISTRATION STATEMENT AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE SEC
IN WASHINGTON, D.C.
THE TRUST FILES QUARTERLY AND ANNUAL REPORTS WITH THE SEC. YOU CAN READ
AND COPY THESE REPORTS AT THE SEC PUBLIC REFERENCE FACILITIES IN CHICAGO, NEW
YORK OR WASHINGTON, D.C. PLEASE CALL THE SEC AT 1-800-SEC-0300 FOR FURTHER
INFORMATION.
THE TRUST'S FILINGS ARE POSTED AT THE SEC WEBSITE AT http://www.sec.gov.
----------------------------------------------
CIS INVESTMENTS, INC.
MANAGING OWNER
233 SOUTH WACKER DRIVE
SUITE 2300
CHICAGO, ILLINOIS 60606
(312) 460-4000
-1-
<PAGE>
JWH GLOBAL TRUST
ORGANIZATIONAL CHART
[CHART]
Other than JWH and the Trustee, all of the entities indicated in the
Organizational Chart are Cargill, Incorporated affiliates. See "Conflicts of
Interest" beginning at page 50 and "Transactions Between the CIS Group and the
Trust" at page 52.
FOR CONVENIENCE, CISI AND ENTITIES AFFILIATED WITH IT ARE SOMETIMES
COLLECTIVELY REFERRED TO AS THE "CIS GROUP."
-2-
<PAGE>
JWH GLOBAL TRUST
CONTENTS
PART ONE
DISCLOSURE DOCUMENT
<TABLE>
<S> <C>
Summary.........................................................3
The Risks You Face..............................................9
Investment Factors.............................................14
How the Trust Works........................................... 15
Performance of the Trust...................................... 17
Selected Financial Information................................ 18
Management's Analysis of Operations........................... 19
Quantitative and Qualitative Disclosures About the
Trust's Market Risk........................................ 22
The Managing Owner............................................ 26
John W. Henry & Company, Inc.................................. 28
JWH Principals................................................ 32
Performance of the JWH Programs............................... 35
Interest Income............................................... 42
Charges....................................................... 44
Brokerage Arrangements........................................ 48
Redemptions; Net Asset Value.................................. 49
Conflicts of Interest......................................... 50
Transactions Between the CIS Group
and the Trust.............................................. 52
The Trust and the Trustee .................................... 53
Tax Consequences.............................................. 55
Plan of Distribution.......................................... 58
Lawyers; Accountants.......................................... 60
Financial Statements...........................................61
</TABLE>
PART TWO
STATEMENT OF ADDITIONAL
INFORMATION
<TABLE>
<S> <C>
Investment Diversification .....................................1
Futures Markets and Trading Methods.............................3
Blue Sky Glossary...............................................5
--------------------------
Exhibit A -- Fourth Amended and Restated
Declaration of Agreement of Trust................A-1
Exhibit B -- Subscription Requirements........................B-1
Exhibit C -- Subscription Agreement and
Power of Attorney................................C-1
</TABLE>
SUMMARY
GENERAL
JWH Global Trust is a Delaware business trust which trades in a wide
range of U.S. and international futures and forward markets. CIS Investments,
Inc. ("CISI") is the Trust's Managing Owner. John W. Henry & Company, Inc.
("JWH-Registered Trademark-") is its Trading Advisor.
The Trust began trading on June 2, 1997 with an initial capitalization
of $13,027,103 and a Net Asset Value per Unit of $100. As of July 31, 2000, the
Trust's capitalization was $47,424,908, the Net Asset Value per Unit was $88.97,
and the Trust had a total of 2437 Unitholders.
THE TRUST AND ITS OBJECTIVES
The primary objective of the Trust is substantial capital appreciation
through trading directed by JWH. At the same time, JWH will attempt to reduce
the expected volatility and risk of loss by participating in diversified markets
and applying risk control policies.
Through an investment in the Trust, investors have the opportunity to
participate in markets not typically represented in an individual's portfolio,
and the potential to profit from rising as well as falling prices. The success
of JWH's trading is not dependent upon favorable economic conditions, national
or international. Indeed, periods of economic uncertainty can augment the profit
potential of the Trust by increasing the likelihood of significant movements in
commodity prices, the exchange rates between various countries, world stock
prices and interest rates.
From October 5, 1998, through December 1999, the Trust allocated its
assets 40% to JWH's Original Investment Program, 35% to its Financial and Metals
Portfolio and 25% to its G-7 Currency Portfolio. In January 2000, the Trust
began allocating 40% of its assets to the Financial and Metals Portfolio, 30% to
the G-7 Currency Portfolio and 30% to the JWH GlobalAnalytics-Registered
Trademark- Family of Programs and none of its assets to the Original Investment
Program. JWH will continue to rebalance the Trust's assets at the end of each
quarter among these three trading programs in accordance with the preceding
percentages.
-3-
<PAGE>
The Managing Owner has the discretion, subject to JWH's agreement, from
time to time, to alter the allocation of the Trust's assets among the JWH
trading programs, to delete a trading program or to add other JWH programs. In
deciding whether to delete or add a JWH program, the Managing Owner will
consider, among other things, recent and/or expected economic and market
conditions, the performance of each trading program and the trading programs
combined, the performance of other JWH programs, and the market sector
concentration of the trading programs currently being used by the Trust as well
as the other JWH programs. If the Trust's trading programs become concentrated
in the same market sectors, or if the recent performance of a trading program
appears incompatible with the Trust's objectives, the Managing Owner and JWH
might agree to terminate that program possibly replacing it with another.
JWH AND ITS PROGRAMS
JWH
JWH has been the sole Trading Advisor for the Trust since inception.
JWH manages capital in commodities, financial futures and foreign exchange
markets for international banks, brokerage firms, pension funds, institutions
and high net worth individuals. JWH trades on a 24-hour basis in a wide range of
futures and forward contracts -- more than sixty markets as of the date of this
prospectus -- in the United States, Europe and Asia. JWH is one of the largest
managed futures advisors in terms of assets under management, trading
approximately $1.2 billion in client capital as of July 31, 2000.
JWH currently offers three types of investment programs: Broadly
Diversified; Financial; and Foreign Exchange. Broadly Diversified programs
invest in a broad spectrum of worldwide financial and nonfinancial futures and
forward markets including currencies, interest rates, non-U.S. stock indices,
metals, energies and agricultural commodities. Financial programs invest in
worldwide financial futures and forward markets including currencies, interest
rates and stock indices in addition to the metals and energies markets. Foreign
Exchange programs invest in a wide range of world currencies primarily traded in
the interbank market.
JWH'S PROGRAMS USED FOR THE TRUST
The Trust allocates its assets among JWH's Financial and Metals
Portfolio, G-7 Currency Portfolio and JWH GlobalAnalytics-Registered Trademark-
Family of Programs. The Financial and Metals Portfolio, which began trading
client funds in October 1984, is one of the longest established JWH programs.
The G-7 Currency Portfolio has been trading client funds since February 1991.
JWH GlobalAnalytics-Registered Trademark- Family of Programs is JWH's newest
program and has been trading client capital since June 1997.
THE JWH PROGRAMS USED BY THE TRUST MAY CHANGE MATERIALLY OVER TIME.
PRIOR TO OCTOBER 5, 1998 THE TRUST USED ONLY THE ORIGINAL INVESTMENT PROGRAM AND
THE FINANCIAL AND METALS PORTFOLIO. SINCE OCTOBER 5, 1998, THE TRUST ALSO HAS
USED JWH'S G-7 CURRENCY PORTFOLIO. EFFECTIVE JANUARY 1, 2000, THE TRUST
SUBSTITUTED THE JWH GLOBALANALYTICS-REGISTERED TRADEMARK- FAMILY OF PROGRAMS FOR
THE ORIGINAL INVESTMENT PROGRAM.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FINANCIAL AND METALS PORTFOLIO
MARKET SECTORS TRADED:
INTEREST RATES
NON-U.S. STOCK INDICES
CURRENCIES
PRECIOUS AND BASE METALS
The Financial and Metals Portfolio began trading client capital in
October 1984 and has a compounded annualized rate of return of 28.9% from
inception through July 31, 2000. The Financial and Metals Portfolio seeks to
identify and capitalize on intermediate-term price movements in four worldwide
market sectors: interest rates, currencies, non-U.S. stock indices and metals.
This program takes a market position when trends are identified but may take a
neutral stance or liquidate open positions in non-trending markets. As of July
31, 2000, JWH had approximately $342 million under management pursuant to the
-4-
<PAGE>
Financial and Metals Portfolio, which is the most of any JWH program.
G-7 CURRENCY PORTFOLIO
MARKET SECTORS TRADED:
CURRENCIES
The G-7 Currency Portfolio began trading client capital in February
1991 and has a compounded annualized rate of return of 12.0% from inception
through July 31, 2000. The G-7 Currency Portfolio seeks to identify and
capitalize on intermediate-term price movements in the highly liquid currencies
of major industrialized nations. These currencies allow for trading outrights
against the U.S. dollar or non-dollar cross rates. With the advent of a single
currency for 11 countries in the European Union, the currency exposures formerly
traded for Germany, France and Italy are now executed in the Euro. This program
takes a market position when trends are identified, but may take a neutral
stance or liquidate open positions in non-trending markets. It also incorporates
specialized intra-day volatility filters. As of July 31, 2000, JWH had
approximately $22 million under management in the G-7 Currency Portfolio.
JWH GLOBALANALYTICS-REGISTERED TRADEMARK- FAMILY OF PROGRAMS
MARKET SECTORS TRADED:
INTEREST RATES
NON-U.S. STOCK INDICES
CURRENCIES
ENERGIES
SOFTS
GRAINS
FIBER
PRECIOUS AND BASE METALS
JWH GlobalAnalytics-Registered Trademark- Family of Programs, which is
JWH's most broadly diversified program, is the result of extensive research and
testing by JWH. The program invests in a broad spectrum of worldwide financial
and non-financial futures markets, including interest rate, non-U.S. stock
index, currency, metal, energy and agricultural contracts. Unlike other JWH
programs, which invest in intermediate or long-term price movements, JWH
GlobalAnalytics-Registered Trademark- Family of Programs invests in both long-
and short-term price movements. JWH GlobalAnalytics-Registered Trademark- Family
of Programs uses a combination of two investment styles, one of which always
maintains a market position -- long or short -- and the other of which takes a
market position when trends are identified but may take a neutral stance or
liquidate open positions in non-trending markets. As of July 31, 2000, JWH had
approximately $26 million under management in the JWH GlobalAnalytics-Registered
Trademark- Family of Programs, which included the account referred to as JWH
GlobalAnalytics-Registered Trademark- 99. Please see page 38 for additional
information about the JWH GlobalAnalytics-Registered Trademark- 99 account.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
PLEASE SEE THE CAPSULE PERFORMANCE SUMMARIES BEGINNING ON PAGE 36 AND
THE NOTES ACCOMPANYING THOSE PERFORMANCE SUMMARIES BEGINNING ON PAGE 40.
THE JWH PROGRAMS ARE TECHNICAL AND TREND-FOLLOWING, COMPUTERIZED SYSTEMS
The mathematical models used by the JWH programs are technical systems,
generating trading signals on the basis of statistical research into past market
prices. JWH does not attempt to analyze underlying economic factors, identify
mispricings in the market or predict future prices. Its analysis focuses
exclusively on past price movements.
As a trend-following advisor, JWH's objective is to participate in
major price trends -- sustained price movements either up or down. Such price
trends may be relatively infrequent. Trend-following advisors anticipate that
over half of their positions will be unprofitable. Their strategy is based on
making sufficiently large profits from the trends which they identify and follow
to generate overall profits despite the more numerous but, hopefully, smaller
losses incurred on the majority of their positions.
See "The Risks You Face" beginning at page 9.
-5-
<PAGE>
MARKETS TRADED
The Financial and Metals Portfolio, the G-7 Currency Portfolio and the
JWH GlobalAnalytics-Registered Trademark- Family of Programs emphasize trading
in currencies and financial instruments, but participate in most major sectors
of the global economy, which may include:
<TABLE>
CURRENCIES
----------------------------------------------------------------
<S> <C>
Australian Dollar Japanese Yen
British Pound *Malaysian Ringitt
Canadian Dollar Mexican Peso
Czech Koruna Norwegian Krone
*Danish Krone Singapore Dollar
Euro South African Rand
Greek Drachma *Swedish Krona
Hong Kong Dollar Swiss Franc
Thai Baht
FINANCIAL INSTRUMENTS
--------------------------------- --------------------------------
Australian *Euroswiss
(90-day) Bank Bills Euroyen
Australian Euro BOBL (5 year)
(3-year and 10-year) Euro Shatz (2 year)
Treasury Bonds Japanese Government Bond
Canadian Bank Bills U.K. Long "Gilt"
*Canadian U.K. Short Sterling
Government Bonds U.S. 5- and 10-year
Eurobibor Treasury Note
Eurobund U.S. 30-year Bond
Eurodollar
STOCK INDICES
--------------------------------- --------------------------------
Australian All *Nasdaq Stock Index
Ordinary Index Nikkei 225 Index
*DAX (German) (Japan)
FTSE 100 (UK) *S&P 500
METALS
--------------------------------- --------------------------------
*Aluminum *Palladium
Copper *Platinum
Gold Silver
*Lead *Tin
Nickel Zinc
AGRICULTURAL PRODUCTS
--------------------------------- --------------------------------
Live Cattle *Orange Juice
Cocoa Soybeans
Coffee Soybean Meal
Corn Soybean Oil
Cotton Sugar
Wheat
ENERGIES
--------------------------------- --------------------------------
Crude Oil No. 2 Heating Oil
Natural Gas *Unleaded Gasoline
*London Gasoil
</TABLE>
------------
* These markets are traded if and when contract liquidity, legal constraints,
market conditions and data reliability standards meet JWH's specifications.
As of June 30, 2000, the Trust had the following approximate market
sector commitments. The Trust's market sector weightings may vary significantly
over time.
Metals 7%
Energies 8%
Currencies 24%
Stock Indices 8%
Agricultural Products 6%
European Interest Rates 13%
No. American Interest Rates 3%
Pacific Rim Interest Rates 31%
THERE IS NO WAY TO PREDICT WHICH MARKETS THE TRUST WILL TRADE OR WHAT
ITS RELATIVE COMMITMENTS TO THE DIFFERENT MARKETS WILL BE.
VARYING THE SIZE OF THE TRUST'S MARKET POSITIONS
JWH attempts to adjust the Trust's position sizes and market exposure
to meet its profit and risk-control objectives. Generally, only between 2% and
15% of the face value of a futures or forward position is required as margin to
put on the position. Consequently, JWH has considerable flexibility to make
significant changes in the size of the Trust's open positions. For example, the
margin requirement
-6-
<PAGE>
for the Treasury bond futures contract is only approximately
2% of the face value of each contract. This means that JWH could acquire, for
each $100,000 of Trust capital, positions ranging from a single Treasury bond
contract with a face value of $100,000 up to fifty such contracts with a face
value of $5,000,000. The greater the market exposure of the Trust, the more
profit or loss it will recognize as a result of the same price movements, and
the greater its risk, profit potential and expected performance volatility.
THE MANAGING OWNER
The Managing Owner and Commodity Pool Operator of the Trust is CISI.
CISI was incorporated in Delaware in 1983 and is an affiliate of CIS, the
Trust's futures broker. In addition to the Trust, CISI currently operates two
public commodity pools jointly with IDS Futures Corporation and one private
commodity pool. As of July 31, 2000, the aggregate capitalization of these funds
was approximately $103 million. CISI maintains its principal office at 233 South
Wacker Drive, Suite 2300, Chicago, Illinois 60606; telephone (312) 460-4000.
SEE THE ORGANIZATIONAL CHART OF THE TRUST AT PAGE 2 AND "TRANSACTIONS
BETWEEN THE CIS GROUP AND THE TRUST" AT PAGE 52.
MAJOR RISKS OF THE TRUST
The Trust is a speculative investment. It is not possible to predict
how the Trust will perform over either the long or short term.
Investors must be prepared to lose all or substantially all of their
investment in the Units.
There can be no assurance that the past performance of either the Trust
or JWH is indicative of how they will perform in the future.
The Trust is a single-advisor fund, which is likely to involve higher
risk than multi-advisor funds.
To date, the performance of the Trust has been volatile (one commonly
accepted measure of risk). The Net Asset Value per Unit has varied almost 11% in
a single month.
The Trust could incur large losses over short periods.
The Trust typically takes positions with a face value of three to eight
times its total Net Assets.
Positive correlation among the trading programs (because they trade in
some of the same markets and are all technical, trend-following programs)
reduces diversification and increases the risk of loss.
The performance of the JWH trading programs is dependent upon market
trends of the type that JWH's models are designed to identify. Trendless periods
are frequent, and during such periods the Trust is unlikely to be profitable.
Trading on foreign contract markets involves additional risks,
including the risks of inadequate or lack of regulation, exchange-rate
fluctuations, expropriation, credit and investment controls and counterparty
insolvency.
There can be no assurance of the continued availability of JWH or its
key principals.
Because its performance is entirely unpredictable, there is no way of
telling when is a good time to invest in the Trust. Investors have no means of
knowing whether they are buying Units at a time when profitable periods are
ending, beginning, or not in progress.
The Units are not transferable and may only be redeemed once a month.
Because investors must submit irrevocable subscriptions as well as redemption
notices by the fifth business day prior to month-end, they cannot know the Net
Asset Value at which they will acquire or redeem Units. Investors cannot control
the maximum losses on their Units because they cannot be sure of the redemption
value of their Units.
As Unitholders, investors have no voice in the operation of the Trust;
they are entirely dependent on the management of CISI and JWH for the success of
their investment.
-7-
<PAGE>
FEES AND EXPENSES
The Incentive Fee payable to JWH is calculated on a quarterly basis and
could be substantial even in a breakeven or losing year. The Trust's other
significant expenses are its Brokerage and Management Fees. If the Trust's Net
Asset Value increases, the absolute dollar amount of these percentage-of-assets
fees will also, but they will have the same effect on the Trust's rate of
return.
A redeeming Unitholder pays redemption charges to CISI through the end
of the eleventh month after the redeemed Unit was purchased (reducing the
redemption proceeds otherwise payable to investors).
<TABLE>
<CAPTION>
BREAKEVEN TABLE
TWELVE-MONTH
DOLLAR
TWELVE-MONTH BREAKEVEN
PERCENTAGE ($5,000 INITIAL
EXPENSES BREAKEVEN INVESTMENT)++
-------- ------------ ---------------
<S> <C> <C>
Brokerage Fees 6.50% $325.00
Management Fee 2.00% $100.00
Incentive Fee* 1.00% $50.00
Administrative Expenses* 0.10% $5.00
Organizational and Initial
Offering Cost Amortization 0.20% $10.00
Ongoing Offering Costs 0.50% $25.00
LESS Interest Income* (5.50)% ($275.00)
RETURN ON $5,000 4.80% $240.00
INITIAL INVESTMENT
REQUIRED FOR
"BREAK-EVEN" IF
UNITS HELD AT
LEAST TWELVE
MONTHS
TWELVE-MONTH
BREAKEVEN WITHOUT
REDEMPTION CHARGE 4.80% $240.00
Redemption Charge
(on redemptions prior to
twelve months after purchase) 3.00% $150.00
TWELVE-MONTH
BREAKEVEN WITH
REDEMPTION CHARGE 7.80% $390.00
</TABLE>
---------------
* Estimated. The Incentive Fee is 20% of New Trading Profits and is paid
quarterly; consequently, an Incentive Fee could be due in a breakeven or losing
year.
++ Assumes a constant $5,000 Net Asset Value.
SEE "CHARGES" AT PAGE 44.
PRINCIPAL TAX ASPECTS OF OWNING UNITS
Investors are taxed each year on any gains recognized by the Trust
whether or not they redeem any Units or receive any distributions from the
Trust.
40% of any trading profits on U.S. exchange-traded contracts are taxed
as short-term capital gains at the individual investor's ordinary income tax
rate (39.6% maximum), while 60% of such gains are taxed as long-term capital
gain at a 20% maximum rate for individuals. The Trust's trading gains from other
contracts will be primarily short-term capital gain. This tax treatment applies
regardless of how long an investor holds Units. If, on the other hand, an
investor held a stock or bond for twelve months or longer, all the gain realized
on its sale would generally be taxed at a 20% maximum rate.
Losses on the Units may be deducted against capital gains. Any losses
in excess of capital gains may only be deducted against ordinary income to the
extent of $3,000 per year. Consequently, investors could pay tax on the Trust's
interest income even though they have lost money on their Units. See "Tax
Consequences" beginning at page 55.
AN INVESTMENT IN THE UNITS SHOULD BE CONSIDERED AS A LONG-TERM COMMITMENT
The market conditions in which the Trust is likely to recognize
significant profits occur infrequently. An investor should plan to hold Units
for long enough to have a realistic opportunity for a number of such trends to
develop.
CISI believes that investors should consider the Units at least a three
to five year commitment.
IS THE TRUST A SUITABLE INVESTMENT FOR YOU?
You should consider investing in the Trust if you are interested in its
potential to produce
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<PAGE>
enhanced returns over the long-term that are generally unrelated to the
returns of the traditional debt and equity markets and you are prepared to
risk significant losses. CISI offers the Trust only as a diversification
opportunity for an investor's entire investment portfolio, not as a complete
investment program. No one should invest more than 10% of his or her readily
marketable assets in the Trust.
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<PAGE>
THE RISKS YOU FACE
POSSIBLE TOTAL LOSS OF AN INVESTMENT IN THE TRUST
You could lose all or substantially all of your investment in the
Trust.
SPECIFIC RISKS ASSOCIATED WITH A SINGLE-ADVISOR FUND
Even in the speculative area of managed futures, single-advisor funds
are considered by some to be unusually high risk investments. Multi-advisor
strategies are used by many "commodity pools" specifically for risk control
purposes.
INVESTING IN THE UNITS MIGHT NOT DIVERSIFY AN OVERALL PORTFOLIO
One of the objectives of the Trust is to add an element of
diversification to a traditional securities portfolio. While the Trust may
perform in a manner largely independent from the general stock and bond markets,
there is no assurance it will do so. An investment in the Trust could increase
rather than reduce overall portfolio losses during periods when the Trust as
well as stocks and bonds decline in value. There is no way of predicting whether
the Trust will lose more or less than stocks and bonds in declining markets.
Investors must not rely on the Trust as any form of hedge against losses in
their core securities portfolios.
Prospective investors should consider whether diversification in itself
is worthwhile even if the Trust is unprofitable.
INVESTORS MUST NOT RELY ON THE PAST PERFORMANCE OF EITHER JWH OR THE TRUST IN
DECIDING WHETHER TO BUY UNITS
The performance of the Trust is entirely unpredictable, and the past
performance of the Trust as well as of JWH is not necessarily indicative of
their future results.
The price data which JWH has researched in developing its programs may
not reflect the changing dynamics of future markets. If not, the JWH programs
would have little chance of being profitable. An influx of new market
participants, changes in market regulation, international political
developments, demographic changes and numerous other factors can contribute to
once-successful strategies becoming outdated. Not all of these factors can be
identified, much less quantified. There can be no assurance that JWH will trade
profitably.
VOLATILE JWH TRADING HISTORY
JWH's performance, even when successful, has been characterized by
significant volatility. Since the inception of trading of the JWH programs, the
largest "peak-to-valley" drawdown experienced by any single program was nearly
60% on a composite basis, and certain individual accounts managed pursuant to
such program experienced even greater volatility. Moreover, certain programs
have incurred losses of 10% or more in a single trading day. Even if the Trust
is successful, it is likely to experience significant losses from time to time.
The performance of the Trust to date has been volatile.
THE SIMILARITIES AMONG THE JWH PROGRAMS REDUCE DIVERSIFICATION, INCREASING THE
RISK OF LOSS
The similarities among the programs reduce the Trust's diversification.
The less diversification, the higher the risk that the market will move against
a large number of positions held by different programs at the same time,
increasing losses.
OVERLAP OF THE MARKETS TRADED BY JWH ALSO REDUCES DIVERSIFICATION, INCREASING
THE RISK OF LOSS
The trading programs used by the Trust emphasize trading in the
financial instrument and currency markets. The degree of market overlap changes
with the program mix. However, in general, CISI expects the Trust will maintain
a substantial concentration in these two sectors while the current programs
continue to be used for the Trust. Market concentration increases the risk of
major losses and unstable Unit values, as the same price movements adversely
affect many of the Trust's concentrated positions at or about the same time.
As it is impossible to predict where price trends will occur, certain
trend-following managers
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<PAGE>
attempt to maximize the chance of exploiting such trends by taking positions
in as many different markets and market sectors as feasible. The Trust does
not follow this approach and, as a result, may not capture trends which would
have been highly profitable.
ITS SUBSTANTIAL EXPENSES WILL CAUSE LOSSES FOR THE TRUST UNLESS OFFSET BY
PROFITS AND INTEREST INCOME
The Trust pays fixed annual expenses of approximately 9.30% of its
average month-end assets. In addition to this 9.30% annual expense level, the
Trust is subject to 20% quarterly Incentive Fees on any New Trading Profits.
Because these Incentive Fees are calculated quarterly, they could represent a
substantial expense to the Trust even in a breakeven or losing year. Based on
CISI's experience with its other funds, CISI expects that approximately 1% of
the Trust's average month-end assets might be paid out in Incentive Fees even
during a losing year. Overall, investors must expect that the Trust will pay
about 10.30% per year in expenses, 13.30% including the 3% redemption charge in
effect for the first twelve months after a Unit is issued.
The Trust's expenses could, over time, result in significant losses.
Except for the Incentive Fee, these expenses are not contingent and are payable
whether or not the Trust is profitable.
JWH ANALYZES ONLY TECHNICAL MARKET DATA, NOT ANY ECONOMIC FACTORS EXTERNAL TO
MARKET PRICES
The JWH programs focus exclusively on statistical analysis of market
prices. Consequently, any factor external to the market itself which dominates
prices is likely to cause major losses. For example, a pending political or
economic event may be very likely to cause a major price movement, but JWH would
continue to maintain positions that would incur major losses as a result of such
movement, if its programs indicated that it should do so.
The likelihood of the Units being profitable could be materially
diminished during periods when events external to the markets themselves have an
important impact on prices. During such periods, JWH's historical price analysis
could establish positions on the wrong side of the price movements caused by
such events.
LACK OF PRICE TRENDS OR OF THE TYPES OF PRICE TRENDS WHICH JWH PROGRAMS CAN
IDENTIFY WILL CAUSE MAJOR LOSSES
The Trust cannot trade profitably unless major price trends occur in at
least certain markets that it trades. Many markets are trendless most of the
time, and in static markets the JWH programs are likely to incur losses. In
fact, JWH expects more than half of its trades to be unprofitable; it depends on
significant gains from a few major trends to offset these losses. It is not just
any price trend, but price trends of the type which JWH's systems have been
designed to identify, which are necessary for the Trust to be profitable.
THE DANGER TO THE TRUST OF "WHIPSAW" MARKETS
Often, the most unprofitable market conditions for the Trust are those
in which prices "whipsaw," moving quickly upward, then reversing, then moving
upward again, then reversing again. In such conditions, the JWH programs may
establish losing positions based on incorrectly identifying both the brief
upward or downward price movements as trends.
THE LARGE SIZE OF THE TRUST'S TRADING POSITIONS INCREASES THE RISK OF SUDDEN,
MAJOR LOSSES
The Trust takes positions with face values up to as much as
approximately eight times its total equity. Consequently, even small price
movements can cause major losses.
UNIT VALUES ARE UNPREDICTABLE AND VARY SIGNIFICANTLY MONTH-TO-MONTH
The Net Asset Value per Unit can vary significantly month-to-month. In
August 1998, there was almost an 11% change in the value of a Unit. Investors
cannot know at the time they submit a subscription or a redemption request what
the subscription price or redemption value of their Units will be.
The only way to take money out of the Trust is to redeem Units. You can
only redeem Units at month-end on five business days' advance notice and subject
to possible redemption charges. The
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<PAGE>
restrictions imposed on redemptions limit your ability to protect yourself
against major losses by redeeming Units.
Transfers of Units are subject to limitations as well, such as advance
written notice of any intent to transfer and the consent of CISI to such
transfer.
In addition, investors are unable to know whether they are subscribing
for Units after a significant upswing in the Net Asset Value per Unit - often a
time when the Trust has an increased probability of entering into a losing
period.
THE OPPORTUNITY COSTS OF REBALANCING THE JWH PROGRAMS
The quarterly rebalancing of the Trust's assets among its JWH trading
programs may result in the liquidation of profitable positions, thereby
foregoing greater profits which the Trust would otherwise have realized, and the
establishment of unprofitable positions, thereby incurring losses which the
Trust would otherwise have avoided had rebalancing not occurred.
ALTERATION OF TRADING SYSTEMS AND CONTRACTS AND MARKETS TRADED
JWH may, in its discretion, change and adjust the trading programs, as
well as the contracts and markets which they trade. These adjustments may result
in foregoing profits which the trading programs would otherwise have captured,
as well as incurring losses which they would otherwise have avoided. Neither the
Managing Owner nor the Unitholders are likely to be informed of any non-material
changes in the trading programs.
INCREASED COMPETITION FROM OTHER TREND-FOLLOWING TRADERS COULD REDUCE JWH'S
PROFITABILITY
There has been a dramatic increase over the past twenty years in the
amount of assets managed by trend-following trading systems like the JWH
programs. In 1980, the amount of assets in the managed futures industry were
estimated at approximately $300 million; by July 2000, this estimate had risen
to approximately $39.6 billion. It is also estimated that over half of all
managed futures trading advisors rely primarily on trend-following systems.
Although the amount of trading in the futures industry as a whole has increased
significantly during the same period of time, the increase in managed money
increases trading competition. The more competition there is for the same
positions, the more costly and harder they are to acquire.
JWH'S HIGH LEVEL OF EQUITY UNDER MANAGEMENT COULD LEAD TO DIMINISHED RETURNS
JWH has a significant amount of assets under management. As of January
1, 1990, JWH had approximately $197 million under management; as of July 31,
2000, this figure had risen to approximately $1.2 billion. The more money JWH
manages, the more difficult it may be for JWH to trade profitably because of the
difficulty of trading larger positions without adversely affecting prices and
performance. Large trades result in more price slippage than do smaller orders.
ILLIQUID MARKETS COULD MAKE IT IMPOSSIBLE FOR JWH TO REALIZE PROFITS OR LIMIT
LOSSES
In illiquid markets, JWH could be unable to capitalize on the
opportunities identified by it or to close out positions against which the
market is moving. There are numerous factors which can contribute to market
illiquidity, far too many for JWH to predict when or where illiquid markets may
occur. JWH attempts to limit its trading to highly liquid markets, but there can
be no assurance that a market which has been highly liquid in the past will not
experience periods of unexpected illiquidity.
Unexpected market illiquidity has caused major losses in recent years
in such sectors as emerging markets, fixed income relative value strategies and
mortgage-backed securities. There can be no assurance that the same will not
happen to the Trust at any time or from time to time. The large size of the
positions which JWH acquires for the Trust increases the risk of illiquidity by
both making its positions more difficult to liquidate and increasing the losses
incurred while trying to do so.
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<PAGE>
JWH TRADES EXTENSIVELY IN FOREIGN MARKETS; THESE MARKETS ARE LESS REGULATED THAN
U.S. MARKETS AND ARE SUBJECT TO EXCHANGE RATE, MARKET PRACTICES AND POLITICAL
RISKS
The trading programs used for the Trust trade a great deal outside the
U.S. From time to time, as much as 30%-50% of the Trust's overall market
exposure could involve positions taken on foreign markets. Foreign trading
involves risks -- including exchange-rate exposure, possible governmental
intervention and lack of regulation -- which U.S. trading does not. In addition,
the Trust may not have the same access to certain positions on foreign exchanges
as do local traders, and the historical market data on which JWH bases its
strategies may not be as reliable or accessible as it is in the United States.
Certain foreign exchanges may also be in a more or less developmental stage so
that prior price histories may not be indicative of current price dynamics. The
rights of clients in the event of the insolvency or bankruptcy of a non-U.S.
market or broker are also likely to be more limited than in the case of U.S.
markets or brokers.
UNREGULATED MARKETS LACK REGULATORY PROTECTIONS OF EXCHANGES
A substantial portion of the Trust's trading -- primarily its
trading of spot and forward contracts in currencies -- takes place in
unregulated markets. It is impossible to determine fair pricing, prevent
abuses such as "front-running" or impose other effective forms of control
over such markets. The absence of regulation could expose the Trust in
certain circumstances to significant losses which it might otherwise have
avoided.
MANDATORY CLOSING OUT OF OFFSETTING POSITIONS
Applicable CFTC rules require that offsetting positions taken by JWH on
behalf of the Trust, even though taken by different programs, be closed out. JWH
does not believe that the requirement of liquidating offsetting positions held
for the Trust by the trading programs will, at this point, impede the operation
of the Trust. However, it is possible that under certain circumstances the
requirement to close out offsetting positions on an inter-program basis could
adversely affect the performance of the Trust. The fact that JWH operates three
strategies for the same account without having its overall performance disrupted
by the CFTC's "close out" rule demonstrates the extent of the similarities
between the trading programs and the likelihood of significant positive
correlation among their respective trading results.
REGULATORY CHANGES COULD RESTRICT THE TRUST'S OPERATIONS
The Trust implements a speculative, highly leveraged strategy. From
time to time there is governmental scrutiny of these types of strategies and
political pressure to regulate their activities. For example, the Malaysian
government recently blamed the collapse of its currency on speculative funds and
called for international restrictions on their operations.
Regulatory changes could adversely affect the Trust by restricting its
markets, limiting its trading and/or increasing the taxes to which Unitholders
are subject. As an example, in the mid-1980s the CFTC raised doubts concerning
the legality of futures funds trading currency forwards, and the legality of EFP
transactions come under periodic CFTC review. EFPs are a mechanism for
converting a foreign currency forward into a futures contract. If JWH could not
trade currency forwards or EFPs for the Trust, the effect on the Trust could be
material and adverse. CISI is not aware of any pending or threatened regulatory
developments which might adversely affect the Trust. However, adverse regulatory
initiatives could develop suddenly and without notice.
POSSIBLE EFFECTS OF THE EUROPEAN MONETARY UNION
JWH historically has traded European currencies. The market's reaction
to the Euro, or to any nation's possible withdrawal from the European Monetary
Union, may adversely affect the trading opportunities, or trading results
generally, of currency traders. The absence of historical Euro pricing data
could be detrimental to trend-following traders such as JWH.
The conversion to a single Euro-currency is a very significant and
novel political and economic event and there can be no certainty about its
direct or indirect future effects on currency markets.
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<PAGE>
Unforeseen effects of the European Monetary Union could result in trading
losses for the Trust.
Euro risk, in the form of positions in Euro forward contracts and
futures contracts on Euro-denominated bond interest rates, has been gradually
introduced with increasing exposure throughout 1999 to maintain the Trust's
European risk allocations at a level similar to pre-Euro weightings.
THE TRUST COULD LOSE ASSETS AND HAVE ITS TRADING DISRUPTED DUE TO THE BANKRUPTCY
OF CISI OR OTHERS
The Trust is subject to the risk of CISI, exchange or clearinghouse
insolvency. Trust assets could be lost or impounded in such an insolvency during
lengthy bankruptcy proceedings. Were a substantial portion of the Trust's
capital tied up in a bankruptcy, CISI might suspend or limit trading, perhaps
causing the Trust to miss significant profit opportunities. No CISI fund has
ever lost any assets due to the bankruptcy or default of a broker, exchange or
clearinghouse, but there can be no assurance that this will not happen in the
future.
POSSIBILITY OF TERMINATION OF THE TRUST BEFORE EXPIRATION OF ITS STATED TERM
As Managing Owner, CISI may withdraw from the Trust upon 120 days'
notice, which would cause the Trust to terminate unless a substitute managing
owner were obtained. Other events, such as a long-term substantial loss suffered
by the Trust, could also cause the Trust to terminate before the expiration of
its stated term. This could cause you to liquidate your investments and upset
the overall maturity and timing of your investment portfolio. If the
registrations with the CFTC or memberships in NFA of JWH, CISI or CIS were
revoked or suspended, such entity would no longer be able to provide services to
the Trust.
-------------------------
THE FOLLOWING ARE NOT RISKS BUT RATHER IMPORTANT TAX FEATURES OF
INVESTING IN THE TRUST WHICH ALL PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
BEFORE DECIDING WHETHER TO PURCHASE UNITS.
INVESTORS ARE TAXED EVERY YEAR ON THEIR SHARE OF THE TRUST'S PROFITS -- NOT ONLY
WHEN THEY REDEEM AS WOULD BE THE CASE IF THEY HELD STOCKS OR BONDS
Investors are taxed each year on their investment in the Trust,
irrespective of whether they redeem any Units.
All performance information included in this prospectus is presented on
a pre-tax basis; the investors who experienced such performance had to pay the
related taxes from other sources.
Over time, the compounding effects of the annual taxation of the
Trust's income are material to the economic consequences of investing in the
Trust. For example, a 10% compound annual rate of return over five years would
result in an initial $10,000 investment compounding to $16,105. However, if one
factors in a 30% tax rate each year, the result would be $14,025.
THE TRUST'S TRADING GAINS ARE TAXED AT HIGHER SHORT-TERM CAPITAL GAINS RATE
Investors are taxed on their share of any trading profits of the Trust
at both short- and long-term capital gain rates depending on the mix of U.S.
exchange-traded contracts and non-U.S. contracts traded. These tax rates are
determined irrespective of how long an investor holds Units. Consequently, the
tax rate on the Trust's trading gains may be higher than those applicable to
other investments held by an investor for a comparable period.
TAX COULD BE DUE FROM INVESTORS ON THEIR SHARE OF THE TRUST'S INTEREST INCOME
DESPITE OVERALL LOSSES
Investors may be required to pay tax on their allocable share of the
Trust's interest income, even though the Trust incurs overall losses. Trading
losses can only be used by individuals to offset trading gains and $3,000 of
interest income each year. Consequently, if an investor were allocated $5,000 of
interest income and $10,000 of net trading losses, the investor would owe tax on
$2,000 of interest income even though the investor would have a $5,000 economic
loss for the year. The $7,000 capital loss would carry forward, but subject to
the same limitation on its deductibility against interest income.
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<PAGE>
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
By investing in the Trust, subscribers have the opportunity to place
assets with an experienced active managed futures advisor. JWH is one of the
largest advisors in the managed futures industry in terms of assets under
management. JWH has been continuously managing client funds in the futures and
forward markets for over eighteen years and, as of July 31, 2000, managed
approximately $1.2 billion in client capital. JWH has achieved substantial
profits under a variety of different market conditions and trading a variety of
different programs, including the Financial and Metals Portfolio, the G-7
Currency Portfolio and JWH GlobalAnalytics-Registered Trademark- Family of
Programs.
INVESTMENT DIVERSIFICATION
The globalization of the world's economy offers potentially valuable
trading opportunities, as major political and economic events continue to
influence world markets, at times dramatically. Volatility in interest rates,
the possibility of significant fluctuations in the value of commodities and
currencies, the consolidation of European currencies, fragility in world banking
and credit mechanisms and the growing interdependence among national economies
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 the Trust is as likely to be profitable (or
unprofitable) during periods of declining stock, bond and real estate markets as
at any other time. In addition to the expected non-correlation in its
performance with the performance of the general equity and debt markets, the
Trust's flexibility to take either long or short positions, as opposed to
traditional portfolios which are typically heavily weighted towards the former,
can be an important advantage in times of economic uncertainty.
An investor who is not prepared to spend substantial time trading in
the futures and forward markets may nevertheless participate in the commodities
and financial markets through investing in the Trust, thereby obtaining
diversification from traditional investments such as a diversified portfolio of
stocks, bonds and real estate. By allocating a portion of the risk segment of a
traditional diversified portfolio to the Trust, an investor has the potential,
if the Trust is successful, to enhance the prospects for superior performance of
the overall portfolio as well as to reduce the volatility of the portfolio over
time and the dependence of such portfolio on any single country's economy.
OPPORTUNITY TO PROFIT IN DECLINING AS WELL AS IN RISING MARKETS
The futures markets offer the ability to trade either side of the
market. Unlike short selling in the securities markets, taking short positions
in the futures market (or buying a put option or selling a call option) in
anticipation of a drop in price can be accomplished without additional
restrictions or special margin requirements. Selling short is no more difficult
than establishing a long position.
The profit and loss potential of futures trading is not dependent upon
economic prosperity or interest rate or currency stability. Positive and
negative returns may be realized in both rising and declining markets. It is
potentially advantageous for investors to own assets which can appreciate during
a period of generally declining prices, financial disruption or economic
instability.
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<PAGE>
INTEREST ON TRUST ASSETS
The Trust receives interest income on its assets. On the fifth business
day of each month, CIS and CISFS credit the Trust's account with interest as if
100% of the Trust's average daily balances on deposit with CIS or CISFS, as the
case may be, in the previous month were continuously invested at the average
91-day Treasury bill rate for that previous month for deposits denominated in
dollars and at the applicable rate for deposits denominated in currencies other
than dollars. The interest earned on the Trust's assets can offset a 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.
Although CISI has not yet done so, CISI may place some of the Trust's
assets with a Custodian and hire a third-party cash manager to manage that
money. If Trust assets are deposited with such Custodian, the Trust will receive
the interest actually earned by the third-party cash manager on such assets. CIS
has agreed to credit the account of the Trust at each month-end the amount, if
any, by which returns (net of fees of the cash manager) for such month on Trust
assets held by a Custodian are less than the return that would have been
realized by the Trust had such assets been deposited with CIS.
SMALL MINIMUM INVESTMENT
JWH is typically available to manage individual accounts only of
substantial size -- $5,000,000 or more. Investors in the Trust are currently
able to gain access to three JWH programs for a minimum investment of only
$5,000; $2,000 in the case of eligible employee benefit plans and individual
retirement accounts. A small minimum investment requirement makes the Trust
accessible to a wide range of investors and also means that no investor must
commit a significant amount of assets in order to participate in the Trust.
LIMITED LIABILITY
An investor who opens an individual futures account is generally liable
for all losses incurred in such account, and may lose substantially more than
such investor committed to the account, particularly in light of the large
positions in relation to capital used in futures and forward trading. However, a
Unitholder cannot lose more than his or her investment in the Trust plus
undistributed profits. In fact, in the event the Net Asset Value of a Unit
decreases to less than 50% of the previous highest month-end Net Asset Value per
Unit as of the close of business on any day, the Managing Owner is required to
cause the Trust to liquidate all open positions, suspend trading and declare a
Special Redemption Date in accordance with the provisions in the Declaration and
Agreement of Trust. Without limited liability, it could be imprudent for an
investor to participate in strategies like those applied by JWH where positions
may be large in relation to account equity.
ADMINISTRATIVE CONVENIENCE
The Trust is structured so as to substantially eliminate the
administrative burden which would otherwise be involved in Unitholders engaging
directly in futures and forward trading. Unitholders receive monthly unaudited
and annual certified financial reports as well as all tax information relating
to the Trust necessary for Unitholders to complete their federal income tax
returns. The approximate daily Net Asset Value per Unit is available by calling
your registered representative or CISI at (312) 460-4000 or toll free at (888)
292-9399.
HOW THE TRUST WORKS
BUYING UNITS
You buy Units as of the last business day of any month at Net Asset
Value. Your subscription must be submitted by the fifth business day prior to
the month-end of investment. Late subscriptions will be applied to Unit sales as
of the end of the second month after receipt, unless revoked.
CISI has no present intention to terminate the offering, but may do so
at any time.
Units are offered at Net Asset Value.
Investors need to submit Subscription Agreements with each purchase of
Units.
The minimum purchase for first-time investors is $5,000; $2,000 for
IRAs and other tax-
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exempt accounts. Existing investors may make additional investments in $1,000
minimums.
USE OF PROCEEDS
100% of all subscription proceeds are invested directly into the Trust.
Neither the Trust nor any subscriber pays any selling commissions. CISI pays all
such commissions as part of the ongoing syndication costs of the Trust. In
return, CISI receives substantial revenues from the Trust over time.
The Trust uses subscription proceeds to margin its speculative futures
trading, as well as to pay trading losses and expenses. At the same time that
the Trust's assets are being used as margin, they are also available for cash
management. Substantially all the cash management return earned on the Trust's
assets is paid to the Trust, although the CIS Group does retain certain economic
benefits from possession of the Trust's assets, as described in more detail
under "Interest Income" beginning at page 42.
REDEEMING UNITS
You can redeem Units monthly. To redeem at month-end, contact your
registered representative or CISI. Redemption requests must be received by CISI
no later than the fifth business day prior to the month-end of redemption.
The proceeds of Units redeemed through the eleventh month from the date
of issuance are reduced by a charge of 3% of their redemption date Net Asset
Value. This charge is paid to CIS. If a Unitholder acquires Units at more than
one closing, the Units purchased first by such investor and, accordingly, least
likely to be subject to redemption charges, are assumed to be those first
redeemed.
UNCERTAIN SUBSCRIPTION AND REDEMPTION VALUE OF UNITS
The Trust sells and redeems Units at subscription or redemption date
Net Asset Value, not at the Net Asset Value as of the date that subscriptions or
redemption requests are submitted. Investors must submit irrevocable
subscriptions and redemption requests no later than the fifth business day prior
to the effective date of subscription or redemption. Because of the volatility
of Unit values, this delay means that investors cannot know the value at which
they will purchase or redeem their Units.
Materially adverse changes in the Trust's financial position could
occur between the time an investor irrevocably commits to acquire or redeem
Units and the time the purchase or redemption is made.
NO DISTRIBUTIONS INTENDED
The Trust does not anticipate making any distributions to investors. No
distributions have been made to date.
-17-
<PAGE>
PERFORMANCE OF THE TRUST
The following are the monthly rates of return from the inception of the
Trust through July 31, 2000. During this period, and through September 30, 2000,
the Trust paid JWH a 4% Management Fee and a 15% Incentive Fee. As of October 1,
2000, the Trust pays JWH a 2% Management Fee and a 20% Incentive Fee.
JWH GLOBAL TRUST
JUNE 2, 1997 - JULY 31, 2000
AGGREGATE SUBSCRIPTIONS: $117.7 MILLION
CURRENT CAPITALIZATION: $47.4 MILLION
WORST MONTHLY DECLINE (MONTH/YEAR): (9.97)% (11/98)
WORST PEAK-TO-VALLEY DECLINE (MONTH/YEAR): (26.02)% (7/99 - 7/00)
NET ASSET VALUE PER UNIT, JULY 31, 2000: $88.97
NUMBER OF UNITHOLDERS, JULY 31, 2000: 2,437
<TABLE>
<CAPTION>
=========================================================================================
MONTHLY RATES OF RETUN
-----------------------------------------------------------------------------------------
2000 1999 1998 1997
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January (2.81)% (4.08)% (2.83)%
-----------------------------------------------------------------------------------------
February (3.24) 2.78 (1.14)
-----------------------------------------------------------------------------------------
March (3.47) (0.78) (3.03)
-----------------------------------------------------------------------------------------
April 2.43 3.89 (4.59)
-----------------------------------------------------------------------------------------
May (1.21) (0.20) 3.44
-----------------------------------------------------------------------------------------
June (5.15) 2.58 (1.63) 0.16%
-----------------------------------------------------------------------------------------
July (2.28) (3.42) (3.05) 6.64
-----------------------------------------------------------------------------------------
August (0.25) 10.84 (2.26)
-----------------------------------------------------------------------------------------
September (3.67) 8.02 (1.46)
-----------------------------------------------------------------------------------------
October (7.16) 2.73 2.46
-----------------------------------------------------------------------------------------
November 2.86 (9.97) 0.83
-----------------------------------------------------------------------------------------
December (1.77) 8.35 3.22
-----------------------------------------------------------------------------------------
COMPOUND ANNUAL (14.87)% (9.44)% 5.20% 9.70%
RATE OF RETURN (7 MONTHS) (7 MONTHS)
-----------------------------------------------------------------------------------------
</TABLE>
UNTIL OCTOBER 5, 1998, WHEN THE G-7 CURRENCY PROGRAM WAS ADDED
TO THE TRUST'S PORTFOLIO, THE TRUST USED ONLY TWO JWH
PROGRAMS, THE ORIGINAL INVESTMENT PROGRAM AND THE FINANCIAL
AND METALS PORTFOLIO. EFFECTIVE JANUARY 1, 2000, THE TRUST
SUBSTITUTED THE JWH GLOBALANALYTICS-REGISTERED TRADEMARK-
FAMILY OF PROGRAMS FOR THE ORIGINAL INVESTMENT PROGRAM AND
CHANGED THE ALLOCATION OF TRUST ASSETS AMONG THE THREE
PROGRAMS.
MONTHLY RATE OF RETURN IS THE NET PERFORMANCE OF THE TRUST
DURING A MONTH (INCLUDING INTEREST INCOME) DIVIDED BY THE
TOTAL EQUITY OF THE TRUST AS OF THE BEGINNING OF THE MONTH.
PERFORMANCE INFORMATION IS CALCULATED ON AN ACCRUAL BASIS IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
-18-
<PAGE>
WORST PEAK-TO-VALLEY DECLINE IS THE LARGEST DECLINE IN THE NET
ASSET VALUE PER UNIT WITHOUT SUCH NET ASSET VALUE PER UNIT
BEING SUBSEQUENTLY EQUALED OR EXCEEDED.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-19-
<PAGE>
SELECTED FINANCIAL INFORMATION
The following Selected Financial Information for the period ended June
30, 2000 is derived from the unaudited financial statements of the Trust for the
period from January 1, 2000 to June 30, 2000. The Selected Financial Information
for the years ended December 31, 1999 and 1998 and the period ended December 31,
1997 is derived from the financial statements for the years ended December 31,
1999 and 1998 and the period from June 2, 1997 (commencement of trading
operations) to December 31, 1997, which have been audited by KPMG LLP. See
"Financial Statements" at page 61.
---------------------------------------------
<TABLE>
<CAPTION>
JAN. 1, 2000 JUNE 2, 1997
TO JAN. 1, 1999 JAN. 1, 1998 (COMMENCEMENT OF TRADING
JUNE 30, 2000 TO TO OPERATIONS) TO
INCOME STATEMENT DATA (UNAUDITED) DEC. 31, 1999 DEC. 31, 1998 DEC. 31, 1997
--------------------- -------------- ------------- ------------- ------------------------
<S> <C> <C> <C> <C>
Revenues:
Realized gain (loss) on closed $(3,652,545) $2,105,322 $10,418,484 $1,761,637
positions
Change in unrealized gain (loss) on
open positions (3,510,073) (4,219,845) 3,078,002 4,481,153
Interest income 1,848,687 4,299,669 3,669,771 1,042,648
Foreign currency transaction gain (389,061) 153,831 (296,969) (297,458)
(loss)
-------------- ------------- ------------- ------------------------
Total Revenues $(5,702,992) $ 2,338,977 $16,869,288 $6,987,980
============== ============= ============= ========================
Expenses:
Commissions paid to CIS 2,204,323 6,136,926 5,195,089 1,441,635
Exchange, clearing, and NFA fees 17,834 83,215 59,724 12,426
Management fees 1,372,165 3,833,530 3,239,007 896,312
Incentive fees 0 853,599 1,383,562 715,477
Amortization of prepaid initial
organization and offering expenses 66,086 132,172 132,173 66,238
Ongoing organization and offering
expenses 170,043 474,221 400,616 110,352
Operating expenses 30,100 47,406 58,596 94,292
-------------- ------------- ------------- ------------------------
Total Expenses 3,860,551 11,561,069 10,468,767 3,336,732
============== ============= ============= ========================
Net profit (loss) $(9,563,544) $(9,222,092) $ 6,400,521 $3,651,248
============== ============= ============= ========================
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 2000
NET DEC. 31, 1999 DEC. 31, 1998 DEC. 31, 1997
ASSET VALUE NET NET NET
BALANCE SHEET DATA (UNAUDITED) ASSET VALUE ASSET VALUE ASSET VALUE
--------------------- -------------- ------------- ------------- ------------------------
<S> <C> <C> <C> <C>
Aggregate Net Asset Value $51,230,015 $85,169,866 $95,472,546 $64,351,524
Net Asset Value per Unit $91.05 $104.51 $115.40 $109.70
</TABLE>
THE $650,000 OF ORGANIZATIONAL AND INITIAL OFFERING COSTS REIMBURSED TO
THE MANAGING OWNER BY THE TRUST AS OF THE COMMENCEMENT OF TRADING ARE BEING
AMORTIZED OVER A SIXTY-MONTH PERIOD BEGINNING WITH JUNE 1997.
-20-
<PAGE>
MANAGEMENT'S ANALYSIS
OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
JWH programs do not predict price movements. No fundamental economic
supply or demand analysis is used in attempting to identify mispricings in the
market, and no macroeconomic assessments of the relative strengths of different
national economies or economic sectors is made. Instead, the programs apply
proprietary computer models to analyze past market data, and from this data
alone attempt to determine whether market prices are trending. Technical traders
such as JWH base their strategies on the theory that market prices reflect the
collective judgment of numerous different traders and are, accordingly, the best
and most efficient indication of market movements. However, there are frequent
periods during which fundamental factors external to the market dominate prices.
If JWH's models identify a trend, they signal positions which follow
it. When these models identify the trend as having ended or reversed, these
positions are either closed out or reversed. Due to their trend-following
character, the JWH programs do not predict either the commencement or the end of
a price movement. Rather, their objective is to identify a trend early enough to
profit from it and to detect its end or reversal in time to close out the
Trust's positions while retaining most of the profits made from following the
trend.
In analyzing the performance of JWH's trend-following programs,
economic conditions, political events, weather factors, etc., are not directly
relevant because only market data has any input into JWH's trading results.
There is no direct connection between particular market conditions and price
trends. There are so many influences on the markets that the same general type
of economic event may lead to a price trend in some cases but not in others. The
analysis is further complicated by the fact that the programs are designed to
recognize only certain types of trends and to apply only certain criteria of
when a trend has begun. Consequently, even though significant price trends may
occur, if these trends are not comprised of the type of intra-period price
movements which the programs are designed to identify, the Trust may miss the
trend altogether.
The Trust's success depends on JWH's ability to recognize and
capitalize on major price movements and other profit opportunities in
different sectors of the world economy. Because of the speculative nature of
its trading, operational or economic trends have little relevance to the
Trust's results, and its past performance is not necessarily indicative of
its future results. The Managing Owner believes, however, that there are
certain market conditions -- for example, markets with major price
movements -- in which the Trust has a better opportunity of being profitable
than in others.
The following performance summary outlines certain major price trends
which the JWH programs have identified for the Trust since inception. The fact
that certain trends were captured does not imply that others, perhaps larger and
potentially more profitable trends, were not missed or that JWH will be able to
capture similar trends in the future. Moreover, the fact that the programs were
profitable in certain market sectors in the past does not mean that they will be
so in the future.
The performance summary is an outline description of how the Trust
performed in the past, not necessarily any indication of how it will perform in
the future. Furthermore, the general causes to which certain trends are
attributed may or may not in fact have caused such trends, as opposed to simply
having occurred at about the same time.
While there can be no assurance that JWH will be profitable even in
trending markets, markets in which substantial and sustained price movements
occur offer the best profit potential for the Trust.
PERFORMANCE SUMMARY
2000
The Trust posted losses during the first quarter of 2000 totaling
$7,443,701. Although Y2K came and went without a hitch, the currency sector was
all but quiet in January and the Trust posted overall losses for the month.
Changing expectations regarding economic
-21-
<PAGE>
growth and inflation in February created a difficult trading environment, and
gains in the dollar were offset by losses incurred by long Europe/short Japan
positions and in North American, Asian and European interest rates. During
March, currency destabilization and massive capital shifts out of the U.S.
dollar resulted in a losses for the Trust, primarily in long dollar versus
Euro and yen positions.
Although the Trust began the second quarter by earning a profit in
April, the quarter ended with an overall loss of $2,119,843. In April,
volatility in stocks led to a stronger U.S. dollar versus Euro and profits
for the Trust. Additional profits were accrued in long dollar positions
against the British, Swiss, and Australian currencies. The Trust's metals
positions were up slightly, and overall trading in non-financial markets was
down slightly with the energy and food markets showing losses. In May, the
Trust posted losses in interest rates and the Euro. Short positions in the
Nikkei made the stock index sector the only positive performing financial
area. Long positions in the energy sector produced positive results as
petroleum prices continued to surge. In June, surging petroleum prices
allowed long positions in the energy sector to continue to accrue profits.
Profitable positions in sugar and soybean oil allowed the agricultural sector
to show a small positive return for the month. However, the currency sector,
interest rates, metals and stock indices trading were unprofitable.
1999
The Trust experienced a disappointing year in 1999. The year-end Net
Asset Value for 1999 ended at $104.51 per Unit, representing a loss of 9.44%.
A lack of sustained price movements coupled with abrupt trend
reversals in many market sectors resulted in a very difficult trading
environment in 1999. The forces that supported strong returns in the equity
markets such as strong consumer confidence and the perception of economic
equilibrium caused volatile, sideways price patterns in the futures markets.
This type of price movement is extremely difficult for long-term trend followers
such as JWH. The currency sector provided profit opportunities for the Trust. As
the conflict in Kosovo escalated in early March, there was a flight to quality
into the U.S. dollar and out of the Euro and Swiss franc. This crisis-related
selling of these two currencies continued through mid-July. Short U.S. dollar
positions against the Japanese yen were also profitable. In addition, crude oil
began its sharp ascent from less than $12/barrel in March to $25.60/barrel at
year-end. This sustained trend proved profitable for the Trust throughout the
year as was the strengthening Yen relative to the U.S. dollar during the second
half of the year.
The "choppy" markets described above surfaced in many areas but most
particularly the world's interest rate markets. The Fed's attempt to slow
down the escalating economy resulted in 1/4 point increases in the fed funds
rate in June, August and October. Despite these increases, short positions in
the 10-year and 30-year U.S. bonds resulted in flat performance largely due
to occasional price aberrations, which triggered stop loss orders. The most
difficult trading period for the Trust occurred in the last quarter. Whipsaw
price activity in the Japanese and Australian interest rates led to major
losses. Short gold positions, which had been profitable during the first part
of the year, sustained losses when the price of gold rose $50/ounce in 10
days. Once again, stop loss orders were triggered and the Trust suffered a
significant setback. While unpleasant, the loss sustained in 1999 was within
the expected range of returns over time.
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
-22-
<PAGE>
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 (SEVEN MONTHS)
In 1997, the global futures markets showed a great deal of
volatility, and the Advisor was well positioned to profit from these moves.
The Trust produced a net gain of 9.70% for the calendar year.
The year was marked by declining gold prices and interest rates around
the globe and a rising U.S. 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 U.S. dollar dominated the world currencies reflecting
sound economic fundamentals in the U.S. 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.
LIQUIDITY AND CAPITAL RESOURCES
The amount of assets invested in the Trust generally does not affect
its performance, as typically
-23-
<PAGE>
this amount is not a limiting factor on the positions acquired by JWH, and
the Trust's expenses are primarily charged as a fixed percentage of its asset
base, however large.
The Trust sells no securities other than the Units. The Trust
borrows only to a limited extent and only on a strictly short-term basis in
order to finance losses on non-U.S. dollar denominated trading positions
pending the conversion of the Trust's dollar deposits. These borrowings are
at a prevailing short-term rate in the relevant currency. They have been
immaterial to the Trust's operation to date and are expected to continue to
be so.
The Net Asset Value of the Trust's cash and financial instruments is
not materially affected by inflation. Changes in interest rates, which are
often associated with inflation, could cause the value of certain of the
Trust's debt securities to decline, but only to a limited extent. More
importantly, changes in interest rates could cause periods of strong up or
down price trends, during which the Trust's profit potential generally
increases. Inflation or deflation in commodity prices could also generate
price movements which the programs might successfully follow.
The Trust's assets are held primarily in cash. Except in very
unusual circumstances, the Trust should be able to close out any or all of
its open trading positions and liquidate any or all of its securities
holdings quickly and at market prices. This should permit JWH to limit losses
as well as reduce market exposure on short notice should its programs
indicate reducing market exposure. In addition, because there is a readily
available market value for the Trust's positions and assets, the Trust's
monthly Net Asset Value calculations are precise, and investors need only
wait ten business days to receive the full redemption proceeds of their Units.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT THE TRUST'S MARKET RISK
INTRODUCTION
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE
The Trust is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and all
or substantially all of the Trust's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments
is integral, not incidental, to the Trust's main line of business.
Market movements result in frequent changes in the fair market value
of the Trust's open positions and, consequently, in its earnings and cash
flow. The Trust's market risk is influenced by a wide variety of factors,
including the level and volatility of interest rates, exchange rates, equity
price levels, the market value of financial instruments and contracts, the
diversification effects among the Trust's open positions and the liquidity of
the markets in which it trades.
The Trust can acquire and/or liquidate both long and short positions
in a wide range of different markets. Consequently, it is not possible to
predict how a particular future market scenario will affect performance, and
the Trust's past performance is not necessarily indicative of its future
results.
Value at Risk is a measure of the maximum amount which the Trust
could reasonably be expected to lose in a given market sector. However, the
inherent uncertainty of the Trust's speculative trading and the recurrence in
the markets traded by the Trust of market movements far exceeding
expectations could result in actual trading or non-trading losses far beyond
the indicated Value at Risk or the Trust's experience to date (I.E., "risk of
ruin"). In light of the foregoing as well as the risks and uncertainties
intrinsic to all future projections, the inclusion of the quantification
included in this section should not be considered to constitute any assurance
or representation that the Trust's losses in any market 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
-24-
<PAGE>
Market Risk," is based on an assessment of reasonably possible market
movements and the potential losses caused by such movements, taking into
account the leverage, optionality and multiplier features of the Trust's
market sensitive instruments.
INTERIM PERIODS
Quantitative and qualitative disclosures about the Trust's market
risk are provided as of December 31, 1999 and 1998. CISI believes that there
have not been any material changes to either the sources of the Trust's
trading and non-trading market risk or their impacts on the Trust since the
end of 1999.
QUANTIFYING THE TRUST'S TRADING VALUE AT RISK
QUANTITATIVE FORWARD-LOOKING STATEMENTS
THE FOLLOWING QUANTITATIVE DISCLOSURES REGARDING THE TRUST'S MARKET
RISK EXPOSURES CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
SAFE HARBOR FROM CIVIL LIABILITY PROVIDED FOR SUCH STATEMENTS BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 (SET FORTH IN SECTION 27A OF THE
SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934). ALL
QUANTITATIVE DISCLOSURES IN THIS SECTION ARE DEEMED TO BE FORWARD-LOOKING
STATEMENTS FOR PURPOSES OF THE SAFE HARBOR, EXCEPT FOR STATEMENTS OF
HISTORICAL FACT.
The Trust's risk exposure in the various market sectors traded by
JWH is quantified below in terms of Value at Risk. Due to the Trust's
mark-to-market accounting, any loss in the fair value of the Trust's open
positions is directly reflected in the Trust's earnings (realized or
unrealized) and cash flow (at least in the case of exchange-traded contracts
in which profits and losses on open positions are settled daily through
variation margin).
Exchange maintenance margin requirements have been used by the Trust
as the measure of its Value at Risk. Maintenance margin requirements are set
by exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. The maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an assessment of current
market volatility (including the implied volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic
estimate of the maximum expected near-term one-day price fluctuation.
Maintenance margin has been used rather than the more generally available
initial margin, because initial margin includes a credit risk component which
is not relevant to Value at Risk.
In the case of market sensitive instruments which are not exchange
traded (almost exclusively currencies in the case of the Trust), the margin
requirements for the equivalent futures positions have been used as Value at
Risk. In those rare cases in which a futures-equivalent margin is not
available, dealers' margins have been used.
The fair value of the Trust's futures and forward positions does not
have any optionality component.
In quantifying the Trust's Value at Risk, 100% positive correlation
in the different positions held in each market risk category has been
assumed. Consequently, the margin requirements applicable to the open
contracts have simply been aggregated to determine each trading category's
aggregate Value at Risk. The diversification effects resulting from the fact
that the Trust's positions are rarely, if ever, 100% positively correlated
have not been reflected.
THE TRUST'S TRADING VALUE AT RISK IN DIFFERENT MARKET SECTORS
The following table indicates the average, highest and lowest amounts of
trading Value at Risk associated with the Trust's open positions by market
category for fiscal year 1999 and the actual trading Value at Risk as of
December 31, 1998. All open position trading risk exposures of the Trust have
been included in calculating the figures set forth below. During fiscal year
1999, the Trust's average total capitalization was approximately $94.2 million .
AS of December 31, 1998, the Trust's total capitalization was approximately
$95.5 million.
<TABLE>
<CAPTION>
FISCAL YEAR 1999
--------------------------------------------------------------------
HIGHEST LOWEST AVERAGE % OF
MARKET VALUE VALUE VALUE AVERAGE
SECTOR AT RISK* AT RISK* AT RISK* CAPITALIZATION**
<S> <C> <C> <C> <C>
Interest Rates $4.7 $3.3 $4.1 4.3%
-------------- --------- --------- --------- ------------------
-25-
<PAGE>
Currencies $5.8 $3.5 $4.7 5.0%
Stock Indices $1.2 $0.8 $1.0 1.1%
Precious Metals $2.2 $1.6 $1.9 2.0%
Commodities $0.9 $0.8 $0.9 0.9%
Energy $1.1 $1.0 $1.1 1.1%
Total $15.9 $11.0 $13.7 14.4%
</TABLE>
* Average, highest and lowest Value at Risk amounts relate to the
quarter-end amounts for each calendar quarter-end during the fiscal year. All
amounts represent millions of dollars.
** Average Capitalization is the average of the Trust's capitalization at
the end of each fiscal quarter for fiscal year 1999.
-26-
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------
% OF TOTAL
MARKET SECTOR VALUE AT RISK CAPITALIZATION
------------- -------------- --------------
<S> <C> <C>
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%
Energy $ 0.5 million 0.52%
Total $ 9.0 million 9.42%
============= ======
</TABLE>
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, 1999 and December 31, 1998, the
Trust had approximately $85,054,000 and $90,183,000, respectively, in cash on
deposit with CIS and CISFS.
QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES
THE FOLLOWING QUALITATIVE DISCLOSURES REGARDING THE TRUST'S MARKET
RISK 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, 1999 and 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
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changes in interest rates which have the most effect on the Trust are changes
in long-term, as opposed to short-term, rates. Most of the speculative
positions held by the Trust are in medium- to long-term instruments.
Consequently, even a material change in short-term rates would have little
effect on the Trust were the medium- to long-term rates to remain steady.
CURRENCIES
The Trust's currency exposure is to exchange rate fluctuations,
primarily fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. These fluctuations are
influenced by interest rate changes as well as political and general economic
conditions. The Trust trades in a large number of currencies, including
cross-rates -- I.E., positions between two currencies other than the U.S.
dollar. However, the Trust's major exposures have typically been in the
dollar/yen, dollar/Euro and dollar/pound positions. The Managing Owner does
not anticipate that the risk profile of the Trust's currency sector will
change significantly in the future. The currency trading Value at Risk figure
includes foreign margin amounts converted into U.S. dollars with an
incremental adjustment to reflect the exchange rate risk inherent to the
dollar-based Trust in expressing Value at Risk in a functional currency other
than dollars.
STOCK INDICES
The Trust's primary equity exposure is to equity price risk in the G-7
countries. The stock index futures traded by the Trust are by law limited to
futures on broadly based indices. As of December 31, 1999 and 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, 1999 and 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 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, 1999 and December 31, 1998.
FOREIGN CURRENCY BALANCES
The Trust's primary foreign currency balances are in Japanese yen,
Euros, British pounds and Australian dollars. The Trust controls the non-trading
risk of these balances by regularly
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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 Managing Owner monitors the Trust's performance and the
concentration of its open positions, and consults with JWH concerning the
Trust's overall risk profile. If the Managing Owner felt it necessary to do so,
the Managing Owner could require JWH to close out individual positions as well
as entire programs traded on behalf of the Trust. However, any such intervention
would be a highly unusual event. The Managing Owner primarily relies on JWH's
own risk control policies while maintaining a general supervisory overview of
the Trust's market risk exposures.
RISK MANAGEMENT
JWH attempts to control risk in all aspects of the investment
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, current market volatility, risk exposure,
subjective judgment and evaluation of these and other general market conditions.
THE MANAGING OWNER
The Managing Owner and Commodity Pool Operator of the Trust is CISI, a
wholly-owned subsidiary of CIS, the Trust's Futures Broker. The Managing Owner
was incorporated in Delaware in 1983. It has been registered with the CFTC under
the CEA as a Commodity Pool Operator since December 13, 1985 and is a member of
NFA in such capacity. CISI maintains its principal office at 233 South Wacker
Drive, Suite 2300, Chicago, Illinois 60606; telephone (312) 460-4000. The
records of the Trust are kept at CISI's principal office. The officers and
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directors of CISI do not receive any compensation directly from CISI.
In addition to the Trust, CISI currently operates two public commodity
pools jointly with IDS Futures Corporation and one private commodity pool. CISI
operated one other private commodity pool which has been liquidated.
The directors and officers of CISI are as follows:
BERNARD W. DAN (born in December 1960) is President and a director.
Mr. Dan has been President of CIS since June 1, 1998. He joined CIS 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 actively serves within the futures industry on exchange committees and
industry user groups. He received a B.S. degree in accounting from St. John's
University, Collegeville, Minnesota.
BARBARA A. PFENDLER (born in May 1953) is Vice President and a
director. Ms. Pfendler is a graduate of the University of Colorado, Boulder. She
began her career with Cargill, Incorporated in 1975. She held various
merchandising and management positions within the organization's Oilseed
Processing Division before transferring to CIS in 1986 where she is responsible
for the Fund Services Group. She was appointed Vice President of CISI in May
1990 and Vice President of CIS in June 1996.
SHAUN D. O'BRIEN (born in November 1964) is Vice President and a
director. Mr. O'Brien became a Vice President and a director of CISI on July 1,
1999. Mr. O'Brien graduated from Northeastern University in 1987 and received a
Master's degree from the University of Minnesota's Carlson School of Management
in 1999. Mr. O'Brien began working for Cargill in 1988 and joined CIS in 1999.
JAN R. WAYE (born in June 1948) is Vice President. Mr. Waye assumed the
position of Senior Vice President of CIS in mid-September 1996, after returning
from London where he held various management positions for Cargill Investor
Services, Ltd. including most recently Managing Director for CIS Europe. He was
appointed Vice President with CISI on June 24, 1997. Mr. Waye joined Cargill in
1970 and served in various commodity trading and management position in
Chesapeake, Virginia; Winnipeg, Manitoba; and Vancouver, British Columbia. In
1978 he moved to New York and shortly thereafter Minneapolis as head of Foreign
Exchange for Cargill's metals trading business. Mr. Waye served in various
management positions in the Financial Markets Group until 1988 when he assisted
in the management and sale of Cargill's life insurance business in Akron, Ohio.
He moved to London in late 1988. Mr. Waye has served as a member of the Board of
LIFFE, the London International Financial Futures and Options Exchange, and as
Vice Chairman of its Membership and Rules Committee. He also served on the Board
of the London Commodity Exchange up to its merger with LIFFE. Mr. Waye graduated
from Concordia College, Moorhead, Minnesota, with a B.A. degree in
Communications and Economics in 1970.
CHRISTOPHER MALO (born in August 1956) is Vice President. Mr. Malo
graduated from Indiana University in 1978 with a B.S. in Accounting and further
completed the University of Minnesota Executive Program in 1993. He started work
at Cargill, Incorporated in June 1978. He joined CIS in 1979, and served as
Secretary/Treasurer and Controller from 1983 until 1991. He was elected Vice
President, Administration and Operations in July 1991. He was Managing Director
in Europe from 1996 until January 1999, responsible for CIS activities and
operations in Europe, the Middle East and Russia. He was an active member of the
FIA-UK Chapter and LIFFE Membership and Rules Committee. He currently serves on
the Board of the FIA in Chicago.
RONALD L. DAVIS (born in September 1953) is Vice President. Mr. Davis
graduated from Illinois Institute of Technology, Chicago, Illinois in 1975 with
a B.S. and an M.B.A. in 1977. He began his career in the futures industry with
A. G. Becker,
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Incorporated in 1980 and joined CIS 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) is Secretary and Treasurer.
Ms. Steindel graduated from the University of Illinois in 1987. She began
working at CIS in August 1987. She has held various financial and risk
management positions at CIS and was elected Risk and Compliance Officer and
Secretary in August 1997. She currently serves on the Board of Directors and
Executive Committee of the FIA Financial Management Division.
PATRICE H. HALBACH (born in August 1953) is a Vice President.
Ms. Halbach graduated Phi Beta Kappa from the University of Minnesota with a
B.A. degree in history. In 1980 she received a J.D. degree CUM LAUDE from the
University of Minnesota. She is a member of the Tax Executives Institute, the
American Bar Association and the Minnesota Bar Association. Ms. Halbach joined
the Law Department of Cargill, Incorporated in February 1983. She had previously
been an attorney with Fredrikson & Byron, Minneapolis, Minnesota. In December
1990, she was named Senior Tax Manager for Cargill, Incorporated's Tax
Department and became Assistant Tax Director in March 1993. She was named
Assistant Vice President of Cargill, Incorporated's Administrative Division in
April 1994. In January 1999, she was named Vice President, Tax, of Cargill,
Incorporated. In her current position as Vice President, Tax, Ms. Halbach
oversees Cargill, Incorporated's global tax function.
BARBARA A. WALENGA (born in February 1960) is an Assistant Secretary.
Ms. Walenga graduated from Fayetteville Technical Institute in 1981. She began
working at CIS in August 1981. She has held various compliance management
positions at CIS and is currently the Legal Compliance Manager. She is currently
a member of the FIA Law and Compliance Division and the SIA Compliance and Legal
Division..
The following are additional officers of CISI: JAMES CLEMENS, Assistant
Secretary; and LILLIAN LUNDEEN, Assistant Secretary.
JOHN W. HENRY & COMPANY, INC.
BACKGROUND
JWH, a Florida corporation, began managing assets in 1981 as a sole
proprietorship and was later incorporated in 1982 to conduct business as a
commodity trading advisor ("CTA"; a person who directs the trading of futures
accounts for clients, including commodity pools). JWH's offices are located at
301 Yamato Road, Suite 2200, Boca Raton, Florida 33431 and One Glendinning
Place, Westport, Connecticut 06880. JWH's registration as a CTA became effective
in November 1980. JWH is a member of NFA in this capacity. "JWH" is the
registered trademark of John W. Henry & Company, Inc.
For a description of the principals of JWH, see "JWH Principals"
beginning at page 32.
TRADING STRATEGY
THE FOLLOWING DESCRIPTION OF JWH'S TRADING STRATEGY RELATES TO JWH
GENERALLY AND NOT TO THE TRUST ITSELF.
GENERAL
JWH specializes in managing institutional and individual capital in the
global futures, financial futures and foreign exchange markets. Since 1981, JWH
has developed and implemented proprietary trend-following trading techniques .
As of the date of this prospectus, JWH operates twelve trading programs.
INVESTMENT PHILOSOPHY AND METHODOLOGY
JWH's investment philosophy is based on the premise that market prices,
rather than market fundamentals, are the key aggregator of information necessary
to make investment decisions. JWH believes that changes in market prices
initially reflect human reactions to new or emerging information or events that
will cause trends, but that prices eventually reflect all relevant information.
The price adjustment process takes time, however, since
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reactions of market participants to changing market dynamics initially may be
inefficient. For example, investors may not react immediately to information
because of differing evaluation processes, differing levels of risk tolerance
or uncertainty. Gradual price adjustments manifest themselves in long-terms
trends, which themselves can influence the course of events and from which
profit opportunities can arise. JWH believes that such market inefficiencies
can be exploited through a combination of trend detection and risk management.
There is strong economic and statistical evidence to suggest that
trends do exist in most markets although they may be difficult to identify.
Since it was founded, JWH has employed analytical methods to identify short- to
long-term trends. Comprehensive research undertaken by the firm's founder, John
W. Henry, led to the development of disciplined systematic quantitative models.
JWH's computer models examine market data for systematic price behavior or
relationships which will characterize a trend. When price trends are identified,
the JWH trading system generates buy and sell signals for implementing trades.
The strict application of these signals is one of the most important aspects of
JWH's investment process.
JWH attempts to control risk throughout the investment process. This
includes the confirmation of a trend, determining the optimal exposure in a
given market and money management issues such as the startup or upgrade of
accounts. JWH's research on these and other issues has resulted in investment
program modifications from time to time that have decreased from previous
levels the overall volatility of its investment programs while maintaining
the potential for generating attractive performance returns.
STYLE, TIMING AND MARKET CHARACTERISTICS
JWH investment programs have different style, timing and market
characteristics. Investment style differences are primarily based on the number
of directional phases that investment programs use for markets -- long, short or
neutral and how position sizes are determined. Timing -- whether trends are
recognized over a short to very long-term period -- is a distinguishing
characteristic of JWH investment programs. JWH investment programs can also be
distinguished by the markets they trade.
While some characteristics may overlap, each investment program has a
distinctive combination of style, timing and markets. This does not mean that
one program will have higher returns than another will or that a certain set of
characteristics are preferable for one type of market. At times, an investment
program may, for certain markets, use a style different from its primary style.
DURATION OF POSITIONS HELD
JWH's historical performance demonstrates that, because trends often
last longer than most market participants expect, significant returns can be
generated from positions held over a long period of time. Therefore, market
exposure to profitable positions is not changed based on the time horizon of a
trade, positions held for two to four months are not unusual, and positions have
been held for more than a year. Losing positions are generally reversed or
eliminated relatively quickly, with most closing within a few days or weeks.
However, if the JWH system detects a profitable underlying trend, a position
trading at a loss may be retained in order to capture the potential benefits of
participating in that trend. Throughout the investment process, risk controls
designed to reduce the possibility of an extraordinary loss in any one market
are maintained.
EQUITY DRAWDOWNS
Historically, only 30% to 40% of all trades made pursuant to JWH's
programs have been profitable. Large profits on a few trades in positions that
typically exist for several months have produced favorable results overall. The
greatest cumulative percentage decline in daily net asset value which JWH has
experienced since inception in any single program on a composite basis was
nearly 60%. Prospective investors in the Trust should understand that similar or
greater drawdowns are possible in the future.
To reduce exposure to volatility in any particular market, most JWH
programs participate in several markets at one time. In total, JWH
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participates in more than sixty markets, encompassing interest rates,
currencies and commodities such as agricultural products, energy and precious
and base metals. Most investment programs maintain a consistent portfolio
composition to allow opportunities in as many major market trends as possible.
OVERSIGHT OF TRADING POLICIES
The JWH Investment Policy Committee ("IPC") is a senior-level advisory
group, broadly responsible for evaluating and overseeing trading policies. The
IPC provides a forum for shared responsibility, meeting periodically to discuss
issues relating to implementation of JWH's investment process and its
application to markets, including research on new markets and strategies in
relation to JWH trading models.
Typical issues analyzed by the IPC include liquidity, position size,
capacity, performance cycles and new product and market strategies. The IPC also
makes the discretionary decisions concerning investment program selection, asset
allocation and leverage levels for the Strategic Allocation Program, a
multi-program asset allocation methodology. Composition of the IPC, and
participation in its discussions and decisions by non-members, may vary over
time. The chairman participates in all IPC meetings and decisions. The IPC does
not make day-to-day trading decisions.
DISCRETIONARY ASPECTS
JWH at its sole discretion may override computer-generated signals and
may at times use discretion in the application of its quantitative models, which
may affect performance positively or negatively. This could occur, for example,
when JWH determines that markets are illiquid or erratic, such as may occur
cyclically during holiday seasons or on the basis of irregularly occurring
market events. Subjective aspects of JWH's quantitative models also include the
determination of position size in relation to account equity, when an account
should commence trading, the investment of assets associated with additions,
redemptions and allocations, contracts and contract months traded, and effective
trade execution.
PROGRAM MODIFICATIONS
Proprietary research is conducted on an ongoing basis to refine the
JWH investment strategies. While the basic philosophy underlying the firm's
investment methodology has remained intact throughout its history, the
potential benefits of employing more than one investment methodology, or in
varying combinations, is a subject of continual testing, review and
evaluation. Extensive research may suggest substitution of alternative
investment methodologies with respect to particular contracts. This may
occur, for example, when the testing of a different methodology has indicated
that its use might have resulted in different historical performance. In
addition, risk management research and analysis may suggest modifications
regarding the relative weighting among various contracts, modifying the style
and/or timing used by an investment program to trade a particular contract,
the addition or deletion of particular contracts for an investment program or
a change in position size in relation to account equity. However, most
investment programs maintain a consistent portfolio composition to allow
opportunities in as many major market trends as possible.
All cash in a JWH investment program is available to be used for
trading, although the amounts committed to margin will vary from time to
time. As capital in each JWH trading program increases, additional emphasis
and weighting may be placed on certain markets which have historically
demonstrated the greatest liquidity and profitability. Furthermore, the
weighting of capital committed to various markets in the trading programs is
dynamic, and JWH may vary the weighting at its discretion as market
conditions, liquidity, position limit considerations and other factors
warrant. CISI will generally not be informed of any such changes.
ADJUSTING THE SIZE OF POSITIONS TAKEN
Adjustments to position size in relation to account equity have been
and continue to be an integral part of JWH's investment strategy. At its
discretion, JWH may adjust the size of a position in relation to account equity
in certain markets or entire investment programs. Such adjustments may be made
at certain times for some investment programs but not for others. Factors which
may affect the
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decision to adjust the size of a position in relation to account equity
include ongoing research, program volatility, current market volatility, risk
exposure and subjective judgment and evaluation of these and other general
market conditions. Such decisions to change the size of a position in
relation to account equity may positively or negatively affect performance
and will alter risk exposure for an account. Such adjustments may lead to
greater profits or losses, more frequent and larger margin calls and greater
brokerage expense. No assurance is or can be given that such adjustments will
result in profits for investors in the Trust. JWH reserves the right to
alter, at its sole discretion and without notification to the Trust, its
policy regarding the size of positions taken in relation to account equity.
ADDITION, REDEMPTION AND REALLOCATION OF CAPITAL FOR COMMODITY POOL ACCOUNTS
Investors purchase or redeem Units at Net Asset Value on the close
of business on the last business day of the month. In order to provide market
exposure commensurate with the Trust's equity on the date of these
transactions, JWH's general practice is to adjust positions as near as
possible to the close of business on the last trading date of the month. The
intention is to provide for additions and redemptions at a Net Asset Value
that will be the same for each of these transactions, and to eliminate
possible variations in Net Asset Values that could occur as a result of
inter-day price changes if, for example, additions were calculated on the
first day of the subsequent month. Therefore, JWH may, at its sole
discretion, adjust its investment of the assets associated with the addition
or redemption as near as possible to the close of business on the last
business day of the month to reflect the amount then available for trading.
Based on JWH's determination of liquidity or other market conditions, JWH may
decide to commence trading earlier in the day on, or before, the last
business day of the month, or at its sole discretion, delay adjustments to
trading for an account to a date or time after the close of business on the
last day of the month. No assurance is given that JWH will be able to achieve
the objectives described above in connection with Trust equity level changes.
The use of discretion by JWH in the application of this procedure may affect
performance positively or negatively.
PHYSICAL AND CASH COMMODITIES
JWH may trade in physical or cash commodities for immediate or
deferred delivery, including specifically gold bullion, as well as futures,
options and forward contracts when JWH believes that cash markets offer
comparable or superior market liquidity or the ability to execute
transactions at a single price. The CFTC does not regulate cash transactions,
which are subject to the risk of counterparty failure, inability or refusal
to perform with respect to such contracts.
THE TRADING ADVISORY AGREEMENT
The Trust has entered into a Trading Advisory Agreement with JWH.
The agreement provides that JWH will be the sole trading advisor for the
Trust and will have sole responsibility for determining transactions in
commodity interests with respect to Trust assets. The Trading Advisory
Agreement also provides that the Managing Owner, with the agreement of JWH,
may reallocate assets between the trading programs, delete a trading program
or add one or more other JWH programs. The 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 forty-five days prior to the expiry of the then
current term. The Trading Advisory Agreement will terminate automatically if
the Trust is terminated.
JWH, its principals and employees will not be liable to the Managing
Owner or its principals and employees, the Trust, the Unitholders, or any of
their successors or assigns except by reason of acts or omissions due to bad
faith, misconduct, negligence or not having acted in good faith in the
reasonable belief that such actions or omissions were in, or not opposed to,
the best interests of the Trust. The Trust and the Managing Owner will,
jointly and severally, indemnify JWH, its principals and employees to the
fullest extent permitted by law against any liability incurred or sustained
by JWH in connection with any acts or omissions of JWH relating to its
management of Trust assets or arising out of or in connection with the
Trading Advisory Agreement or arising out of JWH's management of Trust
assets, provided that
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there has been no judicial determination that such liability was the result
of negligence, misconduct, bad faith or a breach of the Trading Advisory
Agreement nor any judicial determination that the conduct which was the basis
for such liability was not done in good faith in the reasonable belief that
it was in, or not opposed to, the best interests of the Trust. Any such
indemnification involving a material amount, unless ordered or expressly
permitted by a court, will be made by the Trust only upon the opinion of
mutually acceptable independent legal counsel that JWH has met the applicable
standard of conduct described above. The Trading Advisory Agreement prohibits
JWH from receiving any commission, compensation, remuneration or payment
whatsoever from any broker with whom the Trust carries any account by reason
of the Trust's transactions.
LEGAL CONCERNS
There neither now exists nor has there previously ever been any
material administrative, civil or criminal action against JWH or its
principals.
Principals of JWH serve on the board of directors and committees of
various organizations, both in and outside of the managed futures industry.
In such capacities, these individuals have a fiduciary duty to the other
organizations they serve, and they are required to act in the best interests
of those organizations even if those actions were to be adverse to the
interest of JWH and its clients.
JWH PRINCIPALS
The following are the principals of JWH:
The sole shareholder of JWH is the John W. Henry Trust dated July
27, 1990. MR. JOHN W. HENRY is chairman of the JWH Board of Directors and is
trustee and sole beneficiary of the John W. Henry Trust. Mr. Henry is also a
member of the Investment Policy Committee. He currently concentrates his
activities at JWH on portfolio management, research and new system
development, day-to-day decisions involving the strategic direction and
business of the firm and frequent dialogue with trading supervisors. Mr.
Henry is the exclusive owner of certain trading systems licensed to Elysian
Licensing Corporation, a corporation wholly-owned by Mr. Henry and
sublicensed by Elysian Licensing Corporation to JWH and utilized by JWH in
managing investor accounts.
Mr. Henry has served on the Board of Directors of the Futures
Industry Association ("FIA"), the National Association of Futures Trading
Advisors ("NAFTA") and the Managed Futures Trade Association, and has served
on the Nominating Committee of NFA. He has served on a panel created by the
Chicago Mercantile Exchange and the Chicago Board of Trade to study
cooperative efforts related to electronic trading, common clearing and issues
regarding a potential merger. In 1989, Mr. Henry established residency in
Florida, and since that time has performed services from that location as
well as from the offices of JWH in Westport, Connecticut. Mr. Henry is a
principal of Westport Capital Management Corporation, Global Capital
Management Limited, JWH Investment Management, Inc., and JWH Financial
Products, Inc., all affiliates of JWH. Since the beginning of 1987, Mr. Henry
has devoted, and will continue to devote, considerable time to activities in
businesses other than JWH and its affiliates, including acting as Chairman of
the Florida Marlins Baseball Club LLC, which continues to be operated by a
professional baseball staff.
MR. MARK H. MITCHELL is vice chairman, counsel to the firm and a
member of the JWH Board of Directors. His duties include the coordination and
allocation of responsibilities among JWH and its affiliates. He is also a
principal of JWH Financial Products, Inc. Prior to joining JWH in January
1994, Mr. Mitchell was a partner at Chapman and Cutler, in Chicago, where he
headed the law firm's futures law practice from August 1983 to December 1993.
He also served as General Counsel of the Managed Funds Association ("MFA")
and General Counsel of NAFTA. Mr. Mitchell is currently a member of the NFA
CPO/CTA Advisory Committee. In addition, he has served as a member of the NFA
Special Committee for the Review of Multi-tiered Regulatory Approach to NFA
Rules, the MFA Government Relations Committee and the Executive Committee of
the Law and Compliance Division of the FIA. In 1985, he received the Richard
P. Donchian Award for Outstanding Contributions to the Field of Commodity
Money
-35-
<PAGE>
Management. He received an A.B. with honors from Dartmouth College and a J.D.
from the University of California at Los Angeles, where he was named to the
Order of the Coif, the national legal honorary society.
MR. VERNE O. SEDLACEK is the president and chief operating officer and
a member of the JWH Investment Policy Committee. He is responsible for the
day-to-day management of the firm. Mr. Sedlacek is also a principal of Westport
Capital Management Corporation, Global Capital Management Limited, JWH
Investment Management, Inc. and JWH Financial Products, Inc. Prior to joining
JWH in July 1998, Mr. Sedlacek was the executive vice president and chief
financial officer of Harvard Management Company, Inc., a wholly-owned subsidiary
of Harvard University, which at the time of his departure managed approximately
$14 billion of University-related funds. He joined Harvard Management Company in
March 1983 and was responsible for managing the areas of personnel, budgets,
systems, performance analysis, contracts, credit, compliance, custody,
operations, cash management, securities lending and market risk evaluation. Mr.
Sedlacek currently serves on the Board of Directors of the NFA, FIA Chicago
Mercantile Exchange, and Commonfund Capital, Inc. and is a member of the Global
Markets Advisory Committee of the CFTC. He is also a member of the NFA/FII Best
Practices Study End User Expert Panel. He received his A.B. in Economics from
Princeton University, M.B.A. in Accounting from New York University and was
certified as a C.P.A. in the State of New York in 1978.
DR. MARK S. RZEPCZYNSKI is a senior vice president, research and
trading, and a member of the JWH Investment Policy Committee. He is also a vice
president of JWH Financial Products, Inc. Dr. Rzepczynski joined JWH in May
1998. From May 1995 to April 1998, he was vice president and director of taxable
credit and quantitative research in the fixed-income division of Fidelity
Management and Research, where he oversaw credit and quantitative research
recommendations for all Fidelity taxable fixed-income funds. From April 1993 to
April 1995, he was a portfolio manager and director of research for CSI Asset
Management, Inc., a fixed-income money management subsidiary of Prudential
Insurance. Dr. Rzepczynski has a B.A. CUM LAUDE in Economics from Loyola
University of Chicago and an A.M. and Ph.D. in Economics from Brown University.
E. LYNDON TEFFT is a senior vice president and the chief financial
officer. He is also a principal of Westport Capital Management Corporation, JWH
Financial Products, Inc. and JWH Securities, Inc. Prior to joining JWH in
October 1998, Mr. Tefft was the Director of MIS and a vice president at Harvard
Management Company, Inc. where he was responsible for directing the design,
development and operation of global equity, bond and derivative trading,
accounting and settlement systems beginning in May 1994. Mr. Tefft received a
B.S. in Industrial Management from Purdue University and an M.B.A. from Wharton
School of Business at the University of Pennsylvania.
MS. ELIZABETH A. M. KENTON is a senior vice president, compliance. She
is responsible for the day-to-day management of compliance, as well as overall
issues pertaining to administration and human resources. She is also a principal
of JWH Financial Products, Inc., Westport Capital Management Corporation,
Global Capital Management Limited and JWH Investment Management, Inc. Since
joining JWH in March 1989, Ms. Kenton has held positions of increasing
responsibility in research and development, administration and regulatory
compliance. She received a B.S. in Finance from Ithaca College.
MR. DAVID M. KOZAK is a senior vice president, general counsel and
secretary to the corporation. He is also a principal of JWH Financial Products,
Inc., Westport Capital Management Corporation and JWH Investment Management,
Inc. Prior to joining JWH in September 1995, he had been a partner at the law
firm of Chapman and Cutler from 1989. In his practice there, he concentrated in
commodity futures law, with an emphasis on commodity money management. Mr. Kozak
is currently the secretary and a director of the MFA, and is a member of that
organization's Executive Committee and chairman of its Government Relations
Committee. He is also a member of the Special Committee on CPO/CTA
-36-
<PAGE>
Disclosure Issues and the Special Committee for the Review of Multi-Tiered
Regulatory Approach to NFA Rules, both of the NFA. He has served as chairman
of the subcommittee on CTA and CPO issues of the Futures Regulation Committee
of the Association of the Bar of the City of New York. He received a B.A.
from Lake Forest College, an M.A. from the University of Chicago and a J.D.
from Loyola University of Chicago.
MR. DAVID I. GINSBERG is a member of the JWH Board of Directors and
special advisor to the chairman. He is also a principal of JWH Investment
Management, Inc. Mr. Ginsberg joined JWH in October 1999. He served as the
managing director of the Multi-Manager Group at Global Asset Management ("GAM")
from its inception in September 1989 until July 1995. This GAM group was, and
continues to be, one of the largest multi-advisor groups specializing in hedge
funds. Since leaving GAM, Mr. Ginsberg has been a private investor and
consultant. Mr. Ginsberg received a M.B.A. with a concentration in Finance from
Boston University and a B.A. from Kenyon College. Mr. Ginsberg is a member of
the board of directors of GAM Diversity, Inc., a global multi-advisor hedge fund
with assets in excess of $1.4 billion that specializes in hedge funds, and a
director of the Adelphi Europe Fund, a hedge fund specializing in European
equities. He is also vice chairman of the Florida Marlins Baseball Club LLC.
M. JOHN WING is a member of the JWH Board of Directors. Mr. Wing is
also the chief executive officer of Market Liquidity Network, LLC (MLN) and a
professor of Law and Finance at the Illinois Institute of Technology (IIT).
Before joining MLN in January 2000, JWH in February 2000 and IIT in July 1998,
he was chairman of the board and chief executive officer of ABN-AMRO
Incorporated, formerly The Chicago Corporation. Mr. Wing joined The Chicago
Corporation as its chief executive officer in 1981 and continued to lead the
firm following the merger with ABN-AMRO in January 1997 until July 1998.
Mr. Wing is currently chairman of the board for the Risk Management
Committee of the Commercial Club. He is also a director of AmerUs Life
Holdings. In addition, he has served as a director of the Midwest Stock
Exchange, The Chicago Board Options Exchange, Securities Industry
Association, Futures Industry Association, National Futures Association and
Chicago Capital Fund. Mr. Wing has also been a governor of the National
Association of Securities Dealers, a member of New York Stock Exchange
Regional Firms Committee, and a member of the Chicago Mercantile Exchange's
special panel to review trading rules and practices. Mr. Wing has also served
as a trustee of IIT and chairman of the Board of Overseers of its Stuart
School of Business. He received a B.A. in Economics from Union College and a
J.D. from George Washington University.
MR. KEVIN S. KOSHI is a senior vice president, proprietary trading
and a member of the JWH Investment Policy Committee. He is responsible for
the implementation and oversight of the firm's proprietary strategies and
investments. Mr. Koshi joined JWH in August 1988 as a professional in the
Finance Department, and since 1990, has held positions of increasing
responsibility in the Trading Department. He received a B.S. in Finance from
California State University at Long Beach.
MR. MATTHEW J. DRISCOLL is a vice president, trading, and chief
trader and a member of the JWH Investment Policy Committee. He is responsible
for the supervision and administration of all aspects of order execution
strategies and implementation of trading policies and procedures. Mr.
Driscoll joined JWH in March 1991 as a member of its trading department.
Since joining the firm, he has held positions of increasing responsibility as
they relate to the development and implementation of JWH's trading strategies
and procedures. He has played a major role in the development of JWH's
24-hour trading operation. Mr. Driscoll attended Pace University.
MR. EDWIN B. TWIST is a member of the JWH Board of Directors. He is
also a director of JWH Investment Management, Inc. and JWH Financial Products,
Inc. Mr. Twist joined JWH as internal projects manager in September 1991 and has
been a director since August 1993. His responsibilities include assisting with
the day-to-day
-37-
<PAGE>
administration and internal projects of JWH's Florida office.
MR. JULIUS A. STANIEWICZ is a vice president, senior strategist and a
member of the JWH Investment Policy Committee. He is also president of JWH
Financial Products, Inc. He joined JWH in March of 1992. Mr. Staniewicz received
a B.A. in Economics from Cornell University.
The additional principals of JWH have the following titles: Mr.
Christopher E. Deakins, vice president, investor services; Ms. Nancy O. Fox,
C.P.A., vice president, investment support; Mr. Andrew D. Willard, vice
president, information technology; Mr. Paul D. Braica, vice president,
analytics; Ms. Florence Y. Sofer, vice president, marketing; Mr. Robert B.
Lendrim, vice president, investor services; and Ms. Wendy B. Goodyear, vice
president, investor services.
PERFORMANCE OF THE JWH PROGRAMS
GENERAL
The composite capsule performance of all accounts managed by JWH
pursuant to the trading programs used for the Trust is presented below. All
performance is current as of July 31, 2000.
Monthly rates of return from inception of client trading through July
31, 2000 are also presented below for the programs used for the Trust.
Descriptions of these programs are set forth on pages 4 and 5. The line
appearing in these performance tables between 1995 and 1994 separates the CFTC
required performance period for the past five years and year to date from the
performance record of the investment programs prior to that period.
The Trust may use any of JWH's active programs in the future subject
to JWH's agreement.
FROM THE INCEPTION OF TRADING OF THE JWH PROGRAMS, THE GREATEST
CUMULATIVE PERCENTAGE DECLINE IN DAILY NET ASSET VALUE EXPERIENCED IN ANY SINGLE
PROGRAM WAS NEARLY 60% ON A COMPOSITE BASIS, AND CERTAIN INDIVIDUAL ACCOUNTS
INCLUDED IN SUCH PROGRAM EXPERIENCED EVEN GREATER DECLINES. CERTAIN JWH ACCOUNTS
HAVE LOST 10% OR MORE IN A SINGLE TRADING DAY. PROSPECTIVE INVESTORS SHOULD
UNDERSTAND THAT SIMILAR OR GREATER DRAWDOWNS ARE POSSIBLE IN THE FUTURE. THERE
CAN BE NO ASSURANCE THAT JWH WILL TRADE PROFITABLY FOR THE TRUST OR AVOID SUDDEN
AND SEVERE LOSSES.
-38-
<PAGE>
THE JWH PROGRAMS USED BY THE TRUST
CAPSULE PERFORMANCE AND
ANNUAL AND MONTHLY RATES OF RETURN
FINANCIAL AND METALS PORTFOLIO
OCTOBER 1984 THROUGH JULY 2000
<TABLE>
<S><C>
INCEPTION OF CLIENT ACCOUNT TRADING BY JWH: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: OCTOBER 1984
ASSETS UNDER MANAGEMENT IN ALL PROGRAMS ON JULY 31, 2000: $1.2 BILLION
ASSETS UNDER MANAGEMENT IN THE PROGRAM ON JULY 31, 2000: $341,621,988
NUMBER OF OPEN ACCOUNTS: 19
WORST MONTHLY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (10.1)% (2/96)
WORST PEAK-TO-VALLEY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (43.7)% (10/98-7/00)
2000 COMPOUND ANNUAL RATE OF RETURN: (20.7)% (7 MOS.)
1999 COMPOUND ANNUAL RATE OF RETURN: (18.7)%
1998 COMPOUND ANNUAL RATE OF RETURN : 7.2%
1997 COMPOUND ANNUAL RATE OF RETURN: 15.2%
1996 COMPOUND ANNUAL RATE OF RETURN: 29.7%
1995 COMPOUND ANNUAL RATE OF RETURN: 38.5%
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN SINCE JANUARY 1995: 6.6%
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN FROM INCEPTION IN OCTOBER 1984
THROUGH JULY 2000: 28.9%
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
ANNUAL AND MONTHLY RATES OF RETURN (%)
---------------------------------------------------------------------------------------------------------------------------------
COMPOUND
YEAR JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER ANNUAL ROR
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 (3.6) (6.2) (2.3) 2.5 (2.1) (9.0) (1.7) N/A N/A N/A N/A N/A (20.7)
(7 MONTHS)
---------------------------------------------------------------------------------------------------------------------------------
1999 (4.8) 0.9 (2.6) 1.6 5.9 6.1 (2.3) (3.1) (7.0) (8.1) (3.2) (2.8) (18.7)
---------------------------------------------------------------------------------------------------------------------------------
1998 (3.5) (4.0) (1.6) (7.9) 3.2 (4.8) (0.9) 17.5 15.3 (3.8) (7.5) 8.9 7.2
---------------------------------------------------------------------------------------------------------------------------------
1997 4.4 (2.2) (0.7) (2.9) (8.3) 4.1 15.8 (3.7) 2.2 2.0 2.5 2.9 15.2
---------------------------------------------------------------------------------------------------------------------------------
1996 6.0 (5.5) 0.7 2.3 (1.7) 2.2 (1.1) (0.8) 3.2 14.3 10.9 (2.6) 29.7
---------------------------------------------------------------------------------------------------------------------------------
1995 (3.8) 15.7 15.3 6.1 1.2 (1.7) (2.3) 2.1 (2.1) 0.3 2.6 1.7 38.5
---------------------------------------------------------------------------------------------------------------------------------
1994 (2.9) (0.6) 7.2 0.9 1.3 4.5 (6.1) (4.1) 1.5 1.7 (4.4) (3.5) (5.3)
---------------------------------------------------------------------------------------------------------------------------------
1993 3.3 13.9 (0.3) 9.3 3.3 0.1 9.7 (0.8) 0.2 (1.1) (0.3) 2.9 46.8
---------------------------------------------------------------------------------------------------------------------------------
1992 (18.0) (13.5) 3.0 (12.2) (5.7) 21.9 25.5 10.2 (5.2) (4.5) (0.8) (2.6) (10.9)
---------------------------------------------------------------------------------------------------------------------------------
1991 (2.3) 3.8 4.5 (0.8) (0.3) (1.3) (13.4) 4.8 25.8 (7.7) 6.6 39.4 61.9
---------------------------------------------------------------------------------------------------------------------------------
1990 28.0 19.5 11.4 2.4 (22.7) 6.9 12.2 11.2 8.3 (5.0) 3.1 (3.7) 83.6
---------------------------------------------------------------------------------------------------------------------------------
1989 31.7 (8.7) 8.5 3.2 37.0 (6.6) 4.4 (8.2) (14.9) (17.5) 21.6 (4.5) 34.6
---------------------------------------------------------------------------------------------------------------------------------
1988 (12.6) 9.8 (2.3) (15.0) 0.3 44.2 5.5 6.9 (8.1) 2.5 5.2 (19.2) 4.0
---------------------------------------------------------------------------------------------------------------------------------
1987 33.0 12.1 34.2 18.2 (7.2) (10.7) 12.2 (14.6) (8.9) 28.0 32.5 21.2 252.4*
---------------------------------------------------------------------------------------------------------------------------------
1986 4.8 21.9 (6.3) 3.7 (17.5) 17.6 25.0 9.4 (0.2) 2.6 (3.6) (0.5) 61.5
---------------------------------------------------------------------------------------------------------------------------------
1985 6.6 17.7 (9.3) (7.8) (7.7) (1.8) 41.3 (10.1) (27.3) 6.4 26.6 1.9 20.7
---------------------------------------------------------------------------------------------------------------------------------
1984 N/A N/A N/A N/A N/A N/A N/A N/A N/A 1.6 (3.2) 11.7 9.9
(3 MONTHS)
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
* The timing of additions and withdrawals materially inflated the 1987
rate of return. The three accounts that were open for the entire year
of 1987 achieved rates of return of 138%, 163% and 259%.
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-39-
<PAGE>
THE JWH PROGRAMS USED BY THE TRUST
CAPSULE PERFORMANCE AND
ANNUAL AND MONTHLY RATES OF RETURN
G-7 CURRENCY PORTFOLIO
FEBRUARY 1991 THROUGH JULY 2000
<TABLE>
<CAPTION>
<S><C>
INCEPTION OF CLIENT ACCOUNT TRADING BY JWH: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: FEBRUARY 1991
ASSETS UNDER MANAGEMENT IN ALL PROGRAMS ON JULY 31, 2000: $1.2 BILLION
ASSETS UNDER MANAGEMENT IN THE PROGRAM ON JULY 31, 2000: $22,449,080
NUMBER OF OPEN ACCOUNTS: 3
WORST MONTHLY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (10.1)% (11/98)
WORST PEAK-TO-VALLEY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (31.4)% (10/92- 1/95)
2000 COMPOUND ANNUAL RATE OF RETURN: (8.1)% (7 MOS.)
1999 COMPOUND ANNUAL RATE OF RETURN: 20.7%
1998 COMPOUND ANNUAL RATE OF RETURN: (4.8)%
1997 COMPOUND ANNUAL RATE OF RETURN: 21.0%
1996 COMPOUND ANNUAL RATE OF RETURN: 14.5%
1995 COMPOUND ANNUAL RATE OF RETURN: 32.2%
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN SINCE JANUARY 1995: 12.6%
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN FROM INCEPTION
IN FEBRUARY 1991 THROUGH JULY 2000: 12.0%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
ANNUAL AND MONTHLY RATES OF RETURN (%)
--------------------------------------------------------------------------------------------------------------------------------
COMPOUND
YEAR JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER ANNUAL ROR
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 (1.4) (1.1) (2.8) 8.2 (6.2) (3.1) (1.4) N/A N/A N/A N/A N/A (8.1)
(7 MONTHS)
--------------------------------------------------------------------------------------------------------------------------------
1999 (2.2) 3.3 5.9 5.0 (1.4) (0.3) (5.6) 4.2 1.4 (0.1) 9.1 0.5 20.7
--------------------------------------------------------------------------------------------------------------------------------
1998 (4.1) (2.6) 4.7 (1.9) 6.6 (2.8) 0.4 (2.5) 2.0 7.4 (9.1) (1.7) (4.8)
-------------------------------------------------------------------------------------------------------------------------------
1997 2.5 3.9 0.4 3.1 (3.3) 5.7 4.1 (3.5) (1.2) 1.2 6.0 0.9 21.0
--------------------------------------------------------------------------------------------------------------------------------
1996 2.9 (4.2) (0.4) 2.2 0.7 1.8 (2.7) (4.3) 1.6 10.9 4.1 1.8 14.5
-------------------------------------------------------------------------------------------------------------------------------
1995 (3.0) 9.6 21.2 2.2 (4.3) (0.2) (1.8) 5.3 1.8 2.0 (1.3) (0.8) 32.2
--------------------------------------------------------------------------------------------------------------------------------
1994 (1.3) (1.7) 0.9 (1.3) (1.0) 7.9 (3.5) (0.3) 2.9 4.1 (7.2) (3.6) (4.9)
--------------------------------------------------------------------------------------------------------------------------------
1993 (4.4) 7.9 (0.3) (1.8) (1.0) 4.6 2.6 (5.0) (1.8) (5.4) (0.6) (0.5) (6.3)
--------------------------------------------------------------------------------------------------------------------------------
1992 (10.7) (1.4) (0.1) (2.6) 1.8 10.0 5.8 10.9 1.6 2.3 (0.3) (1.8) 14.6
--------------------------------------------------------------------------------------------------------------------------------
1991 N/A (1.8) 19.6 0.8 3.5 7.8 (2.9) (4.1) 2.1 0.5 1.7 15.7 48.5
(11 MONTHS)
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-40-
<PAGE>
THE JWH PROGRAMS USED BY THE TRUST
CAPSULE PERFORMANCE AND
ANNUAL AND MONTHLY RATES OF RETURN
JWH GLOBALANALYTICS-REGISTERED TRADEMARK- FAMILY OF PROGRAMS
JUNE 1997 THROUGH JULY 2000
The performance of JWH GlobalAnalytics-Registered Trademark- Family of Programs
is presented in three components: (1) JWH GlobalAnalytics-Registered Trademark-
Family of Programs Composite Performance Record; (2) JWH
GlobalAnalytics-Registered Trademark- Family of Programs Exclusive Fund Accounts
Composite Performance Records; and (3) JWH GlobalAnalytics-Registered Trademark-
99. A portion of component (1) and all of component (2) relate to the same two
accounts. These two accounts were subject to an agreement with one client
operating two funds. Between May 8, 1998 and September 18, 1998, the position
size in relation to account equity was increased for these two accounts. As a
result, the performance of these two accounts has been presented separately for
the periods June 1997 through May 7, 1998 and from May 8, 1998 through December
1999. Beginning in January 2000, the Trust allocated assets to the JWH
GlobalAnalytics-Registered Trademark- Family of Programs and since then the
Trust's account has been combined in the Composite Performance Record shown in
component (1).
In March 1999, an additional account began trading pursuant to the JWH
GlobalAnalytics-Registered Trademark- Family of Programs. This account is
referred to as JWH GlobalAnalytics-Registered Trademark- 99. Due to the size of
the account, it may have different results than other accounts using this
program. Therefore, performance for this account is presented separately.
JWH GLOBALANALYTICS-REGISTERED TRADEMARK- FAMILY OF PROGRAMS COMPOSITE
PERFORMANCE RECORD
(JUNE 1997 THROUGH July 2000)
INCEPTION OF CLIENT ACCOUNT TRADING BY JWH: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JUNE 1997
ASSETS UNDER MANAGEMENT IN ALL PROGRAMS ON JULY 31, 2000: $1.2 BILLION
ASSETS UNDER MANAGEMENT IN THE COMPOSITE PERFORMANCE RECORD ACCOUNTS ON JULY 31,
2000: $14,893,603
NUMBER OF OPEN ACCOUNTS: 1
WORST MONTHLY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (5.0)% (4/98)
WORST PEAK-TO-VALLEY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (5.8)% (2/00 -
4/00)
2000 COMPOUND ANNUAL RATE OF RETURN: (2.5)% (7 MOS.)
1999 COMPOUND ANNUAL RATE OF RETURN: N/A
1998 COMPOUND ANNUAL RATE OF RETURN: (3.6)% (5 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 17.6% (7 MOS.)
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN FROM INCEPTION IN JUNE 1997 THROUGH
JULY 2000: N/A
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
ANNUAL AND MONTHLY RATES OF RETURN (%)
----------------------------------------------------------------------------------------------------------------------------------
COMPOUND
YEAR JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER ANNUAL ROR
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 0.3 (0.1) (4.9) (0.8) 6.8 (1.2) (2.3) N/A N/A N/A N/A N/A (2.5)
(7 MONTHS)
----------------------------------------------------------------------------------------------------------------------------------
1999 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
----------------------------------------------------------------------------------------------------------------------------------
1998 (1.8) (1.1) 4.7 (4.9) (0.3) N/A N/A N/A N/A N/A N/A N/A (3.6)
(5 MONTHS)
----------------------------------------------------------------------------------------------------------------------------------
1997 N/A N/A N/A N/A N/A 3.2 8.4 (4.4) 3.4 0.7 0.5 5.0 17.6
(7 MONTHS)
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
------------------------------
-41-
<PAGE>
THE JWH PROGRAMS USED BY THE TRUST
CAPSULE PERFORMANCE AND
ANNUAL AND MONTHLY RATES OF RETURN
JWH GLOBALANALYTICS-REGISTERED TRADEMARK- FAMILY OF PROGRAMS
JUNE 1997 THROUGH JULY 2000
(CONTINUED)
JWH GLOBALANALYTICS-REGISTERED TRADEMARK- FAMILY OF PROGRAMS EXCLUSIVE FUND
ACCOUNTS COMPOSITE PERFORMANCE RECORD
(MAY 8, 1998 TO DECEMBER 31, 1999)
INCEPTION OF CLIENT ACCOUNT TRADING BY JWH: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JUNE 1997
ASSETS UNDER MANAGEMENT IN ALL PROGRAMS ON JULY 31, 2000: $1.2 BILLION
ASSETS UNDER MANAGEMENT IN THE EXCLUSIVE FUND ACCOUNTS ON DECEMBER 31, 1999:
$95,019,512
NUMBER OF OPEN ACCOUNTS ON DECEMBER 31, 1999: 2
WORST MONTHLY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (9.2)% (10/99)
WORST PEAK-TO-VALLEY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (13.1)%
(7/99 - 10/99)
1999 COMPOUND ANNUAL RATE OF RETURN: (1.3)%
1998 COMPOUND ANNUAL RATE OF RETURN: 25.5% (8 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: N/A
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN FROM MAY 8, 1998 THROUGH
DECEMBER 1999: 13.7%
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
ANNUAL AND MONTHLY RATES OF RETURN (%)
-------------------------------------------------------------------------------------------------------------------------------
COMPOUND
YEAR JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER ANNUAL ROR
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 (1.9) 4.0 (3.9) 3.7 2.6 3.0 (2.6) (0.7) (1.0) (9.2) 3.5 2.0 (1.3)
-------------------------------------------------------------------------------------------------------------------------------
1998 N/A N/A N/A N/A 6.2 (1.9) 0.6 12.4 8.2 (0.3) (5.6) 4.8 25.5
(8 MONTHS)
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------------
JWH GLOBALANALYTICS-REGISTERED TRADEMARK- 99
(MARCH 1999 THROUGH JUNE 2000)
INCEPTION OF CLIENT ACCOUNT TRADING BY JWH: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: MARCH 1999
ASSETS UNDER MANAGEMENT IN ALL PROGRAMS ON JULY 31, 2000: $1.2
BILLION ASSETS UNDER MANAGEMENT IN THE JWH GLOBALANALYTICS-REGISTERED
TRADEMARK- 99 ACCOUNT ON JULY 31, 2000: $10,698,431
NUMBER OF OPEN ACCOUNTS: 1
WORST MONTHLY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (9.4)% (10/99)
WORST PEAK-TO-VALLEY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (16.3)%
(7/99 - 4/00)
2000 COMPOUND ANNUAL RATE OF RETURN: (4.6)% (7 MOS.)
1999 COMPOUND ANNUAL RATE OF RETURN: (7.5)% (10 MOS.)
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN SINCE MARCH 1999: (7.1)%
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
ANNUAL AND MONTHLY RATES OF RETURN (%)
------------------------------------------------------------------------------------------------------------------------------
COMPOUND
YEAR JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER ANNUAL ROR
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 (0.5) (0.1) (5.2) (0.8) 6.5 (1.6) (2.6) N/A N/A N/A N/A N/A (4.6)
(7 MONTHS)
-------------------------------------------------------------------------------------------------------------------------------
1999 N/A N/A (4.7) 2.9 2.3 2.9 (3.2) (1.5) (1.7) (9.4) 3.7 1.7 7.5%
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
-42-
<PAGE>
NOTES ON PERFORMANCE RECORDS
An investor should note that the composite capsule performance
presentations include individual accounts which, even though traded according to
the same investment program, have materially different rates of return. The
reasons for this are numerous material differences among accounts: (a)
procedures governing timing for the commencement of trading and means of moving
toward full portfolio commitment of new accounts; (b) the period during which
accounts are active; (c) client trading restrictions, including futures versus
forward contracts and contract months; (d) trading size to equity ratio
resulting from JWH procedures for the commencement of trading and full portfolio
commitment of new accounts and new capital; (e) the size of the account, which
can influence the size of positions taken and restrict the account from
participating in all markets available to an investment program; (f) the amount
of interest income earned by an account, which will depend on the rates paid by
futures commission merchants on equity deposits and/or on the portion of an
account invested in interest-bearing obligations such as U.S. Treasury bills;
(g) the amount of management and incentive fees paid to JWH and the amount of
brokerage commissions paid, which will vary and will depend on the commissions
negotiated by the client with the broker; (h) the timing of orders to open or
close positions; (i) the market conditions, which in part determine the quality
of trade executions; (j) variations in fill prices; and (k) timing of additions
and withdrawals. Notwithstanding these material differences among accounts, the
composite remains a valid representation of the accounts included therein.
Composite performance presentation is only allowed for accounts which
are not materially different. For the purpose of determining whether material
differences exist among accounts traded pursuant to the same trading program,
the gross trading performance of each JWH investment program and each individual
JWH account within the relevant program is reviewed against the following
parameters established by interpretations of the Division of Trading and Markets
of the CFTC to determine whether the differences are material: (i) if the
arithmetic average of two percentages is greater than ten percentage points, the
difference between the two is less than 10% of their average; (ii) if the
arithmetic average of the two percentages is greater than five percentage points
but less than ten percentage points, the difference between the two is 1.5
percentage points or less; and (iii) if the arithmetic average of the two
percentages is less than five percentage points and the difference between the
two is one percentage point or less. If one of the parameters (i) - (iii) is
satisfied in the review, then the results within the designated range are deemed
"materially the same" or "not materially different." The parameters (i) - (iii)
determine if differences between accounts are material. The gross trading
performance of each JWH investment program and each individual JWH account
within the relevant program not satisfying the above parameters (i) - (iii) is
then reviewed to determine whether any material differences detected could
produce misleading composite performance results. With the exception of accounts
that were established at levels below JWH's current minimum account size, JWH's
policy is to provide separate performance capsules when an account is
consistently performing differently on a gross trading basis than the other JWH
accounts traded pursuant to the same trading program and the continued inclusion
of that account in the composite would create a distortion in the composite rate
of return.
The composite rates of return indicated should not be taken as
representative of any rate of return actually achieved by any single account
represented in the records. Investors are further cautioned that the data set
forth in the performance capsule records is not indicative of any results which
may be attained by JWH in the future since past performance is not necessarily
indicative of future results.
During the periods covered by the preceding capsule performance
records, and particularly since 1989, JWH has increased and decreased position
size in relation to account equity in certain markets and entire programs, and
also altered the composition of the markets and contracts for certain programs.
In general since 1992, JWH began implementing certain position size adjustments
that were of a more permanent nature. While historical returns represent actual
performance achieved, you should be aware that the position size relative to
account equity
-43-
<PAGE>
utilized currently or in the future may be significantly different from that
used during previous time periods. You should be aware of the following position
size adjustments relative to account equity:
Financial and Metals Portfolio -- reduced 50% commencing in August 1992
G-7 Currency Portfolio -- increased 50% commencing in May 1998.
Prior to December 1991, capsule performance records are presented on a
cash basis except as otherwise stated in the notes to the records. The recording
of items on a cash basis should not, for most months, be materially different
from presenting such rates of return on an accrual basis. Any differences in the
monthly rates of return between the two methods are immaterial to the overall
performance presented. With the change to the accrual basis of accounting for
incentive fees in December 1991, the net effect on monthly net performance and
the rate of return in the capsule performance records of continuing to record
interest income, management fees, commissions and other expenses on a cash basis
is materially equivalent to the full accrual basis. JWH began reflecting all
items of net performance on an accrual basis for the G-7 Currency Portfolio in
July 1992, and at the inception of client trading for the JWH
GlobalAnalytics-Registered Trademark- Family of Programs. In August 1998, JWH
made an adjustment to the accounting method employed for every investment
program not already utilizing the full accrual basis of accounting. This
adjustment moved all JWH investment programs to the full accrual basis beginning
on September 1, 1998.
The calculation of management and incentive fees is subject to
variation due to the agreed upon definitions contained in each account's
advisory agreement. Management fees range historically from 0% to 6% of assets
under management and incentive fees range from 0% to 25% of trading profits.
From time to time, such variations in advisory fees may have a material impact
on the performance of an account.
NOTES TO JWH PROGRAMS' CAPSULE
PERFORMANCE RECORDS
Number of open accounts is the number of accounts directed by JWH
pursuant to the investment program shown as of July 31, 2000.
Assets under management in a program is the aggregate amount of total
equity, excluding "notional" equity under management, of JWH in the investment
program shown as of July 31, 2000.
Worst monthly decline on an individual account basis within the past
five years is the largest monthly loss experienced by any single account in the
relevant investment program in any calendar month covered by the capsule. "Loss"
for these purposes is calculated on the basis of the loss experienced by the
individual account, expressed as a percentage of total equity (including
"notional" equity) in the account. Worst monthly decline information includes
the month and year of such decline.
Worst peak-to-valley decline on an individual account basis is the
largest percentage decline by any single account in the relevant investment
program (after eliminating the effect of additions and withdrawals) during the
period covered by the capsule from any month-end net asset value, without such
month-end net asset value being equalled or exceeded as of a subsequent
month-end by the individual account, expressed as a percentage of the total
equity (including "notional" equity) in the account. The worst peak-to-valley
decline since inception is the worst peak-to-valley decline by the program as a
composite.
Compound Annual Rate of Return is calculated by compounding the monthly
rates of return over the number of periods in a given year. For example, each
monthly rate of return in hundredths is added to one (1) and the result is
multiplied by the previous month's compounded monthly rate of return similarly
expressed. One (1) is then subtracted from the product. For periods less than
one year, the results are year to date.
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<PAGE>
Average Compounded Annualized Rate of Return is calculated in a similar
manner to Compound Annual Rate of Return, except that before subtracting one (1)
from the product, the product is exponentially changed by the factor of one (1)
divided by the number of years in the program's performance record, then one (1)
is subtracted.
Monthly Rates of Return are daily compounded monthly rates of return in
the investment program. The daily compounded monthly rate of return is
calculated by compounding the daily rates of return over the number of days in
the month. For example, each of the daily rates of return in hundredths is added
to one (1) and the result is multiplied by the previous day's daily rate of
return similarly expressed. One (1) is then subtracted from the product. The
daily rates of return are calculated by dividing the day's net performance by
the sum of the beginning equity, plus additions minus withdrawals for the day.
Prior to September 1998, Monthly Rates of Return were calculated by dividing net
performance by the sum of the beginning equity, plus additions minus withdrawals
in the investment program for the month. For such purposes all additions and
withdrawals were treated as if they had been made on the first day of the month,
even if, in fact, they occurred later. From December 1991 through August 1998,
if additions and withdrawals were material to a program's performance, they were
time weighted. If time weighting was materially misleading, then the only
accounts traded method was utilized. As of September 1998, time weighting is no
longer relevant as the monthly rates of return are daily compounded monthly
rates of return.
Proprietary capital is included in the rates of return for the
Financial and Metals Portfolio for certain periods. The absence of management
and incentive fees as well as reduced commissions during these periods may have
had a material effect on the rates of return . This potential material effect
occurred from inception of the program through July 1987 for the Financial and
Metals Portfolio . In addition, during the period May 1991 through August 1995,
the Financial and Metals Portfolio included two other proprietary accounts,
which had no material impact on the rates of return presented.
For periods other than those described above, proprietary capital is
included in the rates of return for the G-7 Currency Portfolio pursuant to an
investment in a fund. These proprietary accounts were traded in exactly the same
manner as client funds, and were subject to all of the same fees and expenses
charged to a client investment in the fund. Therefore, there is no material
impact on the rates of return presented.
ADDITIONAL NOTE FOR THE
FINANCIAL AND METALS PORTFOLIO
In May 1992, position sizes were reduced by 50% for 35% of the assets
in the Financial and Metals Portfolio at the request of a client. This reduction
in position size materially affected the rates of return in some JWH accounts;
the 1992 annual rate of return for the relevant accounts was negative 24.3%. The
1992 annual rate of return for the Financial and Metals Portfolio was negative
10.9%. If these accounts had been excluded from the performance record, the 1992
annual rate of return would have been negative 3.9%. The effect of this
reduction in position size was eliminated in September 1992 when all accounts in
this program underwent a reduction in position size.
INTEREST INCOME
The Trust's assets are generally deposited with CIS and CISFS.
On the fifth business day of each month, CIS and CISFS credit the Trust
with interest on 100% of the Trust's average daily balances on deposit with CIS
or CISFS, as the case may be, in the previous month at the average 91-day
Treasury bill rate for such previous month in respect of deposits denominated in
dollars. 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 credit
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<PAGE>
the Trust with interest on the fifth business day of each month on the average
daily balance of Trust assets held in such currency during the previous month at
a rate equal to 0.75% below the average rate paid with respect to deposits in
such currency by the relevant clearing association for such previous month
(which is zero in certain cases). With respect to currencies required for margin
on markets not currently traded by JWH, CIS and CISFS will credit the Trust with
interest at the rates paid by, respectively, CIS and CISFS to other accounts
similar in size and character to that of the Trust.
The economic benefit from possession of the Trust's assets in excess of
the interest credited by CIS and CISFS to the Trust is retained by CIS and
CISFS, respectively.
To the extent that the Trust participates in the spot and forward
currency markets, the Trust is required to deposit margin with CISFS. CIS
satisfies such margin requirements by transferring Trust assets from the Trust's
account at CIS to CISFS. Amounts transferred to CISFS as margin on spot and
forward currency and precious metals positions are not held by CISFS as customer
segregated funds under the CEA and the rules of the CFTC but are included in
determining the interest to be credited to the Trust as described above.
The Trust's assets are used either as margin to secure the Trust's
obligations under the open positions which it holds in the markets or as a
reserve to support further trading in the event of market losses. The assets
deposited as margin with and held by the Futures Broker are held in "customer
segregated funds accounts" or "foreign futures and foreign options secured
amount accounts" (in the case of futures and options traded on non-U.S.
exchanges), as prescribed by the CEA and applicable CFTC regulations. Assets
deposited as margin with and held by the Foreign Currency Broker are held in
unregulated accounts. In general, approximately 80% to 94% of the Trust's assets
are held in customer segregated funds accounts or with a Custodian,
approximately 5% to 15% in foreign futures and options secured amount accounts
and approximately 1% to 8% in unregulated accounts. Assets held in "customer
segregated funds accounts" may be held in cash or invested in United States
Treasury bills or notes. Assets held at a Custodian may be held in cash or
invested on an unleveraged basis in Treasury bills, notes and bonds as well as
other securities issued or guaranteed as to principal and/or interest by certain
U.S. government agencies or instrumentalities.
Although currently not contemplated, CISI may deposit a portion of
Trust assets with a Custodian and engage a third-party cash manager to manage
such assets. Such assets will be invested on an unleveraged basis in Treasury
bills, notes and bonds as well as other securities issued or guaranteed as to
principal and/or interest by certain U.S. government agencies or
instrumentalities. The fees of such third-party cash manager will be paid by the
Trust. CIS has agreed to credit to the account of the Trust at each month-end
the amount, if any, by which returns (net of fees of the cash manager) for such
month on Trust assets held by a Custodian are less than the return that would
have been realized by the Trust had such assets been deposited with CIS. THERE
CAN BE NO ASSURANCE THAT, IF THE SERVICES OF ONE OR MORE CASH MANAGERS ARE USED,
THE TRUST WILL AVOID LOSS OF PRINCIPAL WITH RESPECT TO TRUST ASSETS PLACED WITH
SUCH MANAGERS.
----------------------
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<PAGE>
CHARGES
CHARGES PAID BY THE TRUST
The Trust is subject to the following charges and fees.
<TABLE>
<CAPTION>
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
--------- ----------------- -----------------
<S> <C> <C>
CISI Organizational and initial CISI advanced these costs, approximately $650,000, and was reimbursed
offering costs by the Trust at the initial closing. These costs are being amortized
over the first sixty months of the Trust's operations, subject to a
maximum monthly payment of 1/60 of 2% of the month-end Net Assets.
Year-to-date through July 2000, amortized organizational and initial
offering costs equalled $77,101. During 1999, amortized organizational
and initial offering costs equalled $132,172.
Third Parties Ongoing offering costs As incurred, subject to a ceiling of 0.5% of the Trust's average
month-end Net Assets in each fiscal year. Year-to-date through July
2000, ongoing offering costs equalled $190,914. During 1999, ongoing
offering costs equalled $474,221.
CIS Brokerage Fee 6.5% annually (or approximately 0.542% per month) of the Trust's
month-end assets (after deduction of the Management Fee payable to JWH
and before recognizing the purchases and redemptions for the month) is
paid to CIS. Such Brokerage Fee covers all brokerage, exchange,
clearing and NFA fees incurred in the Trust's trading including
brokerage fees payable to CISFS on spot and forward currency trading.
Year-to-date through July 2000, Brokerage Fees equalled $2,495,499.
During 1999, Brokerage Fees equalled $6,220,141.
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 above CIS and CISFS credit the Trust with interest on 100% of the Trust's
amount credited to the Trust, if average daily U.S. dollar balances on deposit with CIS or CISFS during
any each month at the average 91-day Treasury bill rate and at the
applicable rates (which may be zero in some cases) in respect of
non-U.S. dollar deposits. The economic benefit from the possession
of the Trust's assets in excess of the interest credited by CIS
and CISFS to the Trust will be retained by CIS and CISFS,
respectively.
</TABLE>
-47-
<PAGE>
<TABLE>
<CAPTION>
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
--------- ----------------- -----------------
<S> <C> <C>
Third Parties Administrative expenses As incurred, currently estimated to be approximately $70,000 annually.
Year-to-date through July 2000, administrative expenses equalled
$35,100. During 1999, administrative expenses equalled $47,406.
JWH Management Fee 2% annually (or approximately 0.166% per month) of the Trust's
month-end assets after deduction of a portion of the Brokerage Fee at a
1.25% annual rate (rather than 6.5% annual rate) and before recognizing
the purchases and redemptions for the month; payable monthly. Through
September 30, 2000, the Management Fee was charged at a 4% annual
rate. Year-to-date through July 2000, Management Fees equalled
$1,540,658. During 1999, Management Fees equalled $3,833,530.
JWH Incentive Fee As of each calendar quarter-end, 20% of any New Trading Profits for
such quarter will be paid to JWH. Trading Profits for any period equal
the sum of (i) the net of any profits and losses realized on all trades
closed out during a quarter, (ii) the net of any unrealized profits and
losses on open positions as of the end of such quarter less the net of
any unrealized profits and losses on open positions as of the end of
the immediately preceding quarter, minus (iii) the Brokerage Fee at the
annual rate of 1.25% (rather than 6.5% annual rate) of the Trust's
month-end assets and the Management Fee.
Trading Profits do not include interest income.
Trading Profits are calculated on the basis of the overall performance
of the Trust, not the performance of each trading program considered
individually.
New Trading Profits for any quarter are the amount of cumulative
calendar quarter-end Trading Profits in excess of the highest
level of such cumulative Trading Profits as of any previous calendar
quarter-end.
Through September 30, 2000, the Incentive Fee was equal to 15% of any
New Trading Profits per quarter. Year-to-date through July 2000,
Incentive Fees equalled $0. During 1999, Incentive Fees equalled
$853,599.
Third Parties Reimbursement of delivery, Actual payments to third parties; not subject to estimate.
insurance, storage and any other
extraordinary charges; taxes (if
any)
</TABLE>
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<PAGE>
------------------------
The above fees are the complete compensation that will be received by CIS or its
affiliates from the Trust. This excludes redemption fees which will be charged
to some Unitholders if they redeem on or before the twelfth month of ownership.
--------------------
BROKERAGE COMMISSIONS; ADMINISTRATIVE FEES
BROKERAGE FEE
BROKERAGE FEE RATE. Commodity brokerage commissions are typically paid
upon the completion or liquidation of a trade and are referred to as "round-turn
commissions," which cover both the initial purchase (or sale) and the subsequent
offsetting sale (or purchase) of a commodity futures contract. The Trust does
not pay commodity brokerage commissions on a per-trade basis but rather pays
monthly flat-rate Brokerage Fees at the annual rate of 6.5% (or a monthly rate
of approximately 0.542%) of the Trust's average month-end assets after deduction
of the Management Fee but before inclusion of purchases and redemptions for the
month. CIS receives such Brokerage Fee, irrespective of the number of trades
executed on the Trust's behalf.
SPECIAL BROKERAGE FEE RATE. A Unitholder who purchases at least
$5,000,000 of Units as of any month-end (an "Eligible Unitholder") will be
charged Brokerage Fees at the flat rate of 5% per annum (or 0.417% per month;
the "Special Brokerage Fee Rate"). As of each month-end that a Unitholder holds
Units with an aggregate issue price of at least $5,000,000, such Unitholder will
remain an Eligible Unitholder regardless of the aggregate Net Asset Value of
such Units.
An investor who makes an additional purchase of Units on a closing date
that causes the aggregate issue price of all of such investor's Units to equal
at least $5,000,000 will be charged the Special Brokerage Fee Rate with respect
to such additional Units as of the next month-end but with respect to earlier
purchased Units only after such Units have been outstanding for at least twelve
full months. For example, if an investor makes an initial investment of
$3,000,000 as of March 31, 2000 ("Initial Purchase Date") and an incremental
investment of $3,000,000 as of September 30, 2000 ("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 April 30, 2001 with respect to Units acquired as of
the Initial Purchase Date. In determining the Brokerage Fees due on such an
investor's Units, Units when redeemed will be treated on a "first-in, first-out"
basis.
The Special Brokerage Fee reduction is effected while maintaining a
uniform Net Asset Value per Unit by issuing additional Units to Eligible
Unitholders.
THE TRUST'S BROKERAGE FEES CONSTITUTE A "WRAP FEE," WHICH COVER THE CIS
GROUP'S COSTS AND EXPENSES, NOT JUST THE COST OF BROKERAGE EXECUTIONS.
THE BROKERAGE FEES MAY NOT BE INCREASED ABOVE THE CURRENT LEVEL WITHOUT
THE UNANIMOUS CONSENT OF ALL UNITHOLDERS.
JWH'S MANAGEMENT FEES
The Trust pays monthly Management Fees to JWH at a rate of 0.166% (a 2%
annual rate) of the month-end assets of the Trust, after reduction for a 1.25%
(rather 6.5% per annum) portion of the Brokerage Fee charged, but before
reduction for any Incentive Fee or other costs and before inclusion of purchases
and redemptions for the month.
INCENTIVE FEES
METHOD OF CALCULATING
The Trust pays to JWH an Incentive Fee equal to 20% of any New Trading
Profits as of the end of each calendar quarter. New Trading Profits are any
cumulative Trading Profit in excess of
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<PAGE>
the highest level -- the "High Water Mark" -- of cumulative Trading Profits as
of any previous calendar quarter-end.
Trading Profits (i) include realized and unrealized profits and losses,
(ii) exclude interest income and (iii) are reduced by Brokerage Fees of 1.25%
(not 6.5%) of month-end assets, the Management Fee and by no other costs.
Accrued Incentive Fees on Units when redeemed are paid to JWH. Any
shortfall between cumulative Trading Profits and the "High Water Mark" in
cumulative Trading Profits is proportionately reduced when Units are redeemed.
Trading Profits are not reduced by redemption charges.
For example, assume that as of January 1, 2000, the Trust is at a "High
Water Mark" in cumulative Trading Profits. If Trading Profits for such month
equalled $500,000, all of such Trading Profits would be New Trading Profits,
resulting in an accrued $100,000 Incentive Fee. Assume also that by the end of
the next month, losses, the 1.25% Brokerage Fee and the Management Fee have
reduced the $500,000 New Trading Profits to a loss of $(180,000). If the Trust
then withdrew 50% of its assets, this $(180,000) loss carryforward would be
reduced by 50% to ($90,000) for Incentive Fee calculation purposes. If during
the following month Trading Profits equalled $200,000, New Trading Profits of
$110,000 would be accrued as of the end of such quarter, and JWH would be
entitled to an Incentive Fee of $22,000 for the quarter.
PAID EQUALLY BY ALL UNITS
New Trading Profits may be generated even though the Net Asset Value
per Unit has declined below the purchase price of certain Units. Conversely, if
new Units are purchased at a Net Asset Value reduced by an accrued Incentive Fee
which is subsequently reversed, the reversal is allocated equally among all
Units, although the accrual itself was attributable only to the previously
outstanding Units.
EXTRAORDINARY EXPENSES
The Trust will be required to pay any extraordinary expenses, such as
taxes, incurred in its operation. The Trust has had no such expenses to date,
and in CISI's experience with other managed futures funds, such expenses have
been negligible. Extraordinary expenses, if any, would not reduce Trading
Profits for purposes of calculating the Incentive Fees.
--------------
FEES AND EXPENSES PAID BY CIS
BROKERAGE FEE FOR CURRENCY AND PRECIOUS METALS TRADING
CIS pays CISFS, from CIS's own funds, brokerage fees on a per trade
basis for the Trust's trading of spot and forward contracts on currencies.
SELLING COMMISSIONS AND ONGOING COMPENSATION
CIS pays the Selling Agents selling commissions of up to 4% (up to 2.5%
in respect of Units sold to Eligible Unitholders). CIS also pays eligible
Selling Agents ongoing compensation of up to 4% per annum of the average
month-end Net Asset Value per Unit for all Units which remain outstanding for
longer than twelve months (up to 2.5% per annum in respect of Units owned by
Eligible Unitholders), beginning in the thirteenth month after sale. Selling
Agents ineligible to receive ongoing compensation may receive installment
selling commissions which, when added to the initial selling commission, may not
exceed 9% of the initial subscription price of each Unit sold by any such
Selling Agent. Such ongoing compensation may be deemed to constitute
underwriting compensation. See "Federal Income Tax 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."
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<PAGE>
REDEMPTION CHARGES
A redemption charge of 3% of the redemption date Net Asset Value per
Unit is imposed on Units redeemed on or before the end of the first eleven
months after issuance. This redemption charge is deducted from investors'
redemption proceeds and paid to CISI.
BROKERAGE
ARRANGEMENTS
THE FUTURES BROKER
CIS, the Lead Selling Agent, is also the Trust's Futures Broker. CIS
executes and clears the Trust's futures transactions and provides other
brokerage-related services. CIS is a Delaware corporation. Its principal office
is located at 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606. It
has offices and affiliated offices in Chicago, New York, Kansas City and
Minneapolis as well as in England, France, Switzerland and Singapore. The
clients of CIS include commercial and financial institutions that use the
futures markets for risk management purposes as well as private investors. CIS
has more than 500 employees. CIS is a wholly-owned, but separately managed,
subsidiary of Cargill, Incorporated, a privately-owned international merchant,
warehouser, processor and transporter of agricultural and other bulk commodities
that was founded in 1865.
CIS is a clearing member of all of the principal futures exchanges in
the United States and is a clearing broker or has clearing relationships on all
major world futures exchanges. It is registered with the CFTC as a futures
commission merchant and is a member of NFA in such capacity. Certain employees
of CIS are members of U.S. futures exchanges and may serve on the governing
bodies and standing committees of those exchanges, their clearinghouses and NFA.
In that capacity, these employees have a fiduciary duty to the exchanges and
would be required to act in the best interests of such exchanges, even if that
action might be adverse to the interests of the Trust.
Cargill, Incorporated owns and operates grain elevators and soybean
processing plants that are designated as regular warehouses for delivery of
certain physical commodities in satisfaction of futures contracts under the
rules of the Chicago Board of Trade and similar rules of other U.S. futures
exchanges.
Cargill, Incorporated and its affiliates are substantial users of
virtually all futures contracts for hedging purposes. Such hedging transactions
are generally implemented by employees of Cargill, Incorporated, and CIS
generally executes or clears those transactions. The volume of trading by
Cargill, Incorporated and its affiliates is likely to result in their competing
with the Trust for futures market positions. Thus, in certain instances, CIS may
have orders for trades from the Trust and from Cargill, Incorporated or its
affiliates, and CIS might be deemed to have a conflict of interest with respect
to the sequence in which such orders will be transmitted to the trading floors
of futures exchanges. In order to assure impartial treatment for such orders,
CIS has an operating policy of transmitting orders to the trading floors in the
sequence received regardless of which entity has placed the order. The Trust
might enter into trades in which the other party is Cargill, Incorporated or one
of its affiliates. It is possible that the hedging and cash operations of
Cargill, Incorporated or trading by its affiliates may adversely affect the
Trust. Records of such trading will not be made available to Unitholders. It is
possible that these entities may compete for similar positions in the futures
markets.
NO OFFICERS, DIRECTORS OR EMPLOYEES OF CIS OR ITS AFFILIATES ARE
PERMITTED TO TRADE FUTURES SPECULATIVELY FOR THEIR OWN ACCOUNTS.
In the ordinary course of its business, CIS is engaged in civil
litigation and subject to administrative proceedings which, in the aggregate,
are not expected to have a material effect upon its condition, financial or
otherwise, or the services it will render to the Trust.
The Trust and CIS have entered into a Customer Agreement that provides
that, for as long as the Trust maintains an account with CIS, CIS will execute
and clear trades for the Trust upon instruction of JWH, and will receive the
monthly flat-rate Brokerage Fees. The Customer Agreement is
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terminable on sixty days' notice by either party. If for any reason the
Trust elects to terminate the Customer Agreement with CIS, no assurance may
be given that the Trust will be able to retain the brokerage services of
another futures broker at the same commission rate. In addition, under the
Declaration and Agreement of Trust, Unitholders owning more than 50% of the
outstanding Units may cause the Trust to terminate the Customer Agreement.
CIS is responsible for execution and clearance of futures contracts (and
options, if traded) as well as for certain administrative duties such as
record keeping, transmittal of confirmation statements and calculating equity
balance and margin requirements for the Trust's account. The agreement
provides that CIS will not be liable to the Trust except for bad faith or
negligence.
Trust assets are deposited with CIS in its capacity as the Trust's
Futures Broker. CIS credits interest monthly to the Trust's account on
substantially all of the Trust's average daily balances on deposit at CIS, as
described under "Interest Income." CIS retains any economic benefit derived from
possession of the Trust's assets in excess of the amount credited to the Trust's
account.
THE FOREIGN CURRENCY BROKER
CISFS acts as the Trust's counterparty in the Trust's spot and forward
contracts trades. CISFS is a Delaware corporation that is a wholly-owned
subsidiary of CIS Holdings, Inc. Under most normal circumstances, CISFS will
contact at least two counterparties for a quote on each of the Trust's currency
and precious metals trades. CISFS will enter a spot or forward contract with the
selected counterparty and will enter into a back-to-back spot or forward
contract with the Trust at the same price CISFS buys from (or sells to) the
selected counterparty.
REDEMPTIONS;
NET ASSET VALUE
REDEMPTIONS
THE TRUST IS INTENDED AS A MEDIUM- TO LONG-TERM, "BUY AND HOLD"
INVESTMENT. THE TRUST'S OBJECTIVES ARE TO ACHIEVE SUBSTANTIAL CAPITAL
APPRECIATION OVER TIME. THE TRUST IS NOT INTENDED TO ACHIEVE, NOR TO ATTEMPT TO
ACHIEVE, SIGNIFICANT APPRECIATION OVER THE SHORT TERM.
A Unitholder may cause the Trust to redeem any or all of such
Unitholder's Units at Net Asset Value as of the close of business on the last
business day of any calendar month. Written redemption requests may be submitted
to CISI or to a redeeming Unitholder's Registered Representative but in either
case must be received by CISI no later than five business days prior to
month-end (including the last business day of the month) to effect redemption as
of such month-end. A form of Request for Redemption is attached to the
Subscription Agreement and Power of Attorney as an Annex.
Redemption proceeds will generally be paid within ten business days
after the month-end of redemption, either directly to the redeeming Unitholder
or to the Unitholder's customer securities account as directed by the
Unitholder. However, in special circumstances, including, but not limited to,
default or delay in payments due to the Trust from banks or other persons, the
Trust may, in turn, delay payment to persons requesting redemption of Units of
the proportionate part of the redemption value of their Units equal to the
proportionate part of the Net Assets of the Trust represented by the sums that
are the subject of such default or delay.
A Unit which is redeemed at or prior to the end of the eleventh full
month after its issuance will be assessed a redemption charge of 3% of the Net
Asset Value per Unit as of the date of redemption. In the event that an investor
acquires Units at more than one time, such investor's Units will be treated on a
"first-in, first-out" basis for purposes of determining whether redemption
charges apply.
Applicable state "Blue Sky" policies require that redemption charges
not be assessed on any Unitholder who redeems because the Trust's expenses have
increased.
The Managing Owner may declare additional redemption dates, including
Special Redemption Dates under certain circumstances. If as of the close of
business on any day the Net Asset Value of a Unit has decreased to less than 50%
of the previous
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highest month-end Net Asset Value per Unit, after adding back all
distributions, the Managing Owner shall liquidate all of the Trust's open
positions, suspend trading and within ten business days after the suspension
of trading declare a Special Redemption Date by notice to Unitholders and
otherwise in accordance with the Declaration of Trust.
Unitholders may not transfer or assign Units without providing prior
written notice to the Managing Owner. No assignee may become a substitute
Unitholder except with the consent of the Managing Owner.
NOTICES OF REDEMPTION ARE IRREVOCABLE ONCE SUBMITTED. THE NET ASSET
VALUE PER UNIT AS OF THE DATE OF REDEMPTION MAY DIFFER SUBSTANTIALLY FROM THE
NET ASSET VALUE PER UNIT AS OF THE DATE THAT IRREVOCABLE NOTICE OF REDEMPTION
MUST BE SUBMITTED.
UNITHOLDERS NEED NOT REDEEM ALL THEIR UNITS IN ORDER TO REDEEM ANY SUCH
UNITS, PROVIDED THAT AT LEAST $1,000 OF UNITS ARE REDEEMED AND THAT THE MINIMUM
INVESTMENT OF $1,000 IS MAINTAINED AFTER ANY PARTIAL REDEMPTION.
NET ASSET VALUE
The Net Assets of the Trust are its assets less its liabilities
determined in accordance with generally accepted accounting principles. The Net
Asset Value per Unit is the Net Assets of the Trust divided by the number of
Units outstanding.
Futures or option contracts traded on a United States commodity
exchange are valued at the settlement price on the date of valuation. If an open
position cannot be liquidated on the day with respect to which Net Assets are
being determined, the settlement price on the first subsequent day on which the
position can be liquidated shall be the basis for determining the liquidating
value of such position for such day, or such other value as the Managing Owner
may deem fair and reasonable. The liquidating value of a commodity futures or
option contract not traded on a United States commodity exchange shall mean its
liquidating value as determined by the Managing Owner on a basis consistently
applied for each different variety of contract. Accrued Incentive Fee
liabilities reduce Net Asset Value (subject, however, to possible whole or
partial reversal if the Trust incurs subsequent losses) even if such accrued
Incentive Fees may never, in fact, be finally paid to JWH.
Organizational and initial offering cost reimbursements reduce Net
Asset Value only as amortized over the first 60 months of the Trust's trading.
CONFLICTS OF INTEREST
GENERAL
Neither CISI nor JWH has established any formal procedures to resolve
the following conflicts of interest. Consequently, there is no independent
control on how CISI or JWH resolves these conflicts which can be relied upon by
investors as ensuring that the Trust is treated equitably with other CISI or JWH
clients.
Because no formal procedures are in place for resolving conflicts, they
may be resolved by CISI and/or JWH in a manner which causes the Trust losses.
The value of Unitholders' investment may be diminished by actions or omissions
which independent third parties could have prevented or corrected.
Although the following conflicts of interest are present in the
operation of the Trust, CISI does not believe that they are likely to have a
material adverse effect on its performance. This belief is based on a number of
factors, including the following.
(i) JWH trades all similarly situated CIS accounts in parallel, placing
bulk orders which are allocated among the JWH accounts pursuant to
pre-established procedures. Consequently, JWH has little opportunity to
prefer another JWH client over the Trust.
(ii) CIS simply receives and executes JWH's bulk orders based on
pre-established procedures. CIS has no ability in allocating positions
to favor one account over another.
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(iii) JWH charges similar accounts the same fees.
(iv) CISI, as a fiduciary, is prohibited from benefiting itself at the
expense of the Trust.
In CISI's view, the most important conflict of interest relating to the
Trust is that the business terms applicable to the CIS Group's dealings with the
Trust were not negotiated when they were initially established. These business
terms are described in detail in this prospectus in order to give prospective
investors ample opportunity to accept or reject such terms. However, it may be
difficult for investors to assess, for example, the extent of the adverse impact
which the high level of the Trust's Brokerage Fees has on its long-term
prospects for profitability.
CISI
CISI organized and controls the Trust. CISI and its affiliates are the
primary service providers to the Trust and will remain so even if using other
firms might be better for the Trust. Futures trading is highly competitive. To
the extent that CIS Group entities continue to be retained by the Trust despite
providing non-competitive services, the Trust is likely to be less profitable or
incur greater losses.
CISI allocates its resources among a number of different funds. CISI
may have financial incentives to favor certain funds over the Trust. To the
extent that CISI actually does so, the Net Asset Value per Unit is likely to be
negatively impacted.
The business terms of the Trust -- other than the Management and
Incentive Fees due to JWH which were negotiated between CISI and JWH -- were
not negotiated. CISI unilaterally established these terms, balancing
marketing and performance considerations and its interest in maximizing the
revenues generated to CISI.
CISI'S INTEREST IN MAXIMIZING ITS REVENUES COULD CAUSE IT TO TAKE
ACTIONS WHICH ARE DETRIMENTAL TO THE TRUST IN ORDER TO INCREASE CISI'S INCOME
FROM THE TRUST OR DECREASE ITS COSTS IN SPONSORING THE TRUST. ALSO, BECAUSE CISI
DOES NOT HAVE TO COMPETE WITH THIRD PARTIES TO PROVIDE SERVICES TO THE TRUST,
THERE IS NO INDEPENDENT CHECK ON THE QUALITY OF SUCH SERVICES. CISI MAY LOWER
THE QUALITY OF SUCH SERVICES IN ORDER TO MAXIMIZE THE NET REVENUES WHICH IT
RECEIVES FROM THE TRUST, WHILE AT THE SAME TIME CAUSING THE NET ASSET VALUE PER
UNIT TO DECLINE.
CIS; CISFS
GENERAL
CIS executes trades for different clients in the same markets at the
same time. Consequently, other clients may receive better prices on the same
trades than the Trust, causing the Trust to pay higher prices for its positions.
Many CIS clients pay lower brokerage rates than the Trust. Brokerage
Fees are a major drag on the Trust's performance, and the cumulative effect of
the higher rates paid by the Trust is material.
CIS and CISFS must allocate their resources among many different
clients. They all have financial incentives to favor certain accounts over the
Trust. Because of the competitive nature of the markets in which they trade, to
the extent that either CIS or CISFS prefers other clients over the Trust, the
Trust is likely to be negatively impacted.
CIS AND CISFS DO NOT HAVE TO COMPETE TO PROVIDE SERVICES TO THE TRUST;
CONSEQUENTLY, THERE IS NO INDEPENDENT CHECK ON THE QUALITY OF THEIR SERVICES.
JWH
GENERAL
JWH manages many accounts other than the Trust. Consequently, JWH may
devote less resources to the Trust's trading than JWH otherwise might, to the
detriment of the Trust.
Some of JWH's principals devote a substantial portion of their business
time to ventures other than managing the Trust, including ventures unrelated to
futures trading. The Trust may be at a competitive disadvantage to other
accounts which are managed by advisors whose principals devote their entire
attention to futures trading.
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FINANCIAL INCENTIVES TO DISFAVOR THE TRUST
If the Trust has losses, JWH may have an incentive to prefer other
clients because JWH could begin to receive incentive compensation from such
clients without having to earn back any losses.
ANY ACTION WHICH JWH TAKES TO MAXIMIZE ITS REVENUES BY DISFAVORING THE
TRUST, EITHER IN RESPECT OF THE RESOURCES DEVOTED TO ITS TRADING OR THE PROGRAMS
SELECTED FOR IT, COULD ADVERSELY AFFECT THE TRUST'S PERFORMANCE, PERHAPS TO A
MATERIAL EXTENT.
THE SELLING AGENTS
The Selling Agents receive substantial selling commissions on the sale
of Units. Consequently, the Selling Agents have a conflict of interest in
advising their clients whether to invest in the Units.
The Selling Agents receive, beginning in the thirteenth month after
each month-end sale of Units, ongoing compensation based on the Net Asset Value
of Units sold by them which remain outstanding. Consequently, in advising
clients whether to redeem their Units the Selling Agents will have a conflict of
interest between their interest in maximizing the compensation which they will
receive from the Trust and giving their clients the financial advice which the
Selling Agents believe to be in such clients' best interests. The same conflict
of interest extends to the Wholesalers and correspondents who distribute Units.
PROPRIETARY TRADING
The CIS Group and their employees are prohibited from trading for their
own accounts.
JWH and Mr. Henry may engage in discretionary trading for their own
accounts, 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 as or opposite to the Trust's positions, due to
testing a new quantitative model or program, a neutral allocation system, and/or
trading pursuant to individual discretionary methods. In addition, Mr. Ginsberg
may engage in discretionary trading for his own account pursuant to his own
personal trading approach as long as such trading does not amount to a breach of
fiduciary duty; Mr. Ginsberg's trades may be the same or opposite to positions
that JWH takes for the Trust's account. On occasion, the accounts of JWH, Mr.
Henry and Mr. Ginsberg may receive better fills than the Trust's account.
Records for these accounts will not be made available to the Trust.
Employees and principals of JWH (other than Messrs. Henry and Ginsberg)
are not permitted to trade in futures, options on futures or forward contracts.
However, such principals and employees may invest in investment vehicles that
trade futures, options on futures or forward contracts when an independent
trader manages trading in that vehicle, and in The JWH Employee Fund, L.P., for
which JWH is the trading advisor. Records of these accounts will not be made
available to the Trust.
Mr. Wing is the chief executive officer of Market Liquidity Network,
LLC (MLN). MLN acts as the general partner of partnerships or sponsors entities
that will trade futures, options on futures and equity options for hedging and
risk management purposes in connection with the equity trading of those
entities. Mr. Wing is not involved in directing or overseeing such trading.
Records of MLN's accounts will not be made available to the Trust.
Records of proprietary trading will not be available for inspection by
Unitholders.
Proprietary trading by JWH or Mr. Henry could, if substantial in size
and conducted in the same markets traded by the Trust, cause losses for the
Trust by increasing the cost at which it must acquire and liquidate positions.
Over time, the losses resulting from such increased prices could make it
difficult for the Trust to earn profits even if its trading were otherwise
successful.
TRANSACTIONS BETWEEN THE CIS GROUP AND THE TRUST
All of the service providers to the Trust, other than JWH and the
Trustee, are affiliates of CIS. CISI
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negotiated with JWH over the level of its Management and Incentive Fees.
However, none of the fees paid by the Trust to the CIS Group were negotiated,
and they may be higher than would have been obtained in arm's-length
bargaining.
The Trust pays CIS substantial Brokerage Fees. The Trust also pays CIS
interest on short-term loans extended by CIS to cover losses on foreign currency
positions and permits CIS to retain a portion of the benefit derived from
possession of the Trust's assets.
Within the CIS Group, CISI is the direct beneficiary of the revenues
received by CIS from the Trust. CISI controls the management of the Trust and
CIS serves as its promoter. Although CISI has not sold any assets, directly or
indirectly, to the Trust, CISI makes substantial profits from the Trust due to
the foregoing revenues.
No loans have been, are or will be outstanding between CISI or any of
its principals and the Trust.
CIS pays substantial selling commissions (up to 4% of the subscription
price of Units) and trailing commissions (up to 4% annually of the average Net
Asset Value per Unit, beginning in the thirteenth month after a Unit is sold) to
the Selling Agents for distributing the Units. CIS is ultimately paid back for
these expenditures from the revenues it receives from the Trust.
Descriptions of the dealings between the Trust and the CIS Group are
set forth under "Selected Financial Data," "Interest Income" and "Charges."
THE TRUST AND THE TRUSTEE
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 60606 (telephone: (312) 460-4000).
The records of the Trust, including a list of the Unitholders and their
addresses but excluding detailed trading records of JWH, is located at the
foregoing address, and available for inspection and copying (upon payment of
reasonable reproduction costs) by Unitholders or their representatives during
regular business hours as provided in the Declaration and Agreement of Trust.
(Section 10). There is a limitation to non-commercial purposes. Transfer agent
services will be provided by CIS at 233 South Wacker Drive, Suite 2300, Chicago,
Illinois 60606 at no additional cost to the Trust. The Managing Owner will
maintain and preserve the books and records of the Trust for a period of not
less than six years.
CERTAIN ASPECTS OF THE TRUST
THE TRUST IS THE FUNCTIONAL EQUIVALENT OF A LIMITED PARTNERSHIP;
PROSPECTIVE INVESTORS SHOULD NOT ANTICIPATE ANY LEGAL OR PRACTICAL PROTECTIONS
UNDER THE DELAWARE BUSINESS TRUST ACT GREATER THAN THOSE AVAILABLE TO LIMITED
PARTNERS.
No special custody arrangements are applicable to the Trust which would
not be applicable to a limited partnership, and the existence of a trustee
should not be taken as an indication of any additional level of management or
supervision over the Trust. To the greatest extent permissible under Delaware
law, the Trustee acts in an entirely passive role, delegating all authority over
the operation of the Trust to the Managing Owner. The Managing Owner is the
functional equivalent of the general partner in a limited partnership. (Sections
5(a), 9 and 19).
Although units of beneficial interest in a trust need not carry any
voting rights, the Declaration and Agreement of Trust gives Unitholders voting
rights comparable to those typically extended to limited partners in
publicly-offered futures funds. (Section 19).
The Delaware 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
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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.
The Trust's Declaration of Trust effectively gives CISI, as Managing
Owner, full control over the management of the Trust. Unitholders have no voice
in its operations. In addition, CISI in its operation of the Trust is
specifically authorized to engage in the transactions described herein
(including those involving affiliates of CISI), and is exculpated and
indemnified by the Trust against claims sustained in connection with the Trust,
provided that such claims were not the result of negligence or misconduct and
that CISI determined that such conduct was in the best interests of the Trust.
Although as Unitholders investors have no right to participate in the
control or management of the Trust, they are entitled to: (i) vote on a variety
of different matters; (ii) receive annual audited financial statements,
unaudited monthly reports and timely tax information; (iii) inspect the Trust's
books and records; (iv) redeem Units; and (v) not have the business terms of the
Trust changed in a manner which increases the compensation received by CISI or
its affiliates without their unanimous consent.
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Unitholders' voting rights extend to any proposed change in the
Declaration of Trust which would adversely affect them, as well as to their
right to terminate the Trust's contracts with affiliates of CISI. Unitholders
also have the right to call meetings of the Trust in order to permit Unitholders
to vote on any matter on which they are entitled to vote, including the removal
of CISI as Managing Owner of the Trust.
Unitholders or their duly authorized representatives may inspect the
Trust's books and records, for any purpose reasonably related to their status as
Unitholders in the Trust, during normal business hours upon reasonable written
notice to the CISI. They may also obtain copies of such records upon payment of
reasonable reproduction costs; provided, however, that such Unitholders
represent that the inspection and/or copies of such records will not be for
commercial purposes unrelated to such Unitholders' interest in the Trust.
The Declaration of Trust contains restrictions on CISI's ability to
raise Brokerage Fees, Administrative Fees and other revenues received by the CIS
Group from the Trust, as well as certain other limitations on the various
conflicts of interest to which the CIS Group is subject in operating the Trust.
The Declaration of Trust provides for the economic and tax allocations
of the Trust's profit and loss. Economic allocations are based on investors'
capital accounts, and the tax allocations generally attempt to equalize tax and
capital accounts by, for example, making a priority allocation of taxable income
to Unitholders who redeem at a profit.
A Unitholder may transfer or assign his or her units in the Trust upon
prior written notice to his or her registered representative and CISI and
subject to approval of the assignee, CISI will provide consent when it is
satisfied that the transfer complies with applicable laws. An assignee not
admitted to the Trust as a Unitholder will have only limited rights to share the
profits and capital of the Trust and a limited redemption right.
The Managing Owner may amend the Declaration of Trust in any manner not
adverse to the Unitholders without need of obtaining their consent. These
amendments can be for clarification of inaccuracies or ambiguities,
modifications in response to changes in tax code or regulations or any other
changes CISI deems advisable so long as they do not change the basic investment
policy or structure.
The Trust has agreed to indemnify CISI, as Managing Owner, for actions
taken on behalf of the Trust, provided that CISI's conduct was in the best
interests of the Trust and the conduct was not the result of negligence or
misconduct. Indemnification by the Trust for alleged violation of securities
laws is only available if the following conditions are satisfied:
1) a successful adjudication on the merits of each count alleged
has been obtained, or
2) such claims have been dismissed with prejudice on the merits
by a court of competent jurisdiction; or
3) a court of competent jurisdiction approves a settlement of the
claims and finds indemnification of the settlement and related
costs should be made; and
4) in the case of 3), the court has been advised of the position
of the SEC and the states in which the Units were offered and
sold as to indemnification for the violations.
TAX CONSEQUENCES
THE FOLLOWING CONSTITUTES THE OPINION OF SIDLEY & AUSTIN AND SUMMARIZES
THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES TO UNITED STATES TAXPAYERS WHO ARE
INDIVIDUALS.
THE TRUST'S TAX STATUS
In the opinion of Sidley & Austin, the Trust will be classified as a
partnership for federal income tax purposes. Consequently, the Unitholders
individually, not the Trust itself, are subject to tax.
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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."
TAXATION OF UNITHOLDERS ON PROFITS OR LOSSES OF THE TRUST
Each Unitholder must pay tax on his or her share of the Trust's income
and gains. Such share must be included each year in a Unitholder's taxable
income whether or not such Unitholder has redeemed Units. In addition, a
Unitholder may be subject to paying taxes on the Trust's interest income even
though the Net Asset Value per Unit has decreased due to trading losses. See
" -- Tax on Capital Gains and Losses; Interest Income," below.
The Trust provides each Unitholder with an annual schedule of his or
her share of the Trust's tax items. The Trust generally allocates these items
equally to each Unit. However, when a Unitholder redeems Units, the Trust
allocates capital gains or losses so as to eliminate any difference between the
redemption proceeds and the tax accounts of such Units.
LIMITED DEDUCTIBILITY OF TRUST LOSSES AND DEDUCTIONS
A Unitholder may not deduct Trust losses or deductions in excess of his
or her tax basis in his or her Units as of year-end. Generally, a Unitholder's
tax basis in his or her Units is the amount paid for such Units reduced (but not
below zero) by his or her share of any Trust distributions, losses and
deductions and increased by his or her share of the Trust's income and gains.
LIMITED DEDUCTIBILITY FOR CERTAIN EXPENSES
Individual taxpayers are subject to material limitations on their
ability to deduct investment advisory expenses and other expenses of producing
income. Sidley & Austin has opined that the amount, if any, of the Trust's
expenses which might be subject to this limitation should be DE MINIMIS.
However, the IRS could take a different position. The IRS could contend that the
Management and Incentive Fees should be characterized as "investment advisory
expenses" because the Trust is not engaged in a "trade or business."
Individuals cannot deduct investment advisory expenses in calculating
their alternative minimum tax.
YEAR-END MARK-TO-MARKET OF OPEN POSITIONS
Section 1256 Contracts are futures, futures options traded on U.S.
exchanges, certain foreign currency contracts and stock index options. Certain
of the Trust's open positions are Section 1256 Contracts. Section 1256 Contracts
that remain open at the end of each year are treated for tax purposes as if such
positions had been sold and any gain or loss recognized. The gain or loss on
Section 1256 Contracts is characterized as 40% short-term capital gain or loss
and 60% long-term capital gain or loss regardless of how long any given position
has been held. Non-U.S. exchange-traded futures and forwards are generally
non-Section 1256 Contracts. Gain or loss on non-Section 1256 Contracts will be
recognized when sold by the Trust and will be primarily short-term gain or loss.
Gain or loss on certain currency contracts will be ordinary income or loss.
TAX ON CAPITAL GAINS AND LOSSES; INTEREST INCOME
As described under " -- Year-End Mark-to-Market of Open Positions,"
the Trust's trading generates 60% long-term capital gains or losses and 40%
short-term capital gains or losses from its Section 1256 Contracts and
primarily short-term capital gain or loss from its non-Section 1256
Contracts. Individuals pay tax on long-term capital gains at a maximum rate
of 20%. Short-term capital gains are subject to tax at the same rates as
ordinary income, with a maximum rate of 39.6% for individuals.
Individual taxpayers may deduct capital losses only to the extent of
their capital gains plus $3,000. Accordingly, the Trust could incur significant
losses but a Unitholder could be required to pay taxes on his or her share of
the Trust's interest income.
-59-
<PAGE>
If an individual taxpayer incurs a net capital loss for a year, he may
elect to carryback (up to three years) the portion of such loss which consists
of a net loss on Section 1256 Contracts. A taxpayer may deduct such losses only
against net capital gain for a carryback year to the extent that such gain
includes gains on Section 1256 Contracts. To the extent that a taxpayer could
not use such losses to offset gains on Section 1256 Contracts in a carryback
year, the taxpayer may carryforward such losses indefinitely as losses on
Section 1256 Contracts.
SYNDICATION EXPENSES
The $650,000 in organizational and initial offering costs reimbursed by
the Trust to CISI were non-deductible syndication expenses, as will be the
estimated $250,000 in costs in 2000 associated with the ongoing offering of the
Units under this prospectus and any subsequent ongoing offering expenses
incurred by the Trust. The IRS could also contend that a portion of the
Brokerage Fees paid to CIS constitute non-deductible syndication expenses.
TAXATION OF FOREIGN INVESTORS
A Unitholder who is a non-resident alien individual, foreign
corporation, foreign partnership, foreign trust or foreign estate (a "Foreign
Unitholder") generally is not subject to taxation by the United States on
capital gains from commodity or derivatives trading, provided that such Foreign
Unitholder (in the case of an individual) does not spend more than 182 days in
the United States during his or her taxable year, and provided further, that
such Foreign Unitholder is not engaged in a trade or business within the United
States during a taxable year to which income, gain, or loss is treated as
"effectively connected." An investment in the Trust should not, by itself, cause
a Foreign Unitholder to be engaged in a trade or business within the United
States for the foregoing purposes, assuming that the trading activities of the
Trust will be conducted as described in this prospectus. Pursuant to a "safe
harbor" in the Code, an investment fund whose U.S. business activities consist
solely of trading commodities and derivatives for its own account should not be
treated as engaged in a trade or business within the United States provided that
such investment fund is not a dealer in commodities or derivatives and that the
commodities traded are of a kind customarily dealt in on an organized commodity
exchange. The Managing Owner has advised Sidley & Austin 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
Tax-exempt Unitholders will not be required to pay tax on their share
of income or gains of the Trust, provided that such Unitholders do not purchase
Units with borrowed funds.
IRS AUDITS OF THE TRUST AND ITS UNITHOLDERS
The IRS is required to audit Trust-related items at the Trust rather
than the Unitholder level. CISI is the Trust's "tax matters partner" with
general authority to determine the Trust's responses to a tax audit. If an audit
of the Trust results in an
-60-
<PAGE>
adjustment, all partners may be required to pay additional taxes plus
interest as well as penalties, and additions to tax.
STATE AND OTHER TAXES
In addition to the federal income tax consequences described above, the
Trust and the Unitholders may be subject to various state and other taxes. For
example, the Trust may be subject to a 1.5% Personal Property Replacement Tax in
Illinois. Such tax is imposed on the net income of the Trust allocable to
Illinois.
--------------------
PROSPECTIVE INVESTORS ARE
URGED TO CONSULT THEIR TAX
ADVISERS BEFORE DECIDING
WHETHER TO INVEST.
PLAN OF DISTRIBUTION
SUBSCRIPTION PROCEDURE
Units are offered at Net Asset Value as of the close of business on the
last business day of each calendar month. The minimum initial investment is
$5,000; $2,000 for trustees or custodians of eligible employee benefit plans and
individual retirement accounts. Subscriptions in excess of these minimums are
permitted in $100 increments. Additional subscriptions by existing Unitholders
are permitted in $1,000 minimums with $100 increments. Units are sold in
fractions calculated to five decimal places.
In order to purchase Units, an investor must complete, execute and
deliver to a Selling Agent an original of the Subscription Agreement and Power
of Attorney Signature Page which accompanies this prospectus, together with a
check for the amount of his or her subscription. Pending investment in the
Units, subscriptions will be held in escrow at Bank One. Checks should be made
payable to "BANK ONE, ESCROW AGENT FOR JWH GLOBAL TRUST," and shall be
transmitted to the Escrow Agent by noon of the second business day after receipt
by the Managing Owner.
Subscription payments by clients of certain Selling Agents may be made
by authorizing the Selling Agents to debit a subscriber's customer securities
account with the amount of the subscription. When a subscriber authorizes such a
debit, the subscriber will be required to have the amount of his or her
subscription payment on deposit in his or her account when the subscription is
submitted. The account will be debited, and amounts so debited will be
transmitted directly to Bank One by such Selling Agent via Selling Agent check
or wire transfer made payable to "BANK ONE, ESCROW AGENT FOR JWH GLOBAL TRUST"
for deposit in the escrow account of the Trust.
The Managing Owner will determine, in its sole discretion, whether to
accept or reject a subscription in whole or in part. Such determination is made
within five business days after the receipt of a subscription by the Managing
Owner. The Managing Owner will send each subscriber whose subscription for Units
has been accepted a confirmation of such acceptance.
Subscription documents must be received no later than the fifth
business day prior to the month-end of investment (including the last business
day of the month) in order to be accepted as of the last day of the month.
Subscription funds are invested in short-term United States Treasury
bills or comparable authorized instruments while held in escrow pending
investment in the Units and will earn interest at the applicable rates paid on
these instruments. Escrow interest is allocated PRO RATA among all subscribers
during a particular escrow period based on the amount of their respective
subscriptions and the length of time on deposit in escrow. Interest actually
earned on subscriptions while held in escrow will be invested in the Trust, and
investors will be issued additional Units reflecting each investor's allocable
share of such interest.
No fees are charged on any subscriptions while held in escrow.
Subscribers are notified prior to any return of their subscriptions, and the
amounts returned to them shall in no event be reduced by any deductions for fees
or expenses.
Subscriptions, if rejected, will be promptly returned to investors
directly or, if applicable, to the
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<PAGE>
appropriate Selling Agent for credit to an investor's customer securities
account, together with all interest earned thereon while held in escrow.
No subscriptions are final or binding on a subscriber until the close
of business on the fifth business day following such subscriber's receipt of a
final prospectus (I.E., the date of subscription).
CISI advanced the Trust's organizational and initial offering costs
(approximately $650,000), for which CISI was reimbursed by the Trust at the
initial closing. The Trust is amortizing such costs over the first sixty 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 the subscription was accepted); provided that
such ongoing compensation may only be paid on Units in respect of which
Registered Representatives who are registered with the CFTC and have passed
either the Series 3 or the Series 31 Examination agree to provide certain
ongoing services to their clients who own outstanding Units. Such ongoing
compensation may be deemed to constitute underwriting compensation. See "Federal
Income Tax Aspects -- Syndication Expenses."
Under applicable rules of the National Association of Securities
Dealers, Inc., if either a Selling Agent or a Selling Agent's Registered
Representative is not duly registered with the CFTC, or such Registered
Representative does not agree to provide ongoing services to his or her clients
who own outstanding Units, no ongoing compensation may be paid either to such
Selling Agent or to such Registered Representative by CIS. Rather, such Selling
Agent and such Registered Representatives are restricted to receiving
installment selling commissions, which will be calculated in the same manner as
ongoing compensation except that the total amount of installment selling
commissions and initial selling commission received by any such Registered
Representative on each Unit sold by him or her that remains outstanding may not
exceed 9% of the initial subscription price of the Unit.
Selling Commissions and ongoing compensation payable in respect of
Units sold to any Eligible Unitholder (an investor who purchases at least
$5,000,000 of Units, as described under "Charges -- Brokerage Fee -- Special
Brokerage Fee Rate") shall be up to 2.5% of the subscription
-62-
<PAGE>
amount and up to 2.5% of the average month-end Net Asset Value. The total
amount of initial selling commissions and installment selling commissions
paid on Units sold to Eligible Unitholders by a Selling Agent or Registered
Representative ineligible to receive ongoing compensation also may not exceed
9% of the initial subscription price of such Units.
The Lead Selling Agent may engage Wholesalers who are registered
broker-dealers, or their Registered Representatives who will introduce
Additional Selling Agents to the Lead Selling Agent and assist such Additional
Selling Agents in the offering and sale of Units. Each such Wholesaler will
share with an Additional Selling Agent introduced by the Wholesaler (i) the up
to 4% (in the case of sales to Eligible Unitholders, up to 2.5%) initial selling
commissions and (ii) the up to 4% (in the case of sales to Eligible Unitholders,
up to 2.5%) ongoing compensation payable in respect of Units sold by such
Additional Selling Agent.
Certain Additional Selling Agents may select certain correspondent
"introducing brokers" to distribute Units. On Units sold through each such
correspondent, who must be registered as a broker-dealer, the relevant
Additional Selling Agent will retain (i) up to 1% of the 4% (in the case of
sales to an Eligible Unitholder, up to 0.5% of the 2.5%) initial selling
commissions and (ii) up to 1% of the 4% (in the case of sales to an Eligible
Unitholder, up to 0.5% of the 2.5%) ongoing compensation to be received by such
Additional Selling Agent in respect of Units sold by such correspondent, and
will in each case pass on the remainder of the initial selling commissions and
ongoing compensation to the correspondent.
Wholesalers and correspondents must meet the same eligibility
requirements applicable to Selling Agents in order to receive ongoing
compensation.
LAWYERS; ACCOUNTANTS
Sidley & Austin, Chicago, Illinois and Richards, Layton & Finger,
Wilmington, Delaware have advised CISI and CIS on the offering of the Units.
Sidley & Austin drafted "Tax Consequences."
The financial statements of CISI as of May 31, 2000 and 1999 and the
financial statements of the Trust as of December 31, 1999, 1998 and 1997
included herein have been audited by KPMG LLP.
-63-
<PAGE>
FINANCIAL STATEMENTS
SCHEDULES ARE OMITTED FOR THE REASON THAT THEY ARE NOT REQUIRED OR ARE
NOT APPLICABLE OR THAT EQUIVALENT INFORMATION HAS BEEN INCLUDED IN THE FINANCIAL
STATEMENTS OR NOTES THERETO.
---------------
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
JWH GLOBAL TRUST
<S> <C>
Statements of Financial Condition (unaudited) as of June 30, 2000 and June 30, 1999........................ 62
Statements of Operations (unaudited) for the period from January 1,
2000 to June 30, 2000 and the period from January 1, 1999 to
June 30, 1999............................................................................................. 63
Statements of Unitholders' Capital (unaudited) for the period from
January 1, 2000 to June 30, 2000......................................................................... 64
Statements of Cash Flows (unaudited) for the period from January 1,
2000 to June 30, 2000 and the period from January 1, 1999 to
June 30, 1999............................................................................................ 65
Independent Auditors' Report................................................................................. 66
Statements of Financial Condition as of December 31, 1999 and 1998........................................... 67
Statements of Operations for the years ended December 31, 1999 and 1998 and
the period from June 2, 1997 (commencement of trading operations) to December 31, 1997................... 68
Statements of Unitholders' Capital for the years ended December 31, 1999 and 1998 and
the period from June 2, 1997 (commencement of trading operations) to December 31, 1997.................... 69
Statement of Cash Flows for the years ended December 31, 1999 and 1998 and
the period from June 2,1997 (commencement of trading operations) to December 31, 1997..................... 70
Notes to Financial Statements .............................................................................. 71
CIS INVESTMENTS, INC.
Balance Sheet (unaudited) as of June 30, 2000............................................................... 77
Independent Auditors' Report................................................................................. 78
Statements of Financial Condition as of May 31, 2000 and 1999................................................ 79
Statements of Income for the years ended May 31, 2000 and 1999............................................... 80
Statements of Changes in Stockholder's Equity for the years ended
May 31, 2000 and 1999..................................................................................... 81
Statements of Cash Flows for the years ended May 31, 2000 and 1999........................................... 82
Notes to Financial Statements................................................................................ 83
</TABLE>
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<PAGE>
JWH GLOBAL TRUST
Statements of Financial Condition (unaudited)
June 30, 2000 and 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------- ------------------------ -------------------------
ASSETS JUNE 30, 2000 JUNE 30, 1999
---------------------------------------------------------------------------- ------------------------ -------------------------
<S> <C> <C>
Assets:
Receivable for units sold $5,605 1,294,551
Equity in commodity futures trading accounts:
Cash on deposit with Clearing Broker 54,351,960 96,289,242
Unrealized gain (LOSS) on open futures contracts (170,762) 5,786,966
---------------------------------------------------------------------------- ------------------------ ------------------------
54,186,803 103,370,759
Interest receivable 248,508 363,557
Prepaid initial organization and offering costs 253,331 385,503
---------------------------------------------------------------------------- ------------------------ ------------------------
Total assets $54,688,642 104,119,819
---------------------------------------------------------------------------- ------------------------ ------------------------
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------------------------------------------------- ------------------------ ------------------------
Liabilities:
Accrued commissions on open futures contracts
due to CIS $294,110 548,836
Accrued management fees 182,130 342,552
Accrued incentive fees -- 853,599
Accrued operating expenses 62,156 95,952
Redemptions payable 2,897,666 1,061,235
Accrued selling and offering expenses 22,565 42,081
---------------------------------------------------------------------------- ------------------------ ------------------------
Total liabilities 3,458,627 2,944,256
---------------------------------------------------------------------------- ------------------------ ------------------------
Unitholders' capital:
Beneficial owners (554,042.43 and 834,110.57 units outstanding 100,143,234
at June 30, 2000 and 1999, respectively) 50,446,719
Managing owner (8,602.73 and 8,598.45 units outstanding at
June 30, 2000 and 1999, respectively) 783,296 1,032,329
---------------------------------------------------------------------------- ------------------------ ------------------------
Total unitholders' capital 51,230,015 101,175,563
---------------------------------------------------------------------------- ------------------------ ------------------------
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<PAGE>
<S> <C> <C>
Total liabilities and unitholders' capital $54,688,642 104,119,819
---------------------------------------------------------------------------- ------------------------ ------------------------
</TABLE>
THIS STATEMENT OF FINANCIAL CONDITION, IN THE OPINION OF MANAGEMENT,
REFLECTS ALL ADJUSTMENTS NECESSARY TO FAIRLY STATE THE FINANCIAL CONDITION OF
JWH GLOBAL TRUST AT JUNE 30, 2000 AND 1999 .
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<PAGE>
JWH GLOBAL TRUST
Statements of Operations (unaudited)
Periods ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
JAN. 1, 2000 JAN. 1, 1999
TO TO
JUNE 30, 2000 JUNE 30, 1999
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Gain on trading of commodity futures and forwards contracts, physical
commodities, and related options:
Realized gain (loss) on closed positions $(3,652,545) $9,965,965
Change in unrealized gain (loss) on open positions (3,510,073) (1,319,327)
Interest income 1,848,687 2,039,911
Foreign currency transaction loss (389,061) (389,260)
------------------------------------------------------------------------------------------------------------------------------
Total revenues (5,702,992) 10,297,289
------------------------------------------------------------------------------------------------------------------------------
Expenses:
Commission paid to CIS 2,204,323 3,135,723
Exchange, clearing, and NFA fees 17,834 38,444
Management fees 1,372,165 1,956,001
Incentive fees -- 853,599
Ongoing organization and offering expenses 236,129 307,732
Operating expenses 30,100 30,639
------------------------------------------------------------------------------------------------------------------------------
Total expenses 3,860,551 6,322,138
------------------------------------------------------------------------------------------------------------------------------
Net profit (loss) $(9,563,543) 3,975,151
------------------------------------------------------------------------------------------------------------------------------
Profit (loss) per unit of beneficial ownership interest $(13.46) 4.66
Profit (loss) per unit of managing ownership interest (13.46) 4.66
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THIS STATEMENT OF OPERATIONS, IN THE OPINION OF MANAGEMENT, REFLECTS
ALL ADJUSTMENTS NECESSARY TO FAIRLY STATE THE FINANCIAL CONDITION OF JWH GLOBAL
TRUST.
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<PAGE>
JWH GLOBAL TRUST
Statements of Unitholders' Capital (unaudited)
Periods from January 1, 2000 through June 30, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
Beneficial Managing
Units* owners owner Total
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unitholders' capital at January 1, 2000 806,374.79 $84,270,892 $898,974 $85,169,866
--------------------------------------------------------------------------------------------------------------------------------
Additional Units Sold 10,125.45 985,900 57 985,957
Net profit (loss) -- (9,447,808) (115,735) (9,563,543)
Partner's redemptions (262,457.81) (25,362,265) -- (25,362,265)
--------------------------------------------------------------------------------------------------------------------------------
Unitholders' capital at June 30, 2000 554,042.43 $50,446,719 $783,296 $51,230,015
--------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit at January 1, 2000 $104.51 $104.51
Net profit (loss) per Unit (13.46) (13.46)
Net asset value per unit at September 30, 1999 91.05 91.05
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*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.
-69-
<PAGE>
JWH GLOBAL TRUST
Statements of Cash Flows (unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Periods ended June 30, 2000 and 1999
---------------------------------------------------------------------------------------------------------------------------------
JAN. 1, 2000 JAN. 1, 1999
TO TO
JUNE 30, 2000 JUNE 30, 1999
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) $(9,563,543) 3,975,151
Adjustments to reconcile net profit (loss) to
net cash provided by operating activities:
Change in assets and liabilities:
Decrease in receivable for Units sold 517,038 306,854
Decrease in unrealized gain (loss)
on open futures and forward contracts 3,510,073 1,172,189
Decrease in interest receivable 128,528 (25,293)
Decrease in prepaid organization
and offering expenses 66,086 66,086
Increase (decrease) in accrued liabilities (293,279) 753,954
Decrease in redemptions payable (676,366) (2,471,788)
Increase (decrease) in accrued selling and
offering expenses (14,214) 1,479
Net cash provided by (used in) operating activities (6,325,677) 4,378,632
Cash flows from financing activities:
Additional Units sold 985,957 11,054,289
Unit redemptions (25,362,265) (9,326,423)
Net cash provided by (used in) financing activities (24,376,308) 1,727,866
Net increase (decrease) in cash (30,701,985) 6,106,498
Cash at beginning of period 85,053,945 90,182,744
Cash at end of period $54,351,960 96,289,242
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THIS STATEMENT OF CASH FLOWS, IN THE OPINION OF MANAGEMENT, REFLECTS
ALL ADJUSTMENTS NECESSARY TO FAIRLY STATE THE FINANCIAL CONDITION OF JWH GLOBAL
TRUST.
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<PAGE>
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, 1999 and 1998, and the related statements
of operations, changes in unitholders' capital, and cash flows for each of the
years in the three-year period ended December 31, 1999. 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, 1999 and 1998, and the results of operations, changes in unitholders'
capital, and cash flows for each of the years in the three-year period ended
December 31, 1999, in conformity with generally accepted accounting principles.
KPMG LLP
January 20, 2000
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<PAGE>
JWH GLOBAL TRUST
Statements of Financial Condition
December 31, 1999 and 1998
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
ASSETS 1999 1998
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Receivable for units sold $522,643 1,601,405
Equity in commodity trading accounts:
Cash on deposit with Brokers 85,053,945 90,182,744
Unrealized gain on open contracts 3,339,311 7,559,155
-----------------------------------------------------------------------------------------------------------------------------
88,915,899 99,343,304
Interest receivable 377,036 338,264
Prepaid initial organization and offering costs 319,417 451,589
-----------------------------------------------------------------------------------------------------------------------------
Total assets $89,612,352 100,133,157
-----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND UNITHOLDERS' CAPITAL
-----------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued commissions on open contracts due to CIS $474,960 528,885
Accrued management fees 296,715 328,109
Accrued incentive fees -- 120,253
Accrued operating expenses 60,000 109,738
Accrued organization and offering expenses 36,779 40,602
Redemptions payable 3,574,032 3,533,024
-----------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,442,486 4,660,611
-----------------------------------------------------------------------------------------------------------------------------
Unitholder's capital:
Beneficial owners (806,374.79 and 818,706.12 units 84,270,892 94,471,052
outstanding at December 31, 1999 and 1998,
respectively)
Managing owner (8,602.14 units outstanding at
December 31, 1999 and 1998) 898,974 1,001,494
-----------------------------------------------------------------------------------------------------------------------------
Total unitholders' capital 85,169,866 95,472,546
-----------------------------------------------------------------------------------------------------------------------------
Total liabilities and unitholders' capital $89,612,352 $100,133,157
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-72-
<PAGE>
See accompanying notes to financial statements.
-73-
<PAGE>
JWH GLOBAL TRUST
Statements of Operations
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Gain (loss) on trading of commodity contracts:
Realized gain on closed positions $ 10,418,484 1,761,637
2,105,322
Increase (decrease) in unrealized gain on open positions (4,219,845) 3,078,002 4,481,153
Interest income 4,299,669 3,669,771 1,042,648
Foreign currency transaction gain (loss) 153,831 (296,969) (297,458)
---------------------------------------------------------------------------------------------------------------------------------
Total revenues 2,338,977 16,869,288 6,987,980
---------------------------------------------------------------------------------------------------------------------------------
Expenses:
Commission paid to CIS 6,136,926 5,195,089 1,441,635
Exchange, clearing and NFA fees 83,215 59,724 12,426
Management fees 3,833,530 3,239,007 896,312
Incentive fees 853,599 1,383,562 715,477
Amortization of prepaid initial organization and offering costs 132,172 132,173 66,238
Ongoing organization and offering expenses 474,221 400,616 110,352
Operating expenses 47,406 58,596 94,292
---------------------------------------------------------------------------------------------------------------------------------
Total expenses 11,561,069 10,468,767 3,336,732
---------------------------------------------------------------------------------------------------------------------------------
Net profit (loss) $(9,222,092) 6,400,521 3,651,248
---------------------------------------------------------------------------------------------------------------------------------
Profit (loss) per unit of beneficial ownership interest $ (10.89) 5.70 9.70
Profit (loss) per unit of managing ownership interest (10.89) 5.70 9.70
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
-74-
<PAGE>
JWH GLOBAL TRUST
Statements of Changes in Unitholders' Capital
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Beneficial Managing
Units* owners owner Total
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1996 8.17 $ 817 183 1,000
---------------------------------------------------------------------------------------------------------------------------------
Redemption of initial ownership interests (8.17) (817) (183) (1,000)
Net income - 3,612,602 38,646 3,651,248
Unitholders' contributions 589,914.19 61,020,136 610,000 61,630,136
Unitholders' redemptions (9,235.43) (929,860) - (929,860)
---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 580,678.76 $63,702,878 648,646 64,351,524
---------------------------------------------------------------------------------------------------------------------------------
Net Income - 6,324,744 75,777 6,400,521
Unitholders' contributions 358,583.68 37,661,334 277,071 37,938,405
Unitholders' redemptions (120,556.32) (13,217,904) - (13,217,904)
---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 817,706,12 $94,471,052 1,001,494 95,472,546
---------------------------------------------------------------------------------------------------------------------------------
Net Income - (9,119,572) (102,520) (9,222,092)
Unitholders' contributions 164,883.44 18,624,039 - 18,624,039
Unitholders' redemptions (177,214.77) (19,704,627) - (19,704,627)
---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 806,374.79 $84,270,892 898,974 85,169,866
---------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit at December 31, 1999 $104.51 104.51
Net asset value per unit at December 31, 1998 115.40 115.40
Net asset value per unit at December 31, 1997 109.70 109.70
</TABLE>
*Units of beneficial ownership.
-75-
<PAGE>
See accompanying notes to financial statements.
-76-
<PAGE>
JWH GLOBAL TRUST
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net profit (loss) $(9,222,092) 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:
Decrease (increase) in unrealized gain on open contracts 4,219,844 (3,078,002) (4,481,153)
Increase in interest receivable (38,772) (97,519) (240,745)
Decrease (increase) in prepaid initial organization
and offering costs 132,172 132,173 (583,762)
Increase (decrease) in accrued liabilities (259,132) (183,111) 1,310,698
---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (5,167,980) 3,174,062 (343,714)
---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from sale of units 19,702,800 40,446,623 57,521,513
Unit redemptions (19,663,619) (9,716,075) (899,665)
----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 39,181 30,730,548 56,621,848
----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (5,128,799) 33,904,610 56,278,134
Cash at beginning of year 90,182,744 56,278,134 -
---------------------------------------------------------------------------------------------------------------------------------
Cash at end of year $85,053,945 90,182,744 56,278,134
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
-77-
<PAGE>
JWH GLOBAL TRUST
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
(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. The Clearing Broker and the Forwards
Currency Broker will collectively be referred to as the Brokers.
Units of beneficial ownership of the Trust commenced selling on April
3, 1997. 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, 1999, a total of 1,113,281.02 units representing an
investment for $117,297,630 of beneficial ownership interest had been
sold in the combined offerings. In addition, during the offerings, the
Managing Owner purchased a total of 8,602.14 units, representing a
total investment of $885,000. 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, physical
commodities, and related options are recorded on the trade date.
All such transactions are reported on an identified cost basis and
marked to market daily. Unrealized gains and losses on open
contracts reflected in the statements of financial condition
represent the difference between original contract amount and
market value (as determined by exchange settlement prices for
futures contracts and related options and cash dealer prices at a
pre-determined time for forward contracts, physical commodities,
and their related options) as of the last business day of the year
or as of the last date of the financial statements.
-78-
<PAGE>
JWH GLOBAL TRUST
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
The Trust earns interest on its assets on deposit at the Brokers
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
directly by the Trust. The round-turn equivalent rate for
commissions paid by the Trust for the years ended December 31,
1999, 1998 and 1997 was $59, $61 and $92, respectively.
Certain large investors are eligible for a "Special Brokerage Fee
Rate" of 5% per year. As of December 31, 1999, 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 Brokers in the equity in commodity futures
trading accounts.
-79-
<PAGE>
JWH GLOBAL TRUST
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
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.
RECLASSIFICATIONS
Certain reclassifications of prior year amounts have been made to
conform with the current year presentation.
(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 Fees 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 $0, $41,242 and $58,292 for
the years ended December 31, 1999, 1998 and 1997, respectively, 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 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
-80-
<PAGE>
JWH GLOBAL TRUST
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
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 $229,942,351 and $245,184,015, respectively, on December
31, 1999 and $570,328,165 and $1,063,876,786, respectively on December
31, 1998. The contractual amounts of these instruments reflect the
extent of the Trust's 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 $5,169,913,
$4,860,965 and $3,290,863 during 1999, 1998 and 1997, respectively.
Fair value as of December 31, 1999 and 1998 was $3,339,311 and
$7,559,155, respectively. 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 Trust 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 is diversified among the various
futures contracts and forwards contracts in the financial and metals
group. The third program is diversified among various foreign currency
forward contracts, including cross currency
-81-
<PAGE>
JWH GLOBAL TRUST
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
contracts. The programs trade in the U.S. and outside of the U.S.
Such diversification should greatly reduce this market risk.
At December 31, 1999, the cash requirement of the commodity interests
of the Trust was $13,606,854. This cash requirement is met by
$74,766,486 held in segregated funds, $8,457,917 held in secured funds
and $5,168,853 held in nonregulated funds. At December 31, 1998, the
cash requirement of the commodity interests of the Trust was
$9,700,885. This cash requirement was 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, 1999 and 1998, cash was on
deposit with the Brokers which exceeded the cash requirement amount.
-82-
<PAGE>
JWH GLOBAL TRUST
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
The following chart discloses the dollar amount of the unrealized gain or loss
on open contracts of the Trust at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
COMMODITY GROUP 1999 1998
--------------- ------------------ -----------------
<S> <C> <C>
Agricultural $629,757 283,099
Currency 1,461,045 337,027
Stock Indices 190,407 (275,499)
Energies 401,260 325,869
Metals (484,516) 111,650
Interest 1,141,358 6,777,009
------------------ ----------------
Total $3,339,311 7,559,155
================ ================
</TABLE>
The range of expiration dates of these open contracts is February
2000 to December 2000.
-83-
<PAGE>
CIS INVESTMENTS, INC.
Balance Sheet (unaudited)
JUNE 30, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------- ---------------------------
ASSETS JUNE 30, 2000
-------------------------------------------------------------------------------------- ---------------------------
<S> <C>
Assets:
Intercompany receivable $ 1,165,736
Investments in registered commodity pools 1,654,278
-------------------------------------------------------------------------------------- ---------------------------
Total assets $ 2,820,014
-------------------------------------------------------------------------------------- ---------------------------
LIABILITIES AND EQUITY
-------------------------------------------------------------------------------------- ---------------------------
Liabilities:
Deferred Offering Costs $ 36,647
Income Taxes Payable 966
-------------------------------------------------------------------------------------- ---------------------------
Total liabilities 37,613
-------------------------------------------------------------------------------------- ---------------------------
Stockholder's equity:
Common stock, $100 par value. Authorized
30,000 shares; issued 10 shares 1,000
Subscribed Stock, 29,990 shares 2,999,000
Less subscriptions receivable (2,999,000)
Paid-in capital 18,250,000
Less demand note receivable (18,000,000)
Retained earnings 2,531,401
-------------------------------------------------------------------------------------- ---------------------------
Total stockholder's equity 2,782,401
-------------------------------------------------------------------------------------- ---------------------------
Total Liabilities and Equity $ 2,820,014
-------------------------------------------------------------------------------------- ---------------------------
</TABLE>
THIS BALANCE SHEET, IN THE OPINION OF MANAGEMENT, REFLECTS ALL
ADJUSTMENTS NECESSARY TO FAIRLY STATE THE FINANCIAL CONDITION OF CIS
INVESTMENTS, INC. AT JUNE 30, 2000. ALL ADJUSTMENTS MADE WERE OF A NORMAL AND
RECURRING NATURE.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-84-
<PAGE>
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, 2000 and 1999, 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 condition of CIS Investments, Inc. as of
May 31, 2000 and 1999, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
KPMG LLP
July 26, 2000
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-85-
<PAGE>
CIS INVESTMENTS, INC.
Statements of Financial Condition
May 31, 2000 and 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
ASSETS 2000 1999
---------------------------------------------------------------------------- -------------------------- ---------------------
<S> <C> <C>
Assets:
Receivable from JWH Global Trust $ 76,502 219,991
Receivable from funds 486 --
Due from Cargill Inc. 855,106 --
Accrued taxes receivable -- 44,223
Investments in registered commodity pools 1,768,885 2,259,643
---------------------------------------------------------------------------- -------------------------- ---------------------
Total assets $ 2,700,979 2,523,857
---------------------------------------------------------------------------- -------------------------- ---------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
---------------------------------------------------------------------------- -------------------------- ---------------------
Liabilities:
Accounts payable $ 387 387
Accrued taxes payable 966 --
Deferred management fees 67,526 84,209
Due to Cargill Inc. -- 417,943
---------------------------------------------------------------------------- -------------------------- ---------------------
Total liabilities 68,879 502,539
---------------------------------------------------------------------------- -------------------------- ---------------------
Stockholder's equity:
Common stock, $100 par value. Authorized
30,000 shares; issued 10 shares 1,000 1,000
Common stock subscribed, 29,990 shares
at the years ended May 31, 2000 and 1999, respectively 2,999,000 2,999,000
Less subscriptions receivable (2,999,000) (2,999,000)
Paid-in capital 18,250,000 18,250,000
Less demand note receivable (18,000,000) (18,000,000
Retained earnings 2,381,100 1,770,318
---------------------------------------------------------------------------- -------------------------- ---------------------
Total stockholder's equity 2,632,100 2,021,318
---------------------------------------------------------------------------- -------------------------- ---------------------
$ 2,700,979 2,523,857
---------------------------------------------------------------------------- -------------------------- ---------------------
</TABLE>
See accompanying notes to financial statements.
PURCHASERS OF UNITS WILL NOT RECIVE AN INTEREST IN THIS ENTITY.
-86-
<PAGE>
CIS INVESTMENTS, INC.
Statements of Income
Years ended May 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Revenues:
Management fees $ 148,622 201,405
Interest Income 34,805 --
Accounting and administrative services income 1,247,919 1,256,260
Realized and unrealized gain (loss) on investments (490,758) 303,696
------------------------------------------------------------------ ----------------- --------------------------
Total revenues 940,588 1,761,361
Expenses 600 172,976
------------------------------------------------------------------ ----------------- --------------------------
Income before income taxes 939,988 1,588,385
Income tax expense 329,206 595,485
------------------------------------------------------------------ ----------------- --------------------------
Net income $610,782 992,900
------------------------------------------------------------------ ----------------- --------------------------
</TABLE>
See accompanying notes to financial statements.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-87-
<PAGE>
CIS INVESTMENTS, INC.
Statements of Changes in Stockholder's Equity
Years ended May 31, 2000 and 1999
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
COMMON DEMAND
COMMON STOCK SUBSCRIPTIONS PAID-IN NOTE RETAINED
STOCK SUBSCRIBED RECEIVABLE CAPITAL RECEIVABLE EARNINGS TOTAL
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
May 31, 1998 $1,000 2,999,000 (2,999,000) 18,250,000 (18,000,000) 777,418 1,028,418
Net income - - - - - 992,900 992,900
--------------------------------------------------------------------------------------------------------------------------------
Balance at
May 31, 1999 $1,000 2,999,000 (2,999,000) 18,250,000 (18,000,000) 1,770,318 2,021,318
Net income - - - - - 610,782 610,782
--------------------------------------------------------------------------------------------------------------------------------
Balance at
May 31, 2000 $1,000 2,999,000 (2,999,000) 18,250,000 (18,000,000) 2,381,100 2,632,100
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-88-
<PAGE>
CIS INVESTMENTS, INC.
Statements of Cash Flows
Years ended May 31, 2000 and 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 610,782 992,900
Adjustments to reconcile net income to net cash
provided by operating activities:
Realized and unrealized gain on investments 490,758 (303,696)
Decrease (increase) in assets:
Receivable from funds (486) --
Accrued taxes receivable 44,223 1,098
Increase (decrease) in liabilities:
Deferred management fees (16,683) 12,076
Accrued taxes payable 966 (3,512)
-----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,129,560 698,866
-----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Organizational and offering costs of JWH Global Trust 143,489 117,522
Purchase of investments, net -- (41,504)
-----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 143,489 76,018
-----------------------------------------------------------------------------------------------------------------------------------
Cash flow from financing activity --
amount paid to Cargill Inc. (1,273,049) (774,884)
-----------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activity (1,273,049) (774,884)
-----------------------------------------------------------------------------------------------------------------------------------
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 $ 438, 296 594,387
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
PURCHASERS OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-89-
<PAGE>
CIS INVESTMENTS, INC.
Notes to Financial Statements
May 31, 2000 and 1999
--------------------------------------------------------------------------------
(1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies which have been
followed in preparing the accompanying financial statements is set
forth below.
NATURE OF BUSINESS
CIS Investments, Inc. (the Company), a wholly owned subsidiary of
Cargill Investor Services, Inc. (the Parent), is a registered
commodity pool operator with the Commodity Futures Trading
Commission. The Company is the general partner or managing owner
in various limited partnerships or trusts (Funds) organized for
the purpose of engaging in the speculative trading of commodity
interests, including futures contracts, physical commodities, and
related options.
REVENUE
The Company earns accounting and administrative fees from the
Funds when it acts as general partner. Unearned management fees
are amortized over one year, the life of the contract, using the
straight-line method.
INVESTMENTS
Investments in Funds are recorded at a value which approximates
the Company's proportionate share of each Fund's net assets.
INCOME TAXES
The Company is included in the consolidated Federal income tax
return of the Parent. Income tax expense is calculated as if the
Company would file a separate return at the federal rate of 35%.
Accrued taxes represents the remaining balance due from the Parent
for the current year taxes.
EXPENSES
Certain administrative costs are expensed and paid by the Parent.
1999 operating expenses included interest paid to the Parent and a
write-off of unrecoverable organization and offering expenses.
DUE TO/DUE FROM CARGILL, INC.
Due to/due from Cargill, Inc. represents the net balance to/from
Cargill, Inc., the Company's ultimate parent. Cash is maintained
by Cargill, Inc. and the Company receives interest on these
balances.
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
-90-
<PAGE>
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 FUNDS
The Company, as general partner or managing owner, holds the following
interests in Funds. The Company's investment in each Fund is between 1%
and 2% of Fund net assets.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
2000 1999
------------------------------------- -------------------------------
UNITS AMOUNT UNITS AMOUNT
------------------------------------- -------------------------------
------------------------------------------------------------------------------------------------------------------------
<S> <S> <S> <S> <S>
IDS Managed Futures, L.P. 1,423 $387,343 1,423 $513,151
IDS Managed Futures II, L.P. 322 159,801 322 212,795
Everest Futures Fund II, L.P. 370 396,709 370 554,674
JWH Global Trust 8,602 825,032 8,598 979,023
------------------------------------------------------------------------------------------------------------------------
$1,768,885 $2,259,643
------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Funds hold futures contracts and options. A futures contract is
defined as an agreement to buy or sell a specified amount of a
commodity or financial instrument at a particular price on a stipulated
future date. If the markets should move against all the futures
positions held by the Funds at the same time and if the Funds are
unable to offset the futures positions of the Funds, the Funds could
lose all of their assets, and the investors, including the Company,
would realize a 100% loss on their investment.
(3) NET WORTH REQUIREMENTS
The Company is required to maintain an amount of net worth as stated in
each Fund's agreement. For the purpose of compliance, net worth is
defined as the total of common stock issued and subscribed, paid in
capital and retained earnings. At May 31, 2000 and 1999, the Company
believes it 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 29,990 shares of the
Company's stock at $100 per share in order to ensure the Company's
continued compliance with its net worth requirements. No subscribed
stock was issued, nor is it known when and if any will be issued in the
future. As such, the subscribed stock receivable amount is shown as a
deduction from stockholder's equity.
-91-
<PAGE>
(5) RECEIVABLE FROM JWH GLOBAL TRUST
The Company has made an advance to JWH Global Trust (the Trust) for its
initial organizational and offering costs. These costs are being
reimbursed currently by the Trust at a rate of 1/2 of 1% of the net
assets of the Trust per year.
(6) DEMAND NOTE RECEIVABLE
The Company received a capital contribution of $18,000,000 from its
Parent and entered into a related non interest bearing demand note for
$18,000,000. No cash was transferred, nor is it known when and if any
will be transferred in the future. As such, the demand note is shown as
a deduction from stockholder's equity.
-92-
<PAGE>
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
JWH GLOBAL TRUST
$85,600,000
UNITS OF BENEFICIAL INTEREST
-------------------------
THIS IS A SPECULATIVE, LEVERAGED INVESTMENT WHICH INVOLVES THE RISK OF LOSS.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
SEE "THE RISKS YOU FACE" BEGINNING AT PAGE 9 IN PART ONE.
---------------------------------------------------
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE
DOCUMENT AND A STATEMENT OF ADDITIONAL
INFORMATION. THESE PARTS ARE BOUND
TOGETHER, AND BOTH CONTAIN
IMPORTANT INFORMATION.
---------------------------------------------------
CARGILL INVESTOR SERVICES, INC. CIS INVESTMENTS, INC.
LEAD SELLING AGENT MANAGING OWNER
-------------------------
<PAGE>
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Diversification........................................................................................1
Futures Markets and Trading Methods...............................................................................3
"Blue Sky" Glossary...............................................................................................5
</TABLE>
-------------------
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A: Fourth Amended and Restated
Declaration and Agreement of Trust..................................................................A-1
Exhibit B: Subscription Requirements...........................................................................B-1
Exhibit C: Subscription Instructions...........................................................................C-1
</TABLE>
-i-
<PAGE>
INVESTMENT DIVERSIFICATION
Unlike a traditional diversified portfolio of stocks and bonds, the
profit potential of the Trust does not depend upon favorable general economic
conditions. The Trust has the flexibility to take either long or short positions
as opposed to traditional portfolios that are typically heavily weighted towards
the former. As a result, the Trust is as likely to be profitable (or
unprofitable) during periods of declining stock and bond markets as at any other
time. The table below illustrates the generally low correlation between managed
futures and stocks and bonds.
CORRELATION BETWEEN STOCKS, BONDS AND MANAGED FUTURES
(JANUARY 1981 THROUGH JULY 2000)
<TABLE>
<CAPTION>
Int'l Managed
U.S. Stocks U.S. Bonds Stocks Futures
----------- ---------- ------ -------
<S> <C> <C> <C> <C>
U.S. Stocks 1.00
U.S. Bonds 0.35 1.00
Int'l Stocks 0.50 0.18 1.00
Managed Futures 0.01 0.09 (0.03) 1.00
</TABLE>
SOURCES:
U.S. Stocks: Standard & Poor's Total Return Index
U.S. Bonds: Lehman Brothers' Treasury Bond Index
Int'l Stocks: MSCI Europe, Australia and Far East Index
Managed Futures: Barclays CTA Index
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
An investment in the Trust permits an investor to participate in the
commodities and financial futures markets. By allocating a portion of the risk
segment of a traditional portfolio of stocks and bonds to the Trust, an investor
has the potential, if the Trust is successful, to enhance the prospects for
superior performance of the overall portfolio as well as to reduce the
volatility of the portfolio over time. The following graph, prepared by the
Managing Owner, demonstrates the potential effects of adding managed futures to
a traditional stock and bond portfolio. The graph assumes a constant 40/60 ratio
of stocks to bonds as futures are gradually introduced in the portfolio. Adding
futures has the potential to increase the portfolio's overall returns while
decreasing the standard deviation of returns (one measure of risk). Once the
managed futures portion exceeds approximately 20% of the investment portfolio,
returns continue to increase, but so does standard deviation.
-1-
<PAGE>
ILLUSTRATION OF THE HYPOTHETICAL IMPACT OF ADDING
MANAGED FUTURES TO A TRADITIONAL PORTFOLIO
(JANUARY 1981 THROUGH JULY 2000)
<TABLE>
<CAPTION>
(%) OF COMPOUND ANNUALIZED
PORTFOLIO ANNUAL RATE STANDARD
IN MANAGED OF RETURN DEVIATION
FUTURES (%) (%)
<S> <C> <C>
0 13.56% 10.42%
1 13.57% 10.25%
2 13.58% 10.10%
3 13.58% 9.95%
4 13.59% 9.82%
5 13.60% 9.70%
6 13.61% 9.60%
7 13.61% 9.50%
8 13.62% 9.42%
9 13.63% 9.34%
10 13.64% 9.28%
11 13.64% 9.23%
12 13.65% 9.19%
13 13.66% 9.16%
14 13.67% 9.14%
15 13.67% 9.13%
16 13.68% 9.12%
17 13.69% 9.13%
18 13.70% 9.14%
19 13.70% 9.17%
20 13.71% 9.19%
21 13.72% 9.23%
22 13.73% 9.27%
23 13.73% 9.32%
24 13.74% 9.38%
25 13.75% 9.44%
26 13.76% 9.51%
27 13.76% 9.58%
28 13.77% 9.65%
29 13.78% 9.73%
30 13.78% 9.82%
31 13.79% 9.91%
32 13.80% 10.00%
33 13.81% 10.09%
34 13.81% 10.19%
35 13.82% 10.29%
36 13.83% 10.39%
37 13.84% 10.50%
38 13.84% 10.61%
39 13.85% 10.72%
40 13.86% 10.83%
41 13.86% 10.94%
42 13.87% 11.06%
43 13.88% 11.17%
44 13.89% 11.29%
45 13.89% 11.41%
46 13.90% 11.52%
47 13.91% 11.64%
48 13.91% 11.76%
49 13.92% 11.88%
50 13.93% 12.01%
51 13.94% 12.13%
52 13.94% 12.25%
53 13.95% 12.37%
54 13.96% 12.50%
55 13.96% 12.62%
56 13.97% 12.74%
57 13.98% 12.87%
58 13.99% 12.99%
59 13.99% 13.11%
60 14.00% 13.24%
61 14.01% 13.36%
62 14.01% 13.49%
63 14.02% 13.61%
64 14.03% 13.73%
65 14.03% 13.85%
66 14.04% 13.98%
67 14.05% 14.10%
68 14.06% 14.22%
69 14.06% 14.34%
70 14.07% 14.47%
71 14.08% 14.59%
72 14.08% 14.71%
73 14.09% 14.83%
74 14.10% 14.95%
75 14.10% 15.07%
76 14.11% 15.19%
77 14.12% 15.31%
78 14.12% 15.43%
79 14.13% 15.54%
80 14.14% 15.66%
81 14.15% 15.78%
82 14.15% 15.90%
83 14.16% 16.01%
84 14.17% 16.13%
85 14.17% 16.25%
86 14.18% 16.36%
87 14.19% 16.48%
88 14.19% 16.59%
89 14.20% 16.70%
90 14.21% 16.82%
91 14.21% 16.93%
92 14.22% 17.04%
93 14.23% 17.15%
94 14.23% 17.27%
95 14.24% 17.38%
96 14.25% 17.49%
97 14.25% 17.60%
98 14.26% 17.71%
99 14.27% 17.82%
100 14.27% 17.93%
</TABLE>
SOURCES:
Stocks: Standard & Poor's Total Return Index
Bonds: Lehman Brothers' Treasury Bond Index
Managed Futures: Barclays CTA Index
The managed futures component of the portfolio depicted on the
"Efficient Frontier" graph above is the performance of an index, not the
performance of the Trust. The Trust may perform markedly different from the
index. For returns to continually increase, managed futures must out-perform
stocks or bonds. This is not a recommendation that anyone invest more than 10%
of his or her net worth in the Trust, which is the maximum allocation
recommended by the Managing Owner. An investor may lose all of his or her
investment in futures.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-2-
<PAGE>
FUTURES MARKETS AND TRADING METHODS
THE FUTURES AND FORWARD MARKETS
FUTURES AND FORWARD CONTRACTS
Futures contracts in the United States can only be traded on approved
exchanges and call for the future delivery of various commodities. These
contractual obligations may be satisfied either by taking or making physical
delivery or by making an offsetting sale or purchase of a futures contract on
the same exchange.
Forward currency contracts are traded off-exchange through banks or
dealers. In such instances, the bank or dealer generally acts as principal in
the transaction and charges "bid-ask" spreads.
Futures and forward trading is a "zero-sum," risk transfer economic
activity. For every gain there is an equal and offsetting loss.
EXCHANGE OF FUTURES FOR PHYSICALS ("EFP") TRANSACTIONS
Although futures contracts are normally entered into through
competitive bidding and offering on an exchange floor (or its electronic
equivalent), most U.S. exchanges allow futures contracts also to be established
in a transaction known as an exchange of futures for physicals ("EFP"). In an
EFP transaction where two parties engage in a cash sale of a commodity
underlying a futures contract, those same two parties are permitted to establish
futures positions of an equivalent quantity opposite to their cash transaction.
For example, a seller of a cash commodity would be permitted to establish a long
futures position of an equivalent quantity and the buyer of the cash commodity
would be permitted to establish a short futures position of the equivalent
commodity. In some futures markets, the cash transaction upon which the EFP is
based can be the reversal of a previously entered into but unsettled cash
transaction. In those markets, because the cash transaction is essentially
"transitory," EFPs can serve as a means for parties to enter into futures
contracts at negotiated prices and at other than during normal trading hours.
HEDGERS AND SPECULATORS
The two broad classifications of persons who trade futures are
"hedgers" and "speculators." Hedging is designed to minimize the losses that may
occur because of price changes, for example, between the time a merchandiser
contracts to sell a commodity and the time of delivery. The futures and forward
markets enable the hedger to shift the risk of price changes to the speculator.
The speculator risks capital with the hope of making profits from such changes.
Speculators, such as the Trust, rarely take delivery of the physical commodity
but rather close out their futures positions through offsetting futures
contracts.
EXCHANGES; POSITION AND DAILY LIMITS; MARGINS
Each of the commodity exchanges in the United States has an associated
"clearinghouse." Once trades made between members of an exchange have been
cleared, each clearing broker looks only to the clearinghouse for all payments
in respect of such broker's open positions. The clearinghouse "guarantee" of
performance on open positions does not run to customers. If a member firm goes
bankrupt, customers could lose money.
JWH trades for the Trust on a number of foreign commodity exchanges.
Foreign commodity exchanges differ in certain respects from their United States
counterparts and are not regulated by any United States agency.
The CFTC and the United States exchanges have established "speculative
position limits" on the maximum positions that JWH may hold or control in
futures contracts on certain commodities.
Most United States exchanges limit the maximum change in futures prices
during any single trading day. Once the "daily limit" has been reached, it
becomes very difficult to execute trades. Because these limits apply on a
day-to-day basis, they do not
-3-
<PAGE>
limit ultimate losses, but may reduce or eliminate liquidity.
When a position is established, "initial margin" is deposited. On most
exchanges, at the close of each trading day "variation margin," representing the
unrealized gain or loss on the open positions, is either credited to or debited
from a trader's account. If "variation margin" payments cause a trader's
"initial margin" to fall below "maintenance margin" levels, a "margin call" is
made, requiring the trader to deposit additional margin or have his position
closed out.
TRADING METHODS
Managed futures strategies are generally classified as either (i)
systematic or discretionary; and (ii) technical or fundamental.
SYSTEMATIC AND DISCRETIONARY TRADING APPROACHES
A systematic trader relies on trading programs or models to generate
trading signals. Discretionary traders make trading decisions on the basis of
their own judgment.
Each approach involves inherent risks. For example, systematic traders
may incur substantial losses when fundamental or unexpected forces dominate the
markets, while discretionary traders may overlook price trends which would have
been signaled by a system.
TECHNICAL AND FUNDAMENTAL ANALYSIS
Technical analysis operates on the theory that market prices, momentum
and patterns at any given point in time reflect all known factors affecting the
supply and demand for a particular commodity. Consequently, technical analysis
focuses on market data as the most effective means of attempting to predict
future prices.
Fundamental analysis, in contrast, focuses on the study of factors
external to the markets, for example: weather, the economy of a particular
country, government policies, domestic and foreign political and economic
events, and changing trade prospects. Fundamental analysis assumes that markets
are imperfect and that market mispricings can be identified.
TREND-FOLLOWING
Trend-following advisors try to take advantage of major price
movements, in contrast with traders who focus on making many small profits on
short-term trades or through relative value positions. Trend-following traders
assume that most of their trades will be unprofitable. They look for a few large
profits from big trends. During periods with no major price movements, a
trend-following trading advisor is likely to have big losses.
RISK CONTROL TECHNIQUES
Trading advisors often adopt risk management principles. Such
principles typically restrict the size of positions taken as well as
establishing stop-loss points at which losing positions must be liquidated.
However, no risk control technique can assure that big losses will be avoided.
THE JWH PROGRAMS ARE SYSTEMATIC, TECHNICAL AND TREND-FOLLOWING.
"BLUE SKY" GLOSSARY
THE FOLLOWING DEFINITIONS ARE INCLUDED IN THIS APPENDIX II IN
COMPLIANCE WITH THE REQUIREMENTS OF VARIOUS STATE SECURITIES ADMINISTRATORS WHO
REVIEW PUBLIC FUTURES FUND OFFERINGS FOR COMPLIANCE WITH THE "GUIDELINES FOR THE
REGISTRATION OF COMMODITY POOL PROGRAMS" STATEMENT OF POLICY PROMULGATED BY THE
NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION, INC. THE FOLLOWING
DEFINITIONS ARE REPRINTED VERBATIM FROM SUCH GUIDELINES AND MAY, ACCORDINGLY,
NOT IN ALL CASES BE RELEVANT TO AN INVESTMENT IN THE TRUST.
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.
-4-
<PAGE>
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 of the Trust
divided by the number of Units outstanding.
NET WORTH -- The excess of total assets over total liabilities as
determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles.
NEW TRADING PROFITS -- The excess, if any, of Net Assets at the end of
the period over Net Assets at the end of the highest previous period or Net
Assets at the date trading commences, whichever is higher, and as further
adjusted to eliminate the effect on Net Assets resulting from new Capital
Contributions, redemptions, or capital distributions, if any, made during the
period decreased by interest or other income, not directly related to trading
activity, earned on Program assets during the period, whether the assets are
held separately or in a margin account.
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 Interests under
federal and state law, including taxes and fees, and 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
-5-
<PAGE>
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.
-6-
<PAGE>
EXHIBIT A
JWH GLOBAL TRUST
FOURTH AMENDED AND RESTATED
DECLARATION AND AGREEMENT OF TRUST
DATED AS OF JUNE 5, 1998
<PAGE>
JWH GLOBAL TRUST
FOURTH AMENDED AND RESTATED
DECLARATION AND AGREEMENT OF TRUST
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Declaration of Trust............................................................................ A-1
2. The Trustee..................................................................................... A-1
(a) Term; Resignation...................................................................... A-1
(b) Powers................................................................................. A-1
(c) Compensation and Expenses of the Trustee............................................... A-1
(d) Indemnification........................................................................ A-2
(e) Successor Trustee...................................................................... A-2
(f) Liability of the Trustee............................................................... A-2
(g) Reliance by the Trustee and the Managing Owner; Advice of Counsel...................... A-3
(h) Not Part of Trust Estate............................................................... A-3
3. Principal Office ............................................................................... A-3
4. Business ....................................................................................... A-3
5. Term, Dissolution, Fiscal Year and Net Asset Value.............................................. A-4
(a) Term................................................................................... A-4
(b) Dissolution............................................................................ A-4
(c) Fiscal Year............................................................................ A-4
(d) Net Asset Value........................................................................ A-4
6. Net Worth of Managing Owner..................................................................... A-5
7. Capital Contributions; Units; Managing Owner's Liability ....................................... A-5
(a) Capital Contributions; Units........................................................... A-5
(b) Managing Owner's Liability............................................................. A-5
8. Allocation of Profits and Losses................................................................ A-5
(a) Capital Accounts and Allocations....................................................... A-5
(b) Allocation of Profit and Loss for Federal Income Tax Purposes.......................... A-6
(c) Expenses............................................................................... A-7
(d) Limited Liability of Unitholders....................................................... A-8
(e) Return of Capital Contributions........................................................ A-8
9. Management of the Trust......................................................................... A-8
(a) Authority of the Managing Owner........................................................ A-8
(b) Fiduciary Duties....................................................................... A-9
(c) Loans; Investments..................................................................... A-9
(d) Certain Conflicts of Interest Prohibited............................................... A-9
(e) Certain Agreements..................................................................... A-9
(f) Prohibition on "Pyramiding"............................................................ A-10
(g) Freedom of Action...................................................................... A-10
10. Audits and Reports to Unitholders............................................................... A-10
11. Assignability of Units.......................................................................... A-11
12. Redemptions..................................................................................... A-12
13. Offering of Units............................................................................... A-13
14. Additional Offerings............................................................................ A-13
15. Special Power of Attorney....................................................................... A-13
16. Withdrawal of a Unitholder...................................................................... A-14
17. Benefit Plan Investors.......................................................................... A-14
<PAGE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
18. Standard of Liability; Indemnification.......................................................... A-14
(a) Standard of Liability for the Managing Owner........................................... A-14
(b) Indemnification of the Managing Owner by the Trust..................................... A-15
(c) Indemnification by the Unitholders..................................................... A-15
19. Amendments; Meetings............................................................................ A-16
(a) Amendments with Consent of the Managing Owner.......................................... A-16
(b) Amendments and Actions without Consent of the Managing Owner........................... A-16
(c) Meetings; Other........................................................................ A-16
(d) Consent by Trustee..................................................................... A-17
20. Governing Law................................................................................... A-17
21. Miscellaneous................................................................................... A-17
(a) Notices................................................................................ A-17
(b) Binding Effect......................................................................... A-17
(c) Captions............................................................................... A-17
22. Certain Definitions............................................................................. A-17
23. No Legal Title to Trust Estate.................................................................. A-18
24. Legal Title..................................................................................... A-18
25. Creditors....................................................................................... A-18
</TABLE>
Testimonium
Signatures
A-ii
<PAGE>
JWH GLOBAL TRUST
FOURTH AMENDED AND RESTATED
DECLARATION AND AGREEMENT OF TRUST
This FOURTH AMENDED AND RESTATED DECLARATION AND AGREEMENT OF TRUST
("Declaration and Agreement of Trust") of JWH GLOBAL TRUST (the "Trust") is made
and entered into as of this 5th day of June, 1998 by and among CIS INVESTMENTS,
INC., a Delaware corporation, as a managing owner (the "Managing Owner"),
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (the
"Trustee"), each other party who shall execute a counterpart of this Declaration
and Agreement of Trust as an owner of a unit of beneficial interest of the Trust
("Units") or who becomes a party to this Declaration and Agreement of Trust as a
Unitholder by execution of a Subscription Agreement and Power of Attorney
Signature Page or otherwise and who is shown in the books and records of the
Trust as a Unitholder (individually, a "Unitholder" and, collectively, the
"Unitholders").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to continue the Trust for the business
and purpose of issuing Units, the capital of which shall be used to engage in
speculative trading, buying, selling or otherwise acquiring, holding or
disposing of futures and forward contracts on currencies, interest rate, energy
and agricultural products, metals and stock indices, hybrid instruments, swaps,
any rights pertaining thereto and any options thereon or on physical
commodities, with the objective of capital appreciation through speculative
trading, and to amend and restate the Third Amended and Restated Declaration and
Agreement of Trust of the Trust in its entirety.
NOW THEREFORE, the parties hereto agree as follows:
1. DECLARATION OF TRUST.
The Trustee hereby declares that it holds the investments in the Trust in
trust upon and subject to the conditions set forth herein for the use and
benefit of the Unitholders. It is the intention of the parties hereto that the
Trust shall be a business trust under the Act, and that this Declaration and
Agreement of Trust shall constitute the governing instrument of the Trust. The
Trustee has filed the Certificate of Trust required by Section 3810 of the Act.
Nothing in this Declaration and Agreement of Trust shall be construed
to make the Unitholders partners or members of a joint stock association except
to the extent that such Unitholders, as constituted from time to time, are
deemed to be partners under the Internal Revenue Code of 1986, as amended (the
"Code"), and applicable state and local tax laws. Notwithstanding the foregoing,
it is the intention of the parties hereto that the Trust be treated as a
partnership for purposes of taxation under the Code and applicable state and
local tax laws. Effective as of the date hereof, the Trustee shall have all of
the rights, powers and duties set forth herein and in the Act with respect to
accomplishing the purposes of the Trust.
2. THE TRUSTEE.
(a) TERM; RESIGNATION. (i) Wilmington Trust Company has been appointed
and has agreed to serve as the Trustee of the Trust. The Trust shall have only
one trustee unless otherwise determined by the Managing Owner. The Trustee shall
serve until such time as the Managing Owner removes the Trustee or the Trustee
resigns and a successor Trustee is appointed by the Managing Owner in accordance
with the terms of Section 2(e) hereof.
(ii) The Trustee may resign at any time upon the giving of at least 60
days' advance written notice to the Trust; provided, that such resignation shall
not become effective unless and until a successor Trustee shall have been
appointed by the Managing Owner in accordance with Section 2(e) hereof. If the
Managing Owner does not act within such 60 day period, the Trustee may apply to
the Court of Chancery of the State of Delaware for the appointment of a
successor Trustee.
(b) POWERS. Except to the extent expressly set forth in this Section 2
and Sections 3 and 24, the duty and authority of the Trustee to manage the
business and affairs of the Trust are hereby delegated to the Managing Owner.
The Trustee shall have only the rights, obligations or liabilities specifically
provided for herein and in the Act and shall have no implied rights, obligations
or liabilities with respect to the business or affairs of the Trust. The Trustee
shall have the power and authority to execute, deliver, acknowledge and file all
necessary documents, including any amendments to or cancellation of the
Certificate of Trust, and to maintain all necessary records of the Trust as
required by the Act. The Trustee shall provide prompt notice to the Managing
Owner of the Trustee's performance of any of the foregoing. The Managing Owner
shall keep the Trustee informed of any actions taken by the Managing Owner with
respect to the Trust that affect the rights, obligations or liabilities of the
Trustee hereunder or under the Act.
<PAGE>
(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 does hereby indemnify, protect, save and keep harmless the Trustee and
its successors, assigns, legal representatives, officers, directors, agents and
servants (the "Indemnified Parties") from and against any and all liabilities,
obligations, losses, damages, penalties, taxes (excluding any taxes payable by
the Trustee on or measured by any compensation received by the Trustee for its
services hereunder or as indemnity payments pursuant to this Section 2(d)),
claims, actions, suits, costs, expenses or disbursements (including legal fees
and expenses) of any kind and nature whatsoever (collectively, "Expenses"),
which may be imposed on, incurred by or asserted against the Indemnified Parties
in any way relating to or arising out of the formation, operation or termination
of the Trust, the execution, delivery and performance of any other agreements to
which the Trust is a party or the action or inaction of the Trustee hereunder or
thereunder, except for Expenses resulting from the gross negligence or willful
misconduct of the Indemnified Parties. The indemnities contained in this Section
2(d) shall survive the termination of this Declaration and Agreement of Trust or
the removal or resignation of the Trustee. In addition, the Indemnified Parties
shall be entitled to indemnification from any cash, net equity in any commodity
futures, forward and option contracts, all funds on deposit in the accounts of
the Trust, any other property held by the Trust, and all proceeds therefrom,
including any rights of the Trust pursuant to any agreements to which the Trust
is a party (the "Trust Estate") to the extent such expenses are attributable to
the formation, operation or termination of the Trust as set forth above, and to
secure the same the Trustee shall have a lien against the Trust Estate which
shall be prior to the rights of the Managing Owner and the Unitholders to
receive distributions from the Trust Estate. The Trustee nevertheless agrees
that it will, at its own cost and expense, promptly take all action as may be
necessary to discharge any liens on any part of the Trust Estate which result
from claims against the Trustee personally that are not related to the ownership
or the administration of the Trust Estate or the transactions contemplated by
any documents to which the Trust is a party.
(e) SUCCESSOR TRUSTEE. Upon the resignation or removal of the Trustee,
the Managing Owner shall appoint a successor Trustee by delivering a written
instrument to the outgoing Trustee. Any successor Trustee must satisfy the
requirements of Section 3807 of the Act. Any resignation or removal of the
Trustee and appointment of a successor Trustee shall not become effective until
a written acceptance of appointment is delivered by the successor Trustee to the
outgoing Trustee and the Managing Owner and any fees and expenses due to the
outgoing Trustee are paid. Following compliance with the preceding sentence, the
successor Trustee shall become fully vested with all of the rights, powers,
duties and obligations of the outgoing Trustee under this Declaration and
Agreement of Trust, with like effect as if originally named as Trustee, and the
outgoing Trustee shall be discharged of its duties and obligations under this
Declaration and Agreement of Trust.
(f) LIABILITY OF THE TRUSTEE. Except as otherwise provided in this
Section 2, in accepting the trust created hereby, Wilmington Trust Company acts
solely as Trustee hereunder and not in its individual capacity, and all persons
having any claim against the Trustee by reason of the transactions contemplated
by this Declaration and Agreement of Trust and any other agreement to which the
Trust is a party shall look only to the Trust Estate for payment or satisfaction
thereof. The Trustee shall not be liable or accountable hereunder or under any
other agreement to which the Trust is a party, except for the Trustee's gross
negligence or willful misconduct. In particular, but not by way of limitation:
(i) The Trustee shall have no liability or responsibility for the
validity or sufficiency of this Declaration and Agreement of Trust or for
the form, character, genuineness, sufficiency, value or validity of the
Trust Estate;
(ii) the Trustee shall not be liable for any actions taken or omitted
to be taken by it in accordance with the instructions of the Managing
Owner;
(iii) the Trustee shall not have any liability for the acts or
omissions of the Managing Owner;
(iv) the Trustee shall not be liable for its failure to supervise the
performance of any obligations of the Managing Owner, any commodity
broker, any selling agent, any additional selling agent, "wholesaler"
selling agent or "correspondent" selling agent;
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(v) no provision of this Declaration and Agreement of Trust shall
require the Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers
hereunder if the Trustee shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured or provided to it;
(vi) under no circumstances shall the Trustee be liable for
indebtedness evidenced by or other obligations of the Trust arising under
this Declaration and Agreement of Trust or any other agreements to which
the Trust is a party;
(vii) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Declaration and Agreement of Trust,
or to institute, conduct or defend any litigation under this Declaration
and Agreement of Trust or any other agreements to which the Trust is a
party, at the request, order or direction of the Managing Owner or any
Unitholders unless the Managing Owner or such Unitholders have offered to
the Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities that may be incurred by the Trustee (including,
without limitation, the reasonable fees and expenses of its counsel)
therein or thereby; and
(viii) notwithstanding anything contained herein to the contrary, the
Trustee shall not be required to take any action in any jurisdiction other
than in the State of Delaware if the taking of such action will (a)
require the consent or approval or authorization or order of or the giving
of notice to, or the registration with or taking of any action in respect
of, any state or other governmental authority or agency of any
jurisdiction other than the State of Delaware, (b) result in any fee, tax
or other governmental charge under the laws of any jurisdiction or any
political subdivision thereof in existence as of the date hereof other
than the State of Delaware becoming payable by the Trustee or (c) subject
the Trustee to personal jurisdiction other than in the State of Delaware
for causes of action arising from personal acts unrelated to the
consummation by the Trustee of the transactions contemplated hereby.
(g) RELIANCE BY THE TRUSTEE AND THE MANAGING OWNER; ADVICE OF COUNSEL.
(i) In the absence of bad faith, the Trustee and the Managing Owner may
conclusively rely upon certificates or opinions furnished to the Trustee or the
Managing Owner and conforming to the requirements of this Declaration and
Agreement of Trust in determining the truth of the statements and the
correctness of the opinions contained therein, and shall incur no liability to
anyone in acting on any signature, instrument, notice, resolution, request,
consent, order, certificate, report, opinion, bond or other document or paper
which is believed to be genuine and believed to be signed by the proper party or
parties, and need not investigate any fact or matter pertaining to or in any
such document; provided, however, that the Trustee or the Managing Owner shall
have examined any certificates or opinions so as to determine compliance of the
same with the requirements of this Declaration and Agreement of Trust. The
Trustee or the Managing Owner may accept a certified copy of a resolution of the
board of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the
same is in full force and effect. As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the Trustee or the
Managing Owner may for all purposes hereof rely on a certificate, signed by the
president or any vice-president or by the treasurer or other authorized officers
of the relevant party, as to such fact or matter, and such certificate shall
constitute full protection to the Trustee or the Managing Owner for any action
taken or omitted to be taken by either of them in good faith in reliance
thereon.
(ii) In the exercise or administration of the trust hereunder and in
the performance of its duties and obligations under this Declaration and
Agreement of Trust, the Trustee, at the expense of the Trust, (i) may act
directly or through its agents, attorneys, custodians or nominees pursuant to
agreements entered into with any of them, and the Trustee shall not be liable
for the conduct or misconduct of such agents, attorneys, custodians or nominees
if such agents, attorneys, custodians or nominees shall have been selected by
the Trustee with reasonable care and (ii) may consult with counsel, accountants
and other skilled professionals to be selected with reasonable care by the
Trustee; provided that the Trustee shall not allocate any of its internal
expenses or overhead to the account of the Trust. The Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the opinion or advice of any such counsel, accountant or other such
persons.
(h) NOT PART OF TRUST ESTATE. Amounts paid to the Trustee from the
Trust Estate, if any, pursuant to this Section 2 shall not be deemed to be part
of the Trust Estate immediately after such payment.
3. PRINCIPAL OFFICE.
The address of the principal office of the Trust is c/o CIS
Investments, Inc., 233 South Wacker Drive, Suite 2300, Chicago, IL 60606. The
Trustee is located at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890, Attention: Corporate Trust Administration. The Trustee shall
receive service of
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process on the Trust in the State of Delaware at the foregoing address. In the
event Wilmington Trust Company resigns or is removed as the Trustee, the Trustee
of the Trust in the State of Delaware shall be the successor Trustee.
4. BUSINESS.
The Trust's business and purpose is to trade, buy, sell or otherwise
acquire, hold or dispose of all futures contracts including, but not limited to,
those on currencies, interest rates, energy and agricultural products, metals
and stock indices; spot and forward contracts in currencies and precious metals;
any rights pertaining thereto and any options thereon or on physical
commodities; as well as securities and any rights pertaining thereto and any
options thereon, and to engage in all activities necessary, convenient or
incidental thereto. The Trust may also engage in "hedge," arbitrage and cash
trading of any of the foregoing instruments. The Trust may engage in such
business and purpose either directly or through joint ventures, entities or
partnerships, provided that the Trust's participation in any of the foregoing
has no adverse economic or liability consequences for the Unitholders, which
consequences would not be present had the Trust engaged in that same business or
purpose directly.
The objective of the Trust's business is appreciation of its assets
through speculative trading. The Trust shall have the power to engage in all
activities which are necessary, suitable, desirable, convenient or incidental to
the accomplishment to the foregoing business and purpose. The Trust shall do so
under the direction of the Managing Owner.
5. TERM, DISSOLUTION, FISCAL YEAR AND NET ASSET VALUE.
(a) TERM. The term of the Trust commenced on the day on which the
Certificate of Trust was filed with the Secretary of State of the State of
Delaware pursuant to the provisions of the Act and shall end upon the first to
occur of the following: (1) December 31, 2026; (2) receipt by the Managing Owner
of the determination by Unitholders owning more than 50% of the Units then owned
by Unitholders to dissolve the Trust, notice of which is sent by certified mail,
return receipt requested, to the Managing Owner not less than 90 days prior to
the effective date of such dissolution; (3) the bankruptcy, retirement,
resignation, expulsion, withdrawal, insolvency or dissolution of the Managing
Owner, or any other event that causes the Managing Owner to cease to be managing
owner of the Trust unless within 90 days after such event all Unitholders agree
in writing to continue the business of the Trust and to the appointment,
effective as of the date of such event, of one or more managing owners of the
Trust (except Unitholders owning more than 50% of the Units then outstanding may
agree in writing to the appointment of one or more managing owners to continue
the business of the Trust); (4) the insolvency or bankruptcy of the Trust; (5) a
decline in the aggregate Net Assets of the Trust to less than $2,500,000 (except
as provided in Section 12); (6) a decline in the Net Asset Value per Unit to $50
or less (except as provided in Section 12); (7) dissolution of the Trust
pursuant hereto; or (8) any other event which shall make it unlawful for the
existence of the Trust to be continued or require dissolution of the Trust.
(b) DISSOLUTION. Upon the occurrence of an event causing the
dissolution of the Trust, the Trust shall be dissolved and its affairs wound up.
Upon the dissolution of the Trust, the Managing Owner or, in the event that
dissolution of the Trust pursuant to Section 5(a)(3) has caused the Managing
Owner to cease to be managing owner of the Trust, a person or persons approved
by the affirmative vote of more than 50% of the Units then owned by Unitholders,
shall wind up the Trust's affairs and, in connection therewith, shall distribute
the Trust's assets in the following manner and order:
(i) FIRST TO payment and discharge of all claims of creditors of the
Trust (including, to the extent otherwise permitted by law, creditors who are
Unitholders), including by the creation of any reserve that the Managing Owner
(or its successor), in its sole discretion, may consider reasonably necessary
for any losses, contingencies, liabilities or other matters of or relating to
the Trust; provided, however, that if and when the cause for such reserve ceases
to exist, the monies, if any, then in such reserve shall be distributed in the
manner hereinafter provided; and
(ii) SECOND TO distribution in cash of the remaining assets to the
Unitholders in proportion to their capital accounts, after giving effect to the
allocations pursuant to Section 8 hereof as if the date of distribution were the
end of a calendar year.
(c) FISCAL YEAR. The fiscal year of the Trust shall begin on January 1
of each year and end on the following December 31; provided, however, that the
first fiscal year of the Trust shall commence on the date its Certificate of
Trust is filed.
(d) NET ASSET VALUE. The Net Assets of the Trust are its assets less
its liabilities determined in accordance with generally accepted accounting
principles. The Net Asset Value per Unit is the Net Assets of the Trust divided
by the number of Units outstanding, subject to the provision of Section 8(a)
hereof.
A futures or futures option contract traded on a United States
commodity exchange shall be valued at the settlement price on the date of
valuation. If such a contract
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held by the Trust cannot be liquidated on the day with respect to which Net
Assets are being determined, the settlement price on the first subsequent day on
which the contract can be liquidated shall be the basis for determining the
liquidating value of such contract for such day, or such other value as the
Managing Owner may deem fair and reasonable. The liquidating value of a futures,
forward or option contract not traded on a United States commodity exchange
shall mean its liquidating value as determined by the Managing Owner on a basis
consistently applied for each different variety of such contract.
The Managing Owner may only cause the Trust to invest in joint
ventures, entities or partnerships which conform to the foregoing valuation
principles.
Organizational and initial offering cost reimbursement shall not reduce
Net Asset Value for any purpose, including calculating the redemption value of
Units; however, the amount of organizational and initial offering costs
amortized at each month-end during the amortization period will reduce Net Asset
Value as of each such month-end.
Accrued Incentive Fee (as described in the Prospectus as defined in
Section 9(a)) payable to John W. Henry & Company, Inc., the Trust's trading
advisor ("JWH") (including the portion paid to JWH upon intra-calendar quarter
redemption of certain Units) shall reduce the Net Asset Value of the Trust.
6. NET WORTH OF MANAGING OWNER.
The Managing Owner agrees that at all times so long as it remains the
managing owner of the Trust, it will maintain a Net Worth at an amount not less
than 5% of the total contributions by all Unitholders to the Trust and all
entities of which the Managing Owner is general partner or managing owner. In no
event shall the Managing Owner be required to maintain a net worth in excess of
the greater of (i) $1,000,000 or (ii) the amount which the Managing Owner is
advised by counsel as necessary or advisable to ensure that the Trust is taxed
as a partnership for federal income tax purposes.
7. CAPITAL CONTRIBUTIONS; UNITS; MANAGING OWNER'S LIABILITY.
(a) CAPITAL CONTRIBUTIONS; UNITS. The beneficial interests in the Trust
shall consist of two types: a general liability interest and limited liability
Units. The Managing Owner shall acquire the general liability interest, and
investors shall all acquire limited liability Units.
Upon the initial contribution by the Managing Owner to the Trust, the
Managing Owner became the holder of the general liability interest of the Trust.
No certificates or other evidences of beneficial ownership of the Units
will be issued. The Unitholders' respective capital contributions to the Trust
shall be as shown on the books and records of the Trust.
Every Unitholder, by virtue of having purchased or otherwise acquired
Units, shall be deemed to have expressly consented and agreed to be bound by the
terms of this Declaration and Agreement of Trust.
Any Units acquired by the Managing Owner or any of its affiliates will
be non-voting, and will not be considered outstanding for purposes of
determining whether the majority approval of the outstanding Units has been
obtained.
The general liability interest in the Trust held by the Managing Owner
will be non-voting.
(b) MANAGING OWNER'S LIABILITY. The Managing Owner shall have unlimited
liability for the repayment, satisfaction and discharge of all debts,
liabilities and obligations of the Trust to the full extent, and only to the
extent, of the Managing Owner's assets.
The Managing Owner shall be liable for the acts, omissions, obligations
and expenses of the Trust, to the extent not paid out of the assets of the
Trust, to the same extent that the Managing Owner would be so liable if the
Trust were a partnership under the Delaware Revised Uniform Limited Partnership
Act and the Managing Owner were the general partner of such partnership. The
obligations of the Managing Owner under this paragraph shall be evidenced by its
ownership of the general liability interest.
The Managing Owner, so long as it is generally liable for the
obligations of the Trust, shall invest in the Trust, as a general liability
interest, no less than 1% of the total capital contributions to the Trust
(including the Managing Owner's contributions). The Managing Owner may (i)
withdraw any interest it may have in excess of such requirement as of any
month-end or (ii) redeem any Units which it may acquire, in each case on the
same terms as any Unitholder (although without early redemption charges).
8. ALLOCATION OF PROFITS AND LOSSES.
(a) CAPITAL ACCOUNTS AND ALLOCATIONS. A capital account shall be
established for each Unit and for the Managing Owner. The initial balance of
each capital account shall be the aggregate amount contributed to the
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Trust with respect to a Unit, which amount shall be equal to the Net Asset Value
per Unit on the date each Unit is purchased after all accrued fees, expenses and
Incentive Fee allocations (other than unamortized organizational and initial
offering costs). The Net Asset Value per Unit prior to the Trust commencing
operations has been arbitrarily established by the Managing Owner as $100 per
Unit.
As of the close of business (as determined by the Managing Owner) on
the last business day of each month, any increase or decrease in the Trust's Net
Assets as compared to the last such determination of Net Assets shall be
credited or charged equally to the Units of all Unitholders.
In making the month-end adjustments to the capital accounts described
in the preceding paragraph, capital accounts of all Units shall be adjusted to
reflect the Brokerage Fee at the Primary Brokerage Fee Rate, as defined in
Section 8(c). Each Unitholder eligible for a Special Brokerage Fee Rate pursuant
to Section 8(c) shall, to the extent Units are available for sale, be credited
with additional Units at the following month-end Net Asset Value per Unit in an
amount equal to the difference between the adjustment to the such Unitholder's
Units at the Primary Brokerage Fee Rate and the adjustment to the such
Unitholder's Units that would have been made under the applicable Special
Brokerage Fee Rate (the "Brokerage Fee Excess"). The foregoing allocation of
additional Units shall be used solely as a means of efficiently accounting for
the Special Brokerage Fee Rate while preserving a uniform Net Asset Value per
Unit. To the extent Units are not available to be purchased with the Brokerage
Fee Excess as of such date, the Brokerage Fee Excess shall be distributed to the
Unitholder no later than 15 days after such month-end.
(b) ALLOCATION OF PROFIT AND LOSS FOR FEDERAL INCOME TAX PURPOSES. As
of the end of each fiscal year, the Trust's income and expense and capital gain
or loss shall be allocated among the Unitholders (including the Managing Owner
on a Unit-equivalent basis) pursuant to the following provisions of this Section
8(b) for federal income tax purposes. Allocations of profit and loss shall be
PRO RATA from net capital gain or loss and net ordinary income or loss realized
by the Trust unless allocation of items of gain or income or loss or expense are
necessary to satisfy the requirements in Sections 8(b)(1)(B) and 8(b)(1)(D) that
sufficient profit and loss be allocated to tax accounts such that tax accounts
attributable to redeemed Units equal distributions in redemption of such Units.
Notwithstanding the foregoing requirement that annual allocations of profit and
loss be PRO RATA from capital and ordinary income, gain, loss and expense,
adjustments to such allocations shall be made to reflect the extent to which
income or expense is otherwise determined and periodically allocated to the
Unitholders, and such periodic allocations and adjustment shall be determined in
a manner that in the judgment of the Managing Owner is consistent with the
intent of this Section 8(b).
(1) Trust profit and loss shall be allocated as follows:
(A) For the purpose of allocating profit or loss among the Unitholders,
there shall be established a tax account with respect to each outstanding Unit
and with respect to the Managing Owner. The initial balance of each tax account
shall be the amount contributed to the Trust for each Unit and the amount
contributed by the Managing Owner. As of the end of each of the first sixty
months after the Trust begins operations, the balance of such tax account shall
be reduced by each Unit's allocable share of the amount of organizational and
initial offering cost reimbursements amortized as of the end of such month by
the Trust, as provided in Section 8(c). As of the end of each month after the
Trust begins operations, the balance of such tax account shall be further
reduced by each Unit's allocable share of any amount payable by the Trust in
respect of that month for the costs of the ongoing offering of Units. The
adjustment to reflect the amortization of organizational and initial offering
cost reimbursements as well as ongoing offering costs shall be made prior to the
following allocations of Trust profit and loss (and shall be taken into account
in making such allocations). Tax accounts shall be adjusted as of the end of
each fiscal year and as of the date a Unitholder redeems any Units as follows:
(i) Each tax account shall be increased by the amount of profit
allocated to the Unitholder pursuant to Section 8(b)(1)(B) and
8(b)(1)(C) below.
(ii) Each tax account shall be decreased by the amount of loss
allocated to the Unitholder pursuant to Section 8(b)(1)(D) and
8(b)(1)(E) below and by the amount of any distributions the Unitholder
has received with respect to such Unit.
(iii) When a Unit is redeemed, the tax account attributable to
such Unit (determined after making all allocations set forth in Section
8(b)) shall be eliminated.
(B) Profits shall be allocated first to each Unitholder who has
redeemed any Units during the fiscal year up to the excess, if any, of the
amount received upon redemption of the Units over the amount in the Unitholder's
tax account attributable to the redeemed Units.
(C) Profit remaining after the allocation thereof pursuant to Section
8(b)(1)(B) shall be allocated next
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among all Unitholders who hold Units outstanding at the end of the applicable
fiscal year whose capital accounts with respect to such Units are in excess of
their tax accounts in the ratio that each such Unitholder's excess bears to all
such Unitholders' excesses. Profit remaining after the allocation described in
the preceding sentence shall be allocated among all Unitholders in proportion to
their holdings of outstanding Units.
(D) Loss shall be allocated first to each Unitholder who has redeemed
any Units during the fiscal year up to the excess, if any, of the amount in such
Unitholder's tax account attributable to the redeemed Units over the amount
received upon redemption of the Units.
(E) Loss remaining after the allocation thereof pursuant to Section
8(b)(1)(D) shall be allocated next among all Unitholders who hold Units
outstanding at the end of the applicable fiscal year whose tax accounts with
respect to such Units are in excess of their capital accounts in the ratio that
each such Unitholder's excess bears to all such Unitholders' excesses. Loss
remaining after the allocation pursuant to the preceding sentence shall be
allocated among all Unitholders in proportion to their holding of outstanding
Units.
(2) In the event that a Unit has been assigned, the allocations
prescribed by this Section 8(b) shall be made with respect to such Unit without
regard to the assignment, except that in the year of assignment the allocations
prescribed by this Section 8(b) shall, to the extent permitted for federal
income tax purposes, be allocated between the assignor and assignee using the
interim closing of the books method.
(3) The allocation for federal income tax purposes of profit and loss,
as set forth herein, is intended to allocate taxable profit and loss among
Unitholders generally in the ratio and to the extent that net profit and net
loss are allocated to such Unitholders under Section 8(a) hereof so as to
eliminate, to the extent possible, any disparity between a Unitholder's capital
account and his tax account with respect to each Unit then outstanding,
consistent with the principles set forth in Section 704(c) of the Code.
(4) Notwithstanding anything herein to the contrary, in the event that
at the end of any Trust taxable year any Unitholder's capital account is
adjusted for, or such Unitholder is allocated, or there is distributed to such
Unitholder any item described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) in an amount not reasonably expected at the
end of such year, and such treatment creates a deficit balance in such
Unitholder's capital account, then such Unitholder shall be allocated all items
of income and gain of the Trust for such year and for all subsequent taxable
years of the Trust until such deficit balance has been eliminated. In the event
that any such unexpected adjustments, allocations or distributions create a
deficit balance in the capital accounts of more than one Unitholder in any Trust
taxable, all items of income and gain of the Trust for such taxable year and all
subsequent taxable years shall be allocated among all such Unitholders in
proportion to their respective deficit balances until such deficit balances have
been eliminated.
(5) The allocations of profit and loss to the Unitholders shall not
exceed the allocations permitted under Subchapter K of the Code, as determined
by the Managing Owner, whose determination shall be binding.
The Managing Owner may adjust the allocations set forth in this Section
8(b), in the Managing Owner's discretion, if the Managing Owner believes that
doing so will achieve more equitable allocations or allocations more consistent
with the Code.
(c) EXPENSES. The Managing Owner advanced all organizational and
initial offering costs incurred in connection with the initial public offering
of Units, for which the Managing Owner was reimbursed by the Trust on the
closing date of the initial public offering of Units (the "Initial Closing
Date") and such costs are being amortized over 60 months beginning with June
1997. At no month-end will the amount amortized by the Trust exceed 1/60 of 2%
of the month-end Net Assets of the Trust. The amount amortized each month-end
shall be the lesser of (i) the product of (x) one divided by the number of
months remaining in the amortization period times (y) the unamortized balance of
the capitalized organizational and initial offering costs, or (ii) 1/60 of 2% of
such month-end Net Assets at that month-end. The amount of such expenses
amortized each month shall be allocated on a PRO RATA basis to each Unit
outstanding at such month-end (determined prior to any redemptions). If (i) the
Trust is terminated prior to the end of such 60-month period, or (ii) the entire
amount of the organizational and initial offering costs reimbursed to the
Managing Owner is not amortized at the end of the 60-month period due to the 2%
limitation, the Managing Owner shall return to the Trust, without interest, an
amount equal to the unamortized balance of the capitalized organizational and
initial offering costs.
The Trust shall pay no later than the fifth day of each month to
Cargill Investor Services, Inc., the Trust's clearing broker ("CIS"), the
monthly Brokerage Fee at an annual rate of 6.5% (or approximately 0.542% per
month) of the Trust's assets (after deduction of the Management Fee payable to
the Trust's trading advisor) as of the immediately preceding month-end (the
"Brokerage Fee Rate"); provided that, with respect to the month-end assets of
the Trust attributable to Units held by any Unitholder holding as of such
month-end Units originally issued at an aggregate Net Asset Value of at least
$5,000,000, CIS
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shall be paid a Brokerage Fee at an annual rate equal to 5% (or a monthly rate
of approximately 0.417%) of the assets (after deduction of the Management Fee)
attributable to such Units ("Special Brokerage Fee Rate"), as described in the
Prospectus. In the event of Unitholders acquiring Units at more than one time,
their Units will be treated on a "first-in, first-out" basis, as described in
the Prospectus, for purposes of determining whether the Special Brokerage Fee
Rate is applicable.
Any goods and services provided to the Trust by the Managing Owner
shall be provided at rates and terms at least as favorable as those which may be
obtained from third parties in arm's-length negotiations. All of the expenses
which are for the Trust's account shall be billed directly to the Trust, as
appropriate. Appropriate reserves may be created, accrued and charged against
Net Assets for contingent liabilities, if any, as of the date any such
contingent liability becomes known to the Managing Owner.
The Trust shall bear the costs of the continuous offering of the Units
(other than selling commissions and ongoing compensation), as incurred; provided
that the Managing Owner shall absorb, without reimbursement from the Trust, all
such costs to the extent that such costs exceed 0.5% of the Trust's average
month-end Net Assets in any fiscal year. The amount of any such costs borne by
the Trust shall be allocated on a PRO RATA basis to each Unit outstanding at any
month-end (determined prior to any redemptions).
Net Assets, for purposes of calculating the 2% and 0.5% limitations on
organizational and initial offering cost amortization and continuous offering
costs set forth in this Section 8(c), shall be calculated in the same manner as
calculation of the redemption value of a Unit, I.E., net of all accrued fees and
expenses including any accrued Incentive Fee (but prior to redemption charges).
In no event shall organizational and offering expenses (including
redemption fees, but excluding selling commission and ongoing compensation)
exceed 15% of the capital contributions to the Trust.
The Managing Owner shall not allocate any of its internal expenses or
overhead to the account of the Trust.
(d) LIMITED LIABILITY OF UNITHOLDERS. Each Unit, when purchased in
accordance with this Declaration and Agreement of Trust, shall, except as
otherwise provided by law, be fully-paid and nonassessable. Any provisions of
this Declaration and Agreement of Trust to the contrary notwithstanding,
Unitholders (including the Managing Owner, except to the extent otherwise
provided herein) shall be entitled to the same limitation on personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware.
The Trust will indemnify, to the full extent permitted by law, each
Unitholder (other than the Managing Owner in the event that the Managing Owner
acquires Units) against any claims of liability asserted against such Unitholder
solely because such Unitholder is a beneficial owner of the Trust (other than in
respect of taxes due from such Unitholder as such a beneficial owner).
Every written note, bond, contract, instrument, certificate or
undertaking made or issued by the Managing Owner shall give notice to the effect
that the same was executed or made by or on behalf of the Trust and that the
obligations of any of the foregoing are not binding upon the Unitholders
individually but are binding only upon the assets and property of the Trust, and
that no resort shall be had to the Unitholders' personal property for the
satisfaction of any obligation or claim thereunder, and appropriate references
may be made to this Declaration and Agreement of Trust and may contain any
further recital which the Managing Owner deems appropriate, but the omission
thereof shall not operate to bind the Unitholders individually or otherwise
invalidate any such note, bond, contract, instrument, certificate or
undertaking.
(e) RETURN OF CAPITAL CONTRIBUTIONS. No 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.
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The Managing Owner may, in furtherance of the business of the Trust,
cause the Trust to buy, sell, hold or otherwise acquire or dispose of
commodities, futures contracts, options on futures contracts, and spot and
forward contracts traded on exchanges or otherwise, arbitrage positions,
repurchase agreements, interest-bearing securities, deposit accounts and similar
instruments and other assets, and cause the trading of the Trust to be limited
to only certain of the foregoing instruments. The Managing Owner is specifically
authorized to enter into brokerage, custodial and margining arrangements as
described in the prospectus relating to the public offering of the Units, as it
may be supplemented or updated from time to time (the "Prospectus"). The
Managing Owner may engage, and compensate on behalf of the Trust from funds of
the Trust, or agree to share profits and losses with, such persons, firms or
corporations, including (except as described in this Declaration and Agreement
of Trust) the Managing Owner and any affiliated person or entity, as the
Managing Owner in its sole judgment shall deem advisable for the conduct and
operation of the business of the Trust; provided, that no such arrangement shall
allow brokerage commissions paid by the Trust in excess of such amount as
permitted under the North American Securities Administrators Association, Inc.
Guidelines for the Registration of Commodity Pool Programs (the "NASAA
Guidelines") in effect as of the date of the Prospectus (I.E., 14% 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.
During any fiscal year of the Trust, if the Management Fee exceeds the
6% annual management fee contemplated by the NASAA Guidelines, the Managing
Owner shall reimburse the Trust for such excess.
The Managing Owner may take such other actions on behalf of the Trust
as the Managing Owner deems necessary or desirable to manage the business of the
Trust.
Any material change in the Trust's basic investment policies or
structure shall require the approval of Unitholders owning more than 50% of the
Units then outstanding. In addition, the Managing Owner shall notify Unitholders
of any material changes relating to the Trust as provided in Section 10 hereof.
The Managing Owner is hereby authorized to perform all duties imposed
by Sections 6221 through 6232 of the Code on the Managing Owner as the "tax
matters partner" of the Trust.
All Unitholders, by subscribing to the Units, will be deemed to have
consented to the Managing Owner's selection of: (i) John W. Henry & Company,
Inc. as the Trust's trading advisor; (ii) Cargill Investor Services, Inc. as the
Trust's clearing broker, with whom the Trust's trading assets will be maintained
(it being understood that CIS may place certain Trust assets with a
sub-custodian depository bank and employ the services of a third-party cash
manager solely for purposes of cash management and further that the Managing
Owner may place certain Trust assets in one or more bank accounts in the name of
the Trust and engage a third-party cash manager to manage such assets with the
goal of enhancing the net return on such assets), (iii) CIS Financial Services,
Inc. as the Trust's foreign currency and precious metals counterparty ("CISFS")
and (iv) Cargill Investor Services, Inc. as the Trust's transfer agent. The
Managing Owner is hereby specifically authorized to enter into, on behalf of the
Trust, the Trading Advisory Agreement, the Customer Agreement, the Foreign
Exchange Account Agreement, the Cash Bullion Account Agreement, the Escrow
Agreement, the Selling Agreement and the Transfer Agent Agreement referred to in
the Prospectus.
(b) FIDUCIARY DUTIES. The Managing Owner shall be under a fiduciary
duty to conduct the affairs of the Trust in the best interests of the Trust,
provided that the Managing Owner shall not be obligated to engage in any conduct
on behalf of the Trust to the detriment of any other commodity pool to which the
Managing Owner owes similar fiduciary duties. Except as otherwise provided
herein or disclosed in the Prospectus, the Unitholders will under no
circumstances be deemed to have contracted away the fiduciary obligations owed
them by the Managing Owner under the common law. The Managing Owner's fiduciary
duty includes, among other things, the safekeeping of all funds and assets of
the Trust and the use thereof for the benefit of the Trust. The funds of the
Trust will not be commingled with the funds of any other person or entity
(deposit of funds with a commodity or securities broker, clearinghouse or
forward dealer shall not be deemed to constitute "commingling" for these
purposes). The Managing Owner will take no actions with respect to the property
of the Trust which do not benefit the Trust. The Managing Owner shall at all
times act with integrity and good faith and exercise due diligence in all
activities relating to the conduct of the business of the Trust and in resolving
conflicts of interest.
(c) LOANS; INVESTMENTS. Except as otherwise provided in Section 8(c),
the Trust shall not make loans to any party. The Managing Owner shall make no
loans to the Trust unless approved by the Unitholders in accordance with Section
19(a). If the Managing Owner makes a loan to the Trust, the Managing Owner shall
not receive interest in excess of its interest costs, nor may the Managing Owner
receive interest in excess of the amounts
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which would be charged to the Trust (without reference to the Managing Owner's
financial resources or guarantees) by unrelated banks on comparable loans for
the same purpose. The Managing Owner shall not receive "points" or other
financing charges or fees regardless of the amount. The Trust shall not invest
in any debt instruments other than Government Securities and other Commodity
Futures Trading Commission ("CFTC")-authorized investments, or invest in any
equity security without prior notice to Unitholders.
(d) CERTAIN CONFLICTS OF INTEREST PROHIBITED. No person or entity may
receive, directly or indirectly, any advisory or management fees, profit shares
or any profit-sharing allocation, from joint ventures, partnerships or similar
arrangements in which the Trust participates, for investment advice or
management who shares or participates in any commodity brokerage commissions
paid by the Trust; no broker may pay, directly or indirectly, rebates or
give-ups to any trading advisor, manager or joint venturer, or to the Managing
Owner or any of its affiliates; and such prohibitions may not be circumvented by
any reciprocal business arrangements. No trading advisor shall be affiliated
with the Trust's commodity broker or any of its affiliates.
(e) CERTAIN AGREEMENTS. Any agreements between the Trust and the
Managing Owner or any affiliate of the Managing Owner, or a trading advisor,
shall be terminable by the Trust, without penalty, on no more than 60 days'
written notice.
In addition to any specific contract or agreements described herein,
the Trust and the Managing Owner on behalf of the Trust may enter into any other
contracts or agreements specifically described in or contemplated by the
Prospectus without any further act, approval or vote of the Unitholders,
notwithstanding any other provisions of this Declaration and Agreement of Trust,
the Act or any applicable laws, rules or regulations; provided, however, any
material change in the Trust's basic investment policies or structure shall
require the approval of Unitholders owning more than 50% of the Units then
outstanding and the Managing Owner shall notify Unitholders of any material
changes relating to the Trust as provided in Section 10 hereof.
The Managing Owner shall not enter into any advisory agreement with any
trading advisor that does not satisfy the relevant experience requirements under
the NASAA Guidelines (I.E., a minimum of three years' experience in the managed
futures industry).
The maximum period covered by any contract entered into by the Trust,
except for the various provisions of the Selling Agreement which survive the
final closing of the sale of the Units, shall not exceed one year.
The Managing Owner is hereby specifically authorized (i) to enter into,
deliver and perform on behalf of the Trust the Trading Advisory Agreement,
Selling Agreement on the terms described in the Prospectus, (ii) to enter into,
deliver and perform on behalf of the Trust, as the case may be, the Escrow
Agreement, the Customer Agreement, the Foreign Exchange Account Agreement, the
Cash Bullion Account Agreement and the Transfer Agent Agreement as referred to
in the Prospectus, (iii) to consent, at its sole discretion, to the selection
and appointment by CIS, in its capacity as the Trust Lead Selling Agent, of one
or more Wholesalers, Additional Selling Agents and Correspondents as described
in the Prospectus and in accordance with the terms of the Selling Agreement and
(iv) in the event that the Managing Owner determines to deposit Trust assets in
one or more bank accounts in the name of the Trust at a bank ("Custodian") and
engage the services of a third-party cash manager to manage such assets, to
enter into and deliver an appropriate cash management agreement and any related
agreement.
The brokerage commissions paid by the Trust shall be competitive. The
Trust shall seek the best price and services available for its commodity
transactions.
Initially all of the Trust's assets will be deposited in the Trust's
account with CIS and CISFS. CIS and CISFS will credit the Trust on the fifth
business day of each month with interest income on 100% of the Trust's average
daily assets on deposit with CIS and CISFS, respectively, during the previous
month at the average 91-day U.S. Treasury bill rate for that month in respect of
deposits denominated in dollars and at applicable rates described in the
Prospectus in respect of deposits denominated in currencies other than dollars
(which may be zero in certain cases). The Trust and the Managing Owner reserve
the right to deposit, at any time, a portion of Trust assets with a Custodian
and engage the services of a third-party cash manager to manage such assets with
the goal of enhancing net return on such assets.
(f) PROHIBITION ON "PYRAMIDING." The Trust is prohibited from employing
the trading technique commonly known as "pyramiding." A trading manager or
advisor of the Trust taking into account the Trust's open-trade equity on
existing positions in determining generally whether to acquire additional
commodity positions on behalf of the Trust will not be considered to be engaging
in "pyramiding."
(g) FREEDOM OF ACTION. The Managing Owner is engaged, and may in the
future engage, in other business activities and shall not be required to refrain
from any other activity nor forgo any profits from any such activity, whether or
not in competition with the Trust. Neither the Trust nor any of the Unitholders
shall have any rights by
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virtue of this Declaration and Agreement of Trust in and to such independent
ventures or the income or profits derived therefrom. Unitholders may similarly
engage in any such other business activities. The Managing Owner shall devote to
the Trust such time as the Managing Owner may deem advisable to conduct the
Trust's business and affairs.
10. AUDITS AND REPORTS TO UNITHOLDERS.
The Trust's books shall be audited annually by an independent certified
public accountant. The Trust shall cause each Unitholder to receive (i) within
90 days after the close of each fiscal year certified financial statements for
the fiscal year then ended, (ii) within 90 days of the end of each fiscal year
(but in no event later than March 15 of each year) such tax information as is
necessary for a Unitholder to complete its federal income tax return and (iii)
such other annual and monthly information as the CFTC may by regulation require.
The Managing Owner shall include in the annual reports sent to Unitholders an
approximate estimate (calculated as accurately as may be reasonably practicable)
of the round-turn equivalent brokerage commission rate paid by the Trust during
the preceding year (including forward contracts on a futures-equivalent basis
for purposes of such calculation).
Unitholders or their duly authorized representatives may inspect the
books and records of the Trust, (which do not include records of the Trust's
trades) during normal business hours upon reasonable written notice to the
Managing Owner and obtain copies of such records upon payment of reasonable
reproduction costs; provided, however, that upon request by the Managing Owner,
the requesting Unitholder shall represent that the inspection and/or copies of
such records will not be used for commercial purposes unrelated to such
Unitholder's interest as a beneficial owner of the Trust. The Managing Owner
shall have the right to keep confidential from the Unitholders, for such period
of time as the Managing Owner deems reasonable, any information that the
Managing Owner reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the Managing Owner in good faith believes is
not in the best interest of the Trust or could damage the Trust or its business
or which the Trust is required by law or by agreement with a third party to keep
confidential.
The Managing Owner shall calculate the Net Asset Value per Unit on a
monthly basis and sell and redeem Units at Net Asset Value.
The Managing Owner shall notify the Unitholders of (i) changes to the
trading method of the Trust's trading advisor which the Managing Owner believes
to be material, (ii) changes in Brokerage Fees, Incentive Fee or other fees paid
by the Trust or (iii) material changes in the basic investment policies or
structure of the Trust. The Managing Owner shall so notify Unitholders, by
certified mail or other means of notification providing for evidence of
delivery, prior to any such change. Such notification shall set forth the
Unitholders' voting and redemption rights. The Managing Owner will send written
notice to each Unitholder within seven days of any decline in the Net Asset
Value per Unit to 50% or less of such value as of the previous month-end. Any
such notice shall contain a description of the Unitholders' voting and
redemption rights. The Trust shall pay the cost of any notification delivered
pursuant to this paragraph.
The Managing Owner shall prepare or cause to be prepared and shall file
on or before the due date (or any extension thereof) any federal, state or local
tax returns required to be filed by the Trust. The Managing Owner shall cause
the Trust to pay any taxes payable by the Trust; provided, however, that such
taxes need not be paid if the Managing Owner or the Trust is in good faith and
by appropriate legal proceedings contesting the validity, applicability or
amount thereof, and such contest does not materially endanger any right or
interest of the Trust.
The Managing Owner shall maintain and preserve all required records
relating to the Trust for a period of not less than six years from the receipt
of such records.
In particular, and not by way of limitation, the Managing Owner will
retain all Subscription Agreement and Power of Attorney Signature Pages
submitted by persons admitted as Unitholders, and all other records necessary to
substantiate that Units are sold only to purchasers for whom the Units are a
suitable investment, for at least six years after Units are sold to such
persons.
The Managing Owner shall seek the best price and services for the
Trust's trading, and will, with the assistance of the Trust's commodity
broker(s), make an annual review of the commodity brokerage arrangements
applicable to the Trust. In connection with such review, the Managing Owner will
ascertain, to the extent practicable, the commodity brokerage rates charged to
other major commodity pools whose trading and operations are, in the opinion of
the Managing Owner, comparable to those of the Trust, in order to assess whether
the rates charged the Trust are reasonable in light of the services it receives
and the terms upon which the Trust was promoted to subscribers. If, as a result
of such review, the Managing Owner determines that such rates are unreasonable
in light of the services provided to the Trust and the terms upon which the
Trust was promoted, the Managing Owner will notify the Unitholders, setting
forth the rates charged to the Trust and several funds which are, in the
Managing Owner's opinion, comparable to the Trust. The Managing Owner shall also
make an annual review of the spot and forward trading arrangements for the Trust
in an attempt to determine
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whether such arrangements are competitive with those of other comparable pools
in light of the circumstances.
11. ASSIGNABILITY OF UNITS.
Each Unitholder expressly agrees that it will not assign, transfer or
dispose of, by gift or otherwise, any of its Units or any part or all of its
right, title and interest in the capital or profits of the Trust in violation of
any applicable federal or state securities laws or, except by involuntary
operation of law, without giving written notice to the Managing Owner. No
assignment, transfer or disposition by an assignee of Units or of any part of
its right, title and interest in the capital or profits of the Trust shall be
effective against the Trust, the Trustee or the Managing Owner until the
Managing Owner has received the written notice of the assignment; the Managing
Owner shall not be required to give any assignee any rights hereunder prior to
receipt of such notice. The Managing Owner may, in its sole discretion, waive
any such notice. No such assignee, except with the consent of the Managing
Owner, may become a substituted Unitholder, nor will the estate or any
beneficiary of a deceased Unitholder or assignee have any right to redeem Units
from the Trust except by redemption as provided in Section 12 hereof. The
Managing Owner's consent is required for the admission of a substituted
Unitholder, and the Managing Owner intends to so consent; provided, that the
Managing Owner and the Trust receive an opinion of counsel to the Managing Owner
and of counsel to the Trust that such admission will not adversely affect the
classification of the Trust as a partnership for federal income tax purposes;
and provided further, that an assignee shall not become a substituted Unitholder
without first having executed an instrument reasonably satisfactory to the
Managing Owner accepting and adopting the terms and provisions of this
Declaration and Agreement of Trust, including a Subscription Agreement and Power
of Attorney Signature Page, a counterpart signature page to this Declaration and
Agreement of Trust or other comparable document, and without having paid to the
Trust a fee sufficient to cover all reasonable expenses of the Trust in
connection with its admission as a substituted Unitholder. Each Unitholder
agrees that with the consent of the Managing Owner any assignee may become a
substituted Unitholder without need of the further act or approval of any
Unitholder. If the Managing Owner withholds consent, an assignee shall not
become a substituted Unitholder, and shall not have any of the rights of a
Unitholder, except that the assignee shall be entitled to receive that share of
capital and profits and shall have that right of redemption to which its
assignor would otherwise have been entitled. No assignment, transfer or
disposition of Units shall be effective against the Trust or the Managing Owner
until the last day of the month in which the Managing Owner receives notice of
such assignment, transfer or disposition.
12. REDEMPTIONS.
A Unitholder (including the Managing Owner except to the extent that
its power to redeem is limited by any other provision of this Declaration and
Agreement of Trust) to the extent that it owns Units or any assignee of Units of
whom the Managing Owner has received written notice as described above, may
redeem all or part of its Units, effective as of the close of business (as
determined by the Managing Owner) on the last day of any month, provided, that
(i) all liabilities, contingent or otherwise, of the Trust, except any liability
to Unitholders on account of their capital contributions, have been paid or
there remains property of the Trust sufficient to pay them, (ii) the Unitholder
redeems at least $1,000 of Units, (iii) in the case of partial redemption, such
Unitholder's investment in the Trust after the partial redemption will be at
least $1,000, and (iv) the Managing Owner shall have timely received a request
for redemption (as provided below). If Units are redeemed by a Unitholder at a
time when there is an accrued incentive fee due to the Trust's trading advisor,
the amount of such accrual attributable to the Units being redeemed will be
deducted from the redemption proceeds payable to the redeeming Unitholder and
paid to the Trust's trading advisor. Units redeemed on or before the end of the
eleventh full calendar month after such Units are issued by the Trust are
subject to early redemption charges of 3% of the Net Asset Value at which they
are redeemed. Such charges will be deducted from redemption proceeds due to the
Unitholder making the redemption and will be paid to CIS. Units are issued, for
purposes of determining whether an early redemption charge is due, as of the
date as of which the subscription price of such Units is invested in the Trust,
not when subscriptions are submitted by Unitholders or accepted by the Managing
Owner or subscription funds are accepted into escrow. No redemption charges
shall be applicable to Unitholders who redeem because the Trust's expenses have
been increased.
In the event that a Unitholder acquires Units as of the end of more
than one month, such Units will be treated on a "first-in, first-out" basis for
purposes of identifying which of such Units are being redeemed so as to
determine whether early redemption charges apply.
Requests for redemption as of any month-end must be received by the
Managing Owner on or before the fifth business day prior to the month-end of
redemption (including the last business day of the month), or such later date as
shall be acceptable to the Managing Owner.
If as of the close of business (as determined by the Managing Owner) on
any day, the Net Asset Value of a Unit has decreased to less than 50% of the Net
Asset Value per Unit as of the previous highest month-end Net Asset Value per
Unit or to $50 or less, after adding back
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all distributions, the Managing Owner shall cause the Trust to liquidate all
open positions as expeditiously as possible and suspend trading. Within ten
business days after the suspension of trading, the Managing Owner shall declare
a Special Redemption Date. Such Special Redemption Date shall be a business day
within 30 business days from the suspension of trading by the Trust, and the
Managing Owner shall mail notice of such date to each Unitholder and assignee of
Units of whom it has received written notice as described above, by first-class
mail, postage prepaid, not later than ten business days prior to such Special
Redemption Date, together with instructions as to the procedure such Unitholder
or assignee must follow to have its Units redeemed on such Date (only entire,
not partial, interests in the Trust may be redeemed on a Special Redemption
Date, unless otherwise determined by the Managing Owner). Upon redemption
pursuant to a Special Redemption Date, a Unitholder or any other assignee of
whom the Managing Owner has received written notice as described above, shall
receive from the Trust an amount equal to the Net Asset Value of its Units,
determined as of the close of business (as determined by the Managing Owner) on
such Special Redemption Date. No redemption charges shall be assessed on any
such Special Redemption Date. As in the case of a regular redemption, an
assignee shall not be entitled to redemption until the Managing Owner has
received written notice as described above of the assignment, transfer or
disposition under which the assignee claims an interest in the Units to be
redeemed. If, after a Special Redemption Date, the Net Assets of the Trust are
at least $1,000,000 and the Net Asset Value per Unit is in excess of $25, the
Trust may, in the discretion of the Managing Owner, resume trading.
The Managing Owner may at any time and in its discretion declare a
Special Redemption Date, should the Managing Owner determine that it is in the
best interests of the Trust to do so. If the Managing Owner declares a Special
Redemption Date, the Managing Owner shall not be required to again call a
Special Redemption Date (whether or not a Special Redemption Date would
otherwise be required to be called as described above); and the Managing Owner
in its notice of a Special Redemption Date may, at its discretion, establish the
conditions, if any, under which other Special Redemption Dates must be called,
which conditions may be determined in the sole discretion of the Managing Owner,
irrespective of the provisions of the preceding paragraph. The Managing Owner
may also, in its discretion, declare additional regular redemption dates for
Units, permit certain Unitholders to redeem at other than at month-end and waive
the notice period otherwise required to effect redemptions.
Redemption payments will be made within ten business days after the
month-end of redemption, except that under special circumstances, including, but
not limited to, inability to liquidate commodity positions as of a redemption
date or default or delay in payments due the Trust from commodity brokers, banks
or other persons or entities, the Trust may in turn delay payment to Unitholders
or assignees requesting redemption of their Units of the proportionate part of
the Net Asset Value of such Units equal to the proportionate part of the Trust's
aggregate Net Asset Value represented by the sums which are the subject of such
default or delay.
The Managing Owner may require a Unitholder to redeem all or a portion
of such Unitholder's Units if the Managing Owner considers doing so to be
desirable for the protection of the Trust, and will use best efforts to do so to
the extent necessary to prevent the Trust from being deemed to hold "plan
assets" under the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA") or the Code, with respect to any "employee benefit plan" subject
to ERISA or with respect to any "plan" or "account" subject to Section 4975 of
the Code.
13. OFFERING OF UNITS.
The Managing Owner, on behalf of the Trust shall (i) cause to be filed
a Registration Statement or Registration Statements, and such amendments thereto
as the Managing Owner may deem advisable or necessary, with the Securities and
Exchange Commission for the registration and continuous public offering of the
Units, (ii) use its best efforts to qualify the Units for sale under the
securities laws of such States of the United States or other jurisdictions as
the Managing Owner may deem advisable and (iii) take such action with respect to
the matters described in (i) and (ii) as the Managing Owner may deem advisable
or necessary.
Fractional Units, calculated to five decimal places, may be sold.
All sales of Units in the United States will be conducted by registered
brokers.
The Managing Owner shall not accept any subscriptions for Units if
doing so would cause the Trust to hold "plan assets" under ERISA or the Code
with respect to any "employee benefit plan" subject to ERISA or with respect to
any "plan" or "account " subject to Section 4975 of the Code. If a subscriber
has its subscription reduced for such reason, such subscriber shall be entitled
to rescind its subscription in its entirety even though subscriptions are
otherwise irrevocable.
All subscriptions will be held in escrow by The First National Bank of
Chicago (the "Escrow Agent") until released as of the last business day of the
month. The interest actually earned on subscriptions funds while held by the
Escrow Agent will be invested in the Trust, and
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each subscriber will be issued additional Units reflecting the subscriber's
attributable share of such interest. The Managing Owner may terminate any
offering of Units at any time. The aggregate of all capital contributions shall
be available to the Trust to carry on its business, and no interest shall be
paid by the Trust on any such contributions after such contributions are
released by the Escrow Agent.
14. ADDITIONAL OFFERINGS.
The Managing Owner may, in its discretion, continue, suspend or
discontinue the public offering of the Units, as well as make additional public
or private offerings of Units, provided that the net proceeds to the Trust of
any such sales shall in no event be less than the Net Asset Value per Unit (as
defined in Section 5(d)) at the time of sale (unless the new Unit's
participation in the profits and losses of the Trust is appropriately adjusted).
No Unitholder shall have any preemptive, preferential or other rights with
respect to the issuance or sale of any additional Units, other than as set forth
in the preceding sentence.
15. SPECIAL POWER OF ATTORNEY.
Each Unitholder by virtue of having purchased or otherwise acquired
Units does hereby irrevocably constitute and appoint the Managing Owner and each
officer of the Managing Owner, with full power of substitution, as its true and
lawful attorney-in-fact, in its name, place and stead, to execute, acknowledge,
swear to (and deliver as may be appropriate) on its behalf and file and record
in the appropriate public offices and publish (as may in the reasonable judgment
of the Managing Owner be required by law): (i) this Declaration and Agreement of
Trust, including any amendments and/or restatements hereto duly adopted as
provided herein; (ii) certificates in various jurisdictions, and amendments
and/or restatements thereto; (iii) all conveyances and other instruments which
the Managing Owner deems appropriate to qualify or continue the Trust in the
State of Delaware and the jurisdictions in which the Trust may conduct business,
or which may be required to be filed by the Trust or the Unitholders under the
laws of any jurisdiction or under any amendments or successor statutes to the
Act, to reflect the dissolution or termination of the Trust or the Trust being
governed by any amendments or successor statutes to the Act or to reorganize or
refile the Trust in a different jurisdiction; and (iv) to file, prosecute,
defend, settle or compromise litigation, claims or arbitrations on behalf of the
Trust. The Power of Attorney granted herein shall be irrevocable and deemed to
be a power coupled with an interest (including, without limitation, the interest
of the other Unitholders in the Managing Owner being able to rely on its
authority to act as contemplated by this Section 15) and shall survive and shall
not be affected by the subsequent incapacity, disability or death of a
Unitholder.
16. WITHDRAWAL OF A UNITHOLDER.
The Trust shall be dissolved upon the death, insanity, bankruptcy,
retirement, resignation, expulsion, withdrawal, insolvency or dissolution of the
Managing Owner, or any other event that causes the Managing Owner to cease to be
the managing owner of the Trust, unless the Trust is continued pursuant to the
terms of Section 5(a)(3). In addition, the Managing Owner may withdraw from the
Trust, without any breach of this Declaration and Agreement of Trust, at any
time upon 120 days' written notice by first class mail, postage prepaid, to the
Trustee, each Unitholder and each assignee of whom the Managing Owner has
notice. If the Managing Owner withdraws from the Trust and all Unitholders agree
in writing to continue the business of the Trust and to the appointment,
effective as of the date of withdrawal of the Managing Owner, of one or more
managing owners, the Managing Owner shall pay all expenses incurred as a result
of its withdrawal. Upon removal or withdrawal, the Managing Owner shall be
entitled to redeem its interest in the Trust at its Net Asset Value on the next
valuation date following the date of removal or withdrawal.
The Managing Owner may not assign its general liability interest or its
obligation to manage the Trust without the consent of each Unitholder; provided,
however, that the consent of Unitholders is not required if the Managing Owner
assigns its general liability interest and its obligation to manage the Trust to
an entity controlling, controlled by or under common control with the Managing
Owner, provided that such entity (i) expressly assumes all obligations of the
Managing Owner under this Declaration and Agreement of Trust and (ii) is
entitled to act in the capacity of managing owner for the benefit of the Trust.
The Managing Owner shall notify all Unitholders of such assignment. The Managing
Owner will notify all Unitholders of any change in the principals of the
Managing Owner.
The death, incompetency, withdrawal, insolvency or dissolution of a
Unitholder or any other event that causes a Unitholder to cease to be a
beneficial owner (within the meaning of the Act) in the Trust shall not
terminate or dissolve the Trust, and a Unitholder, the Unitholder's estate,
custodian or personal representative shall have no right to redeem or value such
Unitholder's interest except as provided in Section 12 hereof. Each Unitholder
that is a natural person expressly agrees that in the event of his or her death,
he or she waives on behalf of himself or herself and his or her estate, and
directs the legal representatives of his or her estate and any person interested
therein to waive, the furnishing of any inventory, accounting or appraisal of
the assets of the Trust
A-14
<PAGE>
and any right to an audit or examination of the books of the Trust. Nothing in
this Section 16 shall, however, waive any right given elsewhere in this
Declaration and Agreement of Trust for Unitholders to be informed of the Net
Asset Value of their Units, to receive periodic reports, audited financial
statements and other information from the Managing Owner or the Trust or to
redeem or transfer Units.
17. BENEFIT PLAN INVESTORS.
Each Unitholder or assignee that is an "employee benefit plan" as
defined in and subject to ERISA, or a "plan" as defined in Section 4975 of the
Code (each such employee benefit plan and plan, a "Plan"), and each fiduciary
thereof who has caused the Plan to become a Unitholder or assignee (a "Plan
Fiduciary"), represents and warrants that: (a) the Plan Fiduciary has considered
an investment in the Trust by such Plan in light of the risks relating thereto;
(b) the Plan Fiduciary has determined that, in view of such considerations, the
investment in the Trust by the Plan is consistent with the Plan Fiduciary's
responsibilities under ERISA; (c) the investment in the Trust by the Plan does
not violate, and is not otherwise inconsistent with, the terms of any legal
document constituting the Plan or any trust agreement thereunder; (d) the Plan's
investment in the Trust has been duly authorized and approved by all necessary
parties; (e) none of the Managing Owner, the Trustee, JWH, CIS, CISFS, any
Selling Agent, Wholesaler, Correspondent, the Escrow Agent, any of their
respective affiliates or any of their respective agents or employees: (i) has
investment discretion with respect to the investment of assets of the Plan used
to purchase Units; (ii) has authority or responsibility to or regularly gives
investment advice with respect to the assets of the Plan used to purchase Units
for a fee and pursuant to an agreement or understanding that such advice will
serve as a primary basis for investment decisions with respect to the Plan and
that such advice will be based on the particular investment needs of the Plan;
or (iii) is an employer maintaining or contributing to the Plan; and (f) the
Plan Fiduciary: (i) is authorized to make, and is responsible for, the decision
of the Plan to invest in the Trust, including the determination that such
investment is consistent with the requirement imposed by Section 404 of ERISA
that Plan investments be diversified so as to minimize the risks of large
losses; (ii) is independent of the Managing Owner, the Trustee, JWH, CIS, CISFS,
any Selling Agent, Wholesaler, Correspondent, the Escrow Agent, and any of their
respective affiliates; and (iii) is qualified to make such investment decision.
18. STANDARD OF LIABILITY; INDEMNIFICATION.
(a) STANDARD OF LIABILITY FOR THE MANAGING OWNER. The Managing Owner
and its Affiliates, as defined below, shall have no liability to the Trust or to
any Unitholder for any loss suffered by the Trust which arises out of any action
or inaction of the Managing Owner or its Affiliates, if the Managing Owner, in
good faith, determined that such course of conduct was in the best interests of
the Trust, and such course of conduct did not constitute negligence or
misconduct of the Managing Owner or its Affiliates.
(b) INDEMNIFICATION OF THE MANAGING OWNER BY THE TRUST. To the fullest
extent permitted by law, subject to this Section 18, the Managing Owner and its
Affiliates shall be indemnified by the Trust against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims sustained by
them in connection with the Trust; provided that such claims were not the result
of negligence or misconduct on the part of the Managing Owner or its Affiliates,
and the Managing Owner, in good faith, determined that such conduct was in the
best interests of the Trust; and provided further that Affiliates of the
Managing Owner shall be entitled to indemnification only for losses incurred by
such Affiliates in performing the duties of the Managing Owner and acting wholly
within the scope of the authority of the Managing Owner.
Notwithstanding anything to the contrary contained in the preceding two
paragraphs, the Managing Owner and its Affiliates and any persons acting as
selling agent for the Units shall not be indemnified for any losses, liabilities
or expenses arising from or out of an alleged violation of federal or state
securities laws unless (1) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee and the court approves indemnification of the litigation
costs, or (2) such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee and the court
approves indemnification of the litigation costs, or (3) a court of competent
jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that indemnification of the settlement and related costs should be
made.
In any claim for indemnification for federal or state securities law
violations, the party seeking indemnification shall place before the court the
position of the Securities and Exchange Commission, the California Department of
Corporations, the Massachusetts Securities Division, the Missouri Securities
Division, the Pennsylvania Securities Commission, the Tennessee Securities
Division, the Texas Securities Board and any other state or applicable
regulatory authority with respect to the issue of indemnification for securities
law violations.
The Trust shall not bear the cost of that portion of any insurance
which insures any party against any liability the indemnification of which is
herein prohibited.
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<PAGE>
For the purposes of this Section 18, the term "Affiliates" shall mean
any person acting on behalf of or performing services on behalf of the Trust
who: (1) directly or indirectly controls, is controlled by, or is under common
control with the Managing Owner; or (2) owns or controls 10% or more of the
outstanding voting securities of the Managing Owner; or (3) is an officer or
director of the Managing Owner; or (4) if the Managing Owner is an officer,
director, partner or trustee, is any entity for which the Managing Owner acts in
any such capacity.
Advances from the funds of the Trust to the Managing Owner or its
Affiliates for legal expenses and other costs incurred as a result of any legal
action initiated against the Managing Owner by a Unitholder are prohibited.
Advances from the funds of the Trust to the Managing Owner or its
Affiliates for legal expenses and other costs incurred as a result of a legal
action will be made only if the following three conditions are satisfied:
(1) the legal action relates to the performance of duties or services by the
Managing Owner or its Affiliates on behalf of the Trust; (2) the legal action is
initiated by a third party who is not a Unitholder; and (3) the Managing Owner
or its Affiliates undertake to repay the advanced funds, with interest from the
initial date of such advance, to the Trust in cases in which they would not be
entitled to indemnification under the standard of liability set forth in
Section 18(a).
In no event shall any indemnity or exculpation provided for herein be
more favorable to the Managing Owner or any Affiliate than that contemplated by
the NASAA Guidelines as in effect on the date of this Declaration and Agreement
of Trust.
In no event shall any indemnification permitted by this subsection (b)
of Section 18 be made by the Trust unless all provisions of this Section for the
payment of indemnification have been complied with in all respects. Furthermore,
it shall be a precondition of any such indemnification that the Trust receive a
determination of qualified independent legal counsel in a written opinion that
the party which seeks to be indemnified hereunder has met the applicable
standard of conduct set forth herein. Receipt of any such opinion shall not,
however, in itself, entitle any such party to indemnification unless
indemnification is otherwise proper hereunder. Any indemnification payable by
the Trust hereunder shall be made only as provided in the specific case.
In no event shall any indemnification obligations of the Trust under
this subsection (b) of Section 18 subject a Unitholder to any liability in
excess of the capital contributed by such Unitholder, his or her share of
undistributed profits and assets and the amount of any distributions wrongfully
distributed to such Unitholder.
(c) INDEMNIFICATION BY THE UNITHOLDERS. In the event that the Trust is
made a party to any claim, dispute or litigation or otherwise incurs any loss or
expense as a result of or in connection with any activities of a Unitholder,
obligations or liabilities unrelated to the business of the Trust or as a result
of or in connection with a transfer, assignment or other disposition or an
attempted transfer, assignment or other disposition by a Unitholder or an
assignee of its Units or of any part of its right, title and interest in the
capital or profits of the Trust in violation of this Declaration and Agreement
of Trust, such Unitholder shall indemnify and reimburse the Trust for all loss
and expense incurred, including reasonable attorneys' fees.
The Managing Owner shall indemnify and hold the Trust harmless from all
loss or expense which the Trust may incur (including, without limitation, any
indemnify payments) as a result of the difference between the standard of
liability and indemnity under the Trading Advisory Agreement, the Customer
Agreement, the Foreign Exchange Account Agreement or the Cash Bullion Account
Agreement, on the one hand, and the Managing Owner's standards of liability as
set forth herein, on the other hand.
19. AMENDMENTS; MEETINGS.
(a) AMENDMENTS WITH CONSENT OF THE MANAGING OWNER. If at any time
during the term of the Trust the Managing Owner shall deem it necessary or
desirable to amend this Declaration and Agreement of Trust, the Managing Owner
may proceed to do so, provided that such amendment shall be effective only if
embodied in an instrument approved by the Managing Owner and, pursuant to a vote
called by the Managing Owner, by the holders of Units representing a majority of
the outstanding Units. Such vote shall be taken at least 30 but not more than 60
days after delivery by the Managing Owner to each Unitholder of record by
certified mail of notice of the proposed amendment and voting procedures.
Notwithstanding the foregoing, the Managing Owner may amend this Declaration and
Agreement of Trust without the consent of the Unitholders in order (i) to
clarify any clerical inaccuracy or ambiguity or reconcile any inconsistency
(including any inconsistency between this Declaration and Agreement of Trust and
the Prospectus), (ii) to effect the intent of the allocations proposed herein to
the maximum extent possible in the event of a change in the Code or the
interpretations thereof affecting such allocations, (iii) to attempt to ensure
that the Trust is not treated as an association taxable as a corporation for
federal income tax purposes, (iv) to qualify or maintain the qualification of
the Trust as a trust in any jurisdiction, (v) to delete or add any provision of
or to this Declaration
A-16
<PAGE>
and Agreement of Trust required to be deleted or added by the Staff of the
Securities and Exchange Commission or any other federal agency or any state
"Blue Sky" or similar official or in order to opt to be governed by any
amendment or successor statute to the Act, (vi) to make any amendment to this
Declaration and Agreement of Trust which the Managing Owner deems advisable,
provided that such amendment is for the benefit of and not adverse to the
Unitholders or the Trustee, or that is required by law, (vii) to make any
amendment that is appropriate or necessary, in the opinion of the Managing
Owner, to prevent the Trust or the Managing Owner or its directors, officers or
controlling persons from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, or to avoid causing the assets of
the Trust from being considered for any purpose of ERISA or Section 4975 of the
Code to constitute assets of any "employee benefit plan," as defined in and
subject to ERISA, or of a "plan," as defined in and subject to Section 4975 of
the Code.
In the event that JWH shall cease to be the sole trading advisor of the
Trust, the Managing Owner shall cause "JWH" to be deleted from the Trust's name
and take all such other actions as shall be necessary or appropriate.
(b) AMENDMENTS AND ACTIONS WITHOUT CONSENT OF THE MANAGING OWNER. In
any vote called by the Managing Owner or pursuant to subsection (c) of this
Section 19, upon the affirmative vote (which may be in person or by proxy) of
more than 50% of the Units then owned by Unitholders, the following actions may
be taken with respect to the Trust, irrespective of whether the Managing Owner
concurs: (i) this Declaration and Agreement of Trust may be amended, provided,
however, that approval of all Unitholders shall be required in the case of
amendments changing or altering this Section 19 or extending the term of the
Trust; in addition, reduction of the capital account of any Unitholder or
assignee or modification of the percentage of profits, losses or distributions
to which a Unitholder or an assignee is entitled hereunder shall not be effected
by any amendment or supplement to this Declaration and Agreement of Trust
without such Unitholder's or assignee's written consent; (ii) the Trust may be
dissolved; (iii) the Managing Owner may be removed and replaced; (iv) a new
managing owner or managing owners may be elected if the Managing Owner withdraws
from the Trust; (v) the sale of all or substantially all of the assets of the
Trust may be approved; and (vi) any contract with the Managing Owner or any
affiliate thereof may be disapproved and, as a result, terminated upon 60 days'
notice.
(c) MEETINGS; OTHER. Any Unitholder upon request addressed to the
Managing Owner shall be entitled to obtain from the Managing Owner, upon payment
in advance of reasonable reproduction and mailing costs, a list of the names and
addresses of record of all Unitholders and the number of Units held by each
(which shall be mailed by the Managing Owner to the Unitholder within ten days
of the receipt of the request); provided, that the Managing Owner may require
any Unitholder requesting such information to submit written confirmation that
such information will not be used for commercial purposes. Upon receipt of a
written proposal, signed by Unitholders owning Units representing at least 10%
of all Units then owned by Unitholders, that a meeting of the Trust be called to
vote upon any matter upon which the Unitholders may vote pursuant to this
Declaration and Agreement of Trust, the Managing Owner shall, by written notice
to each Unitholder of record sent by certified mail within 15 days after such
receipt, call a meeting of the Trust. Such meeting shall be held at least 30 but
not more than 60 days after the mailing of such notice, and such notice shall
specify the date of, a reasonable place and time for, and the purpose of such
meeting. Such notice shall establish a record date for Units entitled to vote at
the meeting, which shall be not more than 15 days prior to the date established
for such meeting.
The Managing Owner may not restrict the voting rights of Unitholders as
set forth herein.
In the event that the Managing Owner or the Unitholders vote to amend
this Declaration and Agreement of Trust in any material respect, the amendment
will not become effective prior to all Unitholders having an opportunity to
redeem their Units.
(d) CONSENT BY TRUSTEE. The Trustee's written consent to any amendment
of this Declaration and Agreement of Trust shall be required, such consent not
to be unreasonably withheld; provided, however, that the Trustee may, in its
sole discretion, withhold its consent to any such amendment that would adversely
affect any right, duty or liability of, or immunity or indemnity in favor of,
the Trustee under this Declaration and Agreement of Trust or any of the
documents contemplated hereby to which the Trustee is a party, or would cause or
result in any conflict with or breach of any terms, conditions or provisions of,
or default under, the charter documents or by-laws of the Trustee or any
document contemplated hereby to which the Trustee is a party; provided further,
that the Trustee may not withhold consent for any action listed in subsections
19(b)(ii)-(vi). Notwithstanding anything to the contrary contained in this
Declaration and Agreement of Trust, the Trustee may immediately resign if, in
its sole discretion, the Trustee determines that the Unitholders' actions
pursuant to subsections 19(b)(i)-(vi) would adversely affect the Trustee in any
manner.
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<PAGE>
20. GOVERNING LAW.
The validity and construction of this Declaration and Agreement of
Trust shall be determined and governed by the laws of the State of Delaware
without regard to principles of conflicts of law; provided, that causes of
action for violations of federal or state securities laws shall not be governed
by this Section 20.
21. MISCELLANEOUS.
(a) NOTICES. All notices under this Declaration and Agreement of Trust
shall be in writing and shall be effective upon personal delivery, or if sent by
first class mail, postage prepaid, addressed to the last known address of the
party to whom such notice is to be given, upon the deposit of such notice in the
United States mails.
(b) BINDING EFFECT. This Declaration and Agreement of Trust shall inure
to and be binding upon all of the parties, their successors and assigns,
custodians, estates, heirs and personal representatives. For purposes of
determining the rights of any Unitholder or assignee hereunder, the Trust and
the Managing Owner may rely upon the Trust records as to who are Unitholders and
assignees, and all Unitholders and assignees agree that their rights shall be
determined and they shall be bound thereby.
(c) CAPTIONS. Captions in no way define, limit, extend or describe the
scope of this Declaration and Agreement of Trust nor the effect of any of its
provisions. Any reference to "persons" in this Declaration and Agreement of
Trust shall also be deemed to include entities, unless the context otherwise
requires.
22. CERTAIN DEFINITIONS.
This Declaration and Agreement of Trust contains certain provisions
required by the NASAA Guidelines. The terms used in such provisions are defined
as follows (the following definitions are included VERBATIM from such Guidelines
and, accordingly, may not in all cases be relevant to this Declaration and
Agreement of Trust):
ADMINISTRATOR. The official or agency administering the securities laws
of a state.
ADVISOR. Any Person who for any consideration engages in the business
of advising others, either directly or indirectly, as to the value, purchase, or
sale of Commodity Contracts or commodity options.
AFFILIATE. An Affiliate of a Person means: (a) any Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of the
outstanding voting securities of such Person; (b) any Person 10% or more of
whose outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote, by such Person; (c) any Person, directly or
indirectly, controlling, controlled by, or under common control of such Person;
(d) any officer, director or partner of such Person; or (e) if such Person is an
officer, director or partner, any Person for which such Person acts in any such
capacity.
CAPITAL CONTRIBUTIONS. The total investment in a Program by a
Participant or by all Participants, as the case may be.
COMMODITY BROKER. Any Person who engages in the business of effecting
transactions in Commodity Contracts for the account of others or for his or her
own account.
COMMODITY CONTRACT. A contract or option thereon providing for the
delivery or receipt at a future date of a specified amount and grade of a traded
commodity at a specified price and delivery point.
CROSS REFERENCE SHEET. A compilation of the NASAA Guidelines sections,
referenced to the page of the prospectus, Program agreement, or other exhibits,
and justification of any deviation from the NASAA Guidelines.
NET ASSETS. The total assets, less total liabilities, of the Program
determined on the basis of generally accepted accounting principles. Net Assets
shall include any unrealized profits or losses on open positions, and any fee or
expense including Net Asset fees accruing to the Program.
NET ASSET VALUE PER PROGRAM INTEREST. The Net Assets divided by the
number of Program Interests outstanding.
NET WORTH. The excess of total assets over total liabilities as
determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles.
NEW TRADING PROFITS. The excess, if any, of Net Assets at the end of
the period over Net Assets at the end of the highest previous period or Net
Assets at the date trading commences, whichever is higher, and as further
adjusted to eliminate the effect on Net Assets resulting from new Capital
Contributions, redemptions, or capital distributions, if any, made during the
period decreased by interest or other income, not directly related to trading
activity, earned on Program assets during the period, whether the assets are
held separately or in a margin account.
A-18
<PAGE>
ORGANIZATIONAL AND OFFERING EXPENSES. All expenses incurred by the
Program in connection with and in preparing a Program for registration and
subsequently offering and distributing it to the public, including, but not
limited to, total underwriting and brokerage discounts and commissions
(including fees of the underwriters' attorneys), expenses for printing,
engraving, mailing, salaries of employees while engaged in sales activity,
charges of transfer agents, registrars, trustees, escrow holders, depositories,
experts, expenses of qualification of the sale of its Program Interest under
federal and state law including taxes and fees, accountants' and attorneys'
fees.
PARTICIPANT. The holder of a Program Interest.
PERSON. Any natural Person, partnership, corporation, association or
other legal entity.
PIT BROKERAGE FEE. Pit Brokerage Fee shall include floor brokerage,
clearing fees, National Futures Association fees, and exchange fees.
PROGRAM. A limited partnership, joint venture, corporation, trust or
other entity formed and operated for the purpose of investing in Commodity
Contracts.
PROGRAM BROKER. A Commodity Broker that effects trades in Commodity
Contracts for the account of a Program.
PROGRAM INTEREST. A limited partnership interest or other security
representing ownership in a Program.
PYRAMIDING. A method of using all or a part of an unrealized profit in
a Commodity Contract position to provide margin for any additional Commodity
Contracts of the same or related commodities.
SPONSOR. Any Person directly or indirectly instrumental in organizing a
Program or any Person who will manage or participate in the management of a
Program, including a Commodity Broker who pays any portion of the Organizational
and Offering Expenses of the Program, and the general partner(s) and any other
Person who regularly performs or selects the Persons who perform services for
the Program. Sponsor does not include wholly independent third parties such as
attorneys, accountants and underwriters whose only compensation is for
professional services rendered in connection with the offering of the units. The
term "Sponsor" shall be deemed to include its Affiliates.
VALUATION DATE. The date as of which the Net Assets of the Program are
determined.
VALUATION PERIOD. A regular period of time between Valuation Dates.
Certain terms not defined herein are used with the respective meanings
set forth in the Prospectus.
23. NO LEGAL TITLE TO TRUST ESTATE.
The Unitholders shall not have legal title to any part of the Trust
Estate.
24. LEGAL TITLE.
Legal title to all the Trust Estate shall be vested in the Trust as a
separate legal entity; except where applicable law in any jurisdiction requires
any part of the Trust Estate to be vested otherwise, the Managing Owner (or the
Trustee, if required by law) may cause legal title to the Trust Estate or any
portion thereof to be held by or in the name of the Managing Owner or any other
person as nominee.
25. CREDITORS.
No creditors of any Unitholders shall have any right to obtain
possession of, or otherwise exercise legal or equitable remedies with respect
to, the Trust Estate.
IN WITNESS WHEREOF, the undersigned have duly executed this Fourth
Amended and Restated Declaration and Agreement of Trust and Trust Agreement as
of the day and year first above written.
WILMINGTON TRUST COMPANY
as Trustee
By: /s/ Emmett R. Harman
--------------------------
Name: Emmett R. Harmon
Title: Vice President
CIS INVESTMENTS, INC.
as Managing Owner
By: /s/ Barbara A. Pfendler
----------------------------
Name: Barbara A. Pfendler
Title: Vice President
All Unitholders now and hereafter admitted as Unitholders of the Trust, pursuant
to powers of attorney now and hereafter executed in favor of, and granted and
delivered to, the Managing Owner.
By: CIS INVESTMENTS, INC.
as Attorney-in-Fact
By: /s/ Barbara A. Pfendler
----------------------------
Name: Barbara A. Pfendler
Title: Vice President
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<PAGE>
EXHIBIT B
JWH GLOBAL TRUST
--------------------
SUBSCRIPTION REQUIREMENTS
By executing a Subscription Agreement and Power of Attorney Signature
Page for JWH GLOBAL TRUST (THE "TRUST"), each PURCHASER ("PURCHASER") of UNITS
OF BENEFICIAL INTEREST ("UNITS") in the Trust subscribes for Units at the Net
Asset Value per Unit, as described in the Trust's current PROSPECTUS (THE
"PROSPECTUS"). The minimum initial subscription is $5,000; $2,000 for trustees
or custodians of eligible employee benefit plans and individual retirement
accounts. Incremental subscriptions will be accepted in multiples of $100 in
excess of such minimums. Existing Unitholders may make additional investments in
the Trust in $1,000 minimums, also with $100 increments. Units are sold in
fractions calculated to five decimal places.
Purchaser is herewith delivering to Purchaser's selling agent
(hereinafter, "Selling Agent") an executed Subscription Agreement and Power of
Attorney Signature Page and either (i) delivering a check in the full amount of
the Purchaser's subscription or (ii) hereby authorizing such Selling Agent to
debit Purchaser's customer securities account maintained with such Selling Agent
for the full amount of Purchaser's subscription in accordance with the
procedures described under "Plan of 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), including, without limitation, the
provisions of Sections 9(a), 11 and 15 thereof. Purchaser agrees to reimburse
the Trust and the Managing Owner for any expense or loss incurred by either as a
result of the cancellation of Purchaser's Units due to a failure of the
Purchaser to deliver good funds in the amount of the subscription price of any
or all of such Units.
If the undersigned is acting on behalf of an "employee benefit plan,"
as defined in and subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or any "plan," as defined in Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code") (each such employee
benefit plan and plan, a "Plan"), the individual signing this Subscription
Agreement and Power of Attorney on behalf of the undersigned, in addition to the
representations and warranties set forth above, hereby further represents and
warrants as, or on behalf of the fiduciary of the Plan responsible for
purchasing a Unit (the "Plan Fiduciary") that: (a) the Plan Fiduciary has
considered an investment in the Trust for such Plan in light of the risks
relating thereto; (b) the Plan Fiduciary has determined that, in view of such
considerations, the investment in the Trust for such Plan is consistent with the
Plan Fiduciary's responsibilities under ERISA; (c) the Plan's investment in the
Trust does not violate and is not otherwise inconsistent with the terms of any
legal document constituting the Plan or any trust agreement thereunder; (d) the
Plan's investment in the Trust has been duly authorized and approved by all
necessary parties; (e) none of the Managing Owner, John W. Henry & Company, Inc.
("JWH"), Cargill Investor Services, Inc. ("CIS"), CIS Financial Services, Inc.
("CISFS"), any Selling Agent, wholesaler or correspondent, Bank One (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.
<PAGE>
INVESTOR SUITABILITY
PURCHASER UNDERSTANDS THAT THE PURCHASE OF UNITS MAY BE MADE ONLY BY
PERSONS WHO, AT A MINIMUM, HAVE (i) A NET WORTH OF AT LEAST $150,000 (EXCLUSIVE
OF HOME, FURNISHINGS AND AUTOMOBILES) OR (ii) AN ANNUAL GROSS INCOME OF AT LEAST
$45,000 AND A NET WORTH (SIMILARLY CALCULATED) OF AT LEAST $45,000. RESIDENTS OF
THE FOLLOWING STATES MUST MEET THE SPECIFIC REQUIREMENTS SET FORTH BELOW (NET
WORTH IS, IN ALL CASES, TO BE CALCULATED EXCLUSIVE OF HOME, FURNISHINGS AND
AUTOMOBILES). IT IS RECOMMENDED (REQUIRED, IN THE CASE OF AN INDIVIDUAL
PENNSYLVANIA PURCHASER) THAT NO INDIVIDUAL PURCHASER SHOULD (MAY, IN THE CASE OF
AN INDIVIDUAL PENNSYLVANIA PURCHASER) INVEST MORE THAN 10% OF HIS OR HER NET
WORTH (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES) IN THE UNITS AND NO
ENTITY PURCHASER, INCLUDING ERISA PLANS, SHOULD INVEST MORE THAN 10% OF ITS
LIQUID NET WORTH (READILY MARKETABLE SECURITIES) IN THE UNITS.
1. 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 residents, including
existing Unitholders in the Trust subscribing for additional Units, must execute
a Subscription Agreement and Power of Attorney Signature Page. Maine residents
must sign a Subscription Agreement and Power of Attorney Signature Page
specifically prepared for Maine residents, a copy of which shall accompany this
Prospectus and 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 -- Except as provided in the immediately following sentence,
each Minnesota Purchaser must be an "accredited investor" as defined in
Regulation D under the Securities Act of 1933 and must, either alone or together
with a purchaser representative, have sufficient financial knowledge and
experience to be capable of evaluating the risks and merits of an investment in
the Units. The Trust may effect no more than 35 sales of Units to non-accredited
investors in Minnesota in any consecutive 12-month period. Each non-accredited
investor must have a net worth of at least $225,000 or a net worth of at least
$60,000 and an annual income of at least $60,000. Minnesota residents must sign
a Subscription Agreement and Power of Attorney Signature Page specifically
prepared for Minnesota residents, a copy of which shall accompany this
Prospectus and delivered to all Minnesota residents.
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
$60,000 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.
B-2
<PAGE>
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.
-------------------------
In the case of IRA and SEP plans, the foregoing suitability standards
are applicable to the beneficiary of the plan for whose account the Units are
being acquired. In the case of a custodian purchasing Units for a minor, the
Units will be either a gift to the minor and not paid with funds of the minor or
the minor meets the foregoing suitability standards.
THE FOREGOING SUITABILITY STANDARDS ARE REGULATORY MINIMUMS ONLY.
MERELY BECAUSE PURCHASER MEETS SUCH REQUIREMENTS DOES NOT NECESSARILY MEAN THAT
A HIGH RISK, SPECULATIVE AND ILLIQUID INVESTMENT SUCH AS THE TRUST IS, IN FACT,
SUITABLE FOR PURCHASER.
B-3
<PAGE>
EXHIBIT C
JWH GLOBAL TRUST
--------------------
SUBSCRIPTION INSTRUCTIONS
FOR
UNITS OF BENEFICIAL INTEREST
ANY PERSON CONSIDERING SUBSCRIBING FOR UNITS SHOULD CAREFULLY READ
AND REVIEW THE PROSPECTUS. THE PROSPECTUS MUST BE ACCOMPANIED BY
THE MOST RECENT ACCOUNT STATEMENT OF THE TRUST
(CURRENT WITHIN 60 CALENDAR DAYS).
The Units are speculative and involve a high degree of risk. It is recommended
that no subscriber should invest more than 10% of such subscriber's net worth
(which excludes home, furnishings and automobiles) in the Trust.
Attached to these subscription instructions is a detachable carbonless copy set
of the Subscription Agreement and Power of Attorney Signature Page (the
"Signature Page") with the Subscription Agreement and Power of Attorney on the
reverse side. The Signature Page is the document which you must execute if you
wish to subscribe for Units. One copy of such Signature Page should be retained
by you for your records and the others delivered to your Registered
Representative.
FILL IN ALL THE INFORMATION ON THE ATTACHED SIGNATURE PAGE, USING BLUE OR
BLACK INK ONLY, AS FOLLOWS:
Item 1 - Enter the whole dollar amount of the
subscription (no cents).
Item 2 - Check the appropriate box if check is
attached or if payment is to be made by
debit from investor's securities account. If
debited, enter the investor's securities
account number.
Item 3 - Enter the Social Security or Taxpayer ID
Number of the investor. Check the
appropriate box to indicate the type of
ownership for the entity that is
subscribing. In the case of joint ownership,
either Social Security Number may be used.
Check box if the Non-Taxable Investor is a
Selling Agent Plan.
Items 4 through 8 - The following specific instructions are
provided for certain ownership types
identified on the Signature Page:
TRUST -- Enter the trust's name in Item 4
and the trustee's name in Item 5, followed
by "Ttee."
CUSTODIAN UNDER UNIFORM GIFTS TO MINORS ACT
-- Complete Item 4 with the name of minor
followed by "UGMA." Enter the minor's Social
Security Number in Item 3. In Item 8, enter
the custodian's name followed by
"Custodian." Be sure to furnish the Taxpayer
ID Number of the Custodian.
PARTNERSHIP OR CORPORATION -- The
partnership's or corporation's name is
required in Item 4. Enter a partner's or
officer's name in Item 5. Enter the Taxpayer
ID Number of the partnership or corporation
in Item 3.
NON-TAXABLE INVESTOR -- If applicable,
complete Item 8 for the Custodian. Be sure
to furnish the Taxpayer ID Number of the
Custodian.
Complete residence address in Item 6 and
mailing address (if different) in Item 7.
The investor(s) must review the
representations relating to backup
withholding tax or non-resident alien status
following Item 7. Check box if applicable.
Item 9 - The investor(s) must sign the Subscription
Agreement and Power of Attorney Signature
Page. Joint accounts must include signatures
of all parties.
Items 10 and 11 - Registered Representative must complete.
THE SELLING AGENT'S COPY OF THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
SIGNATURE PAGE MAY BE REQUIRED TO BE RETAINED IN THE BRANCH OFFICE.
C-2
<PAGE>
THE EXECUTION COPY OF THE SUBSCRIPTION AGREEMENT AND POWER
OF ATTORNEY ACCOMPANIES THIS PROSPECTUS AS A SEPARATE DOCUMENT
--------
JWH GLOBAL TRUST
UNITS OF BENEFICIAL INTEREST
BY EXECUTING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
SUBSCRIBERS ARE NOT WAIVING ANY RIGHTS UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES EXCHANGE ACT OF 1934
--------
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
JWH GLOBAL TRUST
c/o CIS INVESTMENTS, INC., MANAGING OWNER
233 SOUTH WACKER DRIVE, SUITE 2300
CHICAGO, ILLINOIS 60606
Dear Sirs:
1. SUBSCRIPTION FOR UNITS. I hereby subscribe for the dollar amount of
UNITS OF BENEFICIAL INTEREST ("UNITS") in JWH GLOBAL TRUST (the "Trust") set
forth in the Subscription Agreement and Power of Attorney Signature Page
attached hereto (minimum $5,000; $2,000 for trustees or custodians of eligible
employee benefit plans and individual retirement accounts), at a purchase price
per Unit of Net Asset Value. Incremental subscriptions in excess of the
foregoing minimums are permitted in $100 multiples. Existing investors may
subscribe for additional Units in $1,000 minimums, also with $100 increments.
Fractional Units will be issued to five decimal places. The terms of the
offering of the Units are described in the current Prospectus of the Trust (the
"Prospectus"). I have either (i) authorized my selling agent to debit my
customer securities account in the amount of my subscription or (ii) delivered a
check to my selling agent made payable to "BANK ONE, ESCROW AGENT FOR JWH GLOBAL
TRUST." If I have chosen to subscribe by account debit, I acknowledge that I
must have my subscription payment in such account when I submit my subscription.
My Registered Representative shall debit my account and the amounts so debited
will be transmitted directly to the Escrow Agent. CIS INVESTMENTS, INC. (THE
"MANAGING OWNER") may, in its sole and absolute discretion, accept or reject
this subscription in whole or in part. SUBSCRIPTIONS ARE REVOCABLE FOR FIVE
BUSINESS DAYS AFTER SUBMISSION. ALL UNITS ARE OFFERED SUBJECT TO PRIOR SALE.
Subscriptions generally must be received by the Managing Owner no later
than five business days before month-end (including the last business day of the
month) in order to be invested in the Units as of the end of the month.
2. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. I have received the
Prospectus and an account statement (current within 60 days), relating to the
Trust. I understand that certain investor suitability standards must be met as a
condition of my investment in the Units. I acknowledge that I satisfy the
applicable requirements relating to net worth and annual income as set forth in
"Exhibit 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. If subscriber is a custodian for a minor, the Units purchased will be
either a gift to the minor and not paid with funds of the minor or the minor
meets the net worth and annual income requirements set forth in "Exhibit B
--Subscription Requirements" to the Prospectus.
3. POWER OF ATTORNEY. In connection with my purchase of Units, I do
hereby irrevocably constitute and appoint the Managing Owner and its successors
and assigns, as my true and lawful Attorney-in-Fact, with full power of
substitution, in my name, place and stead, to (i) file, prosecute, defend,
settle or compromise litigation, claims or arbitrations on behalf of the Trust
and (ii) make, execute, sign, acknowledge, swear to, deliver, record and file
any documents or instruments which may be considered necessary or desirable by
the Managing Owner to carry out fully the provisions of the Declaration and
Agreement of Trust of the Trust, including, without limitation, the execution of
the said Agreement itself and the execution of all amendments permitted by the
terms thereof. The Power of Attorney granted hereby shall be deemed to be
coupled with an interest, shall be irrevocable, shall survive, and shall not be
affected by, my subsequent death, incapacity, disability, insolvency or
dissolution or any delivery by me of an assignment of the whole or any portion
of my Units.
4. GOVERNING LAW. Subscriber hereby acknowledges and agrees that this
Subscription Agreement and Power of Attorney derives from a business initiated
in and concluded in the United States of America and shall be governed by and be
interpreted in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of laws thereof.
5. RISKS. These securities are speculative and involve a high degree of
risk. It is recommended that you should invest no more than 10% of your net
worth (excluding home, furnishings and automobiles) in the Trust. Risk factors
relating to the Units include the following:
(i) YOU COULD LOSE ALL OR SUBSTANTIALLY ALL OF YOUR INVESTMENT IN THE
TRUST; (ii) THE TRUST IS SPECULATIVE AND IT TAKES POSITIONS WITH TOTAL VALUES
THAT ARE BIGGER THAN THE TOTAL AMOUNT OF THE TRUST'S ASSETS; THE FACE VALUE OF
THE TRUST'S POSITIONS TYPICALLY RANGE FROM THREE TO EIGHT TIMES ITS AGGREGATE
NET ASSET VALUE; (iii) PERFORMANCE HAS BEEN VOLATILE; THE NET ASSET VALUE PER
UNIT HAS FLUCTUATED ALMOST 11% IN A SINGLE MONTH; (iv) THE USE OF A SINGLE
ADVISOR APPLYING A LIMITED NUMBER OF GENERALLY SIMILAR TRADING PROGRAMS
DECREASES DIVERSIFICATION RELATIVE TO A FUND USING MULTIPLE ADVISORS AND
INCREASES RISK; (v) SUBSTANTIAL EXPENSES, TOTALLING ALMOST 10.3% PER ANNUM,
MUST BE OFFSET BY TRADING PROFITS AND INTEREST INCOME; (vi) THERE IS NO MARKET
FOR THE UNITS; UNITS MAY ONLY BE REDEEMED AS OF THE END OF A CALENDAR MONTH
SUBJECT TO A 3% REDEMPTION CHARGE THROUGH THE END OF THE ELEVENTH MONTH AFTER
ISSUANCE; (vii) THE TRUST TRADES TO A SUBSTANTIAL DEGREE ON NON-U.S. MARKETS
WHICH ARE NOT SUBJECT TO THE SAME DEGREE OF REGULATION AS U.S. MARKETS; (viii)
INVESTORS ARE REQUIRED TO MAKE REPRESENTATIONS AND WARRANTIES IN CONNECTION WITH
THEIR INVESTMENT; (ix) EACH PROSPECTIVE INVESTOR IS ENCOURAGED TO DISCUSS THE
INVESTMENT WITH HIS/HER 1INDIVIDUAL FINANCIAL, LEGAL AND TAX ADVISER.
See "The Risks You Face" beginning at page 9 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 SUBSCRIBING BY CHECK OR ACCOUNT
DEBIT.
C-3
<PAGE>
JWH GLOBAL TRUST
UNITS OF BENEFICIAL INTEREST
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE
(SEE ATTACHED SUBSCRIPTION INSTRUCTIONS.)
The investor named below, by executing and delivering this Signature Page and by
payment of the purchase price for units of beneficial interest ("Units") in JWH
GLOBAL TRUST (the "Trust"), by either (i) enclosing a check payable to "BANK
ONE, AS ESCROW AGENT FOR JWH GLOBAL TRUST " or (ii) authorizing the Selling
Agent (or Additional Selling Agent, as the case may be) to debit investor's
securities account in the amount set forth below, hereby subscribes for the
purchase of Units at a purchase price of 100% of the Net Asset Value per Unit.
The named investor further acknowledges receipt of the current Prospectus of the
Trust (the "Prospectus"), together with a recent Account Statement relating to
the Trust (current within 60 calendar days) and the Trust's most recent Annual
Report if not included in the Prospectus. The Prospectus includes the Trust's
Declaration and Agreement of Trust, Subscription Requirements and Subscription
Agreement and Power of Attorney, the terms of which govern the investment in the
Units being subscribed for hereby.
By my signature below, I represent that I satisfy the minimum income and net
worth standards 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) (Check one) / / Check is attached. / / Debit investor's securities
account: Account # ___________________________________
(must be completed)
<TABLE>
<S><C>
3) Social Security # |__|__|__| - |__|__| - |__|__|__|__| or Taxpayer ID # |__|__|-|__|__|__|__|__|__|__|
Taxable Investors (check one):
/ / Individual Investor / / Community Property / / Partnership
/ / Joint Tenants with Right of Survivorship / / Estate / / UGMA/UTMA (Minor)
/ / Tenants in Common / / Trust / / Corporation
Non-Taxable Investors -- Custodian Signature Required (check one)
/ / IRA / / Pension / / Profit Sharing / / Other_________________________________
/ / Roth IRA / / SEP / / Defined Benefit
/ / IRA Rollover
Is this a Selling Agent Plan? / / Yes / / No
4) Investor(s) Name(s):
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
5) Additional Information (For Estate, Partnerships, Trust and Corporations)
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
6) Residence Address of Unitholder
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Street (P.0. Box numbers are not acceptable for residence address)
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__| |__|__|__|__|__|__|__|__|__|__|
City State Zip Country Phone
7) Mailing Address
(if different)
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Street
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State Zip Country
</TABLE>
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 below I hereby certify that the Social
Security or Taxpayer ID Number set forth in Item 3 above is my true, correct and
complete Social Security or Taxpayer ID Number and that the information given in
the immediately preceding sentence is true, correct and complete.
NON-UNITED STATES INVESTORS ONLY
Under the penalties of perjury, by signature below 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.
<TABLE>
<S><C>
8) Custodian Information |__|__| -|__|__|__|__|__|__|__| |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Tax ID# Name
Mailing Address |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Street
|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
City State Zip Country Phone
</TABLE>
C-4
<PAGE>
9) INVESTOR(S) MUST SIGN
------------------------------ -----------------------------------------------
Signature Date Signature of Authorized Fiduciary, Date
Trustee, Partner or Corporate Office
------------------------------ -----------------------------------------------
Signature of Joint Date Print Name of Authorized Fiduciary, Date
Investor (if any) 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.
10) REGISTERED REPRESENTATIVE MUST SIGN
I hereby certify that I have provided the investor with a copy of the Prospectus
and informed the investor of all pertinent facts relating to the: risks; tax
consequences; liquidity and marketability; management; and control of the
Managing Owner with respect to an investment in the Units, as set forth in the
Prospectus. I have also informed the investor of the unlikelihood of a public
trading market developing for the Units and the restrictions on the redemption
of Units. I do not have discretionary authority over the account of the
investor.
I have reasonable grounds to believe, based on information obtained from the
investor concerning his/her investment objectives, other investments, financial
situation and needs and any other information known by me, that an investment in
the Trust is suitable for such investor in light of his/her financial position,
net worth and other suitability characteristics.
The 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).
<TABLE>
<S><C>
X X
--------------------------------------------- ----------------------------------------------
Registered Representative Signature Date Office Manager Signature (if required) Date
11) Broker Dealer |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Registered Representative:
Name (Print) |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
First M.I. Last Reg. Rep. Number
Address |__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|__|
Street City State Zip
Phone Number |__|__|__|__|__|__|__|__|__|__|__|__| Fax Number |__|__|__|__|__|__|__|__|__|__|
</TABLE>
C-5
<PAGE>
JWH GLOBAL TRUST
UNITS OF BENEFICIAL INTEREST
REQUEST FOR REDEMPTION
JWH GLOBAL TRUST ________________________________
c/o CIS INVESTMENTS, INC. DATE
MANAGING OWNER
233 SOUTH WACKER DRIVE, SUITE 2300
CHICAGO, ILLINOIS 60606
Dear Sirs:
The undersigned hereby requests redemption subject to all the terms
and conditions of the Amended and Restated Declaration and Agreement of Trust
(the "Declaration and Agreement of Trust") of JWH GLOBAL TRUST (the "Trust") of
Units of Beneficial Interest ("Units") in the Trust. (INSERT NUMBER OF UNITS OR
DOLLAR AMOUNT TO BE REDEEMED BELOW. UNITHOLDERS NEED NOT REDEEM ALL OF THEIR
UNITS PROVIDED THEY REDEEM AT LEAST $1,000 OF UNITS AND THEY MUST HOLD MINIMUM
INVESTMENT OF $1,000 AFTER ANY PARTIAL REDEMPTION. IF NO NUMBER OF UNITS OR
DOLLAR AMOUNT IS INDICATED, ALL UNITS HELD BY THE UNDERSIGNED WILL BE REDEEMED.)
Units are redeemed at the Net Asset Value per Unit, as defined in the
Declaration and Agreement of Trust, less any applicable redemption charge (see
below). Redemption shall be effective as of the end of the current calendar
month; provided this Request for Redemption is received no later than five
business days before the end of such month (including the last business day of
the month). Payment of the redemption proceeds will generally be made within ten
business days of the date of redemption.
The undersigned hereby represents and warrants that the undersigned is
the true, lawful and beneficial owner of the Units to which this Request for
Redemption relates, with full power and authority to request redemption of such
Units. Such Units are not subject to any pledge or otherwise encumbered in any
fashion.
Units redeemed at or prior to the end of the twelfth full month after
such Units are sold are subject to redemption charges of 3% of the Net Asset
Value of Units at which they are redeemed. Such charges will be deducted from
the redemption proceeds and paid to Cargill Investor Services, Inc., the Trust's
Futures Broker. If the undersigned has purchased Units at more than one closing,
such Units will be treated on a first-in/first-out basis for purposes of
determining whether redemption charges continue to be applicable to such Units.
-------------------
UNITED STATES UNITHOLDERS ONLY:
Under the penalties of perjury, the undersigned hereby certifies that
the Social Security or Taxpayer ID Number indicated on this Request for
Redemption is the undersigned's true, correct and complete Social Security 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.
C-6
<PAGE>
Tax ID - SS# or Fed No
(No hyphens) Account Number
----------------------------------- ------------------------------------
Account Name
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
By:
--------------------------------------------------------------------------------
(Authorized corporate officer, partner, trustee or custodian)
ACCOUNT MAILING ADDRESS
Street or P.O. Box
--------------------------------------------------------------------------------
City
--------------------------------------------------------------------------------
State Zip Country
----------------------- ----------------- --------------------
Phone
------------------------------------------------------------------------
JWH GLOBAL TRUST:
Redeem: Number of Units OR Amount $
----------------------------- -----------
(Write "ALL" for full redemption)
(Check one)
Mail check to the address above
----------
Credit my customer securities account at:
----------
Name of Broker Dealer:
--------------------------------------------
Account Name:
-----------------------------------------------------
Account Number:
---------------------------------------------------
SIGNATURES MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED.
---------------------------------------------------
Individual Unitholder(s)/Custodian Signature
---------------------------------------------------
Individual Unitholder(s)/Custodian Signature
C-7
<PAGE>
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"), advanced all initial organization and offering costs (approximately
$650,000) as described in the Prospectus, for which it was reimbursed by the
Registrant on the initial closing date. The following is an estimate of the
costs incurred in connection with updating the Prospectus and preparing and
filing this Post-Effective Amendment No. 4 to the Registration Statement. The
Trust will pay all such costs:
<TABLE>
<CAPTION>
Approximate
Amount
-------------
<S> <C>
Printing Expenses................................. $100,000
Fees of Certified Public Accountants.............. 15,000
Blue Sky Expenses (Excluding Legal Fees).......... 15,000
Fees of Counsel................................... 50,000
Escrow Fees....................................... 20,000
Advertising and Sales Literature.................. 20,000
Miscellaneous Offering Costs...................... 10,000
----------
Total.................................... $ 230,000
========
</TABLE>
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. Recent Sales of Unregistered Securities.
There have been no sales of unregistered securities of the
Registrant within the last three years.
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<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
The following documents are made a part of this Registration Statement:
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<S> <C> <C>
3.01 Fourth Amended and Restated Declaration and Agreement of
Trust of the Registrant (included as Exhibit A to the
Prospectus).
10.01 Form of Subscription Agreement and Power of Attorney
(included as Exhibit C to the Prospectus).
23.01(a) Consent of Sidley & Austin.
23.01(b) Consent of Richards, Layton & Finger.
23.02 Consent of KPMG Peat Marwick, LLP.
27.01 Financial Data Schedule
The following exhibits are incorporated by reference herein from the exhibits of
the same description and number filed on March 1, 1999 with Post-Effective
Amendment No. 2 to Registration Statement on Form S-1 (Reg. No. 333-33937).
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.
The following exhibits are incorporated by reference herein from the exhibits of
the same description and number filed on August 19, 1997 with Registrant's
Registration Statement on Form S-1 (Reg. No. 333-33937).
1.01 Form of Selling Agreement, as amended, 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).
10.02 Form of Amended Escrow Agreement among the Registrant,
The First National Bank of Chicago, the Managing Owner
and the Lead Selling Agent.
The following exhibits are incorporated by reference herein from the exhibits of
the same description and number filed on February 10, 1997 with Amendment No. 1
to Registrant's Registration Statement on Form S-1 (Reg. No. 333-16825; declared
effective April 3, 1997).
3.02 Amended and Restated Declaration and Agreement of Trust.
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<PAGE>
3.03 Certificate of Amendment of Certificate of Trust of the
Registrant.
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.
10.06 Form of Transfer Agent Agreement.
The following exhibits are incorporated by reference herein from the exhibits of
the same description and number filed on November 26, 1996 with Registrant's
Registration Statement on Form S-1 (Reg. No. 333-16825; declared effective April
3, 1997).
3.01 Certificate of Trust of the Registrant.
3.02 Declaration and Agreement of Trust.
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.
</TABLE>
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
(or the most recent post-effective amendment thereof) 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
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<PAGE>
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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement or Registration
Statement Amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago in the State of Illinois on
September 18, 2000.
JWH GLOBAL TRUST
By: CIS Investments, Inc., Managing Owner
By: /s/ Bernard W. Dan
-----------------------
Bernard W. Dan
President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement or Registration Statement Amendment 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 September 18, 2000.
/s/ Bernard W. Dan President and Director
------------------------------ (Principal Executive Officer)
Bernard W. Dan
/s/ Shaun D. O'Brien Treasurer and Director
------------------------------ (Principal Financial and Accounting Officer)
Shaun D. O'Brien
/s/ Barbara A. Pfendler Vice President and Director
------------------------------
Barbara A. Pfendler
(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/ Bernard W. Dan
------------------------------
Bernard W. Dan
President
II-5
<PAGE>
JWH GLOBAL TRUST
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<S> <C> <C>
3.01 Fourth Amended and Restated Declaration and Agreement of
Trust of the Registrant (included as Exhibit A to the
Prospectus).
10.01 Form of Subscription Agreement and Power of Attorney
(included as Exhibit C to the Prospectus).
23.01(a) Consent of Sidley & Austin.
23.01(b) Consent of Richards, Layton & Finger.
23.02 Consent of KPMG Peat Marwick, LLP.
27.01 Financial Data Schedule
</TABLE>
