<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 15, 1997
Registration No. 33-90756
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
THE MILLBURN WORLD RESOURCE TRUST
(Exact name of registrant as specified in its charter)
DELAWARE 6799 06-6415-583
- ------------------------ --------------------------- --------------------
(State of Organization) (Primary Standard Industrial (I.R.S. Employer
Classification Number) Identification Number)
C/O MILLBURN RIDGEFIELD CORPORATION
600 STEAMBOAT ROAD
GREENWICH, CONNECTICUT 06830
203/625-7554
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
GEORGE E. CRAPPLE
MILLBURN RIDGEFIELD CORPORATION
600 STEAMBOAT ROAD
GREENWICH, CONNECTICUT 06830
203/625-7554
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
___________________
COPIES TO:
JAMES B. BIERY
CHRISTOPHER A. RILEY
SIDLEY & AUSTIN
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60603
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
___________________
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE
OFFERED ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE
SECURITIES ACT OF 1933 (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 DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE
434, PLEASE CHECK THE FOLLOWING BOX. [ ]
____________________________
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM
NO. PROSPECTUS HEADING
<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of Prospectus Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus Inside Cover Page; Table of Contents
3. Summary Information, Risk Factors
and Ratio of Earnings to
Fixed Charges Risk Disclosure Statement; Summary; Risk
Factors; Charges
4. Use of Proceeds Use of Proceeds; The Futures and Forward Markets
5. Determination of Offering Price Inside Cover Page; Plan of Distribution
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Inside Cover Page; Plan of Distribution
9. Description of Securities to Be
Registered Cover Page; Redemptions; Net Asset Value;
The Trust and the Trustee
10. Interests of Named Experts and
Counsel Legal Matters; Experts
11. Information with Respect to the
Registrant Summary; Risk Factors; The Trust and Its Objectives;
Investment Factors; Performance of the Trust; Millburn
Ridgefield Corporation; Use of Proceeds; Charges;
Redemptions; Net Asset Value; The Clearing Brokers;
Conflicts of Interest; The Trust and the Trustee; The
Futures and Forward Markets; Index to Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED JANUARY 15, 1997
THE MILLBURN WORLD RESOURCE TRUST
$45,000,000
UNITS OF BENEFICIAL INTEREST
THE MILLBURN WORLD RESOURCE TRUST (THE "TRUST") is a Delaware business
trust engaged in the speculative trading of futures, commodity options and
forward contracts on currencies, interest rates, energy and agricultural
products, metals and stock indices. The Trust applies systematic, technical
strategies and risk control policies to these diverse market sectors. MILLBURN
RIDGEFIELD CORPORATION (THE "MANAGING OWNER" OR "MILLBURN RIDGEFIELD") acts as
the manager and trading advisor of the Trust. Millburn Ridgefield and its
principals have been trading in the futures, futures options and forward markets
pursuant to systematic quantitative trading strategies and risk management
methods for 25 years, and as of January 1, 1997 had approximately $569 million
of client and proprietary capital under management in these markets; of which
approximately $57 million was being managed pursuant to the World Resource
Portfolio used for the Trust. See "Millburn Ridgefield Corporation," at page
28. The Trust places greater emphasis on the non-financial market sectors (in
particular, energy and metals) than the other funds sponsored to date by the
Managing Owner, although employing the same trading systems used by the other
Millburn Ridgefield portfolios. The Trust's objective is substantial capital
appreciation. THERE CAN BE NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS
OBJECTIVES OR AVOID SUBSTANTIAL LOSSES.
The Trust began trading September 13, 1995 with an initial capitalization
of $15,297,069. As of January 1, 1997, the Trust's capitalization was
$57,943,453, and the Net Asset Value of a unit of beneficial interest ("Unit")
in the Trust initially sold for $1,000 was $1,154.81.
Units are sold on a continuous basis as of the first day of each month at
Net Asset Value. The Net Asset Value per Unit equals the Net Assets of the
Trust divided by the number of Units outstanding. Units are sold in fractions
calculated to three decimal places. The Trust trades in highly liquid markets,
and its Net Assets are readily quantified from third-party pricing sources.
As the Trust is an operating entity, there is no minimum number of Units
which must be sold as of the beginning of a month for any Units then to be sold.
As of the date of this Prospectus, there are approximately $45,000,000 million
of Units registered for public offering and available for sale. Millburn
Ridgefield anticipates, however, that, if there is adequate demand, the Trust
will in the future make the necessary regulatory filings to register additional
Units for sale to the public.
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 may be made in $100 increments.
Additional subscriptions by existing Unitholders are permitted in $1,000
minimums, also with $100 increments.
There is no market for the Units and none will develop. Units may,
however, be redeemed at Net Asset Value, as of the end of any calendar month
upon 10 business days' notice to Millburn Ridgefield. Early redemption charges,
payable to Millburn Ridgefield, of 4% and 3% of the redemption value of each
Unit are assessed on Units redeemed on or prior to the end of the sixth and
after the end of the sixth but on or prior to the end of the twelfth month after
issuance, respectively.
__________________________
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
- - INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS: AN INVESTMENT
IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
- - FUTURES AND FORWARD TRADING IS SPECULATIVE, VOLATILE AND LEVERAGED, AND
INVOLVES A HIGH DEGREE OF RISK.
- - THE TRUST HAS TO DATE EXHIBITED, AND IS EXPECTED TO CONTINUE TO EXHIBIT,
CONSIDERABLE PERFORMANCE VOLATILITY. THE UNITS ARE SUITABLE ONLY FOR A
LIMITED PORTION OF THE RISK SEGMENT OF AN INVESTMENT PORTFOLIO.
- - THE TRUST IS THE FIRST MILLBURN RIDGEFIELD CLIENT ACCOUNT TO TRADE THE
"WORLD RESOURCE PORTFOLIO" OF MARKETS.
- - SINGLE-ADVISOR FUNDS SUCH AS THE TRUST ARE TYPICALLY CONSIDERED -- EVEN
AMONG SPECULATIVE MANAGED FUTURES FUNDS -- UNUSUALLY HIGH RISK. MOREOVER,
THE TRUST IS VULNERABLE TO ADVERSE CHANGES AFFECTING MILLBURN RIDGEFIELD
WHICH COULD DIRECTLY IMPACT THE TRUST'S ABILITY TO CONTINUE TRADING.
- - THE TRUST IS SUBJECT TO SUBSTANTIAL CHARGES, PAYABLE IRRESPECTIVE OF
PROFITABILITY, AS WELL AS TO QUARTERLY PROFIT SHARES. THE MANAGING OWNER
ESTIMATES THAT THE TRUST NEEDS TO ACHIEVE TRADING PROFITS AND INTEREST
INCOME IN THE FIRST TWELVE MONTHS AFTER A UNIT IS ISSUED OF APPROXIMATELY
11.5% TO OFFSET EXPENSES AND OF APPROXIMATELY 14.5% TO OFFSET BOTH EXPENSES
AND THE 3% REDEMPTION CHARGES DUE ON UNITS REDEEMED AS OF THE END OF THE
TWELFTH MONTH AFTER ISSUANCE.
- - THE TRUST MAY BE ADVERSELY AFFECTED BY INCREASES IN THE AMOUNT OF FUNDS
MANAGED BY MILLBURN RIDGEFIELD.
- - MILLBURN RIDGEFIELD IS ALMOST EXCLUSIVELY A SYSTEMATIC, TREND-FOLLOWING
TRADER. MARKET CONDITIONS IN WHICH STRONG PRICE TRENDS DO NOT DEVELOP
TYPICALLY RESULT IN SUBSTANTIAL LOSSES FOR TREND-FOLLOWING TRADERS.
- - UNLESS THE TRUST IS SUCCESSFUL, OF WHICH THERE CAN BE NO ASSURANCE, IT
CANNOT SERVE AS A BENEFICIAL DIVERSIFICATION FOR AN INVESTOR'S PORTFOLIO.
SEE "RISK FACTORS" BEGINNING AT PAGE 11 OF THIS PROSPECTUS.
__________________________
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
__________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO PUBLIC SELLING COMMISSIONS PROCEEDS TO TRUST
(1) (4)(5)(6) (2)(3)(4)(5)
---------------- -------------------- ------------------
Per Unit Net Asset Value None Net Asset Value
SEE NOTES ON PAGES (I)-(II).
THE DATE OF THIS PROSPECTUS IS JANUARY __, 1997
(NOT FOR USE AFTER SEPTEMBER __, 1997)
<PAGE>
NOTES TO COVER PAGE
(1) The Units are sold at Net Asset Value.
The Units are offered on a "best efforts" basis without any firm
underwriting commitment through Prudential Securities Incorporated ("Prudential
Securities") and PaineWebber Incorporated ("PaineWebber") (together, the
"Principal Selling Agents"), as well as certain Additional Selling Agents
selected by Millburn Ridgefield with the consent of the Principal Selling Agents
(the Principal Selling Agents and the Additional Selling Agents being
hereinafter collectively referred to as the "Selling Agents").
This Prospectus will first be used to solicit investors on or about the
date hereof.
Units are sold as of the first day of each month. Millburn Ridgefield may,
upon sufficient notice to subscribers, cause the Trust to sell Units at
intra-month closings as well as at the beginning of the month.
Millburn Ridgefield may suspend, limit or terminate the offering at any
time.
(2) Prudential Securities deposits accepted subscription proceeds
directly into the Trust's trading account from subscribers' accounts with
Prudential Securities on the first day of each month. Other subscription
proceeds as received are held in escrow at Chemical Bank, New York, New York,
Escrow Account No. SE14791, pending investment in the Units as of the first day
of the following month.
Interest actually earned on subscriptions while held in escrow is invested
in the Trust, and investors are issued additional Units reflecting each
investor's attributable share of such interest. All subscription funds, plus
all interest earned on such funds, are promptly returned to subscribers in the
event that their subscriptions are rejected.
(3) The Trust's organizational and initial offering expenses were
somewhat in excess of $600,000. Millburn Ridgefield advanced these costs, and
is being reimbursed for them (without interest) by the Trust in 24 equal monthly
installments of $25,000, ending September 30, 1997. The costs of the ongoing
offering of the Units, including the costs of updating this Prospectus, are paid
by the Trust.
(4) The Principal Selling Agents are the clearing brokers and forward
dealers (the "Clearing Brokers") for the Trust, and in such capacity receive
brokerage commissions from Millburn Ridgefield (which receives the Brokerage
Fees paid by the Trust) and dealers' spreads from the Trust. The Trust
allocates its trades among the Clearing Brokers so as approximately to reflect
the amount of outstanding Units sold through each.
The Managing Owner, with the consent of the Principal Selling Agents,
appoints certain Additional Selling Agents to distribute the Units.
See "Plan of Distribution -- Subscription Procedure" at page 66 for
information relating to certain indemnification arrangements with respect to the
Selling Agents.
PaineWebber distributes certain Units through correspondent "introducing
brokers," in which case PaineWebber shares with such correspondents the
selling commissions and ongoing compensation described in Notes (5) and (6)
below due in respect of such Units. Such correspondents must either be
registered as broker-dealers or exempt from such registration, and must
satisfy the same eligibility requirements as the Selling Agents themselves in
order to receive ongoing compensation. Units sold through such "introducing
brokers" are considered to have been sold through PaineWebber for purposes of
allocating the Trust's trading transactions between the Clearing Brokers.
(5) No selling commissions are paid from the proceeds of subscriptions.
The Selling Agents receive, from Millburn Ridgefield, selling commissions equal
to 5% of the subscription price of all Units sold by them. Because Millburn
Ridgefield, not the Trust or the investors, pays the selling commissions, 100%
of all subscriptions is invested in the Units. The Trust is not a "no load"
fund; early redemption charges apply, and the Managing Owner is reimbursed over
time for the selling commissions advanced by it through receipt of the Brokerage
Fees paid by the
-i-
<PAGE>
NOTES TO COVER PAGE (CONT'D)
Trust. However, the Trust's fees have been structured so that
all the capital invested by subscribers is available for trading from the date
of their subscription.
(6) Selling Agents, provided that they (i) are registered with the
Commodity Futures Trading Commission (the "CFTC") as "futures commission
merchants" or "introducing brokers," and (ii) sell Units through Registered
Representatives who are themselves registered with the CFTC, have passed either
the Series 3 National Commodity Futures Examination or the Series 31 Futures
Managed Funds Examination and agree to provide certain ongoing services to
clients, are eligible to receive ongoing compensation in the form of "trailing
commissions." Such "trailing commissions" equal 4% per annum of the average
month-end Net Asset Value per Unit, beginning with the thirteenth month after a
particular Unit is issued and continuing for as long as such Unit remains
outstanding. These "trailing commissions" may be deemed to constitute
"underwriting compensation."
Registered Representatives who are not registered with the CFTC, have not
passed the Series 3 or Series 31 Examination or do not agree to provide ongoing
services to clients in respect of their Units are not eligible to receive
"trailing commissions." Rather, such Registered Representatives and their
Selling Agents are restricted to receiving installment selling commissions.
Such installment selling commissions are paid, also by Millburn Ridgefield, in
the same manner as "trailing commissions." However, installment selling
commissions are limited, when added to the 5% initial selling commissions, to a
total of no more than 9.5% of the initial subscription price of each Unit.
_______________________
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE TRUST, MILLBURN RIDGEFIELD, ANY SELLING AGENT
OR ANY OTHER PERSON.
SUBSCRIBERS WILL BE REQUIRED TO MAKE CERTAIN REPRESENTATIONS AND WARRANTIES
IN THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY.
_______________________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.
_______________________
MILLBURN RIDGEFIELD SENDS ALL UNITHOLDERS ANNUAL AND MONTHLY REPORTS
COMPLYING WITH CFTC AND NATIONAL FUTURES ASSOCIATION ("NFA") REQUIREMENTS. THE
ANNUAL REPORTS CONTAIN CERTIFIED AND AUDITED, AND THE MONTHLY REPORTS UNAUDITED,
FINANCIAL INFORMATION.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A RECENT MONTHLY REPORT OF THE
TRUST.
THE SELLING AGENTS MUST DELIVER ANY SUPPLEMENTED OR AMENDED PROSPECTUS
ISSUED BY THE TRUST.
_______________________
THE DIVISION OF INVESTMENT MANAGEMENT OF THE SECURITIES AND EXCHANGE
COMMISSION REQUIRES THAT THE FOLLOWING STATEMENT BE SET FORTH PROMINENTLY
HEREIN: "THE MILLBURN WORLD RESOURCE TRUST IS NOT A MUTUAL FUND OR ANY OTHER
-ii-
<PAGE>
TYPE OF INVESTMENT COMPANY WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED, AND IS NOT SUBJECT TO REGULATION THEREUNDER."
_______________________
NO SUBSCRIBER SHOULD INVEST MORE THAN 10% OF SUCH SUBSCRIBER'S "LIQUID" NET
WORTH (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES IN THE CASE OF
INDIVIDUALS; READILY MARKETABLE SECURITIES IN THE CASE OF ENTITIES) IN THE
TRUST.
THE TRUST IS SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE SECURITIES
EXCHANGE ACT OF 1934 AND IN ACCORDANCE THEREWITH FILES REPORTS AND OTHER
INFORMATION WITH THE COMMISSION. REPORTS, PROXIES (IF ANY), INFORMATION
STATEMENTS (IF ANY), AND OTHER INFORMATION FILED BY THE TRUST, CAN BE INSPECTED
AND COPIED AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE COMMISSION AT
450 FIFTH STREET, N.W., WASHINGTON, DC 20549 AND AT ITS NORTHEAST REGIONAL
OFFICE AT 7 WORLD TRADE CENTER, SUITE 1300, NEW YORK, NY 10048 AND AT ITS
MIDWEST REGIONAL OFFICE AT CITICORP CENTER, 500 WEST MADISON STREET, SUITE 1400,
CHICAGO, IL 60661. COPIES OF SUCH MATERIAL CAN BE OBTAINED FROM THE PUBLIC
REFERENCE SECTION OF THE COMMISSION, 450 FIFTH STREET, N.W., WASHINGTON, DC
20549 AT PRESCRIBED RATES. THE FUND IS AN ELECTRONIC FILER. THE SEC MAINTAINS
A WEB SITE THAT CONTAINS REPORTS, PROXY AND INFORMATION STATEMENTS, AND OTHER
INFORMATION REGARDING REGISTRANTS THAT FILE ELECTRONICALLY WITH THE SEC, AT
HTTP://WWW.SEC.GOV.
-iii-
<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, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE
POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO
AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT
CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGE
36 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO "BREAKEVEN," THAT IS,
TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGES 7 TO 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 11 TO 18.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE
SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE
POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE
UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR
MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY
BE EFFECTED.
-1-
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
TABLE OF CONTENTS
PROSPECTUS SECTION PAGE
SUMMARY 4
GENERAL 4
PERFORMANCE OF THE TRUST 4
OVERVIEW 4
RISK FACTORS 5
CERTAIN INVESTMENT CONSIDERATIONS 6
REDEMPTIONS 7
CHARGES 7
"BREAKEVEN TABLE" 7
FEDERAL INCOME TAX ASPECTS 9
THE OFFERING 9
GENERAL 10
RISK FACTORS 11
(1) ALL OR SUBSTANTIALLY ALL OF AN
INVESTMENT COULD BE LOST; PAST
PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS 11
(2) VOLATILE MARKETS; HIGHLY
LEVERAGED TRADING 11
(3) HIGHLY VOLATILE
PERFORMANCE 11
(4) RECENTLY DEVELOPED
PORTFOLIO 12
(5) PARTICULAR RISKS
ASSOCIATED WITH A SINGLE-ADVISOR
PORTFOLIO 12
(6) SUBSTANTIAL CHARGES PAYABLE
IRRESPECTIVE OF PROFITABILITY 13
(7) POSSIBLE ADVERSE EFFECTS OF
INCREASING MILLBURN RIDGEFIELD'S
ASSETS UNDER MANAGEMENT 13
(8) MILLBURN RIDGEFIELD'S TECHNICAL,
TREND-FOLLOWING SYSTEMS 13
(9) NON-CORRELATED AS OPPOSED TO
NEGATIVELY CORRELATED PERFORMANCE 14
(10) POSSIBLY ILLIQUID MARKETS 14
(11) "ZERO-SUM" TRADING 15
(12) TRADING ON COMMODITY EXCHANGES
OUTSIDE THE UNITED STATES 15
(13) LIMITED ABILITY TO LIQUIDATE AN
INVESTMENT IN THE UNITS 15
(14) THE TRUST IS SUBJECT TO CONFLICTS
OF INTEREST 15
(15) UNITHOLDERS HAVE NO ROLE
IN MANAGEMENT 16
(16) UNITHOLDERS ARE TAXED ON TRUST
PROFITS ALTHOUGH NOT DISTRIBUTED 16
(17) TAXATION OF INTEREST INCOME
IRRESPECTIVE OF TRADING LOSSES 16
(18) LIMITATIONS ON THE
DEDUCTIBILITY OF "INVESTMENT
ADVISORY FEES" 16
PROSPECTUS SECTION PAGE
RISK FACTORS (CONT'D)
(19) NONDEDUCTIBILITY OF "SYNDICATION
EXPENSES" 17
(20) POSSIBILITY OF TAX AUDIT
OF BOTH THE TRUST AND INDIVIDUAL
UNITHOLDERS 17
(21) BANKRUPTCY OF CLEARING
BROKERS AND CURRENCY DEALERS 17
(22) UNREGULATED MARKETS;
POSSIBLE FUTURE REGULATORY CHANGES 17
INVESTMENT FACTORS 18
PERFORMANCE OF THE TRUST 21
MONTHLY RATES OF RETURN 21
SELECTED FINANCIAL INFORMATION 22
MANAGING OWNER'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 23
THE TRUST AND ITS OBJECTIVES 25
PERFORMANCE POTENTIAL 25
INVESTMENT DIVERSIFICATION 25
MARKET DIVERSIFICATION 26
THE MANAGING OWNER 28
MILLBURN RIDGEFIELD CORPORATION 28
MILLBURN RIDGEFIELD CORPORATION 28
BACKGROUND AND MANAGEMENT 29
TRADING STRATEGIES IN GENERAL 30
MILLBURN RIDGEFIELD TRADING STRATEGY 31
FIDUCIARY OBLIGATIONS OF MILLBURN RIDGEFIELD 33
NATURE OF FIDUCIARY OBLIGATIONS;
CONFLICTS OF INTEREST 33
REMEDIES AVAILABLE TO THE
UNITHOLDERS 34
USE OF PROCEEDS 34
PROCEEDS OF SUBSCRIPTIONS 34
MAINTENANCE OF ASSETS 35
STRATEGIES IMPLEMENTED 36
CHARGES 36
BROKERAGE FEES 37
PROFIT SHARES 39
GENERAL 41
DISTRIBUTION COSTS 41
REDEMPTION CHARGES 42
-2-
<PAGE>
PROSPECTUS SECTION PAGE
REDEMPTIONS; NET ASSET VALUE 43
REDEMPTION PROCEDURE 43
NET ASSET VALUE 43
THE CLEARING BROKERS 44
PRUDENTIAL SECURITIES INCORPORATED 44
PAINEWEBBER INCORPORATED 47
CONFLICTS OF INTEREST 50
GENERAL 50
THE MANAGING OWNER 50
THE CLEARING BROKERS 51
THE SELLING AGENTS 52
PROPRIETARY TRADING AND TRADING
FOR OTHER ACCOUNTS 52
INDEMNIFICATION AND STANDARD
OF LIABILITY 52
THE TRUST AND THE TRUSTEE 53
PRINCIPAL OFFICE; LOCATION OF
RECORDS 53
CERTAIN ASPECTS OF THE TRUST 53
THE TRUSTEE 54
MANAGEMENT OF TRUST AFFAIRS;
VOTING BY UNITHOLDERS 55
RECOGNITION OF THE TRUST IN
CERTAIN STATES 55
POSSIBLE REPAYMENT OF DISTRIBUTIONS
RECEIVED BY UNITHOLDERS;
INDEMNIFICATION OF THE TRUST BY
UNITHOLDERS 55
TRANSFERS OF UNITS RESTRICTED 56
REPORTS TO UNITHOLDERS 56
GENERAL 56
FEDERAL INCOME TAX ASPECTS 57
THE FUTURES AND FORWARD MARKETS 63
FUTURES AND FORWARD CONTRACTS 63
HEDGERS AND SPECULATORS 63
COMMODITY EXCHANGES 63
SPECULATIVE POSITION AND DAILY LIMITS 64
MARGIN 64
PROSPECTUS SECTION PAGE
PURCHASES BY EMPLOYEE BENEFIT PLANS 64
GENERAL 64
"PLAN ASSETS" 65
INELIGIBLE PURCHASERS 65
PLAN OF DISTRIBUTION 66
SUBSCRIPTION PROCEDURE 66
THE SELLING AGENTS 67
LEGAL MATTERS 68
EXPERTS 68
REPORTS 68
ADDITIONAL INFORMATION 68
INDEX OF DEFINED TERMS 69
INDEX TO FINANCIAL STATEMENTS 70
PERFORMANCE OF THE MILLBURN RIDGEFIELD
CLIENT FUNDS AND TRADING PROGRAMS 85
ANNUAL RATES OF RETURN SINCE INCEPTION
OF THE MILLBURN RIDGEFIELD CLIENT FUNDS 95
APPENDIX I -- "BLUE SKY"
GLOSSARY APPI-1
EXHIBIT A--SECOND AMENDED AND
RESTATED DECLARATION OF TRUST
AND TRUST AGREEMENT TA-1
EXHIBIT B--SUBSCRIPTION
REQUIREMENTS SR-1
EXHIBIT C--SUBSCRIPTION
AGREEMENT AND POWER OF ATTORNEY SA-1
____________________
THE EXECUTION COPY OF THE SUBSCRIPTION AGREEMENT AND
POWER OF ATTORNEY ACCOMPANIES THIS PROSPECTUS.
____________________
MILLBURN RIDGEFIELD CORPORATION
600 Steamboat Road
Greenwich, Connecticut 06830
(203) 625-7554
MANAGING OWNER
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<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
SUMMARY
GENERAL
The Millburn World Resource Trust, a Delaware business trust (the "Trust"),
engages in the speculative trading of futures, commodity options and forward
contracts on currencies, interest rates, energy and agricultural products,
metals and stock indices. Millburn Ridgefield Corporation, a Delaware
corporation (the "Managing Owner" or "Millburn Ridgefield"), acts as the
managing owner (the functional equivalent of a general partner in a limited
partnership), commodity pool operator and trading advisor of the Trust. Units
of beneficial interest ("Units") in the Trust are continuously offered, at Net
Asset Value, pursuant to the terms of this Prospectus.
PERFORMANCE OF THE TRUST
- The Trust began trading September 13, 1995 with an initial
capitalization of $15,297,069. Through December 31, 1996, the
Trust's performance has been profitable while exhibiting a high degree
of volatility -- volatility which can be expected to continue.
THE MILLBURN WORLD RESOURCE TRUST
<TABLE>
<CAPTION>
Month-end Month-end
Monthly Net Asset Month-end Monthly Net Asset Month-end
Rate of Value Net Asset Rate of Value Net Asset
1995 Return Per Unit* Value* 1996 Return Per Unit* Value*
- ---- ------- --------- ----------- ----- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sept. (1/2 mo.) (6.62)% $ 933.80 $14,284,924 Jan. (0.36)% $1,068.44 $32,925,030
Oct. (1.92)% 915.83 $17,807,742 Feb. (12.30)% 937.05 $34,377,923
Nov. 0.92 % 924.25 $20,363,730 Mar. 2.94% 964.56 $40,010,844
Dec. 16.02 % 1,072.34 $26,457,277 Apr. 2.55% 989.12 $42,739,498
May (7.88)% 911.19 $40,617,824
1995 COMPOUND RATE OF RETURN (3 1/2 MONTHS)7.23% June 6.64% 971.65 $45,108,706
July (0.36)% 968.18 $45,980,784
Aug. 1.49% 982.59 $46,836,993
Sept. 4.01% 1,022.02 $47,529,825
Oct. 8.09% 1,104.75 $51,392,603
Nov. 4.10% 1,149.99 $54,724,582
Dec. 0.42% 1,154.81 $56,140,318
1996 COMPOUND ANNUAL RATE OF RETURN 7.69%
</TABLE>
COMPOUND RATE OF RETURN SINCE INCEPTION (15 1/2 MONTHS): 11.79%
________________________
* The Month-end Net Asset Value per Unit and Month-end Net Asset Value
figures above reflect a reduction for accrued Profit Shares, if any. The
GAAP Aggregate Net Asset Value figure, but not the Redemption Aggregate
Net Asset Value figure, is reduced, as of December 31, 1995 and December
31, 1996, respectively, by $525,000 and $225,000 of unamortized
organizational and initial offering cost reimbursement payments, which are
accrued for GAAP but not for redemption purposes.
** Subscriptions for a total of $2,396,807 were accepted as of January 1,
1997.
OVERVIEW
- A LEVERAGED, PROFESSIONALLY MANAGED INVESTMENT, THE TRUST TRADES IN A
WIDE RANGE OF DOMESTIC AND INTERNATIONAL MARKETS WITH AN INCREASED
EMPHASIS, AS COMPARED TO MILLBURN RIDGEFIELD'S OTHER CLIENT ACCOUNTS,
ON THE TRADITIONAL COMMODITY MARKETS.
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<PAGE>
SUMMARY (CONT'D)
- PERFORMANCE OBJECTIVES OF SUBSTANTIAL CAPITAL APPRECIATION WITH
CONTROLLED VOLATILITY.
- A BROADLY DIVERSIFIED PORTFOLIO OF INTERNATIONAL MARKET SECTORS.
- MULTIPLE SYSTEMS ARE APPLIED IN EACH MARKET, PROVIDING "INTERNAL"
DIVERSIFICATION TO THE TRUST'S TRADING APPROACH DESPITE ITS USE OF A
SINGLE ADVISOR.
- EQUALLY LIKELY TO BE PROFITABLE OR UNPROFITABLE IN "UP" AS IN "DOWN"
MARKETS; TO DATE, THE PERFORMANCE OF THE TRUST HAS BEEN SIGNIFICANTLY
NON-CORRELATED WITH THE GENERAL UNITED STATES DEBT AND EQUITY MARKETS.
- PERFORMANCE NOT DEPENDENT UPON ANY SINGLE NATION'S ECONOMY OR
CURRENCY.
- THE POTENTIAL, IF SUCCESSFUL, TO PROVIDE A VALUABLE COMPONENT OF
DIVERSIFICATION TO TRADITIONAL PORTFOLIOS.
- OFFERING THE ADVANTAGES OF LIMITED LIABILITY IN HIGHLY LEVERAGED
TRADING, AS WELL AS ADMINISTRATIVE CONVENIENCE IN A BUSINESS TRUST
WHICH IMPLEMENTS COMPLEX TRADING STRATEGIES IN NUMEROUS AND DIVERSE
INTERNATIONAL MARKETS.
- THE TRUST EARNS INTEREST ON APPROXIMATELY 95% OF ITS DAILY NET ASSETS.
- PERSONS INVESTING $1,000,000 OR MORE BENEFIT FROM DISCOUNTED BROKERAGE
FEES, AT NO COST TO OTHER UNITHOLDERS. DISCOUNTED BROKERAGE FEES
APPLY TO SUCH INVESTORS' ENTIRE ACCOUNTS, NOT JUST THAT PORTION
CORRESPONDING TO CAPITAL CONTRIBUTIONS OF $1,000,000 OR MORE.
RISK FACTORS
- INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS: AN
INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. SEE "COMMODITY FUTURES TRADING COMMISSION RISK DISCLOSURE
STATEMENT" AT PAGE 1 AND "RISK FACTOR (1)--ALL OR SUBSTANTIALLY ALL OF
AN INVESTMENT COULD BE LOST; PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS" AT PAGE 11.
- FUTURES AND FORWARD TRADING IS SPECULATIVE, VOLATILE AND LEVERAGED,
AND INVOLVES A HIGH DEGREE OF RISK; TRADING ON FOREIGN FUTURES AND
INTERBANK FORWARD MARKETS MAY INVOLVE ADDITIONAL RISKS. SEE "THE
TRUST AND ITS OBJECTIVES" AT PAGE 25 AND "RISK FACTOR (2)--VOLATILE
MARKETS; HIGHLY LEVERAGED TRADING" AT PAGE 11.
- THE TRUST HAS TO DATE EXHIBITED, AND IS EXPECTED TO CONTINUE TO
EXHIBIT, CONSIDERABLE PERFORMANCE VOLATILITY. THE TRUST'S TRADING HAS
BEEN PROFITABLE THROUGH DECEMBER 31, 1996. THE UNITS ARE SUITABLE
ONLY FOR A LIMITED PORTION OF THE RISK SEGMENT OF AN INVESTMENT
PORTFOLIO. SEE "PERFORMANCE OF THE TRUST" AT PAGE 21 AND "RISK FACTOR
(3)--HIGHLY VOLATILE PERFORMANCE" AT PAGE 11.
- THE TRUST IS THE FIRST MILLBURN RIDGEFIELD CLIENT ACCOUNT TO TRADE THE
"WORLD RESOURCE PORTFOLIO" OF MARKETS AND HAS ONLY BEEN TRADING SINCE
SEPTEMBER 13, 1995. SEE "THE TRUST AND ITS OBJECTIVES" AT PAGE 25 AND
"RISK FACTOR (4)--RECENTLY DEVELOPED PORTFOLIO" AT PAGE 12.
- SINGLE-ADVISOR FUNDS SUCH AS THE TRUST ARE TYPICALLY CONSIDERED --
EVEN AMONG SPECULATIVE MANAGED FUTURES FUNDS -- UNUSUALLY HIGH RISK
AND VOLATILE INVESTMENTS (AN EXPECTATION CONSISTENT WITH THE
PERFORMANCE OF THE TRUST TO DATE). MOREOVER, THE TRUST IS VULNERABLE
TO ADVERSE CHANGES AFFECTING MILLBURN RIDGEFIELD WHICH COULD DIRECTLY
IMPACT THE TRUST'S ABILITY TO CONTINUE TRADING. SEE "RISK FACTOR
(5)--PARTICULAR RISKS ASSOCIATED WITH A SINGLE-ADVISOR PORTFOLIO" AT
PAGE 12.
- THE TRUST IS SUBJECT TO SUBSTANTIAL CHARGES, PAYABLE IRRESPECTIVE OF
PROFITABILITY, AS WELL AS TO QUARTERLY PROFIT SHARES. THE MANAGING
OWNER ESTIMATES THAT THE TRUST NEEDS TO ACHIEVE TRADING PROFITS AND
INTEREST INCOME IN THE FIRST TWELVE MONTHS AFTER A UNIT IS ISSUED OF
APPROXIMATELY 11.5% TO OFFSET EXPENSES, AND OF APPROXIMATELY 14.5% TO
OFFSET BOTH EXPENSES AND THE 3% REDEMPTION CHARGE DUE ON
-5-
<PAGE>
SUMMARY (CONT'D)
UNITS REDEEMED AS OF THE END OF THE TWELFTH MONTH AFTER ISSUANCE. SEE
"CHARGES" AT PAGE 36 AND "RISK FACTOR (6)--SUBSTANTIAL CHARGES PAYABLE
IRRESPECTIVE OF PROFITABILITY" AT PAGE 13.
- THE TRUST MAY BE ADVERSELY AFFECTED BY INCREASES IN THE AMOUNT OF
FUNDS MANAGED BY MILLBURN RIDGEFIELD. SEE "RISK FACTOR (7)--POSSIBLE
ADVERSE EFFECTS OF INCREASING MILLBURN RIDGEFIELD'S ASSETS UNDER
MANAGEMENT" AT PAGE 13.
- MILLBURN RIDGEFIELD IS ALMOST EXCLUSIVELY A SYSTEMATIC,
TREND-FOLLOWING TRADER. MARKET CONDITIONS IN WHICH STRONG PRICE
TRENDS DO NOT DEVELOP TYPICALLY RESULT IN SUBSTANTIAL LOSSES FOR
TREND-FOLLOWING TRADERS. THE NUMBER OF SYSTEMATIC TRADERS HAS
INCREASED SIGNIFICANTLY IN RECENT YEARS, INCREASING COMPETITION.
SEE "MILLBURN RIDGEFIELD CORPORATION" AT PAGE 28 AND "RISK FACTOR
(8)--MILLBURN RIDGEFIELD'S TECHNICAL, TREND-FOLLOWING SYSTEMS" AT
PAGE 13.
- UNLESS THE TRUST IS SUCCESSFUL, OF WHICH THERE CAN BE NO ASSURANCE, IT
CANNOT SERVE AS A BENEFICIAL DIVERSIFICATION FOR AN INVESTOR'S
PORTFOLIO. SEE "RISK FACTOR (9)--NON-CORRELATED AS OPPOSED TO
NEGATIVELY CORRELATED PERFORMANCE" AT PAGE 14.
____________________
CERTAIN INVESTMENT CONSIDERATIONS
- As of January 1, 1997, the Managing Owner was directing the trading of
approximately $569 million of client and proprietary capital,
approximately $93 million of which was being managed pursuant to the
World Resource Portfolio used by the Trust. The Trust is the largest
account managed pursuant to this Portfolio. Millburn Ridgefield has
been continuously managing client funds in the futures and forward
markets for 25 years.
- Millburn Ridgefield employs a highly systematic, trend-following
approach relying primarily on technical, price-based information. The
objective is to identify and profit from sustained market trends while
limiting losses in trendless markets.
- Although Millburn Ridgefield applies the same systems in managing the
Trust as Millburn Ridgefield does in managing its other accounts, the
allocation of the Trust's trading commitments -- referred to by
Millburn Ridgefield as the "World Resource Portfolio" -- among the
various markets places greater emphasis on the non-financial markets
(particularly, energy and metals) than do other Millburn Ridgefield
accounts.
- The Managing Owner implements multiple trading systems (generally, at
least three) in each market traded. Each system is operated
independently in an attempt to identify price trends through different
analytical techniques, and only when all systems indicate that a major
price trend is in progress will the Managing Owner acquire the maximum
position allowed by its risk control parameters. The use of multiple
systems gives Millburn Ridgefield's strategy a potentially valuable
dimension of internal diversification.
- Millburn Ridgefield imposes a risk control overlay which limits
exposure to any single market based on volatility analysis.
- The Managing Owner believes that there is a potential during the
closing years of the 1990s for a number of major price trends to occur
in the energy, agricultural and metal markets. The Managing Owner's
trend-following trading systems typically are most profitable when
major price movements occur.
- The Managing Owner has the ability to shift capital readily among
different international economies and markets.
- The Trust has to date been and is expected to continue to be largely
non-correlated with traditional portfolio components such as stocks
and bonds.
-6-
<PAGE>
SUMMARY (CONT'D)
- An investment in the Trust can, BUT ONLY IF THE TRUST ITSELF IS
SUCCESSFUL, improve the reward/risk profile of an overall portfolio.
- The Trust should be considered a medium- to long-term investment (2 to
3 years).
REDEMPTIONS
No market exists for the Units. Units may be redeemed as of the end of any
calendar month, upon 10 business days' prior written notice to the Managing
Owner, subject to redemption charges of 4% and 3% of redemption date Net Asset
Value, respectively, through the end of the sixth and from the end of the sixth
through the end of the twelfth full calendar months after Units are sold. In
the case of subscriptions of $1,000,000 or more, redemption charges are reduced
to 3% and 2%, respectively. All such charges are paid to the Managing Owner.
(Units are considered sold, for purposes of determining whether redemption
charges apply, on the day -- the first day of the month -- that their
subscription proceeds are invested in the Trust, not the day subscriptions are
accepted or subscription funds deposited into escrow.)
CHARGES
The Trust pays substantial charges. Annual Brokerage Fees, Profit Shares
(potentially even in "breakeven" or losing years), administrative expenses and
organizational and initial offering cost reimbursements together are estimated
to total approximately 11.5% of the Trust's average month-end Net Assets; and 4%
(for the first six months) and 3% (for the second six months) redemption charges
are in effect through the end of the first twelve months after a Unit is sold.
At current interest rates, the charges to which the Trust is subject
substantially exceed the interest it earns on its assets.
During 1996, the Trust had paid the following fees and Profit Shares
(average month-end Net Assets during this period equaled approximately $45
million):
JANUARY 1, 1996 -- DECEMBER 31, 1996
AMOUNT AS %
OF AVERAGE
FEE OR PROFIT SHARE $ AMOUNT MONTH-END NET ASSETS
------------------- ---------- ---------------------
Brokerage Fees $3,998,675 8.92%
Administrative Expenses 238,630 0.53
Reimbursement of Organizational 581,124 1.30
and Initial Offering Costs
Profit Shares 829,080 1.85
---------- ------
TOTAL $5,647,509 12.60%
During 1996, total interest income of $2,115,972 or 4.72% of average
month-end Net Assets was earned by the Trust. As of December 31, 1996, the
Net Asset Value of a Unit initially issued as of September 13, 1995 for
$1,000 and which had a Net Asset Value as of January 1, 1996 of $1,072.34 was
$1,154.81.
The only variables, as a percentage of average month-end Net Assets, in the
Trust's ongoing expenses are the amounts of the Profit Share and ongoing
administrative expenses. The latter are, in any event, DE MINIMIS as a
percentage of the Trust's capitalization. Organizational and initial offering
cost reimbursements are fixed at $25,000 per month through September 30, 1997,
but vary as a percentage of the Trust's month-end Net Assets. Brokerage Fees
are fixed at 9.0% of the Trust's average month-end Net Assets (7.0% in the case
of Unitholders who invest $1,000,000 or more).
The amount of interest income earned by the Trust varies materially over
time with prevailing interest rates.
"BREAKEVEN TABLE"
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<PAGE>
SUMMARY (CONT'D)
ONE OF THE PRINCIPAL RISKS OF MANY PUBLICLY-OFFERED FUTURES FUNDS SUCH AS
THE TRUST IS THE MAGNITUDE OF THE COSTS WHICH THEY MUST DEFRAY TO AVOID NET
ASSET VALUE DEPLETION SOLELY AS A RESULT OF THEIR EXPENSES.
THE FOLLOWING "BREAKEVEN TABLE" INDICATES THE APPROXIMATE PERCENTAGE AND
DOLLAR RETURNS REQUIRED FOR THE REDEMPTION VALUE OF AN INITIAL $5,000 INVESTMENT
IN THE UNITS TO EQUAL, TWELVE MONTHS AFTER ISSUANCE, THE AMOUNT ORIGINALLY
INVESTED.
"BREAKEVEN TABLE" (CONT'D)
MILLBURN RIDGEFIELD BELIEVES THAT THE PROFIT SHARES, ADMINISTRATIVE
EXPENSES AND INTEREST INCOME INCLUDED IN THE "BREAKEVEN TABLE" ARE REASONABLE
ESTIMATES, AND ACTUAL FEES PAID BY THE TRUST TO DATE HAVE BEEN GENERALLY
CONSISTENT WITH THE FOLLOWING ESTIMATES. HOWEVER, BASED ON THE TRUST'S
EXPERIENCE TO DATE, DURING CERTAIN LOSING OR "BREAKEVEN" PERIODS PROFIT SHARES
HAVE EXCEEDED (BY APPROXIMATELY 1% OF AVERAGE MONTH-END NET ASSETS ON AN
ANNUALIZED BASIS) THE ESTIMATE SET FORTH BELOW.
COLUMN I COLUMN II
PERCENTAGE DOLLAR RETURN REQUIRED
RETURN REQUIRED ($5,000 INITIAL INVESTMENT)
FIRST TWELVE MONTHS FIRST TWELVE MONTHS
ROUTINE EXPENSES(1) OF INVESTMENT OF INVESTMENT
Brokerage Fees 9.00% $450.00
Administrative Expenses(2) 0.50% $25.00
Reimbursement of Organizational
and Initial Offering Costs(3) 1.00% $50.00
Profit Share(4) 1.00% $50.00
Redemption Charge(5) 3.10% $155.00
Less Interest Income(6) (5.00)% $(250.00)
RETURN ON $5,000
INITIAL INVESTMENT
REQUIRED FOR
"BREAKEVEN" 9.60% $480.00
- -------------------
(1) See the foregoing detail of the actual charges to the Trust for 1996 and
"Charges" at page 36 for an explanation of the expenses and Profit Share
included in the "Breakeven Table."
(2) Administrative Expenses are estimated at no more than 0.5 of 1% of average
month-end Net Assets annually. Actual administrative expenses incurred
during 1996 were $238,630 or 0.53 of 1% of average month-end Net Assets.
(3) The Managing Owner advanced the organizational and initial offering costs
of the Trust and is being reimbursed by the Trust in 24 monthly
installments of $25,000, ending September 30, 1997.
(4) The Profit Share is calculated on the basis of the overall profits of the
Trust, not the investment experience of any particular Unit. Furthermore,
the Profit Share is calculated quarterly, not annually, on the basis of the
overall profits of the Trust. The 1% Profit Share assumed during a
"breakeven" year is intended, in part, to reflect possible timing
differences between quarterly Profit Shares and annual performance, as well
as Profit Share misallocations which result from charging all Units the
same Profit Share, regardless of the time of purchase. Substantial
quarterly Profit Shares may be allocated to the Managing Owner in respect
of interim quarters even during a "breakeven" (as well as an unprofitable)
year. Furthermore, certain Units may pay an allocable Profit Share even
though such Units have only "broken even" (or declined) in Net Asset Value
from their original purchase price. The 1% Profit Share charge is also
included as a reflection of the approximately 0.7% Profit Share which would
accrue on the approximately 4% New Trading Profit which would be necessary
to offset the 3% redemption charge applied to Units redeemed as of the end
of the twelfth month after their issuance and the 1% annual (for the first
24 months of trading) organizational and initial offering cost
reimbursements. Redemption charges and such reimbursement payments do not
reduce New Trading Profit for purposes of calculating Profit Shares.
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<PAGE>
SUMMARY (CONT'D)
(5) Redemption charges would equal 3.1% of the initial $5,000 investment
because these charges would equal 3% of the $5,155 Net Asset Value required
so that, after subtraction of the 3% redemption charge, the investor would
receive net redemption proceeds of $5,000.
(6) Interest income is estimated based on the yields on 91-day Treasury bills
as of the date of this Prospectus, approximately 5%. Interest income at
the annual rate of approximately 5% is consistent with the Trust's
experience to date.
FEDERAL INCOME TAX ASPECTS
The Trust is treated as a partnership for federal income tax purposes and
not as a "publicly-traded partnership." As a result, the Trust itself is not
subject to federal income tax; instead, investors report on their individual tax
returns their allocable share of the Trust's income, gain, loss or deduction,
whether or not they redeem any of their Units and whether or not any
distributions are made.
The Trust's interest income is taxable to Unitholders irrespective of
trading losses, which generally constitute capital losses whereas interest
income is taxed as ordinary income. Non-corporate Unitholders' capital losses
may only be used to offset interest income to a very limited extent.
Non-corporate Unitholders may be required to treat the Trust's expenses as
"investment advisory fees" which are subject to substantial restrictions on
deductibility for federal income tax purposes. In addition, the Internal
Revenue Service could contend that the Profit Share should be characterized as
an "investment advisory fee." Absent statutory or administrative clarification
to the contrary, Millburn Ridgefield is not treating either the Trust's expenses
or the Profit Share as "investment advisory fees" but rather as ordinary and
necessary business expenses and, in the case of the Profit Share, as an
allocation of capital gain to Millburn Ridgefield.
THE OFFERING
- Units are sold at Net Asset Value as of the first business day of each
calendar month (Millburn Ridgefield may, from time to time, also
permit certain intra-month closings).
- $5,000 minimum investment; $2,000 for trustees or custodians of
eligible employee benefit plans and individual retirement accounts.
Incremental investments are permitted in multiples of $100. Existing
investors subscribing for additional Units may do so in $1,000
minimums, also with $100 increments. Units are sold in fractions
calculated to three decimal places.
- AN INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE
OF RISK. INVESTORS MUST BE PREPARED TO LOSE ALL OR SUBSTANTIALLY ALL
OF THEIR SUBSCRIPTIONS. NO ONE MAY INVEST MORE THAN 10% OF HIS OR HER
"LIQUID" NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES IN
THE CASE OF INDIVIDUALS; READILY MARKETABLE SECURITIES IN THE CASE OF
ENTITIES) IN THE TRUST.
- Subscribers must complete, execute and deliver to their Selling Agent
the Subscription Agreement and Power of Attorney Signature Page which
accompanies this Prospectus. THE SUBSCRIPTION AGREEMENT AND POWER OF
ATTORNEY REQUIRES INVESTORS TO MAKE CERTAIN SPECIFIED REPRESENTATIONS
AND WARRANTIES. SUBSCRIBERS SHOULD CAREFULLY READ (I) EXHIBIT B --
SUBSCRIPTION REQUIREMENTS, (II) EXHIBIT C -- SUBSCRIPTION AGREEMENT
AND (III) THE SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE
PAGE WHICH ACCOMPANIES THIS PROSPECTUS IN ADDITION TO REVIEWING THIS
ENTIRE PROSPECTUS CAREFULLY BEFORE THEY DECIDE WHETHER TO INVEST IN
THE UNITS. See "Plan of Distribution -- Subscription Procedure" at
page 66.
____________________
-9-
<PAGE>
SUMMARY (CONT'D)
GENERAL
FUTURES AND FORWARD TRADING INVOLVES A HIGH DEGREE OF RISK. AN INVESTMENT
IN THE TRUST IS SPECULATIVE, AND SUITABLE ONLY FOR A LIMITED PORTION OF THE RISK
SEGMENT OF AN INVESTOR'S PORTFOLIO. THERE CAN BE NO ASSURANCE THAT THE TRUST
WILL ACHIEVE ITS OBJECTIVES OR AVOID SUBSTANTIAL LOSSES.
NO ONE SHOULD INVEST MORE IN THE TRUST THAN HE OR SHE CAN AFFORD TO LOSE,
AND IN NO EVENT MORE THAN 10% OF HIS OR HER READILY MARKETABLE ASSETS. AN
INVESTMENT IN THE TRUST IS SUITABLE ONLY FOR A LIMITED PORTION OF THE RISK
SEGMENT OF A PORTFOLIO.
PROSPECTIVE SUBSCRIBERS SHOULD CONSIDER THE HIGHLY LEVERAGED AND
SPECULATIVE NATURE OF AN INVESTMENT IN THE TRUST BEFORE DETERMINING WHETHER SUCH
AN INVESTMENT IS CONSISTENT WITH THEIR OVERALL PORTFOLIO OBJECTIVES.
THE TRUST IS THE FIRST, AND REMAINS THE LARGEST, MILLBURN RIDGEFIELD CLIENT
ACCOUNT TO TRADE THE WORLD RESOURCE PORTFOLIO OF MARKET ALLOCATIONS.
THE PERFORMANCE OF THE TRUST THROUGH THE DATE OF THIS PROSPECTUS HAS
DEMONSTRATED A SIGNIFICANT DEGREE OF VOLATILITY, ONE WIDELY-ACCEPTED MEASURE OF
RISK.
THESE ARE SPECULATIVE SECURITIES. INVESTORS MAY LOSE ALL
OR SUBSTANTIALLY ALL OF THEIR INVESTMENT IN THE TRUST.
-10-
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE UNITS IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. A PURCHASER MAY LOSE ALL OR SUBSTANTIALLY ALL OF HIS OR HER INVESTMENT IN
THE TRUST. THE PROFITABILITY OF THE TRUST DEPENDS ON MILLBURN RIDGEFIELD
TRADING SUCCESSFULLY. THERE CAN BE NO ASSURANCE WHATSOEVER THAT MILLBURN
RIDGEFIELD WILL DO SO, AND IF IT DOES NOT, THE TRUST CANNOT BE SUCCESSFUL EITHER
AS A STAND-ALONE INVESTMENT OR AS AN ELEMENT OF DIVERSIFICATION FOR AN OVERALL
PORTFOLIO.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING RISK FACTORS BEFORE
DECIDING WHETHER TO SUBSCRIBE FOR UNITS.
(1) ALL OR SUBSTANTIALLY ALL OF AN INVESTMENT COULD BE LOST;
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
The success of the Trust is entirely speculative. There can be no
assurance that the Trust will achieve any of its risk control or rate of return
objectives. Investors may lose all or substantially all of their investment.
Through December 31, 1996, the Trust has been profitable, but has exhibited
significant volatility -- one widely-accepted measure of risk. For example, in
December 1995, a gain of 16.02% was recognized by the Trust, whereas the Trust
incurred a (12.30)% loss in February 1996 and a (6.62)% loss in its first two
weeks of trading in September 1995. The deviation between these high and low
returns is very high, and over only a brief period of trading. During fifteen
and one-half months of trading, the Trust has had 9 months in which it has been
profitable. See "Performance of the Trust" at page 21.
In speculative trading such as that in which the Trust engages, past
performance is not necessarily indicative of future results. The evolving
character of both the markets in which the Trust participates increases the
uncertainty of its future performance.
Not only is the World Resource Portfolio a recently developed weighting of
the markets to which Millburn Ridgefield's systems are applied, but also these
systems are themselves continually evolving, so that the systems used to date
for the Trust may not be representative of those which will be used in the
future.
BECAUSE PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS,
INVESTORS SHOULD NOT INVEST IN THE TRUST IN RELIANCE ON MILLBURN RIDGEFIELD'S
PERFORMANCE TO DATE. INVESTORS MUST BE PREPARED TO LOSE ALL OR SUBSTANTIALLY
ALL OF THEIR INVESTMENT IN THE TRUST.
(2) VOLATILE MARKETS; HIGHLY LEVERAGED TRADING
The Trust trades in volatile markets. Such volatility, combined with the
high degree of leverage employed in these markets, results in a high degree of
risk.
An extraordinarily high degree of leverage is available in the markets in
which the Trust trades. The Trust generally holds positions with a face value
as much as six, and possibly as much as ten or more, times its Net Asset Value.
Consequently, even a slight adverse movement in the prices of the Trust's open
positions could result in significant losses.
THE COMBINATION OF MARKET VOLATILITY AND HIGHER LEVERAGE MEANS THAT THE
TRUST COULD INCUR SUBSTANTIAL LOSSES IN SHORT PERIODS OF TIME, IMPAIRING ITS
EQUITY BASE AND ABILITY TO ACHIEVE ITS LONG-TERM PROFIT OBJECTIVES.
(3) HIGHLY VOLATILE PERFORMANCE
A multi-advisor approach is frequently employed by managed futures funds in
an effort to protect against major drawdowns and limit performance volatility
through diversification. The performance of a single-advisor futures fund would
typically be expected to be more volatile than that of a multi-advisor pool. IN
FACT, THE
-11-
<PAGE>
PERFORMANCE OF THE TRUST TO DATE HAS EXHIBITED A HIGH DEGREE OF VOLATILITY
AND CAN BE EXPECTED TO CONTINUE TO DO SO IN THE FUTURE.
VOLATILE PERFORMANCE INDICATES THAT SUDDEN AND SUBSTANTIAL LOSSES ARE
LIKELY FROM TIME TO TIME TO BE INCURRED BY THE TRUST AS WELL AS THAT THE
DAY-TO-DAY VALUE OF THE UNITS IS VARIABLE AND UNCERTAIN. THE NET ASSET VALUE
PER UNIT MAY CHANGE MATERIALLY BETWEEN THE DATE A REDEMPTION IS REQUESTED AND
THE MONTH-END OF REDEMPTION.
(4) RECENTLY DEVELOPED PORTFOLIO
THE TRUST HAS BEEN TRADING SINCE SEPTEMBER 13, 1995. NO MILLBURN
RIDGEFIELD ACCOUNT TRADED THE WORLD RESOURCE PORTFOLIO PRIOR TO JANUARY 1995,
AND ONLY ONE PROPRIETARY ACCOUNT, THE TRUST AND TWO ADDITIONAL CLIENT ACCOUNTS
HAVE DONE SO SINCE THEN. AS OF JANUARY 1, 1997, THE ASSETS OF THE TRUST
REPRESENT OVER 62% OF THE TOTAL CLIENT ASSETS BEING MANAGED PURSUANT TO THE
WORLD RESOURCE PORTFOLIO.
THERE CAN BE NO ASSURANCE THAT THE NON-FINANCIAL COMMODITY MARKETS WILL
EXPERIENCE MORE FAVORABLE TRENDS OVER THE MEDIUM- TO LONG-TERM THAN WILL THE
CURRENCY AND FINANCIAL MARKETS. THE MARKET EMPHASIS OF THE TRUST MAY CAUSE IT
TO MISS PROFIT OPPORTUNITIES ON WHICH IT WOULD OTHERWISE HAVE CAPITALIZED, AS
WELL AS TO INCUR LOSSES WHICH IT OTHERWISE WOULD HAVE AVOIDED. IF THERE IS, IN
FACT, LITTLE INFLATION (OR PERHAPS EVEN DEFLATION) IN THE CLOSING YEARS OF THE
1990S, THE PROFIT POTENTIAL OF THE WORLD RESOURCE PORTFOLIO COULD BE
SIGNIFICANTLY DIMINISHED. CURRENTLY, THE LEADING MARKET INDICATORS APPEAR TO
SUGGEST THAT IT IS DOUBTFUL THAT THE UNITED STATES ECONOMY (ONE OF THE MAJOR
MARKETS IN WHICH THE TRUST TRADES AND ONE WHICH MATERIALLY AFFECTS OTHER
INTERNATIONAL MARKETS) WILL EXPERIENCE ANY SIGNIFICANT INFLATION IN THE NEAR
FUTURE.
THE TRUST ITSELF HAS A LIMITED PERFORMANCE HISTORY, AND MILLBURN
RIDGEFIELD HAS LIMITED EXPERIENCE TRADING THE WORLD RESOURCE PORTFOLIO.
CONSEQUENTLY, INVESTORS HAVE ONLY LIMITED INFORMATION ON WHICH TO MAKE AN
INVESTMENT DECISION REGARDING THE UNITS.
(5) PARTICULAR RISKS ASSOCIATED WITH A SINGLE-ADVISOR PORTFOLIO
Even in the speculative field of managed futures, single advisor funds are
considered to be unusually high risk investments. The application of single
strategies to the highly leveraged and volatile futures and forward markets
inherently involves greater risk of loss than the diversified, multi-advisor
approach implemented by many "commodity pools" (and often specifically for the
purpose of controlling the risk of loss). In addition to being managed by a
single advisor, the Millburn Ridgefield trading systems may have a tendency,
even in Millburn Ridgefield's diversified portfolios such as the World Resource
Portfolio, to concentrate the Trust's positions in a limited group of markets.
Portfolio concentration increases the risk of loss. Despite its generally
diversified approach, the World Resource Portfolio nevertheless concentrates 50%
of its market exposure in the currency and financial instrument sectors -- both
of which are materially impacted by interest-rate movements.
An important risk of a single-advisor structure -- unrelated to market or
trading risk -- is that were the management services of Millburn Ridgefield to
become unavailable for any reason, the Trust would terminate. Furthermore, were
the services of certain principals of Millburn Ridgefield to become unavailable
for any reason, the effect on Millburn Ridgefield could be material and adverse.
Were Millburn Ridgefield to lose the services of any of its principals, Millburn
Ridgefield would either continue to manage the Trust (in doing which Millburn
Ridgefield could be subject to material conflicts of interest) or dissolve it
(perhaps at a disadvantageous period in the markets or before Millburn
Ridgefield's strategies had a realistic opportunity to achieve their
objectives). In a single-advisor fund such as the Trust, there is no recourse
or "fall back" on which investors can rely in the event of a material, adverse
change in such advisor. The Trust, in fact, is in a potentially more vulnerable
position in this respect than many single advisor funds in which there is an
independent general partner or managing owner which operates the fund. An
independent general partner or managing owner can provide not only a valuable
source of ongoing supervision and monitoring of the single advisor's trading,
but also a source of continuity and stability in the event of adverse events
affecting such advisor. In the case of the Trust, there is no party other than
Millburn Ridgefield to monitor or manage the Trust or to protect and continue it
in the case of adverse developments at Millburn Ridgefield.
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NOT ONLY DOES THE TRUST'S SINGLE-ADVISOR STRUCTURE INHERENTLY PROVIDE LESS
DIVERSIFICATION AND RISK CONTROL THAN WOULD A MULTI-ADVISOR FUND, BUT ALSO THE
VIABILITY OF AN INVESTMENT IN THE TRUST WILL DEPEND UPON THE CONTINUED
AVAILABILITY OF CERTAIN "KEY" MILLBURN RIDGEFIELD PRINCIPALS. THERE CAN BE NO
ASSURANCE OF SUCH CONTINUED AVAILABILITY.
(6) SUBSTANTIAL CHARGES PAYABLE IRRESPECTIVE OF PROFITABILITY
The Trust pays annual Brokerage Fees equal to 9.0% of its average month-end
Net Assets, prior to reduction for any accrued but unpaid fees. Trading profits
and interest income sufficient to defray these Brokerage Fees, as well as
ongoing administrative costs and organizational and initial offering cost
reimbursement obligations, must be recognized in order to avoid depletion of the
Trust's assets. The cumulative effect of these costs results in the Trust
having to achieve trading profits and interest income estimated at approximately
11.5% of average month-end Net Assets in order for the Net Asset Value per Unit
to equal the initial subscription price as of the end of the first twelve months
after a Unit is issued. This 11.5% estimate would be increased to approximately
14.5% in order for the redemption value per Unit, after the 3% redemption charge
(on subscriptions of less than $1,000,000), to equal the initial subscription
price twelve months after issuance.
Trading profits (if any) recognized by the Trust are subject to the
Managing Owner's 17.5% quarterly Profit Share. Moreover, New Trading Profit is
calculated on the basis of the overall profits of the Trust, not increases in
the Net Asset Value per Unit. Certain Units have been and could in the future
be allocated substantial Profit Share expense despite having declined
substantially in Net Asset Value from their purchase price. Conversely, accrued
Profit Shares which reduce the Net Asset Value per Unit at the time of purchase,
if reversed due to subsequent losses, are misallocated -- I.E., allocated
equally to all outstanding Units rather than only to those outstanding during
the period when such Profit Share accrued. See "Charges -- Profit Shares" at
pages 39-40.
During 1996, the Trust paid Brokerage Fees of $3,998,675 or 8.92% of
average month-end Net Assets, and Profit Shares of $829,080 or 1.85% of average
month-end Net Assets.
THE TRUST IS SUBJECT TO SUBSTANTIAL COSTS AND MUST RECOGNIZE EQUALLY
SUBSTANTIAL PROFITS IN ORDER TO OFFSET THESE COSTS. MILLBURN RIDGEFIELD, WHICH
IS THE RECIPIENT OF THE BULK OF THE TRUST'S FEES, COULD RECOGNIZE SIGNIFICANT
PROFITS FROM ITS ASSOCIATION WITH THE TRUST, WHILE THE TRUST ITSELF INCURS
LOSSES.
(7) POSSIBLE ADVERSE EFFECTS OF INCREASING MILLBURN RIDGEFIELD'S ASSETS UNDER
MANAGEMENT
Millburn Ridgefield has not agreed to limit the amount of additional equity
which it may manage. The rates of return achieved by trading advisors often
tend to degrade as assets under management increase. There can be no assurance
that Millburn Ridgefield's strategies will not be adversely affected by the
additional equity, including the Trust's account, accepted by Millburn
Ridgefield. Millburn Ridgefield may be more limited in the amount of assets
which it can trade in the non-financial commodities markets than it is in the
currency and financial markets, due to the generally greater illiquidity of the
former. Historically, managed futures advisors' returns have tended to diminish
as the amount of assets managed by them have increased, and Millburn Ridgefield
itself generally achieved higher rates of return prior to 1991 (the five-year
CFTC "cut-off" date for required performance presentation) when it was managing
fewer assets than it has recently. See "Annual Rates of Return Since Inception
of the Millburn Ridgefield Client Funds" at page 95.
The World Resource Portfolio incorporates agricultural markets to a greater
extent than do Millburn Ridgefield's other programs. The agricultural markets
tend to be less liquid than the financial markets, and daily speculative
position limits remain applicable to the former ("position accountability"
having replaced speculative position limits in the latter). Consequently, the
adverse effects of accepting additional equity under management may be more
pronounced in the World Resource Portfolio than in other Millburn Ridgefield
programs.
MILLBURN RIDGEFIELD ACTIVELY MARKETS ITS MANAGEMENT SERVICES TO PROSPECTIVE
INVESTORS AND THE ASSETS UNDER ITS MANAGEMENT MAY, AT ANY TIME, INCREASE
SUBSTANTIALLY. THERE CAN BE NO ASSURANCE THAT INCREASED EQUITY UNDER MILLBURN
RIDGEFIELD'S MANAGEMENT WILL NOT IMPAIR THE TRUST'S PROFIT POTENTIAL.
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(8) MILLBURN RIDGEFIELD'S TECHNICAL, TREND-FOLLOWING SYSTEMS
The profitability of any trading system based on technical trend-following
analysis, such as that used by Millburn Ridgefield, depends upon the future
occurrence of significant sustained price movements in at least some of the
markets traded. In the past there have been sustained periods without such
price movements occurring, and Millburn Ridgefield expects such periods to
recur.
There has been, in recent years, a major proliferation in the use of
technical trading systems, particularly trend-following systems. Millburn
Ridgefield's systems are based on the mathematical analysis of historical price
data. As the capital under the management of trading systems based on the same
general principles increases, an increasing number of traders may attempt to
initiate or liquidate substantial positions at or about the same time as the
Trust, or otherwise alter historical trading patterns or affect the execution of
trades, to the significant detriment of the Trust.
Although the Trust is as likely to be profitable as unprofitable in up or
down markets (it has had significant gains as well as losses during the
sustained bull market since it began trading), there is some tendency for
managed futures products -- particularly those managed by systematic,
trend-following advisors -- to perform similarly during the same or
approximately the same periods. Prospective investors must recognize that
the success of the Trust is substantially dependent on general market
conditions over which Millburn Ridgefield has no control.
Although Millburn Ridgefield applies highly systematic strategies, these
strategies retain certain discretionary aspects. Decisions, for example,
regarding which contracts to trade, method of order entry, the number of
contracts to be traded relative to the equity in an account and whether to
modify or simply not implement trading signals generated by the Millburn
Ridgefield systems require judgmental input from individual principals.
Discretionary decision-making may result in Millburn Ridgefield failing to
capitalize on certain price trends or making unprofitable trades in situations
when a more wholly systematic approach would not have done so.
THE ALMOST EXCLUSIVELY TECHNICAL, SYSTEMATIC CHARACTER OF THE MILLBURN
RIDGEFIELD TRADING STRATEGY MEANS THAT THE TRUST COULD INCUR SIGNIFICANT LOSSES
UNDER CERTAIN MARKET CONDITIONS IN WHICH DISCRETIONARY OR OTHER TRADING
APPROACHES PROSPER.
IF THE TYPE OF TRENDING MARKET CONDITIONS WHICH THE MILLBURN RIDGEFIELD
TRADING STRATEGY IS DESIGNED TO EXPLOIT DO NOT OCCUR WITH SOME FREQUENCY,
INVESTORS MUST EXPECT TO INCUR SUBSTANTIAL LOSSES. MILLBURN RIDGEFIELD'S
DISCRETIONARY DECISIONS REGARDING THE IMPLEMENTATION OF ITS TRADING SYSTEMS MAY
CAUSE THESE SYSTEMS TO PERFORM POORLY EVEN IN FAVORABLE MARKET CONDITIONS.
(9) NON-CORRELATED AS OPPOSED TO NEGATIVELY CORRELATED PERFORMANCE
The Trust anticipates that over time its performance will be non-correlated
with the general equity and debt markets, as it has been in the Trust's trading
history to date. NON-CORRELATION, however, is not NEGATIVE CORRELATION. The
Trust will by no means necessarily be profitable during downward cycles in stock
and bond prices. Non-correlation means only that the performance of the Trust
may or may not be similar to that of the general financial markets; not that
there should be an inverse relationship between them -- stock indices may rise
while Unit values fall as well as while Unit values rise. During certain
periods, the Trust has performed and may continue to perform in a manner very
similar to more traditional portfolio holdings, providing little, if any,
diversification benefits.
IF THE TRUST DOES NOT PERFORM IN A MANNER NON-CORRELATED WITH THE GENERAL
FINANCIAL MARKETS, INVESTORS WILL OBTAIN NO DIVERSIFICATION BENEFITS BY
INVESTING IN THE UNITS. FURTHERMORE, BECAUSE THE TRUST'S PERFORMANCE IS
EXPECTED TO BE NON-CORRELATED, NOT NEGATIVELY CORRELATED, WITH THE GENERAL STOCK
AND BOND MARKETS, IT IS POSSIBLE THAT THE TRUST COULD INCUR SUBSTANTIAL LOSSES
DURING THE SAME PERIOD THAT AN INVESTOR'S TRADITIONAL PORTFOLIO COMPONENTS ARE
ALSO DECLINING IN VALUE.
DURING ITS PERFORMANCE HISTORY TO DATE, THE VOLATILITY OF THE TRUST'S
PERFORMANCE HAS SUBSTANTIALLY EXCEEDED THAT OF THE EQUITY OR DEBT MARKETS.
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(10) POSSIBLY ILLIQUID MARKETS
Although generally highly liquid, the markets in which the Trust trades
can experience periods of illiquidity, sometimes of significant duration.
The non-financial commodities markets, to which the Trust gives greater
emphasis than do other Millburn Ridgefield accounts, tend to be less liquid
than the financial and currency markets. Government intervention, weather
and numerous other factors may disrupt even ordinarily liquid markets.
Market illiquidity or disruptions could result in major losses to the Trust.
ILLIQUID MARKETS COULD CAUSE THE TRUST TO INCUR SIGNIFICANT LOSSES WHICH
MILLBURN RIDGEFIELD COULD BE UNABLE TO PREVENT BECAUSE IT IS UNABLE TO CLOSE OUT
POSITIONS AGAINST WHICH THE MARKET IS MOVING.
(11) "ZERO-SUM" TRADING
Futures and forward trading is a "zero-sum" economic activity in which for
every gain there is an equal and offsetting loss (without considering
transaction costs). An investment in the Trust is in this respect very
different from a typical securities investment in which there is an expectation
of consistent yields (in the case of debt) or participation over time in general
economic growth (in the case of equity).
OVERALL STOCK AND BOND PRICES COULD RISE SIGNIFICANTLY AND THE ECONOMY AS A
WHOLE PROSPER, WHILE THE TRUST INCURS MAJOR LOSSES. THE RESULTS OF MILLBURN
RIDGEFIELD'S TRADING ARE SPECULATIVE AND UNCERTAIN.
(12) TRADING ON COMMODITY EXCHANGES OUTSIDE THE UNITED STATES
Millburn Ridgefield trades on commodity exchanges outside the United States
on behalf of the Trust. Trading on such exchanges is not regulated by any
United States governmental agency and may involve certain risks not applicable
to trading on United States exchanges, such as currency controls and
expropriation. In trading on foreign exchanges, the Trust is also subject to
the risk of changes in the exchange rates between the United States dollar and
the currencies in which contracts traded on such exchanges are settled and in
which the related margin deposits must be maintained.
INVESTORS COULD INCUR SUBSTANTIAL LOSSES FROM THE TRUST'S TRADING ON
FOREIGN EXCHANGES TO WHICH THEY WOULD NOT HAVE BEEN SUBJECT HAD MILLBURN
RIDGEFIELD LIMITED ITS TRADING ON BEHALF OF THE TRUST TO U.S. MARKETS.
(13) LIMITED ABILITY TO LIQUIDATE AN INVESTMENT IN THE UNITS
Units may be redeemed at Net Asset Value only as of the close of business
on the last day of a calendar month. Units are subject to early redemption
charges, payable to the Managing Owner, of 4% and 3%, respectively (3% and 2%,
respectively, in the case of subscriptions of $1,000,000 more), of the Net Asset
Value per Unit as of the date of redemption, through the end of the sixth and
from the end of the sixth through the end of the twelfth month after such Units
are issued.
THE LIMITED ABILITY TO REDEEM UNITS MEANS THAT INVESTORS COULD BE UNABLE TO
LIMIT THEIR LOSSES IN THE TRUST, AND THAT THEY MAY BE UNABLE TO WITHDRAW THE
CAPITAL THEY HAVE COMMITTED TO THE TRUST IN ORDER TO TAKE ADVANTAGE OF OTHER,
MORE FAVORABLE INVESTMENT OPPORTUNITIES.
(14) THE TRUST IS SUBJECT TO CONFLICTS OF INTEREST
The Trust is subject to numerous actual and potential conflicts of
interest. Such conflicts include, among other things, that: (i) the Brokerage
Fee and Profit Share have not been negotiated at arm's-length; (ii) the Managing
Owner has agreed to utilize the Principal Selling Agents as Clearing Brokers,
because they are marketing the Units; (iii) the initial selling commissions,
ongoing compensation and installment selling commissions which the Selling
Agents receive give them an incentive to promote the sale of Units as well as to
discourage redemptions; (iv) the brokerage commissions which the Principal
Selling Agents will receive, as Clearing Brokers for the Trust, give them an
additional incentive to promote the sale of Units as well as to discourage
redemptions; (v) the Managing Owner has significant financial incentives both to
promote the sale of the Units and to discourage their redemption; and (vi)
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the Managing Owner of the Trust will not select any other advisor even if
doing so would be in the best interests of the Trust.
Millburn Ridgefield, the Clearing Brokers and their respective principals
and affiliates may trade in the futures and forward markets for their own
accounts and for the accounts of their clients, and in doing so may take
positions opposite to, or ahead of, those held by the Trust, or may be competing
with the Trust for positions in the marketplace. Records of this trading are
not available for inspection by investors. Such trading may create conflicts of
interest on behalf of one or more of such persons in respect of their
obligations to the Trust.
NONE OF THE PARTIES AFFECTED BY SUCH CONFLICTS OF INTEREST HAVE ADOPTED ANY
PROCEDURES OR SAFEGUARDS FOR RESOLVING THE FOREGOING CONFLICTS OF INTEREST.
INVESTORS MUST RELY ENTIRELY ON SUCH PARTIES' GOOD FAITH IN SUCH MATTERS.
THESE CONFLICTS OF INTEREST RAISE THE POSSIBILITY THAT THE INVESTORS WILL
BE FINANCIALLY DISFAVORED TO THE BENEFIT OF MILLBURN RIDGEFIELD, THE CLEARING
BROKERS, THE SELLING AGENTS OR THEIR RESPECTIVE PRINCIPALS AND AFFILIATES.
(15) UNITHOLDERS HAVE NO ROLE IN MANAGEMENT
In investing in the Trust, Unitholders are placing their reliance on
Millburn Ridgefield. No Unitholder has any input into the management of the
Trust, and no management elections or other investor votes are regularly held.
Subject to its fiduciary obligations, Millburn Ridgefield has essentially
plenary authority over the operation of the Trust.
PROSPECTIVE INVESTORS MUST NOT ANTICIPATE THAT ANY ENTITY OTHER THAN
MILLBURN RIDGEFIELD WILL HAVE ANY CONTROL OR INFLUENCE OVER THE MANAGEMENT OF
THE TRUST, OR THAT UNITHOLDERS WILL HAVE ANY INPUT INTO ITS OPERATIONS.
(16) UNITHOLDERS ARE TAXED ON TRUST PROFITS ALTHOUGH NOT DISTRIBUTED
If the Trust recognizes income or gain in a fiscal year, such income or
gain will be taxable to Unitholders in accordance with their allocable shares of
the Trust's profits. The tax liability of Unitholders in respect of the
profits, if any, of the Trust will exceed any distributions received from it.
See "Federal Income Tax Aspects" at page 57.
In comparing the Trust's profit objectives with familiar financial
benchmarks such as the S&P 500 Stock Index, prospective investors must recognize
that if an investor purchased common stock, there would be no tax due on the
appreciation in such stock until it was sold. In the case of the Trust, on the
other hand, Unitholders must pay taxes for each year that a Unit is held based
on any appreciation in the Net Asset Value per Unit during such year, with a
significant compounding effect over time. Furthermore, because a substantial
portion of the Trust's open positions are "marked-to-market" at the end of each
year, Unitholders are taxed on unrealized as well as realized gains.
BECAUSE UNITHOLDERS ARE TAXED CURRENTLY ON THEIR ALLOCABLE SHARE OF THE
TRUST'S INCOME OR GAINS, THE TRUST MAY TRADE SUCCESSFULLY, WHILE INVESTORS WOULD
HAVE RECOGNIZED SIGNIFICANTLY GREATER GAINS ON AN AFTER-TAX BASIS HAD THEY
INVESTED IN CONVENTIONAL STOCKS AND BONDS WITH COMPARABLE PERFORMANCE.
(17) TAXATION OF INTEREST INCOME IRRESPECTIVE OF TRADING LOSSES
Losses on the Trust's trading are almost exclusively capital losses, and
capital losses are deductible against ordinary income only to the extent of
$3,000 per year for non-corporate investors. If a non-corporate investor had,
for example, an allocable trading (I.E., capital) loss of $10,000 in a given
fiscal year and allocable interest income (after reduction for allocable
ordinary Trust business expenses) of $5,000, the investor would incur a net loss
in the Net Asset Value of his or her Units equal to $5,000, but would
nevertheless recognize taxable income of $2,000.
THE LIMITED DEDUCTIBILITY OF CAPITAL LOSSES FOR NON-CORPORATE UNITHOLDERS
COULD RESULT IN SUCH UNITHOLDERS OWING TAXES IN RESPECT OF THEIR INVESTMENT IN
THE UNITS DESPITE INCURRING OVERALL LOSSES ON SUCH INVESTMENT.
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(18) LIMITATIONS ON THE DEDUCTIBILITY OF "INVESTMENT ADVISORY FEES"
The Managing Owner is -- in the absence of further clarification by
legislation, the promulgation of regulations or judicial or administrative
interpretation -- not treating any ordinary expenses of the Trust as "investment
advisory fees" for federal income tax purposes. The Managing Owner believes
that this is the position adopted by virtually all United States futures fund
sponsors. However, were the ordinary expenses of the Trust characterized as
"investment advisory fees," they would be subject to substantial restrictions on
deductibility for non-corporate taxpayers, materially increasing the amount of
tax payable by Unitholders in respect of their investment in the Trust. In
fact, were the ordinary expenses of the Trust to be so recharacterized,
Unitholders could actually recognize taxable income despite having incurred a
financial loss.
The Internal Revenue Service (the "IRS") might challenge the status of the
Profit Shares as an allocation of capital gain for federal income tax purposes.
NON-CORPORATE UNITHOLDERS' AFTER-TAX RETURNS WOULD BE SIGNIFICANTLY
DECREASED IF THE TRUST'S EXPENSES AND MILLBURN RIDGEFIELD'S PROFIT SHARE WERE
TREATED AS "INVESTMENT ADVISORY FEES."
(19) NONDEDUCTIBILITY OF "SYNDICATION EXPENSES"
Neither the Trust nor any Unitholder will be entitled to any deduction for
"syndication expenses." The IRS could contend that the selling commissions and
ongoing compensation paid by the Managing Owner constitute non-deductible
"syndication expenses" in respect of the Unitholders.
UNITHOLDERS' AFTER-TAX RETURNS WOULD BE SIGNIFICANTLY DECREASED IF THE
SELLING COMMISSIONS AND ONGOING COMPENSATION WERE TREATED AS "SYNDICATION
EXPENSES."
(20) POSSIBILITY OF TAX AUDIT OF BOTH THE TRUST AND INDIVIDUAL UNITHOLDERS
There can be no assurance that the Trust's tax returns will not be audited
by the IRS or that adjustments to such returns will not be made as a result of
such an audit.
IF AN AUDIT RESULTS IN AN ADJUSTMENT, UNITHOLDERS COULD THEMSELVES BE
AUDITED AND PAY ADDITIONAL TAXES, PLUS INTEREST AND PENALTIES.
PROSPECTIVE INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISERS
AND COUNSEL WITH RESPECT TO THE POSSIBLE TAX CONSEQUENCES TO THEM OF AN
INVESTMENT IN THE TRUST; SUCH TAX CONSEQUENCES MAY DIFFER IN RESPECT OF
DIFFERENT INVESTORS AND MAY HAVE A MATERIAL EFFECT ON THE NET ECONOMIC
CONSEQUENCES OF OWNING UNITS. SEE "FEDERAL INCOME TAX ASPECTS" AT PAGE 57.
(21) BANKRUPTCY OF CLEARING BROKERS AND CURRENCY DEALERS
Were one of the Trust's Clearing Brokers (Prudential Securities or
PaineWebber) or counterparties to become bankrupt, the Trust would be limited to
recovering only its PRO RATA share of all available customer funds segregated by
such Clearing Broker or counterparty, even though property (for example,
Treasury bills) specifically traceable to the Trust was held by such Clearing
Broker or counterparty.
THE BANKRUPTCY OF A CLEARING BROKER OR COUNTERPARTY COULD LEAD TO
SUBSTANTIAL LOSSES FOR THE TRUST.
(22) UNREGULATED MARKETS; POSSIBLE FUTURE REGULATORY CHANGES
A substantial portion of the Trust's trading -- primarily its currency
options and forward strategies -- takes place in unregulated markets. There is
no way to determine fair pricing, prevent abuses such as "front-running" or
impose other effective forms of control over such markets. In certain
situations, the absence of regulation could expose the Trust to significant
losses which it might otherwise have avoided.
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Significant international governmental concern has been expressed
regarding, for example: (i) the disruptive effects of speculative pools of
capital trading in the currency markets on central banks' attempts to influence
the exchange rates of their own countries' currencies; and (ii) the need to
regulate the "derivatives" markets in general. In the current environment,
perhaps more than in prior periods, prospective investors must recognize the
possibility of future regulatory change altering, perhaps to a material extent,
the nature of an investment in the Trust.
TRADING IN UNREGULATED MARKETS CAN INVOLVE SIGNIFICANT RISKS, ESPECIALLY
DURING PERIODS OF MARKET DISRUPTIONS.
INVESTORS COULD MAKE A GOOD INVESTMENT DECISION IN SUBSCRIBING FOR THE
UNITS ONLY TO HAVE THAT DECISION RESULT IN SUBSTANTIAL LOSSES DUE TO SUBSEQUENT
REGULATORY CHANGES.
____________________
THE FOREGOING LIST OF RISK FACTORS DOES NOT PURPORT TO BE A COMPLETE
EXPLANATION OF THE NUMEROUS RISKS INVOLVED IN INVESTING IN THE TRUST. POTENTIAL
INVESTORS SHOULD READ THIS ENTIRE PROSPECTUS AND ATTEMPT TO FAMILIARIZE
THEMSELVES WITH THE RISKS OF SPECULATIVE, HIGHLY LEVERAGED FUTURES AND FORWARD
TRADING BEFORE DETERMINING WHETHER TO INVEST IN THE TRUST.
INVESTMENT FACTORS
AN INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. THERE CAN BE NO ASSURANCE THAT MILLBURN RIDGEFIELD WILL TRADE
SUCCESSFULLY ON BEHALF OF THE TRUST OR THAT THE TRUST WILL AVOID SUBSTANTIAL
LOSSES, WHICH COULD INCLUDE THE COMPLETE LOSS OF ONE'S INVESTMENT. THE TRUST
CANNOT SERVE AS A SUCCESSFUL MEANS OF DIVERSIFYING A PORTION OF THE RISK SEGMENT
OF A PORTFOLIO UNLESS THE TRUST ITSELF TRADES PROFITABLY. HOWEVER, IF
SUCCESSFUL, THE TRUST OFFERS INVESTORS THE FOLLOWING POTENTIAL ADVANTAGES.
THE MANAGING OWNER
Millburn Ridgefield and its principals have extensive experience in
designing, promoting, marketing and administering futures funds. Certain of
these principals have been associated with the United States futures fund
industry virtually since its inception in the mid-1970s. Millburn Ridgefield
(and its predecessors) is one of the longest operating of all futures money
managers and has been a leader in developing systematic trading technologies.
The Millburn Ridgefield track record spans 25 years. In investing in the
Trust, investors have the opportunity to place capital under the management of a
trading advisor with one of the longest continuous trading records of any active
manager.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
INVESTMENT DIVERSIFICATION
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. The Managing Owner believes that the profit
potential of the Trust does not depend upon favorable general economic
conditions and that the Trust is as likely to be profitable (or unprofitable)
during periods of declining stock, bond and real estate markets as at any other
time.
Volatility in interest rates, the possibility of significant fluctuations
in the value of commodities and of the U.S. dollar, fragility in world banking
and credit mechanisms and the growing globalization of national economies create
high risks but also substantial opportunities for profit. These factors may
make a diversification into an investment vehicle such as the Trust particularly
timely. The Trust's flexibility to take either long or short positions --
whereas traditional portfolios are typically heavily weighted towards the former
- -- can be an important advantage in times of economic uncertainty. Allocating a
limited portion of the risk segment of a portfolio to a managed futures
investment, such as the Trust, can add a potentially valuable element of
diversification to a traditionally-structured portfolio. Diversifying assets
among investments which generate positive but non-correlated returns has the
potential
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to decrease risk without a corresponding decrease in returns -- enhancing the
reward/risk profile of an overall portfolio.
The expected, and in its trading to date actual, non-correlation of the
performance of the Trust and the performance of the general equity and debt
markets suggests that if the Trust is successful (of which there can be no
assurance), allocating a portion of one's overall portfolio to the Trust can
actually increase overall returns while decreasing volatility. However,
prospective investors must recognize that unless the Trust is profitable, while
an investment in the Units may serve to reduce overall portfolio volatility, the
Units cannot be a successful investment. The only benefit of non-correlation to
the general debt and equity markets without profitable performance would be that
the Units could serve as a potential source of capital, available even after
sharp declines in the stock and debt markets, to reallocate to a performing
investment. Any such reallocation would, in any event, require an investment
decision entirely independent of a decision to invest in the Trust, and,
furthermore, there are numerous less expensive and virtually riskless
investments through which investors can create a source of "market insulated"
assets available to invest at appropriate times. The Trust is subject to the
risk of substantial losses; it is not a good "pocketbook" in this respect,
regardless of the expected non-correlation of its performance to that of the
general stock and bond markets. To be a successful investment, the Trust must
trade profitably; and there can be no assurance whatsoever that it will be able
to do so.
IF THE TRUST DOES NOT TRADE SUCCESSFULLY, IT CANNOT SERVE AS A BENEFICIAL
DIVERSIFICATION FOR A TRADITIONAL PORTFOLIO. THE PERFORMANCE OF THE TRUST IS
EXPECTED TO BE NON-CORRELATED, NOT NEGATIVELY CORRELATED, WITH GENERAL STOCK AND
BOND PRICE LEVELS. THE NON-CORRELATED PERFORMANCE OF THE TRUST TO DATE MAY NOT,
IN FACT, BE INDICATIVE OF THE LIKELY DEGREE OF FUTURE CORRELATION BETWEEN THE
TRUST AND GENERAL SECURITIES MARKET INDICES. FURTHERMORE, THE TRUST'S
PERFORMANCE HAS EXHIBITED A MATERIALLY HIGHER DEGREE OF VOLATILITY THAN EITHER
THE DEBT OR THE EQUITY MARKETS.
OPPORTUNITY TO PROFIT IN RISING AS WELL AS IN DECLINING MARKETS
The futures markets offer the ability to trade either side of any market.
Unlike short selling in the securities markets, selling short in futures 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.
THE FUND IS AS LIKELY TO BE UNPROFITABLE IN FAVORABLE MARKETS AS IT IS TO
BE PROFITABLE IN UNFAVORABLE ONES.
THERE CAN BE NO ASSURANCE THAT THE TRUST'S PERFORMANCE WILL, IN FACT, BE
NON-CORRELATED WITH THE GENERAL DEBT AND EQUITY MARKETS.
THE WORLD RESOURCE PORTFOLIO
There can be no assurance whatsoever as to how the Trust will perform.
However, Millburn Ridgefield believes that the World Resource Portfolio should
be well positioned to achieve its objectives in the event that price trends of
the type that Millburn Ridgefield's systems are designed to follow develop in
the non-financial commodities markets. Millburn Ridgefield believes that there
are indications that underlying economic conditions may be favorable to the
development of such trends during the closing years of the 1990s, particularly
as the "emerging" economies increasingly compete for tangible and capital
resources. The Trust also maintains approximately 50% of its market commitment
in the financial instrument and currency markets and could recognize significant
profits in these sectors if favorable trends develop. THE DIVERSIFICATION OF
THE TRUST PERMITS INVESTORS TO PARTICIPATE IN MARKETS WHICH WOULD OTHERWISE NOT
BE INCLUDED IN THEIR PORTFOLIOS, THEREBY BOTH POTENTIALLY DIVERSIFYING RISK AND
INCREASING PROFIT OPPORTUNITIES.
THERE CAN BE NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS OBJECTIVES OR
AVOID SUBSTANTIAL LOSSES.
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THERE ALSO CAN BE NO ASSURANCE THAT THE WORLD RESOURCE PORTFOLIO MARKET
ALLOCATIONS WILL NOT UNDERPERFORM THOSE OF MILLBURN RIDGEFIELD'S OTHER ACCOUNTS.
IF INFLATIONARY PATTERNS DO NOT DEVELOP IN THE CLOSING YEARS OF THE 1990S, THE
WORLD RESOURCE PORTFOLIO MAY SUBSTANTIALLY UNDERPERFORM OTHER MILLBURN
RIDGEFIELD PROGRAMS. THERE ARE INDICATIONS, AT LEAST IN THE UNITED STATES, THAT
SUBSTANTIAL INFLATION IS UNLIKELY TO DEVELOP IN THE NEAR FUTURE.
INTEREST ON TRUST ASSETS
The Trust receives all of the income earned on its assets. Substantially
all (approximately 95%) of the Trust's available assets are invested in deposit
accounts, United States Treasury bills or notes or in similar securities issued
by foreign governments to meet margin requirements on non-U.S. exchanges. THE
INTEREST EARNED ON THE TRUST'S ASSETS CAN OFFSET A SUBSTANTIAL PORTION OF ITS
ROUTINE COSTS. THE TRUST'S INTEREST INCOME REPRESENTS A SOURCE OF REVENUE
ENTIRELY INDEPENDENT OF THE SUCCESS OR FAILURE OF ITS SPECULATIVE FUTURES AND
FORWARD TRADING.
THE TRUST'S INTEREST INCOME IS SUBJECT TO THE RISK OF TRADING LOSSES AND IS
NOT, IN ANY EVENT, SUFFICIENT TO OFFSET THE TRUST'S BROKERAGE FEES.
SMALL MINIMUM INVESTMENT; SMALLER MINIMUM ADDITIONAL INVESTMENT
Millburn Ridgefield is typically available to manage individual accounts
only of substantial size -- $1,000,000 or more. Investors in the Trust are able
to gain access to Millburn Ridgefield for a minimum investment of only $5,000;
$2,000 in the case of trustees or custodians of eligible employee benefit plans
and individual retirement accounts; and in increments of only $100. Existing
Unitholders making additional investments may do so in minimums of only $1,000;
again with $100 increments. A SMALL MINIMUM INVESTMENT REQUIREMENT MAKES THE
TRUST ACCESSIBLE TO A WIDE RANGE OF INVESTORS AND ALSO MEANS THAT NO INVESTOR
MUST COMMIT A SIGNIFICANT AMOUNT OF ASSETS IN ORDER TO PARTICIPATE IN THE TRUST.
NO INVESTOR SHOULD INVEST MORE IN THE TRUST THAN SUCH INVESTOR CAN
COMFORTABLY AFFORD TO LOSE. A COROLLARY OF THE SMALL MINIMUM INVESTMENT IN THE
TRUST IS THAT EXISTING AND PROSPECTIVE INVESTORS HAVE NOT BEEN REPRESENTED IN
NEGOTIATING THE TERMS OF THE TRUST.
LIMITED LIABILITY
An investor who opens an individual futures account is generally liable for
all losses incurred in such account, and may lose substantially more than such
investor committed to the account. However, a subscriber to the Trust cannot
lose more than his or her investment plus undistributed profits. Without
limited liability, it could be imprudent for an investor to participate in such
highly leveraged strategies as those applied by Millburn Ridgefield.
ALTHOUGH UNITHOLDERS CANNOT LOSE MORE THAN THEIR INVESTMENT IN THE TRUST
PLUS UNDISTRIBUTED PROFITS, THEY MUST BE PREPARED TO LOSE ALL OR SUBSTANTIALLY
ALL OF THEIR INVESTMENT. FURTHERMORE, UNDER CERTAIN CIRCUMSTANCES UNITHOLDERS
MAY BE REQUIRED TO DISGORGE DISTRIBUTIONS AND REDEMPTION PROCEEDS RECEIVED FROM
THE TRUST AS WELL AS TO INDEMNIFY THE TRUST FOR VARIOUS TAX LIABILITIES AND
OTHER CLAIMS.
ADMINISTRATIVE CONVENIENCE
The Trust is structured so as to 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
representatives of the Managing Owner at (312) 715-6850. THE DIVERSITY AND
RANGE OF MARKETS IN WHICH MILLBURN RIDGEFIELD TRADES, ON A 24-HOUR BASIS, MAKE
THE ADMINISTRATIVE CONVENIENCE OF AN INVESTMENT IN THE TRUST A HIGHLY ATTRACTIVE
FEATURE FOR PROSPECTIVE INVESTORS.
ALTHOUGH AN INVESTMENT IN THE TRUST IS ADMINISTRATIVELY CONVENIENT,
UNITHOLDERS HAVE ACCESS TO SUBSTANTIALLY LESS INFORMATION THAN THEY WOULD
TRADING IN AN INDIVIDUAL ACCOUNT. THE ADMINISTRATIVE CONVENIENCE OF
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THE TRUST DERIVES FROM INVESTORS' COMPLETE RELIANCE ON MILLBURN RIDGEFIELD
IN INVESTING IN THE TRUST. AN INVESTMENT IN THE FUND IS CONVENIENT BECAUSE
MILLBURN RIDGEFIELD IS RESPONSIBLE FOR ALL ASPECTS OF THE TRUST'S OPERATION.
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PERFORMANCE OF THE TRUST
THE MILLBURN WORLD RESOURCE TRUST
(SEPTEMBER 13, 1995 - DECEMBER 31, 1996)
TYPE OF POOL: Single-Advisor/Publicly-Offered/No Principal Protection
INCEPTION OF TRADING: September 13, 1995
AGGREGATE SUBSCRIPTIONS: $55 million
CURRENT CAPITALIZATION: $57 million
WORST MONTHLY DRAWDOWN (MONTH/YEAR): (12.30)% (2/96)
WORST PEAK-TO-VALLEY DRAWDOWN (MONTH/YEAR): (15.03)% (1/96-5/96)
MONTHLY RATE MONTH-END NET
OF RETURN ASSET VALUE PER UNIT
----------- --------------------
MONTH 1995 1995
- -----------------------------------------------------------------------
September (1/2 month) (6.62)% $ 933.80
- -----------------------------------------------------------------------
October (1.92)% 915.83
- -----------------------------------------------------------------------
November 0.92 % 924.25
- -----------------------------------------------------------------------
December 16.02 % 1,072.34
- -----------------------------------------------------------------------
1995 COMPOUND
RATE OF RETURN: (3 1/2 MOS.) 7.23 %
- -----------------------------------------------------------------------
MONTH 1996 1996
- -----------------------------------------------------------------------
January (0.36)% $1,068.44
- -----------------------------------------------------------------------
February (12.30)% 937.05
- -----------------------------------------------------------------------
March 2.94% 964.56
- -----------------------------------------------------------------------
April 2.55% 989.12
- -----------------------------------------------------------------------
May (7.88)% 911.19
- -----------------------------------------------------------------------
June 6.64% 971.65
- -----------------------------------------------------------------------
July (0.36)% 968.18
- -----------------------------------------------------------------------
August 1.49% 982.59
- -----------------------------------------------------------------------
September 4.01% 1,022.02
- -----------------------------------------------------------------------
October 8.09% 1,104.75
- -----------------------------------------------------------------------
November 4.10% 1,149.99
- -----------------------------------------------------------------------
December 0.42% 1,154.81
- -----------------------------------------------------------------------
1996 Compound Annual Rate
of Return: 7.69%
- -----------------------------------------------------------------------
_____________
DECEMBER 31, 1996 NET ASSET VALUE PER UNIT: $1,154.81
_____________
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
"WORST MONTHLY DRAWDOWN" MEANS THE LARGEST NEGATIVE MONTHLY RATE OF RETURN
EXPERIENCED BY THE TRUST. A "DRAWDOWN" IS MEASURED ON THE BASIS OF MONTH-END
NET ASSET VALUE PER UNIT ONLY, AND DOES NOT REFLECT INTRA-MONTH FIGURES.
"WORST PEAK-TO-VALLEY DRAWDOWN" REPRESENTS THE GREATEST PERCENTAGE
DECLINE INCURRED BY THE TRUST FROM A MONTH-END NET ASSET VALUE, WITHOUT SUCH
MONTH-END NET ASSET VALUE PER UNIT BEING EQUALED OR EXCEEDED AS OF A
SUBSEQUENT MONTH-END. FOR EXAMPLE, IF THE NET ASSET VALUE PER UNIT DECLINED
BY $1 IN EACH OF JANUARY AND FEBRUARY, INCREASED BY $1 IN MARCH AND DECLINED
AGAIN BY $2 IN APRIL, A "PEAK-TO-VALLEY DRAWDOWN" ANALYSIS CONDUCTED AS OF
THE END OF APRIL WOULD CONSIDER THE "DRAWDOWN" TO BE STILL CONTINUING AND TO
BE $3 IN AMOUNT, WHEREAS IF THE NET ASSET VALUE PER UNIT HAD INCREASED BY $2
IN MARCH, THE JANUARY-FEBRUARY DRAWDOWN WOULD HAVE ENDED AS OF THE END OF
FEBRUARY AT THE $2 LEVEL.
MONTHLY RATE OF RETURN IS CALCULATED ON THE BASIS OF THE ACTUAL RATE OF
RETURN RECOGNIZED BY AN INITIAL $1,000 INVESTMENT IN THE TRUST.
PERFORMANCE INFORMATION IS CALCULATED ON AN ACCRUAL BASIS IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
THE PERFORMANCE OF OTHER MILLBURN RIDGEFIELD COMMODITY POOLS AND TRADING
PROGRAMS IS INCLUDED UNDER THE "PERFORMANCE OF THE MILLBURN RIDGEFIELD CLIENT
FUNDS AND TRADING PROGRAMS" ON PAGE 85 AND "ANNUAL RATES OF RETURN SINCE
INCEPTION OF THE MILLBURN RIDGEFIELD CLIENT FUNDS" ON PAGE 95.
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SELECTED FINANCIAL INFORMATION
THE FOLLOWING SELECTED FINANCIAL INFORMATION FOR THE PERIOD ENDED DECEMBER
31, 1995 AND THE YEAR ENDED DECEMBER 31, 1996 IS DERIVED (I) FROM THE FINANCIAL
STATEMENTS OF THE TRUST FOR THE PERIOD FROM SEPTEMBER 13, 1995 (COMMENCEMENT OF
TRADING OPERATIONS) TO DECEMBER 31, 1995 WHICH HAVE BEEN AUDITED BY COOPERS &
LYBRAND L.L.P., INDEPENDENT ACCOUNTANTS, AS STATED IN THEIR REPORT INCLUDED IN
THIS PROSPECTUS (SEE "INDEX TO FINANCIAL STATEMENTS" AT PAGE 70) AND (II) FROM
THE UNAUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996.
_________________________
SEPTEMBER 13, 1995 JANUARY 1, 1996
(COMMENCEMENT OF TO
TRADING OPERATIONS) TO DECEMBER 31, 1996
INCOME STATEMENT DATA DECEMBER 31, 1995 (UNAUDITED)
- --------------------- ---------------------- ------------------
Realized gains (losses)
Futures and forwards $ 551,797 $7,549,355
Options (98,084) 979,525
---------- ----------
Total realized gain (loss) 453,713 8,528,880
Increase (decrease) in unrealized
appreciation
Futures and forwards 2,716,040 (89,823)
Options 112,827 702,736
---------- ----------
Total increase (decrease) in 2,828,867 612,913
unrealized appreciation ---------- ----------
Gross trading results 3,282,580 9,141,793
Less, Brokerage Fees 548,790 3,998,675
---------- ----------
Total trading results 2,733,790 5,143,118
Interest income 303,229 2,115,972
Foreign exchange gain (loss) (9,539) (72,910)
---------- ----------
Total income (loss) 3,027,480 7,186,180
---------- ----------
Expenses:
Profit Share 460,840 829,080
Administrative expenses 59,492 519,754
---------- ----------
Total expenses 520,332 1,348,834
---------- ----------
Net income (loss) $2,507,148 $5,837,346
---------- ----------
---------- ----------
DECEMBER 31, 1996
DECEMBER 31, 1995 NET
NET ASSET VALUE
BALANCE SHEET DATA ASSET VALUE (UNAUDITED)
- ------------------ ----------------- -----------------
GAAP REDEMPTION GAAP REDEMPTION
---- ---------- ---- ----------
Aggregate Net Asset Value $25,932,277 $26,457,277 $56,140,338 $56,365,318
Net Asset Value per Unit $ 1,050.69 $ 1,072.34 $1,150.14 $1,154.81
_________________________
IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP"), THE
FULL AMOUNT OF THE ORGANIZATIONAL AND INITIAL OFFERING COSTS BEING PAID BY THE
TRUST IN EQUAL MONTHLY INSTALLMENTS OF $25,000 THROUGH SEPTEMBER 30, 1997 HAS
BEEN DEDUCTED FROM UNITHOLDERS' CAPITAL FROM INCEPTION AND, ACCORDINGLY, IS NOT
REFLECTED IN OPERATING RESULTS. THE TRUST, HOWEVER, HAS BEEN REDUCING NET ASSET
VALUE FOR SUCH REIMBURSEMENT PAYMENTS ONLY AS SUCH PAYMENTS ARE
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<PAGE>
ACTUALLY MADE AS OF THE END OF EACH MONTH. THIS DIFFERENCE IN ACCOUNTING
CONVENTIONS IS THE CAUSE OF THE DIFFERENCES ($525,000 AND $225,000,
RESPECTIVELY) BETWEEN AGGREGATE NET ASSET VALUE FOR REDEMPTION AND FOR GAAP
PURPOSES AS OF DECEMBER 31, 1995 AND DECEMBER 31, 1996.
MANAGING OWNER'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
PERFORMANCE SUMMARY
The Trust's success depends on the Managing Owner's ability to recognize
and capitalize on trends and other profit opportunities in different sectors of
the world economy. The Managing Owner's trading methods are confidential, so
that substantially the only information that can be furnished regarding the
Trust's results of operations is its performance record, as set forth above.
Unlike most operating businesses, general economic or seasonal conditions have
no direct effect on the profit potential of the Trust, while, at the same time,
its past performance is not necessarily indicative of future results. Because
of the speculative nature of its trading, operational or economic trends have
little relevance to the Trust's results. The Managing Owner believes, however,
that there are certain market conditions -- for example, markets with strong
price trends -- in which the Trust has a better opportunity of being profitable
than in others.
1995
From the commencement of trading on September 13, 1995 through December 31,
1995, the Trust's average month-end Net Assets equaled approximately
$19,613,000, and it recognized gross trading gains of $3,282,580 or 16.74% of
average month-end Net Assets. Brokerage Fees of $548,790 or 2.80% of average
month-end Net Assets and Profit Shares of $460,840 or 2.35% of average month-end
Net Assets were paid or accrued. Interest income (at an average rate of
approximately 5.1% per annum) of $303,229 or 1.55% of average month-end Net
Assets, resulted in net income (after deduction for administrative expenses, but
without reduction for organizational and initial offering cost reimbursement
payments) of $2,507,148 or 12.78% of average month-end Net Assets, and a 7.23%
increase in the Net Asset Value per Unit (for redemption purposes).
The Trust began operations in mid-September 1995 and quickly incurred
significant losses as it became fully invested in the markets just as sustained
trends in two of its six portfolio sectors -- currencies and energy -- reversed.
Losses continued in October with a small gain in November during generally
trendless markets, causing a cumulative loss in the first two and one-half
months of trading of approximately (71/2)%. In December 1995, however, the
Trust was able to achieve major profits in the energy sector as a combination of
cold weather, depleted inventories and pipeline capacity constraints resulted in
soaring natural gas prices. Also profitable were stock index, interest rate and
agricultural trading. The total gain in December was 16.02%, resulting in a
1995 (31/2 month) Compound Rate of Return of 7.23% and a December 31, 1995 Net
Asset Value per Unit of $1,072.34.
1996
During 1996, the Trust's average month-end Net Assets equaled approximately
$45,000,000, and it achieved gross trading gains of $9,141,793 or 20.40% of
average month-end Net Assets. Brokerage Fees of $3,998,675 or 8.92% of average
month-end Net Assets and Profit Shares of $829,080 or 1.85% of average month-end
Net Assets were paid or accrued. Interest income (at an average rate of
approximately 4.72% per annum) of $2,115,972 or 4.72% of average month-end Net
Assets, resulted in a net gain (after deduction for administrative expenses, but
without reduction for organizational and initial offering cost reimbursement
payments) of $5,837,346 or 13.03% of average month-end Net Assets, and a 7.69%
increase in the Net Asset Value per Unit (for redemption purposes).
January 1996 began with major gains continuing in the energy sector, but
the upward price trends in these markets reversed sharply later in the month and
resulted in a small loss. February saw the Trust incur its worst monthly
drawdown as all six sectors traded by World Resource Portfolio sustained losses
- -- an unusual result. In the next two months, the Trust managed comparatively
minor gains and then in May a loss of (7.88)% was sustained, as all sectors
except energy were unprofitable. In June, a soaring energy market produced
gains which almost offset May's losses. In July, the Trust incurred slight
losses as energy trading was unprofitable. The following five months, August
through December, produced profits in each month as major trends occurred in the
interest rate and currency markets. As of December 31, 1996, the Net Asset
Value per Unit reached an all-time month-end high of $1,154.81 with a 1996
Compound Annual Rate of Return of 7.69%.
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<PAGE>
The performance of the Trust to date has demonstrated significant
volatility as well as the dependence of the Trust for its profitability on
general market conditions over which the Managing Owner has no control.
The extreme swings in the Trust's monthly rates of return in its trading to
date have been symptomatic of the erratic, "whipsaw" character of the markets in
which it has been trading. Although Millburn Ridgefield did not anticipate --
particularly given the more broadly diversified portfolio traded by the Trust --
that its performance would be so volatile, there can be no assurance whatsoever
that it will not continue to be so. Millburn Ridgefield has not made and has no
present intention of attempting to make any adjustments to its trading systems
or the World Resource Portfolio in response to recent market activity and
performance. Although there can be no assurance that the Trust will ultimately
be profitable or avoid substantial losses, its performance to date clearly
demonstrates why the Managing Owner believes that the Units are only suitable as
a medium- to long-term investment (at least 2-3 years).
Market conditions can make it virtually impossible for the Trust to avoid
losses over certain, occasionally sustained, periods of time or avoid major and
sudden declines in Net Asset Value.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
LIQUIDITY
The Trust's assets are generally held as cash or cash equivalents which are
used to margin the Trust's futures and forward positions and withdrawn, as
necessary, to pay redemptions and expenses. Other than potential market-imposed
limitations on liquidity, due, for example, to daily price fluctuation limits
(see "Risk Factors -- (10) Possibly Illiquid Markets" at page 14), which are
inherent in the Trust's futures and forward trading, the Trust's assets are
highly liquid and are expected to remain so. During its operations to date, the
Trust experienced no meaningful periods of illiquidity in any of the numerous
markets traded by the Managing Owner.
Although Units may be redeemed at any month-end (redemption penalties apply
through the end of the first twelve months after a Unit is issued), no one who
cannot afford to commit funds to a comparatively illiquid investment should
subscribe to the Trust. The Managing Owner believes that investors who are not
prepared to regard the Trust as a medium- to long-term investment should not
purchase Units.
The Managing Owner may consider making distributions to investors under
certain circumstances (for example, if substantial profits are recognized);
however, the Managing Owner has not done so to date and does not presently
intend to do so.
CAPITAL RESOURCES
Units are offered for sale as of the beginning, and may be redeemed as of
the end, of each month. (The Managing Owner has discretion from time to time to
accept intra-month Unit sales.)
The amount of capital raised for the Trust should not have a significant
impact on its operations, as the Trust has no significant capital expenditure or
working capital requirements other than for monies to pay trading losses,
brokerage commissions and charges. Within broad ranges of capitalization, the
Managing Owner's trading positions should increase or decrease in approximate
proportion to the size of the Trust.
The Trust raises additional capital only through the sale of Units and
trading profits (if any) and does not engage in borrowing.
The Trust trades futures, options and forward contracts on currencies,
interest rates, energy and agricultural products, metals and stock indices.
Risk arises from changes in the value of these contracts (market risk) and the
potential inability of counterparties or brokers to perform under the terms of
their contracts (credit risk). Market risk is generally to be measured by the
face amount of the positions acquired and the volatility of the markets traded.
The credit risk from counterparty non-performance associated with these
instruments is the net unrealized gain, if any, on these positions. The risks
associated with exchange-traded contracts are generally perceived to be less
than those associated with over-the-counter transactions, because exchanges
typically (but not universally) provide clearinghouse arrangements in which the
collective credit (in some cases limited in amount, in some cases not) of the
members of the exchange is pledged to support the financial integrity of the
exchange. In over-the-counter transactions, on the other
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<PAGE>
hand, traders must rely solely on the credit of their respective individual
counterparties. Margins, which may be subject to loss in the event of a
default, are generally required in exchange trading, and counterparties may
require margin in the over-the-counter markets.
Due to the nature of the Trust's business, substantially all its assets are
represented by cash, United States government obligations and short-term foreign
sovereign debt obligations, while the Trust maintains its market exposure
through open futures, options and forward contract positions.
Inflation may be a significant factor in the Trust's profitability,
particularly in light of the Trust's trading in energy, agricultural and metals
markets. However, inflationary cycles can give rise either to the type of major
price movements which can have a materially favorable impact on the Trust's
profitability or to the "whipsaw markets" which can have a materially adverse
impact on the Trust's profitability. Furthermore, as the Trust does not sell
products, but rather only trades, its income by no means correlates with
inflation. Consequently, in periods of high inflation, the profit potential of
the Trust may be reduced in terms of real dollars.
IMPORTANCE OF MARKET CONDITIONS TO PROSPECTS FOR PROFITABILITY
The Managing Owner expects that the Trust is most likely to trade
successfully in markets which exhibit strong and sustained price trends. The
trading strategy employed by the Managing Owner is technical, systematic and
trend-following. Consequently, one would expect that in trendless, "choppy"
markets the Trust would likely be unprofitable, while in markets in which major
price movements occur, the Trust would have its best profit potential (although
there could be no assurance that the Trust would, in fact, trade profitably).
The brief performance history of the Trust to date appears to have borne out
this expectation, while demonstrating the high degree of performance volatility
to which the Trust is subject.
The Managing Owner believes that the profit potential of a managed futures
product such as the Trust can be increased in markets in which major price
movements occur. There have, however, been prolonged periods in the futures
markets without significant price movements, as well as "whipsaw" markets, in
which prices appear to be moving in one direction but then quickly reverse.
Such periods may recur with considerable frequency, and Millburn Ridgefield
would expect it to be very difficult to achieve profitability in such markets.
There can be, in any event, no assurance that the Managing Owner will trade
profitably or that major market movements will occur.
The Trust's results are determined by the performance of the Managing
Owner, price trends and movements and prevailing interest rates. None of these
factors can be predicted with any degree of accuracy, and the past performance
of the Trust, the Managing Owner or its trading strategy may have very little
relevance to how the Trust will perform in the future.
THE TRUST AND ITS OBJECTIVES
PERFORMANCE POTENTIAL
The Trust offers investors a portfolio which places a greater emphasis on
non-financial markets than Millburn Ridgefield's other accounts. Millburn
Ridgefield believes that there may be substantially greater profit opportunities
over the medium- to long-term in these markets than there have been during the
past five to ten years of low inflation. The Trust also maintains a significant
market commitment to currencies and financial instruments, in which Millburn
Ridgefield accounts have achieved substantial profits in the past. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, PARTICULARLY IN THE
SPECULATIVE MARKETS IN WHICH THE TRUST TRADES. THE TRUST IN ITS PERFORMANCE TO
DATE HAS DEMONSTRATED SIGNIFICANT VOLATILITY. THERE CAN BE NO ASSURANCE THAT
MILLBURN RIDGEFIELD WILL TRADE PROFITABLY IN THE FUTURE OR THAT THE WORLD
RESOURCE PORTFOLIO WILL NOT SUBSTANTIALLY UNDERPERFORM MILLBURN RIDGEFIELD'S
OTHER MARKET PORTFOLIOS. IT IS IMPOSSIBLE TO PREDICT WHETHER INFLATIONARY
PERIODS WILL DEVELOP DURING THE CLOSING YEARS OF THE 1990S, AND IF SUCH PERIODS
DO NOT DO SO, THE EFFECT ON THE PERFORMANCE OF THE WORLD RESOURCE PORTFOLIO
COULD BE MATERIALLY ADVERSE.
INVESTMENT DIVERSIFICATION
Through an investment in the Trust, investors have the opportunity to
participate in markets not typically represented in an individual's portfolio,
and the potential to profit from rising as well as falling prices. Many "buy
and
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<PAGE>
hold" strategies in "alternative asset classes," E.G., real estate, fine art
or precious metals, are dependent on rising prices. The Trust's profitability
is not. The success of Millburn Ridgefield'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.
MARKET DIVERSIFICATION
The Trust trades, from time to time, in over 50 markets (although Millburn
Ridgefield by no means necessarily maintains positions in all of the markets
included in the World Resource Portfolio at all times). Portfolio allocations
are under continuous review, on the basis of both systematic and discretionary
analysis, and are adjusted from time to time.
Futuures contracts on non-financial/traditional commodities have not been a
primary area of interest for many market participants in recent years. The
underlying commodities themselves are today, in many cases, at historically low
price levels (certainly on a constant dollar basis). "Just in time" inventory
management is changing the way commodities are handled and has been a factor in
reducing inventories. While these fundamentals are transforming the supply side
of the equation, political and economic reforms in many emerging economies are
pointing to an era of sutained growth in the global economy. While it is
impossible to know how this scenario will unfold, Millburn Ridgefield believes
that many of these markets warrant a larger allocation than they have enjoyed in
the 1980s and 1990s. Increased demand for both financial and hard resources
(commodities) is already apparant in some markets. While Millburn Ridgefield
will continue to trade markets from both the long and the short side consistent
with their systematic approach and the prevailing market trends, is should be
recognized that the Managing Owner's decision to increase the portfolio
weightings in traditional commodity markets, at this time, was a response to the
Managing Owner's interpretation of these global changes and the potential
opportunities that could result.
While the Trust will maintain significant currency and financial instrument
commitments, it has increased (as compared to Millburn Ridgefield's other
accounts) its emphasis on the non-financial markets. Unlike many other
investments, the success of the Trust does not require a favorable economic
climate or rising stock and bond markets. 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. THE MARKET
SECTOR ALLOCATIONS OF THE TRUST ARE SUBJECT TO PERIODIC REVIEW AND POSSIBLE
ALTERATIONS FROM TIME TO TIME. The following depicts the market allocations as
of January 1, 1997 of the World Resource Portfolio.
[PIE CHART HERE]
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ALTHOUGH THE MARKET SECTOR WEIGHTINGS OF THE WORLD RESOURCE PORTFOLIO HAVE
REMAINED RELATIVELY CONSISTENT IN THE TRUST'S TRADING TO DATE, THEY MAY VARY
MATERIALLY OVER TIME; HOWEVER, THE MANAGING OWNER INTENDS FOR THE TRUST AT ALL
TIMES TO TRADE A DIVERSIFIED RANGE OF MARKETS WITH A SIGNIFICANT PORTFOLIO
ALLOCATION TO NON-FINANCIAL COMMODITIES. ALTHOUGH THE WORLD RESOURCE PORTFOLIO
PLACES GREATER EMPHASIS ON THESE NON-FINANCIAL MARKET SECTORS, CONSIDERED
COLLECTIVELY, THAN DO MILLBURN RIDGEFIELD'S OTHER ACCOUNTS, THE PORTFOLIO
RETAINS AN APPROXIMATELY 50% ALLOCATION TO THE CURRENCY AND FINANCIAL MARKETS.
WORLD RESOURCE PORTFOLIO MARKETS
World Resource Portfolio markets currently include:
AGRICULTURAL COMMODITIES METALS ENERGY
Cocoa Soybeans Aluminum Crude Oil
Coffee Soy Meal Copper Gas Oil
Corn Soy Oil Gold Heating Oil
Cotton Sugar Nickel Natural Gas
Orange Juice Palladium Unleaded Gas
Silver
CURRENCIES
MAJOR SECONDARY CROSSES
----- --------- -------
British Pound Belgian Franc Canadian $ - Japanese Yen
Deutsche Mark Danish Krone Deutsche Mark - Italian Lira
French Franc Dollar Index Deutsche Mark - Japanese Yen
Japanese Yen Dutch Guilder Deutsche Mark - Swiss Franc
Swiss Franc European Currency Unit Dutch Guilder - Japanese Yen
Italian Lira
Norwegian Krone
Portuguese Escudo
Spanish Peseta
INTEREST RATES STOCK INDICES
Australian Bonds Italian Bond Australian All Ordinaries
Eurodollars London Short Rates Hong Kong Hang Seng
Euro Yen Tokyo Yen Bond London FT-SE
French Bond U.S. Treasury Bonds Nikkei Dow
French Pibor U.S. Treasury Notes S&P 500
German Bunds Topix Index
THE TRUST HAS NOT, IN ITS OPERATIONS TO DATE, TRADED IN ALL OF THE
FOREGOING MARKETS. THERE CAN BE NO ASSURANCE AS TO WHICH MARKETS THE TRUST WILL
TRADE IN THE FUTURE OR AS TO WHICH MARKETS WILL BE INCLUDED IN THE WORLD
RESOURCE PORTFOLIO OVER TIME. SUCH MARKETS MAY BE CHANGED WITHOUT NOTICE, IN
THE DISCRETION OF MILLBURN RIDGEFIELD. MOREOVER, MILLBURN RIDGEFIELD DOES NOT
MAINTAIN OPEN POSITIONS IN ALL WORLD RESOURCE PORTFOLIO MARKETS AT ALL TIMES.
AT CERTAIN TIMES, MILLBURN RIDGEFIELD MAY ENTIRELY WITHDRAW FROM ONE OR MORE
SUCH MARKETS.
THE WORLD RESOURCE PORTFOLIO IS NOT A DISTINCT TRADING SYSTEM OR PROGRAM,
BUT SIMPLY THE APPLICATION OF MILLBURN RIDGEFIELD'S GENERAL TRADING SYSTEMS TO A
GROUP OF MARKETS MORE WEIGHTED TOWARDS NON-FINANCIAL COMMODITIES THAN ARE
MILLBURN RIDGEFIELD'S OTHER ACCOUNTS.
The World Resource Portfolio was developed by Millburn Ridgefield as a
combination of markets potentially better positioned to capitalize on what
Millburn Ridgefield believes may be a number of major price movements in the
non-financial market sectors which could occur during the remainder of the
1990s. The Managing Owner believes
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that profit opportunities will remain over the medium- to long-term in the
financial and currency markets (and the World Resource Portfolio maintains a
significant commitment to these markets), but that there is also good profit
potential in increasing exposure to other market sectors at this time. THERE
CAN BE NO ASSURANCE THAT THE PROFIT POTENTIAL WHICH MILLBURN RIDGEFIELD
BELIEVES WILL DEVELOP IN THE NON-FINANCIAL MARKET SECTORS WILL, IN FACT,
MATERIALIZE, OR THAT THE TRUST WILL BE ABLE TO REALIZE SUCH POTENTIAL EVEN IF
IT DOES SO.
THE MANAGING OWNER
Millburn Ridgefield is one of the longest operating of all active managed
futures advisors. Principals of Millburn Ridgefield have been managing client
assets in the futures and forward markets since 1972, and as of January 1, 1997
Millburn Ridgefield was managing approximately $569 million of client and
proprietary capital in these markets. As of such date, Millburn Ridgefield and
its affiliates were also managing over $152 million in other disciplines.
Millburn Ridgefield uses a highly systematic trend-following approach which
relies primarily on technical, market-related information. Millburn Ridgefield
regards its strategies as long-term in nature, and gives substantial emphasis to
risk management -- through, for example, analysis of leverage, implementation of
"stop-loss" liquidation points on all open positions and ongoing rebalancing of
portfolio commitments based on volatility risk assessments of the different
markets traded.
Millburn Ridgefield implements multiple systems (generally, at least three)
in analyzing each market which it trades. Only if all systems implemented in a
market generate a positive trading signal will a "full position" be taken. A
"full position" represents the maximum exposure that the risk control overlay in
the trading system will allow in a given market based on account equity, market
volatility and other factors. Because Millburn Ridgefield utilizes multiple
trading systems, a negative signal in one system may be offset by positive
signals in the other systems. Partial positions may be taken if one or more
trading systems generate a neutral or negative trading signal while the other
systems generate positive signals. This multi-system approach helps to filter
out the "whipsaw" effect which short-term "noise" price fluctuations and
reversals can otherwise have on trend-following systems -- resulting in the
dissipation of account equity through the frequent acquisition and liquidation
of positions. The use of multiple evaluative models gives Millburn Ridgefield's
strategy a degree of internal diversification which has the potential to
increase its risk control capabilities.
As is the case with most trend-following systems, Millburn Ridgefield seeks
to achieve cumulative profitability through capturing sustained price trends of
significant duration and magnitude. Such trends tend to be relatively
infrequent (often occurring only 2 to 3 times or less during a year in any given
market). The early determination of the beginning and end of such major trends
is an important feature of successful trading. Millburn Ridgefield's technical
trading systems are designed with the objective that they will generate a
trading signal when market conditions indicate a trend is likely to occur. If
the trend is not subsequently confirmed or quickly reverses itself, positions
are closed out in an attempt to limit capital losses. Positions which are
profitable are maintained until the trading systems indicate that the trend has
ended.
MILLBURN RIDGEFIELD CORPORATION
MILLBURN RIDGEFIELD CORPORATION
Millburn Ridgefield Corporation, the Managing Owner, is a Delaware
corporation organized in May 1982 to manage discretionary accounts in futures
and forward markets. It is the corporate successor to a futures trading and
advisory organization which has been continuously managing assets in the
currency and futures markets using quantitative, systematic techniques since
1971. As of January 1, 1997, Millburn Ridgefield, together with its affiliate
ShareInVest Research L.P., was managing over $747 million in currencies,
financial and commodity futures, equities and funds of funds.
Millburn Ridgefield has been registered with the CFTC as a "commodity pool
operator" since September 13, 1984 and as a "commodity trading advisor" since
July 1, 1982 and is also registered as a "futures commission merchant." The
Millburn Corporation, an affiliate of Millburn Ridgefield, performs certain
administrative and
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operating functions for Millburn Ridgefield. ShareInVest Research L.P., an
affiliate of Millburn Ridgefield, manages portfolios of U.S. small
capitalization growth stocks. THE REGISTRATION OF MILLBURN RIDGEFIELD WITH
THE CFTC MUST NOT BE TAKEN AS AN INDICATION THAT SUCH AGENCY HAS RECOMMENDED
OR APPROVED EITHER MILLBURN RIDGEFIELD OR THE TRUST.
BACKGROUND AND MANAGEMENT
Millburn Ridgefield is organized into four main departments: research,
trading, operations and investor services. Millburn Ridgefield provides its
personnel with a computerized infrastructure that supports Millburn Ridgefield's
research efforts and allows departments to coordinate and communicate
effectively. Millburn Ridgefield was among the first systematic money managers
to begin building a comprehensive in-house computerized database, and this
database has been updated continuously since its introduction in 1975. Millburn
Ridgefield's currency database contains the last twenty years of market
activity, and the interest-rate futures database covers the period since 1975,
the first year that Treasury bill futures contracts were traded.
The systems implemented by the research staff generate signals which the
trading department executes and monitors in more than sixty currency and futures
markets on a 24-hour global basis. The face value of the trades executed by the
trading department is in excess of $10 billion per year. The trade
implementation process is facilitated by the computerization of the related
support functions. These functions include (1) position accounting, (2) profit
and loss statements, (3) trading system signal sheets and (4) portfolio
adjustments. A system of checks and balances is in place to guard against
errors. Examples are multiple confirmations of executed trades and continuous
review of positions by both the trading staff and the senior officers of the
firm. Millburn Ridgefield has also invested substantial time and money in
acquiring sophisticated communications, news and quotation capabilities.
The background of each of the principals and senior officers of Millburn
Ridgefield and its affiliates who perform services on Millburn Ridgefield's
behalf is set forth below.
HARVEY BEKER, AGE 43. Mr. Beker is President, Co-Chief Executive Officer
and a Director of Millburn Ridgefield and The Millburn Corporation, and a
partner of ShareInVest Research L.P. He received a Bachelor of Arts degree in
economics from New York University in 1974 and a Master of Business
Administration degree in finance from NYU in 1975. From June 1975 to July 1977,
Mr. Beker was employed by Loeb Rhoades, Inc. where he developed and traded
silver arbitrage strategies. From July 1977 to June 1978, Mr. Beker was a
futures trader at Clayton Brokerage Co. of St. Louis. Mr. Beker has been
employed by The Millburn Corporation since June 1978. During his tenure at
Millburn, he has been instrumental in the development of the research, trading
and operations areas. Mr. Beker became a principal of the firm in 1982.
GEORGE E. CRAPPLE, AGE 52. Mr. Crapple is Co-Chief Executive Officer,
Vice-Chairman and a Director of Millburn Ridgefield, Vice-Chairman and a
Director of The Millburn Corporation and a partner of ShareInVest Research L.P.
In 1966 he graduated with honors from the University of Wisconsin where his
field of concentration was economics and he was elected to Phi Beta Kappa. In
1969 he graduated from Harvard Law School, MAGNA CUM LAUDE, where he was a
member of the Harvard Law Review. He was a lawyer with Sidley & Austin,
Chicago, Illinois, from 1969 until April 1, 1983, as a partner since 1975,
specializing in commodities, securities, corporate and tax law. He was first
associated with Millburn Ridgefield in 1976 and joined Millburn Ridgefield
Corporation on April 1, 1983 on a full-time basis. Mr. Crapple is a member of
the Board of Directors and a former Chairman of the Eastern Regional Business
Conduct Committee and a former member of the Nominating Committee of the
National Futures Association, a member of the Board of Directors and Executive
Committee of the Managed Futures Association, a member of the Financial Products
Advisory Committee of the CFTC and a former member of the Board of Directors of
the Futures Industry Association.
MARK B. FITZSIMMONS, AGE 49. Mr. Fitzsimmons is a Senior Vice-President
of Millburn Ridgefield and The Millburn Corporation and a partner of
ShareInVest Research L.P. His responsibilities include both marketing and
investment strategy. He graduated SUMMA CUM LAUDE from the University of
Bridgeport, Connecticut in 1970 with a B.S. in economics. His graduate work
was done at the University of Virginia, where he received a certificate of
candidacy for a Ph.D. in economics in 1973. He joined Millburn Ridgefield in
January 1990 from Morgan Stanley & Co. Incorporated where he was a Principal
and Manager of institutional foreign exchange sales and was involved in
strategic trading for the firm. From 1977 to 1987 he was with Chemical Bank
New York Corporation, first as a Senior Economist in Chemical's Foreign
Exchange Advisory Service and later as a Vice-President and Manager of
Chemical's
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Corporate Trading Group. While at Chemical he also traded both foreign
exchange and fixed income products. From 1973 to 1977 Mr. Fitzsimmons was
employed by the Federal Reserve Bank of New York, dividing his time between
the International Research Department and the Foreign Exchange Department.
BARRY GOODMAN, AGE 39. Mr. Goodman is Senior Vice-President, Director of
Trading and Co-Director of Research of Millburn Ridgefield and The Millburn
Corporation and a partner of ShareInVest Research L.P. His responsibilities
include overseeing the firm's trading operation and managing its trading
relationships, as well as the design and implementation of trading systems. He
graduated MAGNA CUM LAUDE from Harpur College of the State University of New
York in 1979 with a B.A. in economics. From 1980 through late 1982 he was a
commodity trader for E. F. Hutton & Co., Inc. At Hutton he also designed and
maintained various technical indicators and coordinated research projects
pertaining to the futures markets. He joined Millburn Ridgefield in 1982 as
Assistant Director of Trading.
DENNIS B. NEWTON, AGE 45. Mr. Newton is a Senior Vice-President of
Millburn Ridgefield. His primary responsibilities are in administration and
marketing. Prior to joining Millburn Ridgefield in September 1991, Mr. Newton
was President of Phoenix Asset Management, Inc., a registered commodity pool
operator from April 1990 to August 1991. Prior to his employment with Phoenix,
Mr. Newton was a Director of Managed Futures with Prudential-Bache Securities
Inc. from September 1987 to March 1990. Mr. Newton joined Prudential-Bache from
Heinold Asset Management, Inc. where he was a member of the senior management
team. Heinold was a pioneer and one of the largest sponsors of funds utilizing
futures and currency forward trading.
GRANT N. SMITH, AGE 45. Mr. Smith is Senior Vice-President and
Co-Director of Research of Millburn Ridgefield and The Millburn Corporation
and a partner of ShareInVest Research L.P. He is responsible for the design,
testing and implementation of quantitative trading strategies, as well as for
planning and overseeing the computerized decision-support systems of the
firm. He received a B.S. degree from the Massachusetts Institute of
Technology in 1974 and an M.S. degree from M.I.T. in 1975. While at M.I.T.
he held several teaching and research positions in the computer science field
and participated in various projects relating to database management. He
joined Millburn Ridgefield in 1975.
MALCOLM H. WIENER, AGE 61. Mr. Wiener is the Founder and non-executive
Chairman of Millburn Ridgefield, The Millburn Corporation and ShareInVest
Research L.P., serves as an adviser to these entities and is a major investor in
funds managed by Millburn Ridgefield and ShareInVest Research L.P. He does not,
however, have investment or operational authority or responsibility for any of
these entities or supervisory authority over their officers or employees.
Mr. Wiener is also a Director of Millburn Ridgefield and The Millburn
Corporation. Mr. Wiener graduated MAGNA CUM LAUDE from Harvard College in 1957,
where his field of concentration was Economics and he was elected to Phi Beta
Kappa. From 1957 to 1960 he served as an officer in the United States Navy.
Mr. Wiener graduated from the Harvard Law School in 1963 and practiced law in
New York City specializing in corporate law and financial transactions until
1973. Mr. Wiener began research on and the trading of futures contracts
pursuant to systematic trading methods and money management principles in 1971
and the management on a full time basis of private funds in this area in 1973.
He is the author of numerous papers on the history of trade and is a member of
the Council on Foreign Relations. He serves on the boards or visiting
committees of various non-profit institutions including the Kennedy School of
Government and the Wiener Center for Social Policy at Harvard University, the
Harvard Art Museums, the Metropolitan Museum in New York, the Museum of Fine
Arts in Boston, the American School of Classical Studies in Athens and the
Council on Economic Priorities in New York.
Millburn Ridgefield shares with its affiliates a staff which includes, in
addition to the seven above-named officers, 15 senior professionals and 17
assistants performing trading, research, operational and administrative
functions. The past performance of Millburn Ridgefield is set forth on page 21
and in "Performance of the Millburn Ridgefield Client Funds and Trading
Programs" at page 85 and "Annual Rates of Return Since Inception of the Millburn
Ridgefield Client Funds" at page 95.
As of December 31, 1996, Millburn Ridgefield's interest in the Trust was
valued at $609,802 (redemption value, not GAAP).
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TRADING STRATEGIES IN GENERAL
Forward and futures traders may generally be classified as either
systematic or discretionary. A systematic trader will generally rely to some
degree on judgmental decisions concerning, for example, which markets to follow
and trade, when to liquidate a position in a contract which is about to expire
and how heavy a weighting a particular market should have in a portfolio.
However, although these judgmental decisions may have a substantial effect on a
systematic trading advisor's performance, the trader's primary reliance is on
trading programs or models which generate trading signals. The systems utilized
to generate trading signals are changed from time to time (although generally
infrequently), but the trading instructions generated by the then-current
systems are followed without significant additional analysis or interpretation.
Discretionary traders on the other hand -- while they may utilize market charts,
computer programs and compilations of quantifiable information to assist them in
making trading decisions -- make trading decisions on the basis of their own
judgment and "trading instinct," not on the basis of trading signals generated
by any program or model. Millburn Ridgefield is a systematic trader.
In addition to being distinguished from one another by the criterion of
whether they trade systematically or on the basis of their discretionary
evaluations of the markets, commodity trading advisors are also distinguished as
relying on either "technical" or "fundamental" analysis, or on a combination of
the two.
Technical analysis is not based on the anticipated supply and demand of a
particular cash (actual) commodity, currency or financial instrument; instead,
it is based on the theory that the study of the markets themselves will provide
a means of anticipating the external factors that affect the supply and demand
for a particular commodity, currency or financial instrument in order to predict
future prices. Technical analysis operates on the theory that market prices at
any given point in time reflect all known factors affecting supply and demand
for a particular commodity, currency or financial instrument. Fundamental
analysis, in contrast, is based on the study of factors external to the trading
markets that affect the supply and demand of a particular commodity, currency or
financial instrument in an attempt to predict futures prices. Such factors
might include the economy of a particular country, government policies, domestic
and foreign political and economic events, and changing trade prospects.
Fundamental analysis theorizes that by monitoring relevant supply and demand
factors for a particular commodity, currency or financial instrument, a state of
current or potential disequilibrium of market conditions may be identified that
has yet to be reflected in the price level of that instrument. Fundamental
analysis assumes that the markets are imperfect, that information is not
instantaneously assimilated or disseminated and that econometric models can be
constructed that generate equilibrium prices that may indicate that current
prices are inconsistent with underlying economic conditions and will,
accordingly, change in the future. Millburn Ridgefield is predominantly a
technical trader.
"Trend-following" advisors, such as Millburn Ridgefield, gear their trading
approaches towards positioning themselves to identify and follow major price
movements, as opposed to, for example, "market forecasters" who attempt to
predict future price levels without relying on such trends to point the way,
"scalpers" who attempt to make numerous small profits on short-term trades, or
arbitrage traders who attempt to capture temporary price disequilibriums between
inter-related markets. Trend-following traders assume that a majority of their
trades will be unprofitable. Their objective is to make a few large profits,
more than offsetting their numerous but smaller losses, by capitalizing on major
trends. Consequently, during periods in which no major price trends develop in
a market, a "trend-following" advisor is likely to incur substantial losses.
MILLBURN RIDGEFIELD TRADING STRATEGY
MULTIPLE TRADING SYSTEMS
The objective of Millburn Ridgefield's trading method is to participate in
all major sustained price moves in the markets traded. Millburn Ridgefield
regards its approach as long-term in nature. Millburn Ridgefield makes trading
decisions pursuant to its trading method, which includes technical trend
analysis (and certain non-trend-following technical systems) and the money
management principles described below, which may be revised from time to time.
Given trends in price of sufficient duration and magnitude, these trading
systems may be profitable even though more than half of all individual trades
are unprofitable. A period of time without such trends, however, may result in
substantial losses.
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Millburn Ridgefield is engaged in a substantial ongoing research effort to
improve its trading methods and to apply its quantitative analytic expertise to
new financial products.
Trading is limited to markets which Millburn Ridgefield believes are
sufficiently liquid in respect of the amount of trading contemplated.
The first step in the trading methodology is developing intermediate- to
long-term trading systems which generate long or short (buy or sell) decisions
in a particular market based on the direction of the price trend in the market.
Millburn Ridgefield has developed hundreds of trading systems using classes of
quantitative models and classes of data such as price, volume and interest
rates. The full range of systems are tested in each market against five, ten or
fifteen years of historical data to simulate the results the system would have
achieved in the markets had the system been used to make trading decisions
during the simulation period. Profits are calculated plus a number of
statistics designed to identify high quality profits such as trade reliability
(percentage of profitable trades), drawdowns (worst losses experienced), average
giveback of maximum profits on profitable trades and Sharpe ratio (risk adjusted
returns).
The performance of all systems in the market are ranked, and three or
four systems are selected which make decisions in different ways at different
times. This multi-system approach ensures that the total risk intended to be
taken in a market is spread over several different strategies. If four
systems are used to trade crude oil, the maximum position would be traded if
all four were long or short. If two were long and two short, they would
cancel each other out and a flat position in crude oil would be signaled.
The effect of the multi-system approach is that in periods during which the
technical picture is unclear, the systems disagree and positions will be
light or flat, but when all systems agree on the trend, maximum positions
will be traded. In certain markets, Millburn Ridgefield also uses short-term
systems based on intraday tick data. Minute-by-minute prices are used to
identify "quiet" as opposed to "noisy" periods, and trades may be implemented
with or counter to the short-term trend depending on conditions.
In certain markets, Millburn Ridgefield uses a strategy which focuses on
calculating options volatility. When volatility is low, the probability of
directional signals being profitable increases, and trades are implemented by
buying at the money or slightly out of the money options. The nature of options
results in an increase in leverage as a position becomes profitable and a
decrease in leverage as a position becomes unprofitable.
RISK MANAGEMENT
Risk is a function of both price level and price volatility. For example,
a 100,000 barrel crude oil position is worth more and is, therefore, more risky
with oil at $30 per barrel than with oil at $10 per barrel. Similarly, if
prices are moving in a 5% daily range, oil is more risky than if prices are
moving in a 1% daily range. In attempting to assess market volatility as a
means of monitoring and evaluating risk. Millburn Ridgefield utilizes its
volatility overlay which is also a part of individual market risk management.
This system measures the risk in the portfolio's position in a market and
signals a decrease in position size when risk increases and an increase in
position size when risk decreases. Millburn Ridgefield's volatility overlay
maintains overall portfolio risk and distribution of risk across markets within
designated ranges. It is applied to all three systematic strategies described
above. A secondary benefit of the volatility overlay can be the timely taking
of profits since markets tend to become more volatile after a profitable trend
has been long underway, and the volatility overlay often signals position
reductions before trend reversals.
In addition to the volatility overlay, Millburn Ridgefield's risk
management focuses on money management principles applicable to the portfolio as
a whole rather than to individual markets. The first principle is portfolio
diversification which attempts further to improve the quality of profits by
reducing volatility. In establishing a futures portfolio, Millburn Ridgefield
will select markets and assign them relevant weightings with the objective of
achieving broad diversification. Factors considered include profitability,
liquidity, market depth, correlation of losing periods and Millburn Ridgefield's
trading experience. Millburn Ridgefield seeks a portfolio in which returns from
trading in different markets are not highly correlated; returns are not all
positive or negative at the same time.
Additional money management principles applicable to the portfolio as a
whole include: limiting the assets committed as margin, generally within a
range of 15% to 30% of an account's net assets at exchange minimum margins
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(including imputed margins on forward positions), although the amount committed
to margin at any time may be substantially higher; prohibiting pyramiding (that
is, using unrealized profits in a particular market as margin for additional
positions in the same market); and changing the equity utilized for trading by
an account solely on a controlled periodic basis rather than as an automatic
consequence of an increase in equity resulting from trading profits.
Another important risk management function is the careful control of
leverage or portfolio size. Leverage levels are determined by simulating the
entire portfolio -- all markets, all systems, all risk control overlays, the
exact weightings of the markets in the portfolio and the proposed level of
leverage -- over the past five or ten years to determine the worst case
experienced by the portfolio in the simulation period. The worst case is
measured from a daily high in portfolio assets to the subsequent daily low
whether that occurs days, weeks or months after the daily high (a peak-to-trough
drawdown). If the drawdown is considered too severe, the leverage or portfolio
size is reduced.
Decisions whether to trade a particular market are based upon various
factors, including the liquidity of the market, its significance in terms of the
desired degrees of concentration and diversification, and its profit potential
(both historically and at a given time). These decisions will require the
exercise of judgment. The decision not to trade certain markets for certain
periods, or to reduce the size of a position in a particular market, may result
at times in missing significant profit opportunities.
The money management principles, computer assisted research into historical
trading data, and experience of the principals of Millburn Ridgefield are
factors upon which decisions concerning the percentage of assets to be used for
each market traded and the size of positions taken or maintained are based.
From time to time decisions to increase or decrease the size of a position, long
or short, may be made. Such decisions also require the exercise of judgment and
may include consideration of the volatility of the particular market; the
pattern of price movements, both inter-day and intra-day; open interest; volume
of trading; changes in spread relationships between various forward contracts;
and overall portfolio balance and risk exposure.
With respect to the execution of trades, Millburn Ridgefield may rely to an
extent upon the judgment of others, including dealers, bank traders and floor
brokers. No assurance is given that it will be possible to execute trades
regularly at or near the desired buy or sell point.
The trading method, systems and money management principles utilized by
Millburn Ridgefield are proprietary and confidential. The foregoing description
is general and is not intended to be complete.
FIDUCIARY OBLIGATIONS OF MILLBURN RIDGEFIELD
NATURE OF FIDUCIARY OBLIGATIONS; CONFLICTS OF INTEREST
As Managing Owner of the Trust, Millburn Ridgefield is subject, under
both statutory and common law, to restrictions comparable to those imposed on
a general partner of a limited partnership. Millburn Ridgefield has a
fiduciary responsibility to the Unitholders to exercise good faith, fairness
and loyalty in all dealings affecting the Trust, consistent with the terms of
the Trust's Second Amended and Restated Declaration of Trust and Trust
Agreement ("Declaration of Trust"). The scope of Millburn Ridgefield's
fiduciary obligations are defined and established, in large part, by the
consent of each Unitholder, in subscribing to the Units, to the business
terms of the Trust, as embodied in the Declaration of Trust and described in
this Prospectus. Certain of the conflicts of interest involved in the
operation of the Trust -- for example, the Trust's trading currency forward
contracts with an affiliate of Millburn Ridgefield -- may be impermissible
under the fiduciary principles applied in certain other investment contexts
- -- for example, the rules governing "investment advisers" trading securities
with their clients on a principal-to-principal basis. In the case of the
Trust, such activities are authorized by disclosure and the informed consent
of subscribers.
Millburn Ridgefield has selected itself as the sole advisor for the Trust,
and is required to clear (although not to execute) the Trust's futures trades
through the Clearing Brokers, and the brokerage commissions paid by the Trust
are assessed on a flat-rate, not a per-trade, basis. Nevertheless, prospective
investors must recognize that by subscribing to the Trust they have consented to
its basic structure, in which affiliates of Millburn Ridgefield, and
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Millburn Ridgefield itself, receive substantial revenues from the Trust and
do not negotiate on behalf of the Trust to achieve lower rates, either from
Millburn Ridgefield entities or third parties.
There are substantial and inherent conflicts of interest in the structure
of the Trust. One of the purposes underlying the disclosures set forth in this
Prospectus is to disclose to all prospective Unitholders these conflicts of
interests so that Millburn Ridgefield may have the opportunity to obtain their
informed consent to such conflicts. Prospective investors who are not willing
to consent to the various conflicts of interest described under "Conflicts of
Interest" are ineligible to invest in the Trust. See "Conflicts of Interest" at
page 50.
The Trust, as a publicly-offered "commodity pool," is subject to the
Statement of Policy of the North American Securities Administrators Association,
Inc. relating to the registration, for public offering, of commodity pool
interests (the "Blue Sky Guidelines"). The Blue Sky Guidelines explicitly
prohibit a general partner of a commodity pool from "contracting away the
fiduciary obligation owed to [the investors] under the common law."
Consequently, once the terms of a given commodity pool, such as the Trust, are
established, it is virtually impossible for the Managing Owner to change such
terms in a manner which disproportionately benefits the Managing Owner, as any
such change could constitute self-dealing under common law fiduciary standards.
The Declaration of Trust provides that Millburn Ridgefield and its
affiliates shall have no liability to the Trust or to any Unitholder for any
loss suffered by the Trust which arises out of any action or inaction of
Millburn Ridgefield or its affiliates if Millburn Ridgefield or its affiliates,
in good faith, determined that such course of conduct was in the best interests
of the Trust, and such course of conduct did not constitute negligence or
misconduct by Millburn Ridgefield or its affiliates. The Trust has agreed to
indemnify Millburn Ridgefield and certain of its affiliates against claims,
losses or liabilities based on their conduct relating to the Trust, provided
that the conduct resulting in the claims, losses or liabilities for which
indemnity is sought did not constitute negligence or misconduct and was done in
good faith and in a manner reasonably believed to be in the best interests of
the Trust. The Blue Sky Guidelines prescribe the maximum permissible extent to
which the Trust can indemnify Millburn Ridgefield and its affiliates and
prohibit the Trust purchasing insurance to cover indemnification which the Trust
could not give directly.
REMEDIES AVAILABLE TO THE UNITHOLDERS
Under Delaware law, a beneficial owner of a business trust may, under
certain circumstances, institute legal action on behalf of himself or herself
and all other similarly situated beneficial owners (a "class action") to recover
damages from a managing owner of such business trust for violations of fiduciary
duties, or on behalf of a beneficial trust (a "derivative action") to recover
damages from a third party where a managing owner has failed or refused to
institute proceedings to recover such damages. In addition, beneficial owners
may have the right, subject to applicable procedural, jurisdictional and
substantive requirements, to bring class actions in federal court to enforce
their rights under the federal securities laws and the rules and regulations
promulgated thereunder by the SEC. For example, beneficial owners who have
suffered losses in connection with the purchase or sale of their beneficial
interests in a trust may be able to recover such losses from a managing owner
where the losses result from a violation by the managing owner of the anti-fraud
provisions of the federal securities laws.
In certain circumstances, Unitholders also have the right to institute a
reparations proceeding before the CFTC against Millburn Ridgefield (a registered
commodity pool operator and commodity trading advisor) and the Clearing Brokers
(registered futures commission merchants), as well as those of their respective
employees who are required to be registered under the Commodity Exchange Act, as
amended, and the rules and regulations promulgated thereunder. There is a
private right of action under the Commodity Exchange Act. Investors in
commodities and in commodity pools may, therefore, invoke the protections
provided by such legislation.
In the case of most public companies, the management is required to make
numerous decisions in the course of the day-to-day operations of the company and
is protected in doing so by the so-called "business judgment rule." This rule
protects management from liability for decisions made in the course of operating
a business if the decisions are made on an informed basis and with the honest
belief that the decision is in the best interests of the corporation. Millburn
Ridgefield believes that similar principles apply to Millburn Ridgefield in its
management of the Trust.
THE FOREGOING SUMMARY DESCRIBING IN GENERAL TERMS THE REMEDIES AVAILABLE TO
UNITHOLDERS UNDER FEDERAL AND STATE LAW IS BASED ON STATUTES, RULES AND
DECISIONS AS OF THE DATE OF THIS PROSPECTUS. THIS IS A RAPIDLY DEVELOPING AND
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CHANGING AREA OF THE LAW. THEREFORE, UNITHOLDERS SHOULD CONSULT THEIR OWN
COUNSEL AS TO THEIR EVALUATION OF THE STATUS OF THE APPLICABLE LAW SHOULD ANY
ISSUES ARISE.
USE OF PROCEEDS
PROCEEDS OF SUBSCRIPTIONS
The proceeds of the continuous offering of the Units are utilized by the
Trust to engage in speculative trading of futures, forward and option contracts
as described under "Millburn Ridgefield Corporation--Millburn Ridgefield Trading
Strategy," at page 31. The Trust trades, pursuant to the Managing Owner's World
Resource Portfolio, in approximately 50 markets in the six following sectors:
currencies, interest rates, energy and agricultural products, metals and stock
indices. As Millburn Ridgefield itself pays all selling commissions in respect
of the Units, 100% of the net proceeds of subscriptions are available for
trading. The Trust is not a "no-load" investment, and redemption charges are
applicable for twelve months after Units are sold. However, the Trust's fees
have been structured so as to allocate 100% of the proceeds of subscriptions to
the Trust's trading account.
MAINTENANCE OF ASSETS
Except as described in the following paragraph, the Trust deposits its
assets in cash either: (i) as margin with Prudential Securities or PaineWebber,
the Trust's Clearing Brokers; or (ii) in trust accounts established in the name
of the Trust at major money-center United States banks. The assets deposited as
margin with the Clearing Brokers 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 Commodity Exchange Act and applicable CFTC regulations. In general,
approximately 20% to 30% of the Trust's assets are held in customer segregated
funds and approximately 10% to 20% in foreign futures and options secured amount
accounts. Assets held in "customer segregated funds accounts" are held in cash
or invested in United States Treasury bills or notes. Assets held in foreign
futures and options secured amount accounts are held in cash or invested in U.S.
Treasury bills or notes or short-term sovereign debt instruments of the relevant
jurisdictions. In general, approximately 30% to 60% of the Trust's assets are
held in bank accounts opened in the Trust's name, although the actual level may
vary from time to time. Assets held in bank accounts are either held as
interest-bearing bank deposits or invested in U.S. Treasury bills or notes.
To the extent that the Trust participates in markets other than regulated
United States or foreign futures exchanges -- for example, the forward currency
markets -- the Trust maintains such funds only in instruments (generally, U.S.
government securities) authorized by the CFTC for the investment of "customer
segregated funds." Assets which cannot be held in CFTC-authorized instruments
are held in cash, on which interest is credited at short-term rates. (The
Clearing Brokers obtain a benefit as a result of the deposit of such cash to
reduce their outstanding overnight borrowings, despite such cash belonging to
the Trust, not the Clearing Broker.) Approximately 10% to 20% of the Trust's
assets are held in unregulated accounts in the United States, with the Clearing
Brokers as well as with other counterparties.
USE OF PROCEEDS
(January 1, 1996-December 31, 1996)
MINIMUM* MAXIMUM*
CFTC-Segregated Funds 20% 30%
Foreign Secured Amount Accounts 10% 20%
Unregulated Accounts 10% 20%
Bank Accounts 30% 60%
______________________
* The actual allocation of the Trust's assets among the foregoing uses varies.
During 1996, the Trust earned $2,115,972 in interest income and related
payments, 4.72% of its average month-end Net Assets. On an ongoing basis,
Millburn Ridgefield anticipates that the Trust will be able to earn interest
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on approximately 95% of its daily Net Assets. The Trust's Clearing Brokers
receive the additional economic benefit derived from possession of the
Trust's assets.
Under current margin requirements, the Trust's average margin to equity
ratio (including imputed margin on forward currency contracts) is approximately
20% to 40% of the Trust's assets. However, margin requirements vary from time
to time.
The Declaration of Trust strictly prohibits the Trust from lending any of
its assets to any person or entity (other than through permitted securities
investments). The Managing Owner will not commingle the property of the Trust
with the property of any other person or entity (deposit of Trust assets with
the Clearing Brokers or trading counterparties does not constitute commingling
for these purposes).
STRATEGIES IMPLEMENTED
The strategies implemented by Millburn Ridgefield (providing assets to
support such strategies constituting the most important use of the proceeds
of subscriptions) are described in general terms (these strategies are
proprietary and confidential and, accordingly, cannot be described in detail)
under "Millburn Ridgefield Corporation -- Millburn Ridgefield Trading
Strategy" at page 31. Millburn Ridgefield has the flexibility to alter, in
its discretion, its trading method (including technical trading systems, risk
control overlays and money management principles), as well as to change the
futures and forward markets traded for the Trust. Millburn Ridgefield may
modify the method used for the Trust so as to include new methods of analysis
and may utilize non-trend-following systems or market-forecasting strategies.
Unitholders will not be notified of changes in the markets traded or
modifications, additions or deletions to Millburn Ridgefield's methods unless
such changes are considered by Millburn Ridgefield to be material.
CHARGES
Millburn Ridgefield believes that the substantial costs to which the Trust
is subject are a material consideration in determining whether to purchase
Units.
Trading results and interest income cannot be predicted, and the Profit
Shares paid by the Trust may have no relationship to the annual change in the
Net Asset Value per Unit because the Profit Shares are calculated quarterly
rather than annually. Furthermore, Profit Shares are calculated on the basis of
the aggregate gain or loss recognized by the Trust, irrespective of the
investment experience of any particular Unit or Unitholder. Prospective
investors should also recognize that the "bid-ask" spreads, which the Trust pays
on its forward contracts, may represent a significant portion of its transaction
costs, although such charges cannot be readily quantified.
The following reflects the routine charges payable by the Trust.
CHARGES PAID BY THE TRUST
THE FOLLOWING SUBSTANTIAL CHARGES ARE PAID BY THE TRUST.
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
Managing Brokerage Fee A flat-rate monthly fee of
Owner 0.75 of 1% of the Trust's
month-end Net Assets after
reduction for expenses but
prior to reduction for any
accrued but unpaid
Brokerage Fees or Profit
Shares (a 9.0% annual
rate).
Persons who invest
$1,000,000 or more in the
Trust will pay annual
Brokerage Fees at the
reduced rate of 7.0% per
annum. Such reduction will
have no effect on other
investors.
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Counterparties "Bid-ask" spreads Unquantifiable, but could
represent a substantial
expense.
Managing Quarterly Profit Share 17.5% of any New Trading
Owner Profit, excluding interest
income and after reduction
for Brokerage Fees and
administrative costs,
calculated as of the end of
each calendar quarter and
upon redemption of Units.
NEW TRADING PROFIT IS
CALCULATED ON THE BASIS OF
THE OVERALL PERFORMANCE OF
THE TRUST, NOT ON THE BASIS
OF ANY INDIVIDUAL
INVESTOR'S GAINS OR LOSSES.
Managing Reimbursement of The Managing Owner advanced
Owner organizational all such costs, totaling
and initial approximately $600,000, for
offering costs which it is being
reimbursed in 24 equal
monthly installments by the
Trust.
Others Trustee fees, legal, As incurred; estimated at
accounting, printing, no more than 0.5 of 1% of
postage and adminis- average month-end Net
trative costs Assets annually.
Others Reimbursement of Actual payments to third
delivery, insurance, parties; expected to be
storage and any negligible; none paid to
other extraordinary date.
charges
CHARGES PAID BY THE MANAGING OWNER
THE FOLLOWING COSTS ARE PAID BY THE MANAGING OWNER, WITHOUT DIRECT
REIMBURSEMENT FROM EITHER THE PROCEEDS OF SUBSCRIPTIONS OR FROM THE TRUST
ITSELF. THE MANAGING OWNER DOES, HOWEVER, RECEIVE SUBSTANTIAL COMPENSATION FROM
THE TRUST, AS DESCRIBED ABOVE.
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
Selling Agents Selling commissions 5% of the subscription
price of each Unit sold by
each of them, respectively
(3% in the case of
subscriptions of $1,000,000
or more).
Selling Agents Ongoing compensation Ongoing compensation in the
amount of 4% of the average
month-end Net Asset Value
(2% in the case of
subscriptions of $1,000,000
or more) of each
outstanding Unit sold by
them, respectively,
commencing with the
thirteenth full month after
such Unit is sold and
continuing for as long as
such Unit is outstanding.
Selling Agents Installment selling Payable at the same rate as
commissions ongoing compensation but
limited to 4.5% of the
subscription price of each
Unit.
Clearing Actual execution An average rate of
Brokers and clearing approximately $10.00 per
and NFA costs; transactions round-turn trade.
fees Estimated at approximately
2% of the Trust's average
month-end Net Assets per
year.
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BROKERAGE FEES
FLAT-RATE BROKERAGE FEES
The Trust pays the Managing Owner a flat-rate annual Brokerage Fee equal
to 9.0% of the Trust's average month-end Net Assets after reduction for
expenses but prior to reduction for any accrued but unpaid Brokerage Fees or
Profit Shares.
The Managing Owner, not the Trust, pays all routine costs of executing
and clearing the Trust's futures trades, including commodity brokerage
commissions payable to the Clearing Brokers. These costs include NFA
transaction fees assessed on the Trust's futures trading on United States
exchanges. Such fees are currently assessed at the rate of $0.14 per
round-turn trade (the purchase and sale or sale and purchase of a single
futures contract) of a futures contract and $0.07 for each trade of a
commodity option. The Trust's Brokerage Fee is unaffected by the number of
transactions actually executed by Millburn Ridgefield on behalf of the Trust.
See "Conflicts of Interest" at page 50. The Trust will pay any
extraordinary costs associated with its trading (E.G., insurance or delivery
expenses).
The Managing Owner has negotiated brokerage rates with the Clearing
Brokers (which are also the Principal Selling Agents) ranging from
approximately $7.75 to approximately $15.00 per round-turn trade, including
all related exchange and regulatory fees (although commissions on certain
foreign exchanges are somewhat higher). At these rates (which result in an
average round-turn rate of approximately $10.00), Millburn Ridgefield
estimates the Trust's aggregate execution and clearing costs at approximately
2% of average month-end Net Assets per year. During 1996, execution and
clearing costs equaled approximately 1.6% of average month-end Net Assets.
The Clearing Brokers also retain the economic benefit derived from possession
of the approximately 5% of the Fund's Net Assets which are maintained in cash
rather than invested in Treasury Bills. The Managing Owner pays these costs
from the Brokerage Fees which it receives. The balance of the Brokerage
Fees, after payment of ongoing compensation to the Selling Agents, is
retained by the Managing Owner. The amount of the Brokerage Fee retained per
Unit by the Managing Owner is estimated to equal approximately 2% of the
average month-end Net Asset Value per Unit during the first year that a Unit
is outstanding, I.E., the 9.0% Brokerage Fee received less (i) the 5% selling
commission paid and (ii) the estimated 2% per annum paid out in execution
costs. In the second year that a Unit is outstanding, the amount retained by
Millburn Ridgefield is estimated to increase to approximately 3% of the
Unit's average month-end Net Asset Value, as the ongoing compensation paid by
Millburn Ridgefield will equal 4% of a Unit's average month-end Net Asset
Value rather than the 5% initial selling commission paid on each Unit.
The savings recognized by Millburn Ridgefield's reduction of selling
commissions and ongoing compensation in the case of persons subscribing for
$1,000,000 or more are passed on to these investors in the form of lower
Brokerage Fees.
It is typical of managed futures advisors to receive management fees of
1% to 4% of an account's average month-end Net Assets annually. The Managing
Owner does not receive any management fee in addition to the Brokerage Fee.
The Managing Owner allocates the Trust's commodity futures, options and
forward trades between Prudential Securities and PaineWebber approximately in
such proportion that PaineWebber clears the percentage of the Trust's
transactions corresponding to the percentage of the outstanding Units sold by
PaineWebber and its correspondents, and Prudential Securities clears the
remaining transactions.
During 1996, the Trust paid Brokerage Fees of $3,998,675, or
approximately 8.92% of its average month-end Net Asset Value. These
Brokerage Fees represented the approximate equivalent of a $52 per round-turn
trade (purchase and sale or sale and purchase) rate not including, for
purposes of calculating such per-trade rate, the Trust's forward currency
transactions on a futures-equivalent basis; the Trust pays "bid-ask" spreads
on such transactions, not brokerage commissions.
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"BID-ASK" SPREADS
Many of the Trust's currency trades are executed in the forward markets,
in which no brokerage commissions are charged. Instead, participants trade
with a spread between the prices at which they are prepared to buy and sell a
particular currency. The "bid-ask" spreads charged by the forward
counterparties with which the Trust trades cannot be quantified, but could be
substantial. The Trust, not Millburn Ridgefield, pays such spreads, as they
are incorporated into the prices at which currencies are bought and sold for
the Trust.
The Principal Selling Agents and other currency dealers will receive
competitive "bid-ask" spreads on the Trust's forward trades for which they
act as counterparties. The Managing Owner does not receive any portion of
such "bid-ask" spreads.
BROKERAGE FEE DIFFERENTIALS
In order to maintain a uniform Net Asset Value per Unit although certain
Units (those held by investors with subscriptions of $1,000,000 or more) may
pay different Brokerage Fees (and, accordingly, different Profit Shares), the
Trust determines the Net Asset Value of each investor's capital account as of
the end of each month based on such investor's allocable share of the Trust's
overall Net Asset Value, and then divides that Net Asset Value by the Net
Asset Value per Unit of the Units which pay the 9.0% Brokerage Fee. This
result, calculated to three decimal places, is the number of Units held by
each Unitholder during the following month. Due to this accounting approach,
Unitholders whose Units are subject to a 7.0% Brokerage Fee are issued
additional Units as of the end of each month so that the Net Asset Value of
their investment in the Trust reflects (i) a 7.0% rather than a 9.0%
Brokerage Fee and (ii) a somewhat higher Profit Share as a result of the
lower Brokerage Fee. Units issued as adjustments reflecting the differential
Brokerage Fees and Profit Shares are treated for purposes of redemptions and
redemption charges as if they were issued, for a cost basis of $0, as of the
first date on which the recipient Unitholder acquired Units.
The level of the Brokerage Fee paid by investors is established by taking
into account the net capital invested by Unitholders, irrespective of profits
or losses. Accordingly, an investor who initially invested $500,000 in the
Units and subsequently invested another $500,000 would qualify for the
reduced Brokerage Fees, even if the Net Asset Value of his or her initial
Units had declined to $400,000 at the time of the second investment.
Conversely, if such investor's initial Units had increased in Net Asset Value
to $600,000, an additional $500,000, not $400,000, investment would be
required in order to qualify for reduced Brokerage Fees.
If an investor redeems Units, he or she ceases to be qualified for
reduced Brokerage Fees if the aggregate Net Asset Value of all Units held by
such investor equals less than $1,000,000 immediately following such
redemption. If such investor makes a subsequent investment after having lost
his or her eligibility for reduced Brokerage Fees, such eligibility is
restored if the amount of such additional investment, plus the amount of such
investor's remaining net capital contributions (subscriptions less
redemptions, but assuming redemptions to be made first from accumulated net
profits, not capital contributions), equals or exceeds $1,000,000.
Investors which qualify for reduced Brokerage Fees also qualify for
reduced redemption charges of 3% and 2% through the end of the twelfth month
after each issuance of Units to them, as opposed to the "standard" 4% and 3%.
See "Redemptions; Net Asset Value" at page 43.
As of the date of this Prospectus, three subscribers had invested
sufficient funds to qualify for discounted Brokerage Fees and reduced
redemption charges.
PROFIT SHARES
17.5% PROFIT SHARE BASED ON "HIGH WATER MARK" NEW TRADING PROFIT
Millburn Ridgefield receives a Profit Share equal to 17.5% of any
cumulative New Trading Profit recognized by the Trust as of the end of each
calendar quarter (whether or not a full calendar quarter). New Trading
Profit includes (i) realized trading profit (loss) plus or minus (ii) the
change in unrealized trading profit (loss) on open
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positions and is calculated after payment of the monthly Brokerage Fee and
ongoing administrative expenses. New Trading Profit does not include
interest earned on the Trust's assets, but is not reduced by organizational
and initial offering cost reimbursements. New Trading Profit is generated
only to the extent previous quarter-end highs in New Trading Profit are
exceeded; however, Profit Shares previously paid do not reduce New Trading
Profit (I.E., Millburn Ridgefield does not have to "earn back" its Profit
Shares in order to produce New Trading Profit from which Profit Shares may be
allocated).
For example, assume that at the end of the first full calendar quarter of
trading the Trust had, after monthly Brokerage Fees and administrative costs,
a realized profit of $50,000 on its closed positions and an unrealized profit
of $150,000 on open positions. New Trading Profit would equal $200,000. The
entire amount would represent an increase in cumulative New Trading Profit
and 17.5%, or $35,000, would be allocated as a Profit Share. Assume that
during the second calendar quarter, again after monthly Brokerage Fees and
administrative costs, the Trust had realized profits of $60,000 and a
decrease in the unrealized profits on its open positions of $50,000,
cumulative New Trading Profit would have increased to $210,000, and 17.5% of
$10,000, or $1,750, would be allocated as a Profit Share. If the Trust were
subsequently to sustain losses, Millburn Ridgefield would not be required to
refund any of the Profit Shares previously allocated, but it would not be
until Millburn Ridgefield's cumulative New Trading Profit, after deducting
all losses and adjusting for redemptions or distributions as described below,
exceeded $210,000 as of a calendar quarter-end that there would be any New
Trading Profit resulting in additional Profit Share payments. Assume that
during the third quarter, again after monthly Brokerage Fees and
administrative costs, the Trust incurred realized losses of $150,000 and a
decrease in the unrealized profit on its open positions of $100,000.
Cumulative New Trading Profit would have decreased as of the end of such
quarter to $(40,000), and no Profit Share would be paid. Millburn Ridgefield
would retain the $36,750 paid as Profit Shares at the end of the first and
second quarters even though the Trust had a year-to-date trading loss of
$(40,000). Millburn Ridgefield would not, however, receive additional Profit
Shares until cumulative New Trading Profit exceeded $210,000 as of a
quarter-end.
Redemption of Units will result in a proportional decrease in any
cumulative trading loss accrued -- since the last calendar quarter-end as of
which a Profit Share was paid -- as of the date of redemption. Redemption of
Units at the time that there is an accrued New Trading Profit will result in
a proportional Profit Share allocation to Millburn Ridgefield.
Because the Profit Shares are calculated on a quarterly basis, it is
possible that the Trust will allocate substantial Profit Shares to Millburn
Ridgefield during a year when the Trust incurs substantial losses.
Persons who invest $1,000,000 or more in the Trust will pay Brokerage
Fees of 7.0% rather than 9.0% per annum. The Profit Shares payable on such
investors' Units will reflect the lower Brokerage Fees deducted from (and,
accordingly, higher New Trading Profit, if any, achieved by) their
investments.
During 1996, the Trust paid aggregate Profit Shares of $829,080
(approximately 1.85% of average month-end Net Assets), while the Net Asset
Value per Unit rose by approximately 7.23%.
PROFIT SHARES ALLOCATED EQUALLY AMONG UNITS SOLD AT DIFFERENT TIMES
Investors purchase Units at different times and accordingly, recognize
different amounts of profit and loss on their investments. However, any
Profit Shares allocated to the Managing Owner are calculated on the basis of
the cumulative trading profits recognized by the Trust as a whole and reduce
the Net Asset Value of all Units equally, irrespective of the investment
performance of an individual investor's Units. Consequently, certain Units
have their Net Asset Value reduced by an allocable Profit Share despite
having actually declined in value, perhaps significantly, since their date of
purchase. Other Units incur losses generating a loss carryforward, for
purposes of calculating subsequent Profit Shares, only to have such loss
carryforward diluted by the admission of new Unitholders. Similarly, Units
purchased during a calendar quarter at a Net Asset Value reduced by accrued
Profit Shares benefit from any subsequent reversal of such accruals, even
though such reversals should be allocated entirely to the Units already
outstanding at the time of such intra-quarter purchases (as the full amount
of the accrued Profit Shares subsequently being reversed had already
benefited the holders of the newly purchased Units by reducing the purchase
price of such Units).
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GENERAL
ORGANIZATIONAL AND INITIAL OFFERING COSTS
Organizational and initial offering costs (not including selling
commissions) of approximately $600,000 were incurred. The Managing Owner
advanced all these costs, for which the Trust is reimbursing the Managing
Owner, without interest, in 24 equal monthly installments ending September
30, 1997.
ADMINISTRATIVE EXPENSES
The Trust pays all routine legal, accounting, administrative, printing
and similar costs associated with its operations, including the Trustee's
fees and the costs of the ongoing offering of the Units. The payment of such
costs does not include the reimbursement to the Managing Owner of any of its
indirect expenses (such as overhead or employee salaries) and is not paid to
the Managing Owner but rather to third parties. Such costs are not expected
to exceed 0.5 of 1% of the Trust's average month-end Net Assets in any given
year (although they have to date been incurred at a slightly higher rate).
In 1996, the Trust incurred administrative expenses of $238,630 or
approximately 0.53% of its average month-end Net Assets.
EXTRAORDINARY EXPENSES
The Trust is responsible for the taxes, if any, imposed on it as an
entity (as opposed to those imposed on the Unitholders in respect of their
investment in the Trust). No taxes have been imposed on the Trust to date.
The Managing Owner is not currently aware of any such taxes and will use its
best efforts to avoid the Trust becoming subject to any such taxes in the
future. The Trust is required to pay any extraordinary charges incidental to
its trading. The Trust has incurred no extraordinary charges to date, and in
the Managing Owner's experience sponsoring and managing futures funds, such
charges have always been negligible and, in most cases, non-existent.
DISTRIBUTION COSTS
SELLING COMMISSIONS AND ONGOING COMPENSATION
The Managing Owner pays, from its own funds, selling commissions of 5% on
all Units (other than Units acquired by persons subscribing for $1,000,000 or
more, on which the Managing Owner pays selling commissions of 3%); in the
case of persons subscribing at more than one time, it is only in respect of
the subscription which causes their net investment in the Trust to equal or
exceed $1,000,000, as well as any subsequent subscriptions, that selling
commissions are reduced.
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In the case of Selling Agents (such as the Principal Selling Agents)
which are registered with the CFTC as "futures commission merchants" or
"introducing brokers," the Managing Owner pays annual ongoing compensation to
each such Selling Agent in an amount equal to 4.0% of the average month-end
Net Asset Value (0.33 of 1% of month-end Net Assets each month) of the Units
sold by such Selling Agents through Registered Representatives which (i) are
registered with the CFTC, (ii) have passed either the Series 3 or Series 31
Examination, and (iii) have agreed to provide ongoing services to clients in
respect of their investments in the Units, including: (a) inquiring of the
Managing Owner, from time to time, at the request of their clients, as to the
Net Asset Value per Unit; (b) inquiring of the Managing Owner, from time to
time, at the request of their clients, regarding the commodities markets and
the Trust; (c) assisting, at the request of the Managing Owner, in the
redemption of Units; and (d) providing such other services to owners of the
Units as the Managing Owner may, from time to time, reasonably request.
Ongoing compensation begins to be paid on Units once they have been
outstanding for over twelve full months and continues to be paid for as long
as they remain outstanding.
In the event that either a Selling Agent or a Registered Representative
is not duly registered with the CFTC, or does not provide ongoing services of
the type specified above, ongoing compensation cannot, pursuant to applicable
rules of the National Association of Securities Dealers, Inc. (the "NASD"),
be paid to such Selling Agent or passed on to such Registered Representative.
Installment selling commissions are paid, in the same manner as the selling
commissions and ongoing compensation described above, on Units sold by such
persons; however, the total initial and installment selling commissions which
may be paid in respect of any such Unit shall not exceed 9.5% of the initial
purchase price of such Unit (however long such Unit remains outstanding).
In the case of subscribers who invest $1,000,000 or more in the Trust,
the Brokerage Fee to which their Units are subject is reduced from 9.0% to
7.0% of the average month-end Net Assets of their Units per year. As a
result, the initial selling commissions and ongoing compensation or
installment selling commissions payable in respect of such Units is reduced,
respectively, from 5.0% to 3.0% of the subscription amount and from 4.0% to
2.0% of the average month-end Net Asset Value of such Units each year
beginning after such Units have been outstanding for at least twelve months
(subject to the 9.5% ceiling on the total of initial and subsequent
installment selling commissions, in the case of Registered Representatives
not qualified to receive ongoing compensation). In the case of persons
subscribing at more than one time, ongoing compensation is reduced in respect
of all their outstanding Units, not just Units acquired at or subsequent to
the time that their net investment in the Trust equaled or exceeded
$1,000,000.
Selling Agents pass on all or a portion of the selling commissions and
ongoing compensation which they receive to the qualified Registered
Representatives who service the Units in respect of which such commissions
and/or compensation is paid.
Each Selling Agent or Registered Representative who is not eligible to
receive ongoing compensation at the time that a Unit is sold can subsequently
become so if the required CFTC registrations are obtained and such Registered
Representative agrees to provide the enumerated services to the client
holding such Unit.
In 1996, Millburn Ridgefield had paid (or accrued) to the Selling Agents
a total of $1,453,815 in selling commissions and $216,728 in ongoing
compensation (ongoing compensation only began to accrue once the Units
initially sold in September 1995 had been outstanding for twelve full
months).
REDEMPTION CHARGES
Units redeemed on or prior to the end of the first and second successive
six-month periods after their sale will pay redemption charges of 4% and 3%,
respectively, of the Net Asset Value at which they are redeemed (3% and 2%,
respectively, in the case of subscriptions for $1,000,000 or more). These
redemption charges are paid to the Managing Owner.
In the event that an investor acquires Units at more than one closing
date, such Units will be treated on a "first-in, first-out" basis for
redemption purposes (including determining the amount of any applicable
redemption charge).
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Redemption charges do not reduce Net Asset Value or New Trading Profit
for any purpose; such charges only reduce the amount which Unitholders
receive upon redemption.
In 1996, Millburn Ridgefield had received (paid or accrued) a total of
$105,248 in redemption charges.
REDEMPTIONS; NET ASSET VALUE
REDEMPTION PROCEDURE
The Trust is intended as a medium- to long-term investment (2-3 years).
However, a Unitholder may redeem Units as of the close of business (as
determined by the Managing Owner) on the last day of any calendar month, upon
10 business days' prior written notice to the Managing Owner.
Persons who redeem Units on or prior to the end of the first and second
successive six-month periods after such Units are sold are assessed
redemption charges of 4% and 3%, respectively, of their Units' Net Asset
Value as of the date of redemption (3% and 2%, respectively, in the case of
subscriptions of $1,000,000 or more). These redemption charges are paid to
the Managing Owner. Units purchased on different closing dates are treated on
a "first-in, first-out" basis for purposes of calculating the foregoing
periods. (Additional Units issued as of month-end to subscribers who invest
$1,000,000 or more in the Trust in order to reflect such subscribers being
assessed a 7.0% rather than 9.0% annual Brokerage Fee shall, for such
purposes, be deemed all to have been issued as of the date on which each such
Unitholder first acquired Units, irrespective of whether such Unitholder
makes one or more investments. Furthermore, in the event that Units are sold
at an intra-month closing date, the end of such month will constitute the
first of the twelve month-ends as of which such redemption charges are due.)
The Managing Owner may declare additional redemption dates upon notice to
the Unitholders and may, in unusual circumstances, permit certain (or all)
Unitholders to redeem as of dates other than month-end.
UNITHOLDERS MAY REDEEM ANY WHOLE NUMBER OF UNITS; THEY NEED NOT REDEEM
ALL OR ANY MINIMUM NUMBER OF THEIR UNITS IN ORDER TO REDEEM ANY OF THEIR
UNITS.
Fractional Units may only be redeemed upon redemption of a Unitholder's
entire remaining interest in the Trust.
A form of Request for Redemption is attached to the Declaration of Trust
as an Annex.
All requests for redemption will be honored and payment will be made,
except in the event of highly unusual market disruptions, within 15 business
days of the effective date of redemption. The Managing Owner will make
arrangements with Selling Agents who so request to pay redemptions through
crediting Unitholders' customer securities accounts with such Selling Agents.
The Trust's assets will be liquidated to the extent necessary to effect
redemptions. However, because the Trust's assets will primarily consist of
short-term, riskless investments, it should rarely be necessary to do so. On
the other hand, following substantial redemptions, the Managing Owner may
reduce the size of the Trust's overall market commitments.
Any Units purchased by the Managing Owner representing an investment in
excess of its minimum required investment (the lesser of 1% of the total
capital contributions to the Trust or $500,000, but in no event less than 0.2
of 1% of the total capital contributions to the Trust) may be redeemed on the
same terms as any other Units.
NET ASSET VALUE
Net Assets are determined in accordance with generally accepted
accounting principles and include unrealized profits as well as unrealized
losses on open commodity positions. Net Assets include the sum of all cash,
United States Treasury bills (valued at cost plus accrued interest, which
approximates market value), the liquidating value (or cost of liquidation, as
the case may be) of all futures, forward and options positions and the fair
market value of all other
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assets of the Trust, less all liabilities of the Trust (including accrued
liabilities irrespective of whether such liabilities, such as Profit Shares,
may, in fact, never be paid). If a contract cannot be liquidated on a 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.
Organizational and initial offering costs as reimbursed to the Managing
Owner in $25,000 monthly installments reduce Net Asset Value on a cash rather
than an accrual basis; however, for financial reporting purposes, these costs
were deducted from Trust capital in their entirety as of the beginning of
trading. As a result, the Net Asset Value per Unit under generally accepted
accounting principles differs slightly from the Net Asset Value per Unit for
financial reporting purposes. The Trust's accounting method reflects the
actual assets available to the Trust, as the Trust has full use of the
amounts attributable to its accrued reimbursement obligation to the Managing
Owner until such amounts are actually paid out of the Trust at successive
month-ends (unlike the reimbursement arrangements used by certain futures
funds in which full reimbursement is paid at the outset of trading, but only
amortized against net asset value over a period of time).
THE CLEARING BROKERS
The Principal Selling Agents are also the Trust's Clearing Brokers.
Although Millburn Ridgefield uses a variety of different executing brokers,
all of the Trust's futures, forward and commodity options trades are cleared
at Prudential Securities or PaineWebber. PaineWebber clears that portion of
the Trust's trades corresponding to the proportionate part of all outstanding
Units which are sold through PaineWebber and its correspondents; all other
such trades are cleared at Prudential Securities. See "Conflicts of
Interest" at page 50.
Millburn Ridgefield receives the Brokerage Fees from the Trust and is
responsible for paying all execution and clearing costs associated with the
Trust's trading. Brokerage commissions received by Prudential Securities and
PaineWebber for their clearing services are in addition to the initial
selling commissions, installment selling commissions and ongoing compensation
paid to them by Millburn Ridgefield.
The Customer Agreements among each Clearing Broker, Millburn Ridgefield
and the Trust provide that the respective Clearing Brokers shall not be
liable to the Trust except for gross negligence, willful misconduct or bad
faith and, in the case of trades executed as well as cleared by the Clearing
Brokers, for errors in such execution.
ALTHOUGH AGREEING TO ACT AS THE PRINCIPAL SELLING AGENTS AS WELL AS THE
CLEARING BROKERS FOR THE TRUST, PRUDENTIAL SECURITIES AND PAINEWEBBER DO NOT
TAKE ANY PART IN ITS ONGOING MANAGEMENT AND WERE NOT INVOLVED IN ITS
ORGANIZATION OR PROMOTION.
The following are summary descriptions of the Principal Selling Agents
and of certain civil, administrative or criminal proceedings relating to them.
PRUDENTIAL SECURITIES INCORPORATED
Prudential Securities' main business office is located at Prudential
Securities Building, One New York Plaza, 13th Floor, New York, New York
10292, telephone (212) 214-1000. Prudential Securities, in its capacity as
selling agent for the Trust, is registered as a broker-dealer with the SEC
and is a member of the NASD. Prudential Securities is a major securities
firm with a large commodity brokerage business. It has over 270 offices in
43 states, the District of Columbia, and 18 foreign countries. Prudential
Securities is a clearing member of the Chicago Board of Trade, Chicago
Mercantile Exchange, Commodity Exchange, Inc., and all other major United
States commodity exchanges.
From time to time Prudential Securities (in its respective capacities as
a commodities broker and as a securities broker-dealer) and its principals
are involved in numerous legal actions, some of which individually and all of
which in the aggregate seek significant or indeterminate damages. However,
except for the actions described below, during the five years preceding the
date of this Prospectus, there has been no administrative, civil or criminal
action, including
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actions which are pending, on appeal or concluded, against Prudential
Securities or any of its principals which is material, in light of all the
circumstances, to an investor's decision to invest in the Trust.
On September 29, 1992, Prudential Securities entered into a settlement
with the CFTC in which, without admitting or denying the allegations of the
complaint, Prudential Securities consented to findings by the CFTC that it
failed to supervise employees in connection with the commodity trading
activities of a customer of Prudential-Bache Securities Inc. (the predecessor
of Prudential Securities) who was indicted and convicted of fraud and the
trading practices of two account executives formerly employed by
Prudential-Bache Securities Inc. Prudential Securities further admitted to
findings of recordkeeping violations and for employing an unregistered
associated person in connection with this matter. Pursuant to the
settlement, Prudential Securities agreed to pay a $240,000 civil penalty and
to cease and desist from engaging in further violations of the rules and
regulations with which they had been charged.
On July 22, 1993, Prudential Securities entered into a Settlement
Agreement with the Office of the Secretary of State of the State of South
Carolina. Without admitting or denying the allegations, Prudential Securities
agreed to pay $225,000 in settlement of all administrative inquiries,
investigations and other proceedings against Prudential Securities and its
agents in South Carolina relating to the supervisory and retail sales
activities of Prudential Securities and certain of its registered
representatives.
On October 21, 1993, Prudential Securities entered into an omnibus
settlement with the SEC, state securities regulators in 51 jurisdictions (49
states, the District of Columbia and Puerto Rico) and the NASD to resolve
allegations that had been asserted against Prudential Securities with respect
to the sale of interests in more than 700 limited partnerships generated by
Prudential Securities' Direct Investment Group and sold from January 1, 1980
through December 31, 1990. The limited partnerships principally involved
real estate, oil and gas producing properties and aircraft leasing ventures.
The allegations against Prudential Securities were set forth in a
complaint filed by the SEC on October 21, 1993 and in an Administrative Order
issued by the SEC also on October 21, 1993. It was alleged that federal and
state securities laws had been violated through sales of the limited
partnership interests (and a limited number of certain other securities) to
persons for whom such securities were not suitable in light of their
investment objectives, financial status or investment sophistication. It was
also alleged that the safety, potential returns and liquidity of the
investments had been misrepresented. Prudential Securities neither admitted
nor denied the allegations asserted against it. The Administrative Order
included findings that Prudential Securities' conduct violated the federal
securities laws and that an order issued by the SEC in 1986 requiring
Prudential Securities to adopt, implement and maintain certain supervisory
procedures had not been complied with. The Administrative Order (to which
Prudential Securities consented without admitting or denying the SEC's
findings), directed Prudential Securities to cease and desist from violating
the federal securities laws and imposed a $10 million civil penalty. The
Administrative Order also required Prudential Securities to adopt certain
remedial measures, including the establishment of a Compliance Committee of
its Board of Directors.
Prudential Securities' settlement with the state securities regulators
included an agreement to pay a penalty of $500,000 per jurisdiction. In
settling the NASD disciplinary action, Prudential Securities consented to a
censure and to the payment of a $5 million fine to the NASD.
In connection with the settlement of the allegations asserted against it,
and pursuant to a Final Order and Judgment entered on October 21, 1993 in the
action commenced by the SEC, Prudential Securities has deposited $330 million
as a fund to be used for the resolution of claims for compensatory damages
asserted by persons who purchased the limited partnership interests from
Prudential Securities, and has agreed to provide additional funds, if
necessary, for that purpose. The fund is to be administered by a
court-approved Claims Administrator who is a former SEC Commissioner.
Prudential Securities also consented to the establishment of court-supervised
expedited claims resolution procedures with respect to such claims.
On December 17, 1993, Prudential Securities agreed to the entry of a
Consent Order issued by the State of Rhode Island, Department of Business
Regulation, Division of Securities. The allegations against Prudential
Securities were that ten employees of Prudential Securities engaged in
investment advisory activities with clients in Rhode Island although these
employees were neither licensed as investment adviser representatives nor
exempt from the licensing
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requirements of Section 204 of the Rhode Island Uniform Securities Act (the
"RI Act"). Prudential Securities consented to the payment of a civil penalty
in the amount of $33,000 and agreed to cease and desist from further
violations of Section 203 of the RI Act. Prudential Securities also agreed
to modify relevant internal marketing and training materials distributed to
its sales force. Prior to the entry of the Consent Order discussed above,
Prudential Securities entered into a series of Consent Agreements with the
Department involving similar allegations concerning the registration of
Prudential Securities' investment adviser representatives.
On January 18, 1994, Prudential Securities agreed to the entry of a Final
Consent Order and a Parallel Consent Order by the Texas State Securities
Board. The firm also entered into a related Agreement with the Texas State
Securities Commissioner. The allegations against Prudential Securities were
that the firm had engaged in improper sales practices and other improper
conduct resulting in pecuniary losses and other harm to investors residing in
Texas with respect to purchases and sales of limited partnership interests
during the period of January 1, 1980 through December 31, 1990. Without
admitting or denying the allegations, Prudential Securities consented to a
reprimand, agreed to cease and desist from further violations, and agreed to
provide voluntary donations to the State of Texas in the aggregate amount of
$1,500,000. The firm agreed to suspend the creation of new customer
accounts, the general solicitation of new accounts, and the offer for sale of
securities in or from Prudential Securities' North Dallas office,
irrespective of the place of residence of such new customers, during a period
of twenty consecutive business days. Prudential Securities further agreed to
suspend the creation of new customer accounts, the general solicitation of
new customer accounts, and the offer for sale of securities into or from the
State of Texas to any new customers, irrespective of the place of residence
of such new customers, during a period of five consecutive business days.
Prudential Securities also agreed to comply with the terms of the
Administrative Order entered by the SEC on October 21, 1993 (as discussed
above) and to institute training programs for its securities salesmen in
Texas.
On January 25, 1994, Prudential Securities agreed to the entry of a
Consent Order issued by the Banking Commissioner (the "Commissioner") of the
State of Connecticut, Department of Banking. The allegations against
Prudential Securities were that from January 1992 through at least July 1993,
Prudential Securities employed investment adviser agents who solicited
investment advisory business in Connecticut without being registered to do
so. This conduct was found by the Commissioner to be in violation of the
Connecticut Uniform Securities Act (the "Act") and in violation of the terms
and conditions of a Stipulation and Agreement entered into between the
Commissioner and Prudential Securities on February 20, 1992. It was further
alleged, with respect to Prudential Securities' investment advisory business,
that certain Prudential Securities agents held themselves out to the public
in Connecticut under a business name other than Prudential Securities.
Without admitting or denying the allegations, Prudential Securities agreed to
be censured by the Department of Banking, to cease and desist from violation
of the provisions of the Act, and to pay a civil penalty to the Department of
Banking in the amount of $150,000. Further, Prudential Securities agreed to
be subject to a period of administrative probation which will conclude upon
Prudential Securities' completion of certain remedial actions, including but
not limited to, the following: (a) Prudential Securities shall review,
implement and maintain supervisory procedures designed to ensure its
compliance with the provisions of the Act; and (b) commencing on April 1,
1994 and continuing until April 1, 1996, Prudential Securities shall file
quarterly reports with the Securities and Business Investments Division of
the Department of Banking (the "Division") relating to its investment
advisory business. In addition, Prudential Securities has agreed to pay the
Department of Banking the cost of two or more examinations of any of its
offices by the Division, such amount not to exceed $10,000.
On March 10, 1994, Prudential Securities agreed to the entry of a Consent
Order issued by the State of Missouri, Commissioner of Securities. The
allegations against Prudential Securities were that the firm failed to
supervise a former registered representative, in violation of Missouri
securities laws. Without admitting or denying the allegations, Prudential
Securities agreed to the following: (a) to maintain and make available to
the Missouri Division of Securities all customer and regulatory complaints
concerning any Prudential Securities employee working in a branch located in
Missouri or any security sold by such employees; (b) beginning 30 days from
the date of the Consent Order and continuing for a period of three years, to
include at least one public service information piece selected by the
Commissioner of Securities in all of Prudential Securities' new account
packages mailed to Missouri residents; and (c) for a period of three years
from the date of the Consent Order, to annually provide a notice to
Prudential Securities' Missouri customers which details the procedures for
filing a complaint with Prudential Securities' and the applicable regulatory
authorities. In addition, Prudential Securities agreed to pay a fine in the
amount of $175,000.
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On June 8, 1994, the Business Conduct Committee of the New York
Mercantile Exchange ("NYMEX" or the "Exchange") accepted an Offer of
Settlement submitted by Prudential Securities concerning allegations that
Prudential Securities violated NYMEX rules regarding pre-arranged trades and
wash trades. Without admitting or denying the allegations, Prudential
Securities consented to a finding by the Exchange that Prudential Securities
had violated NYMEX Rule 8.55(A)(18) relating to conduct substantially
detrimental to the interest of the welfare of the Exchange; agreed to cease
and desist from future violations of Rule 8.55; and agreed to pay a fine in
the amount of $20,000.
On September 19, 1994, Prudential Securities consented to the entry of an
Agreement and Order issued by the State of Idaho, Department of Finance,
Securities Bureau (the "Department"). The allegations against Prudential
Securities were that the firm failed to supervise certain employees in
connection with the securities and options trading activities entered into on
behalf of Idaho clients, in violation of the Idaho Securities Act (the
"Act"). It was further alleged that Prudential Securities failed to amend the
Forms U-4 for certain employees. Prudential Securities agreed to a number of
sanctions and remedial measures including, but not limited to, the following:
(a) to install a new branch manager in the Prudential Securities Boise,
Idaho branch office, who is to function in a supervisory capacity only; (b)
to designate a regional quality review officer to review all securities
options accounts and securities options trading activities of Idaho customers
in three Prudential Securities offices; (c) to implement procedures
reasonably designed to ensure compliance with regulations concerning the
timely delivery of prospectuses; and (d) to cooperate in the Department's
ongoing investigation and to comply with all provisions of the Act. In
addition, Prudential Securities agreed to pay a fine to the State of Idaho in
the amount of $300,000. In addition, Prudential Securities has voluntarily
reimbursed certain customers for losses suffered in their accounts in the
amount of $797,518.49.
On October 27, 1994, Prudential Securities and Prudential Securities
Group entered into an agreement with the Office of the United States Attorney
for the Southern District of New York (the "U.S. Attorney") deferring
prosecution of charges contained in a criminal complaint. The complaint
alleged that Prudential Securities committed fraud in connection with the
sale of certain oil and gas limited partnership interests between 1983 and
1990 in violation of federal securities laws. The agreement requires that
Prudential Securities deposit an additional $330,000,000 into an account
established by the SEC to pay restitution to the investors who purchased the
oil and gas partnership interests. Prudential Securities further agreed to
appoint a mutually acceptable outsider to sit on the Board of Directors of
Prudential Securities Group and the Compliance Committee of Prudential
Securities. The outside director will serve as an "ombudsman" whom
Prudential Securities' employees can contact anonymously with complaints
about ethics or compliance. Prudential Securities will report any
allegations or instances of criminal conduct and material improprieties to
the new director. The new director will submit compliance reports of his
findings every three months for a three-year period. If, upon completion of a
three-year period, Prudential Securities has complied with the terms of the
agreement then the government will not pursue the charges in the complaint.
If Prudential Securities does not comply with the agreement, then the
government may elect to pursue the charge.
On June 19, 1995, Prudential Securities entered into a settlement with
the CFTC in which, without admitting or denying the allegations of the
complaint, Prudential Securities consented to findings by the CFTC of certain
recordkeeping violations and failure to supervise in connection with the
commodity trading activities, in 1990 and early 1991, of a former broker of
Prudential Securities. Pursuant to the settlement, Prudential Securities
agreed to (i) pay a civil penalty of $725,000, (ii) the entry of a cease and
desist order with respect to the violations charged and (iii) an undertaking
directing the Prudential Securities Compliance Committee to review certain of
the firm's commodity compliance and supervisory policies and procedures and a
report to be submitted to the CFTC, as well as a report to the CFTC on the
actions taken as a result of the review.
On February 29, 1996, the State of New Mexico Securities Division issued
a final order, subject to a settlement, whereby Prudential Securities neither
admitted nor denied any allegations that Prudential Securities failed to
supervise two former employees and a Branch Office Manager of its Phoenix,
Arizona branch and that such persons engaged in misrepresentation, fraud,
unsuitable trading, failure to properly register and failure to report a
suspected forgery. Prudential Securities consented to the imposition of a
censure and paid a fine in the amount of $15,000 and investigative fees in
the amount of $2,000.
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PAINEWEBBER INCORPORATED
PaineWebber maintains its principal office at 1200 Harbor Boulevard,
Weehawken, New Jersey 07087. As of early 1996, PaineWebber maintained 305
offices worldwide.
Except as set forth below, neither PaineWebber nor any of its principals
have been involved in any administrative, civil or criminal proceeding
- --whether pending, on appeal or concluded -- within the past five years that
is material to a decision whether to invest in the Trust.
PaineWebber is involved in a number of proceedings concerning matters
arising in connection with the conduct of its business. Certain actions, in
which compensatory damages of $153 million or more appear to be sought, are
described below. PaineWebber is also involved in numerous proceedings in
which compensatory damages of less than $153 million appear to be sought, or
in which punitive or exemplary damages, together with the apparent
compensatory damages alleged, appear to exceed $153 million. PaineWebber has
denied, or believes it has legitimate defenses and will deny, liability in
all significant cases pending against it, including those described below,
and intends to defend actively each such case.
On or about June 10, 1991, PaineWebber was served with a "First Amended
Complaint" in an action captioned ROLO V. CITY INVESTING LIQUIDATING TRUST,
ET AL., Civ. Action 90--4420 (D.N.J.), filed on or about May 13, 1991 naming
it and other entities and individuals as defendants. The First Amended
Complaint alleges conspiracy and aiding and abetting violations of: (1) one
or more provisions of the Racketeer Influenced and Corrupt Organizations Act
("RICO"); (2) one or more provisions of the Interstate Land Sales Full
Disclosure Act; and (3) the common law, on behalf of all persons (excluding
defendants) who purchased lots and/or houses from General Development
Corporation ("GDC") or one of its affiliates and who are members of an
association known as the North Port Out-of-State Lot Owners Association.
The secondary liability claims in the First Amended Complaint relating to
PaineWebber are premised on allegations that PaineWebber served as (1) the
co-lead underwriter in connection with the April 8, 1988 offering by GDC of
12-7/8% senior subordinated notes pursuant to a Registration Statement and
Prospectus and (2) the underwriter for a 1989 offering of Adjustable Rate
General Development Residential Mortgage Pass-Through Certificates, Series
1989-A, which Plaintiffs contend enabled GDC to acquire additional financial
resources for the perpetuation of (and/or aided and abetted) an alleged
scheme to defraud purchasers of GDC lots and/or houses. The First Amended
Complaint requests certain declaratory relief, equitable relief, compensatory
damages of not less than $500 million, punitive damages of not less than
three times compensatory damages, treble damages with respect to the RICO
count, pre-judgment and post-judgment interest on all sums awarded, and
attorneys' fees, costs, disbursement and expert witness fees.
On December 27, 1993, the District Court entered an order dismissing
Plaintiffs' First Amended Complaint against PaineWebber and the majority of
the other defendants for failure to state a claim upon which relief can be
granted.
On November 8, 1994, the United States Court of Appeals for the Third
Circuit affirmed the District Court's order dismissing this action against
PaineWebber. On November 18, 1994, Plaintiffs filed a Petition for Rehearing
and Suggestion for Rehearing EN BANC with the Third Circuit.
In July 1994, PaineWebber, together with numerous unrelated firms, were
named as defendants in a series of purported class action complaints that
have since been consolidated for pretrial purposes in the United States
District Court for the Southern District of New York under the caption IN RE
NASDAQ MARKET-MAKER ANTITRUST AND SECURITIES LITIGATION. MDL Docket No.
1023. The amended complaint in these actions alleges that the defendant
firms engaged in activities as market makers on the NASDAQ over-the-counter
market that violated the federal antitrust laws. The Plaintiffs seek
declaratory and injunctive relief, damages in an amount to be determined and
subject to trebling and additional relief. On December 18, 1995, PaineWebber
filed its answer to plaintiffs' refiled consolidated complaint. The parties
are presently engaged in pre-trial discovery.
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A series of purported class actions concerning PaineWebber's sale and
sponsorship of various limited partnership investments have been filed
against PaineWebber and PaineWebber Group Inc. (PaineWebber Group Inc.
generally being included within the definition of PaineWebber for purposes of
this "The Clearing Brokers" section) among others, by allegedly dissatisfied
partnership investors since November 1994. Several such actions (the
"Federal Court Limited Partnership Actions") were filed in the United States
District Court for the Southern District of New York, one was filed in the
United States District Court for the Southern District of Florida and one
complaint (the "New York Limited Partnership Action") was filed in the
Supreme Court of the State of New York. The time to answer or otherwise move
with respect to these complaints has not yet expired.
The complaints in all these cases make substantially similar allegations
that, in connection with the sale of interests in approximately 50 limited
partnerships between 1980 and 1992, PaineWebber: (1) failed to provide
adequate disclosure of the risks involved with each partnership; (2) made
false and misleading representations about the safety of the investments and
the anticipated performance of the partnerships; and (3) marketed the
partnerships to investors for whom such investments were not suitable. The
plaintiffs, who purport to be suing on behalf of all persons who invested in
limited partnerships sold by PaineWebber between 1980 and 1992, also allege
that, following the sale of the partnership units, PaineWebber misrepresented
financial information about the partnerships' value and performance. The
Federal Court Limited Partnership Actions also allege that PaineWebber
violated RICO, and certain of them also claim that PaineWebber violated the
federal securities laws. The plaintiffs seek unspecified damages, including
reimbursement for all sums invested by them in the partnerships, as well as
disgorgement of all fees and other income derived by PaineWebber from the
limited partnerships. In the Federal Court Limited Partnership Actions, the
plaintiffs also seek treble damages under RICO.
In addition, PaineWebber and several of its present or former officers
were sued in two other purported class actions (the "Geodyne Limited
Partnership Actions") filed in the state court in Harris County, Texas.
Those cases, NEDICK V. GEODYNE RESOURCES, INC., ET AL. and WOLFF V. GEODYNE
RESOURCES, INC., ET AL., are similar to the other Limited Partnership Actions
except that the plaintiffs purport to sue only on behalf of those investors
who bought interests in the Geodyne Energy Partnerships, which were a series
of oil and gas partnerships that PaineWebber sold over several years. The
plaintiffs in the Geodyne Limited Partnership Actions allege that PaineWebber
committed fraud and misrepresentation, breached its fiduciary obligations to
its investors and brokerage customers, and breached certain contractual
obligations. The complaints seek unspecified damages, including
reimbursement for all sums invested by them in the partnerships, as well as
disgorgement of all fees and other income derived by PaineWebber from the
Geodyne partnerships. PaineWebber has filed an answer denying the
allegations in plaintiffs' complaint.
Another purported class action was filed in the state court in Brazoria
County, Texas on behalf of investors in the Pegasus aircraft leasing
partnerships. In this case, MALLIA, ET AL. V. PAINEWEBBER INCORPORATED, ET
AL., the plaintiffs allege that PaineWebber committed fraud and
misrepresentation in connection with the sale of these limited partnership
interests. The complaint seeks unspecified damages.
IN ADDITION TO THE FOREGOING PRIVATE LITIGATION, THE FOLLOWING
ADMINISTRATIVE AND EXCHANGE PROCEEDINGS MAY BE CONSIDERED MATERIAL.
In June 1991, the NFA East Regional Business Conduct Committee (the
"Committee") issued a complaint against PaineWebber which alleged that it had
violated NFA By-law 1101 by transacting business with non-members of the NFA
who were required to be registered with the CFTC; further, that it had failed
to observe high standards of commercial honor and just and equitable
principals of trade, in violation of NFA Compliance Rule 2-4, in that it
allegedly knew or in the exercise of reasonable diligence should have known
that it was transacting customer business with unregistered persons who were
required to be registered but who were not so registered. Without admitting
or denying the allegations contained in the complaint, PaineWebber submitted
an offer of settlement. The settlement was accepted by the Committee on
September 25, 1991, and, in connection therewith, the Committee imposed a
$25,000 fine.
In January 1992, PaineWebber, without admitting any of the allegations
against it and solely for the purpose of settling the proceeding, consented
to the issuance by the SEC of an order finding that in connection with
participation
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in primary distributions of certain unsecured debt securities issued by
certain government sponsored entities, it violated SEC Rules 17a-3 and 17a-4
by not accurately reflecting transactions in and customer orders for such
securities. The SEC's order and findings were substantially similar to
orders and finding by the SEC and other federal regulations with respect to
97 other financial intermediaries involving the same conduct. The SEC
ordered PaineWebber to: (i) cease and desist from further such violations;
(ii) pay a civil penalty of $100,000; and (iii) develop, implement and
maintain policies and procedures reasonably designed to ensure its future
compliance with the recordkeeping rules in connection with such activities.
In May 1992, the Chicago Mercantile Exchange ("CME") Probable Cause
Committee issued a Notice of Charge against PaineWebber which alleged that it
accepted contemporaneous buy and sell orders for the same customer account in
S&P 500 Index Futures on trade dates October 3, October 30, and December 5,
1990, in violation of CME Rule 433b (Uncommercial Conduct). Without
admitting or denying the allegations, PaineWebber submitted an offer of
settlement. The settlement was accepted by the Floor Practices Committee of
the CME on June 28, 1991, and in connection therewith, the Committee imposed
a $7,500 fine.
On November 27, 1992, the CFTC filed a five-count administrative
complaint against PaineWebber and a former employee. Simultaneous with the
filing of the complaint, the CFTC accepted an offer of settlement from
PaineWebber. The Complaint alleged that PaineWebber violated provisions of
the Commodity Exchange Act and CFTC regulations by failing to immediately
make a written record of orders placed, entering trades without account
identification, failing to properly time-stamp orders, failing to supervise
diligently the handling of customers' commodity futures accounts and failing
to maintain and produce to CFTC staff certain records relating to orders
entered. Without admitting or denying the allegations or the findings
contained in the complaint, PaineWebber consented to the entry of a CFTC
order which: (i) found that it violated the provisions of the Commodity
Exchange Act and CFTC regulations; (ii) directed it to cease and desist from
further violations of those provisions; and (iii) imposed a civil monetary
penalty of $150,000.
On January 17, 1996, PaineWebber consented, without admitting or denying
the findings therein, to the entry of an Order by the Securities and Exchange
Commission which imposed a censure, a cease and desist order, a $5 million
civil penalty and various remedial sanctions. The SEC alleged that
PaineWebber violated the antifraud and recordkeeping provisions of the
federal securities laws in connection with the offer and sale of certain
limited partnership interests between 1986 and 1992 and failed reasonably to
supervise certain registered representatives and other employees involved in
the sale of these interests. PaineWebber must comply with its representation
that it has paid and will pay a total of $292.5 million to investors,
including a payment of $40 million for a claims fund.
------------------
Other than as may be set forth above, there have been no material
administrative, civil or criminal actions or proceedings -- whether pending,
on appeal or settled -- against either of the Clearing Brokers or any of
their respective principals.
CONFLICTS OF INTEREST
GENERAL
MILLBURN RIDGEFIELD HAS NOT ESTABLISHED ANY FORMAL PROCEDURES TO RESOLVE
THE CONFLICTS OF INTEREST DESCRIBED BELOW. PROSPECTIVE INVESTORS SHOULD BE
AWARE THAT NO SUCH PROCEDURES HAVE BEEN ESTABLISHED, AND THAT, CONSEQUENTLY,
INVESTORS WILL BE DEPENDENT ON THE GOOD FAITH OF THE RESPECTIVE PARTIES
SUBJECT TO SUCH CONFLICTS TO RESOLVE SUCH CONFLICTS EQUITABLY. ALTHOUGH
MILLBURN RIDGEFIELD WILL ATTEMPT TO MONITOR AND RESOLVE THESE CONFLICTS IN
GOOD FAITH, IT WILL BE EXTREMELY DIFFICULT, IF NOT IMPOSSIBLE, FOR IT TO
ASSURE THAT THESE CONFLICTS WILL NOT, IN FACT, RESULT IN ADVERSE CONSEQUENCES
TO THE TRUST.
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PROSPECTIVE INVESTORS SHOULD BE AWARE THAT MILLBURN RIDGEFIELD PRESENTLY
INTENDS TO ASSERT THAT UNITHOLDERS HAVE, BY SUBSCRIBING TO THE TRUST,
CONSENTED TO THE FOLLOWING CONFLICTS OF INTEREST IN THE EVENT OF ANY
PROCEEDING ALLEGING THAT SUCH CONFLICTS VIOLATED ANY DUTY OWED BY MILLBURN
RIDGEFIELD TO INVESTORS.
THE MANAGING OWNER
The responsibilities of Millburn Ridgefield include acting as the
managing owner and trading advisor for the Trust and engaging commodity
brokers and dealers to execute trades on behalf of the Trust. The Managing
Owner has a conflict of interest in that it has a financial disincentive to
replace itself as either the trading advisor or the entity receiving the
Brokerage Fees from the Trust. THE TRUST MIGHT HAVE BEEN MORE PROFITABLE HAD
THE TRUST HAD ACCESS TO ADVISORS OR BROKERS OTHER THAN MILLBURN RIDGEFIELD.
Because Millburn Ridgefield receives the "spread" between (i) the amount
paid out to the Selling Agents plus the amount paid out for executing the
Trust's trades and (ii) the Brokerage Fee received by the Managing Owner from
the Trust, the Managing Owner, which also directs the trading of the Trust,
has a conflict of interest between trading in the manner which it believes to
be in the best interests of the Trust and trading in low volume or in the
forward markets so as to reduce the Trust's futures trading costs.
("Bid-ask" spreads, not brokerage commissions, are paid on the Trust's
forward trading, and these are paid by the Trust, not the Managing Owner.)
MILLBURN RIDGEFIELD MIGHT HAVE TRADED MORE SUCCESSFULLY FOR THE TRUST WERE IT
NOT SHARING IN THE TRUST'S BROKERAGE REVENUES.
Millburn Ridgefield directs the trading of a large amount of client
assets, and Millburn Ridgefield and its principals may have incentives
(financial or otherwise) to favor other accounts which they manage over the
Trust in such matters as, for example, the allocation of available
speculative position limits. Different accounts also pay different fees,
trade at different levels of leverage and will, from time to time, compete
for the same positions. IT COULD BE TO THE BENEFIT OF THE TRUST WERE IT TO
HAVE THE EXCLUSIVE ATTENTION OF AT LEAST CERTAIN MILLBURN RIDGEFIELD
PERSONNEL.
Millburn Ridgefield has agreed to treat the Trust equitably with Millburn
Ridgefield's other accounts. However, Millburn Ridgefield trades different
portfolios for other accounts (the Trust was the first client account traded
pursuant to the World Resource Portfolio of markets), and there can be no
assurance whatsoever that such other portfolios will not outperform the
Trust. IF THE TRUST INCURS LOSSES, MILLBURN RIDGEFIELD COULD HAVE A
DISINCENTIVE TO EXPEND RESOURCES MANAGING THE TRUST BECAUSE OF THE NEED TO
RECOVER ANY LOSS CARRYFORWARD BEFORE A PROFIT SHARE COULD BE EARNED.
THE CLEARING BROKERS
The Clearing Brokers act from time to time as commodity brokers for other
accounts with which they are affiliated or in which they or one of their
respective affiliates has a financial interest. The compensation received by
the Clearing Brokers from such accounts may be more or less than the
compensation which they receive for their brokerage and forward trading
services to the Trust. In addition, various accounts traded through the
Clearing Brokers (and over which their personnel may have discretionary
trading authority) may take positions in the futures markets opposite to
those of the Trust or compete with the Trust for the same positions. The
Clearing Brokers each may have a conflict of interest in its execution of
trades for the Trust and for other of its customers. Millburn Ridgefield
has, however, no reason to believe that the Clearing Brokers knowingly or
deliberately favor any other customer over the Trust with respect to the
execution of commodity trades.
THE CLEARING BROKERS BENEFIT FROM EXECUTING ORDERS FOR OTHER CLIENTS,
WHEREAS THE TRUST IS HARMED TO THE EXTENT THAT THE CLEARING BROKERS HAVE
FEWER RESOURCES TO ALLOCATE TO THE TRUST'S ACCOUNT DUE TO THE EXISTENCE OF
SUCH OTHER CLIENTS.
THE CLEARING BROKERS BENEFIT FROM ASSESSING THE TRUST HIGHER BROKERAGE
COMMISSION RATES AND FORWARD CONTRACT "BID-ASK" SPREADS THAN OTHER CLIENTS.
BECAUSE THE CLEARING BROKERS ALSO ACT AS THE PRINCIPAL SELLING AGENTS FOR THE
TRUST, THE BROKERAGE COMMISSION RATES AND FORWARD CONTRACT PRICING
ARRANGEMENTS FOR THE TRUST MAY NOT HAVE BEEN NEGOTIATED AT ARM'S-LENGTH
(MILLBURN RIDGEFIELD, NOT THE TRUST, PAYS ALL BROKERAGE COMMISSIONS, AS
OPPOSED TO "BID-ASK" SPREADS).
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Certain officers or employees of the Clearing Brokers are, and may in the
future be, members of United States commodities exchanges and are serving,
and may in the future serve, on the governing bodies and standing committees
of such exchanges and of their clearinghouses and of various industry
organizations. In such capacities, these employees have a fiduciary duty to
the exchanges and their clearinghouses which could compel such employees to
act in the best interests of these entities, perhaps to the detriment of the
Trust.
The Managing Owner retains the Principal Selling Agents as the Clearing
Brokers for the Trust, largely because of their assistance in marketing Units.
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 the 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 or installment selling
commissions (as the case may be) based on Units sold by them which remain
outstanding. CONSEQUENTLY, THE SELLING AGENTS HAVE A CONFLICT OF INTEREST IN
ADVISING CLIENTS WHETHER TO REDEEM THEIR UNITS BETWEEN THE SELLING AGENTS'
INTEREST IN MAXIMIZING THE COMPENSATION WHICH THEY RECEIVE FROM THE TRUST AND
GIVING THEIR CLIENTS THE FINANCIAL ADVICE WHICH THE SELLING AGENTS BELIEVE TO
BE IN SUCH CLIENTS' BEST INTERESTS.
The percentage of the Trust's clearing brokerage allocated to each of the
Principal Selling Agents is determined based on the percentage of outstanding
Units sold by PaineWebber and its correspondents, on the one hand, and by
Prudential Securities and the Additional Selling Agents (and any
correspondents), on the other. Furthermore, the total dollar amount of
brokerage commissions paid by the Trust is dependent upon the size of the
Trust's capitalization. CONSEQUENTLY, THE PRINCIPAL SELLING AGENTS HAVE,
ENTIRELY APART FROM THE ONGOING COMPENSATION (AND, POSSIBLY, CERTAIN
INSTALLMENT SELLING COMMISSIONS) TO BE RECEIVED BY THEM, FINANCIAL INCENTIVES
TO DISCOURAGE THEIR CLIENTS FROM REDEEMING UNITS. SEE "--THE CLEARING
BROKERS," ABOVE AT PAGE 44.
PROPRIETARY TRADING AND TRADING FOR OTHER ACCOUNTS
Millburn Ridgefield, the Clearing Brokers and their respective principals
and affiliates may trade in the futures and forward markets for their own
accounts and for the accounts of their clients, and in doing so may take
positions opposite to those held by the Trust or may be competing with the
Trust for positions in the marketplace. Records of this trading are not
available for inspection. Such trading may create conflicts of interest on
behalf of one or more of such persons in respect of their obligations to the
Trust.
Because Millburn Ridgefield, the Clearing Brokers and their respective
principals and affiliates may trade for their own accounts at the same time
that they are managing the Trust's account, prospective investors should be
aware that, as a result of a neutral allocation system, testing a new trading
system, trading their proprietary accounts more aggressively or other actions
not constituting a violation of fiduciary duty, such persons may from time to
time take positions in their proprietary accounts which are opposite, or
ahead of, the positions taken for the Trust. UNITHOLDERS ARE UNLIKELY TO
SUFFER ANY DETRIMENT FROM THE PROPRIETARY TRADING OF ANY OF THE FOREGOING
PERSONS OTHER THAN MILLBURN RIDGEFIELD AND ITS PRINCIPALS, BECAUSE SUCH
PERSONS HAVE NO PRIOR KNOWLEDGE OF MILLBURN RIDGEFIELD'S TRADING.
INDEMNIFICATION AND STANDARD OF LIABILITY
The Managing Owner and certain of its affiliates, officers, directors and
controlling persons may not be liable to the Trust or any Unitholder for
errors in judgment or other acts or omissions not amounting to misconduct or
negligence, as a consequence of the indemnification and exculpatory
provisions described in the following paragraph. Purchasers of Units may
have more limited rights of action than they would absent such provisions.
The Managing Owner and its affiliates shall not have any liability to the
Trust or to any Unitholder for any loss suffered by the Trust which arises
out of any action or inaction of the Managing Owner or any such affiliate if
the Managing Owner or its affiliates, in good faith, determined that such
course of conduct was in the best interests of the
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Trust, and such course of conduct did not constitute negligence or
misconduct. The Trust has agreed to indemnify the Managing Owner and its
affiliates, officers, directors and controlling persons against claims,
losses or liabilities based on their conduct relating to the Trust, provided
that the conduct resulting in the claims, losses or liabilities for which
indemnity is sought did not constitute negligence, misconduct or breach any
fiduciary obligation to the Trust and was done in good faith and in a manner
the Managing Owner, in good faith, determined to be in the best interests of
the Trust. Affiliates of the Managing Owner are entitled to indemnity only
for losses resulting from claims against such affiliates due solely to their
relationship with the Managing Owner or for losses incurred by such
affiliates in performing the duties of the Managing Owner.
The Managing Owner, and not the Trust, has agreed to indemnify the
Selling Agents against claims, losses or liabilities arising out of the
Managing Owner's breach of any representation or warranty contained in the
Selling Agreement among the Trust, the Managing Owner and the Selling Agents
or out of any untrue statement of material fact or omission to state a
material fact in this Prospectus or any related promotional material.
The Declaration of Trust provides that the Managing Owner, its affiliates
and the Selling Agents 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.
The Declaration of Trust also provides that in any claim for
indemnification for federal or state securities law violations, the party
seeking indemnification is required to place before the court the position of
the SEC and various state regulatory authorities that indemnification for
securities law violations is void as against public policy.
THE MANAGING OWNER MAY, DUE TO THE EXCULPATORY AND INDEMNITY PROVISIONS
OF THE DECLARATION OF TRUST, HAVE MORE FLEXIBILITY THAN THE MANAGING OWNER
OTHERWISE WOULD TO RESOLVE THE FOREGOING CONFLICTS OF INTEREST IN A MANNER
MORE FAVORABLE TO THE MANAGING OWNER THAN TO THE TRUST.
THE TRUST AND THE TRUSTEE
THE FOLLOWING SUMMARY DESCRIBES IN BRIEF CERTAIN ASPECTS OF THE OPERATION
OF THE TRUST AND THE TRUSTEE'S AND MANAGING OWNER'S RESPECTIVE
RESPONSIBILITIES CONCERNING THE TRUST. PROSPECTIVE INVESTORS SHOULD
CAREFULLY REVIEW THE DECLARATION OF TRUST ATTACHED HERETO AS EXHIBIT A AND
CONSULT WITH THEIR OWN ADVISERS CONCERNING THE IMPLICATIONS TO SUCH
PROSPECTIVE SUBSCRIBERS OF INVESTING IN A DELAWARE BUSINESS TRUST. THE
SECTION REFERENCES BELOW ARE TO SECTIONS IN THE DECLARATION OF TRUST.
PRINCIPAL OFFICE; LOCATION OF RECORDS
The Trust is organized under the Delaware Business Trust Act. The Trust
is administered by the Managing Owner, whose office is located at 600
Steamboat Road, Greenwich, Connecticut 06830 (telephone: (203) 625-7554).
The records of the Trust, including a list of the Unitholders and their
addresses, 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 of Trust. (Section 10). There is a limitation to non-commercial
purposes. Certain administrative and transfer agent services are provided at
the Managing Owner's Chicago office, Chicago Mercantile Exchange Center, 30
South Wacker Drive, Suite 2114, Chicago, Illinois 60606. The Managing Owner
will maintain and preserve the books and records of the Trust for a period of
not less than six years.
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CERTAIN ASPECTS OF THE TRUST
THE TRUST IS THE FUNCTIONAL EQUIVALENT OF A LIMITED PARTNERSHIP;
PROSPECTIVE INVESTORS SHOULD NOT ANTICIPATE ANY LEGAL OR PRACTICAL
PROTECTIONS UNDER THE DELAWARE BUSINESS TRUST ACT GREATER THAN THOSE
AVAILABLE TO LIMITED PARTNERS OF A LIMITED PARTNERSHIP.
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 a sole general partner in a
limited partnership. (Sections 5(a), 9 and 18).
Although units of beneficial interest in a trust need not carry any
voting rights, the Declaration of Trust gives Unitholders voting rights
comparable to those typically extended to limited partners in
publicly-offered futures funds. (Section 18).
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 the Managing Owner or the Selling Agents. The
Trustee's duties and liabilities with respect to the offering of the Units
and the administration of the Trust are limited to its express obligations
under the Declaration 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 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 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 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 of Trust.
Under the Declaration 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 of Trust. In the
course of its
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management, the Managing Owner may, in its sole and absolute discretion,
appoint an affiliate or affiliates of the Managing Owner as additional
managing owners (except where the Managing Owner has been notified by the
Unitholders that it is to be replaced as the managing owner) and retain such
persons, including affiliates of the Managing Owner, as it deems necessary
for the efficient operation of the Trust. (Section 2).
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.
MANAGEMENT OF TRUST AFFAIRS; VOTING BY UNITHOLDERS
The Unitholders take no part in the management or control, and have no
voice in the operations of the Trust or its business. (Section 9(a)).
Unitholders may, however, remove and replace the Managing Owner as managing
owner of the Trust, and may amend the Declaration of Trust, except in certain
limited respects, by the affirmative vote of a majority of the outstanding
Units then owned by Unitholders (as opposed to by the Managing Owner and its
affiliates). The owners of a majority of the outstanding Units then owned by
Unitholders may also compel dissolution of the Trust. (Section 18(b)). The
owners of 10% of the outstanding Units then owned by Unitholders have the
right to bring a matter before a vote of the Unitholders. (Section 18(c)).
The Managing Owner has no power under the Declaration of Trust to restrict
any of the Unitholders' voting rights. (Section 18(c)). Any Units
purchased by the Managing Owner or its affiliates, as well as the Managing
Owner's general liability interest in the Trust) are non-voting. (Section 7).
The Managing Owner has the right unilaterally to amend the Declaration of
Trust provided that any such amendment is for the benefit of and not adverse
to the Unitholders or the Trustee and also in certain unusual circumstances
- -- for example, if doing so is necessary to effect the intent of the Trust's
tax allocations or to comply with certain regulatory requirements. (Section
18(a)).
In the event that the Managing Owner or the Unitholders vote to amend the
Declaration of Trust in any material respect, the amendment will not become
effective prior to all Unitholders having an opportunity to redeem their
Units. (Section 18(c)).
RECOGNITION OF THE TRUST IN CERTAIN STATES
A number of states do not have "business trust" statutes such as that
under which the Trust has been formed in the State of Delaware. It is
possible, although unlikely, that a court in such a state could hold that,
due to the absence of any statutory provision to the contrary in such
jurisdiction, the Unitholders, although entitled under Delaware law to the
same limitation on personal liability as stockholders in a private
corporation for profit organized under the laws of the State of Delaware, are
not so entitled in such state. In order to protect Unitholders against any
loss of limited liability, the Declaration of Trust provides that no written
obligation may be undertaken by the Trust unless such obligation is
explicitly limited so as not to be enforceable against any Unitholder
personally. Furthermore, the Trust itself indemnifies all Unitholders
against any liability which such Unitholders might incur in addition to that
of a limited partner. The Managing Owner is itself generally liable for all
obligations of the Trust and would use its assets to satisfy any such
liability before such liability would be enforced against any Unitholder
individually.
POSSIBLE REPAYMENT OF DISTRIBUTIONS RECEIVED
BY UNITHOLDERS; INDEMNIFICATION OF THE TRUST BY UNITHOLDERS
The Units are limited liability investments; investors may not lose more
than the amount which they invest plus any profits recognized on their
investment. (Section 8(e)). However, Unitholders could be required, as a
matter of bankruptcy law, to return to the Trust's estate any distribution
which they received at a time when the Trust was in fact insolvent or in
violation of the Declaration of Trust. In addition, although the Managing
Owner is not aware of this provision ever having been invoked in the case of
any public futures fund, Unitholders agree in the Declaration of Trust that
they will indemnify the Trust for any harm suffered by it as a result of (i)
Unitholders' actions unrelated
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to the business of the Trust, (ii) transfers of their Units in violation of
the Declaration of Trust or (iii) taxes imposed on the Trust by the states or
municipalities in which such investors reside (Sections 8(d) and 17(c)).
The foregoing repayment of distributions and indemnity provisions (other
than the provision for Unitholders indemnifying the Trust for taxes imposed
upon it by the state or municipality in which particular Unitholders reside,
which is included only as a formality due to the fact that many states do not
have business trust statutes so that the tax status of the Trust in such
states might, theoretically, be challenged -- although Millburn Ridgefield is
unaware of any instance in which this has actually occurred) are commonplace
in publicly-offered commodity pools as well as other trusts and limited
partnerships.
TRANSFERS OF UNITS RESTRICTED
A Unitholder may, subject to compliance with applicable federal and state
securities laws, assign his or her Units upon notice to the Trust and the
Managing Owner. No assignment will be effective in respect of the Trust or
the Managing Owner until the first day of the month succeeding the month in
which such notice is received. No assignee may become a substituted
Unitholder except with the consent of the Managing Owner and upon execution
and delivery of an instrument of transfer in form and substance satisfactory
to the Managing Owner. (Section 11).
There are, and will be, no certificates for the Units. Any transfers of
Units are reflected on the books and records of the Trust. Transferors and
transferees of Units will each receive notification from the Managing Owner
to the effect that such transfers have been duly reflected as notified to the
Managing Owner. (Section 11).
REPORTS TO UNITHOLDERS
Each month the Managing Owner reports such information as the CFTC may
require to be given to the participants in "commodity pools" such as the
Trust and any such other information as the Managing Owner may deem
appropriate. There are similarly distributed to Unitholders, not later than
March 15 of each year, certified financial statements and the tax information
related to the Trust necessary for the preparation of their annual federal
income tax returns. (Section 10).
The Managing Owner will notify Unitholders within seven business days of
any decline in the Net Asset Value per Unit to less than 50% of such Net
Asset Value as of the previous month-end valuation date. In addition, the
Managing Owner will notify Unitholders of any change in the fees paid by the
Trust or of any material changes in the basic investment policies or
structure of the Trust. Any such notifications shall include a description of
Unitholders' voting rights. The cost of any such notifications to
Unitholders (as opposed to routine reports issued by the Managing Owner) will
be paid by the Managing Owner. (Section 10).
GENERAL
In compliance with the Statement of Policy of the North American
Securities Administrators Association, Inc. relating to the registration of
commodity pool programs under state securities or "Blue Sky" laws, the
Declaration of Trust provides that: (i) the executing and clearing
commissions paid by the Trust shall be competitive (Section 9(e)), and the
Managing Owner shall include in the annual reports containing the Trust's
certified financial statements distributed to Unitholders each year the
approximate round-turn equivalent rate paid on the Trust's trades during the
preceding year, as well as the actual amounts paid by the Managing Owner for
the Trust's execution and clearing costs (Section 10); (ii) no rebates or
give-ups, among other things, may be received from the Trust by any of the
Selling Agents, and such restriction may not be circumvented by any
reciprocal business arrangements among any Selling Agent or any of their
respective affiliates and the Trust (Section 9(f)); (iii) no trading advisor
of the Trust (including Millburn Ridgefield) may participate directly or
indirectly in any per-trade commodity brokerage commissions generated by the
Trust (Section 9(f)); (iv) any agreements between the Trust and the Managing
Owner or any affiliates of the Managing Owner must be terminable by the Trust
upon no more than 60 days' written notice (Section 9(f)); (v) the Trust may
make no loans, and the funds of the Trust will not be commingled with the
funds of any other person (deposit of Trust assets with a commodity broker,
clearinghouse or currency dealer does not constitute commingling
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for these purposes) (Section 9(f)); and (vi) the Trust will not employ the
trading technique commonly known as "pyramiding." (Section 9(f)).
FEDERAL INCOME TAX ASPECTS
IN THE OPINION OF SIDLEY & AUSTIN, THE FOLLOWING SUMMARY CORRECTLY
DESCRIBES THE MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES, AS OF
THE DATE HEREOF, TO A UNITED STATES INDIVIDUAL TAXPAYER WHO INVESTS IN THE
TRUST. THE OPINION OF SIDLEY & AUSTIN IS BASED, IN CERTAIN CASES, ON THE
DESCRIPTION OF THE PROPOSED OPERATION OF THE TRUST CONTAINED IN THIS
PROSPECTUS AND, IN CERTAIN CASES, IS SUBJECT TO THE UNCERTAINTIES DESCRIBED
BELOW.
THE TRUST'S PARTNERSHIP TAX STATUS
In the opinion of Sidley & Austin, the Trust is properly classified as a
partnership for federal income tax purposes. Consequently, the
Unitholders individually, not the Trust itself, are subject to tax.
The Managing Owner believes that all of the income generated by the Trust
to date and 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 is not subject to tax as a corporation under the
provisions applicable to "publicly-traded partnerships."
If the Trust were not treated as a partnership or if the Trust were
subject to tax as a "publicly-traded partnership," the Trust as an entity
would be subject to tax at the same tax rates applicable to corporations,
distributions to Unitholders would be taxable to them as dividends to the
extent of the current and accumulated earnings and profits of the Trust, and
Unitholders would not be entitled to report their share of any deductions or
loss of the Trust on their federal income tax returns.
The remainder of this summary assumes that the Trust is treated as a
partnership and not as a "publicly-traded partnership."
TAXATION OF UNITHOLDERS ON PROFITS AND LOSSES OF THE TRUST
The Trust, as an entity, is not subject to federal income tax in the
opinion of Sidley & Austin as described above. Consequently, with the
exception of Unitholders who are not citizens or residents of the United
States, each Unitholder is required for federal income tax purposes to take
into account, in his or her taxable year with which or within which a taxable
year of the Trust ends, his or her allocable share of all items of Trust
income, gain (including unrealized gain from open futures and forward
contracts and options "marked-to-market"), loss, deduction and other items
for such taxable year of the Trust. A Unitholder must take such items into
account even if the Trust does not make any distributions of cash or other
property to such Unitholder.
A Unitholder's share of such items for federal income tax purposes
generally is determined by the allocations made pursuant to the Declaration
of Trust unless such items so allocated do not have "substantial economic
effect" or are not in accordance with the Unitholders' interests in the
Trust. Under the Declaration of Trust, allocations are generally made in
proportion to Unitholders' capital accounts (each Unit sharing equally in the
Net Assets of the Trust), and therefore such allocations should have
substantial economic effect. However, in cases in which a Unitholder redeems
part or all of his or her interest in the Trust, the allocations of capital
gain or loss specified in the Declaration of Trust are not in proportion to
capital accounts. Because such allocations are consistent with the economic
effect of the Declaration of Trust that bases the amount to be paid to a
redeeming Unitholder upon his or her share of the realized and unrealized
gains and losses at the time his or her Units are redeemed, the Managing
Owner files the Trust's tax return based upon the allocations specified in
the Declaration of Trust. In the opinion of Sidley & Austin, the foregoing
allocations should be upheld if audited. Nevertheless, it is not certain
that the IRS would agree that such allocations have substantial economic
effect or are determined in accordance with the Unitholders' interests in the
Trust. If such
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tax allocations were challenged and not sustained, some or all of a redeeming
Unitholder's capital gain or loss could be converted from short-term to
long-term and each remaining Unitholder's share of the capital gain or loss
that is the subject of such allocations would be increased (solely for tax
purposes).
LIMITATIONS ON DEDUCTIBILITY OF TRUST LOSSES BY UNITHOLDERS
The amount of any Trust loss (including capital loss) that a Unitholder
is entitled to include in his or her personal income tax return is limited to
his or her tax basis for his or her interest in the Trust as of the end of
the Trust's taxable year in which such loss occurred. Generally, a
Unitholder's tax basis for his or her interest in the Trust is the amount
paid for such interest reduced (but not below zero) by his or her share of
any Trust distributions, realized losses (including constructively realized
under the "mark-to-market" system described below) and expenses and increased
by his or her share of the Trust's realized income and gains (including
constructively realized under the "mark-to-market" system described below).
Similarly, a Unitholder that is subject to the "at risk" limitations
(generally, non-corporate taxpayers and closely-held corporations) may not
deduct losses of the Trust (including capital losses) to the extent that they
exceed the amount he or she has "at risk" with respect to his or her interest
in the Trust at the end of the year. The amount that a Unitholder has at
risk will generally be the same as his or her adjusted basis as described
above, except that it will not include any amount that he or she has borrowed
on a nonrecourse basis or from a person who has an interest in the Trust or a
person related to such person.
Losses denied under the basis or at risk limitations are suspended and
may be deducted in subsequent years, subject to these and other applicable
limitations.
Because of the limitations imposed upon the deductibility of capital
losses (see "-- Tax on Capital Gains and Losses," below at page 59), a
Unitholder's distributive share of any capital losses of the Trust does not
materially reduce the federal income tax payable on his or her ordinary
income (including his or her allocable share of the Trust's interest income).
TREATMENT OF INCOME AND LOSS UNDER THE "PASSIVE ACTIVITY LOSS RULES"
The Code contains rules (the "Passive Activity Loss Rules") designed to
prevent the deduction of losses from "passive activities" against income not
derived from such activities, including income from investment activities not
constituting a trade or business, such as interest and dividends ("Portfolio
Income"), and salary. The trading activities of the Trust do not constitute
a "passive activity," with the result that income derived from such
activities constitute Portfolio Income or other income not from a passive
activity. Thus, losses resulting from a Unitholder's "passive activities"
cannot be offset against such income, and net losses from Trust operations
are deductible in computing the taxable income of such Unitholder (subject to
other limitations on the deductibility of such losses, in particular the
annual limitation applicable to non-corporate investors that no more than
$3,000 of capital losses can be deducted against ordinary income).
CASH DISTRIBUTIONS AND REDEMPTIONS OF UNITS
Cash received from the Trust by a Unitholder as a distribution with
respect to his or her Units or in redemption of less than all of his or her
Units generally is not reportable as taxable income by such Unitholder,
except as described below. Rather, such distribution or withdrawal reduces
(but not below zero) the total tax basis of all of the Units held by the
Unitholder after the distribution or withdrawal. Any cash distribution in
excess of a Unitholder's adjusted tax basis for all of his or her Units is
taxable to him or her as gain from the sale or exchange of such Units and,
assuming that the Unitholder has held his or her Units for more than one
year, constitutes long-term capital gain.
Redemption for cash of the entire interest held by a Unitholder results
in the recognition of gain or loss for federal income tax purposes. Such
gain or loss equals the difference, if any, between the amount of the cash
distribution and the Unitholder's adjusted tax basis for his or her Units.
Assuming that the Unitholder has held his or her Units for more than one
year, any gain or loss on their redemption will be long-term capital gain or
loss.
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GAIN OR LOSS ON SECTION 1256 CONTRACTS
Under the "mark-to-market" system of taxing futures and futures options
contracts traded on United States exchanges and certain foreign currency
forward contracts ("Section 1256 Contracts"), any unrealized profit or loss
on positions in such Section 1256 Contracts which are open as of the end of a
taxpayer's fiscal year is treated as if such profit or loss had been realized
for tax purposes as of such time. If an open position on which profit or
loss has been realized as of the end of a fiscal year declines in value after
such year-end and before the position is in fact offset, a loss is recognized
for tax purposes at the end of the fiscal year in which the value declines
(irrespective of the fact that the taxpayer may actually have realized a gain
on the position considered from the time that such position was initiated).
The converse is the case with an open position on which a "mark-to-market"
loss was recognized for tax purposes as of the end of a fiscal year but which
subsequently increases in value prior to being offset. In general, 60% of
the net gain or loss which is generated as a result of the "mark-to-market"
system is treated as long-term capital gain or loss, and the remaining 40% of
such net gain or loss is treated as short-term capital gain or loss.
GAIN OR LOSS ON NON-SECTION 1256 CONTRACTS
Except as described below with respect to Section 988 transactions
entered into by a qualified fund, gain or loss with respect to contracts that
are non-Section 1256 Contracts will generally be taken into account for tax
purposes only when realized.
Foreign currency transactions ("Section 988 transactions") include
entering into or acquiring any forward contract, futures contract or similar
instrument if the amount paid or received is denominated in terms of a
foreign currency (or determined by reference to the value of one or more
currencies) other than the taxpayer's functional currency or if the
underlying property to which the contract or instrument ultimately relates is
a foreign currency other than the taxpayer's functional currency. In
general, foreign currency gain or loss on Section 988 transactions is treated
as ordinary income or loss. Under a qualified fund election, however, gain
or loss with respect to certain Section 988 transactions, other than those
described in Section 1256 which would be taxed as described above under "--
Gain or Loss on Section 1256 Contracts," would be short-term capital gain or
loss. In addition, all such transactions would be subject to the
"mark-to-market" rules (see "-- Gain or Loss on Section 1256 Contracts,"
above).
TAX ON CAPITAL GAINS AND LOSSES
Net capital gains (I.E., the excess of net long-term capital gain over
net short-term capital loss) will be taxed for non-corporate taxpayers at a
maximum rate of 28% and for corporate taxpayers at the same rates as other
income. See "-- Limitation on Deductibility of Interest on Investment
Indebtedness," below at page 61 (for a discussion of the reduction in the
amount of a non-corporate taxpayer's net capital gain for a taxable year to
the extent such gain is taken into account by such taxpayer as investment
income) and "-- 'Conversion Transactions,'" below (for a discussion of
possible recharacterization of capital gains as ordinary income). Capital
losses are deductible by non-corporate taxpayers only to the extent of
capital gains for the taxable year plus $3,000. See "Risk Factors -- (17)
Taxation of Interest Income Irrespective of Trading Losses" at page 16.
If a non-corporate taxpayer incurs a net capital loss for a year, the
portion thereof, if any, which consists of a net loss on Section 1256
Contracts may, at the election of the taxpayer, be carried back three years.
Losses so carried back may be deducted only against net capital gain for such
year to the extent that such gain includes gains on Section 1256 Contracts.
Losses so carried back will be deemed to consist of 60% long-term capital
loss and 40% short-term capital loss (see "-- Gain or Loss on Section 1256
Contracts," above at page 59). To the extent that such losses are not used
to offset gains on Section 1256 Contracts in a carryback year, they will
carry forward indefinitely as losses on Section 1256 Contracts in future
years.
The Profit Share allocated to the Managing Owner correspondingly reduces
the Trust's capital gain and loss to be allocated among Unitholders for
federal income tax purposes.
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"CONVERSION TRANSACTIONS"
The Code contains provisions intended to prevent a taxpayer from
converting the income from transactions ("conversion transactions") in which
substantially all of his or her expected return is attributable to the time
value of his or her investment in the transaction (I.E., transactions that
are the functional equivalents of loans) into capital gain. If a transaction
is characterized as a conversion transaction, a portion of the gain that
would otherwise be treated as capital gain will be treated as ordinary
income. The portion so treated will be based upon the product of 120% of the
applicable federal interest rate and the amount of the net investment in the
transaction. Among the types of transactions subject to these rules are
certain straddles and transactions in which an investor acquires property and
on a substantially simultaneous basis enters into a contract to sell such
property (or substantially identical property) at a future date for a
specified price. The Code grants the Treasury Department authority to
promulgate regulations that specify other types of transactions that will be
subject to these rules. Based on the description of the Trust's activities
included in this Prospectus, in the opinion of Sidley & Austin, the trading
activities of the Trust will involve risks other than those undertaken by a
lender, and the Trust's income will not be the functional equivalent of
interest. If so, the Trust's transactions should not be characterized as
conversion transactions.
LIMITED DEDUCTION FOR CERTAIN EXPENSES
The Code provides that, for non-corporate taxpayers who itemize
deductions when computing taxable income, expenses of producing income,
including "investment advisory fees," are aggregated with unreimbursed
employee business expenses, other expenses of producing income and certain
other deductions (collectively, "Aggregate Investment Expenses"), and that
the aggregate amount of such expenses is deductible only to the extent that
such amount exceeds 2% of a non-corporate taxpayer's adjusted gross income
(the "2% Floor"). In addition, Aggregate Investment Expenses in excess of
the 2% threshold, when combined with a taxpayer's deductions for certain
items are subject to a reduction equal to, generally, 3% of the taxpayer's
adjusted gross income in excess of a certain threshold amount (the "3% Phase
Out"). Moreover, such Aggregate Investment Expenses are miscellaneous
itemized deductions which are not deductible by a non-corporate taxpayer in
calculating its alternative minimum tax.
The Managing Owner treats the ordinary expenses of the Trust as ordinary
business deductions not subject to the 2% Floor or the 3% Phase Out. It is
the standard practice in the managed futures industry to treat such charges
as not being subject to the 2% Floor or the 3% Phase Out.
Based on the trading activities of the Trust, in the opinion of Sidley &
Austin, the Trust should be treated as engaged in the conduct of a trade or
business for federal income tax purposes, and, as a result, the ordinary and
necessary business expenses incurred by the Trust in conducting its commodity
futures trading business should not be subject to the 2% Floor or the 3%
Phase-Out.
Sidley & Austin has also opined that the Profit Share should be treated
as a distributive share of the Trust's income allocated to Millburn
Ridgefield. However, if the Profit Share were held to constitute a fee rather
than an allocation of income, it should, nevertheless, be deductible as an
ordinary and necessary business expense, pursuant to the foregoing opinion
of Sidley & Austin that the Trust should be treated as engaged in a trade or
business.
Investors should be aware that an opinion of counsel is not binding on
the IRS or on any court and it is possible that the IRS could contend, or
that a court could decide, that the contemplated trading activities of the
Trust do not constitute a trade or business for federal income tax purposes.
In addition, the IRS could contend that some or all of the Brokerage Fee and
the Profit Share paid to the Managing Owner should be characterized as
"investment advisory fees." To the extent the characterization of these
payments as "investment advisory fees" were to be sustained, each
non-corporate Unitholder's PRO RATA share of the amounts so characterized
would be deductible only to the extent that such non-corporate Unitholder's
Aggregate Investment Expenses exceeded the 2% Floor and, when combined with
certain other itemized deductions, exceeded the 3% Phase-Out. In addition,
each non-corporate Unitholder's distributive share of income from the Trust
would be increased (solely for tax purposes) by such Unitholder's PRO RATA
share of the amounts so recharacterized. Any such recharacterization could
require Unitholders to file amended tax returns. (See "-- IRS Audits of the
Trust and Its Unitholders," below at page 62.)
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INTEREST INCOME
Interest received by the Trust, as well as on subscriptions while held in
escrow, is taxed as ordinary income.
The trading by the Trust generates almost exclusively capital gain or
loss. Capital losses can be deducted against ordinary income, in the case of
non-corporate taxpayers, only to the extent of $3,000 per year. Accordingly,
the Trust could incur significant capital losses but an investor,
nevertheless, could be required to pay substantial taxes in respect of such
investor's allocable share of the Trust's interest income and other ordinary
income. See "Risk Factors -- (17) Taxation of Interest Income Irrespective
of Trading Losses" at page 16.
SYNDICATION EXPENSES
Neither the Trust nor any Unitholder are entitled to any deduction for
syndication expenses, nor can these expenses be amortized by the Trust or any
Unitholder, even though the payment of such expenses reduces Net Asset Value.
All of the organizational and initial offering costs for which the
Managing Owner is being reimbursed by the Trust constitute non-deductible,
non-amortizable, syndication expenses.
The IRS could take the position that a portion of the Brokerage Fee paid
to the Managing Owner constitutes non-deductible syndication expenses.
LIMITATION ON DEDUCTIBILITY OF INTEREST ON INVESTMENT INDEBTEDNESS
Interest paid or accrued on indebtedness properly allocable to property
held for investment constitutes "investment interest." Interest expense
incurred by a Unitholder to acquire or carry his or her Units (as well as
other investments) will constitute "investment interest." Such interest is
generally deductible by non-corporate taxpayers only to the extent that it
does not exceed net investment income (that is, generally, the excess of (i)
gross income from interest, dividends, rents and royalties, which would
include a Unitholder's share of the Trust's interest income, and (ii) certain
gains from the disposition of investment property, over the expenses directly
connected with the production of such investment income). Any investment
interest expense disallowed as a deduction in a taxable year solely by reason
of the above limitation is treated as investment interest paid or accrued in
the succeeding taxable year. A non-corporate taxpayer's net capital gain
from the disposition of investment property is included in clause (ii) of the
second preceding sentence only to the extent such taxpayer elects to make a
corresponding reduction in the amount of net capital gain that is subject to
tax at the maximum 28% rate described above. (See "--Tax on Capital Gains
and Losses," above at page 59.)
TAXATION OF FOREIGN INVESTORS
A Unitholder who is a non-resident alien individual, foreign corporation,
foreign partnership, foreign trust or foreign estate (a "Foreign Unitholder")
generally is not subject to taxation by the United States on capital gains
from commodity trading, provided that such Foreign Unitholder (in the case of
an individual) does not spend more than 182 days in the United States during
his or her taxable year, and provided further, that such Foreign Unitholder
is not engaged in a trade or business within the United States during a
taxable year to which income, gain, or loss is treated as "effectively
connected." An investment in the Trust should not, by itself, cause a Foreign
Unitholder to be engaged in a trade or business within the United States for
the foregoing purposes, assuming that the trading activities of the Trust
continue to be conducted as described in this Prospectus. Pursuant to a "safe
harbor" in the Code, an investment fund which trades commodities for its own
account should not be treated as engaged in a trade or business within the
United States provided that such investment fund is not a dealer in
commodities and that the commodities traded are of a kind customarily dealt
in on an organized commodity exchange. The Managing Owner has advised Sidley
& Austin of the contracts that the Trust currently trades. 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
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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 or its equivalent. The
interest received by the Trust is not subject to U.S. withholding tax.
"UNRELATED BUSINESS TAXABLE INCOME"
Income earned by the Trust does not constitute "unrelated business
taxable income" under Section 511 of the Code to employee benefit plans and
other tax-exempt entities which purchase Units, provided that the Units
purchased by such plans and entities are not "debt-financed."
IRS AUDITS OF THE TRUST AND ITS UNITHOLDERS
The tax treatment of Trust-related items is determined at the Trust level
rather than at the Unitholder level. The Managing Owner is the Trust's "tax
matters partner" with the authority to determine the Trust's responses to an
audit, except that the Managing Owner does not have the authority to settle
tax controversies on behalf of any Unitholder who files a statement with the
Internal Revenue Service stating that the Managing Owner has no authority to
do so. The limitations period for assessment of deficiencies and claims for
refunds with respect to items related to the Trust is three years after the
Trust's return for the taxable year in question is filed, and the Managing
Owner has the authority to, and may, extend such period with respect to all
Unitholders.
If an audit results in an adjustment, all Unitholders may be required to
pay additional taxes, plus interest, and, possibly, tax penalties and
additions to tax. Unitholders may themselves also be subject to tax audits.
There can be no assurance that the Trust's or a Unitholder's tax return will
not be audited by the Internal Revenue Service or that no adjustments to such
returns will be made as a result of such an audit.
STATE AND OTHER TAXES
In addition to the federal income tax consequences described above, the
Trust and the Unitholders may be subject to various state and other taxes.
Certain of such taxes could, if applicable, have a significant effect on the
amount of tax payable in respect of an investment in the Trust.
------------------
THE FOREGOING DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX
PLANNING, PARTICULARLY SINCE CERTAIN OF THE INCOME TAX CONSEQUENCES OF AN
INVESTMENT IN THE TRUST MAY NOT BE THE SAME FOR ALL TAXPAYERS. ACCORDINGLY,
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS WITH SPECIFIC
REFERENCE TO THEIR OWN TAX SITUATION UNDER FEDERAL LAW AND THE PROVISIONS OF
APPLICABLE STATE AND OTHER LAWS BEFORE DETERMINING WHETHER TO SUBSCRIBE FOR
UNITS.
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THE FUTURES AND FORWARD MARKETS
FUTURES AND FORWARD CONTRACTS
Commodity futures contracts in the United States are required to be made
on approved commodity exchanges and call for the future delivery of various
commodities at a specified time and place. These contractual obligations,
depending on whether one is a buyer or a seller, may be satisfied either by
taking or making physical delivery of an approved grade of the particular
commodity (or, in the case of some contracts, by cash settlement) or by
making an offsetting sale or purchase of an equivalent commodity futures
contract on the same exchange prior to the designated date of delivery.
Currencies may be purchased or sold for future delivery through banks or
dealers pursuant to what are commonly referred to as "forward contracts." In
such instances, the bank or dealer generally acts as principal in the
transaction and includes its anticipated profit and the costs of the
transaction in the prices it quotes for such contract; such mark-ups are
known as "bid-ask" spreads. Brokerage commissions are typically not charged
in forward trading. (The level of the Trust's Brokerage Fee is, however,
unaffected by the amount of forward trades it executes.)
HEDGERS AND SPECULATORS
The two broad classifications of persons who trade in commodity futures
are "hedgers" and "speculators." Commercial interests that market or process
commodities use the futures markets to a significant extent for hedging.
Hedging is a protective procedure designed to minimize losses that may occur
because of price fluctuations, for example, between the time a merchandiser
or processor makes a contract to sell a raw or processed commodity and the
time he or she must perform the contract. The commodity markets enable the
hedger to shift the risk of price fluctuations to the speculator. The
speculator, unlike the hedger, generally expects neither to deliver nor
receive the physical commodity; rather, the speculator risks his or her
capital with the hope of making profits from price fluctuations in commodity
futures contracts. Speculators rarely take delivery of physical commodities
but rather close out their futures positions by entering into offsetting
purchases or sales of futures contracts.
COMMODITY EXCHANGES
Commodity exchanges provide centralized market facilities for trading in
futures contracts relating to specified commodities. Each of the commodity
exchanges in the United States has an associated "clearinghouse." Once
trades made between members of an exchange have been confirmed, the
clearinghouse becomes substituted for the clearing member acting on behalf of
each buyer and each seller of contracts traded on the exchange and in effect
becomes the other party to the trade. Thereafter, each clearing member firm
party to the trade looks only to the clearinghouse for performance.
Clearinghouses do not deal with customers, but only with member firms, and
the "guarantee" of performance under open positions provided by the
clearinghouse does not run to customers. If a customer's commodity broker
becomes bankrupt or insolvent, or otherwise defaults on such broker's
obligations to such customer, the customer in question may not receive all
amounts owing to such customer in respect of his or her trading, despite the
clearinghouse fully discharging all of its obligations.
The Managing Owner trades on foreign commodity exchanges. Foreign
commodity exchanges differ in certain respects from their United States
counterparts and are not subject to regulation by any United States
governmental agency. Therefore, the protections afforded by such regulation
are not available to the Trust in its trading on such exchanges. For
example, in contrast to United States exchanges, many foreign exchanges are
"principals' markets," where trades remain the liability of the traders
involved and the exchange or clearinghouse does not become substituted for
any party. Certain foreign exchanges also have no position limits, with each
dealer, acting individually, establishing the size of the positions it will
permit traders to hold.
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The Trust engages, to a substantial extent, in transactions on foreign
exchanges, and in doing so is subject to the risks of trading in principals'
markets as well as the risk of fluctuations in the exchange rate between the
currencies in which the contracts traded on such foreign exchanges are
denominated and United States dollars (as well as the possibility that
exchange controls could be imposed in the future).
SPECULATIVE POSITION AND DAILY LIMITS
The CFTC and the United States exchanges have established limits,
referred to as "speculative position limits," on the maximum net long or net
short position that any person (other than a hedger) may hold or control in
futures contracts or options on particular commodities. These limits may
restrict the Managing Owner's ability to acquire positions which it otherwise
would acquire on behalf of the Trust, particularly in certain non-financial
commodities, such as energy, metals and agriculture.
Most United States exchanges limit by regulations the maximum permissible
fluctuation in commodity futures contract prices during a single trading day.
These regulations specify what are commonly referred to as "daily limits."
Daily limits establish the maximum amount by which the price of a futures
contract may vary either up or down from the previous day's settlement price
at the end of the trading session. Because daily limits apply only on a
day-to-day basis, they do not limit ultimate losses, and may cause
illiquidity in certain markets which results in substantial losses to the
Trust which the Managing Owner is powerless to limit or prevent.
MARGIN
Margin represents a security deposit to assure futures traders'
performance under their open positions. When a position is established,
"initial margin" is deposited and at the close of each trading day "variation
margin" is either credited or debited from a trader's account, representing
the unrealized gain or loss on open positions during the day. If "variation
margin" payments cause a trader's "initial margin" to fall below "maintenance
margin" levels, a "margin call" will be made requiring the trader to deposit
additional margin or have his or her position closed out.
PURCHASES BY EMPLOYEE BENEFIT PLANS
ALTHOUGH THERE CAN BE NO ASSURANCE THAT AN INVESTMENT IN THE TRUST, OR
ANY OTHER MANAGED FUTURES PRODUCT, WILL ACHIEVE THE INVESTMENT OBJECTIVES OF
AN EMPLOYEE BENEFIT PLAN, SUCH INVESTMENTS HAVE CERTAIN FEATURES WHICH MAY BE
OF INTEREST TO SUCH PLANS. FOR EXAMPLE, THE FUTURES MARKETS ARE ONE OF THE
FEW INVESTMENT FIELDS IN WHICH EMPLOYEE BENEFIT PLANS CAN PARTICIPATE IN
LEVERAGED STRATEGIES WITHOUT BEING REQUIRED TO PAY TAX ON "UNRELATED BUSINESS
TAXABLE INCOME." SEE "FEDERAL INCOME TAX ASPECTS -- 'UNRELATED BUSINESS
TAXABLE INCOME'" AT PAGE 62. IN ADDITION, BECAUSE THEY ARE NOT TAXPAYING
ENTITIES, EMPLOYEE BENEFIT PLANS ARE NOT SUBJECT TO PAYING ANNUAL TAX ON
THEIR PROFITS (IF ANY) FROM THE TRUST DESPITE RECEIVING NO DISTRIBUTIONS FROM
IT, AS ARE OTHER UNITHOLDERS.
AS A MATTER OF POLICY, MILLBURN RIDGEFIELD LIMITS SUBSCRIPTIONS TO THE
TRUST FROM ANY EMPLOYEE BENEFIT PLAN TO NO MORE THAN 10% OF THE "LIQUID" NET
ASSETS OF SUCH PLAN AT THE TIME OF INVESTMENT (IRRESPECTIVE OF THE NET WORTH
OF THE BENEFICIARY OR BENEFICIARIES OF SUCH PLAN).
GENERAL
The following section sets forth certain consequences under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code,
which a fiduciary of an "employee benefit plan" as defined in and subject to
ERISA or of a "plan" as defined in Section 4975 of the Code who has
investment discretion should consider before deciding to invest any of such
plan's assets in the Trust (such "employee benefit plans" and "plans" being
referred to herein as "Plans," and such fiduciaries with investment
discretion being referred to herein as "Plan Fiduciaries"). The following
summary is not intended to be complete, but only to address certain questions
under ERISA and the Code which are likely to be raised by the Plan
Fiduciary's own counsel.
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In general, the terms "employee benefit plan" as defined in ERISA and
"plan" as defined in Section 4975 of the Code together refer to any plan or
account of various types which provide retirement benefits or welfare
benefits to an individual or to an employer's employees and their
beneficiaries. Such plans and accounts include, but are not limited to,
corporate pension and profit sharing plans, "simplified employee pension
plans," KEOGH plans for self-employed individuals (including partners),
individual retirement accounts described in Section 408 of the Code and
medical benefit plans, but generally do not include any such plan maintained
by a church or by a state or local government.
Each Plan Fiduciary must give appropriate consideration to the facts and
circumstances that are relevant to an investment in the Trust, including the
role that an investment in the Trust plays in the Plan's overall investment
portfolio. Each Plan Fiduciary, before deciding to invest in the Trust, must
be satisfied that investment in the Trust is a prudent investment for the
Plan, that the investments of the Plan, including the investment in the
Trust, are diversified so as to minimize the risk of large losses and that an
investment in the Trust complies with the terms of the Plan and the related
trust.
EACH PLAN FIDUCIARY CONSIDERING ACQUIRING UNITS MUST CONSULT
WITH ITS OWN LEGAL AND TAX ADVISERS BEFORE DOING SO. AN
INVESTMENT IN THE TRUST IS SPECULATIVE AND INVOLVES
A HIGH DEGREE OF RISK. THE TRUST IS NOT INTENDED
AS A COMPLETE INVESTMENT PROGRAM.
"PLAN ASSETS"
The purchase of Units by a Plan raises the issue of whether that purchase
will cause, for purposes of Title I of ERISA and Section 4975 of the Code,
the underlying assets of the Trust to be considered to constitute assets of
such Plan. A regulation issued under ERISA (the "ERISA Regulation") contains
rules for determining when an investment by a Plan in an equity interest of
an entity will result in the underlying assets of such entity being
considered assets of such Plan for purposes of ERISA and Section 4975 of the
Code (I.E., "plan assets"). Those rules provide that assets of an entity
will not be considered assets of a Plan which purchases an equity interest in
the entity if certain exceptions apply, including an exception applicable if
the equity interest purchased is a "publicly-offered security." The Units
qualify as a "publicly-offered security" pursuant to the foregoing rules.
INELIGIBLE PURCHASERS
Units may not be purchased with the assets of a Plan if Millburn
Ridgefield, the Trustee, any Selling Agent, any Clearing Broker, Chemical
Bank, N.A. or any of their respective affiliates or any of their respective
agents or employees: (a) has investment discretion with respect to the
investment of the assets of such Plan invested in the Units; (b) has
authority or responsibility to give or regularly gives investment advice with
respect to such Plan assets, for a fee, and pursuant to an agreement or
understanding that such advice will serve as a primary basis for investment
decisions with respect to such Plan assets and that such advice will be based
on the particular investment needs of the Plan; or (c) is an employer
maintaining or contributing to such Plan. A party that is described in
clause (a) or (b) of the preceding sentence is a fiduciary under ERISA and
the Code with respect to the Plan, and any such purchase might result in a
"prohibited transaction" under ERISA and the Code.
Except as otherwise set forth, the foregoing statements regarding the
consequences under ERISA and the Code of an investment in the Trust are based
on the provisions of the Code and ERISA as currently in effect, and the
existing administrative and judicial interpretations thereunder. No
assurance can be given that administrative, judicial or legislative changes
will not occur that will not make the foregoing statements incorrect or
incomplete.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF PLANS IS IN NO RESPECT A
REPRESENTATION BY THE TRUST, MILLBURN RIDGEFIELD, ANY SELLING AGENT OR ANY
OTHER PARTY THAT THIS INVESTMENT MEETS SOME OR ALL OF THE RELEVANT LEGAL
REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR PLAN OR THAT THIS
INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR PLAN. THE PERSON WITH
INVESTMENT DISCRETION SHOULD
-66-
<PAGE>
CONSULT WITH HIS OR HER ATTORNEY AND FINANCIAL ADVISERS AS TO THE PROPRIETY
OF AN INVESTMENT IN THE TRUST IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR
PLAN AND CURRENT TAX LAW.
PLAN OF DISTRIBUTION
SUBSCRIPTION PROCEDURE
The Units are offered to the public -- on a "best efforts" basis -- at
Net Asset Value as of the first business day of each calendar month (Millburn
Ridgefield may from time to time elect to issue Units at intra-month
closings). 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
up to three decimal places.
In order to purchase Units, an investor must complete, execute and
deliver to a Selling Agent an original of the Subscription Agreement and
Power of Attorney Signature Page which accompanies this Prospectus, together
with a check for the amount of his or her subscription. Checks should be
made payable to "CHEMICAL BANK, AS ESCROW AGENT FOR THE MILLBURN WORLD
RESOURCE TRUST, ESCROW ACCOUNT NO. SE14791."
Subscription payments by clients of certain Selling Agents may be made by
authorizing the Selling Agents to debit a subscriber's customer securities
account for the amount of the subscription. When a subscriber authorizes
such a debit, the subscriber will be required to have the amount of his or
her subscription payment on deposit in his or her account on a settlement
date specified by such Selling Agent. Prudential Securities clients must
have the amount of their subscriptions on deposit in their customer
securities accounts before the Managing Owner may accept their subscriptions.
The account will be debited, and amounts so debited will be transmitted
directly to Chemical Bank by such Selling Agent via check or wire transfer
made payable to "CHEMICAL BANK, AS ESCROW AGENT FOR THE MILLBURN WORLD
RESOURCE TRUST, ESCROW ACCOUNT NO. SE14791," for deposit in the escrow
account of the Trust, on such settlement date. Such settlement date will
occur on a date specified by such Selling Agents, not later than three
business days following notification by the Managing Owner of the acceptance
of an investor's subscription and not later than the termination of the
Offering Period.
The Managing Owner determines, in its sole discretion, whether to accept
or reject a subscription in whole or in part. Such determination is made
within five (5) business days of the submission of a subscription to the
Managing Owner. Settlement of the subscription payments on accepted
subscriptions is made within three (3) business days of acceptance of the
related subscription.
Subscription documents must generally be received at least five (5)
calendar days before the end of a month in order to be accepted as of the
first day of the immediately following month.
Interest earned on each subscription while held in escrow (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) is invested in the Trust and increases
the number of Units received by such investors. Interest earned on rejected
subscriptions is paid directly to the rejected subscribers.
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 prevailing "risk free"
rates.
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, are promptly returned to investors together
with all interest accrued thereon while held in escrow.
-67-
<PAGE>
Subject to compliance with applicable regulatory requirements, the
Managing Owner may at any time elect not to continue to use an escrow
account. In such case, prospective subscribers will be duly notified that
subscriptions will be accepted at a single month-end closing date, directly
into the Trust's account.
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.
THE SELLING AGENTS
No selling commissions are paid from the proceeds of this offering. The
Selling Agents are paid selling commissions by the Managing Owner equal to 5%
of Net Asset Value of all Units sold by each Selling Agent, respectively. In
addition to selling commissions, the Managing Owner 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 0.33
of 1% (a 4.0% annual rate) of the month-end Net Assets of all Units sold by
them which remain outstanding, beginning with the end of the thirteenth full
month after the date such Units were first issued (not the date that the
related subscription was deposited into escrow); provided that such ongoing
compensation may only be paid on Units sold by Registered Representatives who
are (i) registered with the CFTC, (ii) have passed either the Series 3 or the
Series 31 Examination, and (iii) agree to provide certain ongoing services to
their clients who own outstanding Units. Such ongoing compensation may be
deemed to constitute underwriting compensation.
In the event that 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 the Managing
Owner. Rather, pursuant to applicable rules of the NASD, such Selling Agent
and such Registered Representative are restricted to receiving, in addition
to the initial 5% selling commissions, installment selling commissions
payable in the same manner as ongoing compensation, but limited in amount to
4.5% of the initial subscription price of Units sold by them -- resulting in
total initial and installment selling commissions equal to 9.5% of such
subscription price.
The selling commissions and ongoing compensation paid by the Managing
Owner in respect of Units acquired by persons which invest $1,000,000 or more
in the Trust (and, accordingly, will pay Brokerage Fees of 7.0% rather than
9.0% per annum), are reduced to 3% of the subscription amount and a 2% annual
rate, respectively.
PaineWebber, one of the Principal Selling Agents, selects certain
"introducing brokers," for which PaineWebber clears customer transactions and
carries customer accounts, to distribute Units. On Units sold through such
introducing brokers (each of which must be registered as a broker-dealer or a
foreign broker exempt from such registration requirement), PaineWebber will
retain (i) 1% of the 5% initial selling commissions, passing on to the
introducing brokers the remaining 4% (1% of the 3% initial selling
commissions being retained by PaineWebber and 2% passed on to such
introducing broker in the case of subscriptions of $1,000,000 or more), as
well as (ii) 1% per annum of the ongoing compensation paid on Units which
remain outstanding more than twelve months, passing on the remaining 3% to
the introducing brokers (0.75% being retained by PaineWebber and 1.25% passed
on to such introducing broker in the case of subscriptions of $1,000,000 or
more).
In addition to distributing Units through the Selling Agents, the Trust
may from time to time sell Units directly, without selling or "trailing"
commissions. Units sold directly by the Trust may pay brokerage fees reduced
to reflect the absence of selling and "trailing" commissions paid in respect
of such Units. Direct Unit sales by the Trust will have no effect on any
other Units (except to the extent that the sale of such Units reduces all
Units' PRO RATA share of the organizational and initial offering expenses
reimbursement payments due to Millburn Ridgefield by the Trust), and the
proceeds of all Units will be managed in the same trading account.
-68-
<PAGE>
Other than as described above, no commissions or other fees are paid,
directly or indirectly, by the Trust, the Managing Owner, any affiliate of
the foregoing or any principal or officer of any of the foregoing, to any
person in connection with the solicitation of purchasers for Units.
The Managing Owner advanced the Trust's organizational and initial
offering costs in the amount of $600,000 for which the Managing Owner is
being reimbursed, without interest, by the Trust in 24 equal monthly
installments through September 30, 1997.
LEGAL MATTERS
Legal matters in connection with the Units being offered hereby are
passed upon for the Managing Owner by Sidley & Austin, Chicago, Illinois.
Sidley & Austin does not represent either the Trust or the Unitholders, and
advises the Managing Owner on an ongoing basis, including concerning its
responsibilities as Managing Owner and with respect to matters relating to
the management of the Trust and the Managing Owner's obligations to the
Unitholders. Except with respect to certain matters, Sidley & Austin will
rely as to matters of Delaware law upon the opinion of Richards, Layton &
Finger, Wilmington, Delaware. The statements under "Federal Income Tax
Aspects" have been reviewed by Sidley & Austin.
EXPERTS
Mr. Arthur Friedman, C.P.A., is Millburn Ridgefield's independent public
accountant, Mr Friedman has audited the Millburn Ridgefield Corporation
Statement of Financial Position as of December 31, 1995. His report is
included in this Prospectus. Such financial statement is included herein in
reliance on the report of Mr. Arthur Friedman, C.P.A., independent auditor,
as stated in his report appearing herein, and is so included in reliance upon
such report, given upon the authority of that individual as an expert in
auditing and accounting.
Coopers & Lybrand L.L.P. are the Trust's independent accountants. The
financial statements of the Trust as of December 31, 1995 and for the period
then ended included in this Prospectus have been audited by Coopers & Lybrand
L.L.P., independent accountants, as stated in their report appearing herein,
and have been so included in reliance upon such report given upon the
authority of that firm as experts in auditing and accounting.
REPORTS
Applicable rules of the CFTC require that this Prospectus be accompanied
by summary financial information (which may be a recent Monthly Report of the
Trust) current within 60 calendar days as well as by the most recent Annual
Report of the Trust containing financial statements certified by an
independent accountant (unless the information in such Annual Report has been
included in this Prospectus).
ADDITIONAL INFORMATION
This Prospectus constitutes part of the Registration Statement filed by
the Trust with the SEC in Washington, D.C. This Prospectus does not contain
all of the information set forth in such Registration Statement, certain
portions of which have been omitted pursuant to the rules and regulations of
the SEC including, without limitation, certain exhibits thereto (for example,
the Selling Agreement, the Escrow Agreement and the Customer Agreements).
The descriptions contained herein of agreements included as exhibits to the
Registration Statement are necessarily summaries, and the exhibits themselves
may be inspected without charge at the public reference facilities maintained
by the SEC in Washington, D.C., and copies of all or part thereof may be
obtained from the SEC upon payment of the prescribed fees.
-69-
<PAGE>
INDEX OF DEFINED TERMS
A NUMBER OF DEFINED OR SPECIALIZED TERMS ARE USED IN THIS PROSPECTUS.
THE RESPECTIVE DEFINITIONS OR DESCRIPTIONS OF SUCH TERMS MAY BE FOUND ON THE
FOLLOWING PAGES OF THIS PROSPECTUS.
PAGE(S)
-------
Additional Selling Agents . . . . . . . . . . . . . . . . . . . . -i-
Administrative expenses . . . . . . . . . . . . . . . . . . . . . 40
"Bid-ask" spreads . . . . . . . . . . . . . . . . . . . . . . . . 38
"Breakeven" analysis . . . . . . . . . . . . . . . . . . . . . . 7
Brokerage Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Business trust. . . . . . . . . . . . . . . . . . . . . . . . . . 53
CFTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -ii-
Clearing Broker . . . . . . . . . . . . . . . . . . . . . . . . . -i-
Clearinghouse . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Daily limits . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Employee benefit plan . . . . . . . . . . . . . . . . . . . . . . 64
Forward contracts . . . . . . . . . . . . . . . . . . . . . . . . 63
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . 63
Initial margin . . . . . . . . . . . . . . . . . . . . . . . . . 64
Installment selling commissions . . . . . . . . . . . . . . . . . -ii-
Investment advisory fees. . . . . . . . . . . . . . . . . . . . . 16
Maintenance margin. . . . . . . . . . . . . . . . . . . . . . . . 64
Managing Owner . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Margin call . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Millburn Ridgefield . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . 43
New Trading Profit. . . . . . . . . . . . . . . . . . . . . . . . 39
NFA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -ii-
Ongoing compensation . . . . . . . . . . . . . . . . . . . . . . -i-
Organizational and initial offering cost reimbursement. . . . . . 40
Principals' markets . . . . . . . . . . . . . . . . . . . . . . . 64
Principal Selling Agents . . . . . . . . . . . . . . . . . . . . -i-
Profit Share . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Redemption charges. . . . . . . . . . . . . . . . . . . . . . . . 42
Round-turn commissions. . . . . . . . . . . . . . . . . . . . . . 37
Selling Agents. . . . . . . . . . . . . . . . . . . . . . . . . . -i-
Selling commissions . . . . . . . . . . . . . . . . . . . . . . . -i-
Series 3 Examination . . . . . . . . . . . . . . . . . . . . . . -ii-
Series 31 Examination . . . . . . . . . . . . . . . . . . . . . . -ii-
Speculative position limits . . . . . . . . . . . . . . . . . . . 64
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Variation margin. . . . . . . . . . . . . . . . . . . . . . . . . 64
World Resource Portfolio . . . . . . . . . . . . . . . . . . . . 26
"Zero-sum" trading. . . . . . . . . . . . . . . . . . . . . . . . 15
-70-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
THE MILLBURN WORLD RESOURCE TRUST
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . 71
Statements of Financial Condition as of December 31, 1995 and
December 31, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . 72
Statements of Operations from September 13, 1995 to December 31,
1995 and from January 1, 1996 to December 31, 1996. . . . . . . . . . . 73
Statements of Changes in Trust Capital for the periods from June 7,
1995 (date Trust was organized) to December 31, 1995 and from
January 1, 1996 to December 31, 1996 . . . . . . . . . . . . . . . . . 74
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 75
MILLBURN RIDGEFIELD CORPORATION
Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . . . 80
Statement of Financial Position as of December 31, 1996 . . . . . . . . . 81
Notes to Statement of Financial Position . . . . . . . . . . . . . . . . 83
------------------
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.
-71-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE UNITHOLDERS OF
THE MILLBURN WORLD RESOURCE TRUST:
We have audited the accompanying statement of financial condition of THE
MILLBURN WORLD RESOURCE TRUST as of December 31, 1995, the related statement
of operations for the period from September 13, 1995 (commencement of trading
operations) to December 31, 1995, and the statement of changes in Trust
capital for the period from June 7, 1995 (date Trust was organized) to
December 31, 1995. These financial statements are the responsibility of
management of the Managing Owner. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 audit provides 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 The Millburn World Resource
Trust as of December 31, 1995 and the results of its operations for the
period from June 7, 1995 to December 31, 1995, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
January 25, 1996
-72-
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
STATEMENTS OF FINANCIAL CONDITION
ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
DECEMBER 31, 1995 (UNAUDITED)
----------------- -----------------
<S> <C> <C>
Equity in trading accounts:
Investments in U.S. Treasury bills - $ 14,165,755 $ 30,156,181
at value (cost $14,165,755,
December 31, 1995; and $29,549,254,
December 31, 1996) (Note 3)
Investments in foreign treasury bills - 289,952 0
at value (cost $289,952,
December 31, 1995) (Note 3)
Options owned, at market value 289,511 922,536
(cost $176,684, December 31, 1995;
and $685,998, December 31, 1996)
Unrealized appreciation on open contracts 3,109,435 3,779,038
Cash 1,790,700 5,855,321
------------ ------------
19,645,353 40,713,076
Money market fund 4,090,183 2,447,271
Investment in U.S. Treasury bills - at value
(cost $3,442,128, December 31, 1995; and
$15,075,649, December 31, 1996) (Note 3) 3,442,128 15,462,514
------------ ------------
Total assets $ 27,177,664 $ 58,622,861
------------ ------------
------------ ------------
LIABILITIES AND TRUST CAPITAL:
Unrealized depreciation on open currency contracts $ 393,395 $ 573,797
Due to Managing Owner (Note 4) 554,791 252,264
Accounts payable and accrued expenses 59,305 52,344
Redemptions payable to Unitholders, net (Note 10) 67,488 1,260,914
Accrued Brokerage Fees (Note 5) 170,408 343,224
------------ ------------
Total liabilities 1,245,387 2,482,543
------------ ------------
Trust capital (Notes 5, 10 and 11):
Managing Owner interest 730,387 1,417,312
Unitholders: 23,986.087 at December 31,
1995 and 47,579.531 at December 31,
1996 Units of Beneficial
Interest outstanding 25,201,890 54,723,006
------------ ------------
Total Trust capital 25,932,277 56,140,318
------------ ------------
Total liabilities and Trust capital $ 27,177,664 $ 58,622,861
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-73-
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
SEPTEMBER 13, 1995 FOR THE YEAR FROM
(COMMENCEMENT OF JANUARY 1, 1996 TO
TRADING OPERATIONS) DECEMBER 31, 1996
TO DECEMBER 31, 1995 (UNAUDITED)
-------------------- ------------------
<S> <C> <C>
Income (Note 3):
Net gains (losses) on trading of futures, forward and
option contracts:
Realized gains (losses)
Futures and forwards $ 551,797 $7,549,355
Options (98,084) 979,525
Increase (decrease) in unrealized appreciation:
Futures and forwards 2,716,040 (89,823)
Options 112,827 702,736
----------- -----------
3,282,580 9,141,793
Less, Brokerage Fees (Note 5) 548,790 3,998,675
----------- -----------
Net realized and unrealized gains (losses)
on trading of futures, forward and option
contracts 2,733,790 5,143,118
Interest income 303,229 2,115,972
Foreign exchange loss (9,539) (72,909)
----------- -----------
Total income 3,027,480 7,186,180
----------- -----------
Expenses (Note 3):
Profit Share (Note 5) 460,840 829,080
Administrative expenses 59,492 519,754
----------- -----------
Total expenses 520,332 1,348,834
----------- -----------
Net income (loss) $2,507,148 $5,837,346
----------- -----------
----------- -----------
Net income (loss) per Unit of Beneficial
Interest (Note 11) $ 75.75 $ 99.45
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-74-
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
STATEMENTS OF CHANGES IN TRUST CAPITAL
FOR THE PERIODS FROM JUNE 7, 1995 (DATE TRUST WAS ORGANIZED) TO DECEMBER 31,
1995 AND FROM JANUARY 1, 1996 TO DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NEW
PROFITS
MEMO MANAGING
UNITHOLDERS ACCOUNT OWNER TOTAL
----------- -------- -------- -----
<S> <C> <C> <C> <C>
Initial capital contributions $ 1,600 $ 400 $ 2,000
Proceeds from initial offering of 15,141.664
Units of Beneficial Interest and Managing Owner
contribution 15,141,664 155,005 15,296,669
Initial capital contribution withdrawn (1,600) (1,600)
----------- --------- -----------
Opening Trust capital for operations 15,141,664 155,405 15,297,069
Proceeds from sale of 8,926.044 Units of
Beneficial Interest and Managing Owner
contributions 8,267,366 85,000 8,352,366
Organizational and initial offering costs (593,674) (6,326) (600,000)
Net income 2,471,680 35,468 2,507,148
Redemptions (81.621 Units of Beneficial
Interest) (85,146) (85,146)
Managing Owner's Profit Share $460,840 460,840
Transfer from New Profits Memo Account to
Managing Owner (460,840) 460,840
----------- --------- ---------- ------------
Trust capital at December 31, 1995 $25,201,890 $ -- $ 730,387 $25,932,277
----------- --------- ---------- ------------
----------- --------- ---------- ------------
Proceeds from sale of 30,447.310 Units of
Beneficial Interest and Managing Owner
contributions $31,099,099 $217,000 $31,316,099
Net income 5,735,662 $ 712 100,972 5,837,346
Redemptions (6,951.474 Units of Beneficial
Interest) (7,313,645) (460,840) (7,774,485)
Managing Owner's Profit Share 829,081 829,081
----------- --------- ---------- ------------
----------- --------- ---------- ------------
Transfer from New Profits Memo Account to
Managing Owner (829,793) 829,793
----------- --------- ---------- ------------
----------- --------- ---------- ------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-75-
<PAGE>
<TABLE>
<CAPTION>
NEW
PROFITS
MEMO MANAGING
UNITHOLDERS ACCOUNT OWNER TOTAL
----------- -------- -------- -----
<S> <C> <C> <C> <C>
Trust capital at December 31, 1996 $54,723,006 $ -- $1,417,312 $56,140,318
----------- --------- ---------- ------------
----------- --------- ---------- ------------
</TABLE>
See accompanying notes to financial statements.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-76-
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS
(THE INFORMATION WITH RESPECT TO 1996 IS UNAUDITED)
1. ORGANIZATION:
The Millburn World Resource Trust (the "Trust") was organized on June 7,
1995 under the Delaware Business Trust Act. At such time, the only capital
contributed to the Trust was the original capital contribution of $400 by
Millburn Ridgefield Corporation (the "Managing Owner") and $1,600 by the
initial Unitholder. The Managing Owner has agreed to make additional
capital contributions as Managing Owner, subject to certain possible
exceptions, to maintain its capital account at not less than 1% of the
total capital accounts of the Trust (or $500,000, if less, but not less
than 0.2% of such capital accounts). The Managing Owner and the holders of
the Units of Beneficial Interest ("Units") issued by the Trust will share
in any profits and losses of the Trust in proportion to the percentage
interest owned by each, subject to the Managing Owner's receipt of a 9.0%
annual Brokerage Fee (7.0% in the case of Unitholders who invest $1,000,000
or more) and a 17.5% quarterly Profit Share.
The proceeds from the initial offering of Units were deposited in the
Trust's accounts on September 13, 1995, and the Trust commenced trading
operations. The Trust is engaged in speculative trading in the futures,
options and forward markets.
2. THE OFFERING OF THE UNITS:
The Trust offered Units to the public initially at the price of $1,000 per
Unit, and, after the initial sale of the Units, at the Net Asset Value per
Unit (as defined in the Declaration of Trust and Trust Agreement) as of the
first business day of each calendar month. Selling commissions are paid by
the Managing Owner. These selling commissions will equal 5% (3% in the
case of Unitholders who invest $1,000,000 or more) of the subscription
price (Net Asset Value) per Unit after trading begins.
The proceeds from the subscriptions for Units are held in escrow and
invested in interest-bearing obligations. Subscribers are credited, when
the Units are issued, with additional Units in an amount corresponding to
the interest earned on their subscriptions while held in escrow. If a
subscription is rejected, the subscription funds plus all interest earned
thereon while held in escrow is promptly returned to the investor.
3. ACCOUNTING POLICIES:
a. INVESTMENTS
Open options, futures and forward contracts are valued at market value.
Realized gain (loss) and changes in unrealized values on futures, forward
and option contracts are recognized in the periods in which the contracts
are closed or the changes occur, and are included in net gain (losses) on
trading of futures, forward and option contracts.
Investments in U.S. and foreign treasury bills are valued at cost plus
amortized discount which approximates market. Amortization of discount is
reflected as interest income.
b. FOREIGN CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated at
quoted prices of such currencies. Purchases and sales of investments are
translated at the exchange rate prevailing when such transactions occurred.
c. INCOME TAXES
Income taxes have not been provided, as each Unitholder is individually
liable for the taxes, if any, on his or her share of the Trust's income and
expenses.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-77-
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION WITH RESPECT TO 1996 IS UNAUDITED)
d. 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.
4. ORGANIZATIONAL AND INITIAL OFFERING COSTS:
Organizational and initial offering costs (exclusive of selling
commissions), of approximately $600,000, were advanced by the Managing
Owner and are being reimbursed by the Trust in 24 equal monthly
installments, provided that the monthly installments received during any
fiscal year shall not in the aggregate exceed 0.167 of 1% (a 2% annual
rate) of the month-end Net Asset Value of the Trust as of each of the
months elapsed during such fiscal year including the month of
determination, and the 24-month period shall be extended as necessary to
complete the reimbursement. The total costs were deducted from Trust
capital upon commencement of trading, and reduce the redemption value per
Unit to the extent that the reimbursement payments have been made to the
Managing Owner. The Managing Owner also pays, from its own funds, selling
commissions on all sales of Units.
5. TRUST AGREEMENT:
The Trust Agreement provides that the Managing Owner shall control, conduct
and manage the business of the Trust, and may make all trading decisions.
The Trust pays brokerage fees to the Managing Owner at the annual rate of
9.0% of the Trust's average month-end Net Assets of Unitholders interests
(prior to reduction for accrued brokerage fees or Profit Share). Such rate
is reduced to 7.0% in respect of Units sold to subscribers which invest
$1,000,000 or more in the Units. The Managing Owner, not the Trust, will
pay all routine costs of executing and clearing the Trust's futures and
options trades, including brokerage commissions payable to the Clearing
Brokers.
Profit Share equal to 17.5% of any New Trading Profits (as defined) in
excess of the highest cumulative level of Trading Profit as of any previous
calendar quarter-end is added to the New Profits Memo Account. A transfer
from such account to Managing Owner's capital account is made to the extent
taxable capital gains are allocated to the Managing Owner.
The Trust pays its legal, accounting, auditing, printing, postage and
similar administrative expenses (including the Trustee's fees, the charges
of an outside accounting services agency and the expenses of updating the
Prospectus), as well as extraordinary costs.
6. TRADING ACTIVITIES:
All of the derivatives owned by the Trust, including options, futures and
forwards, are held for trading purposes. The results of the Trust's
trading activity are shown in the statement of operations. The fair value
of the derivative financial instruments, at December 31, 1995 was
$1,067,105 and the average fair value during the year then ended calculated
on a monthly basis, approximated $416,835.
The Trust conducts its trading activities with various brokers acting
either as a broker or counterparty to various transactions. At December
31, 1995, and December 31, 1996, the cash and treasury bills, aggregating
$15,956,455, and $36,011,502 respectively, included in the Trust's equity
trading accounts are held by such brokers in segregated accounts as
required by Commodity Futures Trading Commission regulations.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-78-
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION WITH RESPECT TO 1996 IS UNAUDITED)
7. DERIVATIVE INSTRUMENTS:
The Trust is party to derivative instruments in the normal course of its
business. These financial instruments include forwards, futures and
options, whose value is based upon an underlying asset, index, or reference
rate, and generally represent future commitments to exchange currencies or
cash flows, or to purchase or sell other financial instruments at specific
terms at specified future dates. These instruments may be traded on an
exchange or over-the-counter. Exchange traded instruments are standardized
and include futures and certain options. Each of these instruments is
subject to various risks similar to those related to the underlying
financial instruments including market and credit risk.
Market risk is the potential changes in the value of the instruments traded
by the Trust due to market changes, including interest and foreign exchange
rate movements and fluctuations in commodity or security prices. Market
risk is directly impacted by the volatility and liquidity in the markets in
which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit
risk is normally reduced to the extent that an exchange or clearing
organization acts as a counterparty to futures or options transactions,
since typically the collective credit of the members of the exchange is
pledged to support the financial integrity of the exchange. In the case of
over-the-counter transactions, the Trust must rely solely on the credit of
the individual counterparties. The Trust's risk of loss in the event of
counterparty default is typically limited to the amounts recognized in the
statement of financial condition, not to the contract or notional amounts
of the instruments.
8. OPEN DERIVATIVE INSTRUMENTS (CONTRACTS):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996
NOTIONAL OR CONTRACTUAL NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS AMOUNT OF COMMITMENTS
-------------------------- --------------------------
TO PURCHASE TO SELL TO PURCHASE TO SELL
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
Financial instruments $ 44,221,000 $ 44,256,000 $252,987,856 $17,450,754
Stock indices 12,001,000 12,345,921 18,318,485
Currencies* 29,393,000 46,955,000 69,559,540 90,703,807
Energy 17,467,000 13,081,809
Agricultural 6,880,000 10,566,000 20,597,363 18,230,972
Metals 17,980,000 7,934,569 34,479,640
------------ ------------ ------------ -----------
$109,962,000 $119,757,000 $376,607,058 $179,193,658
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
* Currencies include offsetting commitments to purchase and sell the same
currency on the same date in the future. These commitments are
economically offsetting but are not, as a technical matter, offset in the
forward market until the settlement date.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-79-
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION WITH RESPECT TO 1996 IS UNAUDITED)
The notional or contractual amounts of these derivative instruments, while
not recorded in the financial statements, reflect the extent of the Trust's
involvement in these instruments. All of these instruments mature within
90 days of the balance sheet date.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS UNREALIZED GAIN (LOSS)
----------------------- ----------------------
TO PURCHASE TO SELL GROSS NET
----------- ------- ----- ---
<S> <C> <C> <C> <C>
Exchange traded $ 80,569,000 $ 2,802,000 $3,180,313 $2,954,930
Non-exchange traded 29,393,000 46,955,000 267,332 (126,063)
------------ ------------ ---------- -----------
$109,962,000 $119,757,000 $3,447,645 $2,828,867*
------------ ------------ ---------- -----------
------------ ------------ ---------- -----------
</TABLE>
* Includes net unrealized gains on exchange traded options of $112,827.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS UNREALIZED GAIN (LOSS)
----------------------- ----------------------
TO PURCHASE TO SELL GROSS NET
----------- ------- ----- ---
<S> <C> <C> <C> <C>
Exchange traded $306,947,518 $ 88,489,851 $2,921,568 $3,777,738
Non-exchange traded 69,559,540 90,703,807 302,383 876,180
------------ ------------ ---------- -----------
$376,507,058 $179,193,658 $3,223,951 $4,653,918
------------ ------------ ---------- -----------
------------ ------------ ---------- -----------
</TABLE>
* Is reduced by net unrealized losses on exchange traded options of $(58,185).
9. TERMINATION:
The Trust will terminate on December 31, 2025 or at an earlier date if
certain conditions occur as defined in the Declaration of Trust.
10. REDEMPTIONS:
Units may be redeemed, at the option of any Unitholder, at Net Asset Value
(as defined) as of the close of business on the last business day of any
calendar month on ten business days' written notice to the Managing Owner.
Persons who redeem Units at or prior to the end of the first and second
successive six-month periods after such Units are sold are assessed
redemption charges of 4% and 3%, respectively (3% and 2%, respectively, in
the case of subscriptions of $1,000,000 or more), of their redeemed Units'
Net Asset Value as of the date of redemption. All redemption charges are
paid to the Managing Owner.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-80-
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION WITH RESPECT TO 1996 IS UNAUDITED)
11. NET ASSET VALUE PER UNIT:
Changes in net asset value per Unit during the period from September 13,
1995 to December 31, 1995 and the year from January 1, 1996 to December 31,
1996 were as follows:
<TABLE>
<CAPTION>
JANUARY 1, 1996
SEPTEMBER 13, 1995 TO
TO DECEMBER 31, 1996
DECEMBER 31, 1995 (UNAUDITED)
------------------ -----------------
<S> <C> <C>
Net realized and unrealized gains (losses)
on futures, forwards and options $ 83.52 $ 87.62
Interest income 14.46 36.05
Foreign exchange loss (0.38) (1.24)
Profit Share expense (19.16) (14.12)
Administrative expenses (2.69) (8.86)
--------- ---------
Net income (loss) per unit 75.75 99.45
Organization and offering costs (25.06) 0.00
--------- ---------
Increase (decrease) for the period 50.69 99.45
Net asset value per Unit, beginning
of period 1,000.00 1,050.69
--------- ---------
Net asset value per Unit, end
of period $1,050.69 $1,150.14
--------- ---------
--------- ---------
Redemption value per Unit (before redemption
charge) $1,072.34 $1,154.81
--------- ---------
--------- ---------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-81-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF MILLBURN RIDGEFIELD CORPORATION:
We have audited the Statement of Financial Position of Millburn Ridgefield
Corporation as of December 31, 1995. The Statement of Financial Position is
the responsibility of the company's management. Our responsibility is to
express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in 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 audit provides a reasonable
basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Millburn Ridgefield
Corporation as of December 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR FRIEDMAN
New York, New York
March 20, 1996
-82-
<PAGE>
MILLBURN RIDGEFIELD CORPORATION
STATEMENTS OF FINANCIAL POSITION
Assets
December 31, 1996
Current Assets: December 31, 1995 (Unaudited)
Cash $ 3,466 $ 395
Money Market funds 22,833 1,265,727
------ ------------
Total cash and equivalents 26,299 1,266,122
Management and incentive fees and
commissions receivable 7,334,660 10,424,308
Investments: (Notes A 1 and 2)
Millburn Alternative Strategies L.P. 12,688 15,076
Apollo Fund 486,515 623,897
The Futures Expansion Fund Limited Partnership 245,174 267,058
MCo Partners, L.P. 753,274 1,272,952
Millburn Global Opportunity Fund L.P. 668,156 796,025
Millburn Global Markets Portfolio L.P. 957,965 1,150,778
John Henry/Millburn L.P.:
Series A 108,299 130,058
Series B 85,510 102,635
Series C 133,820 159,970
Millburn Currency Fund L.P. 420,014 499,668
Millburn Currency Fund II, L.P. 299,673 356,538
Millburn Emerging Markets Opportunity
Portfolio L.P. 107,284 105,100
Millburn Emerging Markets Opportunity Fund
Ltd. 276,735
Millburn Hedge Fund 255,000
Millburn Multi-Strategy Portfolio L.P. 61,913 262,744
Millburn World Resource Fund L.P. 22,062 79,599
Millburn World Resource Trust 275,103 589,908
MRC Currency Partners L.P. 856,599 1,101,490
Metalworkers Fund 284,000 340,000
Nestor Partners (Note B) 3,498,201 4,343,590
Millburn International Stock Index Fund 139,588 154,720
Sector Strategy Fund II L.P. 12,826 14,075
Sector Strategy Fund V L.P. 11,550 11,909
----------- -----------
9,440,214 12,909,485
Loan Receivables 376,000 396,750
----------- -----------
Total Current Assets 17,177,173 24,996,665
----------- -----------
Fixed Assets, net of depreciation in the
amount of $455,574 at December 31, 1995
and $550,494 at December 31, 1996 190,339 197,168
Total Non-Current Assets 193,339 197,168
----------- -----------
Total Assets $17,367,512 $25,193,833
----------- -----------
----------- -----------
The accompanying notes are an integral part of these Statements of Financial
Position.
PURCHASERS OF UNITS WILL NOT ACQUIRE AN INTEREST IN THIS COMPANY.
-83-
<PAGE>
MILLBURN RIDGEFIELD CORPORATION
STATEMENTS OF FINANCIAL POSITION
(CONTINUED)
DECEMBER 31, 1996
Liabilities and Shareholders' Equity DECEMBER 31, 1995 (Unaudited)
----------------- ----------------
Liabilities
Current Liabilities
Due to Shareholders 222,250 222,250
Accrued expenses 2,734,054 568,999
Notes Payable - Short-term 1,145,956 656,272
----------- -----------
Total Liabilities 4,102,260 1,447,521
----------- -----------
Shareholders' Equity
Common Stock $ 1,000 $ 1,000
Additional paid-in capital 920,733 920,733
Retained earnings 12,343,519 22,824,579
----------- -----------
Total Shareholders' Equity 13,265,252 23,746,312
----------- -----------
Total Liabilities and Shareholders' Equity $17,367,512 $25,193,833
----------- -----------
----------- -----------
The accompanying notes are an integral part of these Statements of Financial
Position.
PURCHASERS OF UNITS WILL NOT ACQUIRE AN INTEREST IN THIS COMPANY.
-84-
<PAGE>
MILLBURN RIDGEFIELD CORPORATION
NOTES TO STATEMENTS OF FINANCIAL POSITION
(THE INFORMATION WITH RESPECT TO 1996 IS UNAUDITED)
A. Summary of Significant Accounting Policies
1. Nature of Business
Millburn Ridgefield Corporation ("Millburn Ridgefield") was
incorporated in the State of Delaware on May 19, 1982, for the
purpose of acting as a Commodity Pool Operator and Commodity
Trading Advisor, and is registered with the Commodity Futures
Trading Commission as such. Millburn Ridgefield is the advisor to
each of the investment companies listed as an investment on the
Statement of Financial Position. Millburn Ridgefield is also an
advisor to other commodity funds.
2. Accounting Methods
Millburn Ridgefield utilizes the accrual basis method of reporting
income and expenses for financial reporting purposes. Millburn
Ridgefield utilizes the cash basis method of accounting for income
tax purposes.
Money market accounts are treated as cash equivalents for the
purposes of the financial statements.
Investments are reported by Millburn Ridgefield at their fair
market values.
3. Income Taxes
Millburn Ridgefield has elected to be treated as a small business
corporation for income tax purposes and, accordingly, has not
provided for an accrual of Federal corporate income taxes.
B. Nestor Partners
Millburn Ridgefield is the general partner of Nestor Partners as
well as a significant investor, owning 4.2% of the December 31,
1995 Capital and 3.3% of the December 31, 1996 capital. At each
such date Millburn Ridgefield's total investment in Nestor
Partners was comprised of two elements:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
DECEMBER 31, 1995 (UNAUDITED)
----------------- -----------------
<S> <C> <C>
Investment (see Statement of Financial Position) $3,498,201 $4,343,590
Uncollected profit allocation (included in management
and incentive fees and commissions receivable on the
Statement of Financial Position) 488,548 2,890,754
----------------- -----------------
Total Investment $3,986,749 $7,234,344
----------------- -----------------
----------------- -----------------
</TABLE>
Following is a summary of the Statement of Financial Condition of
Nestor Partners at December 31, 1995 and December 31, 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
DECEMBER 31, 1995 (UNAUDITED)
----------------- -----------------
<S> <C> <C>
Investment in U.S. Government Obligations $76,440,787 105,693,997
Equity in trading account 11,711,850 21,396,391
Other current assets 8,166,723 9,224,527
Current liabilities 1,932,382 3,177,789
Partners' capital 94,386,978 133,137,126
</TABLE>
PURCHASERS OF UNITS WILL NOT ACQUIRE AN INTEREST IN THIS COMPANY.
-85-
<PAGE>
MILLBURN RIDGEFIELD CORPORATION
NOTES TO STATEMENTS OF FINANCIAL POSITION (CONTINUED)
(THE INFORMATION WITH RESPECT TO 1996 IS UNAUDITED)
Following is a summary of the Statement of Operations of Nestor
Partners for the periods January 1, 1995 through December 31, 1995
and January 1, 1996 through December 31, 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
DECEMBER 31,1995 (UNAUDITED)
---------------- -----------------
<S> <C> <C>
Net realized and unrealized gains on
trading of futures, forward and
option contracts $ 20,056,022 $ 18,447,103
Other income 4,543,123 4,984,955
Expenses, including profit share allocation 3,186,350 3,117,390
</TABLE>
C. Off-Balance-Sheet Risk
Millburn Ridgefield is the general partner of several investment
partnerships which in the normal course of their business trade in
and are parties to financial instruments with off-balance-sheet
risk. These instruments include commodity futures and forward
contracts. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from
changes in the market value of the underlying instruments.
PURCHASERS OF UNITS WILL NOT ACQUIRE AN INTEREST IN THIS COMPANY.
-86-
<PAGE>
PERFORMANCE OF THE MILLBURN RIDGEFIELD CLIENT FUNDS AND TRADING PROGRAMS
PERFORMANCE OF THE MILLBURN RIDGEFIELD CLIENT FUNDS
The following performance summaries present the results of the Millburn
Ridgefield client funds which, while employing the same basic trading systems
as the Trust, have traded with a significantly different market emphasis.
This difference in market emphasis has resulted in significant differences in
performance results despite the use of the same trading systems. For
example, in 1994, Nestor Partners had a 9.53% gain, while Millburn Currency
Fund II, L.P. had a (16.59)% loss. Similarly, in 1993, Nestor Partners had a
8.43% gain, while Millburn Currency Fund L.P. had a (11.71)% loss.
The following performance tables are included herein per CFTC
requirements and may make possible certain performance comparisons which may
be helpful to prospective investors in determining whether to acquire Units.
However, the difference in the performance of these funds (e.g., Millburn
Global Opportunity Fund L.P., 6.28%, Millburn Currency Fund II, L.P. (12.17)%
in 1993) indicates that the performance of one Millburn Ridgefield fund may
have very little significance in terms of the performance of other Millburn
Ridgefield client funds employing different portfolios.
Although Millburn Ridgefield and its principals have significant
investments in certain of the following funds, the performance presented
reflects that experienced by an investor paying full client fees.
The following performance information has been calculated on the accrual
basis of accounting in accordance with generally accepted accounting
principles.
THE FOLLOWING FUNDS HAVE TRADED PURSUANT TO THE SAME SYSTEMS BUT IN
MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST. THE PERFORMANCE OF
MILLBURN RIDGEFIELD PROGRAMS TRADING IN DIFFERENT MARKETS THAN THE TRUST IS
NOT REPRESENTATIVE OF HOW THE TRUST HAS OR WILL PERFORM.
INVESTORS SHOULD NOTE THAT INTEREST INCOME MAY CONSTITUTE A SIGNIFICANT
PORTION OF A COMMODITY POOL'S INCOME AND, IN CERTAIN INSTANCES, MAY GENERATE
PROFITS WHERE THERE HAVE BEEN REALIZED AND UNREALIZED LOSSES FROM COMMODITY
TRADING.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE. INVESTORS MAY LOSE ALL
OR SUBSTANTIALLY ALL OF THEIR INVESTMENT.
-85-
<PAGE>
PERFORMANCE OF MILLBURN RIDGEFIELD CLIENT FUNDS
MILLBURN GLOBAL OPPORTUNITY FUND L.P.
TYPE OF POOL: Publicly offered, single-advisor
INCEPTION OF TRADING: January 1993
AGGREGATE SUBSCRIPTIONS: $42 million
CURRENT CAPITALIZATION: $20 million
WORST MONTHLY DRAWDOWN: (10.54)% (1/94)
WORST PEAK-TO-VALLEY DRAWDOWN: (13.78)% (1/94-1/95)
1996 COMPOUND RATE OF RETURN: 9.42%
1995 COMPOUND RATE OF RETURN: 24.00%
1994 COMPOUND RATE OF RETURN: (8.99)%
1993 COMPOUND RATE OF RETURN: 6.28%
1992 COMPOUND RATE OF RETURN: N/A
1991 COMPOUND RATE OF RETURN: N/A
_____________
DECEMBER 31, 1996 VALUE OF INITIAL $1,000 UNIT: $1,312
______________________________
MILLBURN CURRENCY FUND II, L.P.
TYPE OF POOL: Publicly offered, single-advisor, 75% principal protected
INCEPTION OF TRADING: August 1991
AGGREGATE SUBSCRIPTIONS: $13 million
CURRENT CAPITALIZATION: $2.4 million
WORST MONTHLY DRAWDOWN: (9.15)% (8/93)
WORST PEAK-TO-VALLEY DRAWDOWN: (32.96)% (10/92-1/95)
1996 COMPOUND RATE OF RETURN: 7.84%
1995 COMPOUND RATE OF RETURN: 11.49%
1994 COMPOUND RATE OF RETURN: (16.59)%
1993 COMPOUND RATE OF RETURN: (12.17)%
1992 COMPOUND RATE OF RETURN: 11.39%
1991 COMPOUND RATE OF RETURN: 4.75% (5 mos.)
___________
DECEMBER 31, 1996 VALUE OF INITIAL $100 UNIT: $103
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS
WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ALL PERFORMANCE DATA IS CURRENT THROUGH DECEMBER 31, 1996.
-86-
<PAGE>
PERFORMANCE OF MILLBURN RIDGEFIELD CLIENT FUNDS
(CONTINUED)
NESTOR PARTNERS
TYPE OF POOL: Privately offered, single-advisor
INCEPTION OF TRADING: February 1977
AGGREGATE SUBSCRIPTIONS: $151 million
CURRENT CAPITALIZATION: $133 million
WORST MONTHLY DRAWDOWN: (10.12)% (2/96)
WORST PEAK-TO-VALLEY DRAWDOWN: (11.22)% (1/91-8/91)
1996 COMPOUND RATE OF RETURN: 14.19%
1995 COMPOUND RATE OF RETURN: 26.68%
1994 COMPOUND RATE OF RETURN: 9.53%
1993 COMPOUND RATE OF RETURN: 8.43%
1992 COMPOUND RATE OF RETURN: 14.91%
1991 COMPOUND RATE OF RETURN: 4.43%
__________
DECEMBER 31, 1996 VALUE OF INITIAL $1,000 UNIT: $28,116
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THIS FUND
WHICH TRADES IN THE SAME MARKET SECTORS AS THE TRUST
BUT WITH DIFFERENT MARKET ALLOCATIONS.
______________________________
MILLBURN GLOBAL MARKETS PORTFOLIO L.P.
TYPE OF POOL: Privately offered, single-advisor
INCEPTION OF TRADING: October 1993
AGGREGATE SUBSCRIPTIONS: $1.8 million
CURRENT CAPITALIZATION: $3.0 million
WORST MONTHLY DRAWDOWN: (9.67)% (1/94)
WORST PEAK-TO-VALLEY DRAWDOWN: (13.12)% (2/96-8/96)
1996 COMPOUND RATE OF RETURN: 12.26%
1995 COMPOUND RATE OF RETURN: 28.76%
1994 COMPOUND RATE OF RETURN: (4.35)%
1993 COMPOUND RATE OF RETURN: 9.24% (3 mos.)
1992 COMPOUND RATE OF RETURN: N/A
1991 COMPOUND RATE OF RETURN: N/A
_________
DECEMBER 31, 1996 VALUE OF INITIAL $1,000 UNIT: $1,510
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THIS FUND WHICH
TRADES IN DIVERSIFIED BUT DIFFERENT MARKET
SECTORS THAN DOES THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ALL PERFORMANCE DATA IS CURRENT THROUGH DECEMBER 31, 1996.
-87-
<PAGE>
PERFORMANCE OF MILLBURN RIDGEFIELD CLIENT FUNDS
(CONTINUED)
MILLBURN CURRENCY FUND L.P.
TYPE OF POOL: Privately offered, single-advisor
INCEPTION OF TRADING: January 1990
AGGREGATE SUBSCRIPTIONS: $40 million
CURRENT CAPITALIZATION: $12 million
WORST MONTHLY DRAWDOWN: (9.68)% (8/93)
WORST PEAK-TO-VALLEY DRAWDOWN: (24.94)% (10/92-1/95)
1996 COMPOUND RATE OF RETURN: 14.15%
1995 COMPOUND RATE OF RETURN: 19.28%
1994 COMPOUND RATE OF RETURN: (8.63)%
1993 COMPOUND RATE OF RETURN: (11.71)%
1992 COMPOUND RATE OF RETURN: 14.57%
1991 COMPOUND RATE OF RETURN: 3.63%
___________
DECEMBER 31, 1996 VALUE OF INITIAL $1,000 UNIT: $1,977
______________________________
MRC CURRENCY PARTNERS L.P.
TYPE OF POOL: Privately offered, single-advisor
INCEPTION OF TRADING: August 1990
AGGREGATE SUBSCRIPTIONS: $92 million
CURRENT CAPITALIZATION: $10 million
WORST MONTHLY DRAWDOWN: (9.44)% (8/93)
WORST PEAK-TO-VALLEY DRAWDOWN: (20.41)% (10/92-1/95)
1996 COMPOUND RATE OF RETURN: 16.84%
1995 COMPOUND RATE OF RETURN: 22.02%
1994 COMPOUND RATE OF RETURN: (6.71)%
1993 COMPOUND RATE OF RETURN: (8.53)%
1992 COMPOUND RATE OF RETURN: 15.67%
1991 COMPOUND RATE OF RETURN: 6.35%
___________
DECEMBER 31, 1996 VALUE OF INITIAL $1,000 UNIT: $1,888
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS
WHICH TRADE IN MATERIALLY DIFFERENT MARKET SECTORS THAN DOES THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ALL PERFORMANCE DATA IS CURRENT THROUGH DECEMBER 31, 1996.
-88-
<PAGE>
PERFORMANCE OF MILLBURN RIDGEFIELD CLIENT FUNDS
(CONTINUED)
MILLBURN WORLD RESOURCE FUND L.P.
TYPE OF POOL: Privately offered, single-advisor
INCEPTION OF TRADING: January 1995
AGGREGATE SUBSCRIPTIONS: $5.3 million
CURRENT CAPITALIZATION: $6.6 million
WORST MONTHLY DRAWDOWN: (11.82)% (2/96)
WORST PEAK-TO-VALLEY DRAWDOWN: (14.00)% (2/96-5/96)
1996 COMPOUND RATE OF RETURN: 17.79%
1995 COMPOUND RATE OF RETURN: 36.25%
1994 COMPOUND RATE OF RETURN: N/A
1993 COMPOUND RATE OF RETURN: N/A
1992 COMPOUND RATE OF RETURN: N/A
1991 COMPOUND RATE OF RETURN: N/A
___________
DECEMBER 31, 1996 VALUE OF INITIAL $1,000 UNIT: $1,605
______________________________
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THIS FUND
WHICH TRADES PURSUANT TO THE SAME TRADING PROGRAM AS THE TRUST.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ALL PERFORMANCE DATA IS CURRENT THROUGH DECEMBER 31, 1996.
-89-
<PAGE>
PERFORMANCE OF MILLBURN RIDGEFIELD CLIENT TRADING PROGRAMS
The following capsules present not the results of individual funds, but
the composite results of all accounts traded pursuant to different Millburn
Ridgefield trading portfolios. The performance of particular accounts may be
significantly impacted by the timing of when they begin trading, a factor
which is mitigated by a composite presentation of a number of accounts. The
information presented is current as of December 31, 1996.
Millburn Ridgefield is a highly systematic trader, which uses
essentially the same systematic approach in each market traded. These
systems and models have evolved over time, but Millburn Ridgefield applies
the same basic trading policies now as it did when it began in 1971. The
difference in the performance of the various portfolios is significant and is
due primarily to different market conditions prevailing in certain market
sectors, particularly currencies, during different periods. In volatile,
"whipsaw" markets, Millburn's systems which are based on attempting to
identify major price trends are likely to be unprofitable. In addition,
the more concentrated a trading program, in terms of the market sectors in
which it trades, the more volatile such program is likely to be. Comparing
the performance capsules for the Diversified Portfolio and the Currency
Portfolio gives an indication of the extent to which market focus can
increase variability of performance, despite use of the same basic trading
systems.
Millburn Ridgefield and its principals maintain investments in each of
the following programs.
THE FOLLOWING CAPSULES INCLUDE THE PERFORMANCE OF PROGRAMS WHICH HAVE
TRADED PURSUANT TO THE SAME SYSTEMS BUT IN MATERIALLY DIFFERENT MARKET
SECTORS THAN DOES THE TRUST. THE PERFORMANCE OF MILLBURN RIDGEFIELD PROGRAMS
TRADING IN DIFFERENT MARKETS THAN THE TRUST IS NOT REPRESENTATIVE OF HOW THE
TRUST HAS OR WILL PERFORM.
INVESTORS SHOULD NOTE THAT INTEREST INCOME MAY CONSTITUTE A SIGNIFICANT
PORTION OF A COMMODITY TRADING ADVISOR'S INCOME AND, IN CERTAIN INSTANCES,
MAY GENERATE PROFITS WHERE THERE HAVE BEEN REALIZED AND UNREALIZED LOSSES
FROM COMMODITY TRADING.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FUTURES TRADING IS SPECULATIVE. INVESTORS MAY LOSE ALL
OR SUBSTANTIALLY ALL OF THEIR INVESTMENT.
-90-
<PAGE>
PERFORMANCE OF MILLBURN RIDGEFIELD CLIENT TRADING PROGRAMS
WORLD RESOURCE PORTFOLIO
NAME OF CTA: Millburn Ridgefield Corporation
INCEPTION OF TRADING BY CTA: February 1971
INCEPTION OF TRADING IN PROGRAM: September 1995
NUMBER OF OPEN ACCOUNTS: 5
TOTAL ASSETS UNDER MANAGEMENT: $557 million
TOTAL ASSETS IN PROGRAM: $89 million
WORST MONTHLY DRAWDOWN: (12.20)% (2/96)
WORST PEAK-TO-VALLEY DRAWDOWN: (14.98)% (1/96-5/96)
ACCOUNTS CLOSED PROFITABLE: 0
ACCOUNTS CLOSED UNPROFITABLE: 0
1996 COMPOUND RATE OF RETURN: 8.46%
1995 COMPOUND RATE OF RETURN: 7.28%
1994 COMPOUND RATE OF RETURN: N/A
1993 COMPOUND RATE OF RETURN: N/A
1992 COMPOUND RATE OF RETURN: N/A
1991 COMPOUND RATE OF RETURN: N/A
THIS PROGRAM IS UTILIZED ON BEHALF OF THE TRUST.
______________________________
DIVERSIFIED PORTFOLIO
NAME OF CTA: Millburn Ridgefield Corporation
INCEPTION OF TRADING BY CTA: February 1971
INCEPTION OF TRADING IN PROGRAM: February 1971
NUMBER OF OPEN ACCOUNTS: 5
TOTAL ASSETS UNDER MANAGEMENT: $557 million
TOTAL ASSETS IN PROGRAM: $120 million
WORST MONTHLY DRAWDOWN: (11.05)% (2/96)
WORST PEAK-TO-VALLEY DRAWDOWN: (11.31)% (1/92-4/92)
ACCOUNTS CLOSED PROFITABLE: 1
ACCOUNTS CLOSED UNPROFITABLE: 0
1996 COMPOUND RATE OF RETURN: ___%
1995 COMPOUND RATE OF RETURN: 30.46%
1994 COMPOUND RATE OF RETURN: 10.46%
1993 COMPOUND RATE OF RETURN: 9.82%
1992 COMPOUND RATE OF RETURN: 16.29%
1991 COMPOUND RATE OF RETURN: 3.49%
THIS PROGRAM IS NOT UTILIZED ON BEHALF OF THE TRUST, BUT ALSO
TRADES A DIVERSIFIED RANGE OF MARKETS.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ALL PERFORMANCE DATA IS CURRENT THROUGH DECEMBER 31, 1996.
-91-
<PAGE>
PERFORMANCE OF MILLBURN RIDGEFIELD CLIENT TRADING PROGRAMS
(CONTINUED)
GLOBAL PORTFOLIO
NAME OF CTA: Millburn Ridgefield Corporation
INCEPTION OF TRADING BY CTA: February 1971
INCEPTION OF TRADING IN PROGRAM: November 1989
NUMBER OF OPEN ACCOUNTS: 5
TOTAL ASSETS UNDER MANAGEMENT: $557 million
TOTAL ASSETS IN PROGRAM: $202 million
WORST MONTHLY DRAWDOWN: (9.04)% (1/94)
WORST PEAK-TO-VALLEY DRAWDOWN: (13.50)% (7/94-1/95)
ACCOUNTS CLOSED PROFITABLE: 3
ACCOUNTS CLOSED UNPROFITABLE: 0
1996 COMPOUND RATE OF RETURN: 11.40%
1995 COMPOUND RATE OF RETURN: 25.76%
1994 COMPOUND RATE OF RETURN: (5.24)%
1993 COMPOUND RATE OF RETURN: 9.10%
1992 COMPOUND RATE OF RETURN: 9.66%
1991 COMPOUND RATE OF RETURN: 8.36%
_______________
CURRENCY PORTFOLIO
NAME OF CTA: Millburn Ridgefield Corporation
INCEPTION OF TRADING BY CTA: February 1971
INCEPTION OF TRADING IN PROGRAM: November 1989
NUMBER OF OPEN ACCOUNTS: 7
TOTAL ASSETS UNDER MANAGEMENT: $557 million
TOTAL ASSETS IN PROGRAM: $50 million
WORST MONTHLY DRAWDOWN: (9.35)% (8/93)
WORST PEAK-TO-VALLEY DRAWDOWN: (25.49)% (10/92-1/95)
ACCOUNTS CLOSED PROFITABLE: 18
ACCOUNTS CLOSED UNPROFITABLE: 17
1996 COMPOUND RATE OF RETURN: 11.66%
1995 COMPOUND RATE OF RETURN: 18.88%
1994 COMPOUND RATE OF RETURN: (7.90)%
1993 COMPOUND RATE OF RETURN: (13.00)%
1992 COMPOUND RATE OF RETURN: 12.47%
1991 COMPOUND RATE OF RETURN: (1.92)%
THESE PROGRAMS ARE NOT UTILIZED ON BEHALF OF THE TRUST AND
TRADE IN MATERIALLY DIFFERENT MARKET SECTORS.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ALL PERFORMANCE DATA IS CURRENT THROUGH DECEMBER 31, 1996.
-92-
<PAGE>
PERFORMANCE OF MILLBURN RIDGEFIELD CLIENT TRADING PROGRAMS
(CONTINUED)
HIGH LEVERAGE GLOBAL PORTFOLIO
NAME OF CTA: Millburn Ridgefield Corporation
INCEPTION OF TRADING BY CTA: February 1971
INCEPTION OF TRADING IN PROGRAM: July 1993
NUMBER OF OPEN ACCOUNTS: 4
TOTAL ASSETS UNDER MANAGEMENT: $557 million
TOTAL ASSETS IN PROGRAM: $28 million
WORST MONTHLY DRAWDOWN: (12.93)% (1/94)
WORST PEAK-TO-VALLEY DRAWDOWN: (20.00)% (7/94-1/95)
ACCOUNTS CLOSED PROFITABLE: 3
ACCOUNTS CLOSED UNPROFITABLE: 1
1996 COMPOUND RATE OF RETURN: 11.16%
1995 COMPOUND RATE OF RETURN: 32.15%
1994 COMPOUND RATE OF RETURN: (9.03)%
1993 COMPOUND RATE OF RETURN: 9.34% (6 mos.)
1992 COMPOUND RATE OF RETURN: N/A
1991 COMPOUND RATE OF RETURN: N/A
_______________
HIGH LEVERAGE CURRENCY PORTFOLIO
NAME OF CTA: Millburn Ridgefield Corporation
INCEPTION OF TRADING BY CTA: February 1971
INCEPTION OF TRADING IN PROGRAM: July 1993
NUMBER OF OPEN ACCOUNTS: 1
TOTAL ASSETS UNDER MANAGEMENT: $557 million
TOTAL ASSETS IN PROGRAM: $13 million
WORST MONTHLY DRAWDOWN: (13.10)% (8/93)
WORST PEAK-TO-VALLEY DRAWDOWN: (29.75)% (8/93-1/95)
ACCOUNTS CLOSED PROFITABLE: 0
ACCOUNTS CLOSED UNPROFITABLE: 3
1996 COMPOUND RATE OF RETURN: 17.70%
1995 COMPOUND RATE OF RETURN: 25.15%
1994 COMPOUND RATE OF RETURN: (21.29)%
1993 COMPOUND RATE OF RETURN: (11.10)% (6 mos.)
1992 COMPOUND RATE OF RETURN: N/A
1991 compound rate of return: N/A
THESE PROGRAMS ARE NOT UTILIZED ON BEHALF OF THE TRUST AND
TRADE IN MATERIALLY DIFFERENT MARKET SECTORS.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
ALL PERFORMANCE DATA IS CURRENT THROUGH DECEMBER 31, 1996.
-93-
<PAGE>
NOTES TO PERFORMANCE OF
THE MILLBURN RIDGEFIELD CLIENT FUNDS AND TRADING PROGRAMS
NOTES TO PERFORMANCE OF THE MILLBURN RIDGEFIELD CLIENT FUNDS
1. TYPE OF POOL. The CFTC specifies that pools should be categorized
as: (i) either publicly or privately offered; (ii) "principal
protected" (I.E., generally assuring the return of some or all of an
initial investment at a date certain in the future), if applicable; and
(iii) either multi-advisor or single-advisor.
2. INCEPTION OF TRADING is the date of inception of trading by the
fund.
3. AGGREGATE SUBSCRIPTIONS is the aggregate gross capital
subscriptions (without regard to redemptions).
4. CURRENT CAPITALIZATION is the net asset value of the fund at the
end of the period indicated.
5. WORST MONTHLY DRAWDOWN is the largest net asset loss experienced in
any calendar month expressed as a percentage of net asset value and
includes the month and year of such drawdown.
6. WORST PEAK-TO-VALLEY DRAWDOWN is the largest calendar month-end to
calendar month-end net asset loss (regardless of whether such loss is
continuous) experienced during the period January 1, 1991 (or
inception) through December 31, 1996, expressed as a percentage of
total equity in the program, and includes the months and years in which
it occurred. For example, a Worst Peak-to-Valley Drawdown of (13.78)%
(1/94-1/95) (see the "Millburn Global Opportunity Fund L.P." at page
86) means that the peak-to-valley drawdown lasted from January 1994
through January 1995 and resulted in a (13.78)% drawdown.
7. COMPOUND RATE OF RETURN is calculated on the basis of the actual
rate of return recognized by an initial $1,000 investment in the fund.
NOTES TO PERFORMANCE OF THE MILLBURN RIDGEFIELD CLIENT TRADING PROGRAMS
1. NAME OF CTA is Millburn Ridgefield Corporation.
2. INCEPTION OF TRADING BY CTA is the date on which Millburn
Ridgefield began trading client accounts.
3. INCEPTION OF TRADING IN PROGRAM is the date on which Millburn
Ridgefield began trading client accounts pursuant to the program shown.
4. NUMBER OF OPEN ACCOUNTS is the number of accounts directed by
Millburn Ridgefield pursuant to the program shown as of December 31,
1996.
5. TOTAL ASSETS UNDER MANAGEMENT is the aggregate amount of assets
under the management of Millburn Ridgefield as of December 31, 1996.
6. TOTAL ASSETS IN PROGRAM is the aggregate amount of assets in the program
specified as of December 31, 1996.
7. WORST MONTHLY DRAWDOWN is the largest loss experienced by the
program in any calendar month during the period January 1, 1991 through
December 31, 1996 expressed as a percentage of the total equity in the
program and includes the month and year of such drawdown.
8. WORST PEAK-TO-VALLEY DRAWDOWN is the largest calendar month-end to
calendar month-end net asset loss experienced by the program
(regardless of whether such loss is continuous) during the period
January 1, 1991 (or inception) through December 31, 1996 expressed as a
percentage of total equity in the program and includes the months and
years in which it occurred. For example, a Worst Peak-to-Valley
Drawdown of (20.00)% (7/94-1/95) (see the "High Leverage Global
Portfolio" at page 93) means that the peak to valley drawdown was
(20.00)% and lasted from July 1994 through January 1995.
9. ACCOUNTS CLOSED PROFITABLE is the number of accounts traded
pursuant to the program that were closed while profitable during the
period January 1, 1991 (or inception) through December 31, 1996.
10. ACCOUNTS CLOSED UNPROFITABLE is the number of accounts traded
pursuant to the program that were closed while unprofitable during the
period January 1, 1991 (or inception) through December 31, 1996.
11. COMPOUND RATE OF RETURN is computed on a compounded monthly basis
assuming reinvestment of accrued profits. Rate of Return is computed by
reference to total equity in the program. These numbers represent the
composite performance of all accounts in the program, not the
performance of any specific account.
-94-
<PAGE>
ANNUAL RATES OF RETURN SINCE INCEPTION
OF THE MILLBURN RIDGEFIELD CLIENT FUNDS
The following are the annual rates of return of the client (as
opposed to proprietary) futures funds sponsored by Millburn Ridgefield
(other than the Trust itself; see "Performance of the Trust" at page
21). Of the following funds, Nestor Partners trades a diversified
portfolio most similar (but nevertheless materially different) in
market sector emphasis to the World Resource Portfolio. THE MANAGING
OWNER WISHES TO EMPHASIZE TO PROSPECTIVE INVESTORS THAT THERE HAVE BEEN
A NUMBER OF YEARS IN WHICH MILLBURN RIDGEFIELD CLIENT FUNDS HAVE
SUSTAINED SIGNIFICANT LOSSES AND THAT THE VOLATILITY OF THESE FUNDS'
PERFORMANCE IS QUALITATIVELY GREATER THAN THAT OF MANY MANAGED FUTURES
FUNDS.
None of the following funds is managed pursuant to the World
Resource Portfolio. None of the following funds is being offered to
investors pursuant to the Prospectus, and it is the performance of the
Trust itself, not of Millburn Ridgefield's other funds, which is most
pertinent to a decision whether or not to invest in the Units.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
MILLBURN GLOBAL MILLBURN CURRENCY NESTOR PARTNERS
OPPORTUNITY FUND L.P. FUND II, L.P. (DIVERSIFIED;
(CURRENCIES AND FINANCIALS; (CURRENCIES ONLY; PRIVATELY OFFERED)
PUBLICLY OFFERED) PUBLICLY OFFERED)
<TABLE>
<CAPTION>
ANNUAL ANNUAL ANNUAL
YEAR RATE OF RETURN YEAR RATE OF RETURN YEAR RATE OF RETURN
- ---- -------------- ---- -------------- ---- --------------
<S> <C> <C> <C> <C> <C>
1996 9.42% 1996 7.84% 1996 14.19%
1995 24.00 1995 11.49 1995 26.68
1994 (8.99) 1994 (16.59) 1994 9.53
1993 6.28 1993 (12.17) 1993 8.43
1992 11.39 1992 14.91
1991 (5 mos.) 4.75 1991 4.43
1990 48.25
1989 0.43
1988 2.20
1987 43.70
1986 (17.09)
1985 26.56
1984 20.74
1983 (6.28)
1982 26.54
1981 39.11
1980 48.57
1979 60.93
1978 20.78
1977 (11 mos.) 3.33
</TABLE>
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS.
-95-
<PAGE>
MILLBURN GLOBAL MILLBURN CURRENCY MRC CURRENCY
MARKETS PORTFOLIO L.P. FUND L.P. PARTNERS L.P.
(DIVERSIFIED; PRIVATELY OFFERED) (CURRENCIES ONLY; (CURRENCIES ONLY;
PRIVATELY OFFERED) PRIVATELY OFFERED)
<TABLE>
<CAPTION>
ANNUAL ANNUAL ANNUAL
YEAR RATE OF RETURN YEAR RATE OF RETURN YEAR RATE OF RETURN
- ---- -------------- ---- -------------- ---- --------------
<S> <C> <C> <C> <C> <C>
1996 12.26% 1996 14.15% 1996 16.84%
1995 28.76 1995 19.28 1995 22.02
1994 (4.35) 1994 (8.63) 1994 (6.71)
1993 (3 mos.) 9.24 1993 (11.71) 1993 (8.53)
1992 14.57 1992 15.67
1991 3.63 1991 6.35
1990 51.64 1990 (5 mos.) 26.16
</TABLE>
________________________
Prospective investors should note the significant extent to which
Millburn Ridgefield's private pools have outperformed its public funds. This
is due in principal part to the significantly higher costs to which public
funds are subject, due primarily to the costs associated with the
distribution of the interests in such funds to the public. The Trust, as a
public fund, is subject to such higher costs, and its performance can be
expected to reflect the effect of such costs, which cumulate significantly
over time.
THE ANNUAL RATES OF RETURN SET FORTH ABOVE SUGGEST THAT MILLBURN
RIDGEFIELD'S PERFORMANCE MAY HAVE BEEN ADVERSELY AFFECTED BY INCREASING THE
AMOUNT OF ASSETS UNDER ITS MANAGEMENT. MILLBURN RIDGEFIELD, IN GENERAL,
APPEARS TO HAVE BEEN ABLE TO ACHIEVE BETTER PERFORMANCE IN EARLIER THAN IN
MORE RECENT YEARS. ALTHOUGH THIS COULD BE DUE TO A NUMBER OF FACTORS,
INCREASED ASSETS UNDER MANAGEMENT MAY WELL BE A MATERIALLY CONTRIBUTING
FACTOR. SEE "RISK FACTORS (7) POSSIBLE ADVERSE EFFECTS OF INCREASING
MILLBURN RIDGEFIELD'S ASSETS UNDER MANAGEMENT" AT PAGE 13.
PAST PERFORMANCE -- AND CERTAINLY THE PAST PERFORMANCE OF FUNDS OTHER THAN
THE TRUST -- IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FURTHERMORE,
EACH OF THE FOREGOING FUNDS TRADES A DIFFERENT PORTFOLIO THAN DOES THE
MILLBURN WORLD RESOURCE TRUST.
THERE ARE MATERIAL DIFFERENCES BETWEEN THE PORTFOLIOS TRADED BY THE OTHER
MILLBURN RIDGEFIELD CLIENT FUNDS (EVEN THE DIVERSIFIED FUNDS NESTOR
PARTNERS AND MILLBURN GLOBAL MARKETS PORTFOLIO L.P.) AND THAT TRADED BY THE
TRUST. FURTHERMORE, MILLBURN RIDGEFIELD'S SYSTEMS HAVE DEVELOPED
SIGNIFICANTLY OVER THE PERIOD PRESENTED IN APPENDICES I AND II, SO THAT SUCH
SYSTEMS ARE NOT CURRENTLY THE SAME AS THOSE WHICH GENERATED A SUBSTANTIAL
PORTION THE PERFORMANCE REFLECTED IN THESE APPENDICES. NO REPRESENTATION IS
OR COULD BE MADE THAT THE TRUST WOULD HAVE PERFORMED, OR WILL IN THE FUTURE
PERFORM, IN A MANNER SIMILAR TO THE RESULTS SET FORTH IN THE APPENDICES.
PURCHASERS OF UNITS WILL ACQUIRE NO INTEREST IN THESE FUNDS.
-96-
<PAGE>
APPENDIX I
"BLUE SKY" GLOSSARY
PROSPECTIVE INVESTORS SHOULD BE AWARE OF THE FOLLOWING DEFINITIONS WHICH
ARE APPLIED BY THE STATE SECURITIES ADMINISTRATORS WHEN REVIEWING A PUBLIC
FUTURES FUND OFFERING FOR COMPLIANCE WITH THE "GUIDELINES FOR THE REGISTRATION
OF COMMODITY POOL PROGRAMS" STATEMENT OF POLICY PROMULGATED BY THE NORTH
AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION, INC. A COPY OF SAID
"GUIDELINES" IS FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THE
PROSPECTUS IS A PART. THE FOLLOWING DEFINITIONS ARE REPRINTED VERBATIM FROM
SAID GUIDELINES AND MAY, ACCORDINGLY, NOT IN ALL CASES BE RELEVANT TO AN
INVESTMENT IN THE TRUST. FOR AN INDEX OF DEFINED TERMS THAT APPEAR IN THE
PROSPECTUS, SEE "INDEX OF DEFINED TERMS" AT PAGE 69.
DEFINITIONS -- As used in the Guidelines, the following terms have
the following meanings:
ADMINISTRATOR -- The official or agency administering the security
laws of a state.
ADVISOR -- Any Person who for any consideration engages in the
business of advising others, either directly or indirectly, as to the
value, purchase, or sale of Commodity Contracts or commodity options.
AFFILIATE -- An Affiliate of a Person means: (a) any Person
directly or indirectly owning, controlling or holding with power to
vote 10% or more of the outstanding voting securities of such Person;
(b) any Person 10% or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held with power to vote,
by such Person; (c) any Person, directly or indirectly, controlling,
controlled by, or under common control of such Person; (d) any
officer, director or partner of such Person; or (e) if such Person is
an officer, director or partner, any Person for which such Person acts
in any such capacity.
CAPITAL CONTRIBUTIONS -- The total investment in a Program by a
Participant or by all Participants, as the case may be.
COMMODITY BROKER -- Any Person who engages in the business of
effecting transactions in Commodity Contracts for the account of
others or for his or her own account.
COMMODITY CONTRACT -- A contract or option thereon providing for
the delivery or receipt at a future date of a specified amount and
grade of a traded commodity at a specified price and delivery point.
CROSS-REFERENCE SHEET -- A compilation of the Guideline sections,
referenced to the page of the prospectus, Program agreement, or other
exhibits, and justification of any deviation from the Guidelines.
NET ASSETS -- The total assets, less total liabilities, of the
Program determined on the basis of generally accepted accounting
principles. Net Assets shall include any unrealized profits or losses
on open positions, and any fee or expense including Net Asset fees
accruing to the Program.
NET ASSET VALUE PER PROGRAM INTEREST -- The Net Assets divided by
the number of Program Interests outstanding.
NET WORTH -- The excess of total assets over total liabilities as
determined by generally accepted accounting principles. Net Worth
shall be determined exclusive of home, home furnishings and
automobiles.
NEW TRADING PROFITS -- The excess, if any, of Net Assets at the
end of the period over Net Assets at the end of the highest previous
period or Net Assets at the date trading commences, whichever is
higher, and as further adjusted to eliminate the effect on Net Assets
resulting from new Capital Contributions, redemptions, or capital
distributions, if any, made during the period 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.
APPI-1
<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
underwriter's attorneys), expenses for printing, engraving, mailing,
salaries of employees while engaged in sales activity, charges of
transfer agents, registrars, trustees, escrow holders, depositories,
experts, expenses of qualification of the sale of its Program Interest
under federal and state law, including taxes and fees, accountants'
and attorneys' fees.
PARTICIPANT -- The holder of a Program Interest.
PERSON -- Any natural Person, partnership, corporation,
association or other legal entity.
PIT BROKERAGE FEE -- Pit Brokerage Fee shall include floor
brokerage, clearing fees, National Futures Association fees, and
exchange fees.
PROGRAM -- A limited partnership, joint venture, corporation,
trust or other entity formed and operated for the purpose of investing
in Commodity Contracts.
PROGRAM BROKER -- A Commodity Broker that effects trades in
Commodity Contracts for the account of a Program.
PROGRAM INTEREST -- A limited partnership interest or other
security representing ownership in a Program.
PYRAMIDING -- A method of using all or a part of an unrealized
profit in a Commodity Contract position to provide margin for any
additional Commodity Contracts of the same or related commodities.
SPONSOR -- Any Person directly or indirectly instrumental in
organizing a Program or any Person who will manage or participate in
the management of a Program, including a Commodity Broker who pays any
portion of the Organizational Expenses of the Program, and the general
partner(s) and any other Person who regularly performs or selects the
Persons who perform services for the Program. Sponsor does not
include wholly independent third parties such as attorneys,
accountants, and underwriters whose only compensation is for
professional services rendered in connection with the offering of the
units. The term "Sponsor" shall be deemed to include its Affiliates.
VALUATION DATE -- The date as of which the Net Assets of the
Program are determined.
VALUATION PERIOD -- A regular period of time between Valuation
Dates.
APPI-2
<PAGE>
EXHIBIT A
THE MILLBURN WORLD RESOURCE TRUST
SECOND AMENDED AND RESTATED
DECLARATION OF TRUST AND TRUST AGREEMENT
DATED AS OF MAY 1, 1996
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
SECOND AMENDED AND RESTATED
DECLARATION OF TRUST AND TRUST AGREEMENT
TABLE OF CONTENTS
PAGE
1. Declaration of Trust .......................................... TA-1
2. The Trustee ................................................... TA-2
(a) Term; Resignation ........................................ TA-2
(b) Powers ................................................... TA-2
(c) Compensation and Expenses of the Trustee ................. TA-2
(d) Indemnification .......................................... TA-2
(e) Successor Trustee ........................................ TA-3
(f) Liability of the Trustee ................................. TA-3
(g) Reliance by the Trustee and the Managing Owner; Advice
of Counsel ............................................ TA-4
(h) Not Part of Trust Estate ................................. TA-5
3. Principal Office .............................................. TA-5
4. Business ...................................................... TA-5
5. Term, Dissolution, Fiscal Year and Net Asset Value ............ TA-5
(a) Term ..................................................... TA-5
(b) Dissolution .............................................. TA-5
(c) Fiscal Year .............................................. TA-6
(d) Net Asset Value .......................................... TA-6
6. Net Worth of Managing Owner .............................. TA-6
7. Capital Contributions; Units; Managing Owner's Liability ...... TA-7
8. Allocation of Profits and Losses .............................. TA-7
(a) Capital Accounts and Allocations ......................... TA-7
(b) Allocation of Profit and Loss for Federal Income
Tax Purposes .......................................... TA-9
(c) Profit Share; New Profits Memo Account ................... TA-11
(d) Expenses; Interest Income ................................ TA-12
(e) Limited Liability of Unitholders ......................... TA-13
(f) Return of Capital Contributions .......................... TA-13
9. Management of the Trust ....................................... TA-14
(a) Authority of the Managing Owner .......................... TA-14
(b) Notification of Basic Changes ............................ TA-14
(c) Certain Agreements ....................................... TA-14
(d) Fiduciary Duties ......................................... TA-14
(e) Brokerage Arrangements ................................... TA-15
(f) Prohibited Activities .................................... TA-15
(g) Freedom of Action ........................................ TA-15
10. Audits and Reports to Unitholders ............................. TA-15
11. Assignability of Units ........................................ TA-17
12. Redemptions ................................................... TA-17
13. Offering of Units ............................................. TA-19
14. Special Power of Attorney ..................................... TA-19
15. Withdrawal of a Unitholder .................................... TA-20
16. Benefit Plan Investors ........................................ TA-20
17. Standard of Liability; Indemnification ........................ TA-21
(a) Standard of Liability for the Managing Owner ............. TA-21
(b) Indemnification of the Managing Owner by the Trust ....... TA-21
(c) Indemnification by the Unitholders ....................... TA-22
TA-i
<PAGE>
PAGE
18. Amendments; Meetings .......................................... TA-22
(a) Amendments with Consent of the Managing Owner ............ TA-22
(b) Amendments and Actions without Consent of the
Managing Owner ........................................ TA-23
(c) Meetings; Other .......................................... TA-23
(d) Consent by Trustee ....................................... TA-24
19. Governing Law ................................................. TA-24
20. Miscellaneous ................................................. TA-24
(a) Notices .................................................. TA-24
(b) Binding Effect ........................................... TA-24
(c) Captions ................................................. TA-24
21. Certain Definitions ........................................... TA-24
22. No Legal Title to Trust Estate ................................ TA-26
23. Legal Title ................................................... TA-26
24. Creditors ..................................................... TA-26
Testimonium
Signatures
Schedule A -- Certificate of Trust ............................ TA-28
Annex -- Request for Redemption ............................... RR-1
TA-ii
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
SECOND AMENDED AND RESTATED
DECLARATION OF TRUST AND TRUST AGREEMENT
This SECOND AMENDED AND RESTATED DECLARATION OF TRUST AND TRUST
AGREEMENT ("Declaration of Trust") of THE MILLBURN WORLD RESOURCE TRUST (the
"Trust") is made and entered into as of this 1st day of May, 1996 by and
among MILLBURN RIDGEFIELD CORPORATION, a Delaware corporation, as managing
owner (the "Managing Owner"), WILMINGTON TRUST COMPANY, a Delaware banking
corporation, as trustee (the "Trustee"), and each other party who shall
execute a counterpart of this Declaration of Trust as an owner of a unit
("Unit") of beneficial interest of the Trust or who becomes a party to this
Declaration 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 form and continue the Trust
for the business and purpose of issuing Units, the capital of which shall be
used to engage in speculative trading, buying, selling or otherwise
acquiring, holding or disposing of futures and forward contracts on
currencies, interest rate, energy and agricultural products, metals and stock
indices, hybrid instruments, swaps, any rights pertaining thereto and any
options thereon or on physical commodities, with the objective of capital
appreciation through speculative trading, and to amend and restate the
original Declaration of Trust and Trust Agreement 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 of Trust shall constitute the governing instrument of the Trust.
The Trustee has filed the Certificate of Trust required by Section 3810 of
the Delaware Business Trust Act, 12 DEL. C. Section 3801, ET SEQ., as amended
from time to time (the "Act").
Nothing in this Declaration 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.
TA-1
<PAGE>
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 sixty (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 sixty
(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, 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 its performance of any of the foregoing. The Managing
Owner shall keep the Trustee informed of any actions taken by the Managing
Owner with respect to the Trust that affect the rights, obligations or
liabilities of the Trustee hereunder or under the Act.
(c) COMPENSATION AND EXPENSES OF THE TRUSTEE. The Trustee shall be
entitled to receive from the Trust or, if the assets of the Trust are
insufficient, from the Managing Owner reasonable compensation for its
services hereunder in accordance with the Trustee's standard fee schedule,
and shall be entitled to be reimbursed by the Trust or, if the assets of the
Trust are insufficient, by the Managing Owner for reasonable out-of-pocket
expenses incurred by the Trustee in the performance of its duties hereunder,
including without limitation, the reasonable compensation, out-of-pocket
expenses and disbursements of counsel and such other agents as the Trustee
may employ in connection with the exercise and performance of its rights and
duties hereunder, to the extent attributable to the Trust.
(d) INDEMNIFICATION. The Managing Owner agrees, whether or not
any of the transactions contemplated hereby shall be consummated, to assume
liability for, and 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 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
TA-2
<PAGE>
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 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 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 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 own 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 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 or any additional selling
agent;
(v) no provision of this Declaration 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 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 of Trust, or
to institute, conduct or defend any litigation under this Declaration
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
TA-3
<PAGE>
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 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 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 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 the Managing
Owner, 600 Steamboat Road, Greenwich, Connecticut 06830; telephone: (203)
625-7554. The Trustee is located at Rodney Square
TA-4
<PAGE>
North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration. The Trustee shall receive service of process
on the Trust in the State of Delaware at the foregoing address. In the event
Wilmington Trust Company resigns or is removed as the Trustee, the Trustee of
the Trust in the State of Delaware shall be the successor Trustee.
4. BUSINESS.
The Trust's business and purpose is to 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, and to engage in all activities necessary, convenient or
incidental thereto. 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 purposes.
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, 2025; (2) receipt by the
Managing Owner of an approval to dissolve the Trust at a specified time by
Unitholders owning Units representing more than fifty percent (50%) of the
total number of outstanding Units then owned by Unitholders, 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) 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 a managing owner unless, (i) at the
time of such event there is at least one remaining managing owner of the
Trust who carries on the business of the Trust (and each remaining managing
owner of the Trust is hereby authorized to carry on the business of the Trust
in such an event), or (ii) within 90 days after such event Unitholders owning
at least fifty percent (50%) of the total number of outstanding Units then
owned by 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 pursuant to the terms of Sections 18(b) and
18(c); (4) a decline in the aggregate Net Assets of the Trust to less than
$250,000; (5) a decline in the Net Asset Value per Unit to $250 or less; (6)
dissolution of the Trust pursuant hereto; or (7) any other event which shall
make it unlawful for the existence of the Trust to be continued or shall
require termination 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 dissolution, the New Profits Memo Account will be added to the
Managing Owner's capital account.
Upon the dissolution of the Trust, the Managing Owner (or, if the
Managing Owner has withdrawn, such person as the Unitholders may, by majority
vote of the Units, select) 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 creditors who are Unitholders);
(ii) SECOND TO 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
TA-5
<PAGE>
(iii) THIRD 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.
(d) NET ASSET VALUE. The Net Assets of the Trust are its assets
less its liabilities determined in accordance with generally accepted
accounting principles. If a futures, forward or other contract 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 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. The Trust's accrued
liability to the Managing Owner for reimbursement of its organizational and
initial offering costs will not reduce Net Asset Value for any purpose other
than, and only if and to the extent required for, financial reporting
purposes; rather, reimbursement payments will reduce Net Asset Value only as
actually paid out in twenty-four (24) monthly installments (unless such
period is extended as described in Section 8(d) hereof).
The Brokerage Fee shall be charged (other than to the Managing
Owner's capital account) at the basic rate of 9.0% per annum of the average
month-end Net Assets of the Trust (prior to reduction for accrued but unpaid
fees) allocable to the Unitholders (but not to the Managing Owner's capital
account), and additional Units shall be allocated to Unitholders subject to a
7.0% per annum Brokerage Fee as described in Section 8(a)(3) hereof.
Brokerage Fees, accrued as well as paid, shall reduce Net Asset Value.
Accrued Profit Shares (as described in Section 8 hereof) shall
reduce Net Asset Value, even though such Profit Shares may never, in fact, be
paid. Accrued Profit Shares shall be calculated on a basis which reflects any
aggregate New Trading Profit (as defined), accrued equally in respect of all
outstanding Units (except as necessary to reflect the difference in the
Brokerage Fees charged certain Unitholders) but not in respect of the
Managing Owner's capital account or the New Profits Memo Account (see Section
8(a)).
6. NET WORTH OF MANAGING OWNER.
The Managing Owner agrees that at all times so long as it remains
managing owner of the Trust, it will maintain its Net Worth at an amount not
less than the greater of $50,000 or 5% of the total contributions to the
Trust and to all other entities of which it is managing owner or general
partner. 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 is 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) 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.
(b) 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. The Managing Owner's general liability interest shall be accounted for
on a Unit-equivalent basis, but may receive allocations on an aggregate basis so
as to simplify the Trust's accounting. The Managing Owner's general liability
interest
TA-6
<PAGE>
will not be subject to full Brokerage Fees, but rather only to actual
execution costs, nor shall it be subject to Profit Shares.
(c) No certificates or other evidences of beneficial ownership of
the Units will be issued.
(d) 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 of Trust.
The Unitholders' respective capital contributions to the Trust shall
be as shown on the books and records of the Trust.
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 a 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 the lesser of (i) 1% of the total capital
contributions to the Trust (including the Managing Owner's contributions) or
(ii) $500,000, but in no event shall the Managing Owner invest less than 0.2%
of the total capital contributions to the Trust. The Managing Owner may
withdraw any interest it may have in excess of such requirement as of any
month-end on the same terms as any Unitholder.
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.
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. In addition, a New
Profits Memo Account shall be established on the books of the Trust for
bookkeeping purposes only. The initial balance of each capital account shall
be the amount contributed to the Trust in respect of a Unit or by the
Managing Owner. As of the close of business (as determined by the Managing
Owner) on the last day of each month, the following determinations and
allocations shall be made:
(1) The Net Assets of the Trust will be determined without regard
to Brokerage Fees or Profit Shares.
(2) Any increase or decrease in the Trust's Net Assets (as
determined pursuant to Paragraph 1 above), as compared to the last such
determination of Net Assets, shall then be credited or charged equally to the
capital account of each Unit and PRO RATA to the capital account of the
Managing Owner and to the New Profits Memo Account.
TA-7
<PAGE>
(3) Brokerage Fees shall be charged equally to all Units at the
rate of 0.75 of 1% of the month-end Trust assets (prior to reduction for any
accrued but unpaid fees or Profit Shares) allocable to such Units, not
including the Managing Owner's capital account or the New Profits Memo
Account (a 9.0% annual rate). Such Brokerage Fees shall be paid out to the
Managing Owner; provided that in respect of Units which are subject to
Brokerage Fees of 7.0% per annum of the average month-end Trust assets
allocable to such Units, the difference between the 0.75 of 1% Brokerage Fees
charged and the 0.583 of 1% Brokerage Fee due as of the end of each month
shall not be paid out to the Managing Owner but shall instead be credited to
a Suspense Account which shall not be included in the Net Asset Value of the
Units, and shall be used solely as a means of efficiently accounting for the
reduction in the Brokerage Fee payable by such Unitholders while maintaining
a uniform Net Asset Value per Unit.
Brokerage Fees will not be charged to (or calculated on a basis of
average month-end Trust assets which include) either the Managing Owner's
capital account or the New Profits Memo Account. The capital account of the
Managing Owner and the New Profits Memo Account shall be charged for their
respective PRO RATA shares of the out-of-pocket brokerage commissions paid by
the Managing Owner on behalf of the Trust, but not for any Brokerage Fees.
(4) The Managing Owner's Profit Share will equal 17.5% of any New
Trading Profit (as defined in Section 8(c)). As of the end of each month,
the amount of any such Profit Share shall be calculated and shall reduce the
Net Asset Value per Unit. The amount of any such Profit Share shall be
deducted from each Unit's capital account and credited to the New Profits
Memo Account, as a bookkeeping entry only, as of the end of each calendar
quarter. The Managing Owner's capital account and the New Profits Memo
Account will not be subject to the Profit Share.
(5) The amounts credited to the Suspense Account as provided in
Paragraph 3 above as of the end of any month shall be reduced by the 17.5%
Profit Share if there is an accrued Profit Share in respect of the Units as
of the month-end that such amounts are so credited. If such month-end is
also a quarter-end, the amount of such Profit Share shall be credited to the
New Profits Memo Account, as a bookkeeping entry only, and the remainder of
the Suspense Account shall be reinvested in Units as of such month-end, at
Net Asset Value, for the benefit of the appropriate Unitholders. If such
month-end is not also a quarter-end, the Profit Share accrual, as well as the
remainder of the Suspense Account, shall be reinvested in Units as of such
month-end, at Net Asset Value, for the benefit of the appropriate Unitholders.
(6) The Managing Owner's Profit Share with respect to Units
redeemed as of a month-end which is not the end of a calendar quarter shall
be computed as though such month-end were the end of a calendar quarter, and
the amount of the Profit Share so computed shall be deducted from the
redeemed Units' capital accounts and credited to the New Profits Memo
Account, as a bookkeeping entry only.
(7) When Units subject to the 7.0% per annum Brokerage Fee are
redeemed: (i) if a Profit Share is then accrued, the difference between the
9.0% per annum and 7.0% per annum Brokerage Fee attributable to such Units
for the month-end of redemption shall be assessed a 17.5% Profit Share which
shall be credited to the New Profits Memo Account, as a bookkeeping entry
only; and (ii) the Profit Share, if any, due in respect of such Units shall
be calculated on the same basis as in respect of all other Units, as set
forth in Paragraph 4 above, and credited to the New Profits Memo Account, as
a bookkeeping entry only.
If no Profit Share is accrued as of the date of redemption, then no
New Profits Memo Account credits shall be made in respect of any portion of
the Units redeemed.
(8) The amount of any distributions made in respect of a Unit as of
the end of such month and any amount (not reduced by any early redemption
charges) paid upon partial redemption of Units or upon withdrawal of the
Managing Owner's interest as of the end of such month shall be charged against
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the capital account of such Unit or of the Managing Owner. The capital
account of any Unit fully redeemed shall be eliminated.
(9) Brokerage Fees shall be treated as if paid or payable to a
third party and shall not be credited to the capital account of the general
liability interest held by the Managing Owner.
(10) Persons who make a net capital investment in the Trust,
including both initial and subsequent investments and without regard to
profits or losses, of $1,000,000 or more shall be entitled to pay Brokerage
Fees of 7.0% per annum of the average month-end assets of their respective
capital accounts; provided that, if after any redemption of Units, the
aggregate Net Asset Value of an investor's Units is less than $1,000,000,
such Unitholder will no longer be eligible for 7.0% per annum, as opposed to
a 9.0% Brokerage Fee. Should such person subsequently make an additional
subscription, if the amount of such subsequent subscription plus such
Unitholder's remaining net capital contributions (subscriptions less
redemptions, but assuming redemptions to be made first from accumulated net
profits, not capital contributions) equals $1,000,000 or more, reduced
Brokerage Fees will again apply.
Reduced Brokerage Fees apply to a Unitholder's entire capital
account, not just that part of such capital account corresponding to capital
contributions of $1,000,000 or more.
(b) ALLOCATION OF PROFIT AND LOSS FOR FEDERAL INCOME TAX PURPOSES.
Each of the parties hereto, by entering into this Declaration of Trust, (i)
expresses its intention that the Units will qualify under applicable tax law
as though the Units were interests in a partnership which holds the Trust
Estate for their benefit, (ii) agrees that it will file its own federal,
state and local income, franchise and other tax returns in a manner that is
consistent with the treatment of the Trust as though it were a partnership in
which each of the Unitholders is a partner and (iii) agrees to use reasonable
efforts to notify the Managing Owner promptly upon a receipt of any notice
from any taxing authority having jurisdiction over such Unitholder with
respect to the treatment of the Units as anything other than interests in a
partnership. As of the end of each fiscal year, income and expense and
capital gain or loss of the Trust shall be allocated among the Unitholders
pursuant to the following provisions of this Section 8(b) for federal income
tax purposes. Such allocations shall be PRO RATA from short-term capital
gain or loss and long-term capital gain or loss. For purposes of this
Section 8(b), capital gain and capital loss shall be allocated separately and
not netted.
(1) Items of ordinary income and expenses attributable to the Trust
(other than Brokerage Fees, which shall be allocated as set forth in Section
8(b)(2)), shall be allocated equally among all Units of the Trust outstanding
as of the end of each calendar month (including Units being then redeemed),
and PRO RATA to the account of the Managing Owner.
(2) Ordinary deductions attributable to Brokerage Fees paid to the
Managing Owner shall be allocated to each Unitholder and the Managing Owner
in the same manner as such Brokerage Fees are allocated for financial
purposes pursuant to Section 8(a).
(3) Capital Gain or Loss (as defined in Section 8(b)(3)(H)) shall
be allocated as follows:
(A) 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 net amount paid to
the Trust for each Unit and the amount contributed to the Trust by the
Managing Owner. Amounts reinvested in Units from the Suspense
Account, as described in Section 8(a) hereof, shall not increase the
aggregate tax basis of the affected Unitholders in their Units; rather
the Units acquired upon reinvestment will have an initial tax basis of
$0. As of the end of each of the first twenty-four full calendar
months after the Trust begins operations (or, if longer, for as long
as the reimbursement payments continue), the balance of each Unit's
tax account shall be reduced by such Unit's allocable share of the
amount payable to the Managing Owner as reimbursement for the
organizational and
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initial offering costs incurred in connection with the Trust, as
described in the current prospectus of the Trust (the "Prospectus"),
provided that no tax basis account shall be reduced below $0. The
adjustment to reflect the reimbursement of organizational and
initial offering costs shall be made prior to the allocations of capital
gain or loss (and shall be taken into account in making such allocations).
As of the end of each fiscal year:
(i) Each tax account for the Units and the Managing Owner
shall be increased by the amount of income or gain allocated to
such tax account pursuant to Sections 8(b)(1), 8(b)(3)(B) and
8(b)(3)(D).
(ii) Each tax account for the Units shall be decreased by
the amount of expense or loss allocated to each Unit pursuant to
Sections 8(b)(1), 8(b)(2) and 8(b)(3)(F) and by the amount of any
distributions paid out with respect to such Units other than upon
redemption.
(iii) When a Unit is redeemed, the tax account
attributable to such Unit (determined after making all
allocations described in this Section 8(b)) shall be eliminated.
(B) The Managing Owner shall be allocated Capital Gain, if any, up to
the amount of any bookkeeping credit to the New Profits Memo Account,
including any credits made as of the end of the fiscal year of allocation.
To the extent any such tax allocation is made, the balance in the New
Profits Memo Account shall be reduced, and the balance in the Managing
Owner's capital account, for financial purposes, correspondingly increased.
(C) Each Unitholder who redeems a Unit during a fiscal year
(including Units redeemed as of the end of the last day of such fiscal
year) shall be allocated Capital Gain, if any, up to the amount of the
excess, if any, of the amount received in respect of the Units so redeemed
over the sum of the tax accounts (determined after making the allocation
described in Sections 8(b)(1) and 8(b)(2), but prior to making the
allocations described in this Section 8(b)(3)(C)) allocable to such Units
(an "Excess"). In the event that the aggregate amount of Capital Gain
available to be allocated pursuant to this Section 8(b)(3)(C) is less than
the aggregate amount of Capital Gain required to be so allocated, the
aggregate amount of available Capital Gain shall be allocated among all
such Unitholders in the ratio which each such Unitholder's Excess bears to
the aggregate Excess of all such Unitholders.
(D) Capital Gain remaining after the allocation described in Section
8(b)(3)(C) shall be allocated among all Unitholders who hold Units
outstanding as of the end of the applicable fiscal year (other than Units
redeemed as of the end of the last day of such fiscal year) whose capital
accounts with respect to such Units are in excess of the related tax
accounts (determined after making the allocations described in Sections
8(b)(1) and 8(b)(2)) allocable to such Units, in the ratio that each such
Unitholder's Excess bears to the aggregate Excess of all such Unitholders.
Capital Gain remaining after the allocation described in the preceding
sentence shall be allocated among all Unitholders described in said
sentence in proportion to their holdings of such Units.
(E) Each Unitholder who redeems a Unit during a fiscal year
(including Units redeemed as of the end of the last day of such fiscal
year) shall be allocated Capital Loss, if any, up to the amount of the sum
of the excess of the tax accounts (determined after making the allocations
described in Sections 8(b)(1) and 8(b)(2), but prior to making the
allocations described in this Section 8(b)(3)(E)) allocable to the Units so
redeemed over the amount received in respect of such Units (a "Negative
Excess"). In the event that the aggregate amount of available Capital Loss
required to be allocated pursuant to this Section 8(b)(3)(E) is less than
the aggregate amount required to be so allocated, the aggregate amount of
available Capital Loss shall be allocated among
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all such Unitholders in the ratio that each such Unitholder's Negative
Excess bears to the aggregate Negative Excess of all such Unitholders.
(F) Capital Loss remaining after the allocation described in Section
8(b)(3)(E) shall be allocated among all Unitholders who hold Units
outstanding as of the end of the applicable fiscal year (other than Units
redeemed as of the end of the last day of such fiscal year) whose tax
accounts with respect to such Units are in excess of their capital accounts
(determined after making the allocations described in Sections 8(b)(1) and
8(b)(2) with respect to such Units, in the ratio that each such
Unitholder's Negative Excess bears to the aggregate Negative Excess of all
such Unitholders. Capital Loss remaining after the allocation described in
the preceding sentence shall be allocated among all Unitholders described
in such sentence in proportion to their holdings of such Units.
(G) For purposes of this Section 8(b), the Managing Owner's interest
in the Trust will be treated as if it were a single Unit.
(H) For purposes of this Section 8(b), "Capital Gain" or "Capital
Loss" shall mean gain or loss characterized as gain or loss from the sale
or exchange of a capital asset by the Code, including, but not limited to,
gain or loss required to be taken into account pursuant to Section 1256
thereof.
(4) The allocation of profit and loss for federal income tax
purposes set forth herein allocates taxable profit and loss among the
Unitholders in the ratio and to the extent that financial profit and loss are
allocated to such Unitholders and so as to eliminate, to the maximum
practicable extent, any disparity between a Unit's capital account and its
tax account, consistent with principles set forth in Section 704 of the Code,
including without limitation a "Qualified Income Offset."
(5) The allocations of profit and loss to the Unitholders in
respect of their Units shall not exceed the allocations permitted under
Subchapter K of the Code, as determined by the Managing Owner, whose
determination shall be binding.
(c) PROFIT SHARE; NEW PROFITS MEMO ACCOUNT. The Managing Owner's
Profit Share will equal 17.5% of any cumulative trading profits ("New Trading
Profit"), not including interest income, after deduction of all accrued but
unpaid fees and expenses other than the Profit Share itself ("Trading
Profit"), over the highest level of such cumulative Trading Profit as of any
previous calendar quarter-end, or $0, if higher (the "Profit Share High Water
Mark"). Profit Shares will be calculated on Units subject to a 7.0% per annum
as well as on those subject to a 9.0% per annum Brokerage Fee in the manner
described in Section 8(a) hereof. Trading Profit does not include profits
allocable to the Managing Owner's capital account or to the New Profits Memo
Account.
New Trading Profit is not reduced by organizational and initial
offering cost reimbursement payments, but is reduced by routine
administrative expenses.
If Units are redeemed when there is a loss carryforward for Profit
Share calculation purposes (I.E., the current level of cumulative Trading
Profit is below the Profit Share High Water Mark), such loss carryforward
will be reduced in proportion to the proportion of the total outstanding
Units redeemed.
Neither any Unitholder nor the Managing Owner shall have any
interest in the New Profits Memo Account, except as described in Section 5(b)
hereof. However, as described in Section 8(b)(3)(B), bookkeeping entries in
the New Profits Memo Account shall be reduced, and the Managing Owner's
capital account correspondingly increased to the extent that priority
allocations of Capital Gain are made to the Managing Owner pursuant to said
Section 8(b)(3)(B).
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In the event that the Net Asset Value per Unit is less than $400 as
of any calendar month-end, the balance of any bookkeeping entries to the New
Profits Memo Account then outstanding will be cancelled, and an amount equal
to such balance shall be allocated equally among all outstanding Units, but
not to the Managing Owner's capital account.
(d) EXPENSES; INTEREST INCOME. The Managing Owner is being
reimbursed for organizational and initial offering costs (excluding selling
commissions), in the amount of $600,000, incurred in connection with the
formation of the Trust and the initial offering of the Units in 24 equal
monthly installments ending September 30, 1997.
The Trust shall bear all of any taxes applicable to it. The Trust
shall pay the Managing Owner a Brokerage Fee equal to 0.75 of 1% (a 9.0%
annual rate) of the month-end assets of the Trust (prior to reduction for any
accrued but unpaid Brokerage Fees and Profit Shares), not including the
Managing Owner's capital account; provided that in the case of subscribers
who invest $1,000,000 or more in the Trust, such Brokerage Fee shall be
reduced to 0.583 of 1% (a 7.0% annual fee) of such month-end assets of the
Trust attributable to each such Unitholder's capital account, as contemplated
by Section 8(a)(10) above.
The Managing Owner shall pay all routine charges incidental to
trading (including, without limitation, brokerage commissions, exchange,
clearinghouse, regulatory, floor brokerage and "give-up" fees). Any
extraordinary charges incidental to trading (for example, insurance or
delivery charges) will be paid by the Trust.
The Trust will pay its ongoing administrative expenses, including
the fees of the Trustee. All of the expenses which are for the account of
the Trust shall be billed directly to the Trust. The Trust shall bear all of
its own legal, accounting and administrative expenses, but none of the
Managing Owner's "overhead" expenses incurred in connection with the
administration of the Trust (including, but not limited to, salaries and
rent) shall be charged to the Trust.
Appropriate reserves may be created, accrued and charged against the
Net Assets for contingent liabilities, if any, as of the date any such
contingent liability becomes known to the Managing Owner. Such reserves
shall reduce Net Asset Value for all purposes.
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.
In the event that the Trust shall be subject to taxation by any
state or local or by any foreign taxing authority, the Trust shall be
obligated to pay such taxes to such jurisdiction. In the event that the
Trust shall be required to make payments to any federal, state or local or
any foreign taxing authority in respect of any Unitholder's allocable share
of the Trust's income, the amount of such taxes shall be considered a loan by
the Trust to such Unitholder, and such Unitholder shall be liable for, and
shall pay to the Trust, any taxes so required to be withheld and paid over by
the Trust within ten (10) days after the Managing Owner's request therefor.
Such Unitholder shall also be liable for (and the Managing Owner shall be
entitled to redeem Units of such Unitholder as necessary to satisfy) interest
on the amount of taxes paid over by the Trust to the Internal Revenue Service
("IRS") or other taxing authority, from the date of the Managing Owner's
request for payment to the date of payment or redemption, as the case may be,
at the rate of two percent (2%) per annum over the prime rate charged from
time to time by Chemical Bank, New York, New York. Any amount payable by the
Trust to such Unitholder shall be reduced by any obligations owed to the
Trust by the Unitholder, including, without limitation, the amount of any
taxes required to be paid over by the Trust to the IRS or other taxing
authority and interest thereon as aforesaid. Amounts, if any, deducted by
the Trust from any actual distribution or redemption payment to such
Unitholder shall be treated as an actual distribution to such Unitholder for
all purposes of this Declaration of Trust.
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The Trust will receive all interest income earned on its assets.
(e) LIMITED LIABILITY OF UNITHOLDERS. Each Unit, when purchased
in accordance with this Declaration of Trust, shall, except as otherwise
provided by law, be fully-paid and nonassessable. Any provisions of this
Declaration 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 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.
(f) RETURN OF CAPITAL CONTRIBUTIONS. No Unitholder or subsequent
assignee shall have any right to demand the return of his or her 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 of Trust.
The Managing Owner, to the exclusion of all other Unitholders, shall
control, conduct and manage the business of the Trust. The Managing Owner
shall have sole discretion in determining what distributions of profits and
income, if any, shall be made to the Unitholders (subject to the allocation
provisions hereof), shall execute various documents on behalf of the Trust
and the Unitholders pursuant to powers of attorney and shall supervise the
liquidation of the Trust if an event causing dissolution of the Trust occurs.
The Managing Owner may, in furtherance of the business of the Trust,
cause the Trust to buy, sell, hold or otherwise acquire or dispose of
commodities, futures contracts and options 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 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.
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.
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(b) NOTIFICATION OF BASIC CHANGES. The Managing Owner shall
send to all Unitholders and assignees prior notice of any change in the basic
investment approach of the Trust and of any increase in its charges. Such
notifications shall contain a description of Unitholder's voting and
redemption rights and a description of any material effect of such change or
increase. The Managing Owner is hereby specifically authorized to enter
into, on behalf of the Trust, the Customer Agreements, the Escrow Agreement,
the Selling Agreements and the Additional Selling Agent Agreements as
described in the Prospectus.
(c) CERTAIN AGREEMENTS. 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 any Unitholder other than the Managing
Owner, notwithstanding any other provisions of this Declaration of Trust, the
Act or any applicable law, rule or regulations.
(d) 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. 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 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. The Managing Owner will take no actions with respect
to the property of the Trust which do not benefit the Trust, and the Managing
Owner will not use the assets of the Trust as compensating balances for the
Managing Owner's exclusive benefit.
(e) BROKERAGE ARRANGEMENTS. The Trust's brokerage
arrangements shall be non-exclusive, and the brokerage commissions paid by
the Trust shall be competitive. The Trust shall seek the best price and
services available for its commodity transactions.
The Brokerage Fees paid by the Trust may not exceed the amount
permitted under applicable North American Securities Administrators
Association, Inc. Guidelines for the Registration of Commodity Pool Programs
("Blue Sky Guidelines") in effect as of the date hereof.
(f) PROHIBITED ACTIVITIES. The Trust shall make no loans to
any party, and the funds of the Trust will not be commingled with the funds
of any other person or entity (deposit of funds with a commodity broker,
clearinghouse or forward dealer or entering into joint ventures or
partnerships shall not be deemed to constitute "commingling" for these
purposes). The Managing Owner shall make no loans to the Trust.
The Trust shall not employ the trading technique commonly known as
"pyramiding." The Managing Owner 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."
No person or entity may receive, directly or indirectly, any
advisory, management or incentive fees, 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 per-trade commodity brokerage commissions paid by the Trust; no broker
may pay, directly or indirectly, rebates or give-ups to any trading advisor
or manager or to the Managing Owner or any of their respective affiliates;
and such prohibitions may not be circumvented by any reciprocal business
arrangements.
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The maximum period covered by any contract entered into by the
Trust, except for the various provisions of the Selling Agreement which
survive, shall not exceed one year. Any material change in the basic
investment policies or structure of the Trust shall require the approval of
Unitholders owning Units representing more than fifty percent (50%) of the
total outstanding Units owned by Unitholders as of a record date established
for a vote thereon. Any agreements between the Trust and the Managing Owner
or any affiliate of the Managing Owner shall be terminable by the Trust upon
no more than 60 days' written notice.
(g) FREEDOM OF ACTION. The Managing Owner is engaged, and may in
the future engage, into other business activities and shall not be required
to refrain from any other activity nor forego any profits from any such
activity, whether or not in competition with the Trust. The Trustee and the
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 the conduct of the Trust's business and affairs.
10. AUDITS AND REPORTS TO UNITHOLDERS.
The Trust's books shall be audited annually by an independent
certified public accountant. The Trust will use its best efforts to cause
each Unitholder to receive (i) within 90, but in no event later than 120
days, after the close of each fiscal year certified financial statements for
the fiscal year then ended, (ii) within 90 days of the end of each fiscal
year (but in no event later than March 15 of each year) such tax information
as is necessary for a Unitholder to complete his or her federal income tax
return and (iii) such other annual and monthly information as the Commodity
Futures Trading Commission may by regulation require. Unitholders or their
duly authorized representatives may inspect the books and records of the
Trust during normal business hours upon reasonable written notice to the
Managing Owner and obtain copies of such records upon payment of reasonable
reproduction costs; provided, however, that upon request by the Managing
Owner, the requesting Unitholder shall represent that the inspection and/or
copies of such records will not be used for commercial purposes unrelated to
such Unitholder's interest as an investor in the Trust.
The Managing Owner shall calculate the Net Asset Value per Unit on a
monthly basis and sell and redeem Units at Net Asset Value.
The Brokerage Fees and Profit Share may not be increased without
prior written notice to all Unitholders within sufficient time for the
exercise of their redemption rights prior to any such increase becoming
effective. The Brokerage Fees and the Profit Share may not be increased
during any period when a redemption charge is in effect with respect to any
Units.
The Managing Owner shall notify the Unitholders of (i) changes to
the trading method of the Managing Owner which the Managing Owner believes to
be material, (ii) changes in Brokerage Fees, Profit Share 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 Managing Owner, not 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
are in good faith and by appropriate legal
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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 (6) 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 (6) 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 forward
trading arrangements for the Trust in an attempt to determine whether such
arrangements are competitive with those of other comparable pools in light of
the circumstances.
11. ASSIGNABILITY OF UNITS.
Each Unitholder expressly agrees that he or she will not assign,
transfer or dispose of, by gift or otherwise, any of his or her Units or any
part or all of his or her right, title and interest in the capital or profits
of the Trust in violation of any applicable federal or state securities laws
or without giving written notice to the Managing Owner. No assignment,
transfer or disposition by an assignee of Units or of any part of his or her
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 receives the written notice of the assignment; the Managing
Owner shall not be required to give any assignee any rights hereunder prior
to receipt of such notice. The Managing Owner may, in its sole discretion,
waive any such notice. No such assignee, except with the consent of the
Managing Owner (such consent to be withheld only in the event that such
assignment could give rise to negative legal or tax consequences), 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. 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 his
or her assignor would otherwise have been entitled. No assignment, transfer
or disposition of Units shall be effective against the Trust, the Trustee or
the Managing Owner until the first business day of the calendar month
following the month in which the Managing Owner receives notice of such
assignment, transfer or disposition. The Managing Owner will send written
confirmation to both the transferors and transferees of Units that the
transfers in question have been duly recorded on the Trust's books and
records.
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 of
Trust) or any assignee of Units of whom the
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Managing Owner has received written notice, may redeem all or any of his or
her Units, effective as of the close of business (as determined by the
Managing Owner) on the last business day of any calendar month, provided that
(i) all liabilities, contingent or otherwise, of the Trust (including the
Trust's allocable share of the liabilities, contingent or otherwise, of any
entities in which the Trust invests), 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 and (ii) the Managing Owner
shall have received a redemption request at least ten business days prior to
the date of redemption, or such later time as shall be acceptable to the
Managing Owner. Unitholders who redeem Units on or prior to the end of the
first and second successive six-month periods after such Units are sold will
be assessed redemption charges of 4% and 3%, respectively (3% and 2%,
respectively, in the case of Unitholders who have invested $1,000,000 or more
in the Trust), of their Units' Net Asset Value as of the date of redemption.
Units purchased by the same Unitholder on different closing dates will be
treated on a "first-in, first-out" basis for purposes of calculating the
foregoing six-month periods. Additional Units issued to Unitholders subject
to a 7.0% rather than a 9.0% annual Brokerage Fee will be deemed all to have
been issued as of the date of the longest outstanding Units held by a
particular Unitholder. All redemption charges will be paid to the Managing
Owner.
Any number of whole Units may be redeemed. Fractional Units may
only be redeemed upon redemption of a Unitholder's entire interest in the
Trust.
Redemption requests must be in writing unless the Managing Owner
determines otherwise.
The Managing Owner may declare additional redemption dates upon
notice to the Unitholders as well as to those assignees of whom the Managing
Owner has received notice as described above.
Redemption payments will be made (by mailing a check or crediting a
customer securities account) within 15 business days after the date of
redemption, except that under special circumstances, including, but not
limited to, inability to liquidate commodity positions or default or delay in
payments due 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 that proportionate part of the aggregate Net Asset Value
of the Trust represented by the sums which are the subject of such default or
delay.
All redemptions will be made at Net Asset Value as of the effective
date of the redemption.
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 its 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, as amended ("ERISA"), or Section 4975 of the
Code with respect to any "employee benefit plan" as defined in and subject to
ERISA or with respect to any "plan" as defined in Section 4975 of the Code.
If at the close of business (as determined by the Managing Owner) on
any business day, the Net Asset Value per Unit has decreased to $500 or less,
after adding back all distributions, the Trust will liquidate all open positions
as expeditiously as possible and suspend trading. Within 10 business days after
any such 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 date of 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, 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 such Unitholder's or assignee's interest (only entire, not
partial, interests may be so redeemed unless otherwise determined by the
Managing Owner) in the Trust redeemed on such date. Upon redemption pursuant to
a Special Redemption Date, a Unitholder or any other assignee
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of whom the Managing Owner has received written notice, shall receive from
the Trust an amount equal to the Net Asset Value of such Unitholder's
interest, 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 on any Special
Redemption Date until the Managing Owner has received written notice (see
Section 11) of the assignment, transfer or disposition under which the
assignee claims an interest in the Units to be redeemed. If, after such
Special Redemption Date, the Net Assets of the Trust are at least $250,000
and the Net Asset Value per Unit is in excess of $250, the Trust may, in the
discretion of the Managing Owner, resume trading. If the preceding
conditions are not met or the Managing Owner determines not to resume
trading, the Trust will be terminated.
The Managing Owner may declare additional Special Redemption Dates
upon notice to the Unitholders and assignees of whom the Managing Owner has
received notice. In the event the Managing Owner does, in its discretion,
declare a Special Redemption Date, the Managing Owner may, in its notice of
such Special Redemption Date modify the circumstances under which the
Managing Owner is again required to declare a Special Redemption Date, as set
forth in the preceding paragraph.
13. OFFERING OF UNITS.
The Managing Owner on behalf of the Trust shall (i) cause to be
filed from time to time a Registration Statement or Registration Statements,
and such amendments thereto as the Managing Owner may deem advisable, with
the Securities and Exchange Commission for the registration and ongoing
public offering of Units, (ii) use its best efforts to qualify Units for sale
from time to time under the securities laws of such states of the United
States or other jurisdictions as the Managing Owner shall deem advisable and
(iii) take such action with respect to the matters described in (i) and (ii)
as the Managing Owner shall deem advisable or necessary.
The Managing Owner shall not accept any subscriptions for Units if
doing so would cause the Trust to be considered to hold "plan assets" for any
purpose of ERISA or Section 4975 of the Code with respect to any "employee
benefit plan" as defined in and subject to ERISA or with respect to any
"plan" as defined in Section 4975 of the Code.
All Units subscribed for upon transfer of funds from a subscriber's
account (or receipt of a check in the subscription amount) are issued subject
to the collection of the funds represented by such transfer (or check). In
the event that a transfer (or check) of a subscriber is not honored, the
Trust shall cancel the Units issued to such subscriber in consideration of
such dishonored transfer (or check); provided that the Managing Owner may
waive such cancellation upon receipt of what it believes to be reasonable
assurances that such transfer (or check) will be honored or replaced by
another transfer (or check) which will be honored within 10 business days of
original dishonor. Any losses or profits sustained by the Trust in
connection with its trading allocable to cancelled Units shall be deemed an
increase or decrease in the Net Assets of the Trust and allocated as
described above in Section 8, not a liability of the Managing Owner. Each
subscriber agrees to reimburse the Trust for any expense or losses incurred
in connection with any such cancellation of Units issued to him or her.
Units will be sold as of the first day of each calendar month
subject to the Managing Owner's discretion to hold intra-month closings and
to suspend or terminate the offering of Units.
Each Unitholder consents, by the act of purchasing Units, to the
Trust issuing to such Unitholder additional Units (in fractions calculated up
to three decimal places) in lieu of all interest earned on such Unitholder's
subscription while held pending investment in the Units.
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14. 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 his
or her true and lawful attorney-in-fact, in his or her name, place and stead,
to execute, acknowledge, swear to (and deliver as may be appropriate) on his
or her 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 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 the Managing Owner's authority to act as contemplated by this Section
14) and shall survive and shall not be affected by the subsequent incapacity,
disability or death of a Unitholder.
15. 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 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 the Trust's business is continued, the withdrawing Managing Owner shall
pay all expenses incurred as a result of its withdrawal.
The Managing Owner may not assign its general liability interest or
its obligation to direct the trading of the Trust without the consent of each
Unitholder. 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, his or her 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 expressly agrees that in the event of his or her death, he or she
waives on behalf of himself or herself and his or her estate, and directs the
legal representatives of his or her estate and any person interested therein
to waive, the furnishing of any inventory, accounting or appraisal of the
assets of the Trust and any right to an audit or examination of the books of
the Trust. Nothing in this Section 15 shall, however, waive any right given
elsewhere in this Declaration of Trust for a Unitholder to be informed of the
Net Asset Value of his or her Units, to receive periodic reports, audited
financial statements and other information from the Managing Owner or the
Trust or to redeem or transfer Units.
16. BENEFIT PLAN INVESTORS.
Each Unitholder 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 (a "Plan Fiduciary"), represents and
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warrants 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 by such Plan is consistent with such 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 entered into
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, either
of Prudential Securities Incorporated or PaineWebber Incorporated
(collectively, the "Principal Selling Agents"), any Additional Selling Agent,
the Trustee, Chemical Bank, N.A., 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 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
for 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, both of the Principal
Selling Agents, any Additional Selling Agent, the Trustee, Chemical Bank,
N.A. and any of their respective affiliates; and (iii) is qualified to make
such investment decision.
17. 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 17, the Managing
Owner and its Affiliates shall be indemnified by the Trust against any
losses, judgments, liabilities, expenses and amounts paid in settlement of
any claims sustained by them in connection with the Trust; provided that such
claims were not the result of negligence or misconduct on the part of the
Managing Owner or its Affiliates, and the Managing Owner, in good faith,
determined that such conduct was in the best interests of the Trust; and
provided further that Affiliates of the Managing Owner shall be entitled to
indemnification only for losses incurred by such Affiliates in performing the
duties of the Managing Owner and acting wholly within the scope of the
authority of the Managing Owner.
Notwithstanding anything to the contrary contained in the preceding
two paragraphs, the Managing Owner and its Affiliates and any persons acting
as selling agent for the Units shall not be indemnified for any losses,
liabilities or expenses arising from or out of an alleged violation of
federal or state securities laws unless (1) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular indemnitee and the court approves
indemnification of the litigation costs, or (2) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction
as to the particular indemnitee and the court approves indemnification of the
litigation costs, or (3) a court of competent jurisdiction approves a
settlement of the claims against a particular indemnitee and finds that
indemnification of the settlement and related costs should be made.
In any claim for indemnification for federal or state securities law
violations, the party seeking indemnification shall place before the court the
position of the Securities and Exchange Commission, the California Department of
Corporations, the Massachusetts Securities Division, the Pennsylvania
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Securities Commission, the Tennessee Securities Division, the Texas
Securities Board and any other state or applicable regulatory authority with
respect to the issue of indemnification for securities law violations.
The Trust shall not bear the cost of that portion of any insurance
which insures any party against any liability the indemnification of which is
herein prohibited.
For the purposes of this Section 17, 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 17(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 Blue Sky Guidelines as in effect on the date of this
Declaration of Trust.
In no event shall any indemnification permitted by this subsection
(b) of Section 17 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 17 subject a Unitholder to any liability in
excess of that contemplated by subsection (e) of Section 8 hereof.
(c) INDEMNIFICATION BY THE UNITHOLDERS. In the event that the
Trust is made a party to any claim, dispute or litigation or otherwise incurs
any loss or expense as a result of or in connection with any activities of a
Unitholder, obligations or liabilities unrelated to the business of the Trust
or as a result of or in connection with a transfer, assignment or other
disposition or an attempted transfer, assignment or other disposition by a
Unitholder or an assignee of its Units or of any part of its right, title and
interest in the capital or profits of the Trust in violation of this
Declaration of Trust, such Unitholder shall indemnify and reimburse the Trust
for all loss and expense incurred, including reasonable attorneys' fees.
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18. 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 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
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 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 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 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, and (viii) to make any amendment
that is appropriate or necessary, in the opinion of the Managing Owner, 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 Plan.
(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 18, upon the affirmative vote (which may be in person or by
proxy) of more than fifty percent (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 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
18, extending the term of the Trust, or materially changing the Trust's basic
investment policies or structure; in addition, reduction of the capital
account of any Unitholder or assignee or modification of the percentage of
profits, losses or distributions to which a Unitholder or an assignee is
entitled hereunder shall not be effected by any amendment or supplement to
this Declaration 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 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
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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 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 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 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 18(b)(ii)-(vi). Notwithstanding anything to the contrary
contained in this Declaration of Trust, the Trustee may immediately resign
if, in its sole discretion, the Trustee determines that the Unitholders'
actions pursuant to subsections 18(b)(i)-(vi) would adversely affect the
Trustee in any manner.
19. GOVERNING LAW.
The validity and construction of this Declaration 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 the foregoing choice of law
shall not restrict the application of any state's securities laws to the sale
of Units to its residents or within such state.
20. MISCELLANEOUS.
(a) NOTICES. All notices under this Declaration 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 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 of Trust nor the effect of any of its
provisions. Any reference to "persons" in this Declaration of Trust shall
also be deemed to include entities, unless the context otherwise requires.
21. CERTAIN DEFINITIONS.
This Declaration of Trust contains certain provisions required by
the Blue Sky 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 of
Trust):
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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 Guidelines sections,
referenced to the page of the prospectus, Program agreement, or other
exhibits, and justification of any deviation from the Guidelines.
NET ASSETS. The total assets, less total liabilities, of the Program
determined on the basis of generally accepted accounting principles.
Net Assets shall include any unrealized profits or losses on open
positions, and any fee or expense including Net Asset fees accruing to
the Program.
NET ASSET VALUE PER PROGRAM INTEREST. The Net Assets divided by the
number of Program Interests outstanding.
NET WORTH. The excess of total assets over total liabilities as
determined by generally accepted accounting principles. Net Worth
shall be determined exclusive of home, home furnishings and
automobiles.
NEW TRADING PROFITS. The excess, if any, of Net Assets at the end of
the period over Net Assets at the end of the highest previous period
or Net Assets at the date trading commences, whichever is higher, and
as further adjusted to eliminate the effect on Net Assets resulting
from new Capital Contributions, redemptions, or capital distributions,
if any, made during the period decreased by interest or other income,
not directly related to trading activity, earned on Program assets
during the period, whether the assets are held separately or in a
margin account.
ORGANIZATIONAL AND OFFERING EXPENSES. All expenses incurred by the
Program in connection with and in preparing a Program for registration
and subsequently offering and distributing it to the public,
including, but not limited to, total underwriting and brokerage
discounts and commissions (including fees of the underwriters'
attorneys), expenses for printing, engraving, mailing, salaries of
employees while engaged in sales activity, charges
TA-24
<PAGE>
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. (Organizational and Offering Expenses as used in this
Declaration of Trust does not include selling commissions).
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.
22. NO LEGAL TITLE TO TRUST ESTATE.
The Unitholders shall not have legal title to any part of the Trust
Estate.
23. 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 of any portion thereof to be held by or in the name of the Managing
Owner or any other person as nominee.
TA-25
<PAGE>
24. 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 Second
Amended and Restated Declaration of Trust and Trust Agreement as of the day
and year first above written.
WILMINGTON TRUST COMPANY
as Trustee
By: /s/ EMMETT R. HARMON
-----------------------------
Emmett R. Harmon
Vice President
MILLBURN RIDGEFIELD CORPORATION
as Managing Owner
By: /s/ HARVEY BEKER
-----------------------------
Harvey Beker
Co-Chief Executive Officer
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: MILLBURN RIDGEFIELD CORPORATION
as Attorney-in-Fact
By: /s/ GEORGE E. CRAPPLE
-----------------------------
George E. Crapple
Co-Chief Executive Officer
TA-26
<PAGE>
SCHEDULE A
CERTIFICATE OF TRUST
OF
THE MILLBURN WORLD RESOURCE TRUST
THIS Certificate of Trust of THE MILLBURN WORLD RESOURCE TRUST (the
"Trust"), dated June 7, 1995, is being duly executed and filed by Wilmington
Trust Company, a Delaware banking corporation, as trustee, to form a business
trust under the Delaware Business Trust Act (12 DEL.C. Section 3801 ET SEQ.).
1. NAME. The name of the business trust formed hereby is THE
MILLBURN WORLD RESOURCE TRUST.
2. DELAWARE TRUSTEE. The name and business address of the
trustee of the Trust in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890,
Attention: Corporate Trust Administration.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY,
as Trustee
By: /S/ NORMA P. CLOSS
-----------------------------
Norma P. Closs
Vice President
TA-27
<PAGE>
ANNEX
THE MILLBURN WORLD RESOURCE TRUST
REQUEST FOR REDEMPTION
THE MILLBURN WORLD RESOURCE TRUST ________________________________
C/O MILLBURN RIDGEFIELD CORPORATION DATE
MANAGING OWNER
CHICAGO MERCANTILE EXCHANGE CENTER
30 SOUTH WACKER DRIVE
SUITE 2114
CHICAGO, ILLINOIS 60606
Dear Sirs:
The undersigned (trust account number WR-_______) hereby requests
redemption subject to all the terms and conditions of the Declaration of Trust
and Trust Agreement (the "Declaration of Trust") of THE MILLBURN WORLD RESOURCE
TRUST (the "Trust") of _____ Units of Beneficial Interest ("Units") in the
Trust. (INSERT NUMBER OF WHOLE UNITS TO BE REDEEMED; SUBSCRIBERS MAY REDEEM ANY
NUMBER OF WHOLE UNITS, THEY NEED NOT REDEEM ALL OR ANY MINIMUM NUMBER OF THEIR
UNITS IN ORDER TO REDEEM CERTAIN OF THEIR UNITS; HOWEVER, IF NO NUMBER IS
INDICATED, ALL UNITS HELD OF RECORD BY THE UNDERSIGNED WILL BE REDEEMED;
FRACTIONAL UNITS MAY ONLY BE REDEEMED UPON COMPLETE REDEMPTION OF THE
UNDERSIGNED'S INTEREST IN THE TRUST.) Units are redeemed at the Net Asset Value
per Unit, as defined in the Declaration of Trust, less any applicable redemption
charge (see below). Redemption shall be effective as of the end of the current
calendar month; provided that this Request for Redemption is received at least
ten (10) business days prior to the end of such month. Payment of the
redemption price of Units will generally be made within fifteen (15) 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.
Redemption charges of 4% and 3% (3% and 2% in the case of subscriptions for
$1,000,000 or more) of the Net Asset Value of Units redeemed on or before the
end of the 6th and after the end of the 6th but on or before the end of the 12th
full calendar months, respectively, after the undersigned has purchased the
Units being redeemed will be deducted from the redemption price of all such
Units and paid to the Managing Owner. If the undersigned has purchased Units at
more than one closing, such Units will be treated on a first-in/first-out basis
for purposes of determining whether redemption charges continue to be applicable
to such Units.
___________________
UNITED STATES UNITHOLDERS ONLY:
Under the penalties of perjury, the undersigned hereby certifies that the
Social Security Number or Taxpayer ID Number indicated on this Request for
Redemption is the undersigned's true, correct and complete Social Security
Number or Taxpayer ID Number and that the undersigned is not subject to backup
withholding under the provisions of Section 3406(a)(1)(C) of the Internal
Revenue Code.
NON-UNITED STATES UNITHOLDERS ONLY:
Under the penalties of perjury, the undersigned hereby certifies that (a)
the undersigned is not a citizen or resident of the United States or (b) (in the
case of an investor which is not an individual) the undersigned is not a United
States corporation, partnership, estate or trust.
SIGNATURES MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED
/ / Credit my customer securities account / / Send to the address below
- --------------------------------------------------------------------------------
Name Street City, State and Zip Code
Entity Unitholder Individual Unitholder(s)
(or assignee) (or assignee(s))
_________________________________________ __________________________
(Name of Entity)
__________________________
By:______________________________________ __________________________
(Authorized corporate officer, (Signature(s) of all
partner or trustee) Unitholder(s)
or assignee(s))
Social Security or Taxpayer ID Number _________________________
RR-1
<PAGE>
EXHIBIT B
THE MILLBURN WORLD RESOURCE TRUST
SUBSCRIPTION REQUIREMENTS
By executing a Subscription Agreement and Power of Attorney Signature Page
for THE MILLBURN WORLD RESOURCE TRUST (THE "TRUST"), each PURCHASER
("PURCHASER") of UNITS OF BENEFICIAL INTEREST ("UNITS") in the Trust irrevocably
subscribes for Units at the Net Asset Value per Unit, as described in the
Trust's PROSPECTUS DATED JANUARY 15, 1997 (THE "PROSPECTUS"). The minimum
initial subscription is $5,000; $2,000 for trustees or custodians of employee
benefit plans. 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 three decimal places.
Purchaser is herewith delivering to Purchaser's Selling Agent or Additional
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, Purchaser agrees to contribute Purchaser's subscription
to the Trust and to be bound by the terms of the Trust's Declaration of Trust
(Exhibit A to the Prospectus). Purchaser agrees to reimburse the Trust and
MILLBURN RIDGEFIELD CORPORATION (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 Purchaser 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") (the subscribing "employee benefit
plan" or a "plan" being hereinafter referred to as the "Plan"). Purchaser, as,
or on behalf of, the fiduciary of the Plan responsible for purchasing the Units
(the "Plan Fiduciary") understands that: the Plan Fiduciary must consider an
investment in the Units in light of the risks relating thereto; the Plan
Fiduciary must determine that, in view of such considerations, the Plan's
investment in the Trust is consistent with the Plan Fiduciary's responsibilities
under ERISA; the Plan's investment in the Trust must not violate and must not be
otherwise inconsistent with the terms of any legal document constituting the
Plan or any trust agreement thereunder; and the Plan Fiduciary (i) must be
responsible for the decision to invest in the Units, 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) must be independent of the Managing Owner, any of the Trust's
Selling Agents or Additional Selling Agents, Wilmington Trust Company, Chemical
Bank, N.A. and any of their respective affiliates, (iii) must be qualified to
make such investment decision, and (iv) none of the Managing Owner, any of the
Trust's Selling Agents or Additional Selling Agents, Wilmington Trust Company,
Chemical Bank, N.A., any of their respective affiliates or any of their
respective agents or employees may either: (a) have investment discretion with
respect to the investment of the assets of the Plan used to purchase Units; (b)
have authority or responsibility to or regularly give 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 (c) be an employer
maintaining or contributing to the Plan. The undersigned must, at the request
of the Managing Owner, furnish the Managing Owner with such information as the
Managing Owner may reasonably require to establish that the purchase of Units by
the Plan does not violate any provision of ERISA or the Code including, without
limitation, those provisions relating to "prohibited transactions" by "parties
in interest" or "disqualified persons," as defined therein.
INVESTOR SUITABILITY
PURCHASER UNDERSTANDS THAT THE PURCHASE OF UNITS MAY BE MADE ONLY BY
PERSONS WHO, AT A MINIMUM, HAVE (I) A NET WORTH OF AT LEAST $150,000 (EXCLUSIVE
OF HOME, FURNISHINGS AND AUTOMOBILES) OR (II) AN ANNUAL GROSS
SR-1
<PAGE>
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). IN ADDITION, NO PURCHASER
MAY INVEST MORE THAN 10% OF HIS OR HER NET WORTH (EXCLUSIVE OF HOME,
FURNISHINGS AND AUTOMOBILES) IN THE UNITS. NO ENTITY, INCLUDING ERISA PLANS,
MAY 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. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
SR-2
<PAGE>
_________________________
In the case of IRA and SEP plans, the foregoing suitability standards are
applicable to the beneficiary of the plan for whose account the Units are being
acquired.
THE FOREGOING SUITABILITY STANDARDS ARE REGULATORY MINIMUMS ONLY. MERELY
BECAUSE PURCHASER MEETS SUCH REQUIREMENTS DOES NOT NECESSARILY MEAN THAT A HIGH
RISK, SPECULATIVE AND ILLIQUID INVESTMENT SUCH AS THE UNITS IS, IN FACT,
SUITABLE FOR PURCHASER.
SR-3
<PAGE>
[PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT C
THE EXECUTION COPY OF THE SUBSCRIPTION AGREEMENT AND POWER
OF ATTORNEY ACCOMPANIES THIS PROSPECTUS AS A SEPARATE DOCUMENT.
THE MILLBURN WORLD RESOURCE 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
THE MILLBURN WORLD RESOURCE TRUST
C/O MILLBURN RIDGEFIELD CORPORATION
MANAGING OWNER
CHICAGO MERCANTILE EXCHANGE CENTER
30 SOUTH WACKER DRIVE
SUITE 2114
CHICAGO, ILLINOIS 60604
Dear Sirs:
1. SUBSCRIPTION FOR UNITS. I hereby subscribe for the dollar amount of
UNITS OF BENEFICIAL INTEREST ("UNITS") in THE MILLBURN WORLD RESOURCE 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
employee benefit plans), 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 three
decimal places. The terms of the offering of the Units are described in the
Prospectus of the Trust dated January 15, 1997 (the "Prospectus"). I have
either (i) authorized my selling agent to debit my customer securities account
in the amount of my subscription or (ii) delivered a check to my selling agent
made out to "CHEMICAL BANK, AS ESCROW AGENT FOR THE MILLBURN WORLD RESOURCE
TRUST, ESCROW ACCOUNT NO. SE14791." If I have chosen to subscribe by account
debit, I acknowledge that I must have my subscription payment in such account on
but not before the settlement date for my purchase of Units, which will occur no
later than three (3) business days after the acceptance of my subscription. My
Registered Representative shall inform me of such settlement date, on which date
my account will be debited and the amounts so debited will be transmitted, in
the form of a selling agent check or wire transfer made out to "CHEMICAL BANK,
AS ESCROW AGENT FOR THE MILLBURN WORLD RESOURCE TRUST, ESCROW ACCOUNT NO.
SE14791," directly to the Escrow Agent. MILLBURN RIDGEFIELD CORPORATION (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 submitted no later than five calendar days
prior to the end of a month in order to be invested in the Units as of the
beginning of the immediately following month.
2. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER. I have received the
Prospectus together with a recent Monthly Report of the Trust. I understand
that certain investor suitability standards must be met as a condition of my
SA-1
<PAGE>
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, any Selling Agent, Additional Selling Agent 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 advice will serve as the primary basis for investment decisions
with respect to such trust assets and that such advice will be based on the
particular investment needs of the trust; or (iii) is an employer maintaining
or contributing to the trust. If subscriber is not an individual, the person
signing the Subscription Agreement and Power of Attorney Signature Page on
behalf of the subscriber is duly authorized to execute such Signature Page.
3. POWER OF ATTORNEY. In connection with my purchase of Units, I do
hereby irrevocably constitute and appoint the Managing Owner and its successors
and assigns, as my true and lawful Attorney-in-Fact, with full power of
substitution, in my name, place and stead, to (i) file, prosecute, defend,
settle or compromise litigation, claims or arbitrations on behalf of the Trust
and (ii) make, execute, sign, acknowledge, swear to, deliver, record and file
any documents or instruments which may be considered necessary or desirable by
the Managing Owner to carry out fully the provisions of the Declaration of Trust
of the Trust, including, without limitation, the execution of the said Agreement
itself, and the execution of all amendments permitted by the terms thereof. The
Power of Attorney granted hereby shall be deemed to be coupled with an interest,
shall be irrevocable, shall survive, and shall not be affected by, my subsequent
death, incapacity, disability, insolvency or dissolution or any delivery by me
of an assignment of the whole or any portion of my Units.
4. GOVERNING LAW. Subscriber hereby acknowledges and agrees that this
Subscription Agreement and Power of Attorney shall be governed by and be
interpreted in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of laws.
5. RISKS. These securities are speculative and involve a high degree of
risk. Risk factors relating to the Units include the following:
(i) INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT; PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS; AN INVESTMENT IN
THE TRUST IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK; (ii) FUTURES AND
FORWARD TRADING IS SPECULATIVE, VOLATILE AND LEVERAGED, AND INVOLVES A HIGH
DEGREE OF RISK; TRADING ON FOREIGN FUTURES AND INTERBANK FORWARD MARKETS MAY
INVOLVE ADDITIONAL RISKS; (iii) THE TRUST HAS TO DATE EXHIBITED AND IS EXPECTED
TO CONTINUE TO EXHIBIT CONSIDERABLE PERFORMANCE VOLATILITY; THE TRUST'S TRADING
HAS ALSO BEEN UNPROFITABLE THROUGH DECEMBER 31, 1996; THE UNITS ARE SUITABLE
ONLY FOR A LIMITED PORTION OF THE RISK SEGMENT OF AN INVESTMENT PORTFOLIO;
(iv) THE TRUST IS THE FIRST MILLBURN RIDGEFIELD CLIENT ACCOUNT TO TRADE THE
"WORLD RESOURCE PORTFOLIO" OF MARKETS AND HAS ONLY BEEN TRADING SINCE
SEPTEMBER 13, 1995; (v) SINGLE-ADVISOR FUNDS SUCH AS THE TRUST ARE TYPICALLY
CONSIDERED -- EVEN AMONG SPECULATIVE MANAGED FUTURES FUNDS -- UNUSUALLY HIGH
RISK AND VOLATILE INVESTMENTS (AN EXPECTATION CONSISTENT WITH THE PERFORMANCE
OF THE TRUST TO DATE); MOREOVER, THE TRUST IS VULNERABLE TO ADVERSE CHANGES
AFFECTING MILLBURN RIDGEFIELD WHICH COULD DIRECTLY IMPACT THE TRUST'S ABILITY
TO CONTINUE TRADING; (vi) THE TRUST IS SUBJECT TO SUBSTANTIAL CHARGES,
PAYABLE IRRESPECTIVE OF PROFITABILITY, AS WELL AS TO QUARTERLY PROFIT SHARES;
THE MANAGING OWNER ESTIMATES THAT THE TRUST WILL NEED TO ACHIEVE TRADING
PROFITS AND INTEREST INCOME OF APPROXIMATELY 11.5% IN ITS FIRST TWELVE MONTHS
OF TRADING TO OFFSET EXPENSES AND OF APPROXIMATELY 14.5% TO OFFSET BOTH
EXPENSES AND THE 3% REDEMPTION CHARGES DUE ON UNITS REDEEMED AS OF THE END OF
THE TWELFTH MONTH AFTER THEY ARE ISSUED; (vii) THE TRUST MAY BE ADVERSELY
AFFECTED BY INCREASES IN THE AMOUNT OF FUNDS MANAGED BY MILLBURN RIDGEFIELD;
(viii) MILLBURN RIDGEFIELD IS ALMOST EXCLUSIVELY A SYSTEMATIC, TREND-FOLLOWING
TRADER; MARKET CONDITIONS IN WHICH STRONG PRICE TRENDS DO NOT DEVELOP TYPICALLY
RESULT IN SUBSTANTIAL LOSSES FOR TREND-FOLLOWING TRADERS; THE NUMBER OF
SYSTEMATIC TRADERS HAS INCREASED SIGNIFICANTLY IN RECENT YEARS, INCREASING
COMPETITION AND LOWERING PROFIT MARGINS.
See "Risk Factors" in the Prospectus beginning at page 11.
________________
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.
SA-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Millburn Ridgefield Corporation (the "Managing Owner") advanced all initial
organization and offering costs (total of $600,000), as described in the
Prospectus, for which it is being reimbursed by the Registrant in 24 equal
monthly installments. The following is an estimate of the costs incurred in
connection with preparing and filing this Post-Effective Amendment No. 4 to the
Registration Statement. The Trust pays all such costs.
Approximate
Amount
-----------
Printing Expenses . . . . . . . . . . . . . . . . . . . . . $ 50,000
Fees of Certified Public Accountants. . . . . . . . . . . . 50,000
Blue Sky Expenses (Excluding Legal Fees). . . . . . . . . . 10,000
Fees of Counsel . . . . . . . . . . . . . . . . . . . . . . 50,000
Escrow Fees . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Miscellaneous Offering Costs. . . . . . . . . . . . . . . . 20,000
--------
Total. . . . . . . . . . . . . . . . . . . . . . . . . $195,000
--------
--------
________________________
Item 14. Indemnification of Directors and Officers.
Section 17 of the Second Amended and Restated Declaration of Trust and
Trust Agreement (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 its 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 a 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.
The Initial Unitholder of the Trust acquired Units for $1,600 on June 7,
1995 in order to permit the formation of the Trust. This amount was returned to
the Initial Unitholder, and its Units cancelled, when Units were first sold to
the public. No underwriter or selling agent was used in this transaction, which
was exempt from registration and Section 4(2) of the Securities Act of 1933.
Item 16. Exhibits and Financial Statement Schedules.
The following documents (previously filed or incorporated by reference by
Post-Effective Amendment No. 1 to the Registration Statement dated March 1, 1996
or filed herewith, as indicated) are made a part of this Registration Statement.
(a) Exhibits Previously Filed or previously Incorporated by Reference.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
1.01 Selling Agreement among the Trust, the Managing Owner and the
Principal Selling Agents (includes form of Additional Selling
Agent and Correspondent Selling Agent Agreement).
S-1
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
3.02 Certificate of Trust of the Registrant.
3.03 Declaration and Agreement of Trust of the Registrant.
8.01 Opinion of Sidley & Austin with respect to federal income tax
(amended) consequences.
10.01(a) Form of Subscription Agreement and Power of Attorney.
(amended)
10.01(b) Form of Subscription Agreement and Power of Attorney.
(amended)
10.02(a) Customer Agreement among the Trust, the Managing Owner and a
Principal Selling Agent, in its capacity as a futures
commission merchant.
10.02(b) Customer Agreement among the Trust, the Managing Owner and a
Principal Selling Agent, in its capacity as a futures
commission merchant.
10.05 Escrow Agreement between the Trust and Chemical Bank. N.A.
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 Treatment of Delaware Business Trusts.
99.04 North American Securities Administrators Association, Inc.
Guidelines for the Registration of Commodity Pool Programs.
(b) Exhibits Filed Herewith.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
3.01 Second Amended and Restated Declaration of Trust and Trust
Agreement of the Registrant (included as Exhibit A to the
Prospectus).
5.01(a) Opinion of Sidley & Austin relating to the legality of the
Units.
5.01(b) Opinion of Richards, Layton & Finger relating to the legality
of the Units.
8.01 Opinion of Sidley & Austin with respect to federal income
tax consequences.
23.14 Consent of Sidley & Austin (contained in Exhibit 5.01(a)
above).
23.15 Consent of Richards, Layton & Finger (contained in
Exhibit 5.01(b) above).
23.16 Consent of Arthur Friedman.
23.17 Consent of Coopers & Lybrand L.L.P.
S-2
<PAGE>
(c) Financial Statement Schedules.
No Financial Schedules are required to be filed herewith.
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 10a(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 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 and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant had been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any such
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
S-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Managing
Owner of the Registrant has duly caused this Registration Statement Amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York in the State of New York on the 14th day of January, 1997.
THE MILLBURN WORLD RESOURCE TRUST
By: Millburn Ridgefield Corporation
Managing Owner
By /s/ HARVEY BEKER
-------------------------------
Harvey Beker
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement Amendment has been signed below by the following persons
on behalf of Millburn Ridgefield Corporation, Managing Owner of the Registrant,
in the capacities and on the date indicated.
/s/ GEORGE E. CRAPPLE Vice Chairman, Co-Chief January 14, 1997
- --------------------------------- Executive Officer and
George E. Crapple Director (Principal
Executive Officer)
/s/ HARVEY BEKER President, Co-Chief January 14, 1997
- --------------------------------- Executive Officer and
Harvey Beker Director (Principal
Financial and Accounting
Officer)
/s/ MALCOLM H. WIENER Chairman and Director January 14, 1997
- ---------------------------------
Malcolm H. Wiener
(Being the principal executive officer, the principal financial and
accounting officer and a majority of the directors of Millburn Ridgefield
Corporation.)
MILLBURN RIDGEFIELD CORPORATION Managing Owner of Registrant
By /s/ HARVEY BEKER January 14, 1997
- ---------------------------------
Harvey Beker
President
S-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------- -----------------------
3.01 Second Amended and Restated Declaration of Trust and Trust
Agreement of the Registrant (included as Exhibit A to the
Prospectus)
5.01(a) Opinion of Sidley & Austin relating to the legality of the Units.
5.01(b) Opinion of Richards, Layton & Finger relating to the legality of
the Units.
8.01 Opinion of Sidley & Austin with respect to federal income tax
consequences.
23.14 Consent of Sidley & Austin (contained in Exhibit 5.01(a) above).
23.15 Consent of Richards, Layton & Finger (contained in Exhibit
5.01(b) above).
23.16 Consent of Arthur Friedman.
23.17 Consent of Coopers & Lybrand L.L.P.
27.01 Financial Data Schedule
<PAGE>
EXHIBIT 5.01(A)
[LETTERHEAD]
January 14, 1997
Millburn Ridgefield Corporation
Managing Owner of
The Millburn World Resource Trust
600 Steamboat Road
Greenwich, Connecticut 06830
Dear Madam or Sir:
We refer to the Registration Statement on Form S-1 (Registration
No. 33-90756), filed by The Millburn World Resource Trust, a Delaware
business trust (the "Trust"), with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"), as amended by
Post-Effective Amendment No. 4 thereto, filed with the Securities and
Exchange Commission on or about January 14, 1997 (the "Registration
Statement"), relating to the registration under the Act of 100,000 Units of
Beneficial Interest in the Trust ("Units").
We are familiar with the proceedings to date with respect to the
proposed issuance and sale of the Units and have examined such records,
documents and questions of law, and satisfied ourselves as to such matters of
fact, as we have considered relevant and necessary as a basis for this
opinion.
For purposes of rendering this opinion, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that:
1. The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Business Trust Act (the
"Act").
2. Millburn Ridgefield Corporation (the "Managing Owner") is duly
organized, validly existing and good standing as a corporation under the laws
of the State of Delaware and is in good standing and qualified to do business
in each other jurisdiction in which the failure to so qualify might
reasonably be expected to result in material adverse consequences to the
Trust.
<PAGE>
Millburn Ridgefield Corporation
January 14, 1997
Page 2
3. The Managing Owner has taken all corporate action required to
be taken by it to authorize the issue and sale of Units to the Unitholders
and to authorize the admission to the Trust of the Unitholders as beneficial
owners of the Trust.
4. The Units being offered for sale as described in the
Registration Statement, when sold in the manner and under the conditions set
forth therein, will be validly issued and, subject to the qualifications set
forth herein, will be fully paid and nonassessable beneficial interests in
the Trust, as to which the Unitholders, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit, subject to the obligation of
a Unitholder to make payments provided for in Sections 8(d), 8(3) and 17(c)
of the Amended and Restated Declaration of Trust and Trust Agreement of the
Trust (the "Agreement") and to repay any funds wrongfully distributed to it
from the Trust.
5. Purchasers of the Units will become beneficial owners in the
Trust and their liability for the losses and obligations of the Trust will be
limited to the extent provided by the Act and the Agreement.
We do not find it necessary for the purposes of this opinion to
cover, and accordingly we express no opinion as to, the application of the
securities or blue sky laws of the various states (including the state of
Delaware) to the sale of the Units.
We are not authorized, and do not purport, to practice law in the
State of Delaware. In giving this opinion, except as to paragraphs 2 and 3
above, we have relied exclusively on the opinion dated January 14, 1997 of
Messrs. Richards, Layton & Finger, Wilmington, Delaware, a copy of which is
attached hereto.
This opinion speaks as of the date hereof, and we assume no
obligation to update this opinion as of any future date. We hereby consent
to the filing of this opinion as an Exhibit to the Registration Statement and
to all references to our firm included in or made a part of the Registration
Statement. This opinion shall not be used by any other person for any purpose
without our written consent.
Very truly yours,
/s/ SIDLEY & AUSTIN
<PAGE>
EXHIBIT 5.01(b)
---------------
[LETTERHEAD OF RICHARDS, LAYTON & FINGER]
January 14, 1997
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Re: THE MILLBURN WORLD RESOURCE TRUST
Gentlemen:
We have acted as special Delaware counsel for The Millburn World Resource
Trust, a Delaware business trust (the "Trust"), in connection with the matters
set forth herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of executed or conformed
counterparts, or copies otherwise proved to our satisfaction, of the following:
(a) The Certificate of Trust of the Trust, dated June 7, 1995 (the
"Certificate"), as filed in the office of the Secretary of State of the State of
Delaware (the "Secretary of State") on June 7, 1995;
<PAGE>
Sidley & Austin
January 14, 1997
Page 2
(b) The Declaration and Agreement of Trust of the Trust, dated as of
June 7, 1995;
(c) A registration statement (the "Initial Registration Statement") on
Form S-1 (Registration No. 33-90756), filed by the Trust with the Securities and
Exchange Commission on April 4, 1995, as amended by Amendment No. 1 to the
Initial Registration Statement, filed by the Trust with the Securities and
Exchange Commission on June 27, 1995 ("Amendment No. 1"), as amended by
Amendment No. 2 to the Initial Registration Statement, filed by the Trust with
the Securities and Exchange Commission on July 11, 1995 ("Amendment No. 2"), as
amended by Post-Effective Amendment No. 1 to the Initial Registration Statement,
filed by the Trust with the Securities and Exchange Commission on March 1, 1996
("Amendment No. 3"), as amended by Post-Effective Amendment No. 2 to the Initial
Registration Statement, filed by the Trust with the Securities and Exchange
Commission on March 22, 1996 ("Amendment No. 4"), as amended by Post-Effective
Amendment No. 3 to the Initial Registration Statement, filed by the Trust with
the Securities and Exchange Commission on April 24, 1996 ("Amendment No. 5"),
and as amended by Post-Effective Amendment No. 4 to the Initial Registration
Statement, filed by the Trust with the Securities and Exchange Commission on or
about January 14, 1997 ("Amendment No. 6"), including a related prospectus (the
"Prospectus") (the Initial Registration Statement as amended by Amendment No. 1,
Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5 and Amendment
No. 6 is hereinafter referred to as the "Registration Statement");
<PAGE>
Sidley & Austin
January 14, 1997
Page 3
(d) The Second Amended and Restated Declaration of Trust and Trust
Agreement of the Trust (the "Agreement"), dated as of May 1, 1996, attached to
the Prospectus as Exhibit "A";
(e) A form of Subscription Agreement and Power of Attorney, including a
Subscription Agreement and Power of Attorney Signature Page of the Trust (the
"Subscription Agreement"), attached to the Prospectus as Exhibit "C"; and
(f) A Certificate of Good Standing for the Trust, dated January 14, 1997,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are used
as defined in the Agreement.
For purposes of this opinion, we have not reviewed any documents other than
the documents listed above, and we have assumed that there exists no provision
in any document not listed above that bears upon or is inconsistent with the
opinions stated herein. We have conducted no independent factual investigation
of our own, but rather have relied solely upon the foregoing documents, the
statements and information set forth therein and the additional matters recited
or assumed herein, all of which we have assumed to be true, complete and
accurate in all material respects.
With respect to all documents examined by us, we have assumed that (i) all
signatures on documents examined by us are genuine, (ii) all documents submitted
to us as originals are authentic, and (iii) all documents submitted to us as
copies conform with the original copies of those documents.
<PAGE>
Sidley & Austin
January 14, 1997
Page 4
For purposes of this opinion, we have assumed (i) the due authorization,
execution and delivery by all parties thereto of all documents examined by us,
including, without limitation, the Agreement by each beneficial owner of the
Trust and the Trustee, the Certificate by the Trustee and the Subscription
Agreement by each Unitholder (as defined below), (ii) that after the issuance
and sale of beneficial interests of the Trust (the "Units") under the
Registration Statement and the Agreement, the dollar amount of the Units issued
by the Trust will equal or exceed the minimum, and the dollar amount of the
Units issued and reserved for issuance by the Trust will not exceed the maximum,
dollar amount of the Units which may be issued by the Trust under the
Registration Statement and the Agreement, (iii) that the Agreement constitutes
the entire agreement among the parties thereto with respect to the subject
matter thereof, including with respect to the admission of beneficial owners to,
and the creation, operation and termination of, the Trust, and that the
Agreement and the Certificate are in full force and effect, have not been
amended and no amendment of the Agreement or the Certificate is pending or has
been proposed, and (iv) except for the due creation and valid existence in good
standing of the Trust as a business trust under the Delaware Business Trust Act
(12 DEL.C. Section 3801, ET SEQ.) (the "Act"), the due creation, organization or
formation, as the case may be, and valid existence in good standing of each
party to the documents examined by us under the laws of the jurisdiction
governing its creation, organization or formation and the capacity of persons
and entities who are parties to the documents examined by us. Insofar as the
opinions expressed herein relate to the Units and persons and entities to be
admitted to the Trust as beneficial owners of the Trust in connection
<PAGE>
Sidley & Austin
January 14, 1997
Page 5
with the Registration Statement (the "Unitholders"), the opinions expressed
herein relate solely to the Unitholders and the Units to be issued in
connection with the Prospectus. We have not participated in the preparation
of the Registration Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding the
securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder which are
currently in effect.
Based upon the foregoing, and upon our examination of such questions of law
and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Act.
2. Assuming (i) that the Managing Owner has taken all corporate action
required to be taken by it to authorize the issuance and sale of Units to the
Unitholders and to authorize the admission to the Trust of the Unitholders as
beneficial owners of the Trust, (ii) the due authorization, execution and
delivery to the Managing Owner of a Subscription Agreement by each Unitholder,
(iii) the due acceptance by the Managing Owner of each Subscription Agreement
and the due acceptance by the Managing Owner of the admission of the Unitholders
as beneficial
<PAGE>
Sidley & Austin
January 14, 1997
Page 6
owners of the Trust to the Trust, (iv) the payment by each Unitholder to the
Trust of the full consideration due from it for the Units subscribed to by
it, (v) the due authorization, execution and delivery by all parties thereto,
including the Unitholders as beneficial owners of the Trust, of the
Agreement, (vi) that the books and records of the Trust set forth all
information required by the Agreement and the Act, including all information
with respect to all persons and entities to be admitted as Unitholders and
their contributions to the Trust, and (vii) that the Units are offered and
sold as described in the Registration Statement and the Agreement, the Units
to be issued to the Unitholders will be validly issued and, subject to the
qualifications set forth herein, will be fully paid and nonassessable
beneficial interests in the Trust, as to which the Unitholders, as beneficial
owners of the Trust, will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware, subject
to the obligation of a Unitholder to make payments provided for in Sections
8(d), 8(e) and 17(c) of the Agreement and to repay any funds wrongfully
distributed to it from the Trust.
We understand that you will rely as to matters of Delaware law upon this
opinion in connection with an opinion to be submitted by you to the Trust and
filed by it with the Securities and Exchange Commission as an exhibit to the
Registration Statement in connection with the filing by the Trust of the
Registration Statement under the Securities Act of 1933, as amended. In
connection with such opinion, we hereby consent to your relying as to matters of
Delaware law upon this opinion. This opinion is rendered solely for your
benefit in connection with the
<PAGE>
Sidley & Austin
January 14, 1997
Page 7
foregoing. We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Prospectus. In giving the foregoing consent, we do not
thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, or the rules and
regulations of the Securities and Exchange Commission thereunder. Except as
stated above, without our prior consent, this opinion may not be furnished or
quoted to, or relied upon by, any other person or entity for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER
MIL/MM/kth
<PAGE>
EXHIBIT 8.01
January 14, 1997
Millburn Ridgefield Corporation
Managing Owner of
The Millburn World Resource Trust
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Registration Statement on Form S-1
Dear Madam or Sir:
We have acted as your counsel in connection with the preparation
and filing with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, of Post-Effective Amendment No. 4 to the
Registration Statement on Form S-1, Registration No. 33-90756, filed with the
Securities and Exchange Commission on or about January 14, 1997, (the
"Registration Statement") relating to Units of Beneficial Interest ("Units")
of The Millburn World Resource Trust (the "Trust"), a business trust
organized under the Delaware Business Trust Act.
We have reviewed such data, documents, questions of law and fact
and other matters as we have deemed pertinent for the purpose of this
opinion. Based upon the foregoing, we hereby confirm our opinion expressed
under the caption "Federal Income Tax Aspects" in the Prospectus (the
"Prospectus") constituting a part of the Registration Statement that: (i)
the Trust will be treated as a partnership for federal income tax purposes
(assuming that substantially all of the gross income of the Trust will
constitute "qualifying income" within the meaning of section 7704(d) of the
Internal Revenue Code of 1986, as amended (the "Code")); and (ii) the
allocations of profits and losses made when Unitholders redeem their Units
should be upheld for federal income tax purposes.
We also advise you that in our opinion the description set forth
under the caption "Federal Income Tax Aspects" in the Prospectus correctly
describes (subject to the uncertainties referred to therein) the material
aspects of the United States
<PAGE>
federal income tax treatment to United States individual investors, as of the
date hereof, of an investment in the Trust.
This opinion speaks as of the date hereof, and we assume no
obligation to update this opinion as of any future date. This opinion shall
not be used for any purpose without our written consent. We hereby consent
to the filing of this opinion as an Exhibit to the Registration Statement and
to all references to our firm included in or made a part of the Registration
Statement.
Very truly yours,
/s/ SIDLEY & AUSTIN
<PAGE>
<PAGE>
EXHIBIT 23.16
CONSENT OF ARTHUR FRIEDMAN
I consent to the use in the Registration Statement Amendment of The Millburn
World Resource Trust of my report dated March 20, 1996 on the balance sheet
of The Millburn Ridgefield Corporation as of December 31, 1995 appearing in
the Prospectus, which is part of the Registration Statement Amendment. I
also consent to the reference to me under the heading "Experts" in such
Prospectus.
/s/ ARTHUR FRIEDMAN
Arthur Friedman
New York, New York
January 14, 1997
<PAGE>
EXHIBIT 23.17
CONSENT OF INDEPENDENT ACCOUNTANTS
___________________________________
We consent to the inclusion in this Post-Effective Amendment No. 4 to the
Registration Staement on Form S-1 (File No. 33-90756) of our report dated
January 25, 1996, on our audit of the financial staements of The Millburn
World Resource Trust.
We also consent to the reference to our Firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
New York, New York
January 14, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS
OF FINANCIAL CONDITION AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,302,592
<SECURITIES> 45,618,695
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 58,622,861
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 58,622,861
<CURRENT-LIABILITIES> 2,482,543
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 56,140,318
<TOTAL-LIABILITY-AND-EQUITY> 58,622,861
<SALES> 0
<TOTAL-REVENUES> 7,186,180
<CGS> 0
<TOTAL-COSTS> 1,348,834
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,837,346
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,837,346
<EPS-PRIMARY> 99.45
<EPS-DILUTED> 99.45
</TABLE>
