Form 424(B)(3)
Filed
Pursuant to Rule 424(B)(3)
File No. 333-158421
File No. 333-158421-01
GREENHAVEN CONTINUOUS COMMODITY INDEX FUND
21,000,000 Common Units of Beneficial Interest
GREENHAVEN CONTINUOUS COMMODITY INDEX FUND (the Fund), is organized as a Delaware statutory
trust, that issues units that may be purchased or sold on the New York Stock Exchange ARCA
(NYSE-ARCA). Shares may be purchased from the Fund only in one or more blocks of 50,000 Shares
(each, called a Basket). The Fund will accept subscriptions for Shares in Baskets from certain
authorized participants (Authorized Participants), during a continuous offering period. During
the continuous offering period, the Fund will issue Shares in Baskets to Authorized Participants
continuously as of noon, New York time, on the business day immediately following the date on which
a valid order to create a Basket is accepted by the Fund, at the net asset value of 50,000 Shares
as of the closing time of NYSE-ARCA, or the last to close of the exchanges on which the Funds
assets are traded, whichever is later, on the date that a valid order to create a Basket is
accepted by the Fund. The Fund commenced trading on the American Stock Exchange on January 24, 2008
and its listing was transferred to the NYSE-ARCA platform on November 25, 2008 in relation to the
NYSE-ARCA purchase of the American Stock Exchange.
The Fund invests the proceeds of its offering of Shares in GreenHaven Continuous Commodity Index
Master Fund (the Master Fund). The Master Fund is organized as a Delaware statutory trust. The
Master Fund actively invests in exchange-traded futures on the commodities comprising the
Continuous Commodity Total Return Index (CCI-TR) (Index), with a view to tracking the performance
of the Index over time. The sponsor of the Fund is GreenHaven Commodity Services LLC (the Managing
Owner) which has an exclusive license with respect to the creation of U.S. exchange traded funds
with Thomson Reuters America, LLC which developed, owns and operates the Index. Continuous
Commodity Total Return Index is a trademark of Thomson Reuters America, LLC.
The Fund is not a mutual fund registered under the Investment Company Act of 1940, as amended, and
is not subject to regulation under such Act.
Some of the risks of investing in the Fund include:
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Investing in futures contracts is highly speculative which could result in large
fluctuations in the price of the Funds Shares. |
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The Fund and the Managing Owner may have conflicts of interest, which may permit them
to favor their own interests to your detriment. |
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You could lose all or substantially all of your investment. |
Investing in the Fund involves other significant risks. The Shares are speculative securities and
their purchase involves a high degree of risk. YOU SHOULD CONSIDER ALL RISK FACTORS BEFORE
INVESTING IN THE FUND. PLEASE REFER TO THE RISKS YOU FACE BEGINNING ON PAGE 1 OF THIS PROSPECTUS.
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Number of |
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Maximum Number of |
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Price to the Public |
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Upfront Selling |
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Proceeds to the |
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Offering Period |
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Units Sold |
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Units to be Offered |
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per Unit *** |
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Commission |
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Trust**** |
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Continuous |
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9,500,000 |
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21,000,000 |
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25.81 |
*** |
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$ |
0 |
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$ |
234,950,500 |
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Per Basket |
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Price of Units*** |
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1,290,500 |
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* |
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Number of Units issued from this current offering since May 14, 2009. |
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** |
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Shares may be purchased from the Fund by Authorized Participants in Baskets at the net
asset value of 50,000 Shares as of the closing time of the NYSE-ARCA or the last to close of the
exchanges of which the Index Commodities are traded, whichever is later, on the date that a valid
order to create a Basket is accepted by the Fund. Investors who acquire Shares from Authorized
Participants may pay a price that is higher than net asset value per Share in respect of the
continuous offering period depending upon, among other factors, the trading price of the Shares on
the NYSE-ARCA and the supply of and demand for Shares at the time of acquisition, but is not
expected to exceed the trading price of the Shares on the NYSE-ARCA. There is no upfront selling
commission charged during the continuous offering periods, although investors are expected to be
charged a customary commission by their brokers in connection with purchases of Shares that will
vary from investor to investor. Investors are encouraged to review the terms of their brokerage
accounts for details on applicable charges. Also, the excess, if any, of the price at which an
Authorized Participant sells a Share over the price paid by such Authorized Participant in
connection with the creation of such Share in a Basket may be deemed to be underwriting
compensation. |
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*** |
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Based on closing net asset value on April 23, 2010. The price may vary based on net
asset value on a particular day. |
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**** |
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Proceeds to the Fund for the Units issued from May 14, 2009 through April 23, 2010. |
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS
POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
This prospectus is in two parts: a disclosure document and a statement of additional information.
These parts are bound together, and both contain important information.
The date of this Prospectus is April 29, 2010
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 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 TO THIS POOL AT PAGE 10 AND
A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF
YOUR INITIAL INVESTMENT, AT PAGE 10.
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 1 THROUGH 9.
THIS PROSPECTUS DOES NOT INCLUDE ALL OF THE INFORMATION OR EXHIBITS IN THE REGISTRATION STATEMENT
OF THE FUND AND THE MASTER FUND. YOU CAN READ AND COPY THE ENTIRE REGISTRATION STATEMENT AT THE
PUBLIC REFERENCE FACILITIES MAINTAINED BY THE SEC IN WASHINGTON, D.C.
THE FUND AND THE MASTER FUND FILE QUARTERLY AND ANNUAL REPORTS WITH THE SEC. YOU CAN READ AND COPY
THESE REPORTS AT THE SEC PUBLIC REFERENCE FACILITIES IN WASHINGTON, D.C. PLEASE CALL THE SEC AT
1-800-SEC-0330 FOR FURTHER INFORMATION.
THE FILINGS OF THE FUND AND THE MASTER FUND ARE POSTED AT THE SEC WEBSITE AT http://www.sec.gov.
ii
REGULATORY NOTICES
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, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, THE MASTER FUND, THE
MANAGING OWNER, THE AUTHORIZED PARTICIPANTS OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION MAY NOT LAWFULLY BE MADE.
THE BOOKS AND RECORDS OF THE FUND AND THE MASTER FUND ARE MAINTAINED AS FOLLOWS: ALL MARKETING
MATERIALS AND BASKET CREATION AND REDEMPTION BOOKS AND RECORDS WILL BE MAINTAINED AT THE OFFICES OF
GREENHAVEN COMMODITY SERVICES; TELEPHONE NUMBER (404) 239-7938; ACCOUNTING AND CERTAIN OTHER
FINANCIAL BOOKS AND RECORDS (INCLUDING FUND ACCOUNTING RECORDS, LEDGERS WITH RESPECT TO ASSETS,
LIABILITIES, CAPITAL, INCOME AND EXPENSES, THE REGISTRAR, TRANSFER JOURNALS AND RELATED DETAILS)
AND TRADING AND RELATED DOCUMENTS RECEIVED FROM FUTURES COMMISSION MERCHANTS WILL BE MAINTAINED BY
GREENHAVEN COMMODITY SERVICES, TELEPHONE NUMBER (404) 239-7938. ALL OTHER BOOKS AND RECORDS OF THE
FUND AND THE MASTER FUND (INCLUDING MINUTE BOOKS AND OTHER GENERAL CORPORATE RECORDS, TRADING
RECORDS AND RELATED REPORTS AND OTHER ITEMS RECEIVED FROM THE MASTER FUNDS COMMODITY BROKERS) ARE
MAINTAINED AT THE FUNDS PRINCIPAL OFFICE, C/O GREENHAVEN COMMODITY SERVICES LLC, 3340 PEACHTREE
ROAD, SUITE 1900, ATLANTA, GEORGIA 30326; TELEPHONE NUMBER (404) 239-7938. SHAREHOLDERS HAVE THE
RIGHT, DURING NORMAL BUSINESS HOURS, TO HAVE ACCESS TO AND COPY (UPON PAYMENT OF REASONABLE
REPRODUCTION COSTS) SUCH BOOKS AND RECORDS IN PERSON OR BY THEIR AUTHORIZED ATTORNEY OR AGENT.
THERE WILL SIMILARLY BE DISTRIBUTED TO SHAREHOLDERS, NOT MORE THAN 90 DAYS AFTER THE CLOSE OF EACH
OF THE FUNDS FISCAL YEARS, CERTIFIED AUDITED FINANCIAL STATEMENTS AND (IN NO EVENT LATER THAN
MARCH 15 OF THE IMMEDIATELY FOLLOWING YEAR) THE TAX INFORMATION RELATING TO SHARES OF THE FUND
NECESSARY FOR THE PREPARATION OF SHAREHOLDERS ANNUAL FEDERAL INCOME TAX RETURNS.
THE DIVISION OF INVESTMENT MANAGEMENT OF THE SECURITIES AND EXCHANGE COMMISSION REQUIRES THAT THE
FOLLOWING STATEMENT BE PROMINENTLY SET FORTH HEREIN: NEITHER GREENHAVEN CONTINUOUS COMMODITY INDEX
FUND NOR GREENHAVEN CONTINUOUS COMMODITY INDEX MASTER FUND IS A MUTUAL FUND OR ANY OTHER TYPE OF
INVESTMENT COMPANY WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND IS NOT
SUBJECT TO REGULATION THEREUNDER.
AUTHORIZED PARTICIPANTS MAY BE REQUIRED TO DELIVER A PROSPECTUS WHEN TRANSACTING IN SHARES. SEE
PLAN OF DISTRIBUTION.
iii
GREENHAVEN CONTINUOUS COMMODITY INDEX FUND
TABLE OF CONTENTS
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iv
SUMMARY
This summary of all material information provided in this Prospectus is intended for quick
reference only. The remainder of this Prospectus contains more detailed information; you should
read the entire Prospectus, including all exhibits to the Prospectus, before deciding to invest in
any Shares. This Prospectus is intended to be used beginning April
, 2010.
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The Fund; The Master Fund
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The GreenHaven Continuous Commodity Index Fund (the
Fund) was formed as a Delaware statutory trust on
October 27, 2006. The Fund issues common units of
beneficial interest, or Shares, which represent
units of fractional undivided beneficial interest in
and ownership of the Fund. The term of the Fund is
perpetual (unless terminated earlier in certain
circumstances). |
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The GreenHaven Continuous Commodity Index Master
Fund (the Master Fund), was formed as a Delaware
statutory trust on October 27, 2006. The Master Fund
issues common units of beneficial interest, or
Master Fund Units, which represent units of
fractional undivided beneficial interest in and
ownership of the Master Fund. The term of the Master
Fund is perpetual (unless terminated earlier in
certain circumstances). |
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The principal offices of the Fund and the Master
Fund are located at c/o GreenHaven Commodity
Services LLC (the Managing Owner), 3340 Peachtree
Road, Suite 1910, Atlanta, Georgia 30326, and its
telephone number is (404) 239-7938. |
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The Fund invests substantially all of its assets in
the Master Fund in a master-feeder structure. The
Fund holds no investment assets other than Master
Fund Units. The Master Fund is wholly-owned by the
Fund and the Managing Owner. Each Share issued by
the Fund correlate with a Master Fund Unit issued by
the Master Fund and held by the Fund. |
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Under the Trust Declaration of the Fund and the
Master Fund, CSC Trust Company of Delaware, the
Trustee of the Fund and the Master Fund (the
Trustee) has delegated to the Managing Owner
certain of the power and authority to manage the
business and affairs of the Fund and the Master Fund
and has duties and liabilities to the Fund and the
Master Fund. The duties of the Trustee are limited
to (i) accepting legal process served on the Trust
in the State of Delaware, (ii) the execution of any
certificates required to be filed with the Secretary
of State of the State of Delaware which the Trustee
is required to executed under Delaware law, and
(iii) any other duties specifically allocated to the
Trustee in the Trust Agreement. |
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NYSE-ARCA Listing
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The Shares of the Fund are listed on the NYSE-ARCA
under the symbol GCC. Secondary market purchases
and sales of Shares are subject to ordinary
brokerage commissions and charges. |
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Prior to the offering contained in this Prospectus,
the Fund has issued under its previous registration
statement (available on the SECs website at
http://www.sec.gov) up to 4 million Shares. |
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This offering is for an additional 21,000,000 Shares. |
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The Funds CUSIP number is: 395258 106. |
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Purchases and Sales in
the Secondary Market, on
the NYSE-ARCA
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The Shares of the Fund trade on the NYSE-ARCA like
any other equity security. The Shares are intended
to provide investment results that generally
correspond to the performance of the Index. |
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Baskets of Shares may be created or redeemed only by
Authorized Participants. Baskets are created when
there is sufficient demand for Shares that the
market price per Share is at a premium to the net
asset value per Share. Authorized Participants will
then sell such Shares, which will be listed on the
NYSE-ARCA, to the public at prices that are expected
to reflect, among other factors, the trading price
of the Shares on the NYSE-ARCA and the supply of and
demand for Shares at the time of sale and are
expected to fall between net asset value and the
trading price of the Shares on the NYSE-ARCA at the
time of sale. Similarly, it is expected that Baskets
will be redeemed when the market price per Share is
at a discount to the net asset value per Share.
Retail investors seeking to purchase or sell Shares
on any day are expected to effect such transactions
in the secondary market, on the NYSE-ARCA, at the
market price per Share, rather than in connection
with the creation or redemption of Baskets. |
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The market price of the Shares may not be identical
to the net asset value per Share, but these
valuations are expected to be very close. Investors
are able to use the indicative intra-day value of
the Fund to determine if they want to purchase on
the secondary market via the NYSE-ARCA. |
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The indicative intra-day value of the Fund is
provided by NYSE-ARCA every fifteen (15) seconds
throughout each trading day and disseminated on the
Managing Owners website, www.greenhavenfunds.com
and on the NYSE-ARCAs website www.nysearca.com. The
Managing Owner publishes the net asset value of the
Fund and the net asset value per Share daily on its
website. |
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Purchases or sales of Shares may be subject to
customary brokerage commissions. Investors are
encouraged to review the terms of their brokerage
accounts for details on applicable charges. |
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The Index
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Thomson Reuters America LLC is the owner, publisher,
and custodian of the Continuous Commodity Total
Return Index (CCI-TR or Index) which represents a
total return version of the underlying commodities
of the ninth revision (as of 1995-2005) of the
original Commodity Research Bureau (CRB) Index. The
CCI-TR is not the CRB Index. The base year of the
Continuous Commodity Index (CCI) is 1967 with a
starting value of 100. The base year for the CCI-TR
is 1982, with a starting value of 100. The Index was
originally calculated to produce a ratio of the
current price to the base year average price, which
is 1967. |
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The Continuous Commodity Index is not the
Reuters/Jeffries CRB Index (the CRB Index). The
Continuous Commodity Index continued to be
calculated using the ninth revision formula; the
ninth revision is not the most recent revision of
the CRB Index. In 2005, the CRB Index was revised
for a tenth time, and is currently known as the
Thomson Reuters/Jefferies CRB Index. The Funds are
based on a total return version of the underlying
commodities of the Continuous Commodity Index. The
Continuous Commodity Index, both as it existed in
1995-2005 and in its current form as a basis for
Fund performance, is materially different from the
current CRB Index. |
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The sponsor of the Index is the Managing Owner,
which has an exclusive license to develop and create
U.S. exchange traded funds with Thomson Reuters
America LLC which developed, owns and operates the
CCI-TR. The Continuous Commodity Index is a
trademark of Thomson Reuters America LLC. |
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The CCI-TR takes into account the economics of
rolling listed commodity futures forward to avoid
delivery and maintain exposure in liquid contracts. |
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The Index is notionally composed of commodity
futures contracts on physical commodities. Unlike
equities, which typically entitle the holder to a
continuing stake in a corporation, commodity futures
contracts normally specify a certain date for the
delivery of the underlying physical commodity. In
order to avoid the delivery process and maintain a
long futures position, contracts nearing a delivery
date must be sold and contracts that have not yet
reached delivery must be purchased. This process is
known as rolling a futures position. An index,
such as the CCI-TR, is commonly known as a rolling
index because it replaces futures contracts as they
approach maturity by notionally selling and
purchasing off-setting contracts to avoid delivery
and maintain exposure in liquid contracts. |
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The CCI-TR is calculated to offer investors a
representation of the investable returns that an
investor should expect to receive by attempting to
replicate the CCI index by buying the respective
commodity futures and collateralizing their
investment with United States Government securities,
(i.e., 90 day T-Bills). |
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Calculating Total Return: The CCI-TR is calculated
daily by Thomson Reuters America LLC. The
calculation of this index is comprised of the daily
changes in the CCI spot index, the roll yield that
is implied by rolling selected commodity futures
contracts forward to the next defined commodity
contract on specific dates, (Roll Dates) and the 90
day T-Bill yield for a single day. |
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Roll Dates. In order to maintain a fair
representation of the liquid commodity contracts and
avoid the delivery of exchange deliverable contracts
included in the index, the CCI-TR rolls all near
month contracts in the index forward on the second
Friday of January, February, April, June, August and
November. |
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The Index of 17 commodity futures prices offers
investors a broad measure of overall commodity price
trends because of the diverse nature of the 17
commodities of which it is comprised and because it
incorporates an average of prices across time within
each commodity. The current commodities that
comprise the Index are: Corn, Wheat, Soybeans, Live
Cattle, Lean Hogs, Gold, Silver, Copper, Cocoa,
Coffee, Sugar #11, Cotton, Orange Juice, Platinum,
Crude Oil, Heating Oil and Natural Gas. |
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The Index is weighted evenly among the 17
constituent commodities, which is intended to reduce
the impact a single contract month or a single
commodity may have on the Index. |
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Values of the underlying Index are computed by
Thomson Reuters America, LLC, and disseminated by
NYSE-ARCA every fifteen (15) seconds during the
trading day. Only settlement and last-sale prices
are used in the Indexs calculation, bids and offers
are not recognized including limit-bid and
limit-offer price quotes. Where no last-sale price
exists, typically in the more deferred contract
months, the previous days settlement price is used.
This means that the underlying Index may lag its
theoretical value. This tendency to lag is evident
at the end of the day when the Index value is based
on the settlement prices of the component
commodities, and explains why the underlying Index
often closes at or near the high or low for the day. |
vii
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Investment Objective
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The investment objective of the Fund, through its
investment in the Master Fund, is to reflect the
performance of the Index, over time, less the
expenses of the Fund and the Master Funds overall
operations. |
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The Master Fund pursues its investment objective by
investing in a portfolio of exchange-traded futures
on the commodities comprising the Index, or the
Index Commodities, and investing in United States
Treasury securities. |
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The Master Fund holds a portfolio of futures
contracts on the Index Commodities as well as cash
and United States Treasury securities for deposit
with the Master Funds Commodity Broker as margin
and other high credit quality short-term fixed
income securities. The Master Funds portfolio is
traded with a view to reflecting the performance of
the Index over time, whether the Index is rising,
falling or flat over any particular period. The
Master Fund is not managed by traditional methods,
which typically involve effecting changes in the
composition of the Master Funds portfolio on the
basis of judgments relating to economic, financial
and market considerations with a view to obtaining
positive results under all market conditions. To
maintain the correspondence between the composition
and weightings of the Index Commodities comprising
the Index, the Managing Owner adjusts the Portfolio
on a daily basis to conform to periodic changes in
the identity and/or relative weighting of the Index
Commodities. The Managing Owner aggregates certain
of the adjustments and makes changes to the
portfolio at least monthly or more frequently in the
case of significant changes to the Index. |
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There can be no assurance that the Master Fund, or
indirectly the Fund, will achieve its investment
objective or avoid substantial losses. The Master
Fund has commenced trading and has performance
history limited to its inception on January 24,
2008. The value of the Shares is expected to
fluctuate generally in relation to changes in the
value of the Master Fund Units |
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Breakeven Amounts
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The estimated amount of all fees and expenses which
are anticipated to be incurred by a new investor in
Shares of the Fund during the first twelve (12)
months of investment is 1.09% per annum of the net
asset value in respect of Shares purchased plus the
amount of any commissions charged by the investors
broker. Interest income is expected to be
approximately 0.14% per annum, based upon the
current yield on the three month U.S. Treasury bill.
Consequently, the Fund is expected to break even in
twelve (12) months provided that it generates gains
of 0.95% per annum in respect of Shares purchased
plus the amount of any commissions charged by the
investors broker. The brokerage commission rates an
investor may pay to the investors broker in
connection with a purchase of Shares during the
continuous offering period will vary from investor
to investor. |
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Investment Risks
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AN INVESTMENT IN SHARES IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD BE AWARE THAT: |
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You could lose a substantial portion or all of your investment. |
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Commodity trading is highly speculative and the Index, on which
the Master Funds trading is based, is likely to be volatile and
could suffer from periods of prolonged decline in value. |
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The Fund, the Master Fund and the Managing Owner do not have
operating history prior to the commencement of trading on January
24, 2008. |
viii
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The Fund, Master Fund and the Managing Owner are subject to
numerous conflicts of interest, including those arising from the
fact that the Managing Owner may also serve as the managing owner
and commodity pool operator for other commodity pools and investment
funds, and may sponsor others. |
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The Fund and the Master Fund are subject to the fees and expenses
described herein and will be successful only if significant losses
are avoided. To break even in one year on Shares purchased the Fund
must generate, on an annual basis, gains in excess of 0.95%. |
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Past performance of the Index is not necessarily indicative of
future results; all or substantially all of an investment in the
Fund could be lost. |
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The trading of the Master Fund takes place in very volatile
markets. |
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The Commodity Futures Trading Commission (the CFTC) and
commodity exchange rules impose speculative position limits on
market participants trading in certain commodities included in the
Index. If position limits are applied to the Master Fund, the Funds
ability to issue new Baskets, or the Master Funds ability to
reinvest income in these additional futures contracts may be limited
to the extent these activities would cause the Master Fund to exceed
applicable position limits. Limiting the size of the Fund may affect
the correlation between the price of the Shares, as traded on
NYSE-ARCA, and the net asset value of the Fund. That is, the
inability to create additional Baskets could result in Shares
trading at a premium or discount to net asset value of the Fund. |
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Performance may not track the Index during particular periods or
over the long term. Such tracking error may cause the Fund to
outperform or underperform the Index. |
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See THE RISKS YOU FACE beginning on page 1 for additional risks
you should consider. |
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The Trustee
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CSC Trust Company of Delaware (the Trustee) is the sole trustee of
the Fund and the Master Fund. The Trustee delegated to the Managing
Owner certain of the power and authority to manage the business and
affairs of the Fund and the Master Fund and has duties and
liabilities to the Fund and the Master Fund. |
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The Managing Owner
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GreenHaven Commodity Services LLC, a Delaware limited liability
company, serves as Managing Owner of the Fund and the Master Fund.
The Managing Owner was formed on October 18, 2006. Neither the
Managing Owner nor any of its trading principals has ever before
operated a commodity pool. The Managing Owner serves as the
commodity pool operator and commodity trading advisor of the Fund
and the Master Fund. The Managing Owner is registered as a commodity
pool operator and commodity trading advisor with the CFTC and is a
member of the National Futures Association (the NFA). As a
registered commodity pool operator and commodity trading advisor,
with respect to both the Fund and the Master Fund, the Managing
Owner is required to comply with various regulatory requirements
under the Commodity Exchange Act and the rules and regulations of
the CFTC and the NFA, including investor protection requirements,
antifraud prohibitions, disclosure requirements, and reporting and
recordkeeping requirements. The Managing Owner is also subject to
periodic inspections and audits by the CFTC and the NFA. |
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The Shares are not deposits or other obligations of the Managing
Owner, the Trustee or any of their respective subsidiaries or
affiliates or any other bank, are not guaranteed by the Managing
Owner, the Trustee or any of their respective subsidiaries or
affiliates or any other bank and are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency. An
investment in the Shares is speculative and involves a high degree
of risk. |
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The principal office of the Managing Owner is located at 3340
Peachtree Road, Suite 1910, Atlanta, Georgia 30326. The telephone
number of the Managing Owner is (404) 239-7938. |
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The Commodity Broker
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A variety of executing brokers may execute futures transactions on
behalf of the Master Fund. The Managing Owner has designated Morgan
Stanley & Co. Incorporated (MS&Co.), as the Master Funds
commodity broker (the Commodity Broker), to which the executing
brokers give-up all such transactions. In its capacity as clearing
broker, the Commodity Broker may execute and clear each of the
Master Funds futures transactions and perform certain
administrative services for the Master Fund. The Commodity Broker is
registered with the CFTC as futures commission merchants and are
members of the NFA in such capacity. |
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The Master Fund pays to the Commodity Broker all brokerage
commissions, including applicable exchange fees, NFA fees, give-up
fees, pit brokerage fees and other transaction related fees and
expenses charged in connection with trading activities. On average,
total charges paid to the Commodity Broker are expected to be less
than $20 per round-turn trade, although the Commodity Brokers
brokerage commissions and trading fees are determined on a
contract-by-contract basis. The Managing Owner does not expect
brokerage commissions and fees to exceed 0.24% of the net asset
value of the Master Fund in any year, although the actual amount of
brokerage commissions and fees in any year may be greater. |
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The Administrator
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The Managing Owner, on behalf of the Fund and the Master Fund, has
appointed The Bank of New York, N.A. as the administrator of the
Fund and the Master Fund and has entered into an Administration
Agreement in connection therewith. The Bank of New York, N.A. serves
as custodian (the Custodian), of the Fund and has entered into a
Global Custody Agreement, or Custody Agreement, in connection
therewith. The Bank of New York serves as the transfer agent (the
Transfer Agent), of the Fund and has entered into a Transfer
Agency and Service Agreement in connection therewith. |
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The Bank of New York, a banking corporation organized under the laws
of the State of New York with trust powers, has an office at One
Wall Street, New York, New York 10286. The Bank of New York is
subject to supervision by the New York State Banking Department and
the Board of Governors of the Federal Reserve System. Information
regarding the net asset value of the Fund, creation and redemption
transaction fees and the names of the parties that have executed a
participant agreement may be obtained from the Administrator by
calling the following number: (718) 315-4412. A copy of the
Administration Agreement is available for inspection at the Funds
trust office identified above. |
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Pursuant to the Administration Agreement, the Administrator will
perform or supervise the performance of services necessary for the
operation and administration of the Fund and the Master Fund (other
than making investment decisions), including net asset value
calculations, accounting and other fund administrative services. The
Administrator will retain |
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certain financial books and records,
including: fund accounting records, ledgers with respect to assets,
liabilities, capital, income and expenses, the registrar, transfer
journals and related details and trading and related documents
received from futures commission merchants. |
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The Administration Agreement will continue in effect unless
terminated on at least ninety (90) days prior written notice by
either party to the other party. Notwithstanding the foregoing, the
Administrator may terminate the Administration Agreement upon thirty
(30) days prior written notice if the Fund and/or Master Fund has
materially failed to perform its obligations under the
Administration Agreement. |
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The Administration Agreement provides for the exculpation and
indemnification of the Administrator from and against any costs,
expenses, damages, liabilities or claims (other than those resulting
from the Administrators own bad faith, negligence or willful
misconduct) which may be imposed on, incurred by or asserted against
the Administrator in performing its obligations or duties under the
Administration Agreement. Key terms of the Administration Agreement
are summarized under the heading Material Contracts. |
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The Administrators monthly fees are paid by the Managing Owner. |
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The Administrator and any of its affiliates may from time-to-time
purchase or sell Shares for their own account, as agent for their
customers and for accounts over which they exercise investment
discretion. |
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The Administrator also will receive a transaction processing fee in
connection with orders from Authorized Participants to create or
redeem Baskets in the amount of $500 per order. These transaction
processing fees are paid directly by the Authorized Participants and
not by the Fund or the Master Fund. |
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The Distributor
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The Managing Owner, on behalf of the Fund and the Master Fund, has
appointed ALPS Distributors, Inc. (the Distributor), to assist the
Managing Owner and the Administrator with certain functions and
duties relating to the creation and redemption of Baskets, including
receiving and processing orders from Authorized Participants to
create and redeem Baskets, coordinating the processing of such
orders and related functions and duties. The Distributor will retain
all marketing materials and Basket creation and redemption books and
records at c/o ALPS Distributors, Inc., 1290 Broadway, Suite 1100,
Denver, CO 80203; Telephone number (303) 623-2577. Investors may
contact the Distributor toll-free in the U.S. at (800) 320-2577. The
Fund has entered into a Distribution Services Agreement with the
Distributor. The Distributor is affiliated with ALPS Mutual Fund
Services, Inc., a Denver-based service provider of administration,
fund accounting, transfer agency and shareholder services for mutual
funds, closed-end funds and exchange-traded funds, with over 100,000
shareholder accounts and approximately $10 billion in client mutual
fund assets under administration. The Distributor provides
distribution services and has approximately $120 billion in client
assets under distribution. |
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The Managing Owner will pay the Distributor approximately $50,000
per annum, plus any fees or disbursements incurred by the
Distributor in connection with the performance by the Distributor of
its duties on behalf of the Fund. The Distributor has, however,
waived the $50,000 annual fee until the end of the current term of
the Distribution Services Agreement. |
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xi
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The Marketing Agent
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The Managing Owner, on behalf of the Fund and Master Fund, has
appointed ALPS Distributors, Inc., as a marketing agent (the
Marketing Agent) to the Fund and Master Fund. The Marketing Agent
will provide assistance to the Managing Owner with certain function
and duties such as providing various educational and marketing
activities regarding the Fund, primarily in the secondary trading
market, which activities include, but are not limited to,
communicating the Funds name, characteristics, uses, benefits, and
risks, consistent with the prospectus, providing support to national
account managers and wholesalers filed activities, assisting
national account managers in implementing sales strategy. The
Marketing Agent will not open or maintain customer accounts or
handle orders for the Fund. The Marketing Agent will engage in
public seminars, road shows, conferences, media interviews, field
incoming telephone 800 number calls and distribute sales
literature and other communications (including electronic media)
regarding the Fund. Investors may contact the Marketing Agent,
toll-free in the U.S. at (800) 320-2577. |
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The Managing Owner, out of the Management Fee (defined below), pays
the Marketing Agent for performing its duties on behalf of the Fund
and the Master fund. |
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Authorized Participants
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Baskets may be created or redeemed only by Authorized Participants.
Each Authorized Participant must (1) be a registered broker-dealer
or other securities market participant such as a bank or other
financial institution which is not required to register as a
broker-dealer to engage in securities transactions, (2) be a
participant in the Depository Trust Company (DTC), and (3) have
entered into a participant agreement with the Fund and the Managing
Owner, or a Participant Agreement. The Participant Agreement sets
forth the procedures for the creation and redemption of Baskets of
Shares and for the delivery of cash required for such creations or
redemptions. A list of the current Authorized Participants can be
obtained from the Administrator. A similar agreement between the
Fund and the Master Fund sets forth the procedures for the creation
and redemption of Master Unit Baskets by the Fund. See Creation and
Redemption of Shares for more details. |
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Creation and Redemption of Shares
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The Fund will create and redeem Shares from time-to-time, but only
in one or more Baskets. A Basket is a block of 50,000 Shares.
Baskets may be created or redeemed only by Authorized Participants.
Except when aggregated in Baskets, the Shares are not redeemable
securities. Authorized Participants pay a transaction fee of $500 to
the Fund in connection with each order to create or redeem a Basket
of Shares. Authorized Participants may sell the Shares included in
the Baskets they purchase from the Fund to other investors. |
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The Master Fund will create and redeem Master Fund Units from
time-to-time, but only in one or more Master Unit Baskets. A Master
Unit Basket is a block of 50,000 Master Fund Units. Master Unit
Baskets may be created or redeemed only by the Fund. The Fund pays a
transaction fee of $500 to the Master Fund in connection with each
order to create or redeem a Master Unit Basket of Master Fund Units.
The Master Fund will be wholly-owned by the Fund and the Managing
Owner. Each Share issued by the Fund will correlate with a Master
Fund Unit issued by the Master Fund and held by the Fund. See
Creation and Redemption of Shares for more details. |
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The Shares are evidenced by global certificates that the Fund issues
to DTC. The Shares are available only in book-entry form.
Shareholders may hold their Shares through DTC, if they are
participants in DTC, or indirectly through entities that are
participants in DTC. The Master Fund Units are uncertificated and
held by the Fund in book-entry form. |
xii
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Continuous Offering Period
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Since trading of the Fund commenced, the Fund issues Shares in
Baskets to Authorized Participants continuously as of noon (12:00
pm), New York time, on the business day immediately following the
date on which a valid order to create a Basket is accepted by the
Fund, at the net asset value of 50,000 Shares as of the closing time
of NYSE-ARCA or the last to close of the exchanges of which the
Index Commodities are traded, whichever is later, on the date that a
valid order to create a Basket is accepted by the Fund. The Managing
Owner may terminate the continuous offering at any time. |
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The Master Fund issues Master Fund Units in Master Unit Baskets to
the Fund continuously as of noon, New York time, on the business day
immediately following the date on which a valid order to create a
Master Unit Basket is accepted by the Master Fund, at the net asset
value of 50,000 Master Fund Units as of the closing time of
NYSE-ARCA or the last to close of the exchanges on which the Index
Commodities are traded, whichever is later, on the date that a valid
order to create a Master Unit Basket is accepted by the Master Fund.
Each Share issued by the Fund will correlate with a Master Fund Unit
issued by the Master Fund and held by the Fund. |
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Net Asset Value
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Net Asset Value means the total assets of the Master Fund
including, but not limited to, all cash and cash equivalents or
other debt securities less total liabilities of the Master Fund,
each determined on the basis of generally accepted accounting
principles in the United States, consistently applied under the
accrual method of accounting. |
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Net Asset Value per Master Fund Unit is the net asset value of the
Master Fund divided by the number of outstanding Master Fund Units.
Because there will be a one-to-one correlation between Shares and
Master Fund Units and the Master Fund has assumed all liabilities of
the Fund, the net asset value per Share and the net asset value per
Master Fund Unit will be equal. See Certain Material Terms of the
Trust Declaration Net Asset Value for more details. |
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Segregated Accounts/ Interest
Income
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The proceeds of the offerings are deposited in cash in a segregated
account in the name of the Master Fund at the Commodity Brokers (or
other eligible financial institution, as applicable) in accordance
with CFTC investor protection and segregation requirements. The
Master Fund is credited with one hundred percent (100%) of the
interest earned on its average net assets on deposit with the
Commodity Brokers or such other financial institution each week. In
an attempt to increase interest income earned, the Managing Owner
expects to invest the Master Funds non-margin assets in United
States government securities (which include any security issued or
guaranteed as to principal or interest by the United States), or any
certificate of deposit for any of the foregoing, including United
States Treasury bonds, United States Treasury bills and issues of
agencies of the United States government, and certain cash items
such as money market funds, certificates of deposit (under nine
months) and time deposits or other instruments permitted by
applicable rules and regulations. Currently, the rate of interest
expected to be earned is estimated to be 0.14% per annum, based upon
the current yield on the three (3) month U.S. Treasury bill. This
interest income is used to pay or offset the expenses of the Fund
and the Master Fund. See Fees and Expenses for more details. |
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Fees and Expenses
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Upfront Selling Commission. No upfront selling commissions are
charged during the continuous offering period, although it is
expected that investors will be charged a customary commission by
their brokers in connection with purchases of Shares that will vary
from investor to |
xiii
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investor. Investors are encouraged to review the
terms of their brokerage accounts for details on applicable charges.
Also, the excess, if any, of the price at which an Authorized
Participant sells a Share over the price paid by such Authorized
Participant in connection with the creation of such Share in a
Basket may be deemed to be underwriting compensation. |
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Management Fee. The Master Fund pays the Managing Owner a management
fee (the Management Fee), monthly in arrears, in an amount equal
to 0.85% per annum of the average amount of daily net assets of the
Master Fund. No separate management fee will be paid by the Fund. |
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Organization and Offering Expenses. Expenses incurred in connection
with organizing the Fund and the Master Fund and the offering of the
Shares for the Funds initial continuous offering period commencing
on January 23, 2008 were paid by GreenHaven, LLC, a limited
liability company organized in the State of Georgia, which is the
sole member of the Managing Owner. On May 14, 2009 the Fund and
Master Fund registered an additional 21,000,000 units for issuance
in connection with this offering with regulatory agencies. The
Managing Owner has paid for these expenses in connection with this
current prospectus. Neither GreenHaven, LLC nor the Managing Owner
will be reimbursed in connection with the payment of the
organizational and offering expenses. The Funds are not required to
reimburse GreenHaven, LLC or its affiliates or the Company or its
affiliates for any such costs incurred for any related period. |
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Brokerage Commissions and Fees. The Master Fund pays to the
Commodity Broker all brokerage commissions, including applicable
exchange fees, NFA fees, give-up fees, pit brokerage fees and other
transaction related fees and expenses charged in connection with
trading activities. On average, total charges paid to the Commodity
Broker are expected to be less than $20 per round-turn trade,
although the Commodity Brokers brokerage commissions and trading
fees are determined on a contract-by-contract basis. The Managing
Owner does not expect brokerage commissions and fees to exceed 0.24%
of the net asset value of the Master Fund in any year, although the
actual amount of brokerage commissions and fees in any year may be
greater. |
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Routine Operational Administrative and Other Ordinary Expenses. The
Managing Owner assumes all of the routine operational,
administrative and other ordinary expenses of the Fund and the
Master Fund, including, but not limited to, the fees and expenses of
the Trustee, legal and accounting fees and expenses, tax preparation
expenses, filing fees, and printing, mailing and duplication costs. |
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Extraordinary Fees and Expenses. The Master Fund pays all the
extraordinary fees and expenses, if any, of the Fund and the Master
Fund. Such extraordinary fees and expenses, by their nature, are
unpredictable in terms of timing and amount. |
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Management Fee and Ongoing Expenses to be Paid First Out of Interest
Income. The Management Fee and ordinary ongoing expenses of the Fund
and the Master Fund are paid first out of interest income from the
Master Funds holdings of U.S. Treasury bills and other high credit
quality short-term fixed income securities on deposit with the
Commodity Broker as margin or otherwise. It is expected that such
interest income may be sufficient to cover a significant portion of
the Management Fee and ordinary ongoing expenses of the Fund and the
Master Fund. |
xiv
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Distributions
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The Master Fund will make distributions at the discretion of the
Managing Owner. Because the Managing Owner does not presently intend
to make ongoing distributions (but may do so from time-to-time in
its sole discretion), your income tax liability for your pro rata
share of the Funds income and gain on the Master Fund Units held
will, in all likelihood, exceed any distributions you receive. |
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Limitation of Liabilities
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You cannot lose more than your investment in the Shares.
Shareholders are entitled to limitation on liability equivalent to
the limitation on liability enjoyed by stockholders of a Delaware
business corporation for profit. |
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Fiscal Year
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The Funds fiscal year ends on December 31 of each year. |
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Financial Information
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The Fund and the Master Fund file quarterly and annual reports with
the SEC. These can be accessed at www.sec.gov or the Funds website
www.greenhavenfunds.com, free of charge. |
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U.S. Federal Income Tax
Considerations
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Subject to the discussion below in Material U.S. Federal Income Tax
Considerations, the Fund and the Master Fund are each classified as
partnerships for United States federal income tax purposes.
Accordingly, neither the Master Fund nor the Fund will incur United
States federal income tax liability; rather, each beneficial owner
of the Funds Shares is required to take into account its allocable
share of the Master Funds income, gain, loss, deduction and other
items for the Master Funds taxable year ending with or within its
taxable year. |
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Additionally, please refer to the Material U.S. Federal Income Tax
Considerations section below for information on the potential
United States federal income tax consequences of the purchase,
ownership and disposition of Shares. |
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Reports to Shareholders
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The Managing Owner will furnish the Shareholders with annual reports
as required by the rules and regulations of the SEC as well as with
those reports required by the CFTC and the NFA, including, but not
limited to, an annual audited financial statement certified by
independent public accountants and any other reports required by any
other governmental authority that has jurisdiction over the
activities of the Fund and the Master Fund. Shareholders also will
be provided with appropriate information to permit them to file
their United States federal and state income tax returns on a timely
basis. |
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Cautionary Note Regarding
Forward-Looking Statements
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This Prospectus includes forward-looking statements that reflect the
Managing Owners current expectations about the future results,
performance, prospects and opportunities of the Fund and the Master
Fund. The Managing Owner has tried to identify these forward-looking
statements by using words such as may, will, expect,
anticipate, believe, intend, should, estimate or the
negative of those terms or similar expressions. These
forward-looking statements are based on information currently
available to the Managing Owner and are subject to a number of
risks, uncertainties and other factors, both known, such as those
described in Risk Factors and elsewhere in this Prospectus, and
unknown, that could cause the actual results, performance, prospects
or opportunities of the Fund and the Master Fund to differ
materially from those expressed in, or implied by, these
forward-looking statements. |
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You should not place undue reliance on any forward-looking
statements. Except as expressly required by the federal securities
laws, the Managing Owner undertakes no obligation to publicly update
or revise any forward-looking statements or the risks, uncertainties
or other factors described in this Prospectus, as a result of new
information, future events or changed circumstances or for any other
reason after the date of this Prospectus. |
xv
THE SHARES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
THE RISKS YOU FACE
You could lose money investing in the Shares. You should consider carefully the risks described
below before making an investment decision. You should also refer to the other information included
in this Prospectus.
The Value of the Shares Relates Directly to the Value of the Commodity Futures and Other Assets
Held by the Master Fund and Fluctuations in the Price of These Assets Could Materially Adversely
Affect an Investment in the Shares.
The Shares are designed to reflect, as closely as possible, the performance of the Index through
the Master Funds portfolio of exchange-traded futures on the Index Commodities. The value of the
Shares relate directly to the value of the portfolio, less the liabilities (including estimated
accrued but unpaid expenses) of the Fund and the Master Fund. The price of the Index Commodities
may fluctuate widely based on many factors. Some of those factors are:
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changing supply and demand relationships; |
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general economic activities and conditions; |
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weather and other environmental conditions; |
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acts of God; |
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agricultural, fiscal, monetary and exchange control programs and policies of
governments; |
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national and international political and economic events and policies; |
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changes in rates of inflation; or |
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the general emotions and psychology of the marketplace, which at times can be volatile
and unrelated to other more tangible factors. |
In addition to the factors set forth above, each commodity has risks that are inherent in the
investment in such commodity.
Metals Commodities: Price movements in futures contracts held by the Master Fund, in metals
commodities such as gold, silver, platinum and copper are affected by many specific other factors.
Some of these metal specific factors include, but are not limited to:
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A change in economic conditions, such as a recession, can adversely affect the price of
both industrial and precious metals. An economic downturn may have a negative impact on the
usage and demand of metals which may result in a loss for the Master Fund. |
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A sudden shift in political conditions of the worlds leading metal producers may have
a negative effect on the global pricing of metals. |
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An increase in the hedging of precious metals by producers could cause the price of
precious metals to decline. |
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Changes in global supply and demand for industrial and precious metals. |
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The price and quantity of imports and exports of industrial and precious metals. |
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Technological advances in the processing and mining of industrial and precious metals. |
1
Agricultural Commodities: Price movements in futures contracts held by the Master Fund in
agricultural commodities, such as wheat, corn and soybeans, are affected by many factors. Some of
these agricultural specific factors include, but are not limited to:
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Farmer planting decisions, general economic, market and regulatory factors all
influence the price of agricultural commodities. |
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Weather conditions, including hurricanes, tornadoes, storms and droughts, may have a
material adverse effect on crops, live cattle, live hogs and lumber, which may result in
significant fluctuations in prices in such commodities. |
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An increase in the hedging of agricultural commodities by producers could cause the
price of agricultural commodities to decline. |
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Changes in global supply and demand for agriculture products. |
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The price and quantity of imports and exports of agricultural commodities. |
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Political conditions, including embargoes and war, in or affecting agricultural
production, imports and exports. |
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Technological advances in agricultural production. |
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The price and availability of alternative agricultural commodities. |
Energy Commodities: Price movements in futures contracts held by the Master Fund in energy
commodities, such as crude oil, heating oil and natural gas, are subject to risks due to frequent
and often substantial fluctuations in energy commodity prices. In the past, the prices of natural
gas and crude oil have been extremely volatile, and the Managing Owner expects this volatility to
continue. The markets and prices for energy commodities are affected by many factors. Some of those
factors include, but are not limited to:
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Changes in global supply and demand for oil and natural gas. |
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The price and quantity of imports and exports of oil and natural gas. |
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Political conditions, including embargoes and war, in or affecting other oil producing
activities. |
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The level of global oil and natural gas exploration and production. |
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An increase in the hedging of energy commodities by producers could cause the price of
energy commodities to decline. |
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The level of global oil and natural gas inventories, production or pricing. |
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Weather conditions. |
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Technological advances effecting energy consumption. |
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The price and availability of alternative fuels. |
None of these factors can be controlled by the Managing Owner. Even if current and correct
information as to substantially all factors are known or thought to be known, prices still will not
always react as predicted. The profitability of the Fund and the Master Fund will depend on whether
the Master Funds commodities portfolio increases in value over time. If the value increases, the
Fund will only be profitable if such increases exceed the fees and expenses of the Fund. If these
values do not increase, the Fund will not be profitable and will incur losses.
2
Net Asset Value May Not Always Correspond to Market Price and, as a Result, Baskets may be Created
or Redeemed at a Value that Differs from the Market Price of the Shares.
The net asset value per share of the Shares will change as fluctuations occur in the market value
of the Master Funds portfolio. Investors should be aware that the public trading price of a Basket
of Shares may be different from the net asset value of a Basket of Shares (i.e., Shares may trade
at a premium over, or a discount to, the net asset value of a Basket of Shares) and similarly the
public trading market price per Share may be different from the net asset value per Share.
Consequently, an Authorized Participant may be able to create or redeem a Basket of Shares at a
discount or a premium to net asset value. This price difference may be due, in large part, to the
fact that supply and demand forces are at work in the secondary trading market for Shares that is
closely related to, but not identical to, the same forces influencing the prices of the Index
Commodities trading individually or in the aggregate at any point in time. Investors also should
note that the size of the Fund in terms of total assets held may change substantially over time and
from time-to-time as Baskets are created and redeemed.
Authorized Participants or their clients or customers may have an opportunity to realize a profit
if they can purchase a Basket at a discount to the public trading price of the Shares or can redeem
a Basket at a premium over the public trading price of the Shares. The Managing Owner expects that
the exploitation of such arbitrage opportunities by Authorized Participants and their clients and
customers will tend to cause the public trading price to track net asset value per Share closely
over time.
Investors should be aware that if the Fund issues all its authorized shares it could have to cease
creating new Baskets. This could increase the possibility that the trading price of the Funds
shares may not accurately reflect the Index or the net asset value of the Fund. The Fund commenced
investment operations on January 23, 2008 with 4,000,000 shares registered. On March 26, 2009 the
Fund had issued all but one Basket of 50,000 shares under its previous registration statement and
had to cease creating new Baskets of shares. On May 14, 2009 the Fund registered an additional
21,000,000 shares and resumed creating new Baskets of shares. As of December 31, 2009, the Fund had
issued 4,800,000 shares of the 21,000,000 authorized related to this current offering.
Moreover, soon after new Baskets of Shares are created and sold under this Prospectus, there is a
possibility that the availability of newly created Shares may (or may not) affect the trading price
of the Shares already issued, and both current Shareholders and purchasers of newly created Shares
could be adversely affected by falling trading prices.
Your investment could suffer in the event that Thomson Reuters America LLC decides to terminate the
License Agreement between itself and the Managing Owner.
Thomson Reuters America LLC entered into a License Agreement with the Managing Owner whereby the
Managing Owner was granted an exclusive license with respect to the development and creation of
U.S. exchange traded funds. The amended license agreement granted to the Managing Owner has a term
ending September 30, 2010 and may be terminated under certain circumstances which could cause your
investment to decline significantly in value. In addition to that, because the license granted is
an exclusive license with respect to a limited type of investment product, a different product
could be created, which could also cause your investment to decline in value. If the license
expires and is not renewed or is terminated, or a competitive product is created, then the Managing
Owner would seek shareholder approval to either (i) liquidate the Master Fund and the Fund or (ii)
approve a different index to track for comparison purposes.
Your investment could suffer in the event that the Managing Owner creates another product under its
exclusive license agreement which directly competes with the Fund and Master Fund.
The License Agreement is between Thomson Reuters America LLC and the Managing Owner and not between
Thomson Reuters America LLC and the Fund or Master Fund. Therefore, it is possible that the
Managing Owner could create and manage another investment product that is substantially similar to
the Fund and the Master Fund. If this were to happen, then your investment could suffer.
Regulatory and Exchange Position Limits and Other Rules May Restrict the Creation of Baskets and
the Operation of the Master Fund.
CFTC and commodity exchange rules impose speculative position limits on market participants,
including the Master Fund, trading in certain agricultural commodities. These position limits
prohibit any person from holding a position of more than a specific number of such futures
contracts. The Managing Owner anticipates that these position limits will become more of an issue
when the Master Fund reaches close to US$2 billion, at which point the Managing Owner may either
prevent the issuance of additional creation units or may apply to the CFTC for relief from certain
position limits.
3
If the Master Fund applies and is unable to obtain such relief, the Funds ability to issue new
Baskets, or the Master Funds ability to reinvest income in these additional futures contracts, may
be limited to the extent these activities would cause the Master Fund to exceed applicable position
limits. Limiting the size of the Fund may affect the correlation between the price of the Shares,
as traded on NYSE-ARCA, and the net asset value of the Fund. That is, the inability to create
additional Baskets could result in Shares trading at a premium or discount to net asset value of
the Fund.
The Fund May Not Always Be Able Exactly to Replicate the Performance of the Index
It is possible that the Fund may not fully replicate the performance of the Index due to
disruptions in the markets for the Index Commodities or due to other extraordinary circumstances,
including, without limitation, the inability to create additional Baskets. In addition, the Fund is
not able to replicate exactly the performance of the Index because the total return generated by
the Master Fund is reduced by expenses and transaction costs, including those incurred in
connection with the Master Funds trading activities, and increased by interest income from the
Master Funds holdings of short-term high quality fixed income securities. Tracking the Index
requires rebalancing of the Master Funds portfolio and is dependent upon the skills of the
Managing Owner and its trading principals, among other factors.
If the Managing Owner permits the Fund to control commodity positions in excess of the value
of the Funds assets, you could lose all or substantially all of your investment.
Commodity pools trading positions in futures contracts or other commodity interests are typically
required to be secured by the deposit of margin funds that represent only a small percentage of a
futures contracts (or other commodity interests) entire market value. This feature permits
commodity pools to increase their exposure to assets by purchasing or selling futures contracts (or
other commodity interests) with an aggregate value in excess of the commodity pools assets. While
these actions can increase the pools profits, relatively small adverse movements in the price of
the pools futures contracts can cause significant or complete losses to the pool. While the
Managing Owner has not and does not intend to have exposure to futures contracts in excess of the
Funds collateral, the Fund is dependent upon the trading and management skills of the Managing
Owner to maintain the proper position sizes.
The Master Fund Is Not Actively Managed and Will Track the Index During Periods in which the Index
Is Flat or Declining as well as when the Index Is Rising.
The Master Fund is not actively managed by traditional methods. Therefore, if positions in any one
or more of the Index Commodities are declining in value, the Master Fund will not close out such
positions, except in connection with a change in the composition or weighting of the Index. The
Managing Owner will seek to cause the Net Asset Value to track the Index during periods in which
the Index is flat or declining as well as when the Index is rising.
The Exchange May Halt Trading in the Shares Which Would Adversely Impact Your Ability to Sell
Shares.
The Shares are listed for trading on NYSE-ARCA under the market symbol GCC. Trading in Shares may
be halted due to market conditions or, in light of NYSE-ARCA rules and procedures, for reasons
that, in the view of NYSE-ARCA, make trading in Shares inadvisable. In addition, trading is subject
to trading halts caused by extraordinary market volatility pursuant to circuit breaker rules that
require trading to be halted for a specified period based on a specified market decline in the
equity markets. There can be no assurance that the requirements necessary to maintain the listing
of the Shares will continue to be met or will remain unchanged. The Fund and the Master Fund will
be terminated if the Shares are delisted.
The Lack Of An Active Trading Market for the Shares May Result in Losses on Your Investment at the
Time of Disposition of Your Shares.
Although the Shares are listed and traded on NYSE-ARCA, there can be no guarantee that an active
trading market for the Shares will develop or be maintained. If you need to sell your Shares at a
time when no active market for them exists, the price you receive for your Shares, assuming that
you are able to sell them, will likely be lower than the price you would have received if an active
market did exist.
4
The Shares Are a Relatively New Securities Product and their Value Could Decrease if Unanticipated
Operational or Trading Problems Arise.
The mechanisms and procedures governing the creation, redemption and offering of the Shares are
recently developed securities products. Consequently, there may be unanticipated problems or issues
with respect to the mechanics of the operations and the trading of the Shares that could have a
material adverse effect on an investment in the Shares. In addition, although the Master Fund is
not actively managed by traditional methods, to the extent that unanticipated operational or
trading problems or issues arise, the Managing Owners past experience and qualifications may not
be suitable for solving these problems or issues.
As the Managing Owner and its Principals have Limited History of Operating an Investment Vehicle
like the Fund or the Master Fund, their Experience may be Inadequate or Unsuitable to Manage the
Fund or the Master Fund.
The Managing Owner was formed expressly to be the managing owner of the Fund and the Master Fund
and has limited history of past performance. The past performances of the Managing Owners
management in other positions are no indication of their ability to manage an investment vehicle
such as the Fund or the Master Fund. If the experience of the Managing Owner and its principals is
not adequate or suitable to manage an investment vehicle such as the Fund and the Master Fund, the
operations of the Fund and the Master Fund may be adversely affected.
You Should Not Rely on Past Performance in Deciding Whether to Buy Shares.
The Fund has a limited performance history upon which to evaluate your investment in the Fund.
Although past performance is not necessarily indicative of future results, if the Fund had a longer
performance history, such performance history might (or might not) provide you with more
information on which to evaluate an investment in the Fund. Likewise, the Index has a limited
history which might be indicative of the future Index results, or of the future performance of the
Fund. Therefore, you will have to make your decision to invest in the Fund on the basis of limited
information.
Price Volatility May Possibly Cause the Total Loss of Your Investment.
Futures contracts have a high degree of price variability and are subject to occasional rapid and
substantial changes. Consequently, you could lose all or substantially all of your investment in
the Fund.
Fees are Charged Regardless of Profitability and May Result in Depletion of Assets.
The Fund indirectly is subject to the fees and expenses described in this Prospectus which are
payable irrespective of profitability. Such fees and expenses include asset-based fees of up to
0.85% per annum. Additional charges include brokerage fees and operating expenses expected to be
approximately 0.24% per annum in the aggregate. The Fund is expected to earn interest income at an
annual rate of 0.14% per annum, based upon the current yield on a three month U.S. Treasury bill.
Consequently, it is expected that interest income will not exceed fees, and therefore the Fund will
need to have positive performance in order to break-even (net of fees and expenses). Consequently,
the expenses of the Master Fund could, over time, result in significant losses to your investment
in the Shares. You may never achieve profits, significant or otherwise.
Possible Illiquid Markets May Exacerbate Losses.
Futures positions cannot always be liquidated at the desired price. It is difficult to execute a
trade at a specific price when there is a relatively small volume of buy and sell orders in a
market. A market disruption, such as when foreign governments may take or be subject to political
actions which disrupt the markets in their currency or major exports, can also make it difficult to
liquidate a position. Such periods of illiquidity and the events that trigger them are difficult to
predict and there can be no assurance that the Managing Owner will be able to do so.
5
There can be no assurance that market illiquidity will not cause losses for the Fund. The large
size of the positions which the Master Fund may acquire on behalf of the Fund increases the risk of
illiquidity by both making its positions more difficult to liquidate and increasing the losses
incurred while trying to do so.
You May Be Adversely Affected by Redemption Orders that Are Subject To Postponement, Suspension Or
Rejection Under Certain Circumstances.
The Distributor may, in its discretion, and will when directed by the Managing Owner, suspend the
right of redemption or postpone the redemption settlement date (1) for any period during which an
emergency exists as a result of which the redemption distribution is not reasonably practicable, or
(2) for such other period as the Managing Owner determines to be necessary for the protection of
the Shareholders. In addition, the Distributor will reject a redemption order if the order is not
in proper form as described in the Participant Agreement or if the fulfillment of the order, in the
opinion of its counsel, might be unlawful. Any such postponement, suspension or rejection could
adversely affect a redeeming Authorized Participant. For example, the resulting delay may adversely
affect the value of the Authorized Participants redemption proceeds if the net asset value of the
Fund declines during the period of the delay. Under the Distribution Services Agreement, the
Managing Owner and the Distributor may disclaim any liability for any loss or damage that may
result from any such suspension or postponement.
Because the Master Fund will not Acquire Any Asset with Intrinsic Value, the Positive Performance
of Your Investment Is Wholly Dependent Upon an Equal and Offsetting Loss borne by unrelated
participants in the futures market.
Futures trading is a risk transfer economic activity. For every gain there is an equal and
offsetting loss rather than an opportunity to participate over time in general economic growth.
Unlike most alternative investments, an investment in Shares does not involve acquiring any asset
with intrinsic value. Overall stock and bond prices could rise significantly and the economy as a
whole prosper while the Shares may trade unprofitably.
Shareholders Will Not Have the Protections Associated With Ownership of Shares in an Investment
Company Registered Under the Investment Company Act of 1940.
Neither the Fund nor the Master Fund is registered as an investment company under the Investment
Company Act of 1940 and is not required to register under such act. Consequently, Shareholders will
not have the regulatory protections provided to investors in investment companies.
Various Actual and Potential Conflicts of Interest May Be Detrimental to Shareholders.
The Fund and the Master Fund are subject to actual and potential conflicts of interests involving
the Managing Owner, various commodity futures brokers and Authorized Participants. The Managing
Owner and its principals, all of which are engaged in other investment activities, are not required
to devote substantially all of their time to the business of the Fund and the Master Fund, which
also presents the potential for numerous conflicts of interest with the Fund and the Master Fund.
As a result of these and other relationships, parties involved with the Fund and the Master Fund
have a financial incentive to act in a manner other than in the best interests of the Fund and the
Master Fund and the Shareholders. The Managing Owner has not established any formal procedure to
resolve conflicts of interest. Consequently, investors will be dependent on the good faith of the
respective parties subject to such conflicts to resolve them equitably. Although the Managing Owner
attempts to monitor these conflicts, it is extremely difficult, if not impossible, for the Managing
Owner to ensure that these conflicts do not, in fact, result in adverse consequences to the
Shareholders.
In addition, the Fund may be subject to certain conflicts with respect to its Commodity Broker,
including, but not limited to, conflicts that result from receiving greater amounts of compensation
from other clients, and purchasing opposite or competing positions on behalf of third party
accounts traded through the Commodity Broker. See CONFLICTS OF INTEREST p. 31.
6
Shareholders Will Be Subject to Taxation on Their Share of the Master Funds Taxable Income,
Whether or Not They Receive Cash Distributions.
Shareholders will be subject to United States federal income taxation and, in some cases, state,
local, or foreign income taxation on their share of the Master Funds taxable income, whether or
not they receive cash distributions from the Fund. Shareholders may not receive cash distributions
equal to their share of the Master Funds taxable income or even the tax liability that results
from such income.
Items of Income, Gain, Deduction, Loss and Credit with respect to Fund Shares could be Reallocated
if the IRS does not Accept the Assumptions or Conventions Used by the Master Fund in Allocating
Master Fund Tax Items.
U.S. federal income tax rules applicable to partnerships are complex and often difficult to apply
to publicly traded partnerships. The Master Fund will apply certain assumptions and conventions in
an attempt to comply with applicable rules and to report income, gain, deduction, loss and credit
to the Funds Shareholders in a manner that reflects the Shareholders beneficial shares of
partnership items, but these assumptions and conventions may not be in compliance with all aspects
of applicable tax requirements. It is possible that the IRS will successfully assert that the
conventions and assumptions used by the Master Fund do not satisfy the technical requirements of
the Code and/or Treasury regulations and could require that items of income, gain, deduction, loss
or credit be adjusted or reallocated in a manner that adversely affects you.
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 ANY SHARES; SUCH TAX CONSEQUENCES MAY
DIFFER IN RESPECT OF DIFFERENT INVESTORS.
Failure or Lack of Segregation of Assets May Increase Losses.
The Commodity Exchange Act requires a clearing broker to segregate all funds received from
customers from such brokers proprietary assets. If a Commodity Broker fails to do so, the assets
of the Master Fund might not be fully protected in the event of the Commodity Brokers bankruptcy.
Furthermore, in the event of a Commodity Brokers bankruptcy, any Master Fund Units could be
limited to recovering only a pro rata share of all available funds segregated on behalf of the
Commodity Brokers combined customer accounts, even though certain property specifically traceable
to the Master Fund was held by the Commodity Broker. In addition to that, it is possible that in
the event of a clearing brokers bankruptcy investors experience a loss of all their moneys, which
would therefore imply that none of the investments may be recovered, not just a pro rata share. The
Commodity Brokers may, from time to time, have been the subject of certain regulatory and private
causes of action. Such material actions, if any, are described under The Commodity Broker.
In the event of a bankruptcy or insolvency of any exchange or a clearing house, the Master Fund
could experience a loss of the funds deposited through its Commodity Broker as margin with the
exchange or clearing house, a loss of any profits on its open positions on the exchange, and the
loss of unrealized profits on its closed positions on the exchange.
Regulatory Changes or Actions May Alter the Nature of an Investment in the Fund.
Considerable regulatory attention has been focused on non-traditional investment pools which are
publicly distributed in the United States. There is a possibility of future regulatory changes
altering, perhaps to a material extent, the nature of an investment in the Fund or the ability of
the Fund to continue to implement its investment strategy.
The futures markets are subject to comprehensive statutes, regulations, and margin requirements. In
addition, the CFTC and the exchanges are authorized to take extraordinary actions in the event of a
market emergency, including, for example, the retroactive implementation of speculative position
limits or higher margin requirements, the establishment of daily price limits and the suspension of
trading. The regulation of futures transactions in the United States is a rapidly changing area of
law and is subject to modification by government and judicial action. The effect of any future
regulatory change on the Fund is impossible to predict, but could be substantial and adverse.
7
Lack of Independent Experts Representing Investors.
The Managing Owner has consulted with counsel, accountants and other experts regarding the
formation and operation of the Fund and the Master Fund. No counsel has been appointed to represent
you in connection with the offering of the Shares. Accordingly, you should consult your own legal,
tax and financial advisers regarding the desirability of an investment in Shares.
Possibility of Termination of the Fund May Adversely Affect Your Portfolio.
The Managing Owner may withdraw from the Fund upon one hundred and twenty (120) days notice, which
would cause the Fund and the Master Fund to terminate unless a substitute managing owner were
obtained. You cannot be assured that the Managing Owner will be willing or able to continue to
service the Fund for any length of time. If the Managing Owner discontinues its activities on
behalf of the Fund, the Fund may be adversely affected. In addition, owners of seventy-five percent
(75%) of the Shares have the power to terminate the Trust. If it is so exercised, investors who
wished to continue to invest in the Index through the vehicle of the Trust will have to find
another vehicle, and may not be able to find another vehicle that offers the same features as the
Trust. See Description of the Shares and the Master Fund Units; Certain Material Terms of the
Trust Declarations Termination Events for a summary of termination events. Such detrimental
developments could cause you to liquidate your investments and upset the overall maturity and
timing of your investment portfolio. If the registrations with the CFTC or memberships in the NFA
of the Managing Owner or the Commodity Broker were revoked or suspended, such entity would no
longer be able to provide services to the Fund and the Master Fund.
Shareholders Do Not Have the Rights Enjoyed by Investors in Certain Other Vehicles.
As interests in an investment trust, the Shares have none of the statutory rights normally
associated with the ownership of common stock of a corporation (including, for example, the right
to bring oppression or derivative actions). In addition, the Shares have limited voting and
distribution rights (for example, Shareholders do not have the right to elect directors and the
Fund is not required to pay regular dividends, although the Fund may pay dividends at the
discretion of the Managing Owner).
An Investment in the Shares May Be Adversely Affected by Competition From Other Methods of
Investing in Commodities.
The Fund and the Master Fund constitute a relatively new, and thus relatively untested, type of
investment vehicle. They compete with other financial vehicles, including other commodity pools,
hedge funds, traditional debt and equity securities issued by companies in the commodities
industry, other securities backed by or linked to such commodities, and direct investments in the
underlying commodities or commodity futures contracts. Market and financial conditions, and other
conditions that are beyond the Managing Owners control, may make it more attractive to invest in
other financial vehicles or to invest in such commodities directly, which could limit the market
for the Shares and reduce the liquidity of the Shares.
Competing Claims Over Ownership of Intellectual Property Rights Related to the Fund Could Adversely
Affect the Fund and an Investment in the Shares.
While the Managing Owner believes that all intellectual property rights needed to operate the Fund
are either owned by or licensed to the Managing Owner or have been obtained, third parties may
allege or assert ownership of intellectual property rights which may be related to the design,
structure and operations of the Fund. To the extent any claims of such ownership are brought or any
proceedings are instituted to assert such claims, the negotiation, litigation or settlement of such
claims, or the ultimate disposition of such claims in a court of law if a suit is brought, may
adversely affect the Fund and an investment in the Shares, resulting in expenses or damages or the
termination of the Fund.
8
An Absence of Backwardation in the Prices of Certain Commodities, or the Presence of Contango
in the Prices of Certain Commodities, May Decrease the Price of Your Shares.
As the futures contracts that underlie the Index near expiration, they are replaced by contracts
that have a later expiration. Thus, for example, a contract purchased and held in November 2011 may
specify a January 2012 expiration. As that contract nears expiration, it may be replaced by selling
the January 2011 contract and purchasing the contract expiring in March 2012. This process is
referred to as rolling. Historically, the prices of Crude Oil and Heating Oil have frequently
been higher for contracts with shorter-term expirations than for contracts with longer-term
expirations, which is referred to as backwardation. In these circumstances, absent other factors,
the sale of the January 2012 contract would take place at a price that is higher than the price at
which the March 2012 contract is purchased, thereby creating a gain in connection with rolling.
While Crude Oil and Heating Oil have historically exhibited consistent periods of backwardation,
backwardation will likely not exist in these markets at all times. The absence of backwardation in
Crude Oil and Heating Oil could adversely affect the value of the Index and,accordingly, decrease
the value of your Shares. .Conversely, Gold, Corn, Soybeans and Wheat historically exhibit
contango markets rather than backwardation. Contango markets are those in which the prices of
contracts are higher in the distant delivery months than in the nearer delivery months due to the
costs of long-term storage of a physical commodity prior to delivery or other factors. Although
Gold, Corn, Soybeans and Wheat have historically exhibited consistent periods of contango, contango
will likely not exist in these markets at all times. The persistence of contango in Gold, Corn,
Soybeans and Wheat could adversely affect the value of the Index and, accordingly, decrease the
value of your Shares.
The Value of the Shares Will be Adversely Affected if the Fund or the Master Fund is Required to
Indemnify the Trustee or the Managing Owner.
Under the Trust Declarations, the Trustee and the Managing Owner have the right to be indemnified
for any liability or expense it incurs without negligence or misconduct. That means the Managing
Owner may require the assets of the Master Fund to be sold in order to cover losses or liability
suffered by it or by the Trustee. Any sale of that kind would reduce the net asset value of the
Master Fund and the value of the Shares.
Regulatory Reporting and Compliance
Our business is subject to changing regulation of corporate governance and public disclosure that
have increased both our costs and the risk of noncompliance.
Because the Shares are publicly traded, we are subject to certain rules and regulations of federal,
state and financial market exchange entities charged with the protection of investors and the
oversight of companies whose securities are publicly traded. These entities, including the Public
Company Accounting Oversight Board, the SEC and NYSE-ARCA, have in recent years issued new
requirements and regulations, most notably the Sarbanes-Oxley Act of 2002. From time to time, since
the adoption of the Sarbanes-Oxley Act of 2002, these authorities have continued to develop
additional regulations or interpretations of existing regulations. Our ongoing efforts to comply
with these regulations and interpretations have resulted in, and are likely to continue resulting
in, increased general and administrative expenses and diversion of management time and attention
from revenue-generating activities to compliance activities.
We are responsible for establishing and maintaining adequate internal control over financial
reporting. Our internal control system is designed to provide reasonable assurance to its
management and its board of directors regarding the preparation and fair presentation of published
financial statements. All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation.
We assessed the effectiveness of our internal control over financial reporting as of December 31,
2009. Based on the assessment, we believe that, as of December 31, 2009, its internal control over
financial reporting is effective.
9
The Net Asset Value Calculation of the Master Fund May Be Overstated or Understated Due to the
Valuation Method Employed When a Settlement Price is not Available on the Date of Net Asset Value
Calculation.
Calculating the net asset value of the Master Fund (and, in turn, the Fund) includes, in part, any
unrealized profits or losses on open commodity futures contracts. Under normal circumstances, the
net asset value of the Master Fund reflects the settlement price of open commodity futures
contracts on the date when the net asset value is being calculated. However, if a commodity futures
contract traded on an exchange (both U.S. and non-U.S. exchanges) could not be liquidated on such
day (due to the operation of daily limits or other rules of the exchange upon which that position
is traded or otherwise), the settlement price on the most recent day on which the position could
have been liquidated shall be the basis for determining the market value of such position for such
day. In such a situation, there is a risk that the calculation of the net asset value of the Master
Fund on such day will not accurately reflect the realizable market value of such commodity futures
contract. For example, daily limits are generally triggered in the event of a significant change in
market price of a commodity futures contract. Therefore, as a result of the daily limit, the
current settlement price is unavailable. Because the settlement price on the most recent day on
which the position could have been liquidated would be used in lieu of the actual settlement price
on the date of determination, there is a risk that the resulting calculation of the Net Asset Value
of the Master Fund (and, in turn, the Fund) could be under or overstated, perhaps to a significant
degree.
10
BREAK-EVEN ANALYSIS
The Breakeven Table below shows the estimated amount of all fees and expenses which are
anticipated to be incurred by a new investor in the Shares during the first twelve months of
ownership. The total estimated cost and expense load of the Shares is expressed as a percentage of
$25.08 (being the closing trading price of the Shares on March 31, 2010). Although the Managing
Owner has used actual numbers and good faith estimates in preparing this table, the actual expenses
associated with an investment in the Shares may
differ.
Breakeven Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of the Fund(1) |
|
|
Basket(2) |
|
Expense |
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Underwriting Discount(3) |
|
$ |
0.00 |
|
|
|
0 |
% |
|
$ |
0.00 |
|
|
|
0 |
% |
Management Fee(4) |
|
$ |
0.213 |
|
|
|
0.85 |
% |
|
$ |
10,659 |
|
|
|
0.85 |
% |
Organization and Offering Expense Reimbursement (5) |
|
$ |
0.00 |
|
|
|
0.00 |
% |
|
$ |
0.00 |
|
|
|
0.00 |
% |
Brokerage Commissions and Fees(6) |
|
$ |
0.060 |
|
|
|
0.24 |
% |
|
$ |
3,010 |
|
|
|
0.24 |
% |
Routine
Operational, Administrative and Other Ordinary Expenses(7)(8) |
|
$ |
0.00 |
|
|
|
0.00 |
% |
|
$ |
0.00 |
|
|
|
0.00 |
% |
Interest Income(9) |
|
$ |
(0.035 |
) |
|
|
-0.14 |
% |
|
$ |
1,756 |
|
|
|
-0.14 |
% |
12-Month Breakeven (continuous Offering |
|
$ |
(0.238 |
) |
|
|
-0.95 |
% |
|
$ |
(11,913 |
) |
|
|
-0.95 |
% |
|
|
|
1. |
|
The breakeven analysis set forth in this column assumes that the Shares have a constant
month-end net asset value and is based on $25.08 as the net asset value per share. See Fees
and Charges on page 35 for an explanation of the expenses included in the Breakeven Table. |
|
2. |
|
The breakeven analysis set forth in this column assumes that Baskets have a constant
month-end net asset value and is based on $1,254,000 as the net asset value per Basket. See
Fees and Charges on page 35 for an explanation of the expenses included in the Breakeven
Table. |
|
3. |
|
No upfront selling commissions are charged to Shares sold during the continuous offering
period, but it is expected that investors will be charged a customary commission by their
brokers in connection with purchases of Shares that will vary from investor to investor.
Investors are encouraged to review the terms of their brokerage accounts for details on
applicable charges. |
|
4. |
|
From the Management Fee, the managing owner will be responsible for paying the fees and
expenses of any third party responsible for marketing and or distribution of the Fund,
including, but not limited to, the Distributor. |
|
5. |
|
All organizational and offering costs incurred in connection with organizing the Index Fund
and the Master Fund and the offering of the Shares will be borne by GreenHaven LLC, a limited
liability company organized in the State of Georgia which is the sole member of the Managing
Owner. |
|
6. |
|
The costs to the fund for brokerage commissions and trading fees will vary by the broker or
brokers involved to execute specific contracts for the funds interest. The managing owner
expects to pay rates that are commensurate with the going market rate for commissions and
brokerage. The costs to the fund will also be subject to the trading frequency of the fund. |
|
7. |
|
Routine operational, administrative and other ordinary expenses are paid by the Managing
Owner include, but are not limited to, annual audit, accounting, and fund administration and
other fund expenses that are fixed in amount and not charged as a percentage of net asset
value. |
|
8. |
|
In connection with orders to create and redeem Baskets, Authorized Participants will pay a
transaction fee in the amount of $500 per order. Because these transactions fees are de minims
in amount, are charged on a transaction-by transaction basis (and not on a Basket-by-Basket
basis), and are borne by the Authorized Participants, they have not been included in the
Breakeven Table. |
|
9. |
|
Interest income currently is estimated to be earned at a rate of 0.14%, based upon the March
31, 2010 yield on 90 day Treasury Bills. |
11
|
|
|
10. |
|
It is expected that interest income, as stated in footnote 9 above, will not exceed the fees
and costs incurred by the fund over a 12 month period. Therefore, the fund needs to generate
gains of at least 0.95% to break even in a 12 month period. |
|
11. |
|
Investors may pay customary brokerage commissions in connection with purchases of Shares
during the continuous offering period. Because such brokerage commission rates will vary from
investor to investor, such brokerage commissions have not been included in the breakeven
table. Investors are encouraged to review terms of their brokerage commissions have not been
included in the breakeven table. Investors are encouraged to review the terms of their
brokerage accounts for details on applicable charges. |
The Breakeven Table, as presented, is an approximation only. The capitalization of the Fund does
not directly affect the level of its charges as a percentage of its net asset value, other than (i)
administrative expenses (which are assumed for purposes of the Breakeven Table to equal the
maximum estimated percentage of the average beginning of month net asset value) and (ii) brokerage
commissions.
PERFORMANCE
From inception to March 31, 2010
PAST PERFORMANCE RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Name of Pool: GreenHaven Continuous Commodity Index Master Fund
Type of Pool: Publicly offered Commodity Pool Listed on NYSE-ARCA
Inception of Fund: January 23, 2008
First Day of Public Trading: January 24, 2008
Aggregate Subscriptions: $350,736,274 through March 31, 2010.
Current Net Asset Value: $239,418,500 at March 31, 2010.
Largest monthly draw-down: 18.24% October 2008
Worst peak to valley draw-down: 43.33% June 2008-February 2009
12
|
|
|
|
|
|
|
Date |
|
Month |
|
NAV |
|
Rate of Return |
1/23/2008 |
|
Inception |
|
$30.00 |
|
|
1/31/2008 |
|
January |
|
$31.65 |
|
5.50% |
2/29/2008 |
|
February |
|
$35.41 |
|
11.88% |
3/31/2008 |
|
March |
|
$32.46 |
|
-8.33% |
4/30/2008 |
|
April |
|
$33.49 |
|
3.17% |
5/31/2008 |
|
May |
|
$33.77 |
|
0.84% |
6/30/2008 |
|
June |
|
$36.83 |
|
9.06% |
7/31/2008 |
|
July |
|
$33.71 |
|
-8.47% |
8/31/2008 |
|
August |
|
$31.65 |
|
-6.11% |
9/30/2008 |
|
September |
|
$27.74 |
|
-12.35% |
10/31/2008 |
|
October |
|
$22.68 |
|
-18.24% |
11/28/2008 |
|
November |
|
$22.03 |
|
-2.87% |
12/31/2008 |
|
December |
|
$21.92 |
|
-0.50% |
2008 |
|
Total Performance |
|
|
|
-26.93% |
|
|
|
|
|
|
|
Date |
|
Month |
|
NAV |
|
Rate of Return |
1/30/2009 |
|
January |
|
$21.80 |
|
-0.55% |
2/27/2009 |
|
February |
|
$20.87 |
|
-4.27% |
3/31/2009 |
|
March |
|
$21.73 |
|
4.12% |
4/30/2009 |
|
April |
|
$21.69 |
|
-0.18% |
5/29/2009 |
|
May |
|
$24.21 |
|
11.62% |
6/30/2009 |
|
June |
|
$22.73 |
|
-6.11% |
7/31/2009 |
|
July |
|
$23.44 |
|
3.12% |
8/30/2009 |
|
August |
|
$23.19 |
|
-1.07% |
9/30/2009 |
|
September |
|
$23.89 |
|
3.02% |
10/30/2009 |
|
October |
|
$24.94 |
|
4.40% |
11/30/2009 |
|
November |
|
$26.09 |
|
4.61% |
12/31/2009 |
|
December |
|
$26.22 |
|
0.50% |
|
|
Total Performance |
|
|
|
19.62% |
1/29/2010 |
|
January |
|
$25.09 |
|
-4.31% |
2/26/2010 |
|
February |
|
$25.67 |
|
2.31% |
3/31/2010 |
|
March |
|
$25.07 |
|
-2.34% |
|
|
YTD Performance a/o 3/31/2010 |
|
|
|
-4.386% |
The Fund started trading and commenced the Continuous Offering Period on January 24, 2008. The
Funds results are verified by the Funds Administrator. The Managing Owner will provide audited
reports to shareholders annually. Quarterly results for the period ending in March, June, and
September, and annual reports as of December can be accessed online at http://www.sec.gov and the
Funds website, http://www.greenhavenfunds.com. The Funds quarterly and annual results are filed
in the form 10Q and 10K, respectively, with the Securities and Exchange Commission.
13
THE FUND AND MASTER FUND
The GreenHaven Continuous Commodity Index Fund, or the Fund, was formed as a Delaware statutory
trust on October 27, 2006. The Fund issues common units of beneficial interest, or Shares, which
represent units of fractional undivided beneficial interest in and ownership of the Fund. The term
of the Fund is perpetual (unless terminated earlier in certain circumstances).
The GreenHaven Continuous Commodity Index Master Fund, or the Master Fund, was formed as a Delaware
statutory trust on October 27, 2006. The Master Fund issues common units of beneficial interest, or
Master Fund Units, which represent units of fractional undivided beneficial interest in and
ownership of the Master Fund. The term of the Master Fund is perpetual (unless terminated earlier
in certain circumstances).
The principal offices of the Fund and the Master Fund are located at c/o GreenHaven Commodity
Services LLC, 3340 Peachtree Road, Suite 1910, Atlanta, Georgia 30326, and its telephone number is
(404) 239-7938.
The Fund invests substantially all of its assets in the Master Fund in a master-feeder structure.
The Fund holds no investment assets other than Master Fund Units. The Master Fund is wholly-owned
by the Fund and the Managing Owner. Each Share issued by the Fund correlates with a Master Fund
Unit issued by the Master Fund and held by the Fund.
Under the Trust Declaration of the Fund and the Master Fund, CSC Trust Company of Delaware, the
Trustee of the Fund and the Master Fund, has delegated to the Managing Owner certain of the power
and authority to manage the business and affairs of the Fund and the Master Fund and has duties and
liabilities to the Fund and the Master Fund.
14
THE INDEX
Thomson Reuters America LLC is the owner, publisher, and custodian of the Continuous Commodity
Total Return Index Total Return (CCI-TR or Index) which represents a total return version of the
underlying commodities of the ninth revision (as of 1995-2005) of the original Commodity Research
Bureau (CRB) Index. The CCI-TR is not the CRB Index. The Index is widely viewed as a broad measure
of overall commodity price trends because of the diverse nature of the Indexs constituent
commodities. The Index is calculated to produce an unweighted geometric mean of the individual
commodity price relatives, i.e., a ratio of the current price to the base year average price. The
base year of the Continuous Commodity Index (CCI) is 1967 with a starting value of 100. The base
year for the CCI-TR is 1982, with a starting value of 100.
The Index is not the Thomson Reuters/Jefferies CRB Index (the CRB Index). The Index continued to
be calculated using the ninth revision formula; the ninth revision is not the most recent revision
of the CRB Index. In 2005, the CRB Index was revised for a tenth time, and is currently known as
the Thomson Reuters/Jeffries CRB Index. The Funds are based on a total return version of the
underlying commodities of the Continuous Commodity Index. The Index, both as it existed in
1995-2005 and in its current form as a basis for Fund performance, is materially different from the
current CRB Index.
The Index is calculated to offer investors a representation of the investable returns that an
investor should expect to receive by attempting to replicate the CCI index by buying the respective
commodity futures and collateralizing their investment with United States Government securities,
(i.e., 90 day T-Bills). The Index takes into account the economics of rolling listed commodity
futures forward to avoid delivery and maintain exposure in liquid contracts.
The Index is notionally composed of commodity futures contracts on physical commodities. Unlike
equities, which typically entitle the holder to a continuing stake in a corporation, commodity
futures contracts normally specify a certain date for the delivery of the underlying physical
commodity. In order to avoid the delivery process and maintain a long futures position, contracts
nearing a delivery date must be sold and contracts that have not yet reached delivery must be
purchased. This process is known as rolling a futures position. An index, such as the Index, is
commonly known as a rolling index because it replaces futures contracts as they approach maturity
by notionally selling and purchasing off-setting contracts to avoid delivery and maintain exposure
in liquid contracts.
The Index is an equal weight commodity index. By its very structure an evenly-weighted index will
provide broader exposure than one that is not evenly-weighted. To the extent that an index is
over-weighted in a particular commodity class, such as energy, that index will reflect the energy
sector more than it will the broad commodity universe.
The table below indicates the constituent commodities, the allowed contracts, their index weighting
and the sector weighting within the Index.
|
|
|
|
|
|
|
|
|
Commodity |
|
Allowed Contracts |
|
Exchanges* |
|
Index Weight |
|
Sector Weight |
Crude Oil |
|
All 12 calendar months |
|
NYMEX |
|
5.88% |
|
Energy 17.64% |
Heating Oil |
|
All 12 calendar months |
|
NYMEX |
|
5.88% |
|
|
Natural Gas |
|
All 12 calendar months |
|
NYMEX |
|
5.88% |
|
|
Corn |
|
March, May, July, September, December |
|
CBOT |
|
5.88% |
|
Grains 17.64% |
Wheat |
|
March, May, July, September, December |
|
CBOT |
|
5.88% |
|
|
Soybeans |
|
January, March, May, July, August, November |
|
CBOT |
|
5.88% |
|
|
Live Cattle |
|
February, April, June, August, October, December |
|
CME |
|
5.88% |
|
Livestock 11.76% |
Lean Hogs |
|
February, April, June, July,
August, October, December |
|
CME |
|
5.88% |
|
|
Sugar |
|
March, May, July, October |
|
NYBOT |
|
5.88% |
|
Softs 29.40% |
Cotton |
|
March, May, July, December |
|
NYBOT |
|
5.88% |
|
|
Coffee |
|
March, May, July September, December |
|
NYBOT |
|
5.88% |
|
|
Cocoa |
|
March, May, July September, December |
|
NYBOT |
|
5.88% |
|
|
Orange Juice |
|
January, March, May, July, September, November |
|
NYBOT |
|
5.88% |
|
|
Gold |
|
February, April, June, August, December |
|
NYMEX |
|
5.88% |
|
Metals 23.52% |
Silver |
|
March, May, July September, December |
|
NYMEX |
|
5.88% |
|
|
Platinum |
|
January, April, July, October |
|
NYMEX |
|
5.88% |
|
|
Copper |
|
March, May, July September, December |
|
NYMEX |
|
5.88% |
|
|
|
|
|
* |
|
This column of the chart refers to the exchanges in which the standard futures contracts
trade. The column is not intended to be an exhaustive list of all the exchanges in which a
standard futures contract is traded, including foreign exchanges. |
15
Each of the constituent commodities may trade as standard futures contracts on other exchanges,
including, foreign exchange; however, the Master Fund will not engage in the purchase or sale of
any standard constituent commodity traded on a foreign exchange.
The Fund and the Master Fund will not engage in the purchase of any forward, swap or other
non-exchange traded instruments.
The total return version of the CCI index is calculated by Thomson Reuters America LLC. It is
calculated to offer investors a fair representation of the returns that would be realized by an
investment in the underlying commodities that are included in the CCI index on a fully
collateralized basis.
16
Tabular Performance of the CCI-TR since January 1, 1982 using month-end data provided by
Thomson Reuters.
CCI Total Return Historical Prices (Monthly)
Tabular Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29-Jan-82 |
|
|
101.34 |
|
|
31-Jan-85 |
|
|
103.27 |
|
|
29-Jan-88 |
|
|
124.46 |
|
|
31-Jan-91 |
|
|
151.18 |
|
|
31-Jan-94 |
|
|
159.78 |
|
|
31-Jan-97 |
|
|
212.80 |
|
|
31-Jan-00 |
|
|
182.49 |
|
|
31-Jan-03 |
|
|
212.14 |
|
|
31-Jan-06 |
|
|
317.12 |
|
26-Feb-82 |
|
|
97.88 |
|
|
28-Feb-85 |
|
|
99.17 |
|
|
29-Feb-88 |
|
|
121.18 |
|
|
28-Feb-91 |
|
|
153.90 |
|
|
28-Feb-94 |
|
|
160.80 |
|
|
28-Feb-97 |
|
|
217.12 |
|
|
29-Feb-00 |
|
|
181.60 |
|
|
28-Feb-03 |
|
|
210.43 |
|
|
28-Feb-06 |
|
|
307.27 |
|
31-Mar-82 |
|
|
95.25 |
|
|
29-Mar-85 |
|
|
103.90 |
|
|
31-Mar-88 |
|
|
127.08 |
|
|
28-Mar-91 |
|
|
154.35 |
|
|
31-Mar-94 |
|
|
162.09 |
|
|
31-Mar-97 |
|
|
221.21 |
|
|
31-Mar-00 |
|
|
186.68 |
|
|
31-Mar-03 |
|
|
200.92 |
|
|
31-Mar-06 |
|
|
314.70 |
|
30-Apr-82 |
|
|
96.80 |
|
|
30-Apr-85 |
|
|
101.06 |
|
|
29-Apr-88 |
|
|
128.08 |
|
|
30-Apr-91 |
|
|
153.43 |
|
|
29-Apr-94 |
|
|
161.89 |
|
|
30-Apr-97 |
|
|
224.26 |
|
|
28-Apr-00 |
|
|
184.96 |
|
|
30-Apr-03 |
|
|
201.16 |
|
|
28-Apr-06 |
|
|
328.56 |
|
28-May-82 |
|
|
93.93 |
|
|
31-May-85 |
|
|
98.95 |
|
|
31-May-88 |
|
|
134.02 |
|
|
31-May-91 |
|
|
152.96 |
|
|
31-May-94 |
|
|
170.00 |
|
|
30-May-97 |
|
|
227.67 |
|
|
31-May-00 |
|
|
195.03 |
|
|
30-May-03 |
|
|
204.61 |
|
|
31-May-06 |
|
|
328.29 |
|
30-Jun-82 |
|
|
92.81 |
|
|
28-Jun-85 |
|
|
96.93 |
|
|
30-Jun-88 |
|
|
138.37 |
|
|
28-Jun-91 |
|
|
149.72 |
|
|
30-Jun-94 |
|
|
169.55 |
|
|
30-Jun-97 |
|
|
220.61 |
|
|
30-Jun-00 |
|
|
195.06 |
|
|
30-Jun-03 |
|
|
202.54 |
|
|
30-Jun-06 |
|
|
329.34 |
|
30-Jul-82 |
|
|
93.17 |
|
|
31-Jul-85 |
|
|
97.80 |
|
|
29-Jul-88 |
|
|
132.59 |
|
|
31-Jul-91 |
|
|
154.80 |
|
|
29-Jul-94 |
|
|
172.93 |
|
|
31-Jul-97 |
|
|
224.71 |
|
|
31-Jul-00 |
|
|
192.53 |
|
|
31-Jul-03 |
|
|
203.40 |
|
|
31-Jul-06 |
|
|
333.17 |
|
31-Aug-82 |
|
|
95.18 |
|
|
30-Aug-85 |
|
|
98.97 |
|
|
31-Aug-88 |
|
|
132.63 |
|
|
30-Aug-91 |
|
|
152.99 |
|
|
31-Aug-94 |
|
|
169.51 |
|
|
29-Aug-97 |
|
|
226.65 |
|
|
31-Aug-00 |
|
|
198.89 |
|
|
29-Aug-03 |
|
|
210.55 |
|
|
31-Aug-06 |
|
|
330.53 |
|
30-Sep-82 |
|
|
93.88 |
|
|
30-Sep-85 |
|
|
100.66 |
|
|
30-Sep-88 |
|
|
128.43 |
|
|
30-Sep-91 |
|
|
156.77 |
|
|
30-Sep-94 |
|
|
169.57 |
|
|
30-Sep-97 |
|
|
227.92 |
|
|
29-Sep-00 |
|
|
200.19 |
|
|
30-Sep-03 |
|
|
210.87 |
|
|
29-Sep-06 |
|
|
313.11 |
|
29-Oct-82 |
|
|
96.53 |
|
|
31-Oct-85 |
|
|
103.64 |
|
|
31-Oct-88 |
|
|
134.88 |
|
|
31-Oct-91 |
|
|
160.40 |
|
|
31-Oct-94 |
|
|
170.16 |
|
|
31-Oct-97 |
|
|
227.01 |
|
|
31-Oct-00 |
|
|
196.31 |
|
|
31-Oct-03 |
|
|
214.61 |
|
|
31-Oct-06 |
|
|
323.58 |
|
30-Nov-82 |
|
|
98.58 |
|
|
29-Nov-85 |
|
|
104.85 |
|
|
30-Nov-88 |
|
|
139.34 |
|
|
29-Nov-91 |
|
|
158.33 |
|
|
30-Nov-94 |
|
|
166.41 |
|
|
28-Nov-97 |
|
|
224.59 |
|
|
30-Nov-00 |
|
|
203.55 |
|
|
26-Nov-03 |
|
|
215.63 |
|
|
30-Nov-06 |
|
|
342.86 |
|
31-Dec-82 |
|
|
98.44 |
|
|
31-Dec-85 |
|
|
106.03 |
|
|
30-Dec-88 |
|
|
144.35 |
|
|
31-Dec-91 |
|
|
152.25 |
|
|
30-Dec-94 |
|
|
172.50 |
|
|
31-Dec-97 |
|
|
219.56 |
|
|
29-Dec-00 |
|
|
203.47 |
|
|
31-Dec-03 |
|
|
222.14 |
|
|
29-Dec-06 |
|
|
331.29 |
|
31-Jan-83 |
|
|
103.24 |
|
|
31-Jan-86 |
|
|
102.07 |
|
|
31-Jan-89 |
|
|
141.62 |
|
|
31-Jan-92 |
|
|
152.62 |
|
|
31-Jan-95 |
|
|
167.63 |
|
|
31-Jan-98 |
|
|
224.10 |
|
|
31-Jan-01 |
|
|
200.87 |
|
|
30-Jan-04 |
|
|
229.67 |
|
|
31-Jan-07 |
|
|
330.62 |
|
28-Feb-83 |
|
|
98.56 |
|
|
28-Feb-86 |
|
|
98.26 |
|
|
28-Feb-89 |
|
|
144.01 |
|
|
28-Feb-92 |
|
|
150.99 |
|
|
28-Feb-95 |
|
|
170.77 |
|
|
27-Feb-98 |
|
|
217.32 |
|
|
28-Feb-01 |
|
|
199.37 |
|
|
27-Feb-04 |
|
|
241.16 |
|
|
28-Feb-07 |
|
|
342.83 |
|
31-Mar-83 |
|
|
102.16 |
|
|
31-Mar-86 |
|
|
97.97 |
|
|
31-Mar-89 |
|
|
145.51 |
|
|
31-Mar-92 |
|
|
151.55 |
|
|
31-Mar-95 |
|
|
173.78 |
|
|
31-Mar-98 |
|
|
218.08 |
|
|
30-Mar-01 |
|
|
189.30 |
|
|
31-Mar-04 |
|
|
249.10 |
|
|
30-Mar-07 |
|
|
341.39 |
|
29-Apr-83 |
|
|
104.58 |
|
|
30-Apr-86 |
|
|
100.60 |
|
|
28-Apr-89 |
|
|
146.19 |
|
|
30-Apr-92 |
|
|
149.17 |
|
|
28-Apr-95 |
|
|
176.61 |
|
|
30-Apr-98 |
|
|
215.22 |
|
|
30-Apr-01 |
|
|
192.80 |
|
|
30-Apr-04 |
|
|
239.12 |
|
|
30-Apr-07 |
|
|
335.77 |
|
31-May-83 |
|
|
108.48 |
|
|
30-May-86 |
|
|
97.33 |
|
|
31-May-89 |
|
|
142.61 |
|
|
29-May-92 |
|
|
152.77 |
|
|
31-May-95 |
|
|
176.38 |
|
|
29-May-98 |
|
|
207.33 |
|
|
31-May-01 |
|
|
188.39 |
|
|
28-May-04 |
|
|
243.59 |
|
|
31-May-07 |
|
|
339.705 |
|
30-Jun-83 |
|
|
107.15 |
|
|
30-Jun-86 |
|
|
96.02 |
|
|
30-Jun-89 |
|
|
146.79 |
|
|
30-Jun-92 |
|
|
153.52 |
|
|
30-Jun-95 |
|
|
174.40 |
|
|
30-Jun-98 |
|
|
203.41 |
|
|
29-Jun-01 |
|
|
183.78 |
|
|
30-Jun-04 |
|
|
234.32 |
|
|
29-Jun-07 |
|
|
339.29 |
|
29-Jul-83 |
|
|
111.80 |
|
|
31-Jul-86 |
|
|
96.09 |
|
|
31-Jul-89 |
|
|
142.60 |
|
|
31-Jul-92 |
|
|
151.05 |
|
|
31-Jul-95 |
|
|
176.39 |
|
|
31-Jul-98 |
|
|
195.17 |
|
|
31-Jul-01 |
|
|
182.33 |
|
|
30-Jul-04 |
|
|
235.75 |
|
|
31-Jul-07 |
|
|
349.84 |
|
31-Aug-83 |
|
|
113.31 |
|
|
29-Aug-86 |
|
|
102.70 |
|
|
31-Aug-89 |
|
|
144.06 |
|
|
31-Aug-92 |
|
|
147.35 |
|
|
31-Aug-95 |
|
|
180.43 |
|
|
31-Aug-98 |
|
|
183.20 |
|
|
31-Aug-01 |
|
|
178.58 |
|
|
31-Aug-04 |
|
|
243.06 |
|
|
31-Aug-07 |
|
|
339.34 |
|
30-Sep-83 |
|
|
110.20 |
|
|
30-Sep-86 |
|
|
103.82 |
|
|
29-Sep-89 |
|
|
144.97 |
|
|
30-Sep-92 |
|
|
147.89 |
|
|
29-Sep-95 |
|
|
181.67 |
|
|
30-Sep-98 |
|
|
188.69 |
|
|
28-Sep-01 |
|
|
170.11 |
|
|
30-Sep-04 |
|
|
249.04 |
|
|
28-Sep-07 |
|
|
367.75 |
|
31-Oct-83 |
|
|
106.39 |
|
|
31-Oct-86 |
|
|
104.31 |
|
|
31-Oct-89 |
|
|
144.75 |
|
|
30-Oct-92 |
|
|
145.91 |
|
|
31-Oct-95 |
|
|
183.18 |
|
|
30-Oct-98 |
|
|
188.01 |
|
|
31-Oct-01 |
|
|
165.99 |
|
|
29-Oct-04 |
|
|
248.86 |
|
|
31-Oct-07 |
|
|
373.06 |
|
30-Nov-83 |
|
|
109.27 |
|
|
28-Nov-86 |
|
|
103.81 |
|
|
30-Nov-89 |
|
|
147.55 |
|
|
30-Nov-92 |
|
|
148.41 |
|
|
30-Nov-95 |
|
|
184.92 |
|
|
30-Nov-98 |
|
|
180.37 |
|
|
30-Nov-01 |
|
|
170.96 |
|
|
30-Nov-04 |
|
|
253.96 |
|
|
30-Nov-07 |
|
|
368.91 |
|
30-Dec-83 |
|
|
111.16 |
|
|
31-Dec-86 |
|
|
104.80 |
|
|
29-Dec-89 |
|
|
150.98 |
|
|
31-Dec-92 |
|
|
147.44 |
|
|
29-Dec-95 |
|
|
187.77 |
|
|
31-Dec-98 |
|
|
174.47 |
|
|
28-Dec-01 |
|
|
168.51 |
|
|
31-Dec-04 |
|
|
249.80 |
|
|
31-Dec-07 |
|
|
388.29 |
|
31-Jan-84 |
|
|
110.00 |
|
|
30-Jan-87 |
|
|
107.23 |
|
|
31-Jan-90 |
|
|
155.48 |
|
|
29-Jan-93 |
|
|
144.22 |
|
|
31-Jan-96 |
|
|
193.04 |
|
|
29-Jan-99 |
|
|
171.56 |
|
|
31-Jan-02 |
|
|
164.83 |
|
|
31-Jan-05 |
|
|
250.91 |
|
|
31-Jan-08 |
|
|
411.15 |
|
29-Feb-84 |
|
|
111.46 |
|
|
27-Feb-87 |
|
|
106.00 |
|
|
28-Feb-90 |
|
|
158.05 |
|
|
26-Feb-93 |
|
|
145.81 |
|
|
29-Feb-96 |
|
|
196.45 |
|
|
26-Feb-99 |
|
|
163.26 |
|
|
28-Feb-02 |
|
|
167.85 |
|
|
28-Feb-05 |
|
|
269.04 |
|
|
29-Feb-08 |
|
|
459.94 |
|
30-Mar-84 |
|
|
116.15 |
|
|
31-Mar-87 |
|
|
107.87 |
|
|
30-Mar-90 |
|
|
159.10 |
|
|
31-Mar-93 |
|
|
151.90 |
|
|
29-Mar-96 |
|
|
201.72 |
|
|
31-Mar-99 |
|
|
170.85 |
|
|
29-Mar-02 |
|
|
178.98 |
|
|
31-Mar-05 |
|
|
276.15 |
|
|
31-Mar-08 |
|
|
419.58 |
|
30-Apr-84 |
|
|
114.17 |
|
|
30-Apr-87 |
|
|
115.54 |
|
|
30-Apr-90 |
|
|
162.61 |
|
|
30-Apr-93 |
|
|
153.95 |
|
|
30-Apr-96 |
|
|
209.92 |
|
|
30-Apr-99 |
|
|
169.20 |
|
|
30-Apr-02 |
|
|
174.76 |
|
|
29-Apr-05 |
|
|
267.03 |
|
|
30-Apr-08 |
|
|
432.82 |
|
31-May-84 |
|
|
116.20 |
|
|
29-May-87 |
|
|
116.74 |
|
|
31-May-90 |
|
|
162.60 |
|
|
28-May-93 |
|
|
153.73 |
|
|
31-May-96 |
|
|
210.32 |
|
|
28-May-99 |
|
|
165.19 |
|
|
31-May-02 |
|
|
177.87 |
|
|
31-May-05 |
|
|
264.15 |
|
|
30-May-08 |
|
|
436.36 |
|
29-Jun-84 |
|
|
112.18 |
|
|
30-Jun-87 |
|
|
116.95 |
|
|
29-Jun-90 |
|
|
158.82 |
|
|
30-Jun-93 |
|
|
152.79 |
|
|
28-Jun-96 |
|
|
208.80 |
|
|
30-Jun-99 |
|
|
167.21 |
|
|
28-Jun-02 |
|
|
179.55 |
|
|
30-Jun-05 |
|
|
268.09 |
|
|
30-June-08 |
|
|
475.72 |
|
31-Jul-84 |
|
|
103.00 |
|
|
31-Jul-87 |
|
|
119.23 |
|
|
31-Jul-90 |
|
|
160.55 |
|
|
30-Jul-93 |
|
|
158.83 |
|
|
31-Jul-96 |
|
|
205.26 |
|
|
30-Jul-99 |
|
|
165.29 |
|
|
31-Jul-02 |
|
|
182.26 |
|
|
26-Jul-05 |
|
|
270.29 |
|
|
31-Jul-08 |
|
|
434.38 |
|
31-Aug-84 |
|
|
107.59 |
|
|
31-Aug-87 |
|
|
117.97 |
|
|
31-Aug-90 |
|
|
163.58 |
|
|
31-Aug-93 |
|
|
156.42 |
|
|
30-Aug-96 |
|
|
212.64 |
|
|
31-Aug-99 |
|
|
171.44 |
|
|
30-Aug-02 |
|
|
188.45 |
|
|
31-Aug-05 |
|
|
276.75 |
|
|
30-Aug-08 |
|
|
407.25 |
|
28-Sep-84 |
|
|
105.27 |
|
|
30-Sep-87 |
|
|
118.36 |
|
|
28-Sep-90 |
|
|
168.59 |
|
|
30-Sep-93 |
|
|
154.52 |
|
|
30-Sep-96 |
|
|
209.55 |
|
|
30-Sep-99 |
|
|
177.22 |
|
|
30-Sep-02 |
|
|
192.98 |
|
|
30-Sep-05 |
|
|
289.08 |
|
|
30-Sep-08 |
|
|
355.30 |
|
31-Oct-84 |
|
|
106.20 |
|
|
30-Oct-87 |
|
|
119.00 |
|
|
31-Oct-90 |
|
|
161.51 |
|
|
29-Oct-93 |
|
|
153.92 |
|
|
31-Oct-96 |
|
|
204.28 |
|
|
29-Oct-99 |
|
|
175.05 |
|
|
31-Oct-02 |
|
|
194.72 |
|
|
31-Oct-05 |
|
|
285.12 |
|
|
31-Oct-08 |
|
|
288.96 |
|
30-Nov-84 |
|
|
104.62 |
|
|
30-Nov-87 |
|
|
124.75 |
|
|
30-Nov-90 |
|
|
159.48 |
|
|
30-Nov-93 |
|
|
152.67 |
|
|
29-Nov-96 |
|
|
211.48 |
|
|
30-Nov-99 |
|
|
176.49 |
|
|
29-Nov-02 |
|
|
195.84 |
|
|
30-Nov-05 |
|
|
289.17 |
|
|
28-Nov-08 |
|
|
279.58 |
|
31-Dec-84 |
|
|
101.03 |
|
|
31-Dec-87 |
|
|
124.41 |
|
|
31-Dec-90 |
|
|
158.64 |
|
|
31-Dec-93 |
|
|
156.48 |
|
|
31-Dec-96 |
|
|
210.35 |
|
|
31-Dec-99 |
|
|
178.07 |
|
|
31-Dec-02 |
|
|
199.55 |
|
|
21-Dec-05 |
|
|
299.14 |
|
|
31-Dec-08 |
|
|
277.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31-Jan-09 |
|
|
277.32 |
|
|
27-Feb-09 |
|
|
275.21 |
|
|
31-Mar-09 |
|
|
262.70 |
|
|
30-Apr-09 |
|
|
272.62 |
|
|
29-May-09 |
|
|
271.52 |
|
|
30-Jun-09 |
|
|
302.54 |
|
|
31-Jul-09 |
|
|
248.18 |
|
|
31-Aug-09 |
|
|
288.18 |
|
|
30-Sep-09 |
|
|
296.28 |
|
30-Oct-09 |
|
|
308.74 |
|
|
30-Nov-09 |
|
|
322.67 |
|
|
31-Dec-09 |
|
|
323.90 |
|
|
29-Jan-10 |
|
|
309.71 |
|
|
26-Feb-10 |
|
|
316.72 |
|
|
31-Mar-10 |
|
|
309.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Values of the underlying Index are computed by Thomson Reuters America, LLC, and disseminated by
NYSE-ARCA every fifteen (15) seconds during the trading day. Only settlement and last-sale prices
are used in the Indexs calculation, bids and offers are not recognized including limit-bid and
limit-offer price quotes. Where no last-sale price exists, typically in the more deferred contract
months, the previous days settlement price is used. This means that the underlying Index may lag
its theoretical value. This tendency to lag is evident at the end of the day when the Index value
is based on the settlement prices of the component commodities, and explains why the underlying
Index often closes at or near the high or low for the day.
Calculating Total Return
Thomson Reuters America LLC is the owner, custodian, and calculating agent for the Index. The Index
is calculated using the following three variables:
1. The CCI cash index and its daily return; The CCI is a geometric average of 17 commodities
multiplied by a constant factor. The index is calculated by first, averaging the prices of the
valid contract months for each day for each included commodity. The average prices of all
commodities are then multiplied and the seventeenth root of the number is taken as the raw index
value. This raw index value is multiplied by 0.8486, which is the adjustment factor necessitated by
the indexs July 20, 1987 change over from 26 commodities to 21 commodities. The resulting value is
divided by 30.7766, which is the 1967 base year average for these 17 commodities. Finally, this
result is multiplied by 100 in order to convert the index into percentage terms.
CCI = {Geometric Average (PRICES) /30.7766} x 0.8486 x 100
2. The second Friday in January, February, April, June, August, and November are the roll
dates for the CCI Total Return Index. On these dates, two sets of prices are considered one from
the window of the expiring month contract and another from the next contract month window. The
ratio of the two index values is the roll ratio. Each index value in the subsequent contract month,
is multiplied by the value of the ratio. The roll ratio is determined on the roll date and then is
multiplied to each of the index value for that contract month. The index treated by multiplying the
CCI with the roll ratio is called the CCI Roll Return Index or CCI Continuous Contract Index.
Roll Ratio = Index Value (nearby month)/Index value (deferred Month), on the date.
3. The CCI Total Return Index has a starting value of 100 on January 1st 1982. This index is
compounded daily by multiplying the previous day value with change in CCI Index on that day and 90
days T-Bill yield for a single day. Mondays T-Bill yield is used for 3 days because of the
interest earned by the collateral over the Weekend
|
i. |
|
CCI Total Return Index = 100 x (1+ Continuous Daily Return + T-Bill return for one
day), beginning January 1, 1982 |
|
|
ii. |
|
Continuous Daily return = {CCI Continuous Contract Index / CCI Continuous Contract
Index(t-1} 1 |
|
|
iii. |
|
T-Bill return for one day = {[1/(1-(91/360) x T-Bill Rate t-1)]^(l/91)}-1 |
Daily Range
The CCI high and low will be the highest and lowest quoted CCI value each day. Since prices may
change during any given interval, the CCI may miss the actual or theoretical high or low for the
day. Actual high and low are defined as the highest and lowest possible CCI value given all prices
arrive in real time and the CCI is recalculated for each new price. Theoretical high and low are
defined as the CCI value obtained by calculating the CCI from the daily high and low for each
CCI-TR eligible contract.
18
Eligible Contracts
|
|
|
Commodity |
|
Allowed Contracts |
Crude Oil |
|
All 12 calendar months |
Heating Oil |
|
All 12 calendar months |
Natural Gas |
|
All 12 calendar months |
Corn |
|
March, May, July, September, December |
Wheat |
|
March, May, July, September, December |
Soybeans |
|
January, March, May, July, August, November |
Live Cattle |
|
February, April, June, August, October, December |
Lean Hogs |
|
February, April, June, July, August, October, December |
Sugar |
|
March, May, July, October |
Cotton |
|
March, May, July, December |
Coffee |
|
March, May, July September, December |
Cocoa |
|
March, May, July September, December |
Orange Juice |
|
January, March, May, July, September, November |
Gold |
|
February, April, June, August, December |
Silver |
|
March, May, July September, December |
Platinum |
|
January, April, July, October |
Copper |
|
March, May, July September, December |
CCI-TR Eligible Those contracts which are allowed for the commodity and expire up through 6
calendar months from the next roll date, set as the 2nd Friday of January, February, April, June,
August, and November except that there shall be a minimum of two contract months for each commodity
(add contracts beyond the six month window, if necessary).
Furthermore, there shall be a maximum of five contract months for each commodity (drop the most
deferred contracts to remain at five, if necessary).
Interruption of Index Calculation: Calculation of the Index may not be possible or feasible under
certain events or circumstances, including, without limitation, a systems failure, natural or
man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any
similar intervening circumstance, that is beyond the reasonable control of Reuters or the Managing
Owner. Additionally, calculation of the Index may also be disrupted by an event that would require
Reuters to calculate the closing price in respect of the relevant commodity on an alternative
basis.
INVESTMENT OBJECTIVE
Investment Objective
The investment objective of the Fund and the Master Fund is to reflect the performance of the
Index, over time, less the expenses of the operations of the Fund and the Master Fund.
The Fund pursues its investment objective by investing substantially all of its assets in the
Master Fund. The Master Fund pursues its investment objective by investing in a portfolio of
exchange-traded futures on the commodities comprising the Index, or the Index Commodities.
The Master Fund holds a portfolio of futures contracts on the Index Commodities as well as cash and
United States Treasury securities for deposit with the Master Funds Commodity Brokers as margin
and other high credit quality short-term fixed income securities. The Master Funds portfolio is
traded with a view to reflecting the performance of the Index over time, whether the Index is
rising, falling or flat over any particular period. The Master Fund is not managed by traditional
methods, which typically involve effecting changes in the composition of the Master Funds
portfolio on the basis of judgments relating to economic, financial and market considerations with
a view to obtaining positive results under all market conditions. To maintain the correspondence
between the composition and weightings of the Index Commodities comprising the Index, the Managing
Owner may adjust the Portfolio on a daily basis to conform to periodic changes in the identity
and/or relative weighting of the Index Commodities. The
Managing Owner aggregates certain of the adjustments and makes changes to the portfolio in the case
of significant changes to the Index.
19
There can be no assurance that the Fund or the Master Fund will achieve its investment objective or
avoid substantial losses. The Master Fund has limited trading and performance history. The value of
the Shares is expected to fluctuate generally in relation to changes in the value of the Master
Fund Units.
Role of Managing Owner
The Managing Owner will serve as the commodity pool operator and commodity trading advisor of the
Fund and the Master Fund.
Specifically, with respect to the Fund and the Master Fund, the Managing Owner:
|
(i) |
|
selects the Trustee, administrator, distributor and auditor; |
|
|
(ii) |
|
negotiates various agreements and fees; and |
|
|
(iii) |
|
performs such other services as the Managing Owner believes that the Fund and the
Master Fund may from time-to-time require. |
Specifically, with respect to the Master Fund, the Managing Owner:
|
(i) |
|
selects the Commodity Broker; and |
|
|
(ii) |
|
monitors the performance results of the Master Funds portfolio and reallocates assets
within the portfolio with a view to causing the performance of the Master Funds portfolio
to track that of the Index over time. |
The Managing Owner and its trading principals have a limited history operating a commodity pool or
managed a commodity trading account. The Managing Owner is registered as a commodity pool operator
and commodity trading advisor with the CFTC and was approved as a member of the NFA as of November
15, 2006.
The principal office of the Managing Owner is located at 3340 Peachtree Road, Suite 1910, Atlanta,
Georgia 30326. The telephone number of the Managing Owner is (404) 239-7938.
WHO MAY SUBSCRIBE
Baskets may be created or redeemed only by Authorized Participants. Each Authorized Participant
must (1) be a registered broker-dealer or other securities market participant such as a bank or
other financial institution which is not required to register as a broker-dealer to engage in
securities transactions, (2) be a participant in DTC, and (3) have entered into an agreement with
the Fund and the Managing Owner (a Participant Agreement). The Participant Agreement sets forth the
procedures for the creation and redemption of Baskets of Shares and for the delivery of cash
required for such creations or redemptions. A list of the current Authorized Participants can be
obtained from the Administrator. A similar agreement between the Fund and the Master Fund sets
forth the procedures for the creation and redemption of Master Unit Baskets by the Fund. See
Creation and Redemption of Shares for more details.
CREATION AND REDEMPTION OF SHARES
The Fund will create and redeem Shares from time-to-time, but only in one or more Baskets. A Basket
is a block of 50,000 Shares. Baskets may be created or redeemed only by Authorized Participants.
Authorized Participants pay a transaction fee of $500 in connection with each order to create or
redeem a Basket of Shares. Authorized Participants may sell the Shares included in the Baskets they
purchase from the Fund to other investors.
The Master Fund will create and redeem Master Fund Units from time-to-time, but only in one or more
Master Unit Baskets. A Master Unit Basket is a block of 50,000 Master Fund Units. Master Unit
Baskets may be created or redeemed only by the Fund. Each Share issued by the Fund will correlate
with a Master Fund Unit issued by the Master Fund and held by the Fund.
20
Authorized Participants are the only persons that may place orders to create and redeem Baskets.
Investors will not be permitted to purchase Baskets from Authorized Participants. To become an
Authorized Participant, a person must enter into a Participant Agreement with the Fund and the
Managing Owner. The Participant Agreement sets forth the procedures for the creation and redemption
of Baskets and for the payment of cash required for such creations and redemptions. The Participant
Agreement and the related procedures attached thereto may be amended by the Managing Owner and the
Distributor without the consent of any Shareholder or Authorized Participant. To compensate the
Administrator for services in processing the creation and redemption of Baskets, an Authorized
Participant is required to pay a transaction fee to the Fund of $500 per order to create or redeem
Baskets. In turn, the Fund pays this transaction fee to the Master Fund, which then pays such fee
to the Administrator. Authorized Participants who purchase Baskets receive no fees, commissions or
other form of compensation or inducement of any kind from either the Managing Owner or the Fund,
and no such person has any obligation or responsibility to the Managing Owner or the Fund to effect
any sale or resale of Shares.
Authorized Participants are cautioned that some of their activities will result in their being
deemed participants in a distribution in a manner which would render them statutory underwriters
and subject them to the prospectus-delivery and liability provisions of the Securities Act, as
described in Plan of Distribution.
Each Authorized Participant will be registered as a broker-dealer under the Securities Exchange Act
of 1934 (the Exchange Act) and regulated by the NASD, or will be exempt from being or otherwise
will not be required to be so regulated or registered, and will be qualified to act as a broker or
dealer in the states or other jurisdictions where the nature of its business so requires. Certain
Authorized Participants may be regulated under federal and state banking laws and regulations. Each
Authorized Participant will have its own set of rules and procedures, internal controls and
information barriers as it determines is appropriate in light of its own regulatory regime.
Authorized Participants may act for their own accounts or as agents for broker-dealers, custodians
and other securities market participants that wish to create or redeem Baskets.
Under the Participant Agreements, the Managing Owner has agreed to indemnify the Authorized
Participants against certain liabilities, including liabilities under the Securities Act, and to
contribute to the payments the Authorized Participants may be required to make in respect of those
liabilities. The Administrator has agreed to reimburse the Authorized Participants, solely from and
to the extent of the Master Funds assets, for indemnification and contribution amounts due from
the Managing Owner in respect of such liabilities to the extent the Managing Owner has not paid
such amounts when due.
The following description of the procedures for the creation and redemption of Baskets is only a
summary and an investor should refer to the relevant provisions of the Funds Trust Declaration and
the form of Participant Agreement for more detail. The Funds Trust Declaration and the form of
Participant Agreement are filed as exhibits to the registration statement of which this prospectus
is a part.
Creation Procedures
On any business day, an Authorized Participant may place an order with the Distributor to create
one or more Baskets. For purposes of processing both purchase and redemption orders, a business
day means any day other than a day when banks in New York City are required or permitted to be
closed. Purchase orders must be placed by 10:00 a.m., New York time. The day on which the
Distributor receives a valid purchase order is the purchase order date. Purchase orders are
irrevocable. By placing a purchase order, and prior to delivery of such Baskets, an Authorized
Participants DTC account will be charged the non-refundable transaction fee due for the purchase
order.
Determination of required payment
The total payment required to create each Basket is the Net Asset Value of 50,000 Shares as of the
closing time of NYSE-ARCA or the last to close of the exchanges on which the Index Commodities are
traded, whichever is later, on the purchase order date. Baskets will be issued as of 12:00pm, New
York time, on the Business Day immediately following the purchase order date at Net Asset Value per
Share as of the closing time of NYSE-ARCA or the last to close of the exchanges on which the Index
Commodities are traded, whichever is later, on the purchase order date during the continuous
offering period, but only if the required payment has been timely received.
Because orders to purchase Baskets must be placed by 10:00 a.m., New York time, but the total
payment required to create a Basket during the continuous offering period will not be determined
until 4:00 p.m., New York time, on the date the purchase order is received, Authorized Participants
will not know the total amount of the payment required to create a Basket at the time they submit
an irrevocable purchase order for the Basket. The Funds Net Asset Value and the total amount of
the payment required to create a Basket could rise or fall substantially between the time an
irrevocable purchase order is submitted and the time the amount of the purchase price in respect
thereof is determined.
21
Rejection of purchase orders
The Administrator may reject a purchase order if:
|
(i) |
|
it determines that the purchase order is not in proper form; |
|
|
(ii) |
|
the Managing Owner believes that the purchase order would have adverse tax consequences
to the Fund or its Shareholders; or |
|
|
(iii) |
|
circumstances outside the control of the Managing Owner or the Distributor make it,
for all practical purposes, not feasible to process creations of Baskets. |
The Distributor and the Managing Owner will not be liable for the rejection of any purchase order.
Redemption Procedures
The procedures by which an Authorized Participant can redeem one or more Baskets mirror the
procedures for the creation of Baskets. On any business day, an Authorized Participant may place an
order with the Distributor to redeem one or more Baskets. Redemption orders must be placed by 10:00
a.m., New York time. The day on which the Distributor receives a valid redemption order is the
redemption order date. Redemption orders are irrevocable. Individual Shareholders may not redeem
directly from the Fund.
By placing a redemption order, an Authorized Participant agrees to deliver the Baskets to be
redeemed through DTCs book-entry system to the Fund not later than 12:00pm, New York time, on the
business day immediately following the redemption order date. By placing a redemption order, and
prior to receipt of the redemption proceeds, an Authorized Participants DTC account will be
charged the non-refundable transaction fee due for the redemption order.
Determination of redemption proceeds
The redemption proceeds from the Fund consist of the cash redemption amount equal to the net asset
value of the number of Basket(s) requested in the Authorized Participants redemption order as of
the closing time of the NYSE-ARCA or the last to close of the exchanges on which the Index
Commodities are traded, whichever is later, on the redemption order date. The Managing Owner will
distribute the cash redemption amount at 12:00pm, New York time, on the business day immediately
following the redemption order date through DTC to the account of the Authorized Participant as
recorded on DTCs book entry system.
Delivery of redemption proceeds
The redemption proceeds due from the Fund is delivered to the Authorized Participant at 12:00pm,
New York time, on the business day immediately following the redemption order date if, by such
time, the Funds DTC account has been credited with the Baskets to be redeemed. If the Funds DTC
account has not been credited with all of the Baskets to be redeemed by such time, the redemption
distribution is delivered to the extent of whole Baskets received. Any remainder of the redemption
distribution is delivered on the next business day to the extent of remaining whole Baskets
received if the Distributor receives the fee applicable to the extension of the redemption
distribution date which the Distributor may, from time-to-time, determine and the remaining Baskets
to be redeemed are credited to the Funds DTC account by 12:00pm, New York time, on such next
business day. Any further outstanding amount of the redemption order shall be cancelled. The
Distributor is also authorized to deliver the redemption distribution notwithstanding that the
Baskets to be redeemed are not credited to the Funds DTC account by 12:00pm, New York time, on the
business day immediately following the redemption order date if the Authorized Participant has
collateralized its obligation to deliver the Baskets through DTCs book entry system on such terms
as the Distributor and the Managing Owner may from time-to-time agree upon.
22
Suspension or rejection of redemption orders
The Distributor may, in its discretion, and will when directed by the Managing Owner, suspend the
right of redemption, or postpone the redemption settlement date, (1) for any period during which an
emergency exists as a result of which the redemption distribution is not reasonably practicable, or
(2) for such other period as the Managing Owner determines to be necessary for the protection of
the Shareholders. Neither the Distributor nor the Managing Owner will be liable to any person or in
any way for any loss or damages that may result from any such suspension or postponement.
The Distributor will reject a redemption order if the order is not in proper form as described in
the Participant Agreement or if the fulfillment of the order, in the opinion of its counsel, might
be unlawful.
Creation and Redemption Transaction Fee
To compensate the Administrator for services in processing the creation and redemption of Baskets,
an Authorized Participant is required to pay a transaction fee to the Fund of $500 per order to
create or redeem Baskets. In turn, the Fund pays this transaction fee to the Master Fund, which
then pays such fee to the Administrator. An order may include multiple Baskets. The transaction fee
may be reduced, increased or otherwise changed by the Administrator with consent from the Managing
Owner. The Administrator must notify DTC of any agreement to change the transaction fee and will
not implement any increase in the fee for the redemption of Baskets until thirty (30) days after
the date of the notice.
THE COMMODITY BROKER
A variety of executing brokers may execute futures transactions on behalf of the Master Fund. The
Master Fund has designated Morgan Stanley & Co. Incorporated (MS&Co.), a Delaware corporation, to
serve as clearing broker to which the executing brokers give-up all such transactions.
MS&Co. is a wholly-owned subsidiary of Morgan Stanley (MS), a Delaware holding company. MS files
periodic reports with the Securities and Exchange Commission as required by the Securities Exchange
Act of 1934, which include current descriptions of material litigation and material proceedings and
investigations, if any, by governmental and/or regulatory agencies or self-regulatory organizations
concerning MS and its subsidiaries, including MS&Co. As a consolidated subsidiary of MS, MS&Co.
does not file its own periodic reports with the
SEC that contain descriptions of material litigation, proceedings and investigations. As a result,
we refer you to review the Legal Proceedings section of MSs SEC 10-K filings for 2009,2008,
2007, 2006, and 2005.
In addition to the matters described in those filings, in the normal course of business, each of MS
and MS&Co. has been named, from time to time, as a defendant in various legal actions, including
arbitrations, class actions, and other litigation, arising in connection with its activities as a
global diversified financial services institution. Certain of the legal actions include claims for
substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages.
Each of MS and MS&Co. is also involved, from time to time, in investigations and proceedings by
governmental and/or regulatory agencies or self-regulatory organizations, certain of which may
result in adverse judgments, fines or penalties. The number of these investigations and proceedings
has increased in recent years with regard to many financial services institutions, including MS and
MS&Co.
MS&Co. is a Delaware corporation with its main business office located at 1585 Broadway, New York,
New York 10036. Among other registrations and memberships, MS&Co. is registered as a futures
commission merchant and is a member of the National Futures Association.
Effective on or about April 1, 2007 Morgan Stanley DW Inc. (MSDW) was merged into Morgan Stanley
& Co. Incorporated (MS&Co.), which has assumed all of the responsibilities of MSDW. For purposes
of clarity, however, MSDWs litigation disclosure will be retained and listed separately, in
relevant part, until the fifth anniversary of the date of each specific disclosure item in the MSDW
sub-section.
MS&Co. is a wholly-owned subsidiary of Morgan Stanley (MS), a Delaware holding company. MS
files periodic reports with the Securities and Exchange Commission as required by the Securities
Exchange Act of 1934, which include current descriptions of material litigation and material
proceedings and investigations, if any, by governmental and/or regulatory agencies or
self-regulatory organizations concerning MS and its subsidiaries, including MS&Co. As a
consolidated subsidiary of MS, MS&Co. does not file its own periodic reports with the SEC that
contain descriptions of material litigation, proceedings and investigations. As a result, we refer
you to the Legal Proceedings section of MSs SEC 10-K filings for 2009, 2008, 2007, 2006, 2005
and 2004.
23
During the preceding five years, the following administrative, civil, or criminal actions pending,
on appeal or concluded against MS&Co. or any of its principals are material within the meaning of
CFTC Rule 4.24(l)(2) or 4.34(k)(2):
Morgan Stanley DW Inc.
In the normal course of business, MSDW was involved in numerous legal actions, including
arbitrations, class actions, and other litigation. Certain of the legal actions include claims for
substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages.
MSDW was also involved, from time to time, in investigations and proceedings by governmental and/or
regulatory agencies or self-regulatory organizations, certain of which have resulted and may result
in adverse judgments, fines or penalties. The number of these investigations and proceedings has
increased in recent years with regard to many financial services institutions, including MSDW.
On July 14, 2003, the Massachusetts Securities Division filed an administrative complaint alleging
that MSDW filed false information in response to an inquiry from the Massachusetts Securities
Division pertaining to mutual fund sales practices. On August 11, 2003, the Massachusetts
Securities Division filed an administrative complaint, alleging that MSDW failed to make
disclosures of incentive compensation for proprietary and partnered mutual fund transactions. On
November 25, 2003, the Massachusetts Securities Division filed an administrative complaint,
alleging that a former branch manager engaged in securities fraud and dishonest conduct in
promoting the sales of proprietary mutual funds. On May 24, 2004, the presiding hearing officer
granted MSDWs motion to dismiss all claims relating to MSDWs differential compensation practices
and its receipt of remuneration from third-party fund families, holding that these practices did
not violate any state law or regulation. Regarding the Massachusetts Securities Divisions
complaint filed on July 14, 2003, MSDW waived its right to a hearing and agreed to pay an
administrative fine of $25,000 on September 27, 2004. Regarding the Massachusetts Securities
Divisions complaints filed on August 11, 2003 and November 25, 2003, hearings were concluded on
December 20, 2004. On March
27, 2005 the hearing officer issued two decisions dismissing all charges against MSDW and the
branch manager. On April 7, 2005, the Massachusetts Securities Division filed a Motion for
Reconsideration of the hearing officers decisions to dismiss all charges against MSDW and the
branch manager. On August 24, 2005, the hearing officer denied the Massachusetts Securities
Divisions motion for reconsideration as to the branch manager, not having yet ruled upon the
motion as to MSDW.
In fiscal 2004, MSDW discovered irregularities in the accounts of certain clients of Carlos Soto, a
former registered representative in its San Juan, Puerto Rico branch. Mr. Soto stated that, with
respect to certain clients, he had raised some funds by making misrepresentations, issuing false
account statements and diverting some funds to accounts he controlled. MSDW promptly notified
regulators and law enforcement. On December 9, 2004, MSDW reached a final settlement with the New
York Stock Exchange to resolve this matter (see December 2004 matter).
On June 17, 2004, the New Hampshire Bureau of Securities Regulation filed a petition for relief
against MSDW alleging, among other things, that a former representative solicited certain customers
to purchase certain unregistered, non-exempt securities, that certain managers promoted the sale of
proprietary mutual funds and other products by the use of certain sales contests and that MSDW
failed to disclose the alleged material fact of such contests. On April 7, 2005, MSDW entered into
a consent agreement with the New Hampshire Bureau of Securities Regulation. MSDW agreed to a
$425,000 fine, a cease and desist order, to pay $10,000 for the cost of investigation, and to
comply with a variety of undertakings, including requirements to retain an independent consultant
to review certain compliance and policy procedures, provide rescission with respect to certain
transactions, and notify New Hampshire residents of certain rights with respect to arbitration
agreements.
In December 2004, the New York Stock Exchange brought an administrative action (relating to the
Carlos Soto matter noted above and misconduct by a separate former employee of the firm) against
MSDW and its affiliate MS&Co. alleging violations by MSDW and/or MS&Co. of (1) New York Stock
Exchange Rule 342 by failing to provide for appropriate supervision of certain business activities
and by failing to provide for proper implementation of adequate systems and procedures to ensure
adequate supervision of certain customer accounts; (2) New York Stock Exchange Rule 405 by failing
to use due diligence concerning accounts handled by two registered representatives; and (3) New
York Stock Exchange Rule 440 and Regulation 240.17A-3 of the Securities Exchange Act by failing to
maintain complete and accurate books and records related to this matter. Without admitting or
denying guilt, MSDW and MS&Co. consented to a censure and a fine of $6 million which was accepted
by a hearing panel of the New York Stock Exchange on December 9, 2004.
24
In 2004, the New York Stock Exchange brought an administrative action against MSDW and MS&Co.
alleging violations by MSDW and/or MS&Co. of (1) New York Stock Exchange Rules 401 and 476(a)(6) by
failing to ensure delivery of prospectuses in connection with certain sales of securities; (2) New
York Stock Exchange Rule 476(a)(11) by failing to timely and accurately file daily program trade
reports; (3) New York Stock Exchange Rule 440b and SEC Regulation 10a-1 of the Securities Exchange
Act by erroneously executing certain sell orders on a minus tick for securities in which MSDW held
a short position; (4) New York Stock Exchange Rule 351 by failing to timely submit RE-3 in
connection with certain matters; (5) New York Stock Exchange Rule 345 and Securities Exchange Act
Regulations 17f-2 and 17a-3(12)(i) by hiring certain individuals subject to statutory
disqualification and failing to file fingerprint cards for certain non-registered employees; (6)
New York Stock Exchange Rule 123c by failing to comply with requirements concerning certain
market-on-close and limit-on-close orders; (7) New York Stock Exchange Rule 472, 342.16 and 342.17
concerning supervision of certain incoming and/or outgoing communications; and (8) New York Stock
Exchange Rule 342(a) and (b) by failing to reasonably supervise certain activities. MSDW and MS&Co.
resolved the action by consenting, without admitting or denying guilt, to a censure, a fine of $13
million and a rescission offer to those clients who should have received a prospectus during the
period from June 2003 to September 2004. A hearing panel of the New York Stock Exchange accepted
this settlement on December 9, 2004.
In an acceptance, waiver and consent dated August 1, 2005, the National Association of Securities
Dealers, Inc. found that MSDW Inc. violated the National Association of Securities Dealers, Inc.s
rules 3010 and
2110 by failing to establish and maintain a supervisory system, including written procedures,
reasonably designed to review and monitor its fee-based brokerage business between January 2001 and
December 2003. Without admitting or denying the allegations, MSDW consented to the described
sanctions and findings. The firm was censured and fined $1.5 million, and agreed to the payment of
restitution to 3,549 customers in the total amount of approximately $4,640,582, plus interest from
December 31, 2003 until August 1, 2005.
On September 27, 2007, FINRA announced that MS&Co., on behalf of itself and as successor to Morgan
Stanley DW Inc., entered into a Letter of Acceptance, Waiver and Consent to resolve charges filed
by FINRA on December 19, 2006. In the Letter of Acceptance, Waiver and Consent, FINRA found that,
among other things, MS&Co. provided inaccurate information regarding the existence of pre-September
11, 2001 emails and failed to provide such emails to arbitration claimants and regulators in
response to discovery obligations and regulatory inquiries, failed adequately to preserve books and
records, and failed to establish and maintain systems and written procedures reasonably designed to
preserve required records and to ensure that it conducted adequate searches in response to
regulatory inquiries and discovery requests. The Letter of Acceptance, Waiver and Consent also
included findings that MS&Co. failed to provide arbitration claimants with updates to a supervisory
manual when called for in discovery. FINRA found that MS&Co. violated Section 17(a) of the Exchange
Act of 1934 and Rule 17a-4 thereunder, NASD Conduct Rules 2110, 3010 (a) and (b) and 3110, NASD
Procedural Rule 8210 and Interpretative Material 10100 under the NASD Code of Arbitration
Procedure. In the settlement, MS&Co. neither admitted nor denied these findings. The settlement
established a $9.5 million fund for the benefit of potentially affected arbitration claimants to be
administered by a third party at the expense of MS&Co. In addition, MS&Co. was censured and agreed
to pay a $3 million regulatory fine and to retain an independent consultant to review its
procedures for complying with discovery requirements in arbitration proceedings relating to
MS&Co.s retail brokerage operations.
On October 10, 2007, MS&Co., on behalf of itself and as successor to Morgan Stanley DW Inc., became
the subject of an Order Instituting Administrative and Cease-And-Desist Proceedings by the SEC. The
Order found that from as early as 2000 until 2006, MS&Co. failed to provide to its customers
accurate and complete written trade confirmations for certain fixed income securities in violation
of Rule 10b-10 under the Exchange Act, Section 15B(c)(1) of the Exchange Act and Rule G-15 of the
Municipal Securities Rulemaking Board (MSRB). The Order censured MS&Co., ordered it to cease and
desist from committing or causing any violations and any future violations of Rule 10b-10 under the
Exchange Act, Section 15B(c)(1) of the Exchange Act, and MSRB Rule G-15, ordered MS&Co. to pay a
$7.5 million penalty, and to retain an independent consultant to review MS&Co.s policies and
procedures. MS&Co. consented to the issuance of the Order without admitting or denying any of the
SECs findings, except as to the SECs jurisdiction over the matter.
25
Morgan Stanley & Co. Incorporated
On June 2, 2009, MS executed a final settlement with the Office of the New York State Attorney
General (NYAG) in connection with its investigation relating to the sale of auction-rate
securities (ARS). MS agreed, among other things to: (1) repurchase at par illiquid ARS that were
purchased by certain retail clients prior to February 13, 2008; (2) pay certain retail clients that
sold ARS below par the difference between par and the price at which the clients sold the
securities; (3) arbitrate, under special procedures, claims for consequential damages by certain
retail clients; (4) refund refinancing fees to certain municipal issuers of ARS; and (5) pay a
total penalty of $35 million. On August 13, 2008, MS reached an agreement in principle on
substantially the same terms with the Office of the Illinois Secretary of State, Securities
Department (on behalf of a task force of other states under the auspices of the North American
Securities Administrators Association) that would settle their investigations into the same
matters. A separate investigation of these matters by the SEC remains ongoing.
In connection with the MS&Co.s role as either lead or co-lead underwriter in several in initial
public offerings (IPO), the company has been exposed to both regulatory and civil proceedings.
On January 25, 2005, MS&Co. announced a settlement with the Securities and Exchange Commission
regarding allegations that it violated Rule 101 of Regulation M by attempting to induce certain
customers that
received shares in IPOs to place purchase orders for additional shares in the aftermarket. Under
the terms of the settlement, MS&Co. agreed, without admitting or denying the allegations, to the
entry of a judgment enjoining it from violating Rule 101 of Regulation M and the payment of a $40
million civil penalty. The court approved the settlement on February 4, 2005.
On May 12, 2006, the U.S. District Court for the District of Columbia (the D.C. District Court)
entered Final Judgment effecting a settlement MS had reached with the SEC, the New York Stock
Exchange, Inc. (NYSE) and the NASD relating to MS&Co.s production of email in the research
analyst and IPO investigations from December 2000 through at least July 2005. The complaint, filed
by the SEC in the District Court on May 10, 2006, alleges that MS&Co. did not timely produce emails
in response to those matters because it did not diligently search for back-up tapes containing
responsive emails until 2005, and because it over-wrote back-up tapes potentially containing
responsive email until at least December 2002. Without admitting or denying the allegations of the
complaint, MS&Co. consented to (1) a permanent injunction barring future violations of §17(b) of
the Exchange Act (which requires, among other things, that MS respond promptly to SEC subpoenas and
requests) and the relevant regulations promulgated thereunder and (2) the payment of a $15 million
civil penalty, $5 million of which will be paid to the NASD and NYSE.
On May 31, 2006, MS&Co. and MSDW consented, without admitting or denying the findings, to the entry
of an order in which they were censured by the SEC for allegedly violating Section 17(a)(2) of the
Securities Act by managing auctions for auction rate securities in ways that were not adequately
disclosed or that did not conform to disclosed procedures. The order required that MS&Co. and MSDW
cease and desist from committing or causing any violations and any future violations of Section
17(a)(2) of the Securities Act, the payment of a civil money penalty of $1.5 million and to comply
with certain additional undertakings.
On June 27, 2006, MS&Co. and MSDW consented, without admitting or denying the findings, to the
entry of an order in which they were censured by the SEC for allegedly violating Section 15(f) of
the Exchange Act of 1934 and Section 204A of the Investment Advisers Act of 1940 and paid a civil
money penalty of $10 million. The SEC found that MS&Co. and MSDW failed to: (1) conduct any
surveillance of a number of accounts and securities; (2) provide adequate guidance to personnel
charged with conducting surveillance; (3) have adequate controls in place with respect to certain
aspects of watch list maintenance. The SECs findings covered different areas from the 1997
through 2006 time period. The order also required that MS&Co. and MSDW comply with certain
undertakings as described in the SECs order, which include retaining a qualified independent
consultant to conduct a comprehensive review of their policies, practices and procedures relating
to 15(f) of the Exchange Act of 1934 and Section 204A of the Investment Advisors Act of 1940 to
determine the adequacy of such policies, practices and procedures and make appropriate
recommendations.
MS&Co., nor any affiliate, officer, director or employee thereof have passed on the merits of this
Memorandum or offering, or give any guarantee as to the performance or any other aspect of the
Fund.
26
DESCRIPTION OF THE SHARES AND THE MASTER FUND UNITS;
CERTAIN MATERIAL TERMS OF THE TRUST DECLARATIONS
The following summary briefly describes in brief the Shares and the Master Fund Units and certain
aspects of the operation of the Fund and the Master Fund and the respective responsibilities of the
Trustee and the Managing Owner concerning the Fund and Master Fund and the material terms of the
Declarations of Trust, each of which are substantially identical except as set forth below.
Prospective investors should carefully review the Forms of Declarations of Trust filed as exhibits
to the registration statement of which this prospectus is a part and consult with their own
advisers concerning the implications to such prospective subscribers of investing in a Delaware
statutory trust. Capitalized terms used in this section and not otherwise defined shall have such
meanings assigned to them under the applicable Trust Declaration.
Description of the Shares and the Master Fund Units
The Fund will issue common units of beneficial interest, or Shares, which represent units of
fractional undivided beneficial interest in and ownership of the Fund. A Supplemental Listing
Application has been made to list the Shares on the NYSE-ARCA under the symbol GCC.
The Shares may be purchased from the Fund or redeemed on a continuous basis, but only by Authorized
Participants and only in blocks of 50,000 Shares, or Baskets. Individual Shares may not be
purchased from the Fund or redeemed. Shareholders that are not Authorized Participants may not
purchase from the Fund or redeem Shares or Baskets.
The Fund will invest the proceeds of its offering of the Shares in the Master Fund. The Master Fund
will issue common units of beneficial interest, or Master Fund Units, which represent units of
fractional undivided beneficial interest in and ownership of the Master Fund. Master Fund Units may
be purchased or redeemed on a continuous basis, but only by the Fund and only in blocks of 50,000
Master Fund Units, or Master Unit Baskets. The Master Fund is wholly-owned by the Fund and
indirectly, by the Managing Owner. Each Share issued by the Fund will correlate with a Master Fund
Unit issued by the Master Fund and held by the Fund.
27
Principal Office; Location of Records
Each of the Fund and the Master Fund is organized as a statutory trust under the Delaware Statutory
Trust Act. The Fund and Master Fund are managed by the Managing Owner, whose office is located 3340
Peachtree Road, Suite 1910, Atlanta, Georgia 30326, telephone: (404) 239-7938.
The books and records of the Fund and the Master Fund will be maintained as follows: all marketing
materials and Basket creation and redemption books and records will be maintained at the offices of
ALPS Distributors; Telephone number (303) 623-2577; certain financial books and records (including
fund accounting records, ledgers with respect to assets, liabilities, capital, income and expenses,
the registrar, transfer journals and related details) and trading and related document received
from futures commission merchants will be maintained by GreenHaven Commodity Services. All other
books and records of the Fund and the Master Fund (including minute books and other general
corporate records, trading records and related reports and other items received from the Master
Funds Commodity Brokers) will be maintained at its principal office, c/o GreenHaven Commodity
Services LLC, 3340 Peachtree Road, Suite 1910, Atlanta, Georgia 30326, telephone: (404) 239-7938.
The books and records of the Fund and the Master Fund are located at the foregoing addresses, and
available for inspection and copying (upon payment of reasonable reproduction costs) by
Shareholders or their representatives for any purposes reasonably related to a Shareholders
interest as a beneficial owner of such Shares during regular business hours as provided in the
Declarations of Trust. The Managing Owner will maintain and preserve the books and records of the
Fund and the Master Fund for a period of not less than six (6) years.
The Trustee
CSC Trust Company of Delaware, a Delaware corporation, is the sole Trustee of the Fund and Master
Fund. The Trustees principal offices are located at 2711 Centerville Road, Suite 210, Wilmington,
DE 19808. The Trustee is unaffiliated with the Managing Owner. The Trustees duties and liabilities
with respect to the offering of the Shares and the management of the Fund and Master Fund are
limited to its express obligations under the Trust Declarations.
The rights and duties of the Trustee, the Managing Owner and the Shareholders are governed by the
provisions of the Delaware Statutory Trust Act and by the applicable Trust Declaration.
The Trustee serves as the sole trustee of the Fund and the Master Fund in the State of Delaware.
The Trustee will accept service of legal process on the Fund and the Master Fund in the State of
Delaware and will make certain filings under the Delaware Statutory Trust Act. The Trustee does not
owe any other duties to the Fund or the Master Fund, the Managing Owner or the Shareholders. The
Trustee is permitted to resign upon at least sixty (60) days notice to the Fund and the Master
Fund, provided, that any such resignation will not be effective until a successor Trustee is
appointed by the Managing Owner. Each of the Trust Declarations provides that the Trustee is
compensated by the Fund or the Master Fund, as appropriate, and is indemnified by the Fund or
Master Fund, as appropriate, against any expenses it incurs relating to or arising out of the
formation, operation or termination of the Fund or Master Fund, as appropriate, or the performance
of its duties pursuant to the Trust Declarations, 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 Fund, the Master Fund and the Managing Owner are subject to issuer
liability under the federal securities laws for the information contained in this Prospectus and
under federal laws with respect to the issuance and sale of the Shares. 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 Shares. The
Trustees liability in connection with the issuance and sale of the Shares is limited solely to the
express obligations of the Trustee set forth in each Trust Declaration.
28
Under each Trust Declaration, the Trustee has delegated to the Managing Owner the exclusive
management and control of all aspects of the business of the Fund and Master Fund. The Trustee will
have no duty or liability to supervise or monitor the performance of the Managing Owner, nor will
the Trustee have any liability for the acts or omissions of the Managing Owner. The Shareholders
have no voice in the day-to-day management of the business and operations of the Fund or the Master
Fund, other than certain limited voting rights as set forth in each Trust Declaration. In the
course of its management of the business and affairs of the Fund and the Master Fund, 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
Shareholders 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 Fund or
Master Fund, as appropriate.
Because the Trustee has delegated substantially all of its authority over the operation of the Fund
and the Master Fund to the Managing Owner, the Trustee itself is not registered in any capacity
with the CFTC.
The Managing Owner
Background and Principal. GreenHaven Commodity Services LLC, a Delaware limited liability company,
is the Managing Owner of the Fund and the Master Fund. The Managing Owner serves as both commodity
pool operator and commodity trading advisor of the Fund and Master Fund. The Managing Owner is
registered with the CFTC as a Commodity Pool Operator (CPO) and Commodity Trading Advisor (CTA)
and was approved as a Member of the NFA as of November 15, 2006. Its principal place of business is
3340 Peachtree Road, Suite 1910, Atlanta, Georgia 30326, telephone: (404) 239-7938. The
registration of the Managing Owner with the CFTC and its membership in the NFA must not be taken as
an indication that either the CFTC or the NFA has recommended or approved the Managing Owner, the
Fund or the Master Fund.
In its capacity as a commodity pool operator, the Managing Owner is an organization which operates
or solicits funds for a commodity pool; that is, an enterprise in which funds contributed by a
number of persons are combined for the purpose of trading futures contracts. In its capacity as a
commodity trading advisor, the Managing Owner is an organization which, for compensation or profit,
advises others as to the value of or the advisability of buying or selling futures contracts.
Principals and Key Employees. Ashmead Pringle and Thomas Fernandes serve as the chief decision
makers of the Managing Owner.
Ashmead Pringle, 64, President
Mr. Pringle founded the Managing Owner and has served as the President since October of 2006. Since
1984, Mr. Pringle founded and has acted as the President of Grain Service Corporation (GSC), a
commodity research and trading company. Mr. Pringle has conducted hundreds of seminars on hedging,
risk management, and basis trading in energy and agriculture, and is a recognized expert in
commodity risk management. Mr. Pringle became a registered Associated Person and listed Principal
of the Managing Owner on November 15, 2006. He became a listed Principal of GreenHaven, LLC on
November 15, 2006 and a registered Associated Person of GreenHaven, LLC on September 18, 2006.
GreenHaven LLC is a Georgia LLC that focuses on the development of private and public commodity
investments and which became registered as a CTA on September 14, 2006. Mr. Pringle became a
listed Principal of Grain Service Corporation, Inc. on June 12, 1985 and a registered Associated
Person of Grain Service Corporation, Inc. on October 31, 1985.
Thomas Fernandes, 36, Treasurer and Manager of Operations
Mr. Fernandes is the Chief Operations Officer of the Managing Owner and has held that position
since October of 2006. From May 2005 to October 2006, Mr. Fernandes has worked as a commodity
derivatives expert at GSC. Prior to joining GSC, Mr. Fernandes worked as an analyst at West
Broadway Partners, an investment partnership, from March 2002 to April 2005. From March 2000 to
March 2002, Mr. Fernandes was employed as a trader at Fleet Bank of Boston. Mr. Fernandes became a
registered Associated Person
and listed Principal of the Managing Owner on October 26, 2006. He became a listed Principal of
GreenHaven, LLC on August 29, 2006 and an Associated Person of GreenHaven, LLC on September 14,
2006. He became an Associated Person of Grain Service Corporation, Inc. on June 8, 2005.
29
Cooper Anderson, 30, Trader
Mr. Anderson is a trader for the Managing Owner and is responsible for daily futures trading, cash
flow management, treasury portfolio management, and quantitative analysis for the GreenHaven
Continuous Commodity Index Fund. Prior to joining GreenHaven LLC, in April of 2007, Mr. Anderson
worked from December of 2002 until March of 2006 as an analyst in Institutional Equity Sales and
Trading for Credit Suisse Securities USA LLC, a securities broker dealer and investment bank based
in Zurich, Switzerland. At Credit Suisse Securities USA LLC he served as a brokerage sales person
covering the major financial institutions in the Southeastern US and the Caribbean. He has passed
the Level 3 CFA® exam and has a B.B.A. in Finance from the University of Georgia. Mr. Anderson
became a registered Associated Person of GreenHaven LLC on May 29, 2007 and a registered Associated
Person and listed Principal of the Managing Owner on November 30, 2009.
Scott Glasing, 47. Trader
Mr. Glasing is a trader for the Managing Owner and is responsible for daily futures trading. Mr.
Glasing has held this position since November of 2006. Mr. Glasing has an expertise, concentrated
in trading, back office operations and compliance. A native of Chicago, he has interest in finance,
economics and hedging. Mr. Glasing has worked for Grain Service since 1998. Mr. Glasing became a
registered Associated Person on November 15, 2006 and listed Principal of the Managing Owner on
November 30, 2009. He became a registered Associated Person of GreenHaven, LLC on September 14,
2006. He became an Associated Person of Grain Service Corporation, Inc. on February 9, 1998 and
was listed as a principal of Grain Service Corporation, Inc. on March 26, 1998.
Neither Mr. Pringle nor Mr. Fernandes nor Mr. Anderson nor Mr. Glasing receives a salary directly
from the Master Fund or the Fund as a result of serving in any capacity. However, a portion the
Management Fee that is received for the services provided by the Managing Owner shall be used for
payment of compensation to such individuals.
As of the date of this prospectus, neither Mr. Pringle nor Mr. Fernandes nor Mr. Anderson nor Mr.
Glasing owned any shares, and the Managing Owner owned fifty (50) shares.
The Fund and Master Fund performance history started on January 23d, 2008 and is
summarized on page 11.
NEITHER THIS POOL OPERATOR NOR ANY OF ITS TRADING PRINCIPALS HAS PREVIOUSLY OPERATED ANY OTHER
POOLS OR TRADED ANY OTHER ACCOUNTS.
Fiduciary Obligations of the Managing Owner. As managing owner of the Fund and the Master Fund, the
Managing Owner effectively is subject to the duties and restrictions imposed on fiduciaries under
both statutory and common law. The Managing Owner has a fiduciary responsibility to the
Shareholders to exercise good faith, fairness and loyalty in all dealings affecting the Fund and
the Master Fund, consistent with the terms of the Trust Declarations. A form of each of the Trust
Declarations is filed as an exhibit to the registration statement of which this prospectus is a
part. The general fiduciary duties which would otherwise be imposed on the Managing Owner (which
would make the operation of the Fund and the Master Fund as described herein impracticable due to
the strict prohibition imposed by such duties on, for example, conflicts of interest on behalf of a
fiduciary in its dealings with its beneficiaries), are defined and limited in scope by the
disclosure of the business terms of the Fund and the Master Fund, as set forth herein and in the
Trust Declarations (to which terms all Shareholders, by subscribing to the Shares, are deemed to
consent).
The Trust Declarations provide that the Managing Owner and its affiliates shall have no liability
to the Fund or the Master Fund or to any Shareholder for any loss suffered by the Fund or the
Master Fund arising
out of any action or inaction of the Managing Owner or its affiliates or their respective
directors, officers, shareholders, partners, members, managers or employees (the Managing Owner
Related Parties) if the Managing Owner Related Parties, in good faith, determined that such course
of conduct was in the best interests of the Fund or the Master Fund, as applicable, and such course
of conduct did not constitute gross negligence or misconduct by the Managing Owner Related Parties.
The Fund and the Master Fund have agreed to indemnify the Managing Owner Related Parties against
claims, losses or liabilities based on their conduct relating to the Fund and the Master Fund,
provided that the conduct resulting in the claims, losses or liabilities for which indemnity is
sought did not constitute gross negligence or misconduct and was done in good faith and in a manner
reasonably believed to be in the best interests of the Fund or the Master Fund, as applicable.
30
Fiduciary and Regulatory Duties of the Managing Owner
An investor should be aware that the Managing Owner has a fiduciary responsibility to the
Shareholders to exercise good faith and fairness in all dealings affecting the Fund and the Master
Fund.
Under Delaware law, a beneficial owner of a business trust (such as a Shareholder of the Fund) may,
under certain circumstances, institute legal action on behalf of himself 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 business trust (a derivative
action) to recover damages from a third party where a managing owner has failed or refused to
institute proceedings to recover such damages. In addition, beneficial owners may have the right,
subject to certain legal 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 Securities and Exchange Commission (SEC). Beneficial owners who have suffered losses in
connection with the purchase or sale of their beneficial interests 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.
Under certain circumstances, Shareholders also have the right to institute a reparations proceeding
before the CFTC against the Managing Owner (a registered commodity pool operator and commodity
trading advisor), the Commodity Broker (registered futures commission merchant), 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. Private rights of action are
conferred by the Commodity Exchange Act. Investors in commodities and in commodity pools may,
therefore, invoke the protections provided thereunder.
There are substantial and inherent conflicts of interest in the structure of the Fund and the
Master Fund which are, on their face, inconsistent with the Managing Owners fiduciary duties. One
of the purposes underlying the disclosures set forth in this Prospectus is to disclose to all
prospective Shareholders these conflicts of interest so that the Managing Owner may have the
opportunity to obtain investors informed consent to such conflicts. Prospective investors who are
not willing to consent to the various conflicts of interest described under Conflicts of Interest
and elsewhere should not invest in the Fund. The Managing Owner currently intends to raise such
disclosures and consent as a defense in any proceeding brought seeking relief based on the
existence of such conflicts of interest.
The foregoing summary describing in general terms the remedies available to Shareholders under
federal law is based on statutes, rules and decisions as of the date of this Prospectus. This is a
rapidly developing and changing area of the law. Therefore, Shareholders who believe that they may
have a legal cause of action against any of the foregoing parties should consult their own counsel
as to their evaluation of the status of the applicable law at such time.
Ownership or Beneficial Interest in the Fund and Master Fund
No principal has an ownership or beneficial interest in either the Fund or the Master Fund. The
Managing owner owns 50 General Units of the Master Fund and the Fund.
Management; Voting by Shareholders
The Shareholders take no part in the management or control, and have no voice in the operations or
the business of the Fund or the Master Fund. Shareholders, may, however, remove and replace the
Managing Owner as the managing owner of the Fund, and may amend the Trust Declaration of the Fund,
except in certain limited respects, by the affirmative vote of a majority of the outstanding Shares
then owned by Shareholders (as opposed to by the Managing Owner and its affiliates). The owners of
a majority of the outstanding Shares then owned by Shareholders may also compel dissolution of the
Fund. The owners of ten percent (10%) of the outstanding Shares then owned by Shareholders have the
right to bring a matter before a vote of the Shareholders. The Managing Owner has no power under
the Trust Declaration to restrict any of the Shareholders voting rights. Any Shares purchased by
the Managing Owner or its
affiliates, as well as the Managing Owners general liability interest in the Fund or Master Fund,
are non-voting.
The Managing Owner has the right unilaterally to amend the Trust Declaration provided that any such
amendment is for the benefit of and not adverse to the Shareholders or the Trustee and also in
certain unusual circumstances for example, if doing so is necessary to comply with certain
regulatory requirements.
31
Recognition of the Fund and the Master Fund in Certain States
A number of states do not have business trust statutes such as that under which the Fund and the
Master Fund have 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 Shareholders, 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. To protect Shareholders
against any loss of limited liability, the Trust Declarations provide that no written obligation
may be undertaken by the Fund or Master Fund unless such obligation is explicitly limited so as not
to be enforceable against any Shareholder personally. Furthermore, each of the Fund and Master Fund
itself indemnifies all its Shareholders against any liability that such Shareholders might incur in
addition to that of a beneficial owner. The Managing Owner is itself generally liable for all
obligations of the Fund and the Master Fund and will use its assets to satisfy any such liability
before such liability would be enforced against any Shareholder individually.
Possible Repayment of Distributions Received by Shareholders; Indemnification by Shareholders
The Shares are limited liability investments; investors may not lose more than the amount that they
invest plus any profits recognized on their investment. However, Shareholders could be required, as
a matter of bankruptcy law, to return to the estate of the Fund any distribution they received at a
time when the Fund was in fact insolvent or in violation of its Trust Declaration. In addition,
although the Managing Owner is not aware of this provision ever having been invoked in the case of
any public futures fund, Shareholders agree in the Trust Declaration that they will indemnify the
Fund for any harm suffered by it as a result of (i) Shareholders actions unrelated to the business
of the Fund, or (ii) taxes imposed on the Shares by the states or municipalities in which such
investors reside.
The foregoing repayment of distributions and indemnity provisions (other than the provision for
Shareholders indemnifying the Fund for taxes imposed upon it by the state or municipality in which
particular Shareholders 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 Fund in such states might,
theoretically, be challenged although the Managing Owner is unaware of any instance in which
this has actually occurred) are commonplace in statutory trusts and limited partnerships.
Shares Freely Transferable
The Shares are expected to trade on NYSE-ARCA and provide institutional and retail investors with
direct access to the Fund. The Fund will hold no investment assets other than Master Fund Units.
The Master Fund trades with a view to tracking the Index over time, less expenses. The Funds
Shares may be bought and sold on NYSE-ARCA like any other exchange-listed security.
Book-Entry Form
Individual certificates will not be issued for the Shares. Instead, global certificates are
deposited by the Trustee with DTC and registered in the name of Cede & Co., as nominee for DTC. The
global certificates evidence all of the Shares outstanding at any time. Under the Funds Trust
Declaration, Shareholders are limited to (1) participants in DTC such as banks, brokers, dealers
and trust companies (DTC Participants), (2) those who maintain, either directly or indirectly, a
custodial relationship with a DTC
Participant (Indirect Participants), and (3) those banks, brokers, dealers, trust companies and
others who hold interests in the Shares through DTC Participants or Indirect Participants. The
Shares are only transferable through the book-entry system of DTC. Shareholders who are not DTC
Participants may transfer their Shares through DTC by instructing the DTC Participant holding their
Shares (or by instructing the Indirect Participant or other entity through which their Shares are
held) to transfer the Shares. Transfers are made in accordance with standard securities industry
practice.
Reports to Shareholders
The Managing Owner will furnish you with annual reports as required by the rules and regulations of
the SEC as well as with those reports required by the CFTC and the NFA, including, but not limited
to, an annual audited financial statement certified by independent public accountants and any other
reports required by any other governmental authority that has jurisdiction over the activities of
the Fund and the Master Fund. You also will be provided with appropriate information to permit you
(on a timely basis) to file your United States federal and state income tax returns with respect to
your Shares.
32
The Managing Owner will notify Shareholders of any change in the fees paid by the Fund and the
Master Fund or of any material changes to the Fund or the Master Fund. Any such notification shall
include a description of Shareholders voting rights.
Net Asset Value
Net Asset Value means the total assets of the Master Fund including, but not limited to, all cash
and cash equivalents or other debt securities less total liabilities of the Master Fund, each
determined on the basis of generally accepted accounting principles in the United States,
consistently applied under the accrual method of accounting. In particular, Net Asset Value
includes any unrealized profit or loss on open commodity futures contracts, and any other credit or
debit accruing to the Master Fund but unpaid or not received by the Master Fund. All open commodity
futures contracts traded on a United States exchange will be calculated at their then current
market value, which will be based upon the settlement price for that particular commodity futures
contract traded on the applicable United States exchange on the date with respect to which Net
Asset Value is being determined; provided, that if a commodity futures contract traded on a United
States exchange could not be liquidated on such day, due to the operation of daily limits or other
rules of the exchange upon which that position is traded or otherwise, the settlement price on the
most recent day on which the position could have been liquidated shall be the basis for determining
the market value of such position for such day.
The current market value of all open commodity futures contracts traded on a non-United States
exchange shall be based upon the settlement price for that particular commodity futures contract
traded on the applicable non-United States exchange on the date with respect to which net asset
value is being determined; provided further, that if a commodity futures contract traded on a
non-United States exchange could not be liquidated on such day, due to the operation of daily
limits (if applicable) or other rules of the exchange upon which that position is traded or
otherwise, the settlement price on the most recent day on which the position could have been
liquidated shall be the basis for determining the market value of such position for such day.
The Managing Owner may in its discretion (and under extraordinary circumstances, including, but not
limited to, periods during which a settlement price of a futures contract is not available due to
exchange limit orders or force majeure type events such as systems failure, natural or man-made
disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar
intervening circumstance) value any asset of the Master Fund pursuant to such other principles as
the Managing Owner deems fair and equitable so long as such principles are consistent with normal
industry standards. Interest earned on the Master Funds commodity brokerage account will be
accrued at least monthly. The amount of any distribution will be a liability of the Master Fund
from the day when the distribution is declared until it is paid.
Net Asset Value per Master Fund Unit is the Net Asset Value of the Master Fund divided by the
number of outstanding Master Fund Units. Because there will be a one-to-one correlation between
Shares and Master Fund Units, the Net Asset Value per Share and the Net Asset Value per Master Fund
Unit will be equal.
Termination Events
The Fund will dissolve at any time upon the happening of any of the following events:
|
(i) |
|
The filing of a certificate of dissolution or revocation of the Managing Owners
charter (and the expiration of ninety (90) days after the date of notice to the Managing
Owner of revocation without a reinstatement of its charter) or upon the withdrawal,
removal, adjudication or admission of bankruptcy or insolvency of the Managing Owner, or an
event of withdrawal unless (i) at the time there is at least one remaining Managing Owner
and that remaining Managing Owner carries on the business of the Fund or (ii) within ninety
(90) days of such event of withdrawal all the remaining Shareholders agree in writing to
continue the business of the Fund and to select, effective as of the date of such event,
one or more successor Managing Owners. If the Fund is terminated as the result of an event
of withdrawal and a failure of all remaining Shareholders to continue the business of the
Fund and to appoint a successor Managing Owner as provided above within one hundred and
twenty (120) days of such event of withdrawal, Shareholders holding Shares representing at
least seventy-five percent (75%) of the net asset value (not including Shares held by the
Managing Owner and its affiliates) may elect to continue the business of the Fund by
forming a new statutory trust, or reconstituted trust, on the same terms and provisions as
set forth in the Trust Declaration. Any such election must also provide for the election of
a Managing Owner to the reconstituted trust. If such an election is made, all Shareholders
of the Fund shall be bound thereby and continue as Shareholders of the reconstituted trust.
|
33
|
(ii) |
|
The occurrence of any event which would make unlawful the continued existence of the
Fund. |
|
|
(iii) |
|
In the event of the suspension, revocation or termination of the Managing Owners
registration as a commodity pool operator, or membership as a commodity pool operator with
the NFA (if, in either case, such registration is required at such time unless at the time
there is at least one remaining Managing Owner whose registration or membership has not
been suspended, revoked or terminated). |
|
|
(iv) |
|
The Fund becomes insolvent or bankrupt. |
|
|
(v) |
|
The Shareholders holding Shares representing at least seventy-five percent (75%) of the
Net Asset Value (which excludes the Shares of the Managing Owner) vote to dissolve the
Fund, notice of which is sent to the Managing Owner not less than ninety (90) Business Days
prior to the effective date of termination. |
|
|
(vi) |
|
The determination of the Managing Owner that the aggregate net assets of the Fund in
relation to the operating expenses of the Fund make it unreasonable or imprudent to
continue the business of the Fund. |
|
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(vii) |
|
The Fund becoming required to be registered as an investment company under the
Investment Company Act of 1940. |
|
|
(viii) |
|
DTC is unable or unwilling to continue to perform its functions, and a comparable
replacement is unavailable. |
THE ADMINISTRATOR
The Managing Owner, on behalf of the Fund and the Master Fund, has appointed The Bank of New York,
N.A., as the Administrator of the Fund and the Master Fund and has entered into an Administration
Agreement in connection therewith.
The Bank of New York, N.A., a banking corporation organized under the laws of the State of New York
with trust powers, has an office at One Wall Street, New York, New York 10286. The Bank of New
York, N.A. is subject to supervision by the New York State Banking Department and the Board of
Governors of the Federal Reserve System. Information regarding the net asset value of the Fund,
creation and redemption transaction fees and the names of the parties that have executed a
Participant Agreement may be obtained from the Administrator by calling the following number: (718)
315-4412. A copy of the Administration Agreement is available for inspection at the Administrators
office identified above.
The Administrator will retain certain financial books and records, including: fund accounting
records, ledgers with respect to assets, liabilities, capital, income and expenses, the registrar,
transfer journals and related details and trading and related documents received from futures
commission merchants.
A summary of the material terms of the Administration Agreement is disclosed in the Material
Contracts section.
The Administrators monthly fees are paid by the Master Fund and the Fund.
The Administrator and any of its affiliates may from time-to-time purchase or sell Shares for their
own account, as agent for their customers and for accounts over which they exercise investment
discretion.
The Administrator and any successor administrator must be a participant in DTC or such other
securities depository as shall then be acting.
34
The Administrator also will receive a transaction processing fee in connection with orders from
Authorized Participants to create or redeem Baskets in the amount of $500 per order. These
transaction processing fees are paid directly by the Authorized Participants and not by the Fund or
the Master Fund.
The Fund has also retained a consultant to assist with certain tax reporting requirements of the
Fund and its Shareholders.
THE DISTRIBUTOR
The Managing Owner, on behalf of the Fund and the Master Fund, has appointed ALPS Distributors,
Inc., or the Distributor, to assist the Managing Owner and the Administrator with certain functions
and duties relating to the creation and redemption of Baskets. Such services will include the
following: review of distribution-related legal documents and contracts; coordination of processing
of Basket creations and redemptions; coordination and assistance with maintenance of creation and
redemption records; consultation with the marketing staff of the Managing Owner and its affiliates
with respect to NASD compliance in connection with marketing efforts; review and filing of
marketing materials with the NASD; and consultation with the Managing Owner and its affiliates in
connection with marketing and sales strategies. Investors may contact the Distributor toll-free in
the U.S. at (800) 320-2577.
The Distributor will retain all marketing materials and Basket creation and redemption books and
records at the offices of ALPS Distributor, Inc., 1290 Broadway, Suite 1100, Denver CO 80203;
Telephone number (303) 623-2577.
The Managing Owner, out of the Management Fee, will pay the Distributor approximately $50,000 per
year, plus any fees or disbursements incurred by the Distributor in connection with the performance
by the Distributor of its duties on behalf of the Fund and the Master Fund. The Distributor has,
however, waived the $50,000 fee until the end of the current term of the Distribution Services
Agreement. Moreover, there
will be no payment of underwriting compensation to any FINRA Member in excess of 10% of the gross
proceeds of this offering, pursuant to FINRA Conduct Rule 2810.
THE MARKETING AGENT
The Managing Owner, on behalf of the Fund and the Master Fund, has appointed ALPS Distributors,
Inc. (the Marketing Agent), as a marketing agent to the Fund and Master Fund. The Marketing Agent
will provide assistance to the Managing Owner with certain function and duties such as providing
various educational and marketing activities regarding the Fund, primarily in the secondary trading
market, which activities include, but are not limited to, communicating the Funds name,
characteristics, uses, benefits, and risks, consistent with the prospectus, providing support to
national account managers and wholesalers filed activities, assisting national account managers in
implementing sales strategy. The Marketing Agent will not open or maintain customer accounts or
handle orders for the Fund. The Marketing Agent will engage in public seminars, road shows,
conferences, media interviews, field incoming telephone 800number calls and distribute sales
literature and other communications (including electronic media) regarding the Fund. Investors may
contact the Marketing Agent toll-free in the U.S. at (800) 320-2577.
The Managing Owner pays the Marketing Agent for performing its duties on behalf of the Fund and the
Master fund.
AUTHORIZED PARTICIPANTS
As of the date of this prospectus, JPMorgan Chase and Merrill, Lynch Professional Clearing Corp,
and Morgan Stanley & Co., and NewEdge USA, LLC. have each executed a Participant Agreement.
35
CONFLICTS OF INTEREST
General
The Managing Owner has not established formal procedures to resolve all potential conflicts of
interest. Consequently, investors may be dependent on the good faith of the respective parties
subject to such conflicts to resolve them equitably. Although the Managing Owner attempts to
monitor these conflicts, it is extremely difficult, if not impossible, for the Managing Owner to
ensure that these conflicts do not, in fact, result in adverse consequences to the Fund.
Prospective investors should be aware that the Managing Owner presently intends to assert that
Shareholders have, by subscribing for Shares of the Fund, consented to the following conflicts of
interest in the event of any proceeding alleging that such conflicts violated any duty owed by the
Managing Owner to investors:
The Managing Owner
The Managing Owner has a conflict of interest in allocating its own limited resources among
different clients and potential future business ventures, to each of which it owes fiduciary
duties. Additionally, the professional staff of the Managing Owner also services other affiliates
of the Managing Owner and their respective clients. Although the Managing Owner and its
professional staff cannot and will not devote all of its or their respective time or resources to
the management of the business and affairs of the Fund and the Master Fund, the Managing Owner
intends to devote, and to cause its professional staff to devote, sufficient time and resources
properly to manage the business and affairs of the Fund and the Master Fund consistent with its or
their respective fiduciary duties to the Fund and the Master Fund and others.
The Commodity Brokers
The Commodity Brokers may act from time to time as commodity brokers for other accounts with which
it is affiliated or in which it or one of its affiliates has a financial interest. The compensation
received by the
Commodity Brokers from such accounts may be more or less than the compensation received for
brokerage services provided to the Master Fund. In addition, various accounts traded through the
Commodity Brokers (and over which their personnel may have discretionary trading authority) may
take positions in the futures markets opposite to those of the Master Fund or may compete with the
Master Fund for the same positions. The Commodity Brokers may have a conflict of interest in their
execution of trades for the Master Fund and for other customers. The Managing Owner will, however,
not retain any commodity broker for the Master Fund which the Managing Owner has reason to believe
would knowingly or deliberately favor any other customer over the Master Fund with respect to the
execution of commodity trades.
The Commodity Brokers will benefit from executing orders for other clients, whereas the Master Fund
may be harmed to the extent that the Commodity Brokers have fewer resources to allocate to the
Master Funds accounts due to the existence of such other clients.
Certain officers or employees of the Commodity Brokers may be members of United States commodities
exchanges and/or serve on the governing bodies and standing committees of such exchanges, their
clearing houses and/or various other industry organizations. In such capacities, these officers or
employees may have a fiduciary duty to the exchanges, their clearing houses and/or such various
other industry organizations which could compel such employees to act in the best interests of
these entities, perhaps to the detriment of the Master Fund.
Proprietary Trading/Other Clients
The Managing Owner, the Commodity Brokers and their respective principals and affiliates may trade
in the commodity 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 Master Fund or may compete with the Master Fund
for positions in the marketplace. Such trading may create conflicts of interest on behalf of one or
more such persons in respect of their obligations to the Master Fund. Records of proprietary
trading and trading on behalf of other clients will not be available for inspection by
Shareholders.
Because the Managing Owner, the Commodity Brokers and their respective principals and affiliates
may trade for their own accounts at the same time that they are managing the account of the Master
Fund, 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
activities not constituting a breach 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 Master Fund.
36
No Distributions
The Managing Owner has discretionary authority over all distributions made by the Fund. In view of
the Funds objective of seeking significant capital appreciation, the Managing Owner currently does
not intend to make any distributions, but, has the sole discretion to do so from time-to-time.
Greater management fees will be generated to the benefit of the Managing Owner if the Funds assets
are not reduced by distributions to the Shareholders.
37
USE OF PROCEEDS
A substantial amount of proceeds of the offering of the Shares will be used by the Fund, through
the Master Fund, to engage in the trading of exchange-traded futures on the Index Commodities with
a view to reflecting the performance of the Index over time, less the expenses of the operations of
the Fund and the Master Fund. The Master Funds portfolio also will include United States Treasury
securities for deposit with the Master Funds Commodity Brokers as margin and other high credit
quality short-term fixed income securities.
To the extent that the Master Fund trades in futures contracts on United States exchanges, the
assets deposited by the Master Fund with its Commodity Brokers as margin must be segregated
pursuant to the regulations of the CFTC. Such segregated funds may be invested only in a limited
range of instruments principally U.S. government obligations.
Although the percentages set forth below may vary substantially over time, as of the date of this
Prospectus, the Master Fund estimates:
|
(i) |
|
up to approximately 10% of the net asset value of the Master Fund will be placed in
segregated accounts in the name of the Master Fund with the Commodity Brokers (or another
eligible financial institution, as applicable) in the form of cash or United States
Treasury bills to margin commodity positions. Such funds will be segregated pursuant to
CFTC rules; |
|
|
(ii) |
|
approximately 90% of the net asset value of the Master Fund will be maintained in
segregated accounts in the name of the Master Fund in bank deposits or United States
Treasury and United States Government Agencies issues. |
The Managing Owner, a registered commodity pool operator and commodity trading advisor, will be
responsible for the cash management activities of the Master Fund, including investing in United
States Treasury and United States Government Agencies issues.
In addition, assets of the Master Fund not required to margin positions may be maintained in United
States bank accounts opened in the name of the Master Fund and may be held in United States
Treasury bills (or other securities approved by the CFTC for investment of customer funds).
The Master Fund receives 100% of the interest income earned on its interest income assets.
FEES AND CHARGES
Upfront Selling Commissions
No upfront selling commissions will be charged to Shareholders, although investors are expected to
be charged a customary commission by their brokers in connection with purchases of Shares that will
vary from investor to investor. Investors are encouraged to review the terms of their brokerage
accounts for details on applicable charges. Also, the excess, if any, of the price at which an
Authorized Participant sells a Share over the price paid by such Authorized Participant in
connection with the creation of such Share in a Basket may be deemed to be underwriting
compensation.
Management Fee
The Master Fund will pay the Managing Owner a Management Fee, monthly in arrears, in an amount
equal to 0.85% per annum of the average amount of daily net assets of the Master Fund during the
Calendar year. No separate fee will be paid by the Fund.
38
Organization and Offering Expenses
Expenses incurred in connection with organizing the Fund and the Master Fund and the offering of
the Shares for the Funds initial continuous offering period commencing on January 23, 2008 were
paid by GreenHaven, LLC, a limited liability company organized in the State of Georgia, which is
the sole member of the Managing Owner. On May 15, 2010 the Fund and Master Fund registered
21,000,000 units for issuance in connection with this offering with regulatory agencies. The
Managing Owner has paid for these expenses in connection with this current prospectus. Neither
GreenHaven, LLC nor the Managing Owner will be reimbursed in connection with the payment of the
organizational and offering expenses. The Funds are not required to reimburse GreenHaven, LLC or
its affiliates or the Company or its affiliates for any such costs incurred for any related period.
Organization and offering expenses relating to both the Master Fund and the Fund, as applicable,
means those expenses incurred in connection with their formation, the qualification and
registration of the Shares and in offering, distributing and processing the Shares under applicable
federal law, and any other expenses actually incurred and, directly or indirectly, related to the
organization of the Fund and Master Fund or the offering of the Shares, including, but not limited
to, expenses such as:
|
(i) |
|
initial and ongoing registration fees, filing fees, escrow fees and taxes; |
|
|
(ii) |
|
costs of preparing, printing (including typesetting), amending, supplementing, mailing
and distributing the Registration Statement, the exhibits thereto and the Prospectus; |
|
|
(iii) |
|
the costs of qualifying, printing, (including typesetting), amending, supplementing,
mailing and distributing sales materials used in connection with the offering and issuance
of the Shares; |
|
|
(iv) |
|
travel, telegraph, telephone and other expenses in connection with the offering and
issuance of the Shares. |
For the year ended December 31, 2009, the expenses related to the offering of the shares Company
were$198,941 , of which $100,232 were legal fees, $20,309 were audit fees, and $78,400 were
regulatory fees. For the year ended December 31, 2008 the expenses related to the offering of the
shares were $548,441. For the year ended December 31, 2007, the organization and initial offering
expenses incurred were $35,740 and $399,202, respectively. The Managing Owner will not allocate to
the Fund or the Master Fund the indirect expenses of the Managing Owner.
Brokerage Commissions and Fees
The Master Fund will pay to the Commodity Brokers all brokerage commissions, including applicable
exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and
expenses charged in connection with trading activities. On average, total charges paid to the
Commodity Brokers are expected to be less than $20.00 per round-turn trade, although the Commodity
Brokers brokerage commissions and trading fees will be determined on a contract-by-contract basis.
The Managing Owner does not expect brokerage commissions and fees to exceed 0.24% of the net asset
value of the Master Fund in any year, although the actual amount of brokerage commissions and fees
in any year may be greater. These estimates are based on a net asset value of $50 million.
Routine Operational, Administrative and Other Ordinary Expenses
The Managing Owner pays all of the Master Funds and the Funds routine operational, administrative
and other ordinary expenses, including, but not limited to, the fees and expenses of the Trustee,
legal and accounting fees and expenses, tax preparation expenses, filing fees, and printing,
mailing and duplication costs.
Extraordinary Fees and Expenses
The Master Fund pays all its extraordinary fees and expenses, if any, of the Fund and Master Fund
generally, if any, as determined by the Managing Owner. Extraordinary fees and expenses are fees
and expenses which are non-recurring and unusual in nature, such as legal claims and liabilities
and litigation costs and any permitted indemnification payments related thereto. Extraordinary fees
and expenses shall also include material expenses which are not currently anticipated obligations
of the Fund or Master Fund or of managed futures funds in general. Routine operational,
administrative and other ordinary expenses will not be deemed extraordinary expenses.
39
Management Fee and Ongoing Expenses to be Paid First out of Interest Income
The Management Fee and ordinary ongoing expenses of the Fund and the Master Fund will be paid first
out of interest income from the Master Funds holdings of U.S. Treasury bills and other high credit
quality short-term fixed income securities on deposit with the Commodity Broker as margin or
otherwise. It is expected that, at current interest rates, such interest income will not be
sufficient to cover all or a significant portion of the Management Fee and ordinary ongoing
expenses of the Fund and the Master Fund.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Critical Accounting Policies
Critical accounting policies for the Fund and Master Fund are as follows:
Preparation of the financial statements and related disclosures in conformity with U.S. generally
accepted accounting principles requires the application of appropriate accounting rules and
guidance, as well as the use of estimates, and requires the Managing Owner to make estimates and
assumptions that affect the reported amounts of assets and liabilities, revenue and expense and
related disclosure of contingent assets and liabilities during the reporting period of the
consolidated financial statements and accompanying notes. Both the Fund and the Master Fund apply
these policies that involve judgments and actual results may differ from the estimates used.
The Master Fund holds a significant portion of its assets in futures contracts and United States
Treasury Obligations, both of which are recorded on a trade date basis and at fair value in the
consolidated financial statements, with changes in fair value reported in the consolidated
statement of income and expenses. The use of fair value to measure financial instruments, with
related unrealized gains or losses recognized in earnings in each period is fundamental to the
Funds financial statements. The fair value of a financial instrument is the amount that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (the exit price).
In determining fair value of United States Treasury Obligations and commodity futures contracts,
the Fund uses unadjusted quoted market prices in active markets. FASB fair value measurement and
disclosure guidance requires a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The objective of a fair value measurement is to determine
the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants.
When market closing prices are not available, the Managing Owner may value an asset of the Master
Fund pursuant to policies the Managing Owner has adopted, which are consistent with normal industry
standards.
Interest income on United States Treasury Obligations is recognized on an accrual basis when
earned. Premiums and discounts are amortized or accreted over the life of the United States
Treasury Obligations.
Realized gains (losses) and changes in unrealized gain (loss) on open positions are determined on a
specific identification basis and recognized in the consolidated statement of income and expenses
in the period in which the contract is closed or the changes occur, respectively.
Liquidity and Capital Resources
The Master Fund allocates its total net assets to replicating, to the extent possible, the
performance of the Index by investing in commodity futures. A significant portion of the net asset
value is held in U.S. Treasury bills and cash, which are used as margin for the Master Funds
trading in commodities. The percentage that U.S. Treasury bills bear to the total net assets will
vary from period to period as the market values of commodity interests change. The balance of the
net assets is held in the Master Funds commodity trading account. Interest earned on the Master
Funds interest-bearing funds is paid to the Master Fund.
40
The Master Funds commodity contracts will be subject to periods of illiquidity because of market
conditions, regulatory considerations and other reasons. For example, commodity exchanges limit
fluctuations in certain commodity futures contract prices during a single day by regulations
referred to as daily limits. During a single day, no trades may be executed at prices beyond the
daily limit. Once the price of a futures contract for a particular commodity has increased or
decreased by an amount equal to the daily limit, positions in the commodity can neither be taken
nor liquidated unless the traders are willing to effect trades at or within the limit. Commodity
futures prices have occasionally moved to the daily limit for several consecutive days with little
or no resultant trading. Such market conditions could prevent the Master Fund from promptly
liquidating its commodity futures positions.
Since the Master Fund trades futures contracts, its capital is at risk due to changes in the value
of these contracts (market risk) or the inability of counterparties to perform under the terms of
the contracts (credit risk).
The Master Fund generates cash primarily from (i) the sale of Baskets and (ii) interest earned on
cash. A portion of the Master Funds Net Asset Value is held in cash that is used as margin for
trading in the commodities. Cash or U.S. Treasuries as a percentage of the total net assets will
vary from period to period as the market values of the interests will change.
The Managing Owner has entered into a management agreement with each of the Master Fund and the
Fund. In return for its services, the Managing Owner is entitled to receive a management fee
calculated as a fixed percentage of the Master Funds Net Asset Value, currently 0.85%.
Expenses incurred in connection with organizing the Index Fund and the Master Fund and the offering
of the Shares will be paid by GreenHaven, LLC, a Georgia limited liability company formed in August
2005. Neither GreenHaven, LLC nor the Managing Owner will be reimbursed for the payment of the
organizational and offering expenses. GreenHaven, LLC is the sole member of the Managing Owner. As
of December 31, 2008, the organization and offering expenses incurred have been $35,740 and
$548,441, respectively.
Market risk
Trading in futures contracts will involve the Master Fund entering into contractual commitments to
purchase or sell a particular commodity at a specified date and price. The market risk to be
associated with the Master Funds commitments to purchase commodities will be limited to the gross
or face amount of the contracts held. The Master Fund does not intend on selling short commodity
futures as the Index is comprised of long only futures positions. However, should the Master Fund
enter into a contractual commitment to sell short commodities in error, it would be required to
make delivery of the underlying commodity at the contract price and then repurchase the contract at
prevailing market prices or settle in cash. Since the repurchase price to which a commodity can
rise is unlimited, entering into commitments to sell commodities will expose the Master Fund to
theoretically unlimited risk.
The Master Funds exposure to market risk will be influenced by a number of factors including the
volatility of interest rates and foreign currency exchange rates, the liquidity of the markets in
which the contracts are traded and the relationships among the contracts held. The inherent
uncertainty of the Master Funds rebalancing and the processing of creation and redemption orders
as well as the development of drastic market occurrences could ultimately lead to a loss of all or
substantially all of Shareholders capital.
Credit risk
When the Master Fund enters into futures contracts, the Master Fund will be exposed to credit risk
that the counterparty to the contract will not meet its obligations. The counterparty for futures
contracts traded on United States exchanges is the clearing house associated with the particular
exchange. In general, clearing houses are backed by their corporate members who may be required to
share in the financial burden resulting from the nonperformance by one of their members and, as
such, should significantly reduce this credit risk. In cases where the clearing house is not backed
by the clearing members, it may be backed by a consortium of banks or other financial institutions.
There can be no assurance that any counterparty, clearing member or clearing house will meet its
obligations to the Master Fund.
41
The Managing Owner will attempt to minimize these market and credit risks by requiring the Master
Fund to abide by various trading limitations and policies. The Managing Owner will implement
procedures which will include, but will not be limited to:
|
(i) |
|
executing and clearing trades with creditworthy counterparties; |
|
|
(ii) |
|
limiting the amount of margin or premium required for any one commodity or all
commodities combined; and |
|
|
(iii) |
|
generally limiting transactions to contracts which will be traded in sufficient volume
to permit the taking and liquidating of positions. |
The Commodity Brokers, when acting as the Master Funds futures commission merchant in accepting
orders for the purchase or sale of domestic futures contracts, will be required by CFTC regulations
to separately account for and segregate as belonging to the Master Fund, all assets of the Master
Fund relating to domestic futures trading and the Commodity Broker will not be allowed to commingle
such assets with other assets of the Commodity Broker.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
As of the date of this Prospectus, the Fund and the Master Fund have not utilized, nor do they
expect to utilize in the future, special purpose entities to facilitate off-balance sheet financing
arrangements and have no loan guarantee arrangements or off-balance sheet arrangements of any kind
other than agreements entered into in the normal course of business, which may include
indemnification provisions related to certain risks service providers undertake in performing
services which are in the best interests of the Fund and the Master Fund. While the Funds and the
Master Funds exposure under such indemnification provisions cannot be estimated, these general
business indemnifications are not expected to have a material impact on either the Funds or the
Master Funds financial position.
Management Fee payments made by the Master Fund to the Managing Owner are calculated as a fixed
percentage of the Master Funds Net Asset Value. Commission payments to the commodity broker are on
a contract-by-contract, or round-turn, basis. As such, the Managing Owner cannot anticipate the
amount of payments that will be required under these arrangements for future periods as Net Asset
Values are not known until a future date. These agreements are effective for one year terms,
renewable automatically for additional one year terms unless terminated. Additionally, these
agreements may be terminated by either party for various reasons. The organization and offering
expenses of the Master Fund and the Fund will be paid by GreenHaven, LLC.
THE SECURITIES DEPOSITORY; BOOK-ENTRY-ONLY SYSTEM;
GLOBAL SECURITY
DTC acts as securities depository for the Shares. DTC is a limited-purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency
registered pursuant to the provisions of section 17A of the Exchange Act. DTC was created to hold
securities of DTC Participants and to facilitate the clearance and settlement of transactions in
such securities among the DTC Participants through electronic book-entry changes. This eliminates
the need for physical movement of securities certificates. DTC Participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own DTC. Access to the DTC system is
also available to others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a DTC Participant, either directly or indirectly. DTC has
agreed to administer its book-entry system in accordance with its rules and by-laws and the
requirements of law.
Individual certificates will not be issued for the Shares. Instead, global certificates are signed
by the Trustee and the Managing Owner on behalf of the Fund, registered in the name of Cede & Co.,
as nominee for DTC, and deposited with the Trustee on behalf of DTC. The global certificates
evidence all of the Shares outstanding at any time. The representations, undertakings and
agreements made on the part of the Fund in the global certificates are made and intended for the
purpose of binding only the Fund and not the Trustee or the Managing Owner individually.
42
Upon the settlement date of any creation, transfer or redemption of Shares, DTC credits or debits,
on its book-entry registration and transfer system, the amount of the Shares so created,
transferred or redeemed to the accounts of the appropriate DTC Participants. The Managing Owner and
the Authorized Participants designate the accounts to be credited and charged in the case of
creation or redemption of Shares.
Beneficial ownership of the Shares is limited to DTC Participants, Indirect Participants and
persons holding interests through DTC Participants and Indirect Participants. Owners of beneficial
interests in the Shares is shown on, and the transfer of ownership is effected only through,
records maintained by DTC (with respect to DTC Participants), the records of DTC Participants (with
respect to Indirect Participants), and the records of Indirect Participants (with respect to
Shareholders that are not DTC Participants or Indirect Participants). Shareholders are expected to
receive a written confirmation relating to such purchase from or through the DTC Participant
maintaining the account through which the Shareholder has purchased their Shares.
Shareholders that are not DTC Participants may transfer the Shares through DTC by instructing the
DTC Participant or Indirect Participant through which the Shareholders hold their Shares to
transfer the Shares. Shareholders that are DTC Participants may transfer the Shares by instructing
DTC in accordance with the rules of DTC. Transfers are made in accordance with standard securities
industry practice.
DTC may decide to discontinue providing its service with respect to Baskets and/or the Shares by
giving notice to the Trustee and the Managing Owner. Under such circumstances, the Trustee and the
Managing Owner will either find a replacement for DTC to perform its functions at a comparable cost
or, if a replacement is unavailable, terminate the Fund.
The rights of the Shareholders generally must be exercised by DTC Participants acting on their
behalf in accordance with the rules and procedures of DTC. Because the Shares can only be held in
book-entry form through DTC and DTC Participants, investors must rely on DTC, DTC Participants and
any other financial intermediary through which they hold the Shares to receive the benefits and
exercise the rights described in this section. Investors should consult with their broker or
financial institution to find out about procedures and requirements for securities held in
book-entry form through DTC.
SHARE SPLITS
If the Managing Owner believes that the per Share price in the secondary market for Shares has
fallen outside a desirable trading price range, the Managing Owner may direct the Trustee to
declare a split or reverse split in the number of Shares outstanding and to make a corresponding
change in the number of Shares constituting a Basket.
MATERIAL CONTRACTS
License Agreement
Thomson Reuters America, LLC entered into a License Agreement with the Managing Owner granting the
Managing Owner an exclusive, non-transferable right to use the Index in connection with the
development and creation of U.S. exchange traded funds, in the U.S. the Managing Owner is
responsible for paying the fees associated with the licensing fee, and the Fund and Master Fund
will not be required to pay any additional amount to Thomson Reuters America, LLC.
The current term of the License Agreement runs until Sept 30, 2010 (subject to the right of Thomson
Reuters America, LLC to terminate the exclusivity at any time in the event of certain limited
circumstances related to specified asset investment thresholds). On the date of this Prospectus,
the Managing Owner is in compliance with these thresholds.
Brokerage Agreement
The Commodity Brokers and the Master Fund entered into brokerage agreements, or (Brokerage
Agreements). As a result, the Commodity Brokers:
|
(i) |
|
act as the clearing brokers; |
43
|
(ii) |
|
act as custodians of the Master Funds assets; and |
|
|
(iii) |
|
perform such other services for the Master Fund as the Managing Owner may from
time-to-time request. |
As clearing brokers for the Master Fund, the Commodity Brokers receive orders for trades from the
Managing Owner.
Confirmations of all executed trades are given to the Master Fund by the Commodity Brokers. The
Brokerage Agreement incorporates the Commodity Brokers standard customer agreements and related
documents, which generally include provisions that:
|
(i) |
|
all funds, commodities and open or cash positions carried for the Master Fund will be
held as security for the Master Funds obligations to the Commodity Brokers; |
|
|
(ii) |
|
the margins required to initiate or maintain open positions will be as from
time-to-time established by the Commodity Brokers and may exceed exchange minimum levels;
and |
|
|
(iii) |
|
the Commodity Brokers may close out positions, purchase commodities or cancel orders
at any time they deem necessary for its protection, without the consent of the Master Fund. |
As custodian of the Master Funds assets, the Commodity Brokers are responsible, among other
things, for providing periodic accountings of all dealings and actions taken by the Master Fund
during the reporting period, together with an accounting of all securities, cash or other
indebtedness or obligations held by it or its nominees for or on behalf of the Master Fund.
Administrative functions provided by the Commodity Brokers to the Master Fund include, but are not
limited to, preparing and transmitting daily confirmations of transactions and monthly statements
of account, calculating equity balances and margin requirements.
As long as the Brokerage Agreements between the Commodity Brokers and the Master Fund are in
effect, the Commodity Brokers will not charge the Master Fund a fee for any of the services they
have agreed to perform, except for the agreed-upon brokerage fee.
The Brokerage Agreements are not exclusive and run for successive one-year terms to be renewed
automatically each year unless terminated. Each Brokerage Agreement is terminable by the Master
Fund or the respective Commodity Broker without penalty upon thirty (30) days prior written notice
(unless where certain events of default occur or there is a material adverse change to the Master
Funds financial position, in which case only prior written notice is required to terminate the
Brokerage Agreements).
The Brokerage Agreements provide that neither the Commodity Brokers nor any of their respective
managing directors, officers, employees or affiliates shall be liable for any costs, losses,
penalties, fines, taxes and damages sustained or incurred by the Master Fund other than as a result
of the respective Commodity Brokers gross negligence or reckless or willful intentional misconduct
or breach of such agreement.
Administration Agreement
Pursuant to the Administration Agreement among the Fund, the Master Fund and the Administrator, the
Administrator will perform or supervise the performance of services necessary for the operation and
administration of the Fund and the Master Fund (other than making investment decisions), including
net asset value calculations, accounting and other fund administrative services.
The Administration Agreement will continue in effect from the commencement of trading operations
unless terminated on at least ninety (90) days prior written notice by either party to the other
party. Notwithstanding the foregoing, the Administrator may terminate the Administration Agreement
upon thirty (30) days prior written notice if the Fund and/or Master Fund has materially failed to
perform its obligations under the Administration Agreement or upon termination of the Global
Custody Agreement.
44
The Administrator is both exculpated and indemnified under the Administration Agreement.
Except as otherwise provided in the Administration Agreement, the Administrator shall not be liable
for any costs, expenses, damages, liabilities or claims (including attorneys and accountants
fees) incurred by either the Fund or Master Fund, except those costs, expenses, damages,
liabilities or claims arising out of the Administrators own gross negligence or willful
misconduct. In no event shall the Administrator be liable to the Fund, Master Fund or any third
party for special, indirect or consequential damages, or lost profits or loss of business, arising
under or in connection with the Administration Agreement, even if previously informed of the
possibility of such damages and regardless of the form of action. The Administrator shall not be
liable for any loss, damage or expense, including counsel fees and other costs and expenses of a
defense against any claim or liability, resulting from, arising out of, or in connection with its
performance under the Administration Agreement, including its actions or omissions, the
incompleteness or inaccuracy of any Proper Instructions (as defined therein), or for delays caused
by circumstances beyond the Administrators control, unless such loss, damage or expense arises out
of the gross negligence or willful misconduct of the Administrator.
Both the Fund and Master Fund shall indemnify and hold harmless the Administrator from and against
any and all costs, expenses, damages, liabilities and claims (including claims asserted by either
the Fund or Master Fund), and reasonable attorneys and accountants fees relating thereto, which
are sustained or incurred or which may be asserted against the Administrator by reason of or as a
result of any action taken or omitted to be taken by the Administrator in good faith under the
Administration Agreement or in reliance upon (i) any law, act, regulation or interpretation of the
same even though the same may thereafter have been altered, changed, amended or repealed, (ii) the
Registration Statement or Prospectus, (iii) any Proper Instructions, or (iv) any opinion of legal
counsel for the Fund or Master Fund, or arising out of transactions or other activities of the Fund
or Master Fund which occurred prior to the commencement of the Administration Agreement; provided,
that neither the Fund nor Master Fund shall indemnify the Administrator for costs, expenses,
damages, liabilities or claims for which the Administrator is liable under the preceding paragraph.
This indemnity shall be a continuing obligation of both the Fund and Master Fund, their successors
and assigns, notwithstanding the termination of the Administration Agreement. Without limiting the
generality of the foregoing, each of the Fund or Master Fund shall indemnify the Administrator
against and save the Administrator harmless from any loss, damage or expense, including counsel
fees and other costs and expenses of a defense against any claim or liability, arising from any one
or more of the following: (i) errors in records or instructions, explanations, information,
specifications or documentation of any kind, as the case may be, supplied to the Administrator by
any third party described above or by or on behalf of the Fund or Master Fund; (ii) action or
inaction taken or omitted to be taken by the Administrator pursuant to Proper Instructions of the
Fund or Master Fund or otherwise without gross negligence or willful misconduct; (iii) any action
taken or omitted to be taken by the Administrator in good faith in accordance with the advice or
opinion of counsel for the Fund or Master Fund or its own counsel; (iv) any improper use by the
Fund or Master Fund or their agents, distributor or investment advisor of any valuations or
computations supplied by the Administrator pursuant to the Administration Agreement; (v) the method
of valuation and the method of computing net asset value; or (vi) any valuations or net asset value
provided by the Fund or Master Fund.
Actions taken or omitted in reliance on Proper Instructions, or upon any information, order,
indenture, stock certificate, power of attorney, assignment, affidavit or other instrument believed
by the Administrator to be genuine or bearing the signature of a person or persons believed to be
authorized to sign, countersign or execute the same, or upon the opinion of legal counsel for the
Fund or Master Fund or its own counsel, shall be conclusively presumed to have been taken or
omitted in good faith.
Notwithstanding any other provision contained in the Administration Agreement, the Administrator
shall have no duty or obligation with respect to, including, without limitation, any duty or
obligation to determine, or advise or notify the Fund or Master Fund of: (a) the taxable nature of
any distribution or amount received or deemed received by, or payable to the Fund or Master Fund;
(b) the taxable nature or effect on the Fund or Master Fund or their shareholders of any corporate
actions, class actions, tax reclaims, tax refunds, or similar events; (c) the taxable nature or
taxable amount of any distribution or dividend paid, payable or deemed paid by the Fund or Master
Fund to their shareholders; or (d) the effect under any federal, state, or foreign income tax laws
of the Fund or Master Fund making or not making any distribution or dividend payment, or any
election with respect thereto.
45
Global Custody Agreement
The Bank of New York, N.A. will serve as the Funds custodian, or Custodian. Pursuant to the Global
Custody Agreement between the Fund and the Custodian, or Custody Agreement, the Custodian serves as
custodian of all the Funds securities and cash at any time delivered to Custodian during the term
of the Custody Agreement and the Fund has authorized the Custodian to hold its securities in
registered form in its name or the name of its nominees. The Custodian has established and will
maintain one or more securities accounts and cash accounts pursuant to the Custody Agreement. The
Custodian shall maintain books and records segregating the assets.
Either party may terminate the Custody Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than ninety (90) days after the
date of such notice. Upon termination thereof, the Fund shall pay to the Custodian such
compensation as may be due to the Custodian, and shall likewise reimburse the Custodian for other
amounts payable or reimbursable to the Custodian thereunder. The Custodian shall follow such
reasonable oral or written instructions concerning the transfer of custody of records, securities
and other items as the Fund shall give; provided, that (a) the Custodian shall have no liability
for shipping and insurance costs associated therewith, and (b) full payment shall have been made to
Custodian of its compensation, costs, expenses and other amounts to which it is entitled hereunder.
If any securities or cash remain in any account, Custodian may deliver to the Fund such securities
and cash. Except as otherwise provided herein, all obligations of the parties to each other
hereunder shall cease upon termination of the Custody Agreement.
The Custodian is both exculpated and indemnified under the Custody Agreement.
Except as otherwise expressly provided in the Custody Agreement, the Custodian shall not be liable
for any costs, expenses, damages, liabilities or claims, including attorneys and accountants
fees, or losses, incurred by or asserted against Fund, except those losses arising out of the gross
negligence or willful misconduct of the Custodian. The Custodian shall have no liability whatsoever
for the action or inaction of any depository. Subject to the Custodians delegation of its duties
to its affiliates, the Custodians responsibility with respect to any securities or cash held by a
subcustodian is limited to the failure on the part of the Custodian to exercise reasonable care in
the selection or retention of such subcustodian in light of prevailing settlement and securities
handling practices, procedures and controls in the relevant market. With respect to any losses
incurred by Fund as a result of the acts or the failure to act by any subcustodian (other than an
affiliate of the Custodian), the Custodian shall take appropriate action to recover such losses
from such subcustodian; and the Custodians sole responsibility and liability to Fund shall be
limited to amounts so received from such subcustodian (exclusive of costs and expenses incurred by
the Custodian). In no event shall the Custodian be liable to Fund or any third party for special,
indirect or consequential damages, or lost profits or loss of business, arising in connection with
the Custody Agreement.
The Fund shall indemnify the Custodian and each subcustodian for the amount of any tax that the
Custodian, any such subcustodian or any other withholding agent is required under applicable laws
(whether by assessment or otherwise) to pay on behalf of, or in respect of income earned by or
payments or distributions made to or for the account of Fund (including any payment of tax required
by reason of an earlier failure to withhold). The Custodian shall, or shall instruct the applicable
subcustodian or other withholding agent to, withhold the amount of any tax which is required to be
withheld under applicable law upon collection of any dividend, interest or other distribution made
with respect to any security and any proceeds or income from the sale, loan or other transfer of
any security. In the event that the Custodian or any subcustodian is required under applicable law
to pay any tax on behalf of Fund, the Custodian is hereby authorized to withdraw cash from any cash
account in the amount required to pay such tax and to use such cash, or to remit such cash to the
appropriate subcustodian, for the timely payment of such tax in the manner required by applicable
law.
The Fund will indemnify the Custodian and hold the Custodian harmless from and against any and all
losses sustained or incurred by or asserted against the Custodian by reason of or as a result of
any action or inaction, or arising out of the Custodians performance under the Custody Agreement,
including reasonable fees and expenses of counsel incurred by the Custodian in a successful defense
of claims by Fund; provided however, that Fund shall not indemnify the Custodian for those losses
arising out of the Custodians gross negligence or willful misconduct. This indemnity shall be a
continuing obligation of Fund, its successors and assigns, notwithstanding the termination of the
Custody Agreement.
46
Transfer Agency and Service Agreement
The Bank of New York, N.A. will serve as the Funds transfer agent, or Transfer Agent. Pursuant to
the Transfer Agency and Service Agreement between the Fund and the Transfer Agent, the Transfer
Agent will serve as the Funds transfer agent, dividend disbursing agent, and agent in connection
with certain other activities as provided under the Transfer Agency and Service Agreement.
The term of the Transfer Agency and Service Agreement is one (1) year from the effective date and
shall automatically renew for additional one year terms unless either party provides written notice
of termination at least ninety (90) days prior to the end of any one year term or, unless earlier
terminated as provided below:
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(i) |
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Either party terminates prior to the expiration of the initial term in the event the
other party breaches any material provision of the Transfer Agency and Service Agreement,
including, without limitation in the case of the Fund, its obligations to compensate the
Transfer Agent, provided that the non-breaching party gives written notice of such breach
to the breaching party and the breaching party does not cure such violation within ninety
(90) days of receipt of such notice. |
|
|
(ii) |
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The Fund may terminate the Transfer Agency and Service Agreement prior to the
expiration of the initial term upon ninety (90) days prior written notice in the event
that the Managing Owner determines to liquidate the Fund and terminate its registration
with the Securities and Exchange Commission other than in connection with a merger or
acquisition of the Fund. |
The Transfer Agent shall have no responsibility and shall not be liable for any loss or damage
unless such loss or damage is caused by its own gross negligence or willful misconduct or that of
its employees, or its breach of any of its representations. In no event shall the Transfer Agent be
liable for special, indirect or consequential damages regardless of the form of action and even if
the same were foreseeable.
Pursuant to the Transfer Agency and Service Agreement, the Transfer Agent shall not be responsible
for, and the Fund shall indemnify and hold the Transfer Agent harmless from and against, any and
all losses, damages, costs, charges, counsel fees, payments, expenses and liability, or Losses,
arising out of or attributable to:
|
(i) |
|
All actions of the Transfer Agent or its agents or subcontractors required to be taken
pursuant to this Agreement, provided that such actions are taken without gross negligence,
or willful misconduct; |
|
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(ii) |
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The Funds gross negligence or willful misconduct; |
|
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(iii) |
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The breach of any representation or warranty of the Fund thereunder; |
|
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(iv) |
|
The conclusive reliance on or use by the Transfer Agent or its agents or subcontractors
of information, records, documents or services which (i) are received by the Transfer Agent
or its agents or subcontractors, and (ii) have been prepared, maintained or performed by
the Fund or any other person or firm on behalf of the Fund including but not limited to any
previous transfer agent or registrar; |
|
|
(v) |
|
The conclusive reliance on, or the carrying out by the Transfer Agent or its agents or
subcontractors of any instructions or requests of the Fund on behalf of the Fund; |
|
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(vi) |
|
The offer or sale of Shares in violation of any requirement under the federal
securities laws or regulations or the securities laws; or |
|
|
(vii) |
|
Regulations of any state that such Shares be registered in such state or in violation
of any stop order or other determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state. |
Distribution Services Agreement
The Distributor will provide certain distribution services to the Fund. Pursuant to the
Distribution Services Agreement between the Fund and the Distributor, the Distributor will assist
the Managing Owner and the Administrator with certain functions and duties relating to the creation
and redemption of Baskets.
47
The date of the Distribution Services Agreement shall be the effective date and such Agreement
shall continue until two years from such date and thereafter shall continue automatically for
successive annual periods, provided that such continuance is specifically approved at least
annually by the Funds Managing Owner or otherwise as provided under the Distribution Services
Agreement. The Distribution Services Agreement is terminable without penalty on sixty (60) days
written notice by the Funds Managing Owner or by the Distributor. The Distribution Services
Agreement shall automatically terminate in the event of its assignment.
Pursuant to the Distribution Services Agreement, the Fund indemnifies and holds harmless the
Distributor and each of its directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act, against any loss, liability, claim,
damages or expenses (including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damages or expense and reasonable counsel fees incurred in connection therewith)
arising by reason of any person acquiring any Shares, based upon the ground that the registration
statement, prospectus, statement of additional information, shareholder reports or other
information filed or made public by the Fund (as from time-to-time amended) included an untrue
statement of a material fact or omitted to state a material fact required to be stated or necessary
in order to make the statements not misleading under the 1933 Act or any other statute or the
common law. However, the Fund does not indemnify the Distributor or hold it harmless to the extent
that the statement or omission was made in reliance upon, and in conformity with, information
furnished to the Fund by or on behalf of the Distributor. In no case (i) is the indemnity of the
Fund in favor of the Distributor or any person indemnified to be deemed to protect the Distributor
or any person against any liability to the Fund or its security holders to which the Distributor or
such person would otherwise be subject by reason of willful misfeasance, bad faith or negligence in
the performance of its duties or by reason of its reckless disregard of its obligations and duties
under this Agreement, or (ii) is the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Distributor or any person indemnified
unless the Distributor or person, as the case may be, shall have notified the Fund in writing of
the claim promptly after the summons or other first written notification giving information of the
nature of the claims shall have been served upon the Distributor or any such person (or after the
Distributor or such person shall have received notice of service on any designated agent).
However, failure to notify the Fund of any claim shall not relieve the Fund from any liability
which it may have to any person against whom such action is brought otherwise than on account of
its indemnity agreement contained in this paragraph. The Fund shall be entitled to participate at
its own expense in the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any claims, and if the Fund elects to assume the defense, the defense shall be conducted by
counsel chosen by the Fund. In the event the Fund elects to assume the defense of any suit and
retain counsel, the Distributor, officers or directors or controlling person(s), defendant(s) in
the suit, shall bear the fees and expenses of any additional counsel retained by them. If the Fund
does not elect to assume the defense of any suit, it will reimburse the Distributor, officers or
directors or controlling person(s) or defendant(s) in the suit for the reasonable fees and expenses
of any counsel retained by them. The Fund has agreed to notify the Distributor promptly of the
commencement of any litigation or proceeding against it or any of its officers in connection with
the issuance or sale of any of the Shares.
Marketing Services Agreement
The Marketing Agent provides certain marketing services to the Fund. Pursuant to the Marketing
Agreement, as amended from time-to-time, between the Managing Owner, on behalf of the Fund and
Master Fund, and the Marketing Agent, the Marketing Agent assists the Managing Owner with certain
functions and duties such as providing various educational and marketing activities regarding the
Fund, primarily in the secondary trading market, which activities include, but are not limited to,
communicating the Funds name, characteristics, uses, benefits, and risks, consistent with the
prospectus, providing support to an extensive broker database and a network of internal and
external wholesalers. The Marketing Agent will not open or maintain customer accounts or handle
orders for the Fund. The Marketing Agent will engage in public seminars, road shows, conferences,
media interviews, field incoming telephone 800 number calls and distribute sales literature and
other communications (including electronic media) regarding the Fund.
The date of the Marketing Services Agreement is January 14, 2008 and will continue until two years
from January 14, 2008 and thereafter will continue automatically for successive annual periods,
unless a party provides notice to the other party within 60 days of the termination of the then
current term.
48
Pursuant to the Marketing Agreement, each party will indemnify and hold harmless the other party
against all losses, costs and expenses (including reasonable attorneys fees) that an indemnified
party incurs by reason or result of or arising from the breach of any terms, provisions, covenants,
warranties or representations contained in the Marketing Agreement.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material United States federal (and certain state and local)
income tax considerations associated with the purchase, ownership and disposition of Shares as of
the date hereof by United States Shareholders (as defined below) and non-United States Shareholders
(as defined below). This discussion is applicable to a Shareholder who purchases Shares in the
offering to which this Prospectus relates, including a Shareholder who purchases Shares from an
Authorized Purchaser. Except where noted otherwise, it deals only with Shares held as capital
assets and does not deal with special situations, such as those of dealers in securities or
currencies, financial institutions, tax-exempt entities, insurance companies, persons holding
Shares as a part of a position in a straddle or as part of a hedging, conversion or other
integrated transaction for federal income tax purposes, traders in securities or commodities that
elect to use a mark-to -market method of accounting, or holders of Shares whose functional
currency is not the U.S. dollar.
Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of
1986, as amended, or the Code, the Treasury regulations promulgated thereunder, or the Regulations,
and administrative and judicial interpretations thereof, all as of the date hereof, and such
authorities may be repealed, revoked, modified or subject to differing interpretations, possibly on
a retroactive basis, so as to result in United States federal income tax consequences different
from those described below.
A U.S. Shareholder of Shares means a beneficial owner of Shares that is for United States federal
income tax purposes: (i) an individual citizen or resident of the United States; (ii) a corporation
(or other entity taxable as a corporation) created or organized in or under the laws of the United
States or any state thereof or the District of Columbia; (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source; or (iv) a trust if it
(1) is subject to the primary supervision of a court within the United States and one or more U.S.
persons have the authority to control all substantial decisions of such trust or (2) has a valid
election in effect under applicable Regulations to be treated as a U.S. person.
A non-U.S. Shareholder of Shares means a beneficial owner of Shares that is not a U.S.
Shareholder.
Except where noted otherwise, all references below to the term Fund shall be deemed to include
the Fund and the Master Fund.
If a partnership or other entity or arrangement treated as a partnership for United States federal
income tax purposes holds Shares, the tax treatment of a partner will generally depend upon the
status of the partner and the activities of the partnership. If you are a partner of a partnership
holding Shares, we urge you to consult your own tax adviser.
The Fund has received the opinion of Tannenbaum Helpern Syracuse & Hirschtritt LLP, counsel to the
Fund, that the material U.S. federal income tax consequences to the Fund and to U.S. Shareholders
and Non-U.S. Shareholders will be as described below. In rendering its opinion, Tannenbaum Helpern
Syracuse & Hirschtritt LLP has relied on the facts described in this Prospectus as well as certain
representations made by the Fund and the Trustee. The opinion of Tannenbaum Helpern Syracuse &
Hirschtritt LLP is not binding on the United States Internal Revenue Service, or the IRS, and, as a
result, the IRS may not agree with the tax positions taken by the Fund. If challenged by the IRS,
the Funds tax positions might not be sustained by the courts. No ruling has been requested from
the IRS with respect to any matter affecting the Fund or prospective investors.
If you are considering the purchase of Shares, we urge you to consult your own tax adviser
concerning the particular United States federal income tax consequences to you of the purchase,
ownership and disposition of Shares, as well as any consequences to you arising under the laws of
any other taxing jurisdiction.
49
Status of the Fund and the Master Fund
A partnership is not a taxable entity and incurs no United States federal income tax liability.
Section 7704 of the Code provides that publicly traded partnerships will, as a general rule, be
taxed as corporations. However, an exception exists with respect to publicly traded partnerships of
which 90% or more of the gross income during each taxable year consists of qualifying income
within the meaning of Section 7704(d) of the Code (qualifying income exception). Qualifying
income includes dividends, interest, capital gains from the sale or other disposition of stocks and
debt instruments and, in the case of a partnership (such as the Master Fund and the Fund) a
principal activity of which is the buying and selling of commodities or futures contracts with
respect to commodities, income and gains derived from commodities or futures contracts with respect
to commodities. The Fund and the Master Fund anticipate that at least 90% of their respective gross
income for each taxable year will constitute qualifying income within the meaning of Section
7704(d) of the Code.
Under current law and assuming full compliance with the terms of the Trust Declaration (and other
relevant documents) and based upon factual representations made by the Fund and the Master Fund, in
the opinion of Tannenbaum Helpern Syracuse & Hirschtritt LLP, the Fund and the Master Fund will
each be classified as a partnership for United States federal income tax purposes. The factual
representations upon which Tannenbaum Helpern Syracuse & Hirschtritt LLP has relied are: (a) the
Fund and the Master Fund have not elected and will not elect to be treated as corporations for
United States federal income tax purposes; and (b) for each taxable year, more than 90% of the
Funds and the Master Funds gross income will be qualifying income. Fund Shareholders are treated
as owning interests in a partnership whose only investment is an equity interest in the Master
Fund. Because ownership of the Fund and Master Fund will be identical (except for the small equity
interest of the Managing Owner in the Master Fund), the tax years of the two partnerships would
always be the same and Shareholders in the Fund would look through to the assets and tax items of
the Master Fund when determining their federal income tax liability for any particular tax year.
There can be no assurance that the IRS will not assert that the Fund and/or the Master Fund should
be treated as a publicly traded partnership taxable as a corporation. No ruling has been or will be
sought from the IRS, and the IRS has made no determination as to the status of the Fund or the
Master Fund for United States federal income tax purposes or whether the Funds or the Master
Funds operations generate qualifying income under Section 7704(d) of the Code. Whether the Fund
and/or the Master Fund will continue to meet the qualifying income exception is a matter that will
be determined by the Funds and the Master Funds operations and the facts existing at the time of
future determinations. However, the Funds and the Master Funds Managing Owner will use its best
efforts to cause the operations of the Fund and the Master Fund in such manner as is necessary for
the Fund and the Master Fund to continue to meet the qualifying income exception.
If the Master Fund failed to satisfy the qualifying income exception in any year, other than a
failure that is determined by the IRS to be inadvertent and that is cured within a reasonable time
after discovery, the Master Fund would be taxable as a corporation for federal income tax purposes
and the Master Fund would pay federal income tax on its income at regular corporate rates. In that
event, the Fund would be treated as a shareholder in a corporation and, accordingly, the
Shareholders would not report their share of the Master Funds income or loss on their returns. In
addition, distributions from the Master Fund to the Fund would be treated as dividends to the
extent of the Master Funds current or accumulated earnings and profits. To the extent a
distribution exceeded the Master Funds earnings and profits, the distribution would be treated as
a return of capital to the extent of the Funds basis in its Master Fund Units, and thereafter as
gain from the sale of the Master Fund Units. Accordingly, if the Master Fund were to be taxable as
a corporation, it would likely have a material adverse effect on the economic return from an
investment in the Fund and on the value of the Shares.
The discussion below is based on Tannenbaum Helpern Syracuse & Hirschtritt LLPs opinion that the
Fund and the Master Fund will be classified as partnerships that are not subject to corporate
income tax for United States federal income tax purposes.
U.S. Shareholders
Treatment of Fund Income
A partnership does not incur United States federal income tax liability. Instead, each partner of a
partnership is required to take into account its share of items of income, gain, loss, deduction
and other items of the partnership. Accordingly, each Shareholder will be required to include in
income its allocable share of the Funds income, gain, loss, deduction and other items for the
Funds taxable year ending with or within its taxable year. In computing a
partners United States federal income tax liability, such items must be included, regardless of
whether cash distributions are made by the partnership. Thus, Shareholders may be required to
include income without a corresponding current receipt of cash if the Fund generates taxable income
but does not make cash distributions. Because the Trustee currently does not intend to make
distributions, it is likely that in any year the Fund realizes net income and/or gain a U.S.
Shareholder will be required to pay taxes on its allocable share of such income or gain from
sources other than Fund distributions. The Funds taxable year will end on December 31 unless
otherwise required by law. The Fund will use the accrual method of accounting.
50
Fund Shareholders will take into account their share of ordinary income realized by the Fund from
accruals of interest on Treasury Bills (T-Bills) held in the Fund portfolio. The Fund may hold
T-Bills with original issue discount, in which case Fund Shareholders would be required to
include accrued amounts in taxable income on a current basis even though receipt by the Fund of
those amounts may occur in a subsequent year. The Fund may also acquire T-Bills with market
discount. Upon disposition of such obligations, gain would generally be required to be treated as
interest income to the extent of the market discount and Fund Shareholders would be required to
include as ordinary income their share of such market discount that accrued during the period the
obligations were held by the Fund.
The Code generally applies a mark-to-market system of taxing unrealized gains and losses on, and
otherwise provides for special rules of taxation with respect to, Section 1256 Contracts. A Section
1256 Contract includes certain regulated futures contracts. It is expected that the futures on the
Index held by the Fund will constitute Section 1256 Contracts. Section 1256 Contracts held by the
Fund at the end of a taxable year of the Fund will be treated for United States federal income tax
purposes as if they were sold by the Fund at their fair market value on the last business day of
the taxable year. The net gain or loss, if any, resulting from these deemed sales (known as
marking-to-market), together with any gain or loss resulting from any actual sales of Section
1256 Contracts (or other termination of the Funds obligations under such contracts), must be taken
into account by the Fund in computing its taxable income for the year. If a Section 1256 Contract
held by the Fund at the end of a taxable year is sold in the following year, the amount of any gain
or loss realized on the sale will be adjusted to reflect the gain or loss previously taken into
account under the mark- to-market rules.
Capital gains and losses from Section 1256 Contracts generally are characterized as short-term
capital gains or losses to the extent of 40% of the gains or losses and as long-term capital gains
or losses to the extent of 60% of the gains or losses. Thus, Shareholders of Fund will generally
take into account their pro rata share of the long-term capital gains and losses and short-term
capital gains and losses from Section 1256 Contracts held by the Fund. If a noncorporate taxpayer
incurs a net capital loss for a year, the portion of the loss, if any, which consists of a net loss
on Section 1256 Contracts may, at the election of the taxpayer, be carried back three years. A loss
carried back to a year by a noncorporate taxpayer may be deducted only to the extent (1) the loss
does not exceed the net gain on Section 1256 Contracts for the year and (2) the allowance of the
carry-back does not increase or produce a net operating loss for the year.
Allocation of the Funds Profits and Losses
For United States federal income tax purposes, a Shareholders distributive share of the Funds
income, gain, loss, deduction and other items will be determined by the Funds Trust Declaration,
unless an allocation under the agreement does not have substantial economic effect, in which case
the allocations will be determined in accordance with the partners interests in the partnership.
Subject to the discussion below under - Monthly Allocation and Revaluation Conventions and -
Section 754 Election, the allocations pursuant to the Funds Trust Declaration should be
considered to have substantial economic effect or deemed to be made in accordance with the
partners interests in the partnership.
If the allocations provided by the Funds Trust Declaration were successfully challenged by the
IRS, the amount of income or loss allocated to Shareholders for United States federal income tax
purposes under the agreement could be increased or reduced or the character of the income or loss
could be modified.
As described in more detail below, the U.S tax rules that apply to partnerships are complex and
their application is not always clear. Additionally, the rules generally were not written for, and
in some respects are difficult to apply to, publicly traded partnerships. The Fund will apply
certain assumptions and conventions intended to comply with the intent of the rules and to report
income, gain, deduction, loss and credit to Shareholders in a manner that reflects the economic
gains and losses, but these assumptions and conventions may not comply with all aspects of the
applicable Treasury regulations. It is possible therefore that the IRS will successfully assert
that assumptions made and/or
conventions used do not satisfy the technical requirements of the Code or the Treasury regulations
and will require that tax items be adjusted or reallocated in a manner that could adversely impact
the Shareholders.
51
Monthly Allocation and Revaluation Conventions
In general, the Funds taxable income and losses will be determined monthly and will be apportioned
among the holders of Fund Shares in proportion to the number of Shares treated as owned by each of
them as of the close of the last trading day of the preceding month. By investing in Fund Shares, a
U.S. Holder agrees that, in the absence of an administrative determination or judicial ruling to
the contrary, it will report income and loss under the monthly allocation and revaluation
conventions described below.
Under the monthly allocation convention, whomever is treated for U.S. federal income tax purposes
as holding Shares as of the close of the last trading day of the preceding month will be treated as
continuing to hold the Shares until immediately before close of the last trading day of the
following month. As a result, a holder who has disposed of shares prior to the close of the last
trading day of a month may be allocated income, gain, loss and deduction realized after the date of
transfer.
The Code generally requires that items of partnership income and deductions be allocated between
transferors and transferees of partnership interests on a daily basis. It is possible that
transfers of Shares could be considered to occur for U.S. federal income tax purposes when the
transfer is completed without regard to the Funds monthly convention for allocating income and
deductions. If this were to occur, the Funds allocation method might be deemed to violate that
requirement.
In addition, for any month in which a creation or redemption of Shares takes place, the Fund
generally will credit or debit, respectively, the book capital accounts of the holders of
existing Shares with any unrealized gain or loss in the Funds assets. This will result in the
allocation of items of the Funds income, gain, loss, deduction and credit to existing holders of
Shares to account for the difference between the tax basis and fair market value of property owned
by the Fund at the time new Shares are issued or old Shares are redeemed (reverse section 704(c)
allocations). The intended effect of these allocations is to allocate any built-in gain or loss in
the Funds assets at the time of a creation or redemption of Shares to the investors that
economically have earned such gain or loss.
As with the other allocations described above, the Fund generally will use a monthly convention for
purposes of the reverse section 704(c) allocations. More specifically, the Fund generally will
credit or debit, respectively, the book capital accounts of the holders of existing Shares with
any unrealized gain or loss in the Funds assets based on a calculation utilizing the lowest
trading price of the Funds assets during the month in which the creation or redemption transaction
takes place, rather than the fair market value of its assets at the time of such creation or
redemption (the revaluation convention). As a result, it is possible that, for U.S. federal
income tax purposes, (i) a purchaser of newly issued Shares will be allocated some or all of the
unrealized gain in the Funds assets at the time it acquires the Shares or (ii) an existing holder
of Shares will not be allocated its entire share in the unrealized loss in the Funds assets at the
time of such acquisition. Furthermore, the applicable Treasury regulations generally require that
the book capital accounts will be adjusted based on the fair market value of partnership property
on the date of adjustment and do not explicitly allow the adoption of a monthly revaluation
convention.
The Code and applicable Treasury regulations generally require that items of partnership income and
deductions be allocated between transferors and transferees of partnership interests on a daily
basis, and that adjustments to book capital accounts be made based on the fair market value of
partnership property on the date of adjustment. The Code and regulations do not contemplate monthly
allocation or revaluation conventions. If the IRS does not accept the Funds monthly allocation or
revaluation convention, the IRS may contend that taxable income or losses of the Fund must be
reallocated among the holders of Shares. If such a contention were sustained, the holders
respective tax liabilities would be adjusted to the possible detriment of certain holders. The
Manager is authorized to revise the Funds allocation and revaluation methods in order to comply
with applicable law or to allocate items of partnership income and deductions in a manner that
reflects more accurately the Shareholders interests in the Fund.
Section 754 Election
The Fund makes the election permitted by Section 754 of the Code. Such an election is irrevocable
without the consent of the IRS. The making of such election by the Fund will generally have the
effect of requiring a purchaser of Shares to adjust its proportionate share of the basis in the
Funds assets, or the inside basis, pursuant to Section
743(b) of the Code to fair market value (as reflected in the purchase price for the purchasers
Shares), as if it had acquired a direct interest in the Funds assets. The Section 743(b)
adjustment is attributed solely to a purchaser of Shares and is not added to the bases of the
Funds assets associated with all of the other Shareholders. Depending on the relationship between
a holders purchase price for Shares and its unadjusted share of the Funds inside basis at the
time of the purchase, the Section 754 election may be either advantageous or disadvantageous to the
holder as compared to the amount of gain or loss a holder would be allocated absent the Section 754
election.
52
The calculations under Section 754 of the Code are complex, and there is little legal authority
concerning the mechanics of the calculations, particularly in the context of publicly traded
partnerships. Therefore the Fund applies certain conventions in determining and allocating the
Section 743 basis adjustments to help reduce the complexity of those calculations and the resulting
administrative costs to the Fund. It is possible that the IRS will successfully assert that some or
all of such conventions utilized by the Fund do not satisfy the technical requirements of the Code
or the Regulations and, thus, will require different basis adjustments to be made.
In order to make the basis adjustments permitted by Section 754, the Fund is required to obtain
information regarding each holders secondary market transactions in Shares as well as creations
and redemptions of Shares. The Fund will seek such information from the record holders of Shares,
and, by purchasing Shares, each beneficial owner of Shares will be deemed to have consented to the
provision of such information by the record owner of such beneficial owners Shares.
Notwithstanding the foregoing, however, there can be no guarantee that the Fund will be able to
obtain such information from record owners or other sources, or that the basis adjustments that the
Fund makes based on the information it is able to obtain will be effective in eliminating disparity
between a holders outside basis in its Shares and its share of inside basis. In addition the Fund
is generally required to adjust its tax basis in its assets in respect of all Shareholders in cases
of Fund distributions that result in a substantial basis reduction (i.e., in excess of $250,000)
in respect of the Funds property. The Fund also is required to adjust its tax basis in its assets
in respect of a transferee Shareholder in the case of a sale or exchange of Shares, or a transfer
upon death, when there exists a substantial built-in loss (i.e., in excess of $250,000) in
respect of Fund property immediately after the transfer. For this reason, the Fund will require (i)
a Shareholder who receives a distribution from the Fund in connection with a complete withdrawal,
(ii) a transferee of Shares (including a transferee in case of death) and (iii) any other
Shareholder in appropriate circumstances to provide the Fund with information regarding its
adjusted tax basis in its Shares.
Constructive Termination
The Fund will be considered to have terminated for tax purposes if there is a sale or exchange of
50 percent or more of the total Shares within a 12-month period. A constructive termination results
in the closing of the Funds taxable year for all holders of Shares. In the case of a holder of
Shares reporting on a taxable year other than a fiscal year ending December 31, the early closing
of the Funds taxable year may result in more than 12 months of its taxable income or loss being
includable in such holders taxable income for the year of termination. The Fund would be required
to make new tax elections after a termination, including a new election under Section 754. A
termination could also result in penalties if the Fund were unable to determine that the
termination had occurred.
Treatment of Distributions
Non-liquidating distributions of cash by a partnership are generally not taxable to the distributee
to the extent the amount of cash does not exceed the distributees tax basis in its partnership
interest. Thus, any cash distributions made by the Fund will be taxable to a Shareholder only to
the extent such distributions exceed the Shareholders tax basis in the partnership interests it is
treated as owning (see -Tax Basis in Partnership Interests below). Any cash distributions in
excess of a Shareholders tax basis generally will be considered to be gain from the sale or
exchange of the Shares (see -Disposition of Shares below).
Creation and Redemption of Share Baskets
Shareholders, other than Authorized Participants (or holders for which an Authorized Participant is
acting), generally will not recognize gain or loss as a result of an Authorized Participants
creation or redemption of a Basket of Shares. If the Fund disposes of assets in connection with the
redemption of a Basket of Shares, however, the disposition may give rise to gain or loss that will
be allocated in part to the Shareholders. An Authorized Participants creation or redemption of a
Basket of Shares also may affect a Shareholders share of the Funds tax
basis in its assets, which could affect the amount of gain or loss allocated to the Shareholder on
the a sale or disposition of portfolio assets by the Fund.
53
Tax Basis of Shares
A Shareholders tax basis in its Shares is important in determining (1) the amount of taxable gain
it will realize on the sale or other disposition of its Shares, (2) the amount of non-taxable
distributions that it may receive from the Fund and (3) its ability to utilize its distributive
share of any losses of the Fund on its tax return. A Shareholders initial tax basis of its Shares
will equal its cost for the Shares plus its share of the Funds liabilities (if any) at the time of
purchase. In general, a Shareholders share of those liabilities will equal the sum of (i) the
entire amount of any otherwise nonrecourse liability of the Fund as to which the Shareholder or an
affiliate is the creditor (a partner nonrecourse liability) and (ii) a pro rata share of any
nonrecourse liabilities of the Fund that are not partner nonrecourse liabilities as to any
Shareholder.
A Shareholders tax basis in its Shares generally will be (1) increased by (a) its allocable share
of the Funds taxable income and gain, (b) its share of the Funds income, if any, that is exempt
from tax, (c) any increase in its share of the Funds liabilities, and (d) any additional
contributions by the Shareholder to the Fund and (2) decreased (but not below zero) by (a) its
allocable share of the Funds tax deductions and losses, (b) its allocable share of the Funds
expenditures that are neither deductible nor properly chargeable to its capital account, (b) any
distributions by the Fund to the Shareholder, and (d) any decrease in its share of the Funds
liabilities. Pursuant to certain IRS rulings, a Shareholder will be required to maintain a single,
unified basis in all Shares that it owns. As a result, when a Shareholder that acquired its
Shares at different prices sells less than all of its Shares, such Shareholder will not be entitled
to specify particular Shares (e.g., those with a higher basis) as having been sold. Rather, it must
determine its gain or loss on the sale by using an equitable apportionment method to allocate a
portion of its unified basis in its Shares to the Shares sold.
Disposition of Shares
A U.S. Shareholder will recognize capital gain or loss on the sale of its Shares. The U.S.
Shareholder will generally be required to recognize gain or loss measured by the difference between
the amount realized on the sale and the U.S. Shareholders adjusted tax basis in its Shares. The
amount realized will include the U.S. Shareholders share of the Funds liabilities, as well as any
proceeds from the sale. The gain or loss recognized will generally be taxable as capital gain or
loss. Capital gain of non-corporate U.S. Shareholders is eligible to be taxed at reduced rates
where the Shares sold are considered held for more than one year. Capital gain of corporate U.S.
Shareholders is taxed at the same rate as ordinary income. Any capital loss recognized by a U.S.
Shareholder on a sale of Shares will generally be deductible only against capital gains, except
that a non-corporate U.S. Shareholder may also offset up to $3,000 per year of ordinary income.
A Shareholder whose Shares are loaned to a short seller to cover a short sale of Shares may be
considered as having disposed of those Shares. If so, such Shareholder would no longer be a
beneficial owner of those Shares during the period of the loan and may recognize gain or loss from
the disposition. As a result, during the period of the loan, (1) any of Funds income, gain, loss,
deduction or other items with respect to those Shares would not be reported by the Shareholder, and
(2) any cash distributions received by the Shareholder as to those Shares could be fully taxable,
likely as ordinary income. Accordingly, Shareholders who desire to avoid the risk of income
recognition from a loan of their Shares to a short seller are urged to modify any applicable
brokerage account agreements to prohibit their brokers from borrowing their Shares.
Limitations on Deductibility of Losses and Certain Expenses
A number of different provisions of the Code may defer or disallow the deduction of losses or
expenses allocated to a Shareholder by the Fund, including but not limited to those described
below.
A Shareholders deduction of its allocable share of any loss of the Fund will be limited to the
lesser of (1) the tax basis in its Shares or (2) in the case of a Shareholder that is an individual
or a closely held corporation, the amount which the Shareholder is considered to have at risk
with respect to the Funds activities. In general, the amount at risk will be a Shareholders
invested capital plus such Shareholders share of any recourse debt of the Fund for which it is
liable. Losses in excess of the amount at risk must be deferred until years in which the Fund
generates additional taxable income against which to offset such carryover losses or until
additional capital is placed at risk.
54
Noncorporate taxpayers are permitted to deduct capital losses only to the extent of their capital
gains for the taxable year plus $3,000 of other income. Unused capital losses can be carried
forward and used to offset capital gains in future years. In addition, a noncorporate taxpayer may
elect to carry back net losses on section 1256 contracts to each of the three preceding years and
use them to offset section 1256 contract gains in those years, subject to certain limitations.
Corporate taxpayers generally may deduct capital losses only to the extent of capital gains,
subject to special carryback and carryforward rules.
Otherwise deductible expenses incurred by noncorporate taxpayers constituting miscellaneous
itemized deductions, generally including investment-related expenses (other than interest and
certain other specified expenses), are deductible only to the extent they exceed 2 percent of the
taxpayers adjusted gross income for the year. The Code imposes additional limitations (which are
scheduled to be phased out completely in 2010 but will be restored in 2011) on the amount of
certain itemized deductions allowable to individuals, by reducing the otherwise allowable portion
of such deductions by an amount equal to the lesser of: (a) 3% of the individuals adjusted gross
income in excess of certain threshold amounts; or (b) 80% of the amount of certain itemized
deductions otherwise allowable for the taxable year. In addition, these expenses are also not
deductible in determining the alternative minimum tax liability of a U.S. Shareholder. The Fund
will report such expenses on a pro rata basis to the Shareholders, and each U.S. Shareholder will
determine separately to what extent they are deductible on such U.S. Shareholders tax return. A
U.S. Shareholders inability to deduct all or a portion of such expenses could result in an amount
of taxable income to such U.S. Shareholder with respect to the Fund that exceeds the amount of cash
actually distributed to such U.S. Shareholder for the year. It is anticipated that the management
fees and other expenses the Fund will incur will constitute investment-related expenses subject to
the miscellaneous itemized deduction limitation, rather than expenses incurred in connection with a
trade or business.
Noncorporate Shareholders generally may deduct investment interest expense only to the extent of
their net investment income. Investment interest expense of a Shareholder will generally include
any interest accrued by the Fund and any interest paid or accrued on direct borrowings by a
Shareholder to purchase or carry its Shares, such as interest with respect to a margin account. Net
investment income generally includes gross income from property held for investment (including
portfolio income under the passive loss rules but not, absent an election, long-term capital
gains or certain qualifying dividend income) less deductible expenses other than interest directly
connected with the production of investment income.
Under Section 709(b) of the Code, amounts paid or incurred to organize a partnership may, at the
election of the partnership, be treated as deferred expenses, which are allowed as a deduction
ratably over a period of not less than 180 months. The Fund and the Master Fund have not yet
determined whether it will make such an election. A U.S. Shareholders distributive share of such
organizational expenses would constitute miscellaneous itemized deductions. Expenditures in
connection with the issuance and marketing of Shares (so called syndication fees) are not
eligible for the 180-month amortization provision and are not deductible.
To the extent that a Shareholder is allocated losses or expenses of the Fund or the Master Fund
that must be deferred or disallowed as a result of these or other limitations in the Code, a
Shareholder may be taxed on income in excess of its economic income or distributions (if any) on
its Shares. As one example, a Shareholder could be allocated and required to pay tax on its share
of interest income accrued by the Fund for a particular taxable year, and in the same year
allocated a share of a capital loss that it cannot deduct currently because it has insufficient
capital gains against which to offset the loss. As another example, a Shareholder could be
allocated and required to pay tax on its share of interest income and capital gain for a year, but
be unable to deduct some or all of its share of management fees and/or margin account interest
incurred by it with respect to its Shares. Shareholders are urged to consult their own professional
tax advisors regarding the effect of limitations under the Code on their ability to deduct their
allocable share of the Fund and the Master Funds losses and expenses.
Passive Activity Income and Loss
Individuals are subject to certain passive activity loss rules under Section 469 of the Code.
Under these rules, losses from a passive activity generally may not be used to offset income
derived from any source other than passive activities. Losses that cannot be currently used under
this rule may generally be carried forward. Upon an individuals disposition of an interest in the
passive activity, the individuals unused passive losses may generally be used to offset other
(i.e., non-passive) income. Under temporary Regulations, income or loss from the Funds investments
generally will not constitute income or losses from a passive activity. Therefore, income or loss
from the Funds investments will not be available to offset a U.S. Shareholders passive losses or
passive income from other sources.
55
Transferor/Transferee Allocations
In general, the Funds taxable income and losses will be determined monthly and will be apportioned
among the Funds Shareholders in proportion to the number of Shares owned by each of them as of the
close of the last trading day of the preceding month. With respect to any Share that was not
outstanding as of the close of the last trading day of the preceding month, the first person that
is treated as holding such Share (other than an underwriter or other person holding in a similar
capacity) for United States federal income tax purposes will be treated as holding such Share for
this purpose as of the close of the last trading day of the preceding month. As a result, a
Shareholder transferring its Shares may be allocated income, gain, loss and deduction realized
after the date of transfer.
Section 706 of the Code generally requires that items of partnership income and deductions be
allocated between transferors and transferees of partnership interests on a daily basis. It is
possible that transfers of Shares could be considered to occur for United States federal income tax
purposes when the transfer is completed without regard to the Funds convention for allocating
income and deductions. In that event, the Funds allocation method might be considered a monthly
convention that does not literally comply with that requirement.
If the IRS treats transfers of Shares as occurring throughout each month and a monthly convention
is not allowed by the Regulations (or only applies to transfers of less than all of a Shareholders
Shares) or if the IRS otherwise does not accept the Funds convention, the IRS may contend that
taxable income or losses of the Fund must be reallocated among the Shareholders. If such a
contention were sustained, the Shareholders respective tax liabilities would be adjusted to the
possible detriment of certain Shareholders. The Funds Managing Owner is authorized to revise the
Funds methods of allocation between transferors and transferees (as well as among Shareholders
whose interests otherwise vary during a taxable period).
Tax Reporting by the Fund
Information returns will be filed with the IRS, as required, with respect to income, gain, loss,
deduction and other items derived from the Funds Shares. The Fund will file partnership returns
with the IRS and the Fund will issue a Schedule K-1 to each of the Shareholders. If you hold your
Shares through a nominee (such as a broker), we anticipate that the nominee will provide you with
an IRS Form 1099 or substantially similar form, which will be supplemented by additional tax
information that we will make available directly to you at a later date, but in time for you to
prepare your federal income tax return. Each holder of Shares hereby agrees to allow brokers and
nominees to report to the Fund its name and address and such other information as may be reasonably
requested by the Fund for purposes of complying with its tax reporting obligations.
Audits and Adjustments to Tax Liability
Any challenge by the IRS to the tax treatment by a partnership of any item must be conducted at the
partnership, rather than at the partner, level. The Code provides for one partner to be designated
as the tax matters partner as the person to represent the partnership in the conduct of such a
challenge or audit by the IRS. Pursuant to the Funds Trust Declaration, the Managing Owner will be
appointed the tax matters partner of the Fund.
A United States federal income tax audit of the Funds information returns may result in an audit
of the returns of the U.S. Shareholders, which, in turn, could result in adjustments of items of a
Shareholder that are unrelated to the Fund as well as to the Fund related items. In particular,
there can be no assurance that the IRS, upon an audit of an information return of the Fund or of an
income tax return of a U.S. Shareholder, might not take a position that differs from the treatment
thereof by the Fund. A U.S. Shareholder would be liable for interest on any deficiencies that
resulted from any adjustments. Potential U.S. Shareholders should also recognize that they might be
forced to incur substantial legal and accounting costs in resisting any challenge by the IRS to
items in their individual returns, even if the challenge by the IRS should prove unsuccessful.
56
Foreign Tax Credits
Subject to generally applicable limitations, U.S. Shareholders will be able to claim foreign tax
credits with respect to certain foreign income taxes paid or incurred by the Fund, withheld on
payments made to the Fund or paid by the Fund on behalf of Fund Shareholders. If a Shareholder
elects to claim foreign tax credit, it must include in its gross income, for United States federal
income tax purposes, both its share of the Funds items of income and gain and also its share of
the amount which is deemed to be the Shareholders portion of foreign income taxes paid with
respect to, or withheld from, dividends, interest or other income derived by the Fund. U.S.
Shareholders may then subtract from their United States federal income tax the amount of such taxes
withheld, or else treat such foreign taxes as deductions from gross income; however, as in the case
of investors receiving income directly from foreign sources, the above described tax credit or
deduction is subject to certain limitations. Even if the Shareholder is unable to claim a credit,
he or she must include all amounts described above in income. U.S. Shareholders are urged to
consult their tax advisers regarding this election and its consequences to them.
Tax Shelter Disclosure Rules
In certain circumstances the Code and Regulations require that the IRS be notified of taxable
transactions through a disclosure statement attached to a taxpayers United States federal income
tax return. In addition, certain material advisers must maintain a list of persons participating
in such transactions and furnish the list to the IRS upon written request. These disclosure rules
may apply to transactions irrespective of whether they are structured to achieve particular tax
benefits. They could require disclosure by the Fund or Shareholders (1) if a Shareholder incurs a
loss in excess a specified threshold from a sale or redemption of its Shares, (2) if the Fund
engages in transactions producing differences between its taxable income and its income for
financial reporting purposes, or (3) possibly in other circumstances. While these rules generally
do not require disclosure of a loss recognized on the disposition of an asset in which the taxpayer
has a qualifying basis (generally a basis equal to the amount of cash paid by the taxpayer for
such asset), they apply to a loss recognized with respect to interests in a pass through entity,
such as the Shares, even if the taxpayers basis in such interests is equal to the amount of cash
it paid. In addition, under recently enacted legislation, significant penalties may be imposed in
connection with a failure to comply with these reporting requirements. U.S. Shareholders are urged
to consult their tax advisers regarding the tax shelter disclosure rules and their possible
application to them.
Non-U.S. Shareholders
A non-U.S. Shareholder will not be subject to United States federal income tax on such
Shareholders distributive share of the Funds income, provided that such income is not considered
to be income of the Shareholder that is effectively connected with the conduct of a trade or
business within the United States. In the case of an individual non-U.S. Shareholder, such
Shareholder will be subject to United States federal income tax on gains on the sale of Shares in
the Funds or such Shareholders distributive share of gains if such shareholder is present in the
United States for 183 days or more during a taxable year and certain other conditions are met.
If the income from the Fund is effectively connected with a U.S. trade or business carried on by
a non-U.S. Shareholder (and, if certain income tax treaties apply, is attributable to a U.S.
permanent establishment), then such Shareholders share of any income and any gains realized upon
the sale or exchange of Shares will be subject to United States federal income tax at the graduated
rates applicable to United States citizens and residents and domestic corporations. Non-U.S.
Shareholders that are corporations may also be subject to a 30% U.S. branch profits tax (or lower
treaty rate, if applicable) on their effectively connected earnings and profits that are not timely
reinvested in a U.S. trade or business.
Non-U.S. Shareholders that are individuals will be subject to United States federal estate tax on
the value of United States situs property owned at the time of their death (unless a statutory
exemption or tax treaty exemption applies). It is unclear whether partnership interests (such as
the interests of the Fund) will be considered United States situs property. Accordingly, non-U.S.
Shareholders may be subject to U.S. federal estate tax on all or part of the value of the Shares
owned at the time of their death.
Non-U.S. Shareholders are advised to consult their own tax advisers with respect to the particular
tax consequences to them of an investment in the Shares.
57
Regulated Investment Companies
Changes made to the Code by the American Jobs Creation Act of 2004 allow RICs to invest up to 25%
of their assets in qualified publicly traded partnerships, or qualified PTPs, and to treat net
income derived from such investments as qualifying income under the income source test applicable
to entities seeking to qualify for the special tax treatment available to RICs under the Code. In
addition, under these new rules, interests in a qualified PTP are treated as issued by such PTP and
a RIC is not required to look through to the underlying partnership assets when testing compliance
with the asset diversification tests applicable to RICs under the Code. Based on prior performance
of the Index, the Fund anticipates that it is likely to be qualified a PTP for most tax years.
Consequently, RIC investors generally should be able to treat their respective shares of the Funds
net income as qualifying income and to apply the asset diversification test to Shares for purposes
of these rules. However, qualification of the Fund as a qualified PTP depends on performance of the
Fund for the particular tax year and there is no assurance that it will qualify in a given year or
that future performance of the Index will conform to prior experience. Additionally, there is, to
date, no regulatory guidance on the application of these rules, and it is possible that future
guidance may adversely affect qualification of the Fund as a qualified PTP. In a revenue ruling
released on December 16, 2005, the IRS has clarified that derivative contracts owned by a RIC that
provide for a total- return exposure on a commodity index will not produce qualifying income for
purposes of the RIC qualification rules. The IRS, in a subsequent ruling, stated that the ruling
will apply prospectively, beginning October 1, 2006, to allow RICs an opportunity to adapt to the
new position. The IRS interpretation set forth in such ruling, however, does not adversely affect
the Funds ability to be treated as qualified PTPs for purposes of applying the RIC qualification
rules. RIC investors are urged to monitor their investment in Fund and consult with a tax advisor
concerning the impact of such an investment on their compliance with the income source and asset
diversification requirements applicable to RICs.
Tax-Exempt Organizations
Subject to numerous exceptions, qualified retirement plans and individual retirement accounts,
charitable organizations and certain other organizations that otherwise are exempt from federal
income tax (collectively exempt organizations) nonetheless are subject to the tax on its
unrelated business taxable income, or UBTI, to the extent that its UBTI from all sources exceeds
$1,000 in any taxable year. Except as noted below with respect to certain categories of exempt
income, UBTI generally includes income or gain derived (either directly or through a partnership)
from a trade or business, the conduct of which is substantially unrelated to the exercise or
performance of the exempt organizations exempt purpose or function.
UBTI generally does not include passive investment income, such as dividends, interest and capital
gains, whether realized by the exempt organization directly or indirectly through a partnership
(such as the Fund) in which it is a partner. This type of income is exempt, subject to the
discussion of unrelated debt-financed income below, even if it is realized from securities
trading activity that constitutes a trade or business.
UBTI includes not only trade or business income or gain as described above, but also unrelated
debt-financed income. This latter type of income generally consists of (1) income derived by an
exempt organization (directly or through a partnership) from income producing property with respect
to which there is acquisition indebtedness at any time during the taxable year and (2) gains
derived by an exempt organization (directly or through a partnership) from the disposition of
property with respect to which there is acquisition indebtedness at any time during the
twelve-month period ending with the date of the disposition.
To the extent the Fund recognizes gain from property with respect to which there is acquisition
indebtedness, the portion of the gain that will be treated as UBTI will be equal to the amount of
the gain times a fraction, the numerator of which is the highest amount of the acquisition
indebtedness with respect to the property during the twelve month period ending with the date of
their disposition, and the denominator of which is the average amount of the adjusted basis of
the property during the period such property is held by the Fund during the taxable year. In
determining the unrelated debt-financed income of the Fund, an allocable portion of deductions
directly connected with the Funds debt financed property will be taken into account. In making
such a determination, for instance, a portion of losses from debt financed securities (determined
in the manner described above for evaluating the portion of any gain that would be treated as UBTI)
would offset gains treated as UBTI.
58
The federal tax rate applicable to an exempt organization Shareholder on its UBTI generally will be
either the corporate or trust tax rate, depending upon the Shareholders form of organization.
However, while it is not expected
that an investment in the Fund will generate UBTI for a tax-exempt entity, if the Shareholder is a
charitable remainder trust, if the Fund did generate UBTI, an excise tax would be imposed on the
trust in an amount equal to one hundred percent (100%) of such UBTI. The Fund may report to each
such Shareholder information as to the portion, if any, of the Shareholders income and gains from
the Fund for any year that will be treated as UBTI; the calculation of that amount is complex, and
there can be no assurance that the Funds calculation of UBTI will be accepted by the IRS. An
exempt organization Shareholder will be required to make payments of estimated federal income tax
with respect to its UBTI.
Backup Withholding
The Fund is required in certain circumstances to backup withhold on certain payments paid to
noncorporate Shareholders of Fund Shares who do not furnish the Fund with their correct taxpayer
identification number (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding. Backup withholding is not an
additional tax. Any amounts withheld from payments made to you may be refunded or credited against
your United States federal income tax liability, if any, provided that the required information is
furnished to the IRS.
Other Tax Considerations
In addition to federal income taxes, Shareholders may be subject to other taxes, such as state and
local income taxes, unincorporated business taxes, business franchise taxes, and estate,
inheritance or intangible taxes that may be imposed by the various jurisdictions in which the Fund
does business or owns property or where the Shareholders reside. Although an analysis of those
various taxes is not presented here, each prospective Shareholder should consider their potential
impact on its investment in the Fund. It is each Shareholders responsibility to file the
appropriate U.S. federal, state, local, and foreign tax returns. Tannenbaum Helpern Syracuse &
Hirschtritt LLP has not provided an opinion concerning any aspects of state, local or foreign tax
or U.S. federal tax other than those U.S. federal income tax issues discussed herein.
Shareholders should be aware that certain aspects of the United States federal, state and local
income tax treatment regarding the purchase, ownership and disposition of Shares are not clear
under existing law. Thus, Shareholders are urged to consult their own tax advisers to determine the
tax consequences of ownership of the Shares in their particular circumstances, including the
application of United States federal, state, local and foreign tax laws.
Prospective investors are urged to consult their tax advisers before deciding whether to invest in
the Shares.
PURCHASES BY EMPLOYEE BENEFIT PLANS
The United States Employee Retirement Income Security Act of 1974, as amended (ERISA), imposes
certain requirements on employee benefit plans (as defined in Section 3(3) of ERISA) subject to
ERISA, including entities such as collective investment funds and separate accounts whose
underlying assets include the assets of such plans (collectively, ERISA Plans) and on those
persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are subject to
ERISAs general fiduciary requirements, including the requirement of investment prudence and
diversification and the requirement that an ERISA Plans investments be made in accordance with the
documents governing the plan. The prudence of a particular investment must be determined by the
responsible fiduciary of an ERISA Plan by taking into account the ERISA Plans particular
circumstances, including the ERISA Plans existing investment portfolio, and all of the facts and
circumstances of the investment including, but not limited to, the matters discussed above under
Investment Considerations and Risk Factors.
Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the
assets of an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject
to Section 4975 of the Code, such as individual retirement accounts (together with ERISA Plans,
Plans)) and certain persons (referred to as parties in interest for purposes of ERISA and
disqualified persons for purposes of the Code) having certain relationships to such Plans, unless
a statutory or administrative exemption is applicable to the transaction. A party in interest or
disqualified person who engages in a nonexempt prohibited transaction may be subject to excise
taxes and other penalties and liabilities under ERISA and the Code, and the transaction might have
to be rescinded.
59
The U.S. Department of Labor has promulgated a regulation, 29 C.F.R. Section 2510.3-101 (as
modified by Section 3(42) of ERISA) (the Plan Asset Regulation), describing what constitutes the
assets of a Plan with respect to the Plans investment in an entity for purposes of certain
provisions of ERISA, including the fiduciary responsibility and prohibited transaction provisions
of Title I of ERISA and the related prohibited transaction provisions under Section 4975 of the
Code. Under the Plan Asset Regulation, if a Plan invests in an equity interest of an entity that
is neither a publicly offered security nor a security issued by an investment company registered
under the Investment Company Act, the Plans assets include both the equity interest and an
undivided interest in each of the entitys underlying assets, unless it is established that the
entity is an operating company, which includes for purposes of the Plan Asset Regulation a
venture capital operating company, or that equity participation in the entity by Benefit Plan
Investors (as defined below) is not significant.
The publicly offered security exception applies if an equity interest is a security that is (a)
freely transferable; (b) part of a class of securities that is widely held; and (3) either (i)
part of a class of securities registered under Section 12(b) or 12(g) of the Securities Exchange
Act of 1934 (the 1934 Act), or (ii) sold to a Plan as part of a public offering pursuant to an
effective registration statement under the Securities Act of 1933 and the class of which such
security is a part is registered under the 1934 Act within 120 days (or such later time as may be
allowed by the SEC) after the end of the fiscal year of the issue in which the offering of such
security occurred.
Under the Plan Asset Regulation, equity participation in an entity by Benefit Plan Investors (as
defined below) is significant on any date if, immediately after the most recent acquisition of
any equity interest in the entity, 25% or more of the value of any class of equity interests in the
entity is held by Benefit Plan Investors. The term Benefit Plan Investor is defined in the Plan
Asset Regulation as: (a) any employee benefit plan (as defined in Section 3(3) of ERISA), which is
subject to part 4 of subtitle B of Title I of ERISA; (b) any plan subject to Code Section 4975; and
(c) any entity whose underlying assets include plan assets by reason of the investment in the
entity by such employee benefit plan and/or plan. For purposes of this determination, (i) the value
of equity interests held by a person (other than a Benefit Plan Investor) that has discretionary
authority or control with respect to the assets of the entity or that provides investment advice
for a fee (direct or indirect) with respect to such assets (or any affiliate of any such person) is
disregarded, and (ii) only that portion of the equity interests of an entity described in clause
(c) of the preceding sentence investing in another entity that is investing in employee benefit
plans or other plans described in clauses (a) or (b) of the preceding sentence is included in the
testing of such other entity.
The Shares should be considered to be equity interests in the Fund for purposes of the Plan Asset
Regulation and the Units should be considered to be equity interests in the Master Fund for
purposes of the Plan Asset Regulation. The Shares should constitute publicly offered securities
of the Fund for purposes of the Plan Asset Regulation. In addition, investment in the Master Fund
by Benefit Plan Investors should not be significant for purposes of the Plan Asset Regulation.
Therefore, the assets of both the Fund and the Master Fund should not be deemed to constitute the
assets of any Plan.
If the assets of the Fund were deemed to constitute the assets of a Plan, the fiduciary making an
investment in the Fund on behalf of an ERISA Plan could be deemed to have improperly delegated its
asset management responsibility, the assets of the Fund and the Master Fund could be subject to
ERISAs reporting and disclosure requirements, and transactions involving the assets of the Fund
and the Master Fund would be subject to the fiduciary responsibility and prohibited transaction
provisions of ERISA and the prohibited transaction rules of Section 4975 of the Code.
Each Plan fiduciary who is responsible for making the investment decisions whether to invest in the
Shares should determine whether, under the general fiduciary standards of investment prudence and
diversification and under the documents and instruments governing the Plan, an investment in the
Shares is appropriate for the Plan, taking into account the overall investment policy of the Plan
and the composition of the Plans investment portfolio. Any Plan proposing to invest in Shares
should consult with its counsel to confirm that such investment will not result in a prohibited
transaction and will satisfy the other requirements of ERISA and the Code.
The sale of any Shares to a Benefit Plan Investor is in no respect a representation by the Trustee,
the Managing Owner or any of their affiliates that such an investment meets all relevant legal
requirements with respect to investments by Plans generally or any particular Plan, or that such an
investment is appropriate for Plans generally or any particular Plan.
60
Regardless of whether the assets of the Partnership are deemed to be plan assets, the acquisition
of Shares by a Plan could, depending upon the facts and circumstances of such acquisition, be a
prohibited transaction, for example, if Managing Owner or any of its affiliates were a party in
interest or disqualified person with respect to the Plan. However, such a prohibited transaction
may be treated as exempt under ERISA and the Code if the Shares were acquired pursuant to and in
accordance with one or more class exemptions issued by the U.S. Department of Labor, such as
Prohibited Transaction Class Exemption (PTCE) 84-14 (a class exemption for certain transactions
determined by an independent qualified professional asset manager), PTCE 90-1 (a class exemption
for certain transactions involving an insurance company pooled separate account), PTCE 91-38 (a
class exemption for certain transactions involving a bank collective investment fund), PTCE 95-60
(a class exemption for certain transactions involving an insurance company general account), and
PTCE 96-23 (a class exemption for certain transactions determined by an in-house asset manager).
Any insurance company proposing to invest assets of its general account in the Shares should also
consider the extent to which such investment would be subject to the requirements of ERISA in light
of the U.S. Supreme Courts decision in John Hancock Mutual Life Insurance Co. v. Harris Trust and
Savings Bank and under any subsequent legislation or other guidance that has or may become
available relating to that decision, including Section 401(c) of ERISA and the regulations
thereunder published by the U.S. Department of Labor in January, 2000.
The Fund will require a fiduciary of an ERISA Plan that proposes to acquire Shares to represent
that it has been informed of and understands the Funds and the Master Funds investment
objectives, policies, strategies and limitations, that the decision to acquire the Shares was made
in accordance with its fiduciary responsibilities under ERISA and that neither the Trustee, the
Managing Owner nor any of their affiliates has provided investment advice with respect to such
decision. The Fund will also require any investor that is, or is acting on behalf of, a Plan to
represent and warrant that its acquisition and holding of Shares will not result in a nonexempt
prohibited transaction under ERISA and/or Section 4975 of the Code.
Governmental plans and certain church plans, while not subject to the fiduciary responsibility
provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to
state or other federal laws that are substantially similar to the foregoing provisions of ERISA and
the Code. The Fund will require similar representations and warranties with respect to the purchase
of Shares by any such plan. Fiduciaries of such plans should consult with their counsel before
purchasing Shares.
The discussion of ERISA and Section 4975 of the Code contained in this Prospectus is, of necessity,
general and does not purport to be complete. Moreover, the provisions of ERISA and Section 4975 of
the Code are subject to extensive and continuing administrative and judicial interpretation and
review. Therefore, the matters discussed above may be affected by future regulations, rulings and
court decisions, some of which may have retroactive application and effect.
ANY POTENTIAL INVESTOR CONSIDERING AN INVESTMENT IN SHARES THAT IS, OR IS ACTING ON BEHALF OF, A
PLAN (OR A GOVERNMENTAL PLAN SUBJECT TO LAWS SIMILAR TO ERISA AND/OR SECTION 4975 OF THE CODE) IS
STRONGLY URGED TO CONSULT ITS OWN LEGAL, TAX AND ERISA ADVISORS REGARDING THE CONSEQUENCES OF SUCH
AN INVESTMENT AND THE ABILITY TO MAKE THE REPRESENTATIONS DESCRIBED ABOVE.
61
PLAN OF DISTRIBUTION
Continuous Offering Period
The Fund will issue Shares in Baskets to Authorized Participants continuously as of 12:00pm (noon)
New York time on the business day immediately following the date on which a valid order to create a
Basket is accepted by the Fund, at the Net Asset Value of 50,000 Shares as of the closing time of
NYSE-ARCA or the last to close of the exchanges of which the Index Commodities are traded,
whichever is later, on the date that a valid order to create a Basket is accepted by the Fund. The
Managing Owner may terminate the continuous offering at any time. In the event that the continuous
offering period is terminated for any reason, the trading market for the Shares on NYSE-ARCA will
be materially affected and the market value of the Shares may be negatively impacted.
The Master Fund will issue Master Fund Units in Master Unit Baskets to the Fund continuously as of
12:00pm (noon) New York time on the business day immediately following the date on which a valid
order to create a Master Unit Basket is accepted by the Master Fund, at the Net Asset Value of
50,000 Master Fund Units as of the closing time of NYSE-ARCA or the last to close of the exchanges
of which the Index Commodities are traded, whichever is later, on the date that a valid order to
create a Master Unit Basket is accepted by the Master Fund. The Master Fund is wholly-owned by the
Fund and, indirectly, the Managing Owner. Each Share issued by the Fund will correlate with a
Master Fund Unit issued by the Master Fund and held by the Fund.
Authorized Participants are expected to offer to the public the Shares they create at a per-Share
offering price that will vary depending upon, among other factors, net asset value, the trading
price of the Shares on NYSE-ARCA and the supply of and demand for Shares at the time of the offer.
Shares initially comprising the same Basket but offered by Authorized Participants to the public at
different times may have different offering prices. The excess, if any, of the price at which an
Authorized Person sells a Share over the price paid by such Authorized Participant in connection
with the creation of such Share in a Basket may be deemed to be underwriting compensation. No
selling commission will be paid by the Fund to any Authorized Participant in connection with
creations of Baskets, although investors are expected to be charged a customary commission by their
brokers in connection with purchases of Shares that will vary from investor to investor. Investors
are encouraged to review the terms of their brokerage accounts for details on applicable charges.
Likelihood of Becoming a Statutory Underwriter
The Fund issues Shares in Baskets to Authorized Participants from time to time in exchange for
cash. Because new Shares can be created and issued on an ongoing basis at any point during the life
of the Fund, a distribution, as such term is used in the Securities Act, will be occurring. An
Authorized Participant, other broker-dealer firm or its client will be deemed a statutory
underwriter, and thus will be subject to the prospectus-delivery and liability provisions of the
Securities Act, if it purchases a Basket from the Fund, breaks the Basket down into the constituent
Shares and sells the Shares to its customers; or if it chooses to couple the creation of a supply
of new Shares with an active selling effort involving solicitation of secondary market demand for
the Shares. A determination of whether one is an underwriter must take into account all the facts
and circumstances pertaining to the activities of the broker-dealer or its client in the particular
case, and the examples mentioned above should not be considered a complete description of all the
activities that would lead to categorization as an underwriter. Authorized Participants, other
broker-dealers and other persons are cautioned that some of their activities will result in their
being deemed participants in a distribution in a manner which would render them statutory
underwriters and subject them to the prospectus-delivery and liability provisions of the Securities
Act. It is expected that Authorized Participants will avail themselves of any relief that becomes
available with respect to being deemed as a statutory underwriter.
Dealers who are neither Authorized Participants nor underwriters but are participating in a
distribution (as contrasted to ordinary secondary trading transactions), and thus dealing with
Shares that are part of an unsold allotment within the meaning of section 4(3)(C) of the
Securities Act, would be unable to take advantage of the prospectus delivery exemption provided by
section 4(3) of the Securities Act.
General
The Managing Owner intends to qualify the Shares in certain states and through broker-dealers who
are members of FINRA. Investors intending to create or redeem Baskets through Authorized
Participants in transactions not involving a broker-dealer registered in such investors state of
domicile or residence should consult their legal advisor regarding applicable broker-dealer or
securities regulatory requirements under the state securities laws prior to such creation or
redemption.
62
The Managing Owner has agreed to indemnify certain parties against certain liabilities, including
liabilities under the Securities Act, and to contribute to payments that such parties may be
required to make in respect of those liabilities. The Trustee has agreed to reimburse such parties,
solely from and to the extent of the Funds assets, for indemnification and contribution amounts
due from the Managing Owner in respect of such liabilities to the extent the Managing Owner has not
paid such amounts when due.
The offering of Baskets is being made in compliance with Conduct Rule 2810 of FINRA. Accordingly,
Authorized Participants will not make any sales to any account over which they have discretionary
authority without the prior written approval of a purchaser of Shares. The maximum amount of items
of value to be paid to FINRA Members in connection with the offering of the Shares by the Fund will
not exceed 10%.
Pursuant to the Distribution Services Agreement, the Distributor will be paid out of the Management
Fee in an amount of approximately $50,000 per annum, plus any fees or disbursements incurred by the
Distributor in connection with the performance by the Distributor of its duties. The Distributor
has, however, waived the $50,000 fee until the end of the current term of the Distribution Services
Agreement. Pursuant to the Distribution Services Agreement, the Distributor may receive up to
$50,000 (fees) and $100,000 (expenses) for its services under that Agreement.
Pursuant to the Marketing Agreement, the Marketing Agent will be paid the following fees out of the
Management Fee of the Master Fund in an amount of (i) 0.051% per annum on the first $100 million of
the average amount of daily net assets of the Master Fund during each calendar year, or Total Net
Assets, (ii) 0.068% on the next $100 million of Total Net Assets (i.e., the amount of Total Net
Assets above $100 million but below $200 million); (iii) 0.085% on the next $300 million in Total
Net Assets (i.e., the amount of Total Net Assets above $200 million but below $500 million); (iv)
0.102% on the next $500 million of Total Net Assets (i.e., the amount of Total Net Assets above
$500 million but below $1 billion); and (v) 0.153% per annum on the Total Net Assets in excess of
$1 billion. The maximum compensation the Marketing Agent may receive under that Agreement as a
result of this offering is estimated to be $1,786,000, which includes $1,768,000 (fees) and $18,000
(expenses).
The Fund will advise the Distributor and the Marketing Agent if the payment described hereunder
must be limited, when combined with other commissions realized by other FINRA Members, in order to
comply with the 10% limitation on total underwriters compensation pursuant to FINRA Conduct Rule
2810.
LEGAL MATTERS
Tannenbaum Helpern Syracuse & Hirschtritt LLP and Morris James LLP have advised the Managing Owner
in connection with the Shares being offered hereby, and Morris James LLP has provided an opinion as
to the legality of the issuance of such Shares. Tannenbaum Helpern Syracuse & Hirschtritt LLP also
advises the Managing Owner with respect to its responsibilities as managing owner of, and with
respect to matters relating to, the Fund and the Master Fund. Tannenbaum Helpern Syracuse &
Hirschtritt LLP has prepared the section Material U.S. Federal Income Tax Considerations and
Purchases By Employee Benefit Plans with respect to ERISA. Tannenbaum Helpern Syracuse &
Hirschtritt LLP has not represented, nor will it represent, the Fund or the Shareholders in matters
relating to the Fund.
Litigation and Claims. Within the past 5 years of the date of this Prospectus, there have been no
material administrative, civil or criminal actions against the Managing Owner, the Trustee,
underwriter, or any principal affiliate of such parties. This includes any actions pending, on
appeal, concluded, threatened, or otherwise known to them.
EXPERTS
The financial statements included in this prospectus have been so included in reliance upon the reports
of Grant Thornton LLP, independent registered public accountants, upon the authority of said firm
as experts in accounting and auditing in giving said reports.
63
ADDITIONAL INFORMATION
This Prospectus constitutes part of the Registration Statement filed by the Fund and the Master
Fund 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 forms of the Participant Agreement and the Customer Agreement). The descriptions
contained herein of agreements included as exhibits to the Registration Statement are necessarily
summaries; the exhibits themselves may be inspected without charge at the public reference
facilities maintained by the SEC at 100 Front Street, N.E., Washington, D.C. 20549, and copies of
all or part thereof may be obtained from the Commission upon payment of the prescribed fees. The
SEC maintains a Website that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The address of such site
is http://www.sec.gov.
64
Index to Financial Statements
|
|
|
|
|
GreenHaven Continuous Commodity Index Fund |
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
|
67 |
|
|
|
|
68 |
|
|
|
|
69 |
|
|
|
|
70 |
|
|
|
|
71 |
|
|
|
|
72 |
|
|
|
|
73 |
|
|
|
|
74 |
|
|
|
|
75 |
|
|
|
|
|
|
GreenHaven Commodity Service, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|
|
|
88 |
|
|
|
|
89 |
|
|
|
|
90 |
|
|
|
|
91 |
|
|
|
|
92 |
|
65
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Managers and Shareholders of
GreenHaven Continuous Commodity Index Fund:
We have audited the accompanying consolidated statements of financial condition of GreenHaven
Continuous Commodity Index Fund (the Fund) as of December 31, 2009 and 2008, the consolidated
schedule of investments as of December 31, 2009 and 2008, and the related consolidated statements
of income and expenses, changes in shareholders equity, and cash flows for each of the years in
the three-year period ended December 31, 2009. These financial statements are the responsibility
of the Funds management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the Fund as of December 31, 2009 and 2008, and the results of
its operations and its cash flows for each of the years in the three-year period ended December 31,
2009, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), GreenHaven Continuous Commodity Index Funds internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and
our report dated March 15, 2010 (not separately included herein) expressed an unqualified opinion thereon.
|
|
|
|
|
|
|
|
/s/ GRANT THORNTON LLP
|
|
|
|
|
|
Atlanta, Georgia |
|
|
March 15, 2010 |
|
|
66
GreenHaven Continuous Commodity Index Fund
Consolidated Statements of Financial Condition
December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Assets |
|
|
|
|
|
|
|
|
Equity in broker trading accounts: |
|
|
|
|
|
|
|
|
Short-term investments (cost $119,990,308 and $4,998,396 as of 2009
and 2008, respectively) |
|
$ |
119,992,525 |
|
|
$ |
4,999,865 |
|
Cash held by broker |
|
|
97,250,587 |
|
|
|
13,331,630 |
|
Net unrealized appreciation (depreciation) on futures contracts |
|
|
12,380,231 |
|
|
|
(1,880,290 |
) |
|
|
|
|
|
|
|
Total equity in broker trading accounts |
|
|
229,623,343 |
|
|
|
16,451,205 |
|
Capital shares receivable |
|
|
|
|
|
|
1,096,170 |
|
Other assets and prepaid fee to broker |
|
|
|
|
|
|
3,525 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
229,623,343 |
|
|
$ |
17,550,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity |
|
|
|
|
|
|
|
|
Management fee payable to related party |
|
$ |
149,819 |
|
|
$ |
11,076 |
|
Broker fee payable |
|
|
39,186 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
189,005 |
|
|
|
11,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
|
|
|
|
|
|
General Units: |
|
|
|
|
|
|
|
|
Paid in capital 50 units issued |
|
|
1,500 |
|
|
|
1,500 |
|
Retained earnings (deficit) |
|
|
(189 |
) |
|
|
(404 |
) |
|
|
|
|
|
|
|
Total General Units |
|
|
1,311 |
|
|
|
1,096 |
|
|
|
|
|
|
|
|
Limited Units: |
|
|
|
|
|
|
|
|
Paid in capital 8,750,000 and 800,000 redeemable units issued and outstanding
as of 2009 and 2008, respectively |
|
|
210,500,911 |
|
|
|
24,539,494 |
|
Retained earnings (deficit) |
|
|
18,932,116 |
|
|
|
(7,000,766 |
) |
|
|
|
|
|
|
|
Total Limited Units |
|
|
229,433,027 |
|
|
|
17,538,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
229,434,338 |
|
|
|
17,539,824 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
229,623,343 |
|
|
$ |
17,550,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per share
|
|
|
|
|
|
|
|
|
General Units |
|
$ |
26.22 |
|
|
$ |
21.92 |
|
Limited Units |
|
$ |
26.22 |
|
|
$ |
21.92 |
|
See accompanying notes to consolidated financial statements
67
GreenHaven Continuous Commodity Index Fund
Consolidated Schedule of Investments
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
Fair |
|
|
Face |
|
Description |
|
Net Assets |
|
|
Value |
|
|
Value |
|
U.S. Treasury Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Bills, 0.01% due January 21, 2010 |
|
|
23.97 |
% |
|
$ |
54,999,285 |
|
|
$ |
55,000,000 |
|
U.S. Treasury Bills, 0.07% due March 25, 2010 |
|
|
28.33 |
|
|
|
64,993,240 |
|
|
|
65,000,000 |
|
|
|
|
|
|
|
|
|
|
|
Total United States Treasury Obligations (cost
$119,990,308) |
|
|
52.30 |
% |
|
$ |
119,992,525 |
|
|
$ |
120,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
Fair |
|
|
Notional |
|
Description |
|
Net Assets |
|
|
Value |
|
|
Value |
|
Unrealized Appreciation/(Depreciation) on Futures Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
Cocoa (136 contracts, settlement date March 16, 2010) |
|
|
0.07 |
% |
|
$ |
161,180 |
|
|
$ |
4,473,040 |
|
Cocoa (137 contracts, settlement date May 13, 2010) |
|
|
0.08 |
|
|
|
182,110 |
|
|
|
4,534,700 |
|
Cocoa (137 contracts, settlement date July 15, 2010) |
|
|
0.07 |
|
|
|
154,330 |
|
|
|
4,530,590 |
|
Coffee (87 contracts, settlement date March 19, 2010) |
|
|
(0.02 |
) |
|
|
(54,712 |
) |
|
|
4,435,369 |
|
Coffee (87 contracts, settlement date May 18, 2010) |
|
|
(0.02 |
) |
|
|
(44,550 |
) |
|
|
4,489,200 |
|
Coffee (87 contracts, settlement date July 20, 2010) |
|
|
(0.00) |
* |
|
|
5,700 |
|
|
|
4,536,506 |
|
Copper (54 contracts, settlement date March 29, 2010) |
|
|
0.24 |
|
|
|
548,875 |
|
|
|
4,517,775 |
|
Copper (54 contracts, settlement date May 26, 2010) |
|
|
0.25 |
|
|
|
581,925 |
|
|
|
4,536,675 |
|
Copper (53 contracts, settlement date July 28, 2010) |
|
|
0.20 |
|
|
|
449,350 |
|
|
|
4,465,912 |
|
Corn (212 contracts, settlement date March 12, 2010) |
|
|
0.21 |
|
|
|
486,987 |
|
|
|
4,393,700 |
|
Corn (212 contracts, settlement date May 14, 2010) |
|
|
0.22 |
|
|
|
503,862 |
|
|
|
4,497,050 |
|
Corn (212 contracts, settlement date July 14, 2010) |
|
|
0.04 |
|
|
|
97,962 |
|
|
|
4,589,800 |
|
Cotton (118 contracts, settlement date March 09, 2010) |
|
|
0.21 |
|
|
|
491,955 |
|
|
|
4,460,400 |
|
Cotton (117 contracts, settlement date May 06, 2010) |
|
|
0.21 |
|
|
|
479,775 |
|
|
|
4,480,515 |
|
Cotton (118 contracts, settlement date July 08, 2010) |
|
|
0.07 |
|
|
|
163,925 |
|
|
|
4,541,820 |
|
Florida Orange Juice (233 contracts, settlement date March 11, 2010) |
|
|
0.13 |
|
|
|
292,253 |
|
|
|
4,510,298 |
|
Florida Orange Juice (236 contracts, settlement date May 10, 2010) |
|
|
0.29 |
|
|
|
673,343 |
|
|
|
4,699,350 |
|
Florida Orange Juice (208 contracts, settlement date July 12, 2010) |
|
|
0.10 |
|
|
|
220,958 |
|
|
|
4,235,400 |
|
Gold (41 contracts, settlement date February 24, 2010) |
|
|
0.11 |
|
|
|
247,040 |
|
|
|
4,494,420 |
|
Gold (41 contracts, settlement date April 28, 2010) |
|
|
0.12 |
|
|
|
285,440 |
|
|
|
4,500,160 |
|
Gold (41 contracts, settlement date June 28, 2010) |
|
|
(0.03 |
) |
|
|
(73,280 |
) |
|
|
4,505,080 |
|
Heating Oil (31 contracts, settlement date January 29, 2010) |
|
|
0.08 |
|
|
|
171,121 |
|
|
|
2,754,511 |
|
Heating Oil (30 contracts, settlement date February 26, 2010) |
|
|
0.07 |
|
|
|
167,378 |
|
|
|
2,673,594 |
|
Heating Oil (30 contracts, settlement date March 31, 2010) |
|
|
0.07 |
|
|
|
174,531 |
|
|
|
2,679,138 |
|
Heating Oil (30 contracts, settlement date April 30, 2010) |
|
|
0.03 |
|
|
|
79,624 |
|
|
|
2,686,194 |
|
Heating Oil (30 contracts, settlement date May 28, 2010) |
|
|
0.03 |
|
|
|
76,679 |
|
|
|
2,694,132 |
|
Lean Hogs (117 contracts, settlement date February 12, 2010) |
|
|
0.12 |
|
|
|
279,190 |
|
|
|
3,070,080 |
|
Lean Hogs (117 contracts, settlement date April 15, 2010) |
|
|
0.10 |
|
|
|
236,150 |
|
|
|
3,270,150 |
|
Lean Hogs (116 contracts, settlement date June 14, 2010) |
|
|
0.03 |
|
|
|
81,640 |
|
|
|
3,585,560 |
|
Lean Hogs (117 contracts, settlement date July 15, 2010) |
|
|
0.02 |
|
|
|
42,930 |
|
|
|
3,561,480 |
|
Light, Sweet Crude Oil (34 contracts, settlement date January 20,
2010) |
|
|
0.07 |
|
|
|
165,770 |
|
|
|
2,698,240 |
|
Light, Sweet Crude Oil (34 contracts, settlement date February 22,
2010) |
|
|
0.07 |
|
|
|
163,510 |
|
|
|
2,720,680 |
|
Light, Sweet Crude Oil (33 contracts, settlement date March 22, 2010) |
|
|
0.07 |
|
|
|
153,050 |
|
|
|
2,660,790 |
|
Light, Sweet Crude Oil (33 contracts, settlement date April 20, 2010) |
|
|
0.02 |
|
|
|
35,750 |
|
|
|
2,676,630 |
|
Light, Sweet Crude Oil (33 contracts, settlement date May 20, 2010) |
|
|
0.02 |
|
|
|
35,980 |
|
|
|
2,692,470 |
|
Live Cattle (128 contracts, settlement date February 26, 2010) |
|
|
(0.00) |
* |
|
|
(2,580 |
) |
|
|
4,412,160 |
|
Live Cattle (128 contracts, settlement date April 30, 2010) |
|
|
0.03 |
|
|
|
62,390 |
|
|
|
4,597,760 |
|
Live Cattle (128 contracts, settlement date June 30, 2010) |
|
|
0.07 |
|
|
|
153,590 |
|
|
|
4,491,520 |
|
Natural Gas (49 contracts, settlement date January 27, 2010) |
|
|
0.04 |
|
|
|
103,110 |
|
|
|
2,730,280 |
|
Natural Gas (49 contracts, settlement date February 24, 2010) |
|
|
0.03 |
|
|
|
71,960 |
|
|
|
2,710,680 |
|
Natural Gas (48 contracts, settlement date March 29, 2010) |
|
|
0.03 |
|
|
|
66,120 |
|
|
|
2,642,400 |
|
Natural Gas (48 contracts, settlement date April 28, 2010) |
|
|
0.11 |
|
|
|
249,020 |
|
|
|
2,661,600 |
|
Natural Gas (48 contracts, settlement date May 26, 2010) |
|
|
0.11 |
|
|
|
240,580 |
|
|
|
2,695,200 |
|
Platinum (91 contracts, settlement date April 28, 2010) |
|
|
0.24 |
|
|
|
545,890 |
|
|
|
6,693,050 |
|
Platinum (92 contracts, settlement date July 28, 2010) |
|
|
0.17 |
|
|
|
385,155 |
|
|
|
6,785,000 |
|
Silver (53 contracts, settlement date March 29, 2010) |
|
|
(0.01 |
) |
|
|
(24,685 |
) |
|
|
4,463,925 |
|
Silver (53 contracts, settlement date May 26, 2010) |
|
|
0.02 |
|
|
|
55,010 |
|
|
|
4,469,490 |
|
Silver (54 contracts, settlement date July 28, 2010) |
|
|
(0.06 |
) |
|
|
(130,355 |
) |
|
|
4,559,220 |
|
Soybean (85 contracts, settlement date March 12, 2010) |
|
|
0.13 |
|
|
|
303,288 |
|
|
|
4,456,125 |
|
Soybean (85 contracts, settlement date May 14, 2010) |
|
|
0.15 |
|
|
|
340,100 |
|
|
|
4,478,438 |
|
Soybean (86 contracts, settlement date July 14, 2010) |
|
|
0.09 |
|
|
|
198,900 |
|
|
|
4,554,775 |
|
Sugar (160 contracts, settlement date February 26, 2010) |
|
|
0.28 |
|
|
|
638,098 |
|
|
|
4,829,440 |
|
Sugar (161 contracts, settlement date April 30, 2010) |
|
|
0.23 |
|
|
|
522,222 |
|
|
|
4,549,474 |
|
Sugar (161 contracts, settlement date June 30, 2010) |
|
|
0.19 |
|
|
|
423,725 |
|
|
|
4,150,966 |
|
Wheat (162 contracts, settlement date March 12, 2010) |
|
|
0.12 |
|
|
|
268,175 |
|
|
|
4,386,150 |
|
Wheat (162 contracts, settlement date May 14, 2010) |
|
|
0.11 |
|
|
|
263,200 |
|
|
|
4,495,500 |
|
Wheat (162 contracts, settlement date July 14, 2010) |
|
|
(0.03 |
) |
|
|
(70,413 |
) |
|
|
4,584,600 |
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized Appreciation on Futures Contracts |
|
|
5.40 |
% |
|
$ |
12,380,231 |
|
|
$ |
229,249,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Denotes greater than (0.005)% yet less than 0.000% |
See accompanying notes to consolidated financial statements
68
GreenHaven Continuous Commodity Index Fund
Consolidated Schedule of Investments
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
Fair |
|
|
Face |
|
Description |
|
Net Assets |
|
|
Value |
|
|
Value |
|
U.S. Treasury Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Bill,
0.53% due February 5,
2009 (cost $4,998,396) |
|
|
28.51 |
% |
|
$ |
4,999,865 |
|
|
$ |
5,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
Fair |
|
|
Notional |
|
Description |
|
Net Assets |
|
|
Value |
|
|
Value |
|
Unrealized Appreciation (Depreciation) on Futures Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
Cocoa (13 contracts, settlement date March 16, 2009) |
|
|
0.29 |
% |
|
$ |
51,140 |
|
|
$ |
346,450 |
|
Cocoa (13 contracts, settlement date May 13, 2009) |
|
|
0.01 |
|
|
|
1,640 |
|
|
|
345,410 |
|
Cocoa (13 contracts, settlement date July 16, 2009) |
|
|
0.47 |
|
|
|
82,790 |
|
|
|
343,980 |
|
Coffee (8 contracts, settlement date March 19, 2009) |
|
|
(0.40 |
) |
|
|
(71,119 |
) |
|
|
336,150 |
|
Coffee (8 contracts, settlement date May 18, 2009) |
|
|
(0.46 |
) |
|
|
(81,356 |
) |
|
|
342,900 |
|
Coffee (8 contracts, settlement date July 21, 2009) |
|
|
(0.06 |
) |
|
|
(9,900 |
) |
|
|
349,500 |
|
Copper (10 contracts, settlement date March 27, 2009) |
|
|
(0.22 |
) |
|
|
(38,538 |
) |
|
|
352,500 |
|
Copper (10 contracts, settlement date May 27, 2009) |
|
|
(1.15 |
) |
|
|
(200,963 |
) |
|
|
355,125 |
|
Copper (9 contracts, settlement date July 29, 2009) |
|
|
(0.34 |
) |
|
|
(59,513 |
) |
|
|
321,075 |
|
Corn (17 contracts, settlement date March 13, 2009) |
|
|
(0.11 |
) |
|
|
(19,950 |
) |
|
|
345,950 |
|
Corn (16 contracts, settlement date May 14, 2009) |
|
|
(0.37 |
) |
|
|
(64,500 |
) |
|
|
334,200 |
|
Corn (16 contracts, settlement date July 14, 2009) |
|
|
0.08 |
|
|
|
14,663 |
|
|
|
342,400 |
|
Cotton (14 contracts, settlement date March 09, 2009) |
|
|
0.02 |
|
|
|
3,505 |
|
|
|
343,140 |
|
Cotton (14 contracts, settlement date May 06, 2009) |
|
|
(0.65 |
) |
|
|
(113,810 |
) |
|
|
345,170 |
|
Cotton (13 contracts, settlement date July 09, 2009) |
|
|
0.20 |
|
|
|
34,965 |
|
|
|
328,965 |
|
Florida Orange Juice (31 contracts, settlement date March 11, 2009) |
|
|
(0.46 |
) |
|
|
(80,873 |
) |
|
|
315,735 |
|
Florida Orange Juice (32 contracts, settlement date May 08, 2009) |
|
|
(0.64 |
) |
|
|
(111,968 |
) |
|
|
345,360 |
|
Florida Orange Juice (31 contracts, settlement date July 13, 2009) |
|
|
(0.36 |
) |
|
|
(63,195 |
) |
|
|
352,703 |
|
Gold (4 contracts, settlement date February 25, 2009) |
|
|
0.16 |
|
|
|
28,270 |
|
|
|
353,720 |
|
Gold (4 contracts, settlement date April 28, 2009) |
|
|
0.03 |
|
|
|
4,730 |
|
|
|
354,120 |
|
Gold (4 contracts, settlement date June 26, 2009) |
|
|
0.31 |
|
|
|
54,980 |
|
|
|
354,480 |
|
Heating Oil (4 contracts, settlement date January 30, 2009) |
|
|
(0.51 |
) |
|
|
(89,321 |
) |
|
|
242,273 |
|
Heating Oil (4 contracts, settlement date February 27, 2009) |
|
|
(0.86 |
) |
|
|
(150,263 |
) |
|
|
246,557 |
|
Heating Oil (3 contracts, settlement date March 31, 2009) |
|
|
(0.87 |
) |
|
|
(152,141 |
) |
|
|
187,689 |
|
Heating Oil (3 contracts, settlement date April 30, 2009) |
|
|
(0.29 |
) |
|
|
(50,518 |
) |
|
|
190,461 |
|
Heating Oil (3 contracts, settlement date May 29, 2009) |
|
|
(0.19 |
) |
|
|
(33,835 |
) |
|
|
193,296 |
|
Lean Hogs (9 contracts, settlement date February 13, 2009) |
|
|
(0.13 |
) |
|
|
(22,780 |
) |
|
|
219,150 |
|
Lean Hogs (9 contracts, settlement date April 15, 2009) |
|
|
(0.19 |
) |
|
|
(33,680 |
) |
|
|
247,320 |
|
Lean Hogs (9 contracts, settlement date June 12, 2009) |
|
|
(0.01 |
) |
|
|
(990 |
) |
|
|
287,640 |
|
Lean Hogs (9 contracts, settlement date July 15, 2009) |
|
|
0.01 |
|
|
|
1,510 |
|
|
|
286,830 |
|
Light, Sweet Crude Oil (5 contracts, settlement date January 20, 2009) |
|
|
(0.47 |
) |
|
|
(81,800 |
) |
|
|
223,000 |
|
Light, Sweet Crude Oil (4 contracts, settlement date February 20,
2009) |
|
|
(0.79 |
) |
|
|
(139,260 |
) |
|
|
194,360 |
|
Light, Sweet Crude Oil (4 contracts, settlement date March 20, 2009) |
|
|
(0.40 |
) |
|
|
(69,720 |
) |
|
|
202,280 |
|
Light, Sweet Crude Oil (4 contracts, settlement date April 21, 2009) |
|
|
(0.16 |
) |
|
|
(27,460 |
) |
|
|
207,840 |
|
Light, Sweet Crude Oil (4 contracts, settlement date May 19, 2009) |
|
|
(0.14 |
) |
|
|
(25,390 |
) |
|
|
212,640 |
|
Live Cattle (10 contracts, settlement date February 27, 2009) |
|
|
(0.17 |
) |
|
|
(30,520 |
) |
|
|
344,200 |
|
Live Cattle (10 contracts, settlement date April 30, 2009) |
|
|
(0.24 |
) |
|
|
(42,410 |
) |
|
|
356,400 |
|
Live Cattle (9 contracts, settlement date June 30, 2009) |
|
|
(0.05 |
) |
|
|
(9,700 |
) |
|
|
310,320 |
|
Natural Gas (4 contracts, settlement date January 28, 2009) |
|
|
(0.02 |
) |
|
|
(4,090 |
) |
|
|
224,880 |
|
Natural Gas (4 contracts, settlement date February 25, 2009) |
|
|
(0.42 |
) |
|
|
(74,570 |
) |
|
|
226,280 |
|
Natural Gas (4 contracts, settlement date March 27, 2009) |
|
|
(0.53 |
) |
|
|
(93,420 |
) |
|
|
229,000 |
|
Natural Gas (3 contracts, settlement date April 28, 2009) |
|
|
(0.11 |
) |
|
|
(20,160 |
) |
|
|
173,850 |
|
Natural Gas (3 contracts, settlement date May 27, 2009) |
|
|
(0.08 |
) |
|
|
(13,380 |
) |
|
|
177,120 |
|
Platinum (11 contracts, settlement date April 28, 2009) |
|
|
0.26 |
|
|
|
46,325 |
|
|
|
517,825 |
|
Platinum (10 contracts, settlement date July 29, 2009) |
|
|
0.27 |
|
|
|
46,800 |
|
|
|
473,250 |
|
Silver (6 contracts, settlement date March 27, 2009) |
|
|
0.18 |
|
|
|
31,825 |
|
|
|
338,850 |
|
Silver (6 contracts, settlement date May 27, 2009) |
|
|
(0.43 |
) |
|
|
(74,830 |
) |
|
|
339,210 |
|
Silver (6 contracts, settlement date July 29, 2009) |
|
|
0.28 |
|
|
|
49,770 |
|
|
|
339,450 |
|
Soybean (7 contracts, settlement date March 13, 2009) |
|
|
(0.11 |
) |
|
|
(18,838 |
) |
|
|
343,000 |
|
Soybean (7 contracts, settlement date May 14, 2009) |
|
|
(0.50 |
) |
|
|
(87,738 |
) |
|
|
347,025 |
|
Soybean (7 contracts, settlement date July 14, 2009) |
|
|
0.21 |
|
|
|
35,788 |
|
|
|
350,963 |
|
Sugar (26 contracts, settlement date February 27, 2009) |
|
|
(0.04 |
) |
|
|
(7,806 |
) |
|
|
343,907 |
|
Sugar (25 contracts, settlement date April 30, 2009) |
|
|
(0.24 |
) |
|
|
(41,742 |
) |
|
|
344,400 |
|
Sugar (24 contracts, settlement date June 30, 2009) |
|
|
0.08 |
|
|
|
14,605 |
|
|
|
340,301 |
|
Wheat (11 contracts, settlement date March 13, 2009) |
|
|
(0.14 |
) |
|
|
(24,412 |
) |
|
|
335,913 |
|
Wheat (11 contracts, settlement date May 14, 2009) |
|
|
(0.44 |
) |
|
|
(77,575 |
) |
|
|
342,925 |
|
Wheat (11 contracts, settlement date July 14, 2009) |
|
|
0.17 |
|
|
|
30,438 |
|
|
|
348,700 |
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized Depreciation on Futures Contracts |
|
|
(10.72 |
)% |
|
$ |
(1,880,290 |
) |
|
$ |
17,498,138 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
69
GreenHaven Continuous Commodity Index Fund
Consolidated Statements of Income and Expenses
For the Years Ended December 31, 2009, 2008, and 2007(i)
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Income |
|
|
|
|
|
|
|
|
Interest Income |
|
$ |
126,329 |
|
|
$ |
338,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Management fee to related party |
|
|
1,018,526 |
|
|
|
188,888 |
|
Brokerage commissions and fees |
|
|
287,584 |
|
|
|
54,945 |
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,306,110 |
|
|
|
243,833 |
|
|
|
|
|
|
|
|
Net Investment Income (Loss) |
|
|
(1,179,781 |
) |
|
|
94,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and Net Change in Unrealized Gain
(Loss) on Investments and Futures Contracts |
|
|
|
|
|
|
|
|
Realized Gain (Loss) on |
|
|
|
|
|
|
|
|
Investments |
|
|
397 |
|
|
|
2,725 |
|
Futures Contracts |
|
|
12,851,212 |
|
|
|
(5,219,696 |
) |
|
|
|
|
|
|
|
Net Realized Gain (Loss) |
|
|
12,851,609 |
|
|
|
(5,216,971 |
) |
|
|
|
|
|
|
|
Net Change in Unrealized Gain (Loss) on |
|
|
|
|
|
|
|
|
Investments |
|
|
748 |
|
|
|
1,469 |
|
Futures Contracts |
|
|
14,260,521 |
|
|
|
(1,880,290 |
) |
|
|
|
|
|
|
|
Net Change in Unrealized Gain (Loss) |
|
|
14,261,269 |
|
|
|
(1,878,821 |
) |
|
|
|
|
|
|
|
Net Realized and Unrealized Gain (Loss) on
Investments and Future Contracts |
|
|
27,112,878 |
|
|
|
(7,095,792 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
25,933,097 |
|
|
$ |
(7,001,170 |
) |
|
|
|
|
|
|
|
|
|
|
(i) |
|
There were no items of income or expense for the year ended December 31, 2007. The Fund
commenced investment operations on January 23, 2008. |
See accompanying notes to consolidated financial statements
70
GreenHaven Continuous Commodity Index Fund
Consolidated Statement of Changes in Shareholders Equity
For the Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Units |
|
|
Limited Units |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General |
|
|
|
|
|
|
|
|
Limited |
|
|
Total |
|
|
|
General Units |
|
|
Accumulated |
|
|
Shareholders |
|
|
Limited Units |
|
|
Accumulated |
|
|
Shareholders |
|
|
Shareholders |
|
|
|
Units |
|
|
Amount |
|
|
Defecit |
|
|
Equity |
|
|
Units |
|
|
Amount |
|
|
Earnings |
|
|
Equity |
|
|
Equity |
|
Balance at January 1, 2009 |
|
|
50 |
|
|
$ |
1,500 |
|
|
$ |
(404 |
) |
|
$ |
1,096 |
|
|
|
800,000 |
|
|
$ |
24,539,494 |
|
|
$ |
(7,000,766 |
) |
|
$ |
17,538,728 |
|
|
$ |
17,539,824 |
|
Sale of Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000,000 |
|
|
|
260,518,098 |
|
|
|
|
|
|
|
260,518,098 |
|
|
|
260,518,098 |
|
Redemption of Limited Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,050,000 |
) |
|
|
(74,556,681 |
) |
|
|
|
|
|
|
(74,556,681 |
) |
|
|
(74,556,681 |
) |
Net gain: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss |
|
|
|
|
|
|
|
|
|
|
(14 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
(1,179,767 |
) |
|
|
(1,179,767 |
) |
|
|
(1,179,781 |
) |
Net realized gain (loss) on
Investments and Futures
Contracts |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
12,851,611 |
|
|
|
12,851,611 |
|
|
|
12,851,609 |
|
Net change in unrealized
gain on
Investments and
Futures Contracts |
|
|
|
|
|
|
|
|
|
|
231 |
|
|
|
231 |
|
|
|
|
|
|
|
|
|
|
|
14,261,038 |
|
|
|
14,261,038 |
|
|
|
14,261,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain |
|
|
|
|
|
|
|
|
|
|
215 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
25,932,882 |
|
|
|
25,932,882 |
|
|
|
25,933,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
2009 |
|
|
50 |
|
|
$ |
1,500 |
|
|
$ |
(189 |
) |
|
$ |
1,311 |
|
|
|
8,750,000 |
|
|
$ |
210,500,911 |
|
|
$ |
18,932,116 |
|
|
$ |
229,433,027 |
|
|
$ |
229,434,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
71
GreenHaven Continuous Commodity Index Fund
Consolidated Statement of Changes in Shareholders Equity
For the Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Units |
|
|
Limited Units |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited |
|
|
Total |
|
|
|
General Units |
|
|
Accumulated |
|
|
Subscription |
|
|
Shareholders |
|
|
Limited Units |
|
|
Accumulated |
|
|
Shareholders |
|
|
Shareholders |
|
|
|
Units |
|
|
Amount |
|
|
Deficit |
|
|
Receivable |
|
|
Equity |
|
|
Units |
|
|
Amount |
|
|
Deficit |
|
|
Equity |
|
|
Equity |
|
Balance at
January 1, 2008 |
|
|
50 |
|
|
$ |
1,500 |
|
|
$ |
|
|
|
$ |
(1,500 |
) |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Collection of
Subscription
receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500 |
|
|
|
1,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,550,000 |
|
|
|
49,787,546 |
|
|
|
|
|
|
|
49,787,546 |
|
|
|
49,787,546 |
|
Redemption of
Limited Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(750,000 |
) |
|
|
(25,248,052 |
) |
|
|
|
|
|
|
(25,248,052 |
) |
|
|
(25,248,052 |
) |
Net loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
94,616 |
|
|
|
94,616 |
|
|
|
94,622 |
|
Net realized loss on
Investments
and Futures Contracts |
|
|
|
|
|
|
|
|
|
|
(359 |
) |
|
|
|
|
|
|
(359 |
) |
|
|
|
|
|
|
|
|
|
|
(5,216,612 |
) |
|
|
(5,216,612 |
) |
|
|
(5,216,971 |
) |
Net change in
unrealized loss
on Investments and
Futures Contracts |
|
|
|
|
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
(1,878,770 |
) |
|
|
(1,878,770 |
) |
|
|
(1,878,821 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss: |
|
|
|
|
|
|
|
|
|
|
(404 |
) |
|
|
|
|
|
|
(404 |
) |
|
|
|
|
|
|
|
|
|
|
(7,000,766 |
) |
|
|
(7,000,766 |
) |
|
|
(7,001,170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2008 |
|
|
50 |
|
|
$ |
1,500 |
|
|
$ |
(404 |
) |
|
$ |
|
|
|
$ |
1,096 |
|
|
|
800,000 |
|
|
$ |
24,539,494 |
|
|
$ |
(7,000,766 |
) |
|
$ |
17,538,728 |
|
|
$ |
17,539,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
72
GreenHaven Continuous Commodity Index Fund
Consolidated Statement of Changes in Shareholders Equity
For the Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Units |
|
|
Limited Units |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited |
|
|
Total |
|
|
|
General Units |
|
|
Accumulated |
|
|
Subscription |
|
|
Shareholders |
|
|
Limited Units |
|
|
Accumulated |
|
|
Shareholders |
|
|
Shareholders |
|
|
|
Units |
|
|
Amount |
|
|
Earnings |
|
|
Receivable |
|
|
Equity |
|
|
Units |
|
|
Amount |
|
|
Earnings |
|
|
Equity |
|
|
Equity |
|
Balance at
January 1, 2007 |
|
|
50 |
|
|
$ |
1,500 |
|
|
$ |
|
|
|
$ |
(1,500 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Activity for 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2007 |
|
|
50 |
|
|
$ |
1,500 |
|
|
|
|
|
|
$ |
(1,500 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
73
GreenHaven Continuous Commodity Index Fund
Consolidated Statement of Cash Flows
For the Years Ended December 31, 2009, 2008, and 2007(i)
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Cash flow from operating activities: |
|
|
|
|
|
|
|
|
Net Gain/Loss |
|
$ |
25,933,097 |
|
|
$ |
(7,001,170 |
) |
Adjustments to reconcile net gain to net cash used for operating
activities: |
|
|
|
|
|
|
|
|
Purchase of investment securities |
|
|
(604,867,964 |
) |
|
|
(101,741,449 |
) |
Proceeds from sale of investment securities |
|
|
489,996,097 |
|
|
|
97,065,528 |
|
Net accretion of discount and amortization of premium |
|
|
(119,648 |
) |
|
|
(319,750 |
) |
Net realized gain on investment securities |
|
|
(397 |
) |
|
|
(2,725 |
) |
Unrealized (appreciation) depreciation on investments |
|
|
(14,261,269 |
) |
|
|
1,878,821 |
|
(Increase) decrease in capital shares receivable and other assets |
|
|
1,099,695 |
|
|
|
(1,099,695 |
) |
Increase in accrued expenses |
|
|
177,929 |
|
|
|
11,076 |
|
|
|
|
|
|
|
|
Net cash used for operating activities |
|
|
(102,042,460 |
) |
|
|
(11,209,364 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Collection of subscription receivable |
|
|
|
|
|
|
1,500 |
|
Proceeds from sale of Limited Units |
|
|
260,518,098 |
|
|
|
49,787,546 |
|
Redemption of Limited Units |
|
|
(74,556,681 |
) |
|
|
(25,248,052 |
) |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
185,961,417 |
|
|
|
24,540,994 |
|
|
|
|
|
|
|
|
|
|
Net change in cash |
|
|
83,918,957 |
|
|
|
13,331,630 |
|
Cash held by broker at beginning of period |
|
|
13,331,630 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash held by broker at end of period |
|
$ |
97,250,587 |
|
|
$ |
13,331,630 |
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
There were no cash transactions or any activities affecting cash for the year ended December
31, 2007. The Fund commenced investment operations on January 23, 2008. |
See accompanying notes to consolidated financial statements
74
GREENHAVEN CONTINUOUS COMMODITY INDEX FUND
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2009, 2008, and 2007
(1) Organization
The GreenHaven Continuous Commodity Index Fund (the Fund) was formed as a Delaware statutory
trust on October 27, 2006, and GreenHaven Continuous Commodity Master Index Fund (the Master
Fund), was formed as a Delaware statutory trust on October 27, 2006. The Fund offers common units
of beneficial interest (the Shares). Upon inception of the Fund, 50 General Units of the Fund
were issued to GreenHaven Commodity Services, LLC (the Managing Owner) in exchange for a capital
contribution of $1,500. The Managing Owner serves the Fund as commodity pool operator, commodity
trading advisor, and managing owner.
Shares are purchased from the Fund only by Authorized Participants in one or more blocks of 50,000
Shares, called a Basket. The proceeds from the offering of Shares are invested in the Master Fund.
The Master Fund actively trades exchange traded futures on the commodities comprising the Reuters
Continuous Commodity Index (the Index), with a view to tracking the performance of the Index over
time. The Master Funds portfolio also includes United States Treasury securities for deposit with
the Master Funds commodities brokers as margin and other high credit quality short term fixed
income securities. The Fund wholly owns the Master Fund.
The Fund and Master Fund registration statement for the issuance of 4,000,000 Shares went effective
on December 5, 2007. The Fund and Master Fund commenced investment operations on January 23, 2008
with the offering of 350,000 Shares in exchange for $10,500,000. The Fund commenced trading on the
American Stock Exchange (the AMEX) on January 24, 2008. On November 24, 2008 the Fund de-listed
from the AMEX and on November 25, 2008 the Fund listed on NYSE Arca. On May 14, 2009 the Fund
registered an additional 21,000,000 units. Prior to January 23, 2008, the only activity in the Fund
was the subscription in 2006 by the Managing Owner for the General Units and the related payment
for them in January 2008. Accordingly, Statements of Income and Expenses and Cash Flows are
inapplicable for the year ended December 31, 2007.
The Index is intended to reflect the performance of certain commodities. The commodities comprising
the Index (the Index Commodities) are: corn, soybeans, wheat, live cattle, lean hogs, gold,
silver, copper, cocoa, coffee, sugar, cotton, orange juice, platinum, crude oil, heating oil, and
natural gas.
The Managing Owner and the Shareholders share in any profits and losses of the Fund attributable to
the Fund in proportion to the percentage interest owned by each.
The Managing Owner, the Fund and the Master Fund retain the services of third party service
providers to operate the ongoing operations of the Fund and the Master Fund. (See Note (2)).
(2) Service Providers and Related Party Agreements
(a) The Trustee CSC Trust is the trustee for the Fund and Master Fund. CSC Trust is
headquartered in Wilmington, DE.
(b) The Managing Owner GreenHaven Commodity Services, LLC is the managing owner of the Fund
and Master Fund and is responsible for the day to day operations of both entities. The Managing
Owner charges the Fund a management fee for its services. GreenHaven Commodity Services, LLC is a
Delaware limited liability company with operations in Atlanta, GA.
75
(c) The Administrator The Bank of New York Mellon Corporation has been appointed by the
Managing Owner as the administrator, custodian and transfer agent of the Fund and the Master Fund,
and has entered into separate administrative, custodian, transfer agency and service agreements
(collectively referred to as the Administration Agreement). Pursuant to the Administration
Agreement, the Administrator performs or
supervises the services necessary for the operation and administration of the Fund and the Master
Fund (other than making investment decisions), including receiving net asset value calculations,
accounting and other fund administrative services. As the Funds transfer agent, the Administrator
will process additions and redemptions of Shares. These transactions will be processed on
Depository Trust Companys (DTCs) book entry system. The Administrator retains certain financial
books and records, including: Basket creation and redemption books and records, fund accounting
records, ledgers with respect to assets, liabilities, capital, income and expenses, the registrar,
transfer journals and related details and trading and related documents received from futures
commission merchants. The Bank of New York Mellon Corporation is based in New York, New York.
(d) The Commodity Broker Morgan Stanley & Co. Incorporated (MS&Co.) is the Master Funds
Commodity Broker. In its capacity as the Commodity Broker, it executes and clears each of the
Master Funds futures transactions and performs certain administrative services for the Master
Fund. MS&Co. is based in New York, New York.
(e) The Distributor The Managing Owner, on behalf of the Fund and the Master Fund, has
appointed ALPS Distributors, Inc., or the Distributor, to assist the Managing Owner and the
Administrator with certain functions and duties relating to the creation and redemption of Baskets,
including receiving and processing orders from Authorized Participants to create and redeem
Baskets, coordinating the processing of such orders and related functions and duties. The
Distributor retains all marketing materials and Basket creation and redemption books and records at
c/o ALPS Distributors, Inc., 1290 Broadway, Suite 1100, Denver, CO 80203; Telephone number (303)
623-2577. Investors may contact the Distributor toll-free in the U.S. at (800) 320-2577. The Fund
has entered into a Distribution Services Agreement with the Distributor.
The Distributor is affiliated with ALPS Mutual Fund Services, Inc., a Denver-based service provider
of administration, fund accounting, transfer agency and shareholder services for mutual funds,
closed-end funds and exchange-traded funds, with over 100,000 shareholder accounts and
approximately $10 billion in client mutual fund assets under administration. The Distributor
provides distribution services and has approximately $120 billion in client assets under
distribution.
(f) The Authorized Participant Authorized Participants may create or redeem shares of the
Master Fund. Each Authorized Participant must (1) be a registered broker-dealer or other securities
market participant such as a bank or other financial institution which is not required to register
as a broker-dealer to engage in securities transactions, (2) be a participant in the Depository
Trust Company, or DTC, and (3) have entered into a participant agreement with the Fund and the
Managing Owner, or a Participant Agreement. The Participant Agreement sets forth the procedures for
the creation and redemption of Baskets of Shares and for the delivery of cash required for such
creations or redemptions. A list of the current Authorized Participants can be obtained from the
Administrator. A similar agreement between the Fund and the Master Fund sets forth the procedures
for the creation and redemption of Master Unit Baskets by the Fund.
(3) Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the period. Actual results could differ from those estimates.
(b) Cash Held by Broker
The Fund defines cash held by broker to be highly liquid investments, with original maturities of
three months or less when acquired. MS&Co. allows the Fund to apply its Treasury Bill portfolio
towards its initial margin requirement for the Funds futures positions, hence all cash held by
broker is unrestricted cash. The cash and Treasury bill positions are held in segregated accounts
at MS&Co and are not insured by the Federal Deposit Insurance Corporation.
76
(c) United States Treasury Obligations
The Fund records purchases and sales of United States Treasury Obligations on a trade date basis.
These holdings are marked to market based on quoted market closing prices. The Fund holds United
States Treasury Obligations for deposit with the Master Funds commodity brokers as margin and for
trading and held against initial margin of the open futures contracts. Interest income is
recognized on an accrual basis when earned. Premiums and discounts are amortized or accreted over
the life of the United States Treasury Obligations.
(d) Income Taxes
The Fund accounts for uncertainty in income taxes pursuant to the applicable accounting standard,
which provides measurement, presentation and disclosure guidance related to uncertain tax
positions. The guidance addresses how tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements. Under this topic, the Fund must recognize
the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities based on the technical merits
of the position. The tax benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate resolution. The Funds reassessment of its tax positions did not have a
material impact on the Funds financial condition, results of operations or liquidity.
The Fund and Master Fund are classified as a grantor trust and a partnership respectively, for U.S.
federal income tax purposes. Accordingly, neither the Fund nor the Master Fund is subject to U.S.
federal, state, or local income taxes. Accordingly, no provision for federal, state, and local
income taxes has been made in the accompanying consolidated financial statements, as investors are
individually liable for income taxes, if any, on their allocable share of the Funds share of the
Master Funds income, gain, loss, deductions and other items.
(e) Futures Contracts
The Fund purchases and holds commodity futures contracts for investment purposes. These contracts
are recorded on a trade date basis and open contracts are valued daily at settlement prices
provided by the relevant exchanges. In the consolidated statement of financial condition, futures
contracts are presented at their published settlement prices on the last business day of the
period, in accord with the fair value accounting standard. Since these contracts are actively
traded in markets that are directly observable and which provide readily available price quotes,
their market value is deemed to be their fair value under the fair value accounting standard. (see
Note 4 Fair Value Measurements)
However, when market closing prices are not available, the Managing Owner may value an asset of the
Master Fund pursuant to such other principles as the Managing Owner deems fair and equitable so
long as such principles are consistent with the fair value accounting standard. Realized gains
(losses) and changes in unrealized appreciation (depreciation) on open positions are determined on
a specific identification basis and recognized in the consolidated statement of income and expenses
in the period in which the contract is closed or the changes occur, respectively.
(f) Basis of Presentation and Consolidation
Upon the initial offering of the limited shares of the Fund, 100% of the capital raised by the Fund
was used to purchase common units of beneficial interest of the Master Fund. The financial
statement balances of the Master Fund were consolidated with the Funds financial statement
balances beginning with the first reporting period subsequent to the initial offering, and all
significant inter-company balances and transactions were eliminated.
(g) Recently Issued Accounting Pronouncements
The FASB has issued additional disclosure guidance, clarifying existing disclosure requirements,
about fair value measurements. The additional requirements include disclosure regarding the amounts
and reasons for significant transfers in and out of Level 1 and 2 of the fair value hierarchy and
also separate presentation of purchases, sales,
77
issuances and settlements of items measured using significant unobservable inputs (i.e. Level 3).
The guidance clarifies existing disclosure requirements regarding the inputs and valuation
techniques used to measure fair value for measurements that fall in either Level 2 or Level 3 of
the hierarchy. The requirements are effective for interim and annual reporting periods beginning
after December 15, 2009, except for the disclosures about purchases, sales, issuances and
settlements which are effective for fiscal years beginning after December 15, 2010 and for interim
periods within those fiscal years. The Fund is evaluating the impact this new guidance will have on
its financial statements.
(h) Recently Adopted Accounting Standards
In June 2009, the Financial Accounting Standards Board (FASB) issued new accounting requirements,
which made the FASB Accounting Standards Codification (Codification) the single source of
authoritative literature for U.S. accounting and reporting standards. The Codification is not meant
to change existing GAAP but rather provide a single source for all literature. The Fund adopted the
standard during the quarter ended September 30, 2009, which required changing certain disclosures
in the financial statements to reflect Codification or Plain English references rather than
references to FASB Statements, Staff Positions or Emerging Issues Task Force Abstracts. The
adoption of this requirement is reflected in certain disclosures in the financial statements but
did not have an impact on the Funds financial position, results of operations, or cash flows.
Effective January 1, 2009, the Fund adopted a new accounting standard that requires enhanced
disclosures about the Funds derivative instruments and hedging activities. The new disclosures
required by this standard are reflected in Note 5.
During the quarter ended June 30, 2009, the Fund adopted a new accounting standard which
establishes general standards of accounting and disclosure of events that occur after the balance
sheet date but before the financial statements are issued or available to be issued. The Fund has
added disclosure in this Note 12 regarding which subsequent events have been evaluated.
The FASB has issued guidance allowing entities determining the fair value of a liability to use the
perspective of an investor that holds the related obligation as an asset. The guidance was
effective for interim and annual periods beginning after August 27, 2009 and applied to all fair
value measurements of liabilities. This accounting standards update did not have a material impact
on the Funds financial statements.
(4) Fair Value Measurements
In September 2006, the Financial Accounting Standards Board (FASB) issued Accounting Standard
Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines
fair value, establishes framework for the measurement of fair value, and enhances disclosures about
fair value measurements. The Statement does not require any new fair value measures. The Fund
adopted ASC 820 when investment operations commenced on January 23, 2008. The Fund believes that
all of the measurements of operations are recurring measurements. The assets of the Fund are either
exchange-traded or government securities that have widely disseminated market prices.
Additional guidance in applying this standard became effective for the Company for the second
fiscal quarter of 2009. This guidance relates to valuations when the volume of relevant
transactions has decreased or when transactions have become not orderly. The Fund believes that
there have been no circumstances to date in which application of this guidance has had an impact on
the Funds financial statements.
The Fund utilizes various inputs used in determining the value of the Funds investments. These
inputs are summarized in the three broad levels listed below as follows:
Level 1 quoted prices in active markets for identical securities
Level 2 other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, etc.)
78
Level 3 significant unobservable inputs (including the Funds own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk
associated with investing in those securities. A summary of the Funds assets and liabilities at
fair value as of December 31, 2009, classified according to the levels used to value them, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
|
|
|
|
|
Active Market |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
Assets |
|
(Level 1) |
|
|
Inputs (Level 2) |
|
|
Inputs (Level 3) |
|
|
Totals |
|
U.S. Treasuries |
|
$ |
|
|
|
$ |
119,992,525 |
|
|
$ |
|
|
|
$ |
119,992,525 |
|
Futures Contracts |
|
|
12,380,231 |
|
|
|
|
|
|
|
|
|
|
|
12,380,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
12,380,231 |
|
|
$ |
119,992,525 |
|
|
$ |
|
|
|
$ |
132,372,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
|
|
|
|
|
Active Market |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
Liabilities |
|
(Level 1) |
|
|
Inputs (Level 2) |
|
|
Inputs (Level 3) |
|
|
Totals |
|
Futures Contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the Funds assets and liabilities at fair value as of December 31, 2008, classified
according to the levels used to value them, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
|
|
|
|
|
Active Market |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
Assets |
|
(Level 1) |
|
|
Inputs (Level 2) |
|
|
Inputs (Level 3) |
|
|
Totals |
|
U.S. Treasuries |
|
$ |
|
|
|
$ |
4,999,865 |
|
|
$ |
|
|
|
$ |
4,999,865 |
|
Futures Contracts |
|
|
(1,880,290 |
) |
|
|
|
|
|
|
|
|
|
|
(1,880,290 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(1,880,290 |
) |
|
$ |
4,999,865 |
|
|
$ |
|
|
|
$ |
3,119,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
|
|
|
|
|
Active Market |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
Liabilities |
|
(Level 1) |
|
|
Inputs (Level 2) |
|
|
Inputs (Level 3) |
|
|
Totals |
|
Futures Contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) Derivative Instruments and Hedging Activities
The Fund uses derivative instruments as part of its principal investment strategy to achieve its
investment objective. As of December 31, 2009, the Funds were invested in futures contracts.
At December 31, 2009, the fair values of derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Instruments |
|
Asset Derivatives* |
|
|
Liability Derivatives* |
|
|
Net Derivatives* |
|
Futures Contracts |
|
$ |
12,380,231 |
|
|
$ |
|
|
|
$ |
12,380,231 |
|
|
|
|
* |
|
Fair values of derivative instruments include variation margin receivable for futures contracts. |
79
The following is a summary of the realized and unrealized gains of the derivative instruments
utilized by the Fund, categorized by risk exposure, for the year ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
Realized Gain on |
|
|
Net Change in Unrealized Gain |
|
Derivative Instruments |
|
Derivative Instruments |
|
|
on Derivative Instruments |
|
Futures Contracts |
|
$ |
12,851,212 |
|
|
$ |
14,260,521 |
|
At December 31, 2008, the fair values of derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Instruments |
|
Asset Derivatives* |
|
|
Liability Derivatives* |
|
|
Net Derivatives* |
|
Futures Contracts |
|
$ |
(1,880,290 |
) |
|
$ |
|
|
|
$ |
(1,880,290 |
) |
|
|
|
* |
|
Fair values of derivative instruments include variation margin receivable/payable for futures
contracts. |
The following is a summary of the realized and unrealized losses of the derivative instruments
utilized by the Fund, categorized by risk exposure, for the year ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
Realized Loss on |
|
|
Net Change in Unrealized Gain |
|
Derivative Instruments |
|
Derivative Instruments |
|
|
on Derivative Instruments |
|
Futures Contracts |
|
$ |
(5,219,696 |
) |
|
$ |
(1,880,290 |
) |
(6) Financial Instrument Risk
In the normal course of its business, the Fund is party to financial instruments with off-balance
sheet risk. The term off-balance sheet risk refers to an unrecorded potential liability that,
even though it does not appear on the balance sheet, may result in a future obligation or loss. The
financial instruments used by the Fund are commodity futures, whose values are based upon an
underlying asset and generally represent future commitments to have a reasonable possibility to be
settled in cash or through physical delivery. These instruments are traded on an exchange and are
standardized contracts.
Market risk is the potential for changes in the value of the financial instruments traded by the
Fund due to market changes, including fluctuations in commodity prices. In entering into these
contracts, there exists a market risk that such contracts may be significantly influenced by
conditions, resulting in such contracts being less valuable. If the markets should move against all
of the futures interest positions at the same time, and the Managing Owner was unable to offset
such positions, the Fund could experience substantial losses.
Credit risk is the possibility that a loss may occur due to the failure of an exchange
clearinghouse to perform according to the terms of a contract. Credit risk with respect to
exchange-traded instruments is reduced to the extent that an exchange or clearing organization acts
as counterparty to the transactions. The Funds risk of loss in the event of counterparty default
is typically limited to the amounts recognized in the statement of assets and liabilities and not
represented by the contract or notional amounts of the instruments.
The Fund and the Master Fund have not utilized, nor do they expect to utilize in the future,
special purpose entities to facilitate off-balance sheet financing arrangements and have no loan
guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered
into in the normal course of business.
80
(7) Share Purchases and Redemptions
(a) Purchases
Shares may be purchased from the Fund only by certain eligible financial institutions (Authorized
Participants) in one or more blocks of 50,000 Shares, called Baskets. The Fund will issue Shares
in Baskets only to Authorized Participants continuously as of noon, New York time, on the business
day immediately following the date on which a valid order to create a Basket is accepted by the
Fund, at the net asset value of 50,000 Shares as of the closing time of the NYSE Arca or the last
to close of the exchanges on which the Index Commodities are traded, whichever is later, on the
date that a valid order to create a Basket is accepted by the Fund.
(b) Redemptions
On any business day, an Authorized Participant may place an order with the Distributor to redeem
one or more Baskets. Redemption orders must be placed by 10:00 a.m., New York time. The day on
which the Distributor receives a valid redemption order is the redemption order date. The
redemption procedures allow only Authorized Participants to purchase and redeem Baskets. Individual
Shareholders may not redeem Shares directly from the Fund.
By placing a redemption order, an Authorized Participant agrees to deliver the Baskets to be
redeemed through DTCs book-entry system to the Fund not later than noon, New York time, on the
business day immediately following the redemption order date. By placing a redemption order, and
prior to receipt of the redemption distribution, an Authorized Participants DTC account will be
charged the non-refundable transaction fee due for the redemption order.
The redemption distribution from the Fund consists of the cash redemption amount. The cash
redemption amount is equal to the net asset value of the number of Basket(s) requested in the
Authorized Participants redemption order as of the closing time of the NYSE Arca or the last to
close of the exchanges on which the Index Commodities are traded, whichever is later, on the
redemption order date. The Fund will distribute the cash redemption amount at noon, New York time,
on the business day immediately following the redemption order date through DTC to the account of
the Authorized Participant as recorded on DTCs book entry system.
The redemption distribution due from the Fund is delivered to the Authorized Participant at noon,
New York time, on the business day immediately following the redemption order date if, by such time
on such business day immediately following the redemption order date, the Funds DTC account has
been credited with the Baskets to be redeemed. If the Funds DTC account has not been credited with
all of the Baskets to be redeemed by such time, the redemption distribution is delivered to the
extent of whole Baskets received. Any remainder of the redemption distribution is delivered on the
next business day to the extent of remaining whole Baskets received if the Administrator receives
the fee applicable to the extension of the redemption distribution date which the Managing Owner
may, from time to time, determine and the remaining Baskets to be redeemed are credited to the
Funds DTC account by noon, New York time, on such next business day. Any further outstanding
amount of the redemption order shall be canceled. The Administrator is also authorized to deliver
the redemption distribution notwithstanding that the Baskets to be redeemed are not credited to the
Funds DTC account by noon, New York time, on the business day immediately following the redemption
order date if the Authorized Participant has collateralized its obligation to deliver the Baskets
through DTCs book entry system on such terms as the Administrator and the Managing Owner may from
time to time agree upon.
The Distributor may, in its discretion, and will when directed by the Managing Owner, suspend the
right of redemption or postpone the redemption settlement date, (1) for any period during which an
emergency exists as a result of which the redemption distribution is not reasonably practicable, or
(2) for such other period as the Managing Owner determines to be necessary for the protection of
the Shareholders. In addition, the Distributor will reject a redemption order if the order is not
in proper form as described in the Participant Agreement or if the fulfillment of the order, in the
opinion of its counsel, might be unlawful. Any such postponement, suspension or rejection could
adversely affect a redeeming Authorized Participant. For example, the resulting delay may adversely
affect the value of the Authorized Participants redemption proceeds if the net asset value of the
Fund declines during the period of the delay. Under the Distribution Services Agreement, the
Managing Owner and
the Distributor may disclaim any liability for any loss or damage that may result from any such
suspension or postponement.
81
(8) Operating Expenses
(a) Management Fee
The Master Fund pays the Managing Owner a management fee (the Management Fee) monthly in arrears,
in an amount equal to 0.85% per annum of the net asset value of the Master Fund. No separate
management fee will be paid by the Fund. The Management Fee will be paid in consideration of the
use of the license for the Thomson Reuters Continuous Commodity Index held by GreenHaven, LLC, a
Georgia limited liability company formed in August 2005, and its subsidiary GreenHaven Commodity
Services, LLC, as well as for commodity futures trading advisory services. The management fee
incurred for the years ended December 31, 2009 and 2008 was $1,018,526 and $188,888, respectively.
The management fee was charged to the Fund and paid to the Managing Owner. The Fund did not
commence investment operations until January 23, 2008 so there were no management fees incurred for
the year ended December 31, 2007.
(b) Organization and Offering Expenses
Expenses incurred in connection with organizing the Fund and the Master Fund and the offering of
the Shares will be paid by GreenHaven, LLC. GreenHaven, LLC is the sole member of the Managing
Owner. The Fund and the Master Fund do not have an obligation to reimburse GreenHaven, LLC or its
affiliates for organization and offering expenses paid on their behalf.
(c) Brokerage Commissions and Fees
The Master Fund pays to the Commodity Broker all brokerage commissions, including applicable
exchange fees, give-up fees, pit brokerage fees and other transaction related fees and expenses
charged in connection with trading activities. On average, total charges paid to the Commodity
Broker are expected to be less than $20 per round-turn trade. A round-turn trade is a buy and sell
pair. The Managing Owner does not expect brokerage commissions and fees to exceed 0.24% of the net
asset value of the Master Fund in any year. Brokerage commissions and fees will be charged against
the Master Funds Assets on a per transaction basis on the date of the transaction. The brokerage
commissions and trading fees incurred for the years ended December 31, 2009 and 2008 were $287,584
and $54,945, respectively. The Fund did not commence investment operations until January 23, 2008
so there were no brokerage commissions or fees incurred for the year ended December 31, 2007. These
fees were charged to the Fund and paid to the Commodity Broker. Brokerage commissions and trading
fees are typically charged by the Commodity Broker to the Fund on a half-turn basis, i.e. half is
charged when a contract is opened and half is charged when a position is closed. Currently, the
Fund accrues monthly an amount equal to 0.02% of the net asset value of the Master Fund.
(d) Extraordinary Fees and Expenses
The Master Fund will pay all the extraordinary fees and expenses, if any, of the Fund and the
Master Fund. Such extraordinary fees and expenses, by their nature, are unpredictable in terms of
timing and amount. There have been no extraordinary fees and expenses since the Fund commenced
investment operations on January 23, 2008.
(e) Routine Operational, Administrative and Other Ordinary Expenses
During the Continuous Offering Period the Managing Owner pays all of the routine operational,
administrative and other ordinary expenses of the Index Fund and the Master Fund, including, but
not limited to, accounting and computer services, the fees and expenses of the Trustee, legal fees
and expenses, tax preparation expenses, filing fees, fees in connection with fund administration,
and printing, mailing and duplication costs.
(9) Termination
The term of the Fund is perpetual, unless terminated in certain circumstances as set forth below.
The Fund will dissolve at any time upon the happening of any of the following events:
82
|
(i) |
|
The filing of a certificate of dissolution or revocation of the Managing
Owners charter (and the expiration of ninety (90) days after the date of notice to the
Managing Owner of revocation without a reinstatement of its charter) or upon the
withdrawal, removal, adjudication or admission of bankruptcy or insolvency of the
Managing Owner, or an event of withdrawal unless (i) at the time there is at least one
remaining Managing Owner and that remaining Managing Owner carries on the business of
the Fund or (ii) within ninety (90) days of such event of withdrawal all the remaining
Shareholders agree in writing to continue the business of the Fund and to select,
effective as of the date of such event, one or more successor Managing Owners. If the
Fund is terminated as the result of an event of withdrawal and a failure of all
remaining Shareholders to continue the business of the Fund and to appoint a successor
Managing Owner as provided above within one hundred and twenty (120) days of such event
of withdrawal, Shareholders holding Shares representing at least seventy-five percent
(75%) of the net asset value (not including Shares held by the Managing Owner and its
affiliates) may elect to continue the business of the Fund by forming a new statutory
trust, or reconstituted trust, on the same terms and provisions as set forth in the
Trust Declaration. Any such election must also provide for the election of a Managing
Owner to the reconstituted trust. If such an election is made, all Shareholders of the
Fund shall be bound thereby and continue as Shareholders of the reconstituted trust. |
|
|
(ii) |
|
The occurrence of any event which would make unlawful the continued existence
of the Fund. |
|
|
(iii) |
|
In the event of the suspension, revocation or termination of the Managing
Owners registration as a commodity pool operator, or membership as a commodity pool
operator with the NFA (if, in either case, such registration is required at such time
unless at the time there is at least one remaining Managing Owner whose registration or
membership has not been suspended, revoked or terminated). |
|
|
(iv) |
|
The Fund becomes insolvent or bankrupt. |
|
|
(v) |
|
The Shareholders holding Shares representing at least seventy-five percent
(75%) of the Net Asset Value (which excludes the Shares of the Managing Owner) vote to
dissolve the Fund, notice of which is sent to the Managing Owner not less than ninety
(90) Business Days prior to the effective date of termination. |
|
|
(vi) |
|
The determination of the Managing Owner that the aggregate net assets of the
Fund in relation to the operating expenses of the Fund make it unreasonable or
imprudent to continue the business of the Fund. |
|
|
(vii) |
|
The Fund becoming required to be registered as an investment company under the
Investment Company Act of 1940. |
DTC is unable or unwilling to continue to perform its functions, and a comparable replacement is
unavailable.
(10) Profit and Loss Allocations and Distributions
The Managing Owner and the Shareholders share in any profits and losses of the Fund attributable to
the Fund in proportion to the percentage interest owned by each. Distributions may be made at the
sole discretion of the Managing Owner on a pro rata basis in accordance with the respective capital
balances of the shareholders.
(11) Net Asset Value and Financial Highlights
The Fund is presenting the following net asset value and financial highlights related to investment
performance and operations for a Share outstanding for the periods ended December 31, 2009 and
December 31, 2008. The net investment income and total expense ratios have been annualized. The
total return is based on the change in net asset value of the Shares during the period. An
individual investors return and ratios may vary based on the timing of capital transactions.
83
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, 2009 |
|
|
December 31, 2008 (iii) |
|
|
|
|
|
|
|
|
|
|
Net Asset Value |
|
|
|
|
|
|
|
|
Net asset value per Limited Share, beginning of period |
|
$ |
21.92 |
|
|
$ |
30.00 |
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain (loss) from investments and
futures contracts |
|
|
4.53 |
|
|
|
(8.20 |
) |
Net investment income (loss) |
|
|
(0.23 |
) |
|
|
0.12 |
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets from operations |
|
|
4.30 |
|
|
|
(8.08 |
) |
|
|
|
|
|
|
|
Net asset value per Limited Share, end of period |
|
|
26.22 |
|
|
|
21.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value
per Limited Share, beginning of period |
|
|
21.92 |
|
|
|
30.00 |
|
|
|
|
|
|
|
|
Market value per Limted Share, end of period |
|
$ |
26.32 |
|
|
$ |
21.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio to average net assets (i) |
|
|
|
|
|
|
|
|
Net investment income (loss) |
|
|
(0.98 |
)% |
|
|
0.43 |
% |
Total expenses |
|
|
1.08 |
% |
|
|
1.10 |
% |
|
|
|
|
|
|
|
|
|
Total Return, at net asset value (ii) |
|
|
19.62 |
% |
|
|
(26.90 |
)% (iv) |
|
|
|
|
|
|
|
Total Return, at market value (ii) |
|
|
20.07 |
% |
|
|
(26.90 |
)% (iv) |
|
|
|
|
|
|
|
|
|
|
(i) |
|
Percentages are annualized. |
|
(ii) |
|
Percentages are not annualized. |
|
(iii) |
|
Reflects operating results since January 23, 2008, the date of commencement of investment
operations. |
|
(iv) |
|
Percentages are calculated for the period January 23, 2008 to December 31, 2008 based on
initial offering price upon commencement of investment operations of $30.00. |
(12) Subsequent Events
For purposes of disclosure in the financial statements, the Fund has evaluated events occurring
between the end of its fiscal year, December 31, 2009 and when the financial statements were
issued. This evaluation did not result in any subsequent events that necessitated disclosures
and/or adjustments.
84
This page is intentionally blank.
85
This
page is intentionally left blank.
86
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Member of
GreenHaven Commodity Services, LLC
We have audited the accompanying statements of financial condition of GreenHaven Commodity
Services, (the Company) as of December 31, 2009 and 2008 and the related statements of income and
expenses, changes in members capital (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of GreenHaven Commodity Services, LLC as of December 31, 2009 and
2008, and the results of its operations and cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Atlanta, Georgia
April 29, 2010
87
GREENHAVEN COMMODITY SERVICES, LLC
STATEMENTS OF FINANCIAL CONDITION
As of December 31, 2009 and December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
as of |
|
|
as of |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
5,305 |
|
|
$ |
6,583 |
|
Management Fee Receivable |
|
|
149,819 |
|
|
|
11,075 |
|
Receivable from Affiliate |
|
|
55,948 |
|
|
|
1,309 |
|
License |
|
|
|
|
|
|
46,400 |
|
Investment in GreenHaven Continuous Commodity Index Master Fund |
|
|
1,311 |
|
|
|
1,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
212,383 |
|
|
$ |
66,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Members Capital |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
389,218 |
|
|
$ |
201,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
389,218 |
|
|
|
201,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members capital (deficit): |
|
|
|
|
|
|
|
|
Members deficit |
|
|
(176,835 |
) |
|
|
(131,612 |
) |
Subscription receivable GreenHaven LLC |
|
|
|
|
|
|
(3,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total members deficit |
|
|
(176,835 |
) |
|
|
(134,612 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and members deficit |
|
$ |
212,383 |
|
|
$ |
66,463 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
88
GREENHAVEN COMMODITY SERVICES, LLC
STATEMENTS OF INCOME AND EXPENSE
For the Years ended December 31, 2009 and December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
Year ended |
|
|
Year ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Income: |
|
|
|
|
|
|
|
|
Management fees |
|
$ |
1,018,527 |
|
|
$ |
188,887 |
|
Interest income |
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
1,018,561 |
|
|
|
188,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense: |
|
|
|
|
|
|
|
|
Audit fees and tax services |
|
|
309,028 |
|
|
|
77,118 |
|
Administrator fees |
|
|
191,326 |
|
|
|
124,629 |
|
License expense |
|
|
172,455 |
|
|
|
42,463 |
|
Legal fees |
|
|
130,898 |
|
|
|
18,937 |
|
Marketing costs |
|
|
109,358 |
|
|
|
39,854 |
|
Regulatory fees |
|
|
78,400 |
|
|
|
|
|
Printing |
|
|
32,358 |
|
|
|
6,076 |
|
Exchange fees |
|
|
17,000 |
|
|
|
19,057 |
|
Other |
|
|
23,176 |
|
|
|
15,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,063,999 |
|
|
|
343,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss)on investment |
|
|
215 |
|
|
|
(404 |
) |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(45,223 |
) |
|
$ |
(154,858 |
) |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
89
GREENHAVEN COMMODITY SERVICES, LLC
STATEMENTS OF CHANGES IN MEMBERS CAPITAL (DEFICIT)
For the Years Ended December 31, 2009 and December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Capital |
|
|
Subscription |
|
|
|
|
|
|
(Deficit) |
|
|
Receivable |
|
|
Total |
|
December 31, 2007 |
|
$ |
5,000 |
|
|
$ |
(4,500 |
) |
|
$ |
500 |
|
Capital Contribution in 2008 |
|
|
18,246 |
|
|
|
1,500 |
|
|
|
19,746 |
|
Net Loss 2008 |
|
|
(154,858 |
) |
|
|
|
|
|
|
(154,858 |
) |
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
(131,612 |
) |
|
|
(3,000 |
) |
|
|
(134,612 |
) |
Capital Contribution in 2009 |
|
|
|
|
|
|
3,000 |
|
|
|
3,000 |
|
Net Loss 2009 |
|
|
(45,223 |
) |
|
|
|
|
|
|
(45,223 |
) |
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
$ |
(176,835 |
) |
|
$ |
|
|
|
$ |
(176,835 |
) |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements
90
GREENHAVEN COMMODITY SERVICES, LLC
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2009 and December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(45,223 |
) |
|
$ |
(154,858 |
) |
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Unrealized loss (gain) on investment |
|
|
(215 |
) |
|
|
404 |
|
Amortization of License Fee |
|
|
46,400 |
|
|
|
42,463 |
|
Receivable Management Fee |
|
|
(138,744 |
) |
|
|
(11,075 |
) |
Receivable from affiliate |
|
|
(54,639 |
) |
|
|
(1,309 |
) |
Purchase of License Asset |
|
|
|
|
|
|
(70,617 |
) |
Accounts Payable |
|
|
188,143 |
|
|
|
201,075 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
(4,278 |
) |
|
|
6,083 |
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Investment in GCC Master Fund |
|
|
|
|
|
|
(1,500 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
|
|
|
|
(1,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Capital contribution from GreenHaven LLC |
|
|
3,000 |
|
|
|
1,500 |
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
3,000 |
|
|
|
1,500 |
|
|
|
|
|
|
|
|
Increase (decrease) in cash |
|
|
(1,278 |
) |
|
|
6,083 |
|
Cash held at beginning of period |
|
|
6,583 |
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash held at end of period |
|
$ |
5,305 |
|
|
$ |
6,583 |
|
|
|
|
|
|
|
|
Non-cash Financing Activity
GreenHaven, LLC also made a non-cash contribution of $18,246 during 2008 equal to the amortized value of
a license from Thomson Reuters.
The accompanying notes are an integral part of these statements.
91
Notes to Financial Statements
GreenHaven Commodity Services, LLC
(1) Organization
GreenHaven Commodity Services, LLC (the Company, or the Managing Owner), a Delaware limited
liability company, was formed on October 18, 2006, and is a wholly owned subsidiary of GreenHaven,
LLC. The Company is registered as a commodity pool operator and commodity trading advisor with the
Commodity Futures Trading Commission and is a member of the National Futures Association. The
Company serves as the managing owner of GreenHaven Continuous Commodity Index Fund (the Index
Fund) and GreenHaven Continuous Commodity Index Master Fund (the Master Fund) and is also the
commodity pool operator and commodity trading advisor for the Index Fund and the Master Fund
(collectively the Funds).
The Index Fund is organized as a Delaware statutory trust that issues units that may be purchased
or sold on the New York Stock Exchange ARCA. Shares may be purchased or redeemed from the Fund only
in one or more blocks of 50,000 Shares, called a Basket. The Index Fund invests the proceeds of its
offering of Shares in the Master Fund. The Master Fund is organized as a Delaware statutory trust
and actively invests in exchange-traded futures on the commodities comprising the Continuous
Commodity Total Return Index (CCI-TR), or the Index, with a view to tracking the performance of the
Index over time. The sponsor of the Index Fund is the Managing Owner, which has an exclusive
license expiring October 1, 2010 with Thomson Reuters America, LLC which developed, owns and
operates the Index. The Index is a trademark of Thomson Reuters America, LLC.
The Index Fund is not a mutual fund registered under the Investment Company Act of 1940, as
amended, and is not subject to regulation under such Act.
(2) Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period of the financial statements. Actual results could differ from
those estimates.
(b) Revenue Recognition
The Managing Owner recognizes revenue in the period earned under the terms of its management
agreement with the Funds. This agreement provides for fees based upon a percentage of the daily
average net asset value of the Funds. Under the Funds respective Agreements, the Managing Owner
is responsible for investing the assets of the Funds in accordance with the objectives and policies
of the Funds. In addition, the Company has arranged for one or more third parties to provide
administrative, custody, accounting, transfer agency and other necessary services to the Funds. For
these services, the Funds are contractually obligated to pay the Company a management fee, which is
paid monthly, based on the average daily net assets of the Funds. The GreenHaven Continuous
Commodity Index Master Fund pays a fee equal to 0.85% per annum on average daily net assets of the
Funds. As a result the Management fee is accrued daily to reflect the monthly payment of the
management fee to the Managing Owner.
The Funds pay for all brokerage expenses. Other expenses, including licensing fees for the use of
intellectual property, registration or other fees paid to the SEC, the Financial Industry
Regulatory Authority (FINRA) formerly the National Association of Securities Dealers, or any
other regulatory agency in connection with the offer and sale of subsequent units after their
initial registration and all legal, accounting, printing and other expenses associated therewith
are paid by the Managing Owner. The Managing Owner also pays the fees and expenses of its
independent directors. These policies have been in place since the Managing Owner assumed these
expenses from the Fund retroactively from commencement of investment operations on January 23,
2008.
92
(c) Cash and cash equivalents
The Company defines cash and cash equivalents to be highly liquid investments, with original
maturities of three months or less when acquired.
(d) Income Taxes
The Company accounts for uncertainty in income taxes pursuant to the applicable accounting
standard, which provides measurement, presentation and disclosure guidance related to uncertain tax
positions. The guidance addresses how tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements. Under this topic, the Company must recognize
the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities based on the technical merits
of the position. The tax benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate resolution. The Companys reassessment of its tax positions did not have a
material impact on the Companys financial condition, results of operations or liquidity.
The Company is classified as a partnership, for U.S. federal income tax purposes. Accordingly, the
Company is not subject to U.S. federal, state, or local income taxes, therefore no provision for
federal, state, and local income taxes has been made in the accompanying financial statements, as
owners of the Company are individually liable for income taxes, if any, on their allocable share of
the Companys income, gain, loss, deductions and other items.
(e) License Asset The Company holds an exclusive license from Thomson Reuters America, LLC
(Reuters) that allows the Funds to track the Continuous Commodity Index (CCI) and pays certain
fees to Reuters to maintain the license. Initially, these fees were paid in advance, capitalized at
cost, recognized as a License Asset on the balance sheet, and then ratably amortized to expense as
the time period of the license elapsed. The licensing agreement has been revised so that fees are
now paid monthly by the Company and directly expensed without being recognized on the balance sheet
before being expensed.
(3) Related Party Transactions
Since commencement of operations of the Funds, the Funds have paid the Company a management fee
equal to 0.85% per annum of the net asset value of the Master Fund in consideration of the use of
the Managing Owners revocable license to use the Thomson Reuters Continuous Commodity Index for
the provision of commodity futures trading advisory services.
On July 7, 2008, GreenHaven LLC, an affiliate of the Company, transferred ownership of the Reuters
exclusive license to the Managing Owner through an addendum to the original license agreement. This
transfer gave the right to use the revocable license to track the Reuters Continuous Commodity
Index to the Managing Owner. This agreement stipulated cash payments of $25,000 plus an amount
equal to 0.10% of assets under management as a fee payable to Reuters from the Managing Owner.
Expenses incurred in connection with the initial organizational costs of the Index Fund and the
Master Fund and the offering costs of the Shares were the responsibility of GreenHaven LLC prior
to the Funds commencement of operations on January 23rd, 2008. For the year ended
December 31, 2009, the Company expensed $198,941 related to the offering of shares, of which
$100,232 were legal fees, $20,309 were audit fees, and $78,400 were regulatory fees. For the year
ended December 31, 2008, GreenHaven LLC paid $149,239 related to the offering of shares. The
Funds are not required to reimburse GreenHaven LLC or its affiliates or the Company or its
affiliates for any such costs incurred for any related period
Upon inception of the Index Fund and the Master Fund, 50 General Units of each of the Index Fund
and the Master Fund were issued to GreenHaven Commodity Services LLC in exchange for a capital
contribution of $1,500 to the Index Fund and $1,500 to the Master Fund.
As of December 31, 2009 the Company had accumulated a deficit in members equity of $176,835,
comprised mainly of operating costs incurred since the commencement of Fund operations on January
23, 2008. For the year ended December 31, 2009 and 2008, the Company recorded $1,018,527 and
$188,857, respectively, in management fee revenue. At December 31,
2009 and 2008, the Company had receivables from GreenHaven LLC of $55,948 and $1,309, respectively.
93
(4) Contracts and Agreements
The Company is party to a marketing agent agreement with ALPS Distributors Inc. (ALPS) a Colorado
corporation, whereby ALPS provides certain marketing services for the Fund as outlined in the
agreement.
The Company is also party to a Fund Administrator agreement with the Bank of New York Mellon,
(BNYMellon) whereby BNYMellon acts as the Funds Transfer agent and Fund Accountant. The Managing
Owner, on behalf of the Fund and the Master Fund, has appointed BNYMellon as the administrator of
the Fund and the Master Fund and has entered into an Administration Agreement in connection
therewith.
Pursuant to the Administration Agreement, the Administrator performs or supervises the performance
of services necessary for the operation and administration of the Fund and the Master Fund (other
than making investment decisions), including net asset value calculations, accounting and other
fund administrative services.
The Company has entered into brokerage agreements on the Funds behalf with Morgan Stanley & Co.
Incorporated as the Commodity Broker (the Commodity Broker). Since the commencement of its
investment operations on January 23, 2008 the Fund has primarily invested in futures contracts
traded on regulated exchanges, in government securities, and in cash.
(5) Off-Balance Sheet Risks and Contingencies
The Funds engage in the trading of U.S. futures contracts (collectively derivatives). The Funds
are exposed to both market risk, the risk arising from changes in the market value of the
contracts; and credit risk, the risk of failure by another party to perform according to the terms
of a contract.
All of the contracts currently traded by the Funds are exchange-traded. The risks associated with
exchange-traded contracts are generally perceived to be less than those associated with
over-the-counter transactions since, in over-the-counter transactions; the Funds must rely solely
on the credit of their respective individual counterparties. However, in the future, if the Funds
were to enter into non-exchange traded contracts, they would be subject to the credit risk
associated with counterparty non-performance. The credit risk from counterparty non-performance
associated with such instruments is the net unrealized gain, if any. The Funds also have credit
risk since the primary counterparty to all domestic futures contracts is the exchange clearing
corporation. In addition, the Funds bear the risk of financial failure by the clearing broker.
The purchase and sale of futures and options on futures contracts require margin deposits with a
Futures Commission Merchant (FCM). Additional deposits may be necessary for any loss in contract
value. The Commodity Exchange Act requires an FCM to segregate all customer transactions and assets
from the FCMs proprietary activities. A customers cash and other property such as U.S. Treasury
Bills, deposited with an FCM are considered commingled with all other customer funds subject to the
FCMs segregation requirements. In the event of an FCMs insolvency, recovery may be limited to a
pro rata share of segregated funds available. It is possible that the recovered amount could be
less than the total of cash and other property deposited.
For derivatives, risks arise from changes in the market value of the contracts. Theoretically, the
Funds are exposed to market risk equal to the value of futures contracts purchased. The Companys
policy is to continuously monitor the Master Funds exposure to market and counterparty risk
through the use of a variety of financial, position and credit exposure reporting and control
procedures. In addition, the Company has a policy of reviewing the credit standing of each clearing
broker or counter- party with which it conducts business.
The financial instruments held by the Company are reported in the Statement of Financial Condition
at market or fair value, or at carrying amounts that approximate fair value, because of their
highly liquid nature and short-term maturities.
94
(6) Recently Issued Accounting Standards
In June 2009, the Financial Accounting Standards Board (FASB) issued new accounting requirements,
which made the FASB Accounting Standards Codification (Codification) the single source of
authoritative literature for U.S. accounting and reporting standards. The Codification is not meant
to change existing GAAP but rather provide a single source for all literature. The Company adopted
the standard during the year ended December 31, 2009, which required changing certain disclosures
in the financial statements to reflect Codification or Plain English references rather than
references to FASB Statements, Staff Positions or Emerging Issues Task Force Abstracts. The
adoption of this requirement is reflected in certain disclosures in the financial statements but
did not have an impact on the Companys financial position, results of operations, or cash flows.
During the year ended December 31, 2009, the Company adopted a new accounting standard which
establishes general standards of accounting and disclosure of events that occur after the balance
sheet date but before the financial statements are issued or available to be issued. The Company
has added disclosure in this Note 8 regarding which subsequent events have been evaluated.
The FASB has issued guidance allowing entities determining the fair value of a liability to use the
perspective of an investor that holds the related obligation as an asset. The guidance was
effective for interim and annual periods beginning after August 27, 2009 and applied to all fair
value measurements of liabilities. This accounting standards update did not have a material impact
on the Companys financial statements.
In June 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standard
Codification (ASC) 810.10. ASC 810.10 changes the approach to determining a variable interest
entitys primary beneficiary for consolidation purposes, and requires companies to more frequently
reassess whether they must consolidate variable interest entities. The application of ASC 810.10 is
required for fiscal years beginning after November 15, 2009 and interim periods within those fiscal
years, however, in February 2010, the FASB issued an Accounting Standards Update which defers the
effective date of ASC 810.10 for companies, such as the Company, that have an interest in certain
investment entities.
(7) Fair Value Measurements
The guidance for fair value measurements establishes the authoritative definition for fair value,
framework for measuring fair value and outlines the required disclosures regarding fair value
measurements. Fair value is the price that would be received to sell an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants at the measurement date. The Company uses
three
valuation inputs, as follows :
|
|
Level 1: Quoted market prices in active markets for identical assets or liabilities. |
|
|
|
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. |
|
|
|
Level 3: Unobservable inputs developed using the Companys estimates and assumptions, which
reflect those that market participants would use. |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk
associated with investing in those securities. A summary of the Companys assets and liabilities at
fair value as of December 31, 2009, classified according to the levels used to value them, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
Significant |
|
|
|
|
|
|
Quoted Prices |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
|
|
in Active |
|
|
Inputs (Level |
|
|
Inputs (Level |
|
|
|
|
Assets |
|
Market (Level 1) |
|
|
2) |
|
|
3) |
|
|
Totals |
|
General Units |
|
$ |
1,311 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,311 |
|
Total |
|
$ |
1,311 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,311 |
|
95
A summary of the Companys assets and liabilities at fair value as of December 31, 2008, classified
according to the levels used to value them, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
|
|
|
|
|
in Active |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
|
|
Market (Level |
|
|
Inputs (Level |
|
|
Inputs (Level |
|
|
|
|
Assets |
|
1) |
|
|
2) |
|
|
3) |
|
|
Totals |
|
General Units |
|
$ |
1,096 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,096 |
|
Total |
|
$ |
1,096 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,096 |
|
8) Subsequent Events
The Company has evaluated events subsequent to its fiscal year ended December 31, 2009 and through
April 29, 2010, the date these financial statements were available for issuance and determined that
no subsequent event disclosures are required.
96
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is intentionally left blank
STATEMENT OF ADDITIONAL INFORMATION
April 29, 2010
GREENHAVEN CONTINUOUS COMMODITY INDEX FUND
Shares of Beneficial Interest
This is a speculative investment which involves the risk of loss. Past performance is not
necessarily indicative of future results. See The Risks You Face beginning at page 1 in Part One.
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE DOCUMENT AND A STATEMENT OF ADDITIONAL INFORMATION.
THESE PARTS ARE BOUND TOGETHER, AND BOTH CONTAIN IMPORTANT INFORMATION. The Statement of Additional
Information should be read in conjunction with the Disclosure Document.
For information on how to obtain a Disclosure Document, please see page iii above.
GreenHaven Commodity Services LLC
Managing Owner
98
STATEMENT OF ADDITIONAL INFORMATION
April 29, 2010
GREENHAVEN CONTINUOUS COMMODITY INDEX FUND
Shares of Beneficial Interest
Table of Contents
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99
THE FUTURES MARKETS
Futures Contracts
Futures contracts are standardized contracts made on United States or foreign exchanges that call
for the future delivery of specified quantities of various agricultural and tropical commodities,
industrial commodities, currencies, financial instruments or metals at a specified time and place.
The contractual obligations, depending upon whether one is a buyer or a seller, may be satisfied
either by taking or making, as the case may be, physical delivery of an approved grade of commodity
or by making an offsetting sale or purchase of an equivalent but opposite futures contract on the
same, or mutually off-setting, exchange prior to the designated date of delivery. As an example of
an offsetting transaction where the physical commodity is not delivered, the contractual obligation
arising from the sale of one contract of December 2010 wheat on a commodity exchange may be
fulfilled at any time before delivery of the commodity is required by the purchase of one contract
of December 2010 wheat on the same exchange. The difference between the price at which the futures
contract is sold or purchased and the price paid for the offsetting purchase or sale, after
allowance for brokerage commissions, constitutes the profit or loss to the trader. Certain futures
contracts, such as those for stock or other financial or economic indices approved by the CFTC or
Eurodollar contracts, settle in cash (irrespective of whether any attempt is made to offset such
contracts) rather than delivery of any physical commodity.
Hedgers and Speculators
The two broad classes of persons who trade futures interest contracts are hedgers and
speculators. Commercial interests, including farmers, that market or process commodities, and
financial institutions that market or deal in commodities, including interest rate sensitive
instruments, foreign currencies and stocks, and which are exposed to currency, interest rate and
stock market risks, may use the futures markets for hedging. Hedging is a protective procedure
designed to minimize losses that may occur because of price fluctuations occurring, for example,
between the time a processor makes a contract to buy or sell a raw or processed commodity at a
certain price and the time he must perform the contract. The futures markets enable the hedger to
shift the risk of price fluctuations to the speculator. The speculator risks his capital with the
hope of making profits from price fluctuations in futures contracts. Speculators rarely take
delivery of commodities, but rather close out their positions by entering into offsetting purchases
or sales of futures contracts. Since the speculator may take either a long or short position in the
futures markets, it is possible for him to make profits or incur losses regardless of whether
prices go up or down.
Futures Exchanges
Futures exchanges provide centralized market facilities for trading futures contracts and options
(but not forward contracts). Members of, and trades executed on, a particular exchange are subject
to the rules of that exchange. Among the principal exchanges in the United States are the Chicago
Board of Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange, and the New York
Board of Trade.
Each futures exchange in the United States has an associated clearing house. Once trades between
members of an exchange have been confirmed, the clearing house becomes substituted for each buyer
and each seller of contracts traded on the exchange and, in effect, becomes the other party to each
traders open position in the market. Thereafter, each party to a trade looks only to the clearing
house for performance. The clearing house generally establishes some sort of security or guarantee
fund to which all clearing members of the exchange must contribute; this fund acts as an emergency
buffer that enables the clearing house, at least to a large degree, to meet its obligations with
regard to the other side of an insolvent clearing members contracts. Furthermore, clearing
houses require margin deposits and continuously mark positions to market to provide some assurance
that their members will be able to fulfill their contractual obligations. Thus, a central function
of the clearing houses is to ensure the integrity of trades, and members effecting futures
transactions on an organized exchange need not worry about the solvency of the party on the
opposite side of the trade; their only remaining concerns are the respective solvencies of their
commodity broker and the clearing house. The clearing house guarantee
of performance on open positions does not run to customers. If a member firm goes bankrupt,
customers could lose money.
100
Speculative Position Limits
The CFTC and U.S. futures exchanges have established limits, referred to as speculative position
limits or position limits, on the maximum net long or net short speculative position that any
person or group of persons (other than a hedger) may hold, own or control in certain futures
contracts. Among the purposes of speculative position limits is the desire to prevent a corner on
a market or undue influence on prices by any single trader or group of traders. The CFTC has
jurisdiction to establish position limits with respect to all commodities and has established
position limits for all agricultural commodities. In addition, the CFTC requires each United States
exchange to submit position limits for all commodities traded on such exchange for approval by the
CFTC. Position limits do not apply to forward contract trading.
Daily Limits
Most U.S. futures exchanges (but generally not foreign exchanges or banks or dealers in the case of
forward contracts) limit the amount of fluctuation in futures interests contract prices during a
single trading day by regulation. These regulations specify what are referred to as daily price
fluctuation limits or more commonly daily limits. The daily limits establish the maximum amount
that the price of a futures interests contract may vary either up or down from the previous days
settlement price. Once the daily limit has been reached in a particular futures interest, no trades
may be made at a price beyond the limit. See The Risks You May Face Possible Illiquid Markets
May Exacerbate Losses.
Regulations
Futures exchanges in the United States are subject to regulation under the Commodity Exchange Act,
or CEAct, by the CFTC, the governmental agency having responsibility for regulation of futures
exchanges and trading on those exchanges.
The CEAct and the CFTC also regulate the activities of commodity trading advisors and commodity
pool operators and the CFTC has adopted regulations with respect to certain of such persons
activities. Pursuant to its authority, the CFTC requires a commodity pool operator (such as the
Managing Owner) to keep accurate, current and orderly records with respect to each pool it
operates. The CFTC may suspend the registration of a commodity pool operator if the CFTC finds that
the operator has violated the CEAct or regulations thereunder and in certain other circumstances.
Suspension, restriction or termination of the Managing Owners registration as a commodity pool
operator would prevent it, until such time (if any) as such registration were to be reinstated,
from managing, and might result in the termination of, the Fund and the Master Fund. The CEAct
gives the CFTC similar authority with respect to the activities of commodity trading advisors, such
as the Managing Owner. If the registration of a Managing Owner as a commodity trading advisor were
to be terminated, restricted or suspended, the Managing Owner would be unable, until such time (if
any) as such registration were to be reinstated, to render trading advice to the Fund and the
Master Fund. The Fund and the Master Fund themselves are not registered with the CFTC in any
capacity.
The CEAct requires all futures commission merchants, such as the Commodity Broker, to meet and
maintain specified fitness and financial requirements, segregate customer funds from proprietary
funds and account separately for all customers funds and positions, and to maintain specified book
and records open to inspection by the staff of the CFTC.
The CEAct also gives the states certain powers to enforce its provisions and the regulations of the
CFTC.
Shareholders are afforded certain rights for reparations under the CEAct. Shareholders may also be
able to maintain a private right of action for certain violations of the CEAct. The CFTC has
adopted rules implementing the reparation provisions of the CEAct which provide that any person may
file a complaint for a reparations award with the CFTC for violation of the CEAct against a floor
broker, futures commission merchant,
introducing broker, commodity trading advisor, commodity pool operator, and their respective
associated persons.
101
Pursuant to authority in the CEAct, the NFA has been formed and registered with the CFTC as a
registered futures association. At the present time, the NFA is the only non-exchange
self-regulatory organization for commodities professionals. NFA members are subject to NFA
standards relating to fair trade practices, financial condition, and consumer protection. As the
self-regulatory body of the commodities industry, the NFA promulgates rules governing the conduct
of commodity professionals and disciplines those professionals who do not comply with such
standards. The CFTC has delegated to the NFA responsibility for the registration of commodity
trading advisors, commodity pool operators, futures commission merchants, introducing brokers and
their respective associated persons and floor brokers. The Commodity Broker and the Managing Owner
are members of the NFA (the Fund and the Master Fund themselves are not required to become members
of the NFA).
Margin
Initial or original margin is the minimum amount of funds that must be deposited by a futures
trader with his commodity broker in order to initiate futures trading or to maintain an open
position in futures contracts. Maintenance margin is the amount (generally less than initial
margin) to which a traders account may decline before he must deliver additional margin. A margin
deposit is like a cash performance bond. It helps assure the futures traders performance of the
futures interests which contracts he purchases or sells. Futures interests are customarily bought
and sold on margins that represent a very small percentage (ranging upward from less than 2%) of
the purchase price of the underlying commodity being traded. Because of such low margins, price
fluctuations occurring in the futures markets may create profits and losses that are greater, in
relation to the amount invested, than are customary in other forms of investment or speculation.
The minimum amount of margin required in connection with a particular futures interests contract is
set from time-to-time by the exchange on which such contract is traded, and may be modified from
time-to-time by the exchange during the term of the contract.
Brokerage firms carrying accounts for traders in futures contracts may not accept lower, and
generally require higher, amounts of margin as a matter of policy in order to afford further
protection for themselves.
Margin requirements are computed each day by a commodity broker. When the market value of a
particular open futures interests contract position changes to a point where the margin on deposit
does not satisfy maintenance margin requirements, a margin call is made by the commodity broker. If
the margin call is not met within a reasonable time, the broker may close out the Master Funds
position. With respect to the Managing Owners trading, only the Managing Owner, and not the Fund
or its Shareholders personally, will be subject to margin calls.
102