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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File Number 333-8869
KENMAR GLOBAL TRUST
(Exact name of registrant as specified in its charter)
Delaware 06-6429854
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Two American Lane, P.O. Box 5150, Greenwich, Connecticut 06831-8150
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (203) 861-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Beneficial Interest
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
None of the voting securities of the registrant are held by non-affiliates of
the registrant.
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PART I
Item 1. Business
(a) General Development of Business:
Kenmar Global Trust (the "Trust") is a Delaware business trust that operates as
a commodity investment pool. The Trust was formed on July 17, 1996 and commenced
trading on May 22, 1997. The Trust maintains its principal office at Two
American Lane, P.O. Box 5150, Greenwich, Connecticut 06831-8150, with a
telephone number of (203) 861-1000. The proceeds of the offering of the Units
are used by the Trust to engage in the speculative trading on futures, forward,
options and related markets through allocating such proceeds to multiple
commodity trading advisors (the "Advisors"). The assets of the Trust are
deposited with commodity brokers and interbank dealers (collectively, the
"Clearing Brokers") in trading accounts established by the Trust for the
Advisors and are used by the Trust as margin to engage in trading.
Units of beneficial interest are offered for sale as of the last day of each
month at the then-current Net Asset Value per Unit. The minimum investment is 50
Units (or, if less, $5,000), except for (i) trustees or custodians of eligible
employee benefit plans and individual retirement accounts and (ii) Unitholders
subscribing for additional Units, where the minimum investment is 20 Units (or,
if less, $2,000). Investors receive a Prospectus that sets forth the material
terms of the investment. The Prospectus is updated every nine (9) months or upon
any material change (whichever is sooner), as required by the Regulations
promulgated under the Commodity Exchange Act, as amended (the "CEAct"), and
filed with the National Futures Association (the "NFA") and the Commodity
Futures Trading Commission (the "CFTC") in compliance with its Regulations.
The Trust's managing owner is Kenmar Advisory Corp. ("Kenmar"), a corporation
originally organized as a New York corporation in September 1983 and reorganized
as a Connecticut corporation on January 1, 1996. Kenmar is owned equally and
indirectly by Kenneth A. Shewer and Marc S. Goodman, the sole directors of
Kenmar.
The Trust itself does not have any employees. Rather, Kenmar employs 38 persons
(as of March 15, 1998) and provides the Trust with the services of research,
client support (marketing) and management information systems and analysis
personnel to conduct its operational activities.
The Trust is managed by Kenmar Advisory Corp. Kenmar: (i) selects the Trust's
Clearing Brokers and Selling Agents and selects and monitors the Advisors; (ii)
allocates and/or reallocates Trust assets among the Advisors; (iii) determines
if an Advisor should be removed or replaced; (iv) negotiates advisory fees; and
(v) performs such other services as Kenmar believes that the Trust may from time
to time require.
(b) Financial Information about Industry Segments:
The Trust's business constitutes only one segment for financial reporting
purposes, i.e., a commodity investment pool.
(c) Narrative Description of Business:
General
Kenmar believes that the most effective means of controlling the risks of the
Trust's futures, forward and options trading is through a diversified portfolio
of Advisors. An important part of this strategy focuses on controlling risk by
combining Advisors who employ diverse trading methodologies -- such as
technical, fundamental, systematic, trend-following, discretionary or
mathematical -- and who exhibit diverse performance characteristics. The
objective of this strategy is to construct a portfolio of Advisors whose
combined performance best meets the investment aim of the Trust to achieve
superior returns within appropriately defined parameters of risk.
The process of selecting Advisors is an ongoing one--Kenmar continuously
analyzes qualitatively and quantitatively the
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performance and trading characteristics of the current and prospective Advisors
in an effort to determine which Advisors are best suited to Kenmar's perception
of the current market environment. Based upon such continuing analysis, Kenmar
will reallocate assets among the Advisors or change the portfolio of Advisors
when Kenmar's perception of the trading environment or an Advisor's individual
performance indicates to Kenmar that such change or changes are appropriate.
Kenmar believes that its ability to manage successfully the risks of futures and
related investments is dependent upon a willingness to act decisively and a
management style that identifies shifting market trends. Therefore, when
Kenmar's perception of market conditions and/or individual Advisor performance
suggests that an alternative trading style or methodology might be better suited
to Kenmar's perception of the current market environment, Kenmar may alter the
portfolio of Advisors or the allocation of assets among the Advisors without
prior notice to, or the approval of, the Unitholders.
Advisor Summaries
Set forth below is a brief description of the portfolio of Advisors trading for
the Trust as of March 15, 1998.
Chesapeake Capital Corporation
Chesapeake Capital Corporation relies primarily on technical analysis, using
multiple systems and timeframes. The trading methodologies employed by
Chesapeake Capital Corporation are based on programs analyzing a large number of
interrelated mathematical and statistical formulas and techniques which are
quantitative and proprietary in nature. In addition to such mathematical
evaluations, Chesapeake Capital Corporation employs a technique of technical
analysis generally known as "charting" in order to attempt to determine optimal
support and resistance levels and entry and exit points in the various markets.
Chesapeake Capital Corporation also makes extensive use of internally-generated
market information, which includes, but is not limited to, price volatility,
open interest, daily price action, volume and market psychology or sentiment.
The profitability of Chesapeake Capital Corporation's trading programs, traded
pursuant to technical analysis emphasizing mathematical and charting approaches,
will depend upon the occurrence in the future, as in the past, of major trends
in some markets. Chesapeake Capital Corporation trades its Diversified Trading
Program on behalf of the Trust. The Diversified Trading Program emphasizes a
maximum range of diversification, with a global portfolio of futures, forward
and cash markets which includes, but is not limited to, agricultural products,
metals, currencies, financial instruments, and stock, financial and economic
indices.
Dreiss Research Corporation
Dreiss Research Corporation utilizes a trend-following system, which is
technical in nature and ignores news, weather, politics and other fundamental
factors except as they are reflected in the markets.
The technical basis for the trading method is the fractal decomposition of
weekly price patterns. This analysis identifies turning points for constructing
trend lines and determining support and resistance, which are then combined in a
system which generates specific trading signals. Signals are then screened by a
unique Choppiness Index which may then be used to adjust the proximity of entry
and exit signals. Dreiss Research Corporation trades a diversified portfolio of
futures contracts representing most major commodity groups (i.e., agriculture,
currencies, energy, equity indexes, interest rates, livestock, metals and
softs).
Hyman Beck & Company, Inc.
Hyman Beck & Company, Inc. relies primarily on technical analysis. The trading
methodologies employed by Hyman Beck & Company, Inc. are based on programs
analyzing a large number of interrelated mathematical and statistical formulas
and techniques which are quantitative and proprietary in nature. Hyman Beck &
Company, Inc. trades its Global Portfolio on behalf of the Trust, relying on
long-term, technical trend-following analysis. The Global Portfolio trades a
portfolio of over 30 futures and forward markets worldwide with a concentration
in world interest rate and other financial markets.
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Willowbridge Associates Inc.
Willowbridge Associates Inc. utilizes its XLIM Trading Approach on behalf of the
Trust. The XLIM Trading Approach is traded on a discretionary basis by Philip L.
Yang. Trading decisions are based primarily on Mr. Yang's analysis of technical
factors, fundamentals and market action. The XLIM Trading Approach trades are
selected from a wide variety of futures contracts, forwards, spot and options
contracts on United States and international markets, including but not limited
to, financial instruments, currencies, precious and base metals and agricultural
commodities. Mr. Yang reserves the right to change the portfolio composition of
the XLIM Trading Approach.
Witter & Lester, Inc.
Witter & Lester, Inc. trades its Redstone Program on behalf of the Trust,
trading only the S&P 500 Stock Index futures contract. The Redstone Program
stems from a research effort begun in 1993 to automate the interpretation of
traditional Witter & Lester, Inc. market analysis. Witter & Lester, Inc.'s stock
market model is based on pattern recognition of the following nine indicators:
1) Candlestick theory 6) Put/Call ratio
2) Climax Indicator 7) Seasonal variable
3) Volume trends 8) TRIN
4) Momentum 9) Valuation/Sentiment
5) New high/lows
Each day the market timing model produces a rating (bullish or bearish). This
daily analysis drives the degree of long or short exposure taken in the program
each day. Positions are built using a combination of stock index futures and
options.
Use of Proceeds
The proceeds of the offering of the Units are used by the Trust to engage in the
speculative trading on futures, forward, options and related markets through
allocating such proceeds to the Advisors.
To the extent the Trust trades in futures contracts on U.S. exchanges, the
assets deposited by the Trust with its Clearing 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.
To the extent that the Trust trades in futures, forward, options and related
contracts on markets other than regulated U.S. futures exchanges, funds
deposited to margin positions held on such exchanges are invested in bank
deposits or in instruments of a credit standing generally comparable to those
authorized by the CFTC for investment of "customer segregated funds," although
applicable CFTC rules prohibit funds employed in trading on foreign exchanges
from being deposited in "customer segregated fund accounts."
Although the percentages set forth below may vary substantially over time,
Kenmar estimates that:
(i) up to approximately 83% of the Net Asset Value of the Trust will be
placed with the Clearing Broker in the form of cash or U.S. Treasury bills
to margin positions of all commodities combined. Such funds will be
segregated pursuant to CFTC rules; and
(ii) up to approximately 17% of the Trust's assets will be used to margin
foreign futures contracts.
In addition, assets of the Trust not required to margin positions may be
maintained in United States bank accounts opened in the name of the Trust and
may be held in United States Treasury bills (or other securities approved by the
CFTC for investment of customer funds).
The Trust receives all of the interest income earned on its assets.
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"Breakeven Table"
The "Breakeven Table" below indicates the approximate percentage and dollar
returns required for the redemption value of an initial $5,000 investment in the
Units to equal the amount originally invested twelve months after issuance
(assuming the Units are redeemed during months 7-12 and, therefore, are subject
to a 3% redemption charge).
The "Breakeven Table," as presented, is not affected by the size of the Trust.
The Trust's capitalization does not directly affect the level of its charges as
a percentage of Net Asset Value, as the Trust has no fixed dollar amount, as
opposed to (i) percentage of assets, (ii) percentage of profits or (iii)
per-trade costs (each of which will, or should, equal approximately the same
percentage of the Trust's equity, whatever its size), other than administrative
expenses (which are assumed in the "Breakeven Table" to equal the maximum
estimated percentage of the Trust's average beginning of month Net Assets). In
order for Column II in the "Breakeven Table" to present absolute dollar amount
"breakeven" figures, it has been assumed that the average beginning of month Net
Assets attributable to an initial investment during the twelve-month "breakeven"
period equals the amount of such initial investment. This is, in fact, unlikely
to be the case.
"Breakeven Table"
<TABLE>
<CAPTION>
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Dollar Return
EXPENSES (1) Percentage Return Required
WHICH MUST BE OFFSET Required ($5,000 Initial Investment)
TO "BREAK EVEN" First Twelve Months First Twelve Months
of Investment of Investment
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<S> <C> <C>
Brokerage Commissions (2) 11.00% $550.00
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Administrative Expenses (3) 0.50% $25.00
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Miscellaneous Execution Costs (4) 0.25% $12.50
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Advisors' Profit Shares (5) 2.00% $100.00
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Kenmar Incentive Fee (6) 0.15% $7.50
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Organizational and Initial Offering Cost
Reimbursement (7) 2.40% $120.00
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Redemption Charge (8) 3.10% $155.00
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Interest Income (9) (5.00)% $(250.00)
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RETURN ON $5,000 INITIAL
INVESTMENT REQUIRED FOR
"BREAK EVEN" 14.40% $720.00
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</TABLE>
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Notes to "Breakeven Table"
(1) See "Description of Current Charges" for an explanation of the
expenses included in the "Breakeven Table."
(2) Paid to Kenmar each month. Kenmar pays all floor brokerage,
exchange, clearing and NFA fees, selling compensation, trailing
commissions and Consulting Fees from this amount.
(3) Administrative expenses are paid as incurred, but for this
"Breakeven Table" such expenses are assumed to be the maximum
estimated amount.
(4) Estimated; paid on a per-transaction basis. "Bid-ask" spreads are
not included due to the difficulty of determining such spreads,
which may constitute a significant cost to the Trust.
(5) Profit Shares are calculated quarterly on the basis of each
Advisor's individual performance, not the overall performance of the
Trust. Consequently, it is not possible to determine the amount of
Profit Shares, if any, that would be payable in a "breakeven" year.
Kenmar believes that 2.00% of average beginning of month Net Assets
is a reasonable estimate for such Profit Shares, but the actual
Profit Shares paid in a "breakeven" year could substantially exceed
such estimate.
(6) No Incentive Fee might, in fact, be due despite the approximately
3.1% Net Asset Value gain necessary to offset the redemption charge
of $155 (based on an initial $5,000 investment). However, for
purposes of the "Breakeven Table," the Incentive Fee has been
estimated at 5% of such 3.1% gain.
(7) Reimbursed to Kenmar at the rate of 0.2% of beginning of month Net
Assets each month.
(8) Redemption charges for purposes of this "breakeven" analysis equal
3.1% of the initial $5,000 investment because these charges would
equal 3% of the $5,155 Net Asset Value required so that after
subtraction of the 3% redemption charge, the investor would receive
net redemption proceeds of $5,000.
(9) Interest income is estimated based on current rates.
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Description of Current Charges
<TABLE>
<CAPTION>
Recipient Nature of Payment Amount of Payment
- --------- ----------------- -----------------
<S> <C> <C>
Kenmar Reimbursement of organizational Kenmar has advanced total costs
and initial offering costs of approximately $578,000, which
costs may be reduced by up to
$50,000 if certain benchmarks
are not reached. Such advanced
costs are being reimbursed to
Kenmar in monthly installments
of 0.2% of the Trust's beginning
of month Net Assets.
Kenmar Brokerage commissions Flat-rate monthly commissions of
0.917% of the Trust's beginning
of month Net Assets (an 11%
annual rate). Such commissions
cover all floor brokerage,
exchange, clearing and NFA fees
incurred in the Trust's trading.
Third Parties Miscellaneous execution costs Paid as incurred; not
anticipated to exceed 0.25% of
average beginning of month Net
Assets per year.
Counterparties "Bid-ask" spreads Each counterparty with which the
Trust trades receives "bid-ask"
spreads on the forward trades
executed on behalf of the Trust.
Advisors Profit Shares Paid by the Trust on a quarterly
basis (although accrued against
Net Asset Value per Unit
monthly). Each initial Advisor's
Profit Share is determined based
on any New Trading Profit (as
defined) generated by such
Advisor. New Trading Profit in
respect of each Advisor's
account is calculated after
reduction for brokerage
commissions at an annual rate of
4.5% -- 7.0%, rather than at an
11% annual rate, and execution
costs actually incurred (other
than floor brokerage, exchange,
clearing and NFA fees). New
Trading Profit is not reduced by
any Incentive Fee, administrative
expenses or organizational and
initial offering costs (or
extraordinary expenses). The
Profit Shares are payable
separately to each Advisor
based on its individual
performance, not overall
profits of the Trust. Units
may be subject to reduction
for Profit Shares attributable
to a particular Advisor even
though the Net Asset Value per
Unit has declined from the
purchase price of such Units.
</TABLE>
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Description of Current Charges Continued
<TABLE>
<S> <C> <C>
Kenmar Incentive Fee Paid by the Trust as a whole on
an annual basis (although
accrued against Net Asset Value
per Unit monthly). The Incentive
Fee equals 5% of any New Overall
Appreciation (as defined). An
Incentive Fee may be allocated
even though the Net Asset Value
per Unit has declined from the
purchase price of such Units.
Third Parties Administrative costs Paid as incurred; not anticipated
to exceed 0.50% of the Trust's
average beginning of month Net
Assets per year.
Third Parties Reimbursement of delivery, Actual payments to third parties;
insurance, storage and any expected to be negligible.
other extraordinary expenses;
taxes (if any)
</TABLE>
Regulation
Kenmar, the Advisors and the Clearing Brokers are each subject to regulation by
the CFTC and the NFA. Other than in respect of its periodic reporting
requirements and the registration of the Units for continuous public
distribution under the Securities Act of 1933, the Trust itself is generally not
subject to regulation by the Securities and Exchange Commission.
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Item 2. Properties
The Trust does not use any physical properties in the conduct of its business.
The Trust's only place of business is the place of business of Kenmar. Certain
administrative services are provided by Derivatives Portfolio Management L.L.C.
which is located at Two Worlds Fair Drive, P.O. Box 6741, Somerset, New Jersey
08875-6741.
Item 3. Legal Proceedings
There are no pending legal proceedings to which the Trust or Kenmar is a party.
Item 4. Submission of Matters to a Vote of Security Holders
The Trust has never submitted any matters to a vote of its Unitholders.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) Market Information:
There is no established public trading market for the Units, nor will
one develop. Rather, Unitholders may purchase or redeem Units as of the
end of each month at Net Asset Value, subject to certain early
redemption charges.
(b) Holders:
As of December 31, 1997, there were 492 holders of Units, including
Kenmar and the Advisors. As of December 31, 1997, Robert L. Cruikshank
owned 1,000 Units, Marc S. Goodman owned 52.8321 Units in his
individual retirement account and Kenmar owned 1258.4577 Units.
(c) Dividends:
The Trust has made no distributions since trading commenced, nor does
Kenmar presently intend to make any distributions in the future.
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Item 6. Selected Financial Data
The following selected financial data of the Trust has been derived from the
Trust's audited financial statements
<TABLE>
<CAPTION> Year Ended Period Ended
12/31/97 12/31/96
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Operations Data:
Realized Gains (Losses)............ $(162,443) 0
Change in Unrealized............... 838,321 0
Interest Income.................... 293,033 0
Brokerage Commissions.............. 45,814 0
Management Owner Brokerage
Commissions........................ 631,403 0
Advisor Profit Shares ............. 106,886 0
Operating Expenses................. 58,398 0
Net Income......................... 126,410 0
Net Income Per Unit (Based on
Weighted Average Number of
Units Outstanding)................. 1.24 0
Increase in Net Asset Value Per
Unit............................... 0.10 0
<CAPTION>
12/31/97 12/31/96
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial Position Data:
Managing Owner's Capital $ 125,970 400
Other Unitholders' Capital 12,251,351 1,600
Total Capital 12,377,321 2,000
Net Asset Value Per Unit 100.10 100.00
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The proceeds of the offering of the Units are used by the Trust to engage in the
speculative trading on futures, forward, options and related markets through
allocating such proceeds to the Advisors. The assets of the Trust are deposited
with the Clearing Brokers in trading accounts established by the Trust for the
Advisors and are used by the Trust as margin to engage in trading. Such assets
are held in either a non-interest bearing bank account or in securities approved
by the CFTC for investment of customer funds.
Results of Operations.
The Trust incurs substantial charges from the payment of Profit Shares to the
Advisors and the Incentive Fee and Brokerage Commissions to Kenmar. The
Brokerage Commissions are payable without regard to the profitability of the
Trust. Thus, due to the nature of the Trust's business, the success of the Trust
is dependent upon the ability of the Advisors to generate trading profits
through the speculative trading of futures, forward and option contracts
sufficient to produce capital appreciation after payment of all fees and
expenses.
The following paragraph presents a summary of the Trust's operations for the
calendar year 1997. It is important to note, however, that (i) the Advisors
trade in various markets at different times and that prior activity in a
particular market does not mean that such markets will be actively traded by an
Advisor or will be profitable in the future and (ii) the Advisors trade
independently of each other using different trading systems and may trade
different markets with various concentrations at various times. Consequently,
the results of operations of the Trust can only be discussed in the context of
the overall trading activities of the Trust, the Advisors' trading activities on
behalf of the Trust as a whole and how the Trust has performed in the past.
As of December 31, 1997, the Net Asset Value of the Trust was $12,377,321, an
increase of approximately 116.99% from its Net Asset value of $5,704,100 at the
commencement of trading. The Trust's subscriptions and redemptions for the year
ended December 31, 997 totaled $12,847,562 and $450,887, respectively. For the
year ended December 31, 1997, the Trust had revenues comprised of ($162,443) in
realized trading losses, $838,321 in change in unrealized trading gains and
$293,033 in interest income. Total expenses for the year ended December 31, 1997
were $842,501. The Net Income for the year ended December 31, 1997 was $126,410.
The Net Asset Value per Unit at December 31, 1997 increased .10% from $100.00 at
December 31, 1996 to $100.10 at December 31, 1997. The Trust's trading gains
during 1997 were resulted primarily from currencies, global interest rates,
metals and grains.
Past performance is not indicative of future results. As a result, any recent
increases in realized or unrealized trading gains may have no bearing on any
results that may be obtained in the future.
Liquidity and Capital Resources
Units may be redeemed only as of the close of business on the last day of a
calendar month and only beginning on or after the end of the sixth month after
sale. Through the end of the twelfth and eighteenth full months after their
sale, Units will be subject to redemption charges, payable to Kenmar, equal to
3% and 2%, respectively, of the Net Asset Value per Unit as of the date of
redemption. Requests for redemption must be received at least 10 calendar days
before the proposed date of redemption.
The amount of capital raised for the Trust should not, except at extremely high
levels of capitalization, have a significant impact on its operations. The
Trust's costs are generally proportional to its asset base, and, within broad
ranges of capitalization, the Advisors' trading positions (and the resulting
gains and losses) should increase or decrease in approximate proportion to the
size of the Trust account managed by each of them, respectively.
The Trust raises additional capital only through the continuous offering of its
Units.
Inflation per se is not a significant factor in the Trust's profitability,
although inflationary cycles can give rise to the type of major price movements
that can have a materially favorable or adverse impact on the Trust's
performance.
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With respect to the Trust's trading, in general the Trust's Advisors will trade
only futures, forward and options that have sufficient liquidity to enable them
to enter and close out positions without causing major price movements.
Notwithstanding the foregoing, most United States commodity exchanges limit the
amount by which certain commodities may move during a single day by regulations
referred to as "daily price fluctuation limits" or "daily limits". Pursuant to
such regulations, no trades may be executed on any given day at prices beyond
the daily limits. The price of a futures contract has occasionally moved the
daily limit for several consecutive days, with little or no trading, thereby
effectively preventing a party from liquidating his position. While the
occurrence of such an event may reduce or effectively eliminate the liquidity of
a particular market, it will not limit ultimate losses and may in fact
substantially increase losses because of this inability to liquidate unfavorable
positions. In addition, if there is little or no trading in a particular futures
or forward contract that the Trust is trading, whether such illiquidity is
caused by any of the above reasons or otherwise, the Trust may be unable to
execute trades at favorable prices and/or may be unable or unwilling to
liquidate its position prior to its expiration date, thereby requiring the Trust
to make or take delivery of the underlying interest of the commodity.
In highly unusual circumstances, market illiquidity could make it difficult for
certain Advisors to close out open positions, and any such illiquidity could
expose the Trust to significant losses, or cause it to be unable to recognize
unrealized gains. However, in general, there is no meaningful difference between
the Trust's realized and unrealized gains.
In terms of cash flow, it makes little difference whether a market position
remains open (so that the profit or loss on such positions remains unrealized),
as cash settlement of unrealized gains and losses occurs periodically whether or
not positions are closed out. The only meaningful difference between realized
and unrealized gains or losses in the case of the Trust is that unrealized items
reflect gains or losses on positions which the Advisors have determined not to
close out (presumably, in the hope of future profits), whereas realized gains or
losses reflect amounts received or paid in respect of positions no long being
maintained.
Item 8. Financial Statements and Supplementary Data
Financial statements meeting the requirements of Regulation S-X appear beginning
on Page 19 of this report. The supplementary financial information specified by
Item 302 of Regulation S-K is not applicable.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
There were no changes in or disagreements with accountants on accounting and
financial disclosure.
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PART III
Item 10. Directors and Executive Officers of the Registrant
(a,b) Identification of Directors and Executive Officers:
Kenmar Advisory Corp. is the sole managing owner of the Trust. Kenmar, a
corporation originally organized as a New York corporation in September 1983 and
reorganized as a Connecticut corporation on January 1, 1996, is owned equally
and indirectly by Messrs. Shewer and Goodman. The directors and executive
officers of Kenmar currently are as follows:
MR. KENNETH A. SHEWER, age 44, has been the Chairman and a director of Kenmar
since September 1983. Mr. Shewer was employed by Pasternak, Baum and Co., Inc.
("Pasternak, Baum"), an international cash commodity firm, from June 1976 until
September 1983. Mr. Shewer left Pasternak, Baum in September 1983 to form Kenmar
Advisory Corp. with Mr. Goodman. Mr. Shewer created and managed Pasternak,
Baum's Grain Logistics and Administration Department and created its Domestic
Corn and Soybean Trading Department. In 1982, Mr. Shewer became co-manager of
Pasternak, Baum's F.O.B. Corn Department. In 1983, Mr. Shewer was made Vice
President and Director of Pasternak, Baum. Mr. Shewer graduated from Syracuse
University with a B.S. degree in 1975.
MR. MARC S. GOODMAN, age 49, has been the President and a director of Kenmar
since September 1983. Mr. Goodman joined Pasternak, Baum in September 1974 and
was a Vice President and Director from July 1981 until September 1983. Mr.
Goodman left Pasternak, Baum in September 1983 to form Kenmar Advisory Corp.
with Mr. Shewer. While at Pasternak, Baum, Mr. Goodman was largely responsible
for business development outside of the United States, for investment of its
corporate retirement funds and for selecting trading personnel. Mr. Goodman has
conducted extensive business in South America, Europe and the Far East. Mr.
Goodman was awarded an Economics and Finance Department Fellowship from
September 1969 through June 1971. Mr. Goodman graduated from the Bernard M.
Baruch School of Business of the City University of New York with a B.B.A. in
1969 and an M.B.A. in 1971 in Finance and Investments.
MS. ESTHER ECKERLING GOODMAN, age 45, has been the Senior Executive Vice
President of Kenmar since March 1991 and has also served as Chief Operating
Officer of Kenmar since October 1995. Ms. Goodman joined Kenmar in July 1986 and
has been involved in the futures industry since 1974. From 1974 through 1976,
she was employed by Conti-Commodity Services, Inc. and ACLI Commodity Services,
Inc., in the areas of hedging, speculative trading and tax arbitrage. In 1976,
Ms. Goodman joined Loeb Rhoades and Company, Inc., where she was responsible for
the development and management of a managed futures program which, in 1979,
became the trading system for an independent commodity trading advisor of which
Ms. Goodman was a founder and principal. From 1983 through mid-1986, Ms. Goodman
was employed as a marketing executive at Commodities Corp. (USA) of Princeton,
New Jersey. Ms. Goodman was a Director of the Managed Futures Association and
its predecessor, the Managed Futures Trade Association, from 1987 through 1995.
In addition, she has written several articles and has spoken before various
professional groups and organizations on the subject of managed futures. Ms.
Goodman attended Vassar College from 1970-1972 and graduated from Stanford
University in 1974 with a B.A. degree. Ms. Goodman is married to Mr. Marc S.
Goodman.
MR. ROBERT L. CRUIKSHANK, age 61, joined Kenmar as its Executive Vice President
in March 1991. Mr. Cruikshank spent 20 years (1958-1978) at Blyth Eastman Dillon
in New York and was its Executive Vice President in charge of the Securities
Division, which included all domestic and international sales and branch office
activities, all trading departments and the research areas. In 1979, Mr.
Cruikshank jointly formed Neild, Cruikshank & Co., an independent market-maker
on the Chicago Board of Options Exchange ("CBOE"), where he remained until 1984,
when he formed his own market making firm, Nassau Corporation. From 1982 to 1984
Mr. Cruikshank also served as Director and Vice Chairman of the Board of the
CBOE, during which time he was instrumental in the development of the S&P 100
(OEX) option contract. From 1985, when he left Nassau Corporation, until March
1991, he served as President and CEO of First Capital Financial Corporation, a
national real estate syndication firm owned by Sam Zell. Mr. Cruikshank
graduated cum laude from Princeton University with a B.A. degree in economics in
1958.
JOSHUA B. PARKER, ESQ., age 41, has been an Executive Vice President and the
General Counsel of Kenmar since June 1991 and October 1988, respectively. Mr.
Parker has been with Kenmar since October 1988. From January 1986 through
October 1988, Mr. Parker was the general counsel of Michael Becker & Co., a
member firm of the American Stock
-13-
<PAGE> 14
Exchange. During that time he was also an independent floor trader, first in
association with Michael Becker & Co. and later in his own firm, Premium
Investments. From May 1985 through January 1986, Mr. Parker was the associate
general counsel of a company in the over-the-counter drug and personal care
industry. From August 1981 through May 1985, Mr. Parker was associated with the
law firm of Baer Marks & Upham. Mr. Parker is a 1981 graduate of the New York
University School of Law with a J.D. degree and a 1977 graduate of Yale
University with a B.A. degree.
Each director of Kenmar serves until the next annual meeting of stockholders or
until a successor is elected. Executive officers of Kenmar are appointed
annually and serve at the discretion of its Board of Directors. Messrs. Shewer
and Goodman hold directorships in various affiliates of Kenmar.
(c) Identification of Certain Significant Employees:
None.
(d) Family Relationships:
None.
(e) Business Experience:
See Item 10(a)(b) above.
(f) Involvement in Certain Legal Proceedings:
None.
(g) Promoters and Control Persons:
Kenmar is the sole promoter and controlling person of the Trust.
Item 11. Executive Compensation
The Trust has no directors or executive officers. The business of the Trust is
managed by Kenmar which is responsible for the administration of the business
affairs of the Trust and receives the compensation described in Item 1 hereof.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners:
As of December 31, 1997, no person or "group" is known to be or have been the
beneficial owner of more than five percent of the Units.
(b) Security Ownership of Management:
As of December 31, 1997, the following officers of Kenmar beneficially owned the
following number of Units:
<TABLE>
<CAPTION>
Number of Percent
Name of Beneficial Owner Units Owned of Class
------------------------ ----------- --------
<S> <C> <C>
Robert L. Cruikshank 1,000 Less than 1%
Marc S. Goodman 52.8321 Less than 1%
</TABLE>
-14-
<PAGE> 15
As of December 31, 1997, Kenmar has purchased and will maintain a 1% interest in
the Trust in its capacity as managing owner.
(c) Changes in Control:
None.
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others:
Kenmar acts as managing owner and commodity pool operator. Certain
administrative services are provided by Derivatives Portfolio Management L.L.C.
The Trust pays its own administrative expenses.
(b) Certain Business Relationships:
None.
(c) Indebtedness of Management:
The Trust is prohibited from making any loans, to management or otherwise.
(d) Transactions with Promoters:
Not Applicable.
-15-
<PAGE> 16
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this Form 10-K:
1. See Financial Statements beginning on page 19 hereof
2. All financial schedules are omitted because such schedules are
not required or the information required has been presented in
the aforementioned financial statements.
3. The following exhibits are filed with this Report or
incorporated by reference in the Prospectus dated September
26, 1997 included within the Registration Statement on Form
S-1 (File No. 333-8869:
Number Exhibit
- ------ -------
3.1 Declaration of Trust for Kenmar Global Trust
10.1 Customer Agreement between the Trust and ING (U.S.) Securities
Futures & Options Inc.
10.2 Customer Agreement between the Trust and PaineWebber
Incorporated.
10.3 Form of Advisory Agreement between the Trust and the Advisors.
(b) Reports on Form 8-K:
The Trust did not file any reports on Form 8-K during the fourth
quarter of 1997.
-16-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 27th day of March,
1998.
KENMAR GLOBAL TRUST
By: Kenmar Advisory Corp., managing owner
By: /s/ KENNETH A. SHEWER
-------------------------------------
Kenneth A. Shewer
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 27th day of March, 1998.
KENMAR GLOBAL TRUST
By: Kenmar Advisory Corp., managing owner
By: /s/ KENNETH A. SHEWER
-------------------------------------
Kenneth A. Shewer
Chairman and Director
(Principal Executive Officer)
By: /s/ MARC S. GOODMAN
-------------------------------------
Marc S. Goodman
President and Director
By: /s/ THOMAS J. DIVUOLO
-------------------------------------
Thomas J. DiVuolo
Senior Vice President
(Principal Financial and Accounting
Officer for the Trust)
-17-
<PAGE> 18
KENMAR GLOBAL TRUST
ANNUAL REPORT
December 31, 1997
-18-
<PAGE> 19
COMMODITY FUTURES TRADING COMMISSION
Washington, D.C. 20581
Commodity Pool:
KENMAR GLOBAL TRUST
Annual Report Pursuant to Part 4 of Chapter I
of Title 17 of the Code of Federal
Regulations
For the year ended December 31, 1997
Commodity Pool Operator:
Kenmar Advisory Corp.
Two American Lane
P.O. Box 5150
Greenwich, Connecticut 06831-8150
(203) 861-1000
-19-
<PAGE> 20
NATIONAL FUTURES ASSOCIATION
Chicago, Illinois 60606
Commodity Pool:
KENMAR GLOBAL TRUST
Annual Report Pursuant to Part 4 of Chapter I
of Title 17 of the Code of Federal
Regulations
For the year ended December 31, 1997
Commodity Pool Operator:
Kenmar Advisory Corp.
Two American Lane
P.O. Box 5150
Greenwich, Connecticut 06831-8150
(203) 861-1000
-20-
<PAGE> 21
KENMAR GLOBAL TRUST
-----
INDEX
-----
PAGES
-----
Affirmation of the Commodity Pool Operator 22
Independent Auditor's Report 23
Financial Statements
Statements of Financial Condition
December 31, 1997 and 1996 24
Statements of Operations For the Year
Ended December 31, 1997 and For the Period
July 17, 1996 (inception) to December 31, 1996 25
Statements of Cash Flows For the Year
Ended December 31, 1997 and For the Period
July 17, 1996 (inception) to December 31, 1996 26
Statements of Changes in Unitholders' Capital (Net Asset Value)
For the Year Ended December 31, 1997 and For the Period
July 17, 1996 (inception) to December 31, 1996 27
Notes to Financial Statements 28 - 33
-21-
<PAGE> 22
KENMAR GLOBAL TRUST
AFFIRMATION OF THE COMMODITY POOL OPERATOR
----------
To the best of the knowledge and belief of the undersigned, the information
contained in the Annual Report for the year ended December 31, 1997 is accurate
and complete.
--------------------------------------
Marc S. Goodman, President
Kenmar Advisory Corp.
KENMAR GLOBAL TRUST
<PAGE> 23
[Letterhead of Arthur F. Bell, Jr. & Associates, L.L.C.]
INDEPENDENT AUDITOR'S REPORT
To the Unitholders
Kenmar Global Trust
We have audited the accompanying statements of financial condition of Kenmar
Global Trust as of December 31, 1997 and 1996, and the related statements of
operations, cash flows and changes in unitholders' capital (net asset value) for
the year ended December 31, 1997 and for the period July 17, 1996 (inception) to
December 31, 1996. These financial statements are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kenmar Global Trust as of
December 31, 1997 and 1996, and the results of its operations, cash flows and
the changes in its net asset values for the year ended December 31, 1997 and for
the period July 17, 1996 (inception) to December 31, 1996, in conformity with
generally accepted accounting principles.
March 16, 1998
-23-
<PAGE> 24
KENMAR GLOBAL TRUST
STATEMENTS OF FINANCIAL CONDITION
December 31, 1997 and 1996
--------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS
Equity in broker trading accounts
Cash $11,166,621 $ 0
Net option premiums paid 12,165 0
Unrealized gain on open contracts 838,321 0
----------- --------
Deposits with brokers 12,017,107 0
Cash 588,287 2,000
Other assets 177,369 0
----------- --------
Total assets $12,782,763 $ 2,000
=========== ========
LIABILITIES
Accounts payable $ 24,489 $ 0
Commissions and other trading fees on open contracts 6,831 0
Managing Owner brokerage commissions 89,492 0
Advisor profit shares 54,575 0
Reimbursable offering costs 23,058 0
Redemptions payable 176,774 0
Redemption charges payable to Managing Owner 4,503 0
Subscription deposits 25,720 0
----------- --------
Total liabilities 405,442 0
----------- --------
UNITHOLDERS' CAPITAL (Net Asset Value)
Managing Owner - 1,258.4577 and 4.0000 units
outstanding at December 31, 1997 and 1996 125,970 400
Other Unitholders - 122,392.3731 and 16.0000 units
outstanding at December 31, 1997 and 1996 12,251,351 1,600
----------- --------
Total unitholders' capital 12,377,321 2,000
(Net Asset Value) ----------- --------
$12,782,763 $ 2,000
=========== ========
</TABLE>
See accompanying notes.
-24-
<PAGE> 25
KENMAR GLOBAL TRUST
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997 and
For the Period July 17, 1996 (inception) to December 31, 1996
----------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
INCOME
Trading gains (losses)
Realized $(162,443) $ 0
Change in unrealized 838,321 0
--------- ------
Gain from trading 675,878 0
Interest income 293,033 0
--------- ------
Total income 968,911 0
--------- ------
EXPENSES
Brokerage commissions 45,814 0
Managing Owner brokerage commissions 631,403 0
Advisor profit shares 106,886 0
Operating expenses 58,398 0
--------- ------
Total expenses 842,501 0
--------- ------
NET INCOME $ 126,410 0
========= ======
NET INCOME PER UNIT
(based on weighted average number of
units outstanding during the period) $ 1.24 $ 0.00
========= ======
INCREASE IN NET ASSET
VALUE PER UNIT $ 0.10 $ 0.00
========= ======
</TABLE>
See accompanying notes.
-25-
<PAGE> 26
KENMAR GLOBAL TRUST
STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1997 and
For the Period July 17, 1996 (inception) to December 31, 1996
----------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from (for) operating activities
Net income $ 126,410 $ 0
Adjustments to reconcile net income to net
cash (for) operating activities:
Net change in unrealized (838,321) 0
Increase in accounts payable and accrued expenses 175,387 0
Net option premiums paid (12,165) 0
Increase in other assets (177,369) 0
------------ ------
Net cash (for) operating activities (726,058) 0
------------ ------
Cash flows from (for) financing activities
Addition of units 12,847,562 2,000
Increase in subscription deposits 25,720 0
Offering costs paid (124,706) 0
Redemption of units (269,610) 0
------------ ------
Net cash from financing activities 12,478,966 2,000
------------ ------
Net increase in cash 11,752,908 2,000
============ ======
Cash
Beginning of period 2,000 0
------------ ------
End of period $ 11,754,908 $2,000
============ ======
End of period cash consists of:
Cash in broker trading accounts $ 11,166,621 $ 0
Cash 588,287 2,000
------------ ------
Total end of period cash $ 11,754,908 $2,000
============ ======
</TABLE>
See accompanying notes.
-26-
<PAGE> 27
KENMAR GLOBAL TRUST
STATEMENTS OF CHANGES IN UNITHOLDERS' CAPITAL (NET ASSET VALUE)
For the Year Ended December 31, 1997 and
For the Period July 17, 1996 (inception) to December 31, 1996
----------
<TABLE>
<CAPTION>
Unitholders' Capital
Total
Number of Managing Other
Units Owner Unitholders Total
------------ --------- ------------ ------------
<S> <C> <C> <C> <C>
Balances at
July 17, 1996 (inception) 0.0000 $ 0 $ 0 $ 0
Additions 20.0000 400 1,600 2,000
------------ --------- ------------ ------------
Balances at
December 31, 1996 20.0000 400 1,600 2,000
Additions 128,219.1639 125,800 12,721,762 12,847,562
Net income for the year
ended December 31, 1997 1,279 125,131 126,410
Redemptions (4,588.3331) 0 (450,887) (450,887)
Offering costs (1,509) (146,255) (147,764)
------------ --------- ------------ ------------
Balances at
December 31, 1997 123,650.8308 $ 125,970 $ 12,251,351 $ 12,377,321
============ ========= ============ ============
</TABLE>
<TABLE>
<CAPTION>
Net Asset Value Per Unit
------------------------------
December 31,
1997 1996
---- ----
<S> <C>
$100.10 $100.00
======= =======
</TABLE>
See accompanying notes.
-27-
<PAGE> 28
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS
--------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Trust
Kenmar Global Trust (the Trust) is a Delaware business trust.
The Trust is a multi-advisor, multi-strategy commodity pool
which trades in United States (U.S.) and foreign futures,
options, forwards and related markets. The Trust was formed on
July 17, 1996 and commenced trading on May 22, 1997.
B. Regulation
As a registrant with the Securities and Exchange Commission,
the Trust is subject to the regulatory requirements under the
Securities Act of 1933 and the Securities Exchange Act of
1934. As a commodity pool, the Trust is subject to the
regulations of the Commodity Futures Trading Commission, an
agency of the U.S. government which regulates most aspects of
the commodity futures industry, rules of the National Futures
Association, an industry self-regulatory organization, and the
requirements of the various commodity exchanges where the
Trust executes transactions. Additionally, the Trust is
subject to the requirements of the Futures Commission
Merchants (FCMs) and interbank market makers (collectively,
"brokers") through which the Trust trades.
C. Method of Reporting
The Trust's financial statements are presented in accordance
with generally accepted accounting principles, which require
the use of certain estimates made by the Trust's management.
Gains or losses are realized when contracts are liquidated.
Net unrealized gain or loss on open contracts (the difference
between contract purchase prices and market prices) is
reported in the statement of financial condition in accordance
with Financial Accounting Standards Board Interpretation No.
39 "Offsetting of Amounts Related to Certain Contracts." Any
change in net unrealized gain or loss from the preceding
period is reported in the statement of operations. Brokerage
commissions paid directly to brokers include other trading
fees and are charged to expense when contracts are opened.
-28-
<PAGE> 29
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
----------
D. Income Taxes
The Trust prepares calendar year U.S. and state information
tax returns and reports to the Unitholders their allocable
shares of the Trust's income, expenses and trading gains or
losses.
E. Organizational and Offering Costs
Organizational and initial offering costs (exclusive of
selling commissions) of approximately $580,000 were advanced
to the Trust by the Managing Owner. Such costs are charged to
the Trust and reimbursed to the Managing Owner at a monthly
rate of 0.2% of the Trust's beginning of month Net Asset Value
until such amounts are fully reimbursed. The total amount of
organizational and initial offering costs to be reimbursed to
the Managing Owner may be reduced by up to $50,000 if the
Trust's Net Asset Value does not reach certain future levels.
Any unreimbursed organizational and initial offering costs as
of the date of the Trust's dissolution will not be reimbursed
to the Managing Owner.
Ongoing offering costs are borne by the Trust and are charged
directly to unitholders' capital as incurred.
The Declaration of Trust and Trust Agreement limits
organizational and offering costs, including selling
commissions and redemption fees, to 15% of the capital
contributions to the Trust.
F. Foreign Currency Transactions
The Trust's functional currency is the U.S. dollar; however,
it transacts business in currencies other than the U.S.
dollar. Assets and liabilities denominated in currencies other
than the U.S. dollar are translated into U.S. dollars at the
rates in effect at the date of the statement of financial
condition. Income and expense items denominated in currencies
other than the U.S. dollar are translated into U.S. dollars at
the rates in effect during the period. Gains and losses
resulting from the translation to U.S. dollars are reported in
income currently.
Note 2. MANAGING OWNER
The Managing Owner of the Trust is Kenmar Advisory Corp., which
conducts and manages the business of the Trust. The Declaration of
Trust and Trust Agreement requires the Managing Owner to maintain a
capital account equal to 1% of the total capital accounts of the
Trust.
-29-
<PAGE> 30
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
----------
The Managing Owner is paid monthly brokerage commissions equal to
1/12 of 11% (11% annually) of the Trust's beginning of month Net
Asset Value. The Managing Owner, in turn, pays substantially all
actual costs of executing the Trust's trades, selling commissions and
trailing commissions to selling agents, and consulting fees to the
Advisors. The amount paid to the Managing Owner is reduced by
brokerage commissions and other trading fees paid directly by the
Trust. For the period May 22, 1997 (commencement of trading) to
December 31, 1997, brokerage commissions equated to an approximate
round-turn equivalent rate of $92. Such approximate round-turn
equivalent brokerage commission rate will vary depending on the
frequency of trading by the Trust's commodity trading advisors.
The Managing Owner is paid an incentive fee equal to 5% of New
Overall Appreciation (which is defined in the Declaration of Trust
and Trust Agreement and excludes interest income) as of each fiscal
year-end and upon redemption of Units. No incentive fee was earned by
the Managing Owner during 1997.
Note 3. COMMODITY TRADING ADVISORS
The Trust has advisory agreements with various commodity trading
advisors pursuant to which the Trust pays quarterly profit shares of
15% to 20% of Trading Profit (as defined in each advisory agreement).
Note 4. DEPOSITS WITH BROKERS
The Trust deposits funds with brokers subject to Commodity Futures
Trading Commission regulations and various exchange and broker
requirements. Margin requirements are satisfied by the deposit of
cash with such brokers. The Trust earns interest income on its cash
deposited with the brokers.
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
Investments in Units of Beneficial Interest are made by subscription
agreement, subject to acceptance by the Managing Owner.
The Trust is not required to make distributions, but may do so at the
sole discretion of the Managing Owner. A Unitholder may request and
receive redemption of Units owned, beginning with the end of the
sixth month after such Units are sold, subject to restrictions in the
Declaration of Trust and Trust Agreement. Units redeemed on or before
the end of the twelfth full calendar month and after the end of the
twelfth full month but on or before the end of the eighteenth full
calendar month after the date such Units begin to participate in the
profits and losses of the Trust are subject to early redemption
charges of 3% and 2%, respectively, of the Net Asset Value redeemed.
All redemption charges are paid to the
-30-
<PAGE> 31
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
---------
Managing Owner. Such redemption charges are included in redemptions
of unitholders' capital and amounted to $12,592 during 1997.
Note 6. TRADING ACTIVITIES AND RELATED RISKS
The Trust engages in the speculative trading of U.S. and foreign
futures contracts, options on U.S. and foreign futures contracts and
forward contracts (collectively, "derivatives"). These derivatives
include both financial and non-financial contracts held as part of a
diversified trading strategy. The Trust is 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.
Purchases and sales of futures and options on futures contracts
require margin deposits with the FCMs. Additional deposits may be
necessary for any loss of contract value. The Commodity Exchange Act
requires an FCM to segregate all customer transactions and assets
from such FCM's proprietary activities. A customer's cash and other
property (for example, U.S. Treasury bills) deposited with an FCM are
considered commingled with all other customer funds subject to the
FCM's segregation requirements. In the event of an FCM's 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 total cash and other property deposited.
The Trust has cash on deposit with interbank market makers and other
financial institutions in connection with its trading of forward
contracts and its cash management activities. In the event of a
financial institution's insolvency, recovery of Trust assets on
deposit may be limited to account insurance or other protection
afforded such deposits. In the normal course of business, the Trust
does not require collateral from such financial institutions. Since
forward contracts are traded in unregulated markets between
principals, the Trust also assumes the risk of loss from counterparty
nonperformance.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Trust is exposed to a market risk equal
to the value of futures and forward contracts purchased and unlimited
liability on such contracts sold short. As both a buyer and seller of
options, the Trust pays or receives a premium at the outset and then
bears the risk of unfavorable changes in the price of the contract
underlying the option. Written options expose the Trust to
potentially unlimited liability, and purchased options expose the
Trust to a risk of loss limited to the premiums paid.
The fair value of derivatives represents unrealized gains and losses
on open futures and forward contracts and long and short options at
market value. The average fair value of derivatives for the period
May 22, 1997 (commencement of trading) to December 31, 1997
-31-
<PAGE> 32
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
---------
and the related fair values as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
For the Period
May 22, 1997 to As of
December 31 December 31,
1997 1997
--------------- ------------
<S> <C> <C>
Exchange traded futures and options on
futures contracts $440,000 $847,000
Forward contracts 30,000 3,000
</TABLE>
Net trading results from derivatives for the year ended December 31,
1997 is reflected in the statement of operations and consists of the
gain from trading less brokerage commissions and the portion of the
Managing Owner brokerage commissions that is payable to the brokers.
For the year ended December 31, 1997, the net trading gain from
derivatives was approximately $595,000. Such trading results reflect
the net gain arising from the Trust's speculative trading of futures
contracts, options on futures contracts and forward contracts.
-32-
<PAGE> 33
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
---------
Open contracts generally mature within one year; the latest maturity
date for open contracts as of December 31, 1997 is June 1998.
However, the Trust intends to close all contracts prior to maturity.
At December 31, 1997, the notional amount of open contracts is as
follows:
<TABLE>
<CAPTION>
Contracts to Contracts to
Purchase Sell
----------- -----------
<S> <C> <C>
Exchange traded futures contract and written options thereon:
- Financial instruments $44,900,000 $16,300,000
- Metals 1,800,000 3,700,000
- Energy 0 1,100,000
- Agricultural 1,500,000 2,800,000
- Currencies 15,300,000 18,800,000
Forward Contracts:
- Currencies 0 700,000
----------- -----------
$63,500,000 $43,400,000
=========== ===========
Exchange traded purchased options on futures contracts:
- Financial instruments $ 3,400,000 $ 0
- Currencies 0 1,400,000
----------- -----------
$ 3,400,000 $ 1,400,000
=========== ===========
</TABLE>
The above amounts do not represent the Trust's risk of loss due to
market and credit risk, but rather represent the Trust's extent of
involvement in derivatives at the date of the statement of financial
condition.
The Managing Owner has established procedures to actively monitor and
minimize market and credit risk. The Unitholders bear the risk of
loss only to the extent of the market value of their respective
investments and, in certain specific circumstances, distributions and
redemptions received.
-33-
<PAGE> 34
INDEX TO EXHIBITS
Exhibit No. Exhibit Numbered Page*
- ----------- ----------------- -------------
1.01 Form of Selling Agreement N/A
1.02 Amendment No 1 to Selling
Agreement N/A
3.01 Certificate of Formation
of the Registrant N/A
3.02 Declaration of Trust and
Trust Agreement of the
Registrant N/A
3.03 Amended and Restated
Declaration of Trust
and Trust Agreement
of the Registrant N/A
10.01 Form of Advisory
Agreement N/A
10.02 Form of Customer
Agreement between the
Trust and the Commodity
Brokers N/A
10.03 Form Escrow Agreement N/A
10.04 Subscription Agreement
and Power of Attorney N/A
- ----------------------
*Incorporated by reference to the respective exhibit to the
Registrant's Registration Statement No. 333-8869.
Upon request, the Registrant will furnish a copy of any Exhibit
to this report upon payment of a reasonable fee.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
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0
0
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