SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 1999
Commission File Number: 333-9898
Kenmar Global Trust
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-6429854
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two American Lane, P.O. Box 5150, Greenwich, Connecticut 06831-8150
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (203) 861-1000
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 periods 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 ___
1
<PAGE>
KENMAR GLOBAL TRUST
QUARTER ENDED MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of March 31, 1999 (unaudited)
and December 31, 1998 (audited)...................................................1
Statements of Operations for the Three Months Ended March 31, 1999
and 1998 (unaudited)..............................................................2
Statements of Cash Flows for the Three Months Ended March 31, 1999
and 1998 (unaudited)..............................................................3
Statements of Changes in Unitholders' Capital (Net Asset Value) for
the Three Months Ended March 31, 1999 and 1998 (unaudited).......................4
Notes to Financial Statements (unaudited).......................................5-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................................10-12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......................13
PART II - OTHER INFORMATION
Item 2. Changes in Securities............................................................14
Item 6. Exhibits and Reports on Form 8-K.................................................14
SIGNATURES......................................................................................14
</TABLE>
i
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KENMAR GLOBAL TRUST
STATEMENTS OF FINANCIAL CONDITION
March 31, 1999 (Unaudited) and December 31, 1998 (Audited)
------------------
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Equity in broker trading accounts
Cash $13,347,606 $14,288,556
Unrealized gain on open contracts 40,590 1,219,956
----------- -----------
Deposits with brokers 13,388,196 15,508,512
Cash 12,516,874 10,582,645
Subscriptions receivable 35,280 0
----------- -----------
Total assets $25,940,350 $26,091,157
=========== ===========
LIABILITIES
Accounts payable $ 75,247 $ 65,017
Commissions and other trading fees on open contracts 21,600 18,122
Managing Owner brokerage commissions 182,135 160,616
Managing Owner incentive fee 36,442 42,368
Advisor profit shares 0 109,106
Reimbursable offering costs 0 44,975
Redemptions payable 367,457 255,238
Redemption charges payable to Managing Owner 2,334 4,897
Subscription deposits 0 27,720
----------- -----------
Total liabilities 685,215 728,059
----------- -----------
UNITHOLDERS' CAPITAL (NET ASSET VALUE)
Managing Owner -- 2,544.1954 and 2,331.0461 units outstanding
at March 31, 1999 and December 31, 1998 263,401 263,850
Other Unitholders -- 241,395.4867 and 221,745.5512 units
outstanding at March 31, 1999 and December 31, 1998 24,991,734 25,099,248
----------- -----------
Total unitholders' capital
(Net Asset Value) 25,255,135 25,363,098
----------- -----------
$25,940,350 $26,091,157
=========== ===========
</TABLE>
See accompanying notes
1
<PAGE>
KENMAR GLOBAL TRUST
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
------------------
Three Months
Ended
March 31,
1999 1998
----------- -----------
INCOME
Trading gains (losses)
Realized $ (449,037) $ 1,179,902
Change in unrealized (1,179,366) (209,723)
----------- -----------
Gain (loss) from trading (1,628,403) 970,179
Interest income 234,700 187,294
----------- -----------
Total income (loss) (1,393,703) 1,157,473
----------- -----------
EXPENSES
Brokerage commissions 79,211 25,718
Managing Owner brokerage commissions 624,465 337,817
Managing Owner incentive fee 0 22,840
Advisor profit shares 36,442 135,822
Operating expenses 71,961 16,524
----------- -----------
Total expenses 812,079 538,721
----------- -----------
NET INCOME (LOSS) $(2,205,782) $ 618,752
=========== ===========
NET INCOME (LOSS) PER UNIT
(based on weighted average number of
units outstanding during the period) $ (9.61) $ 4.80
=========== ===========
INCREASE (DECREASE) IN NET
ASSET VALUE PER UNIT $ (9.66) $ 3.99
=========== ===========
See accompanying notes.
2
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KENMAR GLOBAL TRUST
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
------------------
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income (loss) $ (2,205,782) $ 618,752
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Increase in net option premiums paid 0 (16,055)
Net change in unrealized 1,179,366 209,723
Decrease in other assets 0 177,369
Increase (decrease) in accounts payable
and accrued expenses (79,805) 102,645
------------ ------------
Net cash from (for) operating activities $ (1,106,221) 1,092,434
------------ ------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units 2,625,258 2,060,373
Decrease in subscription deposits (27,720) (25,720)
Offering costs paid (88,023) (90,339)
Redemption of units (410,015) (310,494)
------------ ------------
Net cash from financing activities 2,099,500 1,633,820
------------ ------------
Net increase in cash 993,279 2,726,254
CASH
Beginning of period 24,871,201 11,754,908
------------ ------------
End of period $ 25,864,480 $ 14,481,162
============ ============
END OF PERIOD CASH CONSISTS OF:
Cash in broker trading accounts $ 13,347,606 $ 12,888,925
Cash 12,516,874 1,592,237
------------ ------------
Total end of period cash $ 25,864,480 $ 14,481,162
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
KENMAR GLOBAL TRUST
STATEMENTS OF CHANGES IN UNITHOLDERS' CAPITAL (NET ASSET VALUE)
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
------------------
<TABLE>
<CAPTION>
Unitholders' Capital
Total --------------------------------------------
Number of Managing Other
Units Owner Unitholders Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Three Months Ended March 31, 1999
Balances at
December 31, 1998 224,076.5973 $ 263,850 $ 25,099,248 $ 25,363,098
Net (loss) for the three months
ended March 31, 1999 (23,000) (2,182,782) (2,205,782)
Additions 24,803.4948 23,000 2,637,538 2,660,538
Redemptions (4,940.4100) 0 (519,671) (519,671)
Offering costs (449) (42,599) (43,048)
------------ ------------ ------------ ------------
Balances at
March 31, 1999 243,939.6821 $ 263,401 $ 24,991,734 $ 25,255,135
============ ============ ============ ============
Three Months Ended March 31, 1998
Balances at
December 31, 1997 123,650.8308 $ 125,970 $ 12,251,351 $ 12,377,321
Net income for the three months
ended March 31, 1998 6,295 612,457 618,752
Additions 20,586.6203 18,400 2,118,253 2,136,653
Redemptions (2,881.4539) 0 (298,977) (298,977)
Offering costs (1,213) (118,104) (119,317)
------------ ------------ ------------ ------------
Balances at
March 31, 1998 141,355.9972 $ 149,452 $ 14,564,980 $ 14,714,432
============ ============ ============ ============
</TABLE>
Net Asset Value Per Unit
----------------------------------------------------------------------
March 31, December 31, March 31, December 31,
1999 1998 1998 1997
---- ---- ---- ----
$103.53 $113.19 $104.09 $100.10
======= ======= ======= =======
See accompanying notes.
4
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
------------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General Description of the Fund
Kenmar Global Trust (the "Fund") is a Delaware business trust.
The Fund is a multi-advisor, multi-strategy commodity pool which
trades in United States (U.S.) and foreign futures, options,
forwards and related markets. The Fund 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
Fund is subject to the regulatory requirements under the
Securities Act of 1933 and the Securities Exchange Act of 1934.
As a commodity pool, the Fund 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 Fund executes transactions.
Additionally, the Fund is subject to the requirements of the
Futures Commission Merchants (FCMs) and interbank market makers
(collectively, "brokers") through which the Fund trades.
C. Method of Reporting
The Fund's financial statements are presented in accordance with
generally accepted accounting principles, which require the use
of certain estimates made by the Fund'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.
D. Income Taxes
The Fund prepares calendar year U.S. and state information tax
returns and reports to the Unitholders their allocable shares of
the Fund's income, expenses and trading gains or losses.
5
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
------------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
E. Organizational and Offering Costs
Organizational and initial offering costs (exclusive of selling
commissions) of approximately $540,000 were advanced to the Fund
by the Managing Owner. Such costs are charged to the Fund and
reimbursed to the Managing Owner at a monthly rate of 0.2% of the
Fund's beginning of month Net Asset Value. As of December 31,
1998, all such organizational and initial offering costs advanced
by the Managing Owner have been charged to unitholders' capital.
Ongoing offering costs are borne by the Fund and are charged
directly to unitholders' capital as incurred.
F. Foreign Currency Transactions
The Fund'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 Fund is Kenmar Advisory Corp., which conducts
and manages the business of the Fund. 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 Fund.
The Managing Owner is paid monthly brokerage commissions equal to 1/12
of 11% (11% annually) of the Fund's beginning of month Net Asset Value.
The Managing Owner, in turn, pays substantially all actual costs of
executing the Fund'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 Fund.
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.
Note 3. COMMODITY TRADING ADVISORS
The Fund has advisory agreements with various commodity trading
advisors pursuant to which the Fund pays quarterly profit shares of 15%
to 20% of Trading Profit (as defined in each advisory agreement).
6
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
------------------
Note 4. DEPOSITS WITH BROKERS
The Fund 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 Fund 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 Fund 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 Fund are subject to early redemption charges
of 3% and 2%, respectively, of the Net Asset Value redeemed. All
redemption charges are paid to the Managing Owner. Such redemption
charges are included in redemptions of unitholders' capital and
amounted to $2,054 and $4,442 during the three months ended March 31,
1999 and 1998, respectively.
Note 6. TRADING ACTIVITIES AND RELATED RISKS
The Fund 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 Fund 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. 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 Fund 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
7
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
------------------
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
institution's insolvency, recovery of Fund assets on deposit may be
limited to account insurance or other protection afforded such
deposits. In the normal course of business, the Fund does not require
collateral from such financial institutions. Since forward contracts
are traded in unregulated markets between principals, the Fund also
assumes the risk of loss from counterparty nonperformance.
For derivatives, risks arise from changes in the market value of the
contracts. Theoretically, the Fund 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 Fund 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 Fund to potentially
unlimited liability, and purchased options expose the Fund 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 three months ended
March 31, 1999 and 1998, and the related fair values as of March 31,
1999 and December 31, 1998, are as follows:
<TABLE>
<CAPTION>
For the Three
Months Ended As of As of
March 31, March 31, December 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Exchange traded futures and
options on futures contracts $ 910,000 $ 850,000 $ 31,000 $ 1,240,000
Forward contracts (50,000) 10,000 10,000 (20,000)
</TABLE>
Net trading results from derivatives for the three months ended March
31, 1999 and 1998, are reflected in the statement of operations and
consists of the gain (loss) from trading less brokerage commissions and
the portion of the Managing Owner brokerage commissions that is payable
to the brokers. For the three months ended March 31, 1999 and 1998, the
net trading gain (loss) from derivatives was approximately $(1,759,000)
and $927,000, respectively. Such trading results reflect the net gain
(loss) arising from the Fund's speculative trading of futures
contracts, options on futures contracts and forward contracts.
8
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
------------------
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
Open contracts generally mature within one year, however, the Fund
intends to close all contracts prior to maturity. The latest maturity
date for open contracts as of March 31, 1999 and December 31, 1998, is
March 2000 and September 1999, respectively. At March 31, 1999 and
December 31, 1998, the notional amount of open contracts is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------------------- ---------------------------
Contracts to Contracts to Contracts to Contract to
Purchase Sell Purchase Sell
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Exchange traded futures contracts:
- Financial instruments $139,800,000 $ 79,800,000 $ 96,900,000 $ 99,000,000
- Metals 10,300,000 12,300,000 4,200,000 11,100,000
- Energy 2,200,000 2,100,000 0 1,800,000
- Agricultural 2,800,000 7,500,000 900,000 9,300,000
- Currencies 6,100,000 22,200,000 6,800,000 6,400,000
Forward Contracts:
- Currencies 4,300,000 7,300,000 4,600,000 2,600,000
------------ ------------ ------------ ------------
$165,500,000 $131,200,000 $113,400,000 $130,200,000
============ ============ ============ ============
</TABLE>
The above amounts do not represent the Fund's risk of loss due to
market and credit risk, but rather represent the Fund'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.
Note 7. INTERIM FINANCIAL STATEMENTS
The statement of financial condition as of March 31, 1999, the
statements of operations, cash flows and changes in unitholders'
capital (net asset value) for the three months ended March 31, 1999
and 1998, are unaudited. In the opinion of management, such financial
statements reflect all adjustments, which were of a normal and
recurring nature, necessary for a fair presentation of financial
position as of March 31, 1999, the results of operations for the
three months ended March 31, 1999 and 1998, and cash flows for the
three months ended March 31, 1999 and 1998.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The proceeds of the offering of the units of beneficial interest (the "Units")
are used by the Fund 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 Fund are deposited with commodity brokers and interbank
dealers (collectively, the "Clearing Brokers") in trading accounts established
by the Fund for the Advisors and are used by the Fund 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.
CAPITAL RESOURCES. The Fund does not have, nor does it expect to have, any
capital assets. Redemptions and sales of the Units in the future will affect the
amount of funds available for trading futures, forwards and options in
subsequent periods.
There are three primary factors that affect the Fund's capital resources: (i)
the trading profit or loss generated by the Advisors (including interest
income); (ii) the capital invested or redeemed by the unitholders of the Fund
(the "Unitholders"); and (iii) the capital invested or redeemed by the Fund's
managing owner, Kenmar Advisory Corp. ("Kenmar"). Kenmar has maintained, and has
agreed to maintain, at all times one percent (1%) interest in the Fund. All
capital contributions by Kenmar necessary to maintain such capital account
balance are evidenced by Units, each of which has an initial value equal to the
Net Asset Value Per Unit (as defined below) at the time of such contribution.
Kenmar, in its sole discretion, may withdraw any excess above its required
capital contribution without notice to the Unitholders. Kenmar, in its sole
discretion, also may contribute any greater amount to the Fund, for which it
shall receive, at its option, additional Units at their then-current Net Asset
Value (as defined below).
"Net Asset Value" is defined as total assets of the Fund less total liabilities
as determined in accordance with generally accepted accounting principles as
described in the Fund's Amended and Restated Declaration of Trust and Trust
Agreement dated as of December 17, 1996 (the "Declaration of Trust Agreement").
The term "Net Asset Value Per Unit" is defined in the Declaration of Trust
Agreement to mean the Net Assets of the Fund divided by the number of Units
outstanding as of the date of determination.
RESULTS OF OPERATIONS. The Fund incurs substantial charges from the payment of
profit shares to the Advisors, incentive fees and brokerage commissions to
Kenmar, miscellaneous execution costs, operating, selling and administrative
expenses. Brokerage commissions are payable based upon the Net Asset Value of
the Fund and are payable without regard to the profitability of the Fund. As a
result, it is possible that the Fund may incur a net loss when trading profits
are not substantial enough to avoid depletion of the Fund's assets from such
fees and expenses. Thus, due to the nature of the Fund's business, the success
of the Fund is dependent upon the ability of the Advisors to generate trading
profits through the speculative trading of futures, forwards and options
sufficient to produce capital appreciation after payment of all fees and
expenses. Until January 31, 1999 the Fund had been reimbursing Kenmar for the
organizational and initial offering costs that it had advanced.
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
Fund can only be discussed in the context of the overall trading activities of
the Fund, the Advisors' trading activities on behalf of the Fund as a whole and
how the Fund has performed in the past.
The Fund commenced trading operations on May 22, 1997. Set forth below are the
results of operations of the Fund for the three months ended March 31, 1999 and
1998.
10
<PAGE>
As of March 31, 1999, the Net Asset Value of the Fund was $25,255,135, a
decrease of approximately 0.43% from its Net Asset Value of $25,363,098 at
December 31, 1998. The Fund's subscriptions and redemptions for the quarter
ended March 31, 1999 totaled $2,660,538 and $519,671, respectively. For the
quarter ended March 31, 1999, the Fund had income comprised of $(449,037) in
realized trading losses, $(1,179,366) in change in unrealized trading losses and
$234,700 in interest income compared to income comprised of $1,179,902 in
realized trading gains, $(209,723) in change in unrealized trading losses, and
$187,294 in interest income for the same period in 1998. For the first quarter
of 1999 the Fund experienced a net income loss of $(2,205,782) compared to net
income gain of $618,752 from the same period in 1998, while total expenses
increased by $273,358 between these periods. The Net Asset Value Per Unit at
March 31, 1999 decreased 8.53% from $113.19 at December 31, 1998 to $103.53 at
March 31, 1999. The Fund's negative performance for the quarter ended March 31,
1999 resulted primarily from European and Pacific Rim interest rates, currencies
and metals.
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. Units may be redeemed, at a Unitholder's option, as of the close of
business on the last day of any month beginning with the end of the sixth month
after their sale. Units are redeemed at Net Asset Value, subject to redemption
charges of 3% and 2%, respectively, for Units redeemed on and after the end of
the sixth month through the end of the twelfth month after sale and from the end
of the twelfth month through the end of the eighteenth month after sale.
With respect to the Fund's trading, in general, the Fund's Advisors will
endeavor to trade only futures, forwards 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 its
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 Fund is trading,
whether such illiquidity is caused by any of the above reasons or otherwise, the
Fund 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 Fund to make or take delivery of the underlying interest of the
commodity.
In addition, certain Advisors trade on futures markets outside the United States
on behalf of the Fund. Certain foreign exchanges may be substantially more prone
to periods of illiquidity than United States exchanges. Further, certain
Advisors trade forward contracts which are not traded on exchanges; rather banks
and dealers act as principals in these markets. The Commodity Futures Trading
Commission does not regulate trading on non-U.S. futures markets or in forward
contracts.
YEAR 2000 COMPLIANCE. Many computer systems were designed using only two digits
to designate years. These systems may not be able to distinguish the Year 2000
from the Year 1900 (commonly known as the "Year 2000 Problem"). Like other
investment funds and financial business organizations, the Fund could be
adversely affected if the computer systems used by Kenmar or the Fund's service
providers do not properly address this problem prior to January 1, 2000.
Currently, Kenmar does not anticipate that the transition to the 21st century
will have any material effect on the Fund.
Kenmar has established a "Y2K Task Force" consisting of representatives of its
information technology, research, accounting, compliance and trading departments
to specifically address all Year 2000 issues in a timely manner. Actions taken
have included an analysis of all in-house software and hardware to determine
Year 2000 compliance.
11
<PAGE>
Kenmar is currently in the process of requesting confirmation from all third
parties with which it and the Fund have a material relationship that said
parties have taken the same actions. In-house compliance for all
mission-critical software is in progress. Testing of corrected software has
already begun. Contingency plans are being established for all non-mission
critical systems. No direct costs have been or are expected to be incurred in
addressing the Year 2000 Problem. Kenmar has addressed all of the issues as a
part of their ongoing operations, so the Fund will not be required to reimburse
Kenmar for any expenses incurred.
Despite the corrective measures that Kenmar has implemented, no assurance can be
given that the Fund's service providers have anticipated every step necessary to
avoid any adverse effect on the Fund attributable to the Year 2000 Problem. A
most likely worst case scenario would be one in which trading of contracts on
behalf of the Fund becomes impossible as a result of the Year 2000 Problem.
Kenmar would be able to assess such a situation in advance of the December 31,
1999 deadline and either liquidate all positions prior to that date and/or
establish relationships with additional counterparties. Further, prospective
Investors should understand that the failure of third parties, such as futures
exchanges, clearing organizations or regulators, to resolve the Year 2000
Problem in a timely manner could result in a material financial risk to the
Fund.
SAFE HARBOR STATEMENT. The discussion above contains certain forward-looking
statements (as such term is defined in the rules promulgated under the
Securities Exchange Act of 1934) that are based on the beliefs of the Fund, as
well as assumptions made by, and information currently available to, the Fund. A
number of important factors should cause the Fund's actual results, performance
or achievements for 1999 and beyond to differ materially from the results,
performance or achievements expressed in, or implied by, such forward-looking
statements. These factors include, without limitation, the factors described
above.
12
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Derivative instruments involve varying degrees of off-balance sheet market risk
and changes in the level or volatility of interest rates, foreign currency
exchange rates or the market values of the financial instruments or commodities
underlying such derivative instruments frequently result in the changes in the
Fund's unrealized profit (loss) on such derivative instruments as reflected in
the Statements of Financial Condition. The Fund's exposure to market risk is
influenced by a number of factors, including the relationships among derivative
instruments held by the Fund as well as the volatility and liquidity of the
markets in which the financial instruments are traded.
Kenmar has procedures in place intended to control the Fund's exposure to market
risk, although there can be no assurance that they will, in fact, succeed in
doing so. These procedures focus primarily on monitoring the trading of the
Advisors selected from time to time for the Fund, calculating the Net Asset
Value of the Advisors respective Fund accounts as of the close of business on
each day and reviewing outstanding positions for over-concentrations - both on
an Advisor-by-Advisor and on an overall Fund basis. While Kenmar will not itself
intervene in the markets to hedge or diversify the Fund's market exposure,
Kenmar may urge Advisors to reallocate positions, or itself reallocate Fund
assets among Advisors (although typically only as of the end of a month) in an
attempt to avoid over-concentrations. However, such interventions would be
unusual. Except in cases in which it appears that an Advisor has begun to
deviate from past practice or trading policies or to be trading erratically,
Kenmar's basic risk control procedures consist of the ongoing process of Advisor
monitoring and selection, with the market risk controls being applied by the
Advisors themselves.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
On December 17, 1996, the Fund commenced offering Units in a public offering
under the Securities Act of 1933. The Fund commenced trading operations on May
22, 1997. Units are offered at Net Asset Value as of the last day of each month.
The minimum investment is $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
$2,000. Investments in excess of these minimums are permitted in $100
increments.
During the first quarter of 1999, 24,803.5 Units were sold for a total of
$2,660,538.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS.
Financial Data Schedule.
B. REPORTS ON FORM 8-K.
None.
SIGNATURES
Pursuant to the requirements 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.
KENMAR GLOBAL TRUST
By Kenmar Advisory Corp., managing owner
Dated: May __, 1999 By: /s/ Robert L. Cruikshank
------------------------
Robert L. Cruikshank
Executive Vice President
(Duly Authorized Officer of Kenmar)
Dated: May __, 1999 By: /s/ Thomas J. DiVuolo
---------------------
Thomas J. DiVuolo
Senior Vice President
(Principal Financial and Accounting
Officer of the Registrant)
14
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<PERIOD-END> MAR-31-1999
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