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, 1998
Commission File Number 333-8869
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KENMAR GLOBAL TRUST
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(Exact name of registrant as specified in its charter)
DELAWARE 06-6429854
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Two American Lane, P.O. Box 5150, Greenwich, Connecticut 06831
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(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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TABLE OF CONTENTS
Page
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PART I
Item 1. Business....................................................... 1
Item 2. Properties..................................................... 7
Item 3. Legal Proceedings.............................................. 7
Item 4. Submission of Matters to a Vote of Security Holders............ 7
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters............................................ 8
Item 6. Selected Financial Data........................................ 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..... 11
Item 8. Financial Statements and Supplementary Data.................... 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................ 11
PART III
Item 10. Directors and Executive Officers of the Registrant............. 12
Item 11. Executive Compensation......................................... 13
Item 12. Security Ownership of Certain Beneficial Owners and
Management..................................................... 13
Item 13. Certain Relationships and Related Transactions................. 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.................................................... 15
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PART I
Item 1. Business
(a) General Development of Business:
Kenmar Global Trust (the "Fund") is a Delaware business trust that operates as a
commodity investment pool. The Fund was formed on July 17, 1996 and commenced
trading on May 22, 1997. The Fund maintains its principal office at Two American
Lane, P.O. Box 5150, Greenwich, Connecticut 06831, with a telephone number of
(203) 861-1000. The proceeds of the offering of 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.
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
$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. 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 Fund'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 Fund itself does not have any employees. Rather, Kenmar employs 38 persons
(as of March 15, 1999) and provides the Fund with the services of research,
client support (marketing) and management information systems and analysis
personnel to conduct its operational activities.
The Fund is managed by Kenmar. Kenmar: (i) selects the Fund's Clearing Brokers
and Selling Agents and selects and monitors the Advisors; (ii) allocates and/or
reallocates Fund 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 Fund may from time to time
require.
(b) Financial Information about Industry Segments:
The Fund'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
Fund'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 Fund 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 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
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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 Fund as of March 15, 1999.
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).
HIRST INVESTMENT MANAGEMENT INC.
Hirst Investment Management Inc. trades a diversified portfolio pursuant to its
DSP Trading System (the "System"). The System is a technical methodology which
uses information generated by the market itself, such as prices, volume and open
interest. It ignores "fundamental" data, such as news, politics, and weather,
except as these factors are reflected in the markets. The methodology and the
algorithms used are original work and are not derived from any other known
trading methodology. Hirst Investment Management Inc. may trade futures on any
and all U.S. and non-U.S. commodities including, but not limited to, financials,
currencies, interest-rate contracts, metals, livestock, grains, stock indices,
energies, softs, fiber and foods. Hirst Investment Management Inc. may also
trade the interbank foreign exchange markets and cash commodities and may effect
exchanges of futures for physicals (EFP) transactions.
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 Fund, 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.
SUNRISE CAPITAL PARTNERS, LLC
Sunrise Capital Partners, LLC will trade its Expanded Diversified Program on
behalf of the Fund. Sunrise Capital Partners, LLC utilizes technical
trend-following systems trading a wide continuum of time windows. Relying on
technical analysis Sunrise Capital Partners, LLC believes that future price
movements in all markets may be more accurately anticipated by analyzing
historical price movements within a quantitative framework rather attempting to
predict or forecast changes in price through fundamental economic analysis. The
trading methodologies employed by Sunrise Capital Partners LLC are based on
programs analyzing a large number of interrelated mathematical and statistical
formulas and techniques which are quantitative, proprietary in nature and which
have been either learned or developed by principals of Sunrise Capital Partners,
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LLC. Sunrise Capital Partners, LLC's trading system consists of multiple,
independent and parallel systems, each designed and tested to seek out and
extract different market inefficiencies on different time horizons.
WILLOWBRIDGE ASSOCIATES INC.
Willowbridge Associates Inc. utilizes its XLIM Trading Approach on behalf of the
Fund. 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.
USE OF PROCEEDS
The proceeds of the offering of 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 the Advisors.
To the extent the Fund trades in futures contracts on U.S. exchanges, the assets
deposited by the Fund 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 Fund 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 56% of the Net Asset Value of the Fund will be
placed with the Clearing Brokers 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;
(ii) up to approximately 5% of the Fund's assets will be used to
margin foreign futures contracts; and
(iii) approximately 39% in bank deposits.
In addition, assets of the Fund not required to margin positions may be
maintained in United States bank accounts opened in the name of the Fund and may
be held in United States Treasury bills (or other securities approved by the
CFTC for investment of customer funds).
The Fund receives all of the interest income earned on its assets.
"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 Fund.
The Fund's capitalization does not directly affect the level of its charges as a
percentage of Net Asset Value, as the Fund 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 Fund's equity, whatever its size), other than administrative
expenses (which are
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assumed in the "Breakeven Table" to equal the maximum estimated percentage of
the Fund'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.
<TABLE>
<CAPTION>
"BREAKEVEN TABLE"
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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) 1.0% $ 50.00
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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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Redemption Charge (7) 3.10% $ 155.00
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Interest Income (8) (4.6)% $(230.00)
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RETURN ON $5,000 INITIAL INVESTMENT REQUIRED FOR "BREAK
EVEN" IF UNITS ARE REDEEMED ON OR BEFORE THE 12TH MONTH- 12.9% $ 645.00
END FOLLOWING SALE.
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RETURN ON $5,000 INITIAL INVESTMENT REQUIRED FOR "BREAK
EVEN" IF UNITS ARE REDEEMED ON THE 13TH MONTH-END 11.84% $ 592.00
THROUGH THE 18TH MONTH-END FOLLOWING SALE.
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RETURN ON $5,000 INITIAL INVESTMENT REQUIRED FOR "BREAK
EVEN" IF UNITS ARE REDEEMED AFTER THE 18TH MONTH-END 9.80% $ 490.00
FOLLOWING SALE.
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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 Fund.
(5) Profit Shares are calculated quarterly on the basis of each Advisor's
individual performance, not the overall performance of the Fund.
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) 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.
(8) Interest income is estimated based on current rates.
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DESCRIPTION OF CURRENT CHARGES
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
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Kenmar Brokerage commissions Flat-rate monthly commissions of 0.917%
of the Fund's beginning of month Net
Assets (an 11% annual rate). Such
commissions cover all floor brokerage,
exchange, clearing and NFA fees
incurred in the Fund's trading.
Third Parties Miscellaneous Paid as incurred; not anticipated to
execution costs exceed 0.25% of average beginning of
month Net Assets per year.
Counterparties "Bid-ask" spreads Each counterparty with which the Fund
trades receives "bid-ask" spreads on
the forward trades executed on behalf
of the Fund.
Advisors Profit Shares Paid by the Fund 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
FUND. 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.
Kenmar Incentive Fee Paid by the Fund 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 Operating, Selling and Paid as incurred; not anticipated to
Administrative costs exceed 1.0% of the Fund's average
beginning of month Net Assets per year.
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 Fund itself is generally not
subject to regulation by the Securities and Exchange Commission.
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ITEM 2. PROPERTIES
The Fund does not use any physical properties in the conduct of its business.
The Fund'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 Fund or Kenmar is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Fund has never submitted any matters to a vote of its Unitholders.
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PART II
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, 1998, there were 838 holders of Units, including Kenmar
and the Advisors. As of December 31, 1998, Robert L. Cruikshank owned 1,000
Units, Marc S. Goodman owned 52.8321 Units in his individual retirement
account and Kenmar owned 2,333.0461 Units.
(c) Dividends:
The Fund 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 Fund has been derived from the
Fund's audited financial statements
<TABLE>
<CAPTION>
Year ended Year ended Period Ended
December 31, 1998 December 31, 1997 December 31, 1996
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<S> <C> <C> <C>
Operations Data
Realized Gains (Losses) ...................... $ 4,443,190 $ (162,443) $ 0
Change in Unrealized ......................... 381,635 838,321 0
Interest Income .............................. 750,290 293,033 0
Brokerage Commissions ........................ 147,779 45,814 0
Managing Owner Brokerage Commissions ......... 1,652,458 631,403 0
Managing Owner Incentive fee ................. 43,400 0 0
Advisor Profit Shares ........................ 984,809 106,886 0
Operating Expenses ........................... 134,568 58,398 0
Net Income ................................... 2,612,101 126,410 0
Net income Per Unit (Based on Weighted
Average Number of Units Outstanding) ....... 16.96 1.24 0
Increase in Net Asset Value per Unit ......... 13.09 0.10 0
12/31/98 12/31/97 12/31/96
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Financial Position Data:
Managing Owner's Capital ..................... $ 263,850 $ 125,970 $ 400
Other Unitholders' Capital ................... 25,099,248 12,251,351 1,600
Total Capital ................................ 25,363,098 12,377,321 2,000
Net Asset Value Per Unit ..................... 113.19 100.10 100.00
</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 Fund to engage in the
speculative trading on futures, forward, options and related markets through
allocating such proceeds to the Advisors. The assets of the Fund are deposited
with 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.
Results of Operations.
The Fund 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
Fund. 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, forward and option contracts sufficient to
produce capital appreciation after payment of all fees and expenses.
The following paragraph presents a summary of the Fund's operations for the
calendar year 1998. 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.
As of December 31, 1998, the Net Asset Value of the Fund was $25,363,098, an
increase of approximately 104.92% from its Net Asset value of $12,377,321 at
December 31, 1997. The Fund's subscriptions and redemptions for the year ended
December 31, 1998 totaled $13,497,520 and $2,401,065, respectively. For the year
ended December 31, 1998, the Fund had revenues comprised of $4,443,190 in
realized trading gains, $381,635 in change in unrealized trading gains and
$750,290 in interest income. Total expenses for the year ended December 31, 1998
were $2,963,014. The Net Income for the year ended December 31, 1998 was
$2,612,101. The Net Asset Value per Unit at December 31, 1998 increased 13.08%
from $100.10 at December 31, 1997 to $113.19 at December 31, 1998. The Fund's
trading gains during 1998 resulted primarily from global interest rates and
global stock indices.
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, 1997 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,
energies 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.
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The amount of capital raised for the Fund should not, except at extremely high
levels of capitalization, have a significant impact on its operations. The
Fund'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 Fund's account managed by each of them, respectively.
The Fund raises additional capital only through the continuous offering of its
Units.
Inflation per se is not a significant factor in the Fund'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 Fund's
performance.
With respect to the Fund's trading, in general the Fund's Advisors will 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 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 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 highly unusual circumstances, market illiquidity could make it difficult for
certain Advisors to close out open positions, and any such illiquidity could
expose the Fund to significant losses, or cause it to be unable to recognize
unrealized gains. However, in general, there is no meaningful difference between
the Fund'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 Fund 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 longer being
maintained.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements meeting the requirements of Regulation S-X appear beginning
on Page 25 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.
-11-
<PAGE>
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 Fund. 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 45, 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 50, 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 46, 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 62, 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.
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
-12-
<PAGE>
hold directorships in the following entities, all of which are affiliates of
Kenmar: Kenmar Asset Allocation Inc., Kenmar Global Strategies Inc., Kenmar
Holdings Inc., Kenmar Investment Adviser Corp., Kenmar Securities, Inc. and
Kenmar Global Investment Management Inc. In addition, Mr. Shewer is a director
of KAS Commodities Inc., Mr. Goodman is a director of MSG Commodities Inc. and
both are managing members of Select Advisors L.L.C. and Kenmar Greenwich
Holdings LLC.
(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 Fund.
ITEM 11. EXECUTIVE COMPENSATION
The Fund has no directors or executive officers. The business of the Fund is
managed by Kenmar which is responsible for the administration of the business
affairs of the Fund 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, 1998, no person or "group" is known to be or has been the
beneficial owner of more than five percent of the Units.
(b) Security Ownership of Management:
As of December 31, 1998, the following officers of Kenmar beneficially owned the
following number of Units:
Number of Percent
Name of Beneficial Owner Units Owned of Class
------------------------ ----------- --------
Robert L. Cruikshank 1,000 Less than 1%
Marc S. Goodman 52.8321 Less than 1%
As of December 31, 1998, Kenmar has purchased and will maintain a 1% interest in
the Fund in its capacity as managing owner.
(c) Changes in Control:
None.
-13-
<PAGE>
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 Fund pays its own administrative expenses.
(b) Certain Business Relationships:
None.
(c) Indebtedness of Management:
The Fund is prohibited from making any loans, to management or otherwise.
(d) Transactions with Promoters:
Not Applicable.
-14-
<PAGE>
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. Affirmation of the Commodity Pool Operator......................... -ii-
Independent Auditor's Report....................................... -iii-
Statements of Financial Condition as of December 31, 1998 and 1997. F-1
Statements of Operations for the years ended December 31, 1998
and 1997 and for the period July 17, 1996 (inception) to
December 31, 1996 ............................................... F-2
Statements of Cash Flows for the years ended December 31, 1998
and 1997 and for the period July 17, 1996 (inception) to
December 31, 1996................................................ F-3
Statements of changes in Unitholders' Capital (Net Asset Value)
for the years ended December 31, 1998 and 1997 and for the
Period July 17, 1996 (inception) to December 31, 1996.......... F-4
Notes to Financial Statements.................................... F-5-F-9
2. Financial Data Schedule
3. The following exhibits are filed with this Report or
incorporated by reference in the Prospectus dated July 1, 1998
included within the Registration Statement on Form S-1 (File
No. 333-8869):
1.01 Form of Selling Agreement
1.02 Amendment No. 1 to Selling Agreement
3.01 Certificate of Formation of the Registrant
3.02 Declaration of Trust and Trust Agreement of the Registrant
3.03 Amended and Restated Declaration of Trust and Trust Agreement
10.01 Form of Advisory Agreement
10.02 Form of Customer Agreement between the Fund and the Commodity
Brokers
10.03 Form of Escrow Agreement
10.04 Subscription Agreement and Power of Attorney
(b) Reports on Form 8-K:
The Fund did not file any reports on Form 8-K during the fourth quarter of
1998.
-15-
<PAGE>
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 25th day of March,
1999.
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 25th day of March, 1999.
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 Fund)
KENMAR GLOBAL TRUST
ANNUAL REPORT
December 31, 1998
<PAGE>
KENMAR GLOBAL TRUST
TABLE OF CONTENTS
PAGE
----
Affirmation of the Commodity Pool Operator............................... -ii-
Independent Auditor's Report............................................. -iii-
Financial Statements
Statements of Financial Condition
December 31, 1998 and 1997............................................ F-1
Statements of Operations For the Years
Ended December 31, 1998 and 1997 and For the Period
July 17, 1996 (inception) to December 31, 1996........................ F-2
Statements of Cash Flows For the Years
Ended December 31, 1998 and 1997 and For the Period
July 17, 1996 (inception) to December 31, 1996........................ F-3
Statements of Changes in Unitholders' Capital (Net Asset Value)
For the Years Ended December 31, 1998 and 1997 and For the Period
July 17, 1996 (inception) to December 31, 1996........................ F-4
Notes to Financial Statements........................................ F-5-F-9
-i-
<PAGE>
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, 1998 is accurate
and complete.
/s/MARC S. GOODMAN
--------------------------
Marc S. Goodman, President
Kenmar Advisory Corp.
KENMAR GLOBAL TRUST
-ii-
<PAGE>
ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
(410) 821-8000
FAX (410) 321-8359
Member:
AMERICAN INSTITUTE OF Suite 200
CERTIFIED PUBLIC ACCOUNTANTS
SEC Practice Section 201 International Circle
Maryland Association of Hunt Valley, Maryland 21030
Certified Public Accountants
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, 1998 and 1997, and the related statements of
operations, cash flows and changes in unitholders' capital (net asset value) for
the years ended December 31, 1998 and 1997 and for the period July 17, 1996
(inception) to December 31, 1996. These financial statements are the
responsibility of the Fund'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, 1998 and 1997, and the results of its operations, cash flows and
the changes in its net asset values for the years ended December 31, 1998 and
1997 and for the period July 17, 1996 (inception) to December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Arthur F. Bell, Jr. & Associates, L.L.C.
Hunt Valley, Maryland
March 1, 1999
-iii-
<PAGE>
KENMAR GLOBAL TRUST
STATEMENTS OF FINANCIAL CONDITION
December 31, 1998 and 1997
----------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Equity in broker trading accounts
Cash .................................................. $14,288,556 $11,166,621
Net option premiums paid .............................. 0 12,165
Unrealized gain on open contracts ..................... 1,219,956 838,321
----------- -----------
Deposits with brokers .............................. 15,508.512 12,017,107
Cash ..................................................... 10,582,645 588,287
Other assets ............................................. 0 177,369
----------- -----------
Total assets ....................................... $26,091,157 $12,782,763
=========== ===========
LIABILITIES
Accounts payable ......................................... $ 65,017 $ 24,489
Commissions and other trading fees on open contracts ..... 18,122 6,831
Managing Owner brokerage commissions ..................... 160,616 89,492
Managing Owner incentive fee ........................... 42,368 0
Advisor profit shares .................................... 109,106 54,575
Reimbursable offering costs .............................. 44,975 23,058
Redemptions payable ...................................... 255,238 176,774
Redemption charges payable to Managing Owner ............. 4,897 4,503
Subscription deposits .................................... 27,720 25,720
----------- -----------
Total liabilities .................................. 728,059 405,442
----------- -----------
UNITHOLDERS' CAPITAL (NET ASSET VALUE)
Managing Owner - 2,331.0461 and 1,258.4577 units
outstanding at December 31, 1998 and 1997 .............. 263,850 125,970
Other Unitholders - 221,745.5512 and 122,392.3731 units
outstanding at December 31, 1998 and 1997 .............. 25,099,248 12,251,351
----------- -----------
Total unitholders' capital (Net Asset Value)........ 25,363,098 12,377,321
----------- -----------
$26,091,157 $12,782,763
=========== ===========
</TABLE>
See accompanying notes.
-F-1-
<PAGE>
KENMAR GLOBAL TRUST
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998 and 1997 and
For the Period July 17, 1996 (inception) to December 31, 1996
<TABLE>
<CAPTION>
Year Ended Year Ended Period Ended
December 31, December 31, December 31,
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
INCOME
Trading gains (losses)
Realized ..................... $4,443,190 $ (162,443) $ 0
Change in unrealized ......... 381,635 838,321 0
---------- ---------- ----------
Gain from trading ......... 4,824,825 675,878 0
Interest income ....................... 750,290 293,033 0
---------- ---------- ----------
Total income .............. 5,575,115 968,911 0
---------- ---------- ----------
EXPENSES
Brokerage commissions ................. 147,779 45,814 0
Managing Owner brokerage commissions .. 1,652,458 631,403 0
Managing Owner incentive fee .......... 43,400 0 0
Advisor profit shares ................. 984,809 106,886 0
Operating expenses .................... 134,568 58,398 0
---------- ---------- ----------
Total expenses ............ 2,963,014 842,501 0
---------- ---------- ----------
NET INCOME ................ $2,612,101 $ 126,410 $ 0
========== ========== ==========
NET INCOME PER UNIT
(based on weighted average number of
units outstanding during the period)... $ 16.96 $ 1.24 $ 0.00
========== ========== ==========
INCREASE IN NET ASSET
VALUE PER UNIT ........................ $ 13.09 $ 0.10 $ 0.00
========== ========== ==========
</TABLE>
See accompanying notes.
-F-2-
<PAGE>
KENMAR GLOBAL TRUST
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998 and 1997 and
For the Period July 17, 1996 (inception) to December 31, 1996
----------
<TABLE>
<CAPTION>
Year Ended Year Ended Period Ended
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income .............................................. $ 2,612,101 $ 126,410 $ 0
Adjustments to reconcile net income to net
cash from (for) operating activities:
(Increase) decrease in net option premiums paid .... 12,165 (12,165) 0
Net change in unrealized ........................... (381,635) (838,321) 0
(Increase) decrease in other assets ................ 177,369 (177,369) 0
Increase in accounts payable and accrued expenses... 219,842 175,387 0
------------ ------------ ------------
Net cash (for) operating activities ............. 2,639,842 (726,058) 0
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units ....................................... 13,497,520 12,847,562 2,000
Increase in subscription deposits ....................... 2,000 25,720 0
Offering costs paid ..................................... (700,862) (124,706) 0
Redemption of units ..................................... (2,322,207) (269,610) 0
------------ ------------ ------------
Net cash from financing activities .............. 10,476,451 12,478,966 2,000
------------ ------------ ------------
Net increase in cash ....................................... 13,116,293 11,752,908 2,000
CASH
Beginning of period ..................................... 11,754,908 2,000 0
------------ ------------ ------------
End of period ........................................... $ 24,871,201 $ 11,754,908 $ 2,000
============ ============ ============
END OF PERIOD CASH CONSISTS OF:
Cash in broker trading accounts ......................... $ 14,288,556 $ 11,166,621 $ 0
Cash .................................................... 10,582,645 588,287 2,000
------------ ------------ ------------
Total end of period cash ........................ $ 24,871,201 $ 11,754,908 $ 2,000
============ ============ ============
</TABLE>
See accompanying notes.
-F-3-
<PAGE>
KENMAR GLOBAL TRUST
STATEMENTS OF CHANGES IN UNITHOLDERS' CAPITAL (NET ASSET VALUE)
For the Years Ended December 31, 1998 and 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
Net income for the year ....... 26,933 2,585,168 2,612,101
ended December 31, 1998
Additions ..................... 123,109.1508 118,400 13,379,120 13,497,520
Redemptions ................... (22,683.3843) 0 (2,401,065) (2,401,065)
Offering costs ................ (7,435) (715,326) (722,779)
------------ ------------ ------------ ------------
Balances at
December 31, 1998 .......... 224,076.5973 $ 263,850 $ 25,099,248 $ 25,363,098
============ ============ ============ ============
<CAPTION>
Net Asset Value Per Unit
----------------------------------------
December 31,
----------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
$113.19 $100.10 $100.00
======= ======= =======
</TABLE>
See accompanying notes.
-F-4-
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS
----------
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.
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 unitholders' capital
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-5-
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note. 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. For the year ended
December 31, 1998 and for the period May 22, 1997 (commencement of
trading) to December 31, 1997, brokerage commissions equated to an
approximate round-turn equivalent rate of $84 and $92, respectively.
Such approximate round-turn equivalent brokerage commission rate will
vary depending on the frequency of trading by the Fund'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.
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).
Note 4. DEPOSITS WITH BROKERS
The Fund deposits cash 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
-F-6-
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note 5. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS (CONTINUED)
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 $51,752 and $12,592 during 1998 and
1997, 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. 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 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 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.
-F-7-
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
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 year ended December
31, 1998 and for the period May 22, 1997 (commencement of trading) to
December 31, 1997 and the related fair values as of December 31, 1998
and 1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------- -------------------------
Average Year End Average Period End
Fair Value Fair Value Fair Value Fair value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Exchange traded futures and
options on futures contracts $1,050,000 $1,240,000 $440,000 $847,000
Forward contracts 20,000 (20,000) 30,000 3,000
</TABLE>
Net trading results from derivatives for the years ended December 31,
1998 and 1997, are reflected in the statement of operations and consist
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 years ended December 31, 1998 and 1997, the net trading gain
from derivatives was approximately $4,564,000 and $595,000,
respectively. Such trading results reflect the net gain arising from the
Fund's speculative trading of futures contracts, options on futures
contracts and forward contracts.
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 at December 31, 1998 and 1997 is September 1999
and June 1998, respectively. At December 31, 1998 and 1997, the notional
amount of open contracts is as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
Contracts to Contracts to Contracts to Contracts to
Purchase Sell Purchase Sell
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Exchange traded futures contracts
and written options thereon:
- Financial instruments .............. $ 96,900,000 $ 99,000,000 $ 44,900,000 $ 16,300,000
- Metals ............................. 4,200,000 11,100,000 1,800,000 3,700,000
- Energy ............................. 0 1,800,000 0 1,100,000
- Agricultural ....................... 900,000 9,300,000 1,500,000 2,800,000
- Currencies ......................... 6,800,000 6,400,000 15,300,000 18,800,000
Forward Contracts:
- Currencies ........................ 4,600,000 2,600,000 0 700,000
------------ ------------ ------------ ------------
$113,400,000 $130,200,000 $ 63,500,000 $ 43,400,000
============ ============ ============ ============
Exchange traded purchased options
on futures contracts:
- Financial instruments ............. 0 0 $ 3,400,000 $ 0
- Currencies ........................ 0 0 0 1,400,000
------------ ------------ ------------ ------------
$ 0 $ 0 $ 3,400,000 $ 1,400,000
============ ============ ============ ============
</TABLE>
-F-8-
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED)
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 market
risks and minimize 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.
-F-9-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 10,582,645
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,091,157
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,091,157
<CURRENT-LIABILITIES> 728,059
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 26,091,157
<SALES> 0
<TOTAL-REVENUES> 5,575,115
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,963,014
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,612,101
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,612,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,612,101
<EPS-PRIMARY> 16.96
<EPS-DILUTED> 16.96
</TABLE>
