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, 1999
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 of (I.R.S. Employer Identification No.)
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
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Page
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PART I
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Item 1. Business......................................................... 1
Item 2. Properties....................................................... 6
Item 3. Legal Proceedings................................................ 6
Item 4. Submission of Matters to a Vote of Security Holders.............. 6
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.............................................. 6
Item 6. Selected Financial Data.......................................... 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 7
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...... 13
Item 8. Financial Statements and Supplementary Data...................... 13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............................. 13
PART III
Item 10. Directors and Executive Officers of the Registrant............... 13
Item 11. Executive Compensation........................................... 14
Item 12. Security Ownership of Certain Beneficial Owners and
Management....................................................... 14
Item 13. Certain Relationships and Related Transactions................... 15
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K...................................................... 15
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i
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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 of futures, forward, options and related
contracts 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) existing holders of Units
("Unitholders") subscribing for additional Units, in which case 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 is filed with the National Futures Association (the "NFA") and the
Commodity Futures Trading Commission (the "CFTC") in compliance with such
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 47 persons
(as of March 15, 2000) 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
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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.
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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 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 and responds to 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
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Set forth below is a brief description of the portfolio of core-Advisors trading
for the Fund as of March 15, 2000.
BRIDGEWATER ASSOCIATES, INC.
Bridgewater Associates, Inc. will trade its Aggressive Pure Alpha Give-Up
Futures Only system on behalf of the Fund. The Aggressive Pure Alpha Give-Up
Futures Only system is substantially similar to Bridgewater Associates Inc.'s
Aggressive Pure Alpha Futures Only system. The principal difference is in
certain of the products traded. The Aggressive Pure Alpha Futures Only system
trades futures contracts on some equity markets which cannot be given up to the
designated clearing broker. These include contracts on the IBEX, TOPIX, OMLX and
MIB-30. Capital allocated to these markets will be reallocated to other markets
in an attempt to realize the same overall portfolio return.
GRINHAM MANAGED FUTURES PTY. LTD.
Grinham Managed Futures Pty. Ltd. is an Australian commodity trading advisor
utilizing an automated, technical trading system. The basic premise of the
system is that markets incorporate a random and non-random component. The
Grinham Managed Futures Pty. Ltd. system is designed to identify when markets
begin to move in a non-random fashion and to generate orders to profit from
non-random price movements. Grinham Managed Futures Pty. Ltd. trades 37 markets
across 7 countries, incorporating most of the major stock indices, interests
rate, currency and commodities markets. Risk control is a major fundamental of
the system, utilizing diversification to limit the risk of any single trade to
less than of the assets under management.
SUNRISE CAPITAL PARTNERS, LLC
Sunrise Capital Partners, LLC trades 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 than 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, 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.
2
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TRANSTREND B.V.
In its Diversified Program, Transtrend B.V. applies a combination of well
researched trading systems. Each trading system has a demonstrated profit
expectancy over the course of time. In particular, the trading systems attempt
to exploit non-random price behaviors based on quantitative analysis of
(typical) price patterns. The trading systems are consistent, systematic and
applied with skill and discipline.
The systems can be applied to well over a hundred different product-market
combinations traded on approximately fifty exchanges in approximately
twenty-five countries. Diversified portfolios consist of a variety of futures
broadly spread over interest instruments, stock indices, tangible commodities
and foreign exchange pairs.
Correlation analysis contributes to a desired portfolio balance. Volatility
analysis plays a prominent role in the assessment of risk. Compatibility between
trading systems and the markets they are applied to is monitored closely.
Multiple entries and exits contribute to the desired stability of returns.
Use of Proceeds
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The proceeds of the offering of the Units are used by the Fund to engage in the
speculative trading of futures, forward, options and related contracts, 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 Fund's assets 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% of the Fund's assets will comprise 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
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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 on or before the 12th month-end following sale
and, therefore, are subject to a 3% redemption charge). Redemptions on the 13th
month-end through the 18th month-end are subject to a 2% charge. Redemptions
after the 18th month-end are redeemed at Net Asset Value (no charge).
3
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The "Breakeven Table," as presented, is an approximation only and 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, other than
administrative expenses (which are assumed in the "Breakeven Table" to equal the
maximum estimated percentage of the Fund's average beginning of month Net
Assets). See "Description of Current Charges" below for an explanation of these
charges.
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DOLLAR RETURN
PERCENTAGE RETURN REQUIRED
EXPENSES (1) REQUIRED ($5,000 INITIAL INVESTMENT)
WHICH MUST BE OFFSET FIRST TWELVE MONTHS FIRST TWELVE MONTHS
TO "BREAK EVEN" OF INVESTMENT OF INVESTMENT
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Brokerage Commissions (2) ................................... 11.00% $550.00
Administrative Expenses (3) ................................. 1.00% $50.00
Miscellaneous Execution Costs (4) ........................... 0.25% $12.50
Advisors' Profit Shares (5) ................................. 2.00% $100.00
Kenmar Incentive Fee (6) .................................... 0.15% $7.50
Redemption Charge (7) ....................................... 3.10% $155.00
Interest Income (8) ......................................... (5.09)% $(254.50)
Return on $5,000 initial investment required for "break
even" if Units are redeemed on or before the 12th month-end
following sale............................................... 12.41% $620.50
Return on $5,000 initial investment required for "break
even" if Units are redeemed on the 13th month-end through the
18th month-end following sale................................ 11.35% $567.50
Return on $5,000 initial investment required for "break
even" if Units are redeemed after the 18th month-end
following sale............................................... 9.31% $465.50
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Notes to "Breakeven Table"
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1. The foregoing break-even analysis assumes that the Units have a constant
month-end Net Asset Value. Calculations are based on $5,000 as the Net
Asset Value per Unit.
2. Paid to Kenmar each month. Kenmar pays all floor brokerage, exchange,
clearing and NFA fees, selling compensation, trailing commissions and
Advisors' Consulting Fees from this amount.
3. Administrative expenses are paid as incurred. However, 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. See "Description of Current
Charges". 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 (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.
4
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Description Of Current Charges
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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 exceed 25% of
execution costs 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 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
2.5%--5.0%, 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 exceed 1.0% of
Administrative costs the Fund's average beginning of month Net Assets per
year.
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5
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Regulation
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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.
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.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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 March 15, 2000, there were 916 holders of Units, including Kenmar and the
Advisors. As of March 15, 2000, Marc S. Goodman owned 52.8321 Units in his
individual retirement account, Kenneth A. Shewer owned 50.2517 in his individual
retirement account and Kenmar owned 2813.3231 Units.
(c) Dividends:
The Fund has made no distributions since trading commenced, nor does Kenmar
presently intend to make any distributions in the future.
Reg. S-K Item 701(f)
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During the fourth quarter of 1999, 2,290.8539 Units were sold for a total of
$221,075.
6
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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. The Fund commenced trading on April 22,
1997.
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YEAR ENDED YEAR ENDED YEAR ENDED
12/31/99 12/31/98 12/31/97
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Operations Data
Realized Gains (Losses) ................................... 130,990 $ 4,443,190 $ (162,443)
Change in Unrealized ...................................... (1,149,702) 381,635 838,321
Interest Income ........................................... 1,082,050 750,290 293,033
Brokerage Commissions ..................................... 274,883 147,779 45,814
Managing Owner
Brokerage Commissions ................................ 2,616,529 1,652,458 631,403
Managing Owner Incentive fee .............................. 0 43,400 0
Advisor Profit Shares ..................................... 109,313 984,809 106,886
Operating Expenses ........................................ 236,610 134,568 58,398
Net Income (Loss) ......................................... (3,173,997) 2,612,101 126,410
Net income (Loss) Per Unit
(Based on Weighted Average
Number of Units Outstanding)............................... (12.65) 16.96 1.24
Increase (Decrease) in Net Asset
Value per Unit ............................................ (13.61) 13.09 0.10
12/31/99 12/31/98 12/31/97
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Financial Position Data:
Managing Owner's Capital .................................. $ 280,146 $ 263,850 $ 125,970
Other Unitholders' Capital ................................ 22,497,207 25,099,248 12,251,351
Total Capital ............................................. 22,777,353 25,363,098 12,377,321
Net Asset Value Per Unit .................................. 99.58 113.19 100.10
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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 of futures, forward, options and related contracts 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.
7
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The following paragraph presents a summary of the Fund's operations for the
calendar year 1999. 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, 1999, the Net Asset Value of the Fund was $22,777,353, a
decrease of approximately 10.19% from its Net Asset Value of $25,363,098 at
December 31, 1998. The Fund's subscriptions and redemptions for the year ended
December 31, 1999, totaled $8,331,096 and $7,590,705, respectively. For the year
ended December 31, 1999, the Fund had revenues comprised of $130,990 in realized
trading gains, ($1,149,702) in change in unrealized trading losses and
$1,082,050 in interest income. Total expenses for the year ended December 31,
1999 were $3,237,335. The Net Loss for the year ended December 31, 1999 was
($3,173,997). The Net Asset Value per Unit at December 31, 1999 decreased 12.02%
from $113.19 at December 31, 1998 to $99.58 at December 31, 1999. The Fund's
trading losses during 1999 resulted primarily from losses in U.S. and European
stock indices, Japanese interest rates, tropicals, grains and currencies.
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 Fund 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 Fund'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 Fund 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 Fund'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.
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.
8
<PAGE>
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
Introduction
Past Performance Not Necessarily Indicative of Future Results. The Fund is a
speculative commodity pool. The market sensitive instruments held by it are
acquired for speculative trading purposes, and all or substantially all of the
Fund's assets are subject to the risk of trading loss. Unlike an operating
company, the risk of market sensitive instruments is integral, not incidental,
to the Fund's main line of business.
Market movements result in frequent changes in the fair market value of the
Fund's open positions and, consequently, in its earnings and cash flow. The
Fund's market risk is influenced by a wide variety of factors, including the
level and volatility of interest rates, exchange rates, equity price levels, the
market value of financial instruments and contracts, the diversification effects
among the Fund's open positions and the liquidity of the markets in which it
trades.
The Fund rapidly acquires and liquidates both long and short positions in a wide
range of different markets. Consequently, it is not possible to predict how a
particular future market scenario will affect performance, and the Fund's past
performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Fund could reasonably
be expected to lose in a given market sector. However, the inherent uncertainty
of the Fund's speculative trading and the recurrence in the markets traded by
the Fund of market movements far exceeding expectations could result in actual
trading or non-trading losses far beyond the indicated Value at Risk or the
Fund's experience to date (i.e., "risk of ruin"). In light of the foregoing as
well as the risks and uncertainties intrinsic to all future projects, the
inclusion of the quantification included in this Item 7A should not be
considered to constitute any assurance or representation that the Fund's losses
in any market sector will be limited to Value at Risk or by the Fund's attempts
to manage its market risk.
9
<PAGE>
Standard of Materiality. Materiality as used in this Item 7A, is based on an
assessment of reasonably possible market movements and the potential losses
caused by such movements, taking into account the leverage, optionality and
multiplier features of the Fund's market sensitive instruments.
Quantifying The Fund's Trading Value At Risk
Quantitative Forward-Looking Statements. The following quantitative disclosures
regarding the Fund's market risk exposures contain "forward-looking statements"
within the meaning of the safe harbor from civil liability provided for such
statements by the Private Securities Litigation Reform Act of 1995 (set forth in
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934). All quantitative disclosures in this section are deemed
to be forward-looking statements for purposes of the safe harbor, except for
statements of historical fact (such as the terms of particular contracts and the
number of market risk sensitive instruments held during or at the end of the
reporting period).
The Fund's risk exposure in the various market sectors traded by the Advisors is
quantified below in terms of Value at Risk. Due to the Fund's mark-to-market
accounting, any loss in the fair value of the Fund's open positions is directly
reflected in the Fund's earnings (realized or unrealized) and cash flow (at
least in the case of exchange-traded contracts in which profits and losses on
open positions are settled daily through variation margin).
Exchange maintenance margin requirements have been used by the Fund as the
measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. The maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an assessment of current
market volatility (including the implied volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic estimate
of the maximum expected near-term one-day price fluctuation. Maintenance margin
has been used rather than the more generally available initial margin, because
initial margin includes a credit risk component which is not relevant to Value
at Risk.
In quantifying the Fund's Value at Risk, 100% positive correlation in the
different positions held in each market risk category has been assumed.
Consequently, the margin requirements applicable to the open contracts have
simply been aggregated to determine each trading category's aggregate Value at
Risk. The diversification effects resulting from the fact that the Fund's
positions are rarely, if ever, 100% positively correlated have not been
reflected.
The Fund's Trading Value At Risk In Different Market Sectors
The following table indicates the trading Value at Risk associated with the
Fund's open positions by market category as of November 30, 1999. Value at Risk
as of December 31, 1999 was $0 due to the full liquidation of all positions in
anticipation of the passage of Year 2000. November 30, 1999 is being used for a
better indication of a typical portfolio. All open position trading risk
exposures of the Fund have been included in calculating the figures set forth
below. As of November 30, 1999 the Fund's total capitalization was approximately
$26.8 million.
10
<PAGE>
NOVEMBER 30, 1999
% OF
TOTAL
MARKET SECTOR VALUE AT RISK CAPITALIZATION
------------- ------------- --------------
Interest Rates $ 700,000 2.5%
Currencies 600,000 2.2%
Stock Indices 600,000 2.2%
Metals 900,000 3.2%
Commodities 600,000 2.2%
Energy 200,000 .8%
----------- ----
Total $ 3,600,000 13.1%
Material Limitations On Value At Risk As An Assessment Of Market Risk
The face value of the market sector instruments held by the Fund is typically
many times the applicable maintenance margin requirement (maintenance margin
requirements generally ranging between approximately 1% and 10% of contract face
value), as well as many times the capitalization of the Fund. The magnitude of
the Fund's open positions creates a "risk of ruin" not typically found in most
other investment vehicles. Because of the size of its positions, certain market
conditions--unusual, but historically recurring from time to time--could cause
the Fund to incur severe losses over a short period of time. The foregoing Value
at Risk table--as well as the past performance of the Fund--give no indication
of this "risk of ruin".
Non-Trading Risk
The Fund has non-trading market risk on its foreign cash balances not needed for
margin. However, these balances (as well as the market risk they represent) are
immaterial.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Fund's market risk
exposures--except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Fund manages its primary market risk
exposures--constitute forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act. The
Fund's primary market risk exposures as well as the strategies used and to be
used by Kenmar and the Advisors for managing such exposures are subject to
numerous uncertainties, contingencies and risks, any one of which could cause
the actual results of the Fund's risk controls to differ materially from the
objectives of such strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant fundamental factors,
political upheavals, changes in historical price relationships, an influx of new
market participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the
risk management strategies of the Fund. There can be no assurance that the
Fund's current market exposure and/or risk management strategies will not change
materially, that any such strategies will be effective in either the short- or
long-term, or that investors will not lose all or substantially all of their
investment in the Fund.
The following were the primary trading risk exposures of the Fund as of November
30, 1999, by market sector.
INTEREST RATES. Interest rate movements directly affect the price of the
sovereign bond positions held by the Fund and indirectly the value of its stock
index and currency positions. Interest rate movements in one country, as well as
relative interest rate movements between countries, materially impact the Fund's
profitability. The Fund's primary interest rate exposure is to interest rate
fluctuations in the United Stated and the other G-7 countries. However, the Fund
also takes positions in the government debt of other nations--e.g., New Zealand
and Australia. Kenmar anticipates that G-7 interest rates will remain the
primary market exposure of the Fund for the foreseeable future.
CURRENCIES. The Fund's currency exposure is to exchange rate fluctuations,
primarily fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. These fluctuations are
influenced by interest rate changes, as well as political and general economic
conditions. The Fund trades in a large number of
11
<PAGE>
currencies, including cross-rates--i.e., positions between two currencies other
than the U.S. dollar. Kenmar does not anticipate that the risk profile of the
Fund's currency sector will change significantly in the future.
STOCK INDICES. The Fund's primary equity exposure is to equity price risk in the
G-7 countries. The stock index futures traded by the Fund are by law limited to
futures on broadly based indices. As of November 30, 1999, the Fund's primary
exposures were in the S&P 500 and the Nikkei indices. Kenmar anticipates little,
if any, trading in non G-7 stock indices. The Fund is primarily exposed to the
risk of adverse price trends or static markets in the major U.S., European and
Japanese indices.
COMMODITIES. The Fund has exposure to agricultural price movements, which are
often directly affected by severe or unexpected weather conditions. Wheat, corn,
soybean oil and sugar accounted for the substantial bulk of the Fund's
commodities exposure as of November 30, 1999. Kenmar anticipates that the
Advisors will maintain an emphasis on grains and tropicals, in which the Fund
has historically taken its largest positions.
METALS. The Fund has significant exposure to fluctuations in the price of gold,
silver and copper. Although certain of the Advisors will from time to time trade
base metals such as aluminum and tin, the principal market exposures of the Fund
have consistently been in the precious metals, gold and silver (and, to a much
less extent, palladium). Kenmar anticipates that gold, silver and copper will
remain the primary metals market exposure for the Fund.
ENERGY. The Fund's primary energy market exposure is to gas and oil price
movements, often resulting from political developments in the Middle East.
Natural gas, unleaded gas , heating oil and crude oil accounted for the
substantial bulk of the Fund's energy exposure as of November 30, 1999.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Fund as of
November 30, 1999.
FOREIGN CURRENCY BALANCES. The Fund's primary foreign currency balances are in
Japanese yen, Canadian dollars, Australian dollars, British pounds and Swiss
francs. The Fund controls the non-trading risk of these balances by regularly
converting these balances back into dollars.
Qualitative Disclosures Regarding Means Of Managing Risk Exposure
The means by which the Fund and the Advisors, severally, attempt to manage the
risk of the Fund's open positions is essentially the same in all market
categories traded. At the Fund-wide level, Kenmar attempts to manage market
exposure by (i) diversifying the Fund's assets among different Advisors whose
strategies focus on different market sectors and trading approaches, and (ii)
monitoring the Fund's actual market exposures on a daily basis. At the Advisor
level, each Advisor applies its own risk management policies to its trading.
These policies generally limit the total exposure that may be taken per "risk
unit" of assets under management. In addition, many Advisors follow
diversification guidelines (often formulated in terms of the maximum margin
which they will commit to positions in any one contract or group of related
contracts), as well as imposing "stop-loss" points at which open positions must
be closed out. Occasionally, Advisors will limit the market exposure of their
Fund account through acquiring put or call options which "collar" the risk of
open positions. However, because of the typically high degree of liquidity in
the markets traded by the Fund and the expense of acquiring options, most
Advisors rely simply on stop-loss policies, requiring the liquidation of
positions once losses of a certain magnitude have been incurred.
Certain Advisors treat their risk control policies as strict rules; others only
as general guidelines for controlling risk.
Kenmar controls the risk of the Fund's non-trading instruments (interest-bearing
securities held for cash management purposes)--the only Fund investments, as
opposed to Advisor selections, directed by Kenmar--limiting the duration of such
instruments to no more than one year.
12
<PAGE>
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.
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 47, 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 52, 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 48, 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 64, 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
13
<PAGE>
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 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, 1999, 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, 1999, the following officers of Kenmar beneficially owned the
following number of Units:
14
<PAGE>
NUMBER OF UNITS
NAME OF BENEFICIAL OWNER OWNED PERCENTAGE OF CLASS
------------------------ --------------- -------------------
Marc S. Goodman 52.8321 Less than 1%
Kenneth A. Shewer 50.2517 Less than 1%
As of December 31, 1999, Kenmar has purchased and will maintain a 1% interest in
the Fund in its capacity as managing owner.
(c) Changes in Control:
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others:
Kenmar acts as managing owner and commodity pool operator. Certain
administrative services are provided by Derivatives Portfolio Management L.L.C.
The 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.
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:
<TABLE>
<S> <C>
1. Independent Auditor's Report..................................................................-i-
Statements of Financial Condition as of December 31, 1999 and 1998............................F-1
Statements of Operations for the years ended December 31, 1999, 1998 and 1997.................F-2
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997.................F-3
Statements of changes in Unitholders' Capital (Net Asset Value) for the years
ended December 31, 1999, 1998 and 1997...................................................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
15
<PAGE>
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 1999.
</TABLE>
16
<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 24th day of March,
2000.
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 24th day of March, 2000.
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)
<PAGE>
ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
(410) 821-8000
FAX (410) 321-8359
Member: American Institute of Certified Suite 200
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, 1999 and 1998, and the related statements of
operations, cash flows and changes in unitholders' capital (net asset value) for
the years ended December 31, 1999, 1998 and 1997. 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, 1999 and 1998, and the results of its operations, cash flows and
the changes in its net asset values for the years ended December 31, 1999, 1998
and 1997, in conformity with generally accepted accounting principles.
/s/ Arthur F. Bell, Jr. & Associates, L.L.C.
Hunt Valley, Maryland
February 17, 2000
<PAGE>
KENMAR GLOBAL TRUST
STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998
------------
<TABLE>
<CAPTION>
1999 1998
---- ----
ASSETS
<S> <C> <C>
Equity in broker trading accounts
Cash $ 3,275,658 $ 14,288,556
Unrealized gain on open contracts 70,254 1,219,956
---------------- ----------------
Deposits with brokers 3,345,912 15,508,512
Cash and cash equivalents 23,481,079 10,582,645
---------------- ----------------
Total assets $ 26,826,991 $ 26,091,157
================ ================
LIABILITIES
Accounts payable $ 40,000 $ 65,017
Commissions and other trading fees on open contracts 5,394 18,122
Managing Owner brokerage commissions 196,233 160,616
Managing Owner incentive fee 0 42,368
Advisor profit shares 13,388 109,106
Reimbursable offering costs 0 44,975
Redemptions payable 3,724,738 255,238
Redemption charges payable to Managing Owner 69,885 4,897
Subscription deposits 0 27,720
---------------- ----------------
Total liabilities 4,049,638 728,059
---------------- ----------------
UNITHOLDERS' CAPITAL (Net Asset Value)
Managing Owner - 2,813.3231 and 2,331.0461 units
outstanding at December 31, 1999 and 1998 280,146 263,850
Other Unitholders - 225,924.9857 and 221,745.5512 units
outstanding at December 31, 1999 and 1998 22,497,207 25,099,248
---------------- ----------------
Total unitholders' capital
(Net Asset Value) 22,777,353 25,363,098
---------------- ----------------
$ 26,826,991 $ 26,091,157
================ ================
</TABLE>
See accompanying notes.
<PAGE>
KENMAR GLOBAL TRUST
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998 and 1997
--------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
INCOME
<S> <C> <C> <C>
Trading gains (losses)
Realized $ 130,990 $ 4,443,190 $ (162,443)
Change in unrealized (1,149,702) 381,635 838,321
---------------- -------------- ---------------
Gain (loss) from trading (1,018,712) 4,824,825 675,878
Interest income 1,082,050 750,290 293,033
---------------- -------------- ---------------
Total income 63,338 5,575,115 968,911
---------------- -------------- ---------------
EXPENSES
Brokerage commissions 274,883 147,779 45,814
Managing Owner brokerage commissions 2,616,529 1,652,458 631,403
Managing Owner incentive fee 0 43,400 0
Advisor profit shares 109,313 984,809 106,886
Operating expenses 236,610 134,568 58,398
---------------- -------------- ---------------
Total expenses 3,237,335 2,963,014 842,501
---------------- -------------- ---------------
NET INCOME (LOSS) $ (3,173,997) $ 2,612,101 $ 126,410
================ ============== ===============
NET INCOME (LOSS) PER UNIT
(based on weighted average number of units
outstanding during the period) $ (12.65) $ 16.96 $ 1.24
================ ============== ===============
INCREASE (DECREASE) IN NET
ASSET VALUE PER UNIT $ (13.61) $ 13.09 $ 0.10
================ ============== ===============
</TABLE>
See accompanying notes.
<PAGE>
KENMAR GLOBAL TRUST
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1999, 1998 And 1997
------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income (loss) $ (3,173,997) $ 2,612,101 $ 126,410
Adjustments to reconcile net income (loss)
to net cash from (for) operating activities:
(Increase) decrease in net option premiums paid 0 12,165 (12,165)
Net change in unrealized 1,149,702 (381,635) (838,321)
(Increase) decrease in other assets 0 177,369 (177,369)
Increase (decrease) in accounts payable and
accrued expenses (140,214) 219,842 175,387
---------------- --------------- ---------------
Net cash from (for) operating activities (2,164,509) 2,639,842 (726,058)
---------------- --------------- ---------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Addition of units 8,331,096 13,497,520 12,847,562
Increase (decrease) in subscription deposits (27,720) 2,000 25,720
Offering costs paid (197,114) (700,862) (124,706)
Redemption of units (4,056,217) (2,322,207) (269,610)
---------------- --------------- ---------------
Net cash from financing activities 4,050,045 10,476,451 12,478,966
---------------- --------------- ---------------
Net increase in cash and cash equivalents 1,885,536 13,116,293 11,752,908
CASH AND CASH EQUIVALENTS
Beginning of year 24,871,201 11,754,908 2,000
---------------- --------------- ---------------
End of year $ 26,756,737 $ 24,871,201 $ 11,754,908
================ =============== ===============
END OF YEAR CASH AND CASH EQUIVALENTS CONSISTS OF:
Cash in broker trading accounts $ 3,275,658 $ 14,288,556 $ 11,166,621
Cash and cash equivalents 23,481,079 10,582,645 588,287
---------------- --------------- ---------------
Total end of year cash and cash
equivalents $ 26,756,737 $ 24,871,201 $ 11,754,908
================ =============== ===============
</TABLE>
See accompanying notes.
<PAGE>
KENMAR GLOBAL TRUST
STATEMENTS OF CHANGES IN UNITHOLDERS' CAPITAL (NET
ASSET VALUE) For the Years Ended December 31,
1999, 1998 and 1997
-------------
<TABLE>
<CAPTION>
Unitholders' Capital
Total ------------------------------------------------
Number of Managing Other
Units Owner Unitholders Total
---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
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
ended December 31, 1998 26,933 2,585,168 2,612,101
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 (7,453) (715,326) (722,779)
---------------- ------------- ------------- -------------
Balances at
December 31, 1998 224,076.5973 263,850 25,099,248 25,363,098
Net (loss) for the year
ended December 31, 1999 (33,117) (3,140,880) (3,173,997)
Additions 79,543.5512 51,000 8,280,096 8,331,096
Redemptions (74,881.8397) 0 (7,590,705) (7,590,705)
Offering costs (1,587) (150,552) (152,139)
---------------- ------------- ------------- -------------
Balances at
December 31, 1999 228,738.3088 $ 280,146 $ 22,497,207 $ 22,777,353
================ ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Net Asset Value Per Unit
-----------------------------------------------
December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
$99.58 $113.19 $100.10
====== ======= =======
</TABLE>
See accompanying notes.
<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 price and
market price) is reflected 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. Cash and Cash Equivalents
Cash and cash equivalents includes cash and short-term time deposits
held at financial institutions.
E. 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.
F. 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 were 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 were charged to unitholders' capital.
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
------------
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. Organizational and Offering Costs (continued)
Ongoing offering costs are borne by the Fund and are charged directly
to unitholders' capital as incurred.
H 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 years ended
December 31, 1999, 1998 and 1997, brokerage commissions equated to an
approximate round-turn equivalent rate of $87, $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.
<PAGE>
KENMAR GLOBAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
------------
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 in the statement of changes in
unitholders' capital and amounted to $92,707, $51,752 and $12,592
during 1999, 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 and cash equivalents 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.
<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 years ended
December 31, 1999 and 1998 and for the period May 22, 1997
(commencement of trading) to December 31, 1997, and the related fair
values as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Fair Value as of
Average Fair Value December 31,
------------------ ------------
1999 1998 1997 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Exchange traded futures and
options on futures contracts $1,280,000 $1,050,000 $440,000 $70,000 $1,240,000
Forward contracts 20,000 20,000 30,000 0 (20,000)
</TABLE>
Net trading results from derivatives for the years ended December 31,
1999, 1998 and 1997, are reflected in the statement of operations and
consist 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 years ended December 31, 1999, 1998 and 1997,
the net trading gain (loss) from derivatives was approximately
$(1,507,000), $4,564,000 and $595,000, 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.
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, 1999 and 1998 is April 2000 and
September 1999, respectively. At December 31, 1999 and 1998, the
notional amount of open contracts is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
Contracts to Contracts to Contracts to Contracts to
Purchase Sell Purchase Sell
------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Exchange traded futures contracts:
- - Financial instruments $ 0 $ 0 $ 96,900,000 $ 99,000,000
- - Metals 9,200,000 9,200,000 4,200,000 11,100,000
- - Energy 0 0 0 1,800,000
- - Agricultural 0 0 900,000 9,300,000
- - Currencies 0 0 6,800,000 6,400,000
Forward Contracts:
- - Currencies 0 0 4,600,000 2,600,000
------------- -------------- ---------------- ---------------
$ 9,200,000 $ 9,200,000 $ 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
market risk 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.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 23,481,079
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,826,991
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,826,991
<CURRENT-LIABILITIES> 4,049,638
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 26,826,991
<SALES> 0
<TOTAL-REVENUES> 63,638
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,237,335
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,173,997)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,173,997)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,173,997)
<EPS-BASIC> (12.65)
<EPS-DILUTED> (12.65)
</TABLE>
