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 35 persons (as of December 31, 2001) 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 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
Set forth below is a brief description of the portfolio of core-Advisors trading for the Fund as of December 31, 2001.
C-View International Limited
C-View Limited is a UK registered Company which is regulated by the FSA (Financial Services Authority in the United Kingdom) as a Trading Advisor. The program utilized by C-View on behalf of the Fund is the 3x Leverage Program. C-View Limited's approach is discretionary, based on a combination of fundamental analysis, technical analysis and market psychology. The intention is to capture profits from short to medium-term price trends whilst maintaining profitability in ranging markets.
C-View Limited aims to maximize returns through the active trading of foreign exchange in the interbank spot, forward and options markets. Profits are sought from fluctuations in exchange rates, and from the differentials in interest rates reflected in the value of currencies.
Grinham Managed Funds Pty Ltd.
Grinham Managed Funds 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 Funds 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 Funds Pty Ltd. trades 36 markets across 7 countries, incorporating most of the major stock indices, interest rates, 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 0.1% of the assets under management.
Transtrend B.V.
In its Diversified Trend 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.
Winton Capital Management Limited
Winton Capital Management Limited is an English company established in 1997 to offer investment advice in the international futures and forwards markets.
The investment strategy of Winton Capital Management Limited's program consists of trading a portfolio of more than one hundred international futures and forward markets, employing a computer-based trading system. This system tracks the daily price movements from these markets around the world and carries out certain computations to determine each day how long or short the portfolio should be in each. If rising prices are anticipated, a long position will be established; if prices are expected to fall, a short position is the appropriate way to realize a profit. The computer does not, of course, make perfect predictions, but by employing a sophisticated and systematic schema for placing such positions in a wide array of futures and forwards markets, it can be demonstrated that there is a reasonable expectation of profit being realized after a sufficient period of time.
The profitability of such a system arises substantially as a result of the tendency of the major international markets to trend and to tend to make exaggerated movements in both upward and downward directions as a result of such trends. Such systems are frequently unprofitable for long periods of time in particular markets or market groups, and occasionally they are unprofitable for periods of more than one year.
Winton Capital Management Limited's program will invest in exchange-traded contracts, centered on the following areas: stock indices, bonds, short term interest rates, currencies, precious metals and commodities.
Use of Proceeds
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 as of December 31, 2001:
(i) up to approximately 67% of the Net Asset Value of the Fund is 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; and
(ii) approximately 33% of the Net Asset Value of the Fund is maintained 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 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).
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.
"Breakeven Table"
Notes to "Breakeven Table"
(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. For this "Breakeven Table" such expenses are at historical amounts.
(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. However, for purposes of the "Breakeven Table," the Incentive Fee has been estimated at 5% of such 3.1% gain referred to below.
(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.
Description Of Current Charges
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.
ITEM 2.
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.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Fund or Kenmar is a party.
ITEM 4.
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.
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 December 31, 2001, there were 633 holders of Units, including Kenmar and the Advisors. As of December 31, 2001, 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 2,041.4999 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)
During the fourth quarter of 2001, 6,835.68 Units were sold for a total of $674,526.00.
ITEM 6.
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.
ITEM 7.
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.
The following paragraph presents a summary of the Fund's operations for the calendar year 2001. 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, 2001, the Net Asset Value of the Fund was $16,125,379, a decrease of approximately 9.06% from its Net Asset Value of $17,732,064 at December 31, 2000. The Fund's subscriptions and redemptions for the year ended December 31, 2001 totaled $2,242,654 and $3,766,020, respectively. For the year ended December 31, 2001, the Fund had revenues comprised of $2,479,061 in realized trading gains, $(584,140) in change in unrealized trading losses and $517,609 in interest income. Total expenses for the year ended December 31, 2001 were $2,371,395. The Net Income for the year ended December 31, 2001 was $41,135. The Net Asset Value per Unit at December 31, 2001 decreased 0.55% from $97.01 at December 31, 2000 to $96.48 at December 31, 2001. The Fund's trading gains during 2001 resulted primarily from global interest rates, currencies, global stock indices and grains, but, net of offering costs, the Fund experienced a negative compounded rate of return of (0.55)%.
As of December 31, 2000, the Net Asset Value of the Fund was $17,732,064, a decrease of approximately 22.15% from its Net Asset Value of $22,777,353 at December 31, 1999. The Fund's subscriptions and redemptions for the year ended December 31, 2000 totaled $3,526,802 and $7,889,441, respectively. For the year ended December 31, 2000, the Fund had revenues comprised of ($14,413) in realized trading losses, $960,207 in change in unrealized trading gains and $1,129,270 in interest income. Total expenses for the year ended December 31, 2000 were $2,555,314. The Net Loss for the year ended December 31, 2000 was ($480,250). The Net Asset Value per Unit at December 31, 2000 decreased 2.58% from $99.58 at December 31, 1999 to $97.01 at December 31, 2000. The Fund's trading losses during 2000 resulted primarily from an unusually volatile market environment for the period, which affected similarly situated funds.
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.
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.
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 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements meeting the requirements of Regulation S-X appear beginning on Page of this report. The supplementary financial information specified by Item 302 of Regulation S-K appears herewith.
Selected Quarterly Financial Data
The following summarized quarterly financial information presents the results of operations for the three month periods ended March 31, June 30, September 30 and December 31, 2001 and 2000.
There were no extraordinary, unusual or infrequently occurring items recognized in any quarter reported above, and the Fund has not disposed of any segments of its business. There have been no year-end adjustments that are material to the results of any fiscal quarter reported above.
ITEM 9.
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.
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. Kenneth A. Shewer is Kenmar's Chairman and Marc S. Goodman is its President. Messrs. Shewer and Goodman are Kenmar's sole directors.
Mr. Kenneth A. Shewer (born 1953), Chairman, was employed by Pasternak, Baum and Co., Inc. ("Pasternak, Baum"), an international cash commodity firm, from June 1976 until September 1983. 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 (born 1948), President, joined Pasternak, Baum in September 1974 and was a Vice President and Director from July 1981 until September 1983. 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 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, where he was awarded an Economics and Finance Department Fellowship from September 1969 through June 1971.
Messrs. Shewer and Goodman left Pasternak, Baum in September 1983 to form Kenmar and they have occupied their present positions with Kenmar since that time.
Ms. Esther Eckerling Goodman (born 1952), Chief Operating Officer and Senior Executive Vice President, 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 developing and managing a managed futures program which, in 1979, became the trading
system for Westchester Commodity Management, 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 Trade Association from 1987 to 1991 and a Director of its successor organization, the Managed Futures Association, from 1991 to 1995 (now the Managed Funds Association). She has written several articles and has spoken before various professional groups and organizations on the subject of managed futures. Ms. Goodman graduated from Stanford University in 1974 with a B.A. degree. Ms. Goodman is married to Mr. Marc S. Goodman.
Mr. Braxton Glasgow III (born 1953), Executive Vice President, joined Kenmar in May 2001. Prior to joining Kenmar, Mr. Glasgow was the Executive Vice President of Chesapeake Capital Corporation. From 1994 to 1995, he was President of the Jay Group Ltd. Mr. Glasgow received a B.S. degree in accounting from the University of North Carolina in 1975.
Ms. Florence Y. Sofer (born 1966), Managing Director, Investor Communications responsible for the development and implementation of all internal and external communications programs worldwide, joined Kenmar in 2001. From 1997 to 2001, Ms. Sofer was the Vice President, Marketing, and a Principal of John W. Henry & Company, where she was responsible for strategic marketing and client communications for the firm and its subsidiaries. From 1994 to 1997, Ms. Sofer was the Marketing Manager for Global Asset Management where she was involved in the successful development and launch of the firm's mutual fund product line. Ms. Sofer received a B.A. degree from American University in 1988 and an M.B.A. in Marketing from George Washington University in 1992.
Mr. Thomas J. DiVuolo (born 1960), Senior Vice President responsible for fund accounting, administration, risk management and account oversight, joined Kenmar in March 1989. From 1982 through 1984, Mr. DiVuolo was employed by Balfour Maclaine International Ltd., working in the commodity accounting and compliance areas. From 1984 through 1986 he was employed at E.F. Hutton and Company, Inc. as a manager of commodity regulatory reporting. From 1986 until he joined Kenmar in 1989, Mr. DiVuolo worked for Lloyds International Trading, a commodity trading division of Lloyds Bank. Mr. DiVuolo graduated from Wagner College in 1990 with an M.B.A. degree in Finance and from Pace University with a B.B.A. degree in Public Accounting in 1982.
Mr. Gary J. Yannazzo (born 1953), Senior Vice President and Chief Financial Officer, joined Kenmar in August 1997. From March 1992 to July 1995, he was Senior Vice President and Controller of Metallgesellschaft Corp., a diversified commodity marketing and trading company, with thirty worldwide subsidiaries and $5 billion in annual revenues. From January 1990 through February 1992, Mr. Yannazzo was President, Chief Executive Officer and part owner of Holland Mortgage Corporation. From December 1982 through November 1989, Mr. Yannazzo was First Vice President of Security Capital Corporation, a publicly traded financial services company and affiliate of Smith Barney, Inc. From June 1975 through November 1982, Mr. Yannazzo was with Arthur Andersen & Co., serving as an Audit Manager from June 1980. From August 1995 until he joined Kenmar, Mr. Yannazzo was a private consultant, engaged primarily in projects and ventures in the commodity and derivative areas. Mr. Yannazzo received his B.S. in Business Administration from Seton Hall University in 1975 and his CPA certification in 1977.
Ms. Joanne D. Rosenthal (born 1965), Senior Vice President and Director of Research, joined Kenmar in October 1999. Prior to joining Kenmar, Ms. Rosenthal spent 9 years at The Chase Manhattan Bank, in various positions of increasing responsibility. From July 1991 through April 1994, she managed the Trade Execution Desk and from May 1994 through September 1999, she was a Vice President and Senior Portfolio Manager of Chase Alternative Asset Management, Inc. Ms. Rosenthal received a Masters of Business Administration in Finance from Cornell University and a Bachelor of Arts in Economics from Concordia University in Montreal, Canada.
Mr. Mark M. Rossow (born 1952), Senior Vice President and General Counsel, joined Kenmar in August 2000. From October 1998 until July 2000, Mr. Rossow was a partner in the law firm of Snow Becker Krauss P.C. From May 1994 until September 1998, Mr. Rossow was a partner in the law firm of Amon & Sabatini. Prior to that, Mr. Rossow was in-house counsel to the international accounting firm BDO Seidman. Mr. Rossow has served on the staff of the United States Securities and Exchange Commission. Mr. Rossow earned a B.A. degree from Syracuse University in 1975 and a J.D. degree from the University of Michigan in 1978. He was admitted to practice law in 1979.
Mr. Jeffrey Wilson (born 1965), Financial Controller, joined Kenmar in January 2001. From June 2000 to December 2000, Mr. Wilson was the Controller for Whitney & Company. From 1995 to May 2000, Mr. Wilson was the Controller at UBS Warburg. Mr. Wilson received a B.B.A. degree in accounting from the University of San Diego in 1988. He received his CPA certification in 1991.
Mr. James Dodd (born 1951), Managing Director, joined Kenmar in 2002. He is responsible for structuring and marketing investment products to insurance companies and other financial institutions. Mr. Dodd has almost twenty years of experience in investment banking and marketing structured investment products, working at Chesapeake Capital, Hoak, Breedlove, Wesneski, Continental Bank and Boettcher & Co. Prior to joining Kenmar, Mr. Dodd was the Chief Financial Officer at VE Group, a company that specialized in venture capital investments from 2000. Prior to that Mr. Dodd was Managing Director, Financial Institutions Marketing, for Chesapeake Capital from 1997. Previously, Mr. Dodd held various positions at distinguished banks and other financial institutions. Mr. Dodd received a A.B. degree from Cornell University in 1974 and a M.B.A. degree from the University of Chicago in 1983.
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) and (b) above.
(f) Involvement in Certain Legal Proceedings: None.
(g) Promoters and Control Persons: Not applicable.
ITEM 11.
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners:
As of December 31, 2001, 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, 2001, the following officers of Kenmar beneficially owned the following number of Units:
As of December 31, 2001, 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.
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.
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. Independent Auditor's Report......................................F-1 Statements of Financial Condition as of December 31, 2001 and 2000 (Audited).........................F-2 Condensed Schedule of Investments as of December 31, 2001 (Audited)..................................F-3 Statements of Operations For the Years Ended December 31, 2001, 2000 and 1999 (Audited).............F-4 Statements of Cash Flows For the Years Ended December 31, 2001, 2000 and 1999 (Audited)...................F-5 Statements of Changes in Unitholders' Capital (Net Asset Value) For the Years Ended December 31, 2001, 2000 and 1999 (Audited)...................F-6 Notes to Financial Statements (Audited)......................F-7-F-10
2. 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 2001.
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 28th day of March, 2002.
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 28th day of March, 2002.
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)
ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C.
Certified Public Accountants
(410) 771-0001
FAX (410) 785-9784
Member:
American Institute of Certified Public Accountants Suite 200 SEC Practice Section 201 International Circle Maryland Association of Certified Public Accountants Hunt Valley, Maryland 21030
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, 2001 and 2000, including the December 31, 2001 condensed schedule of investments, and the related statements of operations, cash flows and changes in unitholders' capital (net asset value) for the years ended December 31, 2001, 2000 and 1999. 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 auditing standards generally accepted in the United States of America. 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, 2001 and 2000, and the results of its operations, cash flows and changes in its net asset values for the years ended December 31, 2001, 2000 and 1999, in conformity with accounting principles generally accepted in the United States of America.
Hunt Valley, Maryland February 11, 2002
KENMAR GLOBAL TRUST STATEMENTS OF FINANCIAL CONDITION December 31, 2001 and 2000
See accompanying notes.
KENMAR GLOBAL TRUST CONDENSED SCHEDULE OF INVESTMENTS December 31, 2001
LONG FUTURES CONTRACTS
SHORT FUTURES CONTRACTS
FORWARD CURRENCY CONTRACTS
See accompanying notes.
KENMAR GLOBAL TRUST STATEMENTS OF OPERATIONS For the Years Ended December 31, 2001, 2000 and 1999
See accompanying notes.
KENMAR GLOBAL TRUST STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2001, 2000 and 1999
See accompanying notes.
KENMAR GLOBAL TRUST STATEMENTS OF CHANGES IN UNITHOLDERS' CAPITAL (NET ASSET VALUE) For the Years Ended December 31, 2001, 2000 and 1999
See accompanying notes.
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.
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 (brokers) and interbank market makers through which the Fund trades.
C. Method of Reporting
The Fund's financial statements are presented in accordance with accounting principles generally accepted in the United States of America, 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 trade 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, reflected as "brokerage commissions" in the statement of operations, 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 applicable state information tax returns and reports to the Unitholders their allocable shares of the Fund's income, expenses and trading gains or losses.
KENMAR GLOBAL TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. Offering Costs
Offering costs are borne by the Fund and are charged directly to unitholders' capital as incurred.
G. 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.
H. Reclassification
Certain amounts in the 2000 and 1999 financial statements were reclassified to conform with the 2001 presentation.
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 at least 1% of the total capital accounts of the Fund.
The Managing Owner is paid monthly brokerage commissions ("Managing Owner 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 commodity trading advisors. Managing Owner brokerage commissions are reduced by brokerage commissions and other trading fees paid directly to brokers by the Fund. For the years ended December 31, 2001, 2000 and 1999, brokerage commissions equated to an approximate round-turn equivalent rate of $60, $65 and $87, 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. No incentive fee was earned by the Managing Owner during 2001, 2000 and 1999.
KENMAR GLOBAL TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 20% of Trading Profit (as defined in each respective 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 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 $9,407, $51,848 and $92,707 during 2001, 2000 and 1999, 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"). 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 brokers. Additional deposits may be necessary for any loss of contract value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such broker's proprietary activities. A customer's cash and other property (for example, U.S. Treasury bills) deposited with a broker are considered commingled with all other customer funds subject to the broker's segregation requirements. In the event of a broker'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. 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 notional contract value of futures and forward contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Fund pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Fund to potentially unlimited liability, and purchased options expose the Fund to a risk of loss limited to the premiums paid.
The Managing Owner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. 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.
KENMAR GLOBAL TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note 7. FINANCIAL HIGHLIGHTS
The following information presents per unit operating performance data and other supplemental financial data for the year ended December 31, 2001. This information has been derived from information presented in the financial statements.
Per Unit Performance (for a unit outstanding throughout the entire year)
Total return is calculated based on the change in value of a unit during the year. An individual unitholder's total return and ratios may vary from the above total return and ratios based on the timing of additions and redemptions.
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(1) Excludes brokerage commissions and other trading fees paid directly to the brokers. (2) Includes brokerage commissions and other trading fees paid directly to the brokers. (3) The net investment (loss) per unit and offering costs per unit are calculated by dividing the net investment (loss) and offering costs by the average number of units outstanding during the year. The net realized and change in unrealized gain from trading is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. (4) Excludes brokerage commissions and other trading fees paid directly to the brokers and advisor profit shares.