10-K 1 c31664_10k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-K ------------ [X] ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 Commission File Number 333-9898 ------------------------------- KENMAR GLOBAL TRUST ----------------------------------------- (Exact Name of Registrant as Specified in Its Charter) DELAWARE 06-6429854 ------------------------------- ------------------------------------ (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) c/o Kenmar Advisory Corp. Two American Lane P.O. Box 5150 Greenwich, Connecticut 06831 ------------------------------------------------------- (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] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2) Yes [ ] No [X] None of the voting securities of the Registrant are held by Non-Affiliates of the Registrant. TABLE OF CONTENTS
PAGE PART I 1 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 6 ITEM 5. MARKET FOR 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................................10 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...................................................................10 ITEM 9A. CONTROLS AND PROCEDURES................................................................................10 PART III 11 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.....................................................11 ITEM 11. EXECUTIVE COMPENSATION.................................................................................13 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS...........................................................13 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................................14 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.................................................................14 PART IV 15 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.................................................................................................15 SIGNATURES CERTIFICATIONS
i 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 32 persons (as of December 31, 2003) 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, 2003. GRAHAM CAPITAL MANAGEMENT, L.P. Graham Capital Management, L.P. ("GCM") was organized as a Delaware limited partnership in May 1994. The general partner of GCM is KGT, Inc., a Delaware corporation of which Kenneth G. Tropin is the President and sole shareholder. The limited partner of GCM is KGT Investment Partners, L.P., a Delaware limited partnership of which KGT, Inc. is also a general partner and in which Mr. Tropin is the principal investor. (KGT, Inc. and KGT Investment Partners, L.P. are not affiliated with Kenmar, the Fund or any other company affiliated or related to Kenmar or the Fund.) GCM became registered as a commodity pool operator and commodity trading advisor under the Commodity Exchange Act and a member of the National Futures Association on July 27,1994. THE REGISTRATION OF GCM WITH THE CFTC AND ITS MEMBERSHIP IN THE NATIONAL FUTURES ASSOCIATION MUST NOT BE TAKEN AS AN INDICATION THAT ANY SUCH AGENCY OR SELF-REGULATORY BODY HAS RECOMMENDED OR APPROVED GCM. The current program used by GCM on behalf of the Fund is the K4 Program at 150% Leverage ("150% Leverage"). The Fund may also elect to have GCM utilize the K4 Program at Standard Leverage ("Standard Leverage") on behalf of the Fund. The Fund will not invest in both the Standard Leverage program and the 150% Leverage program simultaneously. GCM is an investment manager that actively trades worldwide on a 24-hour basis in the equity, fixed income, currency and commodity markets utilizing securities, futures, forwards and other financial instruments. GCM offers clients various systematic and discretionary global macro trading programs and a long-short equity program. GCM uses systematic trading programs or models to produce trading signals on a largely automated basis when applied to market data. GCM also manages discretionary trading programs for which trades are determined subjectively on the basis of its traders' assessment of market conditions rather than through application of an automated system. GCM's long-short equity program applies a mean reversion strategy to several hundred large capitalization stocks. The investment objective of each GCM trading strategy is to provide clients with significant potential for capital appreciation in both rising and falling markets during expanding and recessionary economic cycles. 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. 2 Grinham Managed Funds Pty Ltd. trades the Diversified Managed Accounts Program on behalf of the Fund. Grinham Managed Funds Pty Ltd. trades 45 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. Transtrend, B.V. ("Transtrend") is a Dutch limited liability company formed in November 1991 to provide commodity trading advisory services to selected clients. It has been registered as a commodity trading advisor and commodity pool operator under the CEAct since September 23, 1994, and is a member of the NFA in such capacities. Transtrend is also licensed as a portfolio manager, and is subject to regulation by the Autoriteit Financiele Markten ("AFM"), the securities board of The Netherlands. Registration under the CEAct, membership in the NFA and the AFM license in no way imply that the CFTC, the NFA or the AFM have endorsed Transtrend's qualifications to provide the commodity trading advisory services described in this document. In its Diversified Trend Program, traded on behalf of the Fund, 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 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 markets, through allocating such proceeds to the Advisors. To the extent the Fund trades in futures contracts on U.S. exchanges, the assets deposited by the Fund with its Clearing Brokers as margin must be segregated pursuant to the regulations of the CFTC. Such segregated funds may be invested only in a limited range of instruments -- principally U.S. government obligations. To the extent that the Fund trades in futures, forward, options and related contracts on markets other than regulated U.S. futures exchanges, funds deposited to margin positions held on such exchanges are invested in bank deposits or in instruments of a credit standing generally comparable to those authorized by the CFTC for investment of "customer segregated funds," although applicable CFTC rules prohibit funds employed in trading on foreign exchanges from being deposited in "customer segregated fund accounts." Although the percentages set forth below may vary substantially over time, as of December 31, 2003 the Fund estimates: (i) up to approximately 91% 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; 3 (ii) approximately 9% of the Net Asset Value of the Fund is maintained in bank deposits or U.S. Treasury and U.S. Government Agencies issues. Fund assets maintained in bank deposits are currently maintained with Brown Brothers Harriman & Co. in New York, New York and Georgetown, Grand Cayman Island. 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 U.S. 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 AS OF DECEMBER 31, 2003 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"
-------------------------------------------------------------------------------------------------------------------- EXPENSES (1) PERCENTAGE RETURN DOLLAR RETURN WHICH MUST BE OFFSET REQUIRED REQUIRED TO "BREAK EVEN" FIRST TWELVE MONTHS ($5,000 INITIAL INVESTMENT) OF INVESTMENT FIRST TWELVE MONTHS OF INVESTMENT -------------------------------------------------------------------------------------------------------------------- Brokerage Commissions (2) 10.00% $500.00 -------------------------------------------------------------------------------------------------------------------- Administrative Expenses (3) 1.00% $50.00 -------------------------------------------------------------------------------------------------------------------- Advisors' Profit Shares (4) 2.00% $100.00 -------------------------------------------------------------------------------------------------------------------- Kenmar Incentive Fee (5) 0.15% $7.50 -------------------------------------------------------------------------------------------------------------------- Redemption Charge (6) 3.10% $155.00 -------------------------------------------------------------------------------------------------------------------- Interest Income (7) (1.25)% $(62.50) -------------------------------------------------------------------------------------------------------------------- RETURN ON $5,000 INITIAL INVESTMENT REQUIRED FOR "BREAK 15.00% $750.00 EVEN" IF UNITS ARE REDEEMED ON OR BEFORE THE 12TH MONTH-END FOLLOWING SALE. -------------------------------------------------------------------------------------------------------------------- RETURN ON $5,000 INITIAL INVESTMENT REQUIRED FOR "BREAK 14.00% $700.00 EVEN" IF UNITS ARE REDEEMED ON THE 13TH MONTH-END THROUGH THE 18TH MONTH-END FOLLOWING SALE. -------------------------------------------------------------------------------------------------------------------- RETURN ON $5,000 INITIAL INVESTMENT REQUIRED FOR "BREAK 12.00% $600.00 EVEN" IF UNITS ARE REDEEMED AFTER THE 18TH MONTH-END FOLLOWING SALE. --------------------------------------------------------------------------------------------------------------------
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) 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 4 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. (5) 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. (6) 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). (7) Interest income is estimated based on current rates. DESCRIPTION OF CURRENT CHARGES
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT Kenmar Brokerage commissions Flat-rate monthly commissions of 0.833% of the Fund's beginning of month Net Assets (a 10% annual rate). Such commissions cover all floor brokerage, exchange, clearing and NFA fees incurred in the Fund's trading. Third Parties Miscellaneous execution costs Paid as incurred; not anticipated to exceed 0.25% of average beginning of month Net Assets per year. Counterparties "Bid-ask" spreads Each counterparty with which the 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 20% of 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 a 10% 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.
5 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. 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: (1)(i) 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: (1) As of December 31, 2003, there were 816 holders of Units, including Kenmar and the Advisors. As of December 31, 2003, Marc S. Goodman owned 52.8321 Units in his individual retirement account, Kenneth A. Shewer owned 50.2517 Units in his individual retirement account and Kenmar owned 2,317.0232 Units. (c) Dividends: (1) The Fund has made no distributions since trading commenced, nor does Kenmar presently intend to make any distributions in the future. 6 (d) Securities Authorized for Issuance Under Equity Compensation Plans: (1) Not applicable. REG. S-K ITEM 701(F) During the fourth quarter of 2003, 15,370.5288 Units were sold for a total of $1,693,506. ITEM 6. SELECTED FINANCIAL DATA The following selected financial data of the Fund has been derived from the Fund's audited financial statements.
Year ended Year ended Year ended Year ended Year ended 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 -------- -------- -------- -------- -------- Operations Data Realized Gains (Losses) $3,085,074 $4,672,380 $2,479,061 $ (14,413) $ 130,990 Change in Unrealized (25,999) 631,477 (584,140) 960,207 (1,149,702) Interest Income 127,729 170,849 517,609 1,129,270 1,082,050 Brokerage Commissions (232,081) (184,293) (239,616) 312,560 274,883 Managing Owner Brokerage Commissions 2,009,917 1,647,208 1,566,968 1,911,158 2,616,529 Managing Owner Incentive fee 0 0 0 0 0 Advisor Profit Shares 507,299 934,498 465,428 198,721 109,313 Operating Expenses 153,200 139,531 99,383 132,875 236,610 Net Income (Loss) 284,307 2,569,176 41,135 (480,250) (3,173,997) Net Income (Loss) Per Unit 1.47 15.20 0.24 (2.29) (12.65) (Based on Weighted Average Number of Units Outstanding) Increase (Decrease) in Net Asset Value 0.25 14.29 (0.53) (2.57) (13.61) per Unit 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 -------- -------- -------- -------- -------- Financial Position Data: Managing Owner's Capital $ 257,247 $226,137 $196,966 $195,013 $280,146 Other Unitholders' Capital 24,274,508 19,168,078 15,928,413 17,537,051 22,497,207 Total Capital 24,531,755 19,394,215 16,125,379 17,732,064 22,777,353 Net Asset Value Per Unit 111.02 $110.77 96.48 97.01 99.58
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. 7 CRITICAL ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable and prudent; however, actual results could differ from those estimates. The Fund's significant accounting policies are described in detail in Note 1 of the Financial Statements. The Fund records all investments at fair value in its financial statements, with changes in fair value reported as a component of realized and change in unrealized trading gain (loss) in the Statements of Operations. Generally, fair values are based on market prices; however, in certain circumstances, estimates are involved in determining fair value in the absence of an active market closing price (e.g. forward contracts which are traded in the inter-bank market). 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 2003. 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, 2003, the Net Asset Value of the Fund was $24,531,755, an increase of approximately 26.49% from its Net Asset Value of $19,394,215 at December 31, 2002. The Fund's subscriptions and redemptions for the year ended December 31, 2003, totaled $8,278,861 and $3,187,628, respectively. For the year ended December 31, 2003, the Fund had revenues comprised of $3,085,074 in realized trading gains, $(25,999) in unrealized trading losses and $127,729 of interest income. Total expenses and brokerage commissions for the year ended December 31, 2003 were $2,902,497. The Net Income for the year ended December 31, 2003 was $284,307. The Net Asset Value per Unit increased 0.23% from $110.77 at December 31, 2002, to $111.02 at December 31, 2003. The Fund's positive performance for the year ended December 31, 2003 resulted primarily from currencies, global stock indices and metals. As of December 31, 2002, the Net Asset Value of the Fund was $19,394,215, an increase of approximately 20.27% from its Net Asset Value of $16,125,379 at December 31, 2001. The Fund's subscriptions and redemptions for the year ended December 31, 2002, totaled $3,163,416 and $2,354,126, respectively. For the year ended December 31, 2002, the Fund had revenues comprised of $4,672,380 in realized trading gains, $631,477 in unrealized trading gains and $170,849 of interest income. Total expenses and brokerage commissions for the year ended December 31, 2002 were $2,905,530. The Net Income for the year ended December 31, 2002 was $2,569,176. The Net Asset Value per Unit increased 14.81% from $96.48 at December 31, 2001, to $110.77 at December 31, 2002. The Fund's positive performance for the year ended December 31, 2002 resulted primarily from global interest rates, currencies and global stock indices. 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 8 in unrealized trading losses and $517,609 in interest income. Total expenses and brokerage commissions 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)%. 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. 9 OFF-BALANCE SHEET ARRANGEMENTS None. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements meeting the requirements of Regulation S-X appear beginning on Page F-1 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, 2003 and 2002.
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER 2003 2003 2003 2003 --------------- ----------------- ---------------- ---------------- Gain (Loss) from trading $ 1,171,236 $ 916,963 $ (1,028,023) $ 1,766,818 Net Investment (Loss) (657,529) (690,854) (517,055) (677,249) Net Income (Loss) 513,707 226,109 (1,545,078) 1,089,569 Net Income (Loss) per unit 2.92 1.20 (7.82) 5.11 Increase (Decrease) in Net Asset Value per Unit 2.21 0.92 (7.80) 4.92 Net Asset Value per Unit at end of period 112.98 113.90 106.10 111.02 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER 2002 2002 2002 2002 --------------- ----------------- ---------------- --------------- Gain (Loss) from trading $ (524,692) $ 1,684,268 $ 3,607,446 $ 352,542 Net Investment (Loss) (363,768) (619,320) (1,083,044) (484,256) Net Income (Loss) (888,460) 1,064,948 2,524,402 (131,714) Net Income (Loss) per unit (5.27) 6.28 15.03 (0.78) Increase (Decrease) in Net Asset Value per Unit (5.32) 6.20 14.84 (1.43) Net Asset Value per Unit at end of period 91.16 97.36 112.20 110.77
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. 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. ITEM 9A. CONTROLS AND PROCEDURES Kenmar Advisory Corp., the Managing Owner of the Fund, with the participation of the Managing Owner's Chief Executive Officer, President and Director, and Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the 10 Fund as of the end of the period covered by this annual report, and, based on their evaluation, have concluded that these disclosure controls and procedures are effective. There were no significant changes in the Managing Owner's internal controls over financial reporting that occurred during our most recent fiscal quarter with respect to the Fund or in other factors applicable to the Fund that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting. 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. 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. 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. 11 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. MS. MAUREEN HOWLEY (born 1967), Senior Vice President and Chief Financial Officer, joined Kenmar in July 2003. She is responsible for corporate finance and administration. From July 2001 until July 2003, Ms. Howley was an Associate at Andor Capital Management, LLC, an equity hedge fund company. At Andor, she was responsible for managing the corporate accounting functions. Previously, she was the Controller at John W. Henry & Company, Inc., a commodity trading advisor, where she had held positions of increasing responsibility from September 1996 to July 2001. She began her career in September 1989 at Deloitte & Touche. She held many positions of increasing responsibility for seven years, and left as Audit Senior Manager in July 1996 to join John W. Henry & Company, Inc. Ms. Howley received a B.A. in Accounting from Muhlenberg College in 1989 and designation as a Certified Public Accountant in 1990. 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. 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 an A.B. degree from Cornell University in 1974 and an 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 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 Kenmar Greenwich Holdings LLC. (c) Identification of Certain Significant Employees: None. (d) Family Relationships: Mrs. Esther Eckerling Goodman is married to Mr. Marc S. Goodman. 12 (e) Business Experience: See Item 10(a) and (b) above. (f) Involvement in Certain Legal Proceedings: None. (g) Promoters and Control Persons: Not applicable. (h) Audit Committee Financial Expert The Fund itself does not have any employees. Kenmar acts as managing owner of the Fund. The Board of Directors of Kenmar has delegated audit committee responsibilities to the Internal Controls and Disclosure Committee. Maureen Howley, as the Chief Financial Officer of Kenmar and as a member of the Internal Controls and Disclosure Committee, serves as the "audit committee financial expert" for Kenmar. Ms. Howley is not a member of the Board of Directors and she is not independent of management. (i) Code of Ethics Kenmar has adopted a code of ethics for its chief executive officer, chief financial officer, accounting managers and persons performing similar functions. A copy of the code of ethics may be obtained at no charge by written request to Kenmar, Two American Lane, P.O. Box 5150, Greenwich, Connecticut 06831 or by calling (203) 861-1000. 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 AND RELATED STOCKHOLDER MATTERS REG. S-K ITEM 201(D) (a) Securities Authorized for Issuance Under Equity Compensation Plans. Not applicable. REG. S-K ITEM 403 (a) Security Ownership of Certain Beneficial Owners and Management: As of December 31, 2003, no person or "group" is known to the registrant to be the beneficial owner of more than five percent of the Units. (b) Security Ownership of Management: As of December 31, 2003, the following officers of Kenmar beneficially owned the following number of Units: NAME OF BENEFICIAL NUMBER OF UNITS PERCENTAGE OF OWNER OWNED CLASS Marc S. Goodman 52.8321 Less than 1% Kenneth A. Shewer 50.2517 Less than 1% 13 As of December 31, 2003, 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. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The following table sets forth information with respect to services provided to us by Arthur F. Bell, Jr. & Associates, L.L.C., our independent certified public accountants, for the years ended December 31, 2003 and 2002. 2003 2002 Audit fees billed for the year .......... $41,196 $37,113 Audit-related fees ...................... 0 0 Tax fees ................................ 5,500 4,200 All other fees .......................... 0 0 Total .......................... $46,696 $41,313 ======= ======= (a) Audit Fees. Consists of aggregate fees billed to us by Arthur F. Bell, Jr. & Associates, L.L.C. for each of the last two fiscal years for professional services rendered for the audit of our annual financial statements, review of our interim financial statements, and services that are normally provided in connection with statutory or regulatory filings or engagements, including consents and other services related to Securities and Exchange Commission matters. (b) Audit-Related Fees. Consists of aggregate fees billed to us by Arthur F. Bell, Jr. & Associates, L.L.C. for each of the last two fiscal years for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under "Audit Fees." 14 (c) Tax Fees. Consists of aggregate fees billed to us by Arthur F. Bell, Jr. & Associates, L.L.C. for each of the last two fiscal years for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance and tax audit issues. (d) All Other Fees. Consists of other fees billed to us by Arthur F. Bell, Jr. & Associates, L.L.C. for each of the last two fiscal years for products and services other than the services reported above. PART IV ITEM 15. 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 Report......................................................F-1 Statements of Financial Condition as of December 31, 2003 and 2002 (Audited)...................................F-2 Condensed Schedule of Investments as of December 31, 2003 (Audited)............................................................F-3 Statements of Operations For the Years Ended December 31, 2003, 2002 and 2001 (Audited)...................................................F-4 Statements of Cash Flows For the Years Ended December 31, 2003, 2002 and 2001 (Audited)...................................................F-5 Statements of Changes in Unitholders' Capital (Net Asset Value) For the Years Ended December 31, 2003, 2002 and 2001 (Audited)............................................................F-6 Notes to Financial Statements (Audited)............................F-7-F-12 2. Exhibits. Exhibit Number Description of Document 3.1 Certificate of Formation of the Registrant. (Incorporated by reference to the Fund's Registration Statement on Form S-1, Registration No. 333-8869, dated July 25, 1996). 3.2 Declaration of Trust and Trust Agreement of the Registrant. (Incorporated by reference to the Fund's Registration Statement on Form S-1, Registration No. 333-8869, dated July 25, 1996). 3.3 Amended and Restated Declaration of Trust and Trust Agreement of the Registrant. (Incorporated by reference to the Fund's Registration Statement on Form S-1, Registration No. 333-8869, dated July 25, 1996). 10.1 Form of Advisory Agreement. (Incorporated by reference to the Fund's Registration Statement on Form S-1, Registration No. 333-8869, dated July 25, 1996). 10.2 Form of Customer Agreement between the Trust and the Commodity Brokers. (Incorporated by reference to the Fund's Registration Statement on Form S-1, Registration No. 333-8869, dated July 25, 1996). 10.3 Form of Escrow Agreement. (Incorporated by reference to the Fund's Registration Statement on Form S-1, Registration No. 333-8869, dated July 25, 1996). 10.4 Subscription Agreement and Power of Attorney. (Incorporated by reference to the Fund's Registration Statement on Form S-1, Registration No. 333-8869, dated July 25, 1996). 23.2 Consent of Arthur F. Bell, Jr. & Associates, L.L.C. (Included herein at page F-1.) 31.01 Certification of Kenneth A. Shewer, Chief Executive Officer, pursuant to Rules 13a-14 and 15(d)-14 of the Securities Exchange Act of 1934. 31.02 Certification of Maureen Howley, Senior Vice President and Chief Financial Officer, pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. 15 32.01 Certification of Kenneth A. Shewer, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. 32.02 Certification of Maureen Howley, Senior Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K: The Fund did not file any reports on Form 8-K during the fourth quarter of 2003. 16 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 30th day of March, 2004. 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 30th day of March, 2004. 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/Maureen Howley ---------------------------- Maureen Howley Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer for the Fund) 17 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, 2003 and 2002, including the December 31, 2003 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, 2003, 2002 and 2001. 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, 2003 and 2002, and the results of its operations, cash flows and changes in its net asset values for the years ended December 31, 2003, 2002 and 2001, in conformity with accounting principles generally accepted in the United States of America. /s/ ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C. Hunt Valley, Maryland February 16, 2004, except for Note 7 as to which the date is March 9, 2004 See accompanying notes. F-1 KENMAR GLOBAL TRUST STATEMENTS OF FINANCIAL CONDITION December 31, 2003 and 2002
2003 2002 ------------ ----------- ASSETS Equity in broker trading accounts Cash $ 21,617,196 $10,076,868 Unrealized gain on open contracts 1,082,839 1,074,472 ------------ ----------- Deposits with brokers 22,700,035 11,151,340 Cash and cash equivalents 2,334,203 8,569,208 Unrealized gain (loss) on open forward contracts (31,040) 3,326 Subscriptions receivable 30,000 0 ------------ ----------- Total assets $ 25,033,198 $19,723,874 ============ =========== LIABILITIES Accounts payable $ 50,629 $ 37,706 Commissions and other trading fees on open contracts 4,673 800 Managing Owner brokerage commissions 181,331 142,204 Advisor profit shares 156,471 60,105 Redemptions payable 107,914 85,655 Redemption charges payable to Managing Owner 425 3,189 ------------ ----------- Total liabilities 501,443 329,659 ------------ ----------- UNITHOLDERS' CAPITAL (NET ASSET VALUE) Managing Owner - 2,317.0232 and 2,041.4999 units 257,247 226,137 outstanding at December 31, 2003 and 2002 Other Unitholders - 218,640.2418 and 173,044.1212 units outstanding at December 31, 2003 and 2002 24,274,508 19,168,078 ------------ ----------- Total unitholders' capital (Net Asset Value) 24,531,755 19,394,215 ------------ ----------- $ 25,033,198 $19,723,874 ============ ===========
See accompanying notes. F-2 KENMAR GLOBAL TRUST CONDENSED SCHEDULE OF INVESTMENTS December 31, 2003 --------------------------
LONG FUTURES CONTRACTS Description Value % of Net Asset Value ------------------------------------------- ------------- -------------------- Agricultural $ 12,694 0.05% Currency 297,693 1.21% Energy (40,699) (0.16)% Interest rate 21,480 0.09% Metals 757,821 3.09% Stock index 336,835 1.37% Other (261) 0.00% ------------- ------------ TOTAL LONG FUTURES CONTRACTS $ 1,385,563 5.65% ------------- ------------ SHORT FUTURES CONTRACTS Description Value % of Net Asset Value ------------------------------------------- ------------- -------------------- Agricultural $ 7,048 0.03% Currency 19,684 0.08% Energy (93) 0.00 Interest rate 3,069 0.01% Metals (340,931) (1.39)% Stock index 8,499 0.03% ------------- ------------ TOTAL SHORT FUTURES CONTRACTS $ (302,724) (1.24)% ------------- ------------ TOTAL FUTURES CONTRACTS $ 1,082,839 4.41% ============= ============ FORWARD CURRENCY CONTRACTS Description Value % of Net Asset Value ------------------------------------------- ------------- -------------------- Long forward currency contracts $ (18,061) (0.07)% Short forward currency contracts $ (12,979) (0.05)% ============= ============ TOTAL FORWARD CURRENCY CONTRACTS $ (31,040) (0.12)% ============= ============
See accompanying notes. F-3 KENMAR GLOBAL TRUST STATEMENTS OF OPERATIONS For the Years Ended December 31, 2003, 2002 and 2001
2003 2002 2001 ---- ---- ---- TRADING GAINS (LOSSES) Gain (loss) from trading Realized $ 3,085,074 $ 4,672,380 $ 2,479,061 Change in unrealized (25,999) 631,477 (584,140) Brokerage commissions (232,081) (184,293) (239,616) ----------- ----------- ----------- Gain from trading 2,826,994 5,119,564 1,655,305 ----------- ----------- ----------- NET INVESTMENT (LOSS) Income Interest income 127,729 170,849 517,609 ----------- ----------- ----------- Expenses Managing Owner brokerage commissions 2,009,917 1,647,208 1,566,968 Advisor profit shares 507,299 934,498 465,428 Operating expenses 153,200 139,531 99,383 ----------- ----------- ----------- Total expenses 2,670,416 2,721,237 2,131,779 ----------- ----------- ----------- Net investment (loss) (2,542,687) (2,550,388) (1,614,170) ----------- ----------- ----------- NET INCOME $ 284,307 $ 2,569,176 $ 41,135 =========== =========== =========== NET INCOME PER UNIT (based on weighted average number of units outstanding during the year) $ 1.47 $ 15.20 $ 0.24 =========== =========== =========== INCREASE (DECREASE) IN NET ASSET VALUE PER UNIT $ 0.25 $ 14.29 $ (0.53) =========== =========== ===========
See accompanying notes. F-4 KENMAR GLOBAL TRUST STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2003, 2002 and 2001
2003 2002 2001 ---- ---- ---- CASH FLOWS FROM (FOR) OPERATING ACTIVITIES Net income $ 284,307 $ 2,569,176 $ 41,135 Adjustments to reconcile net income to net cash from operating activities: Net change in unrealized 25,999 (631,477) 584,140 Increase (decrease) in accounts payable and accrued expenses 152,289 54,328 (100,111) ------------ ------------ ------------- Net cash from operating activities 462,595 1,992,027 525,164 ------------ ------------ ------------- CASH FLOWS FROM (FOR) FINANCING ACTIVITIES Addition of units 8,248,861 3,163,416 2,242,654 Offering costs paid (238,000) (109,630) (124,454) Redemption of units (3,168,133) (2,343,977) (4,010,064) ------------ ------------ ------------- Net cash from (for) financing activities 4,842,728 709,809 (1,891,864) ------------ ------------ ------------- Net increase (decrease) in cash and cash equivalents 5,305,323 2,701,836 (1,366,700) CASH AND CASH EQUIVALENTS Beginning of year 18,646,076 15,944,240 17,310,940 ------------ ------------ ------------- End of year $ 23,951,399 $ 18,646,076 $ 15,944,240 ============ ============ ============= END OF YEAR CASH AND CASH EQUIVALENTS CONSISTS OF: Cash in broker trading accounts $ 21,617,196 $ 10,076,868 $ 10,297,595 Cash and cash equivalents 2,334,203 8,569,208 5,646,645 ------------ ------------ ------------- Total end of year cash and cash equivalents $ 23,951,399 $ 18,646,076 $ 15,944,240 ============ ============ =============
See accompanying notes. F-5 KENMAR GLOBAL TRUST STATEMENTS OF CHANGES IN UNITHOLDERS' CAPITAL (NET ASSET VALUE) For the Years Ended December 31, 2003, 2002 and 2001
Unitholders' Capital Total -------------------------------------------------- Number of Managing Other Units Owner Unitholders Total ------------ -------- ----------- ----------- Balances at December 31, 2000 182,793.6866 $195,013 $17,537,051 $17,732,064 Net income for the year ended December 31, 2001 480 40,655 41,135 Additions 23,090.2782 3,000 2,239,654 2,242,654 Redemptions (38,749.0103) 0 (3,766,020) (3,766,020) Offering costs (1,527) (122,927) (124,454) ------------ -------- ----------- ----------- Balances at December 31, 2001 167,134.9545 196,966 15,928,413 16,125,379 Net income for the year ended December 31, 2002 30,486 2,538,690 2,569,176 Additions 31,247.2738 0 3,163,416 3,163,416 Redemptions (23,296.6072) 0 (2,354,126) (2,354,126) Offering costs (1,315) (108,315) (109,630) ------------ -------- ----------- ----------- Balances at 175,085.6211 226,137 19,168,078 19,394,215 December 31, 2002 Net income for the year ended December 31, 2003 3,749 280,558 284,307 Additions 74,176.8974 30,000 8,248,861 8,278,861 Redemptions (28,305.2535) 0 (3,187,628) (3,187,628) Offering costs (2,639) (235,361) (238,000) ------------ -------- ----------- ----------- Balances at December 31, 2003 220,957.2650 $257,247 $24,274,508 $24,531,755 ============ ======== =========== ===========
Net Asset Value Per Unit ---------------------------------------------- December 31, 2003 2002 2001 ---- ---- ---- $111.02 $110.77 $96.48 ======= ======= ====== See accompanying notes. F-6 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 is reported in the statement of operations. Brokerage commissions paid directly to brokers, reflected as "brokerage commissions" in the statement of operations, include exchange and 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. See accompanying notes. F-7 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. 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 has agreed to maintain a net worth of not less than $1,000,000. At December 31, 2003, the Managing Owner has a net worth in excess of $1,000,000. Effective May 9, 2003, the Managing Owner is paid monthly brokerage commissions ("Managing Owner brokerage commissions") equal to 1/12 of 10% (10% annually) of the Fund's beginning of month Net Asset Value. Prior to May 9, 2003, the Managing Owner brokerage commissions were 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, 2003, 2002 and 2001, brokerage commissions equated to an approximate round-turn equivalent rate of $62, $64 and $60, 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 2003, 2002 and 2001. See accompanying notes. F-8 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 $1,845, $4,872 and $9,407 during 2003, 2002 and 2001, 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. See accompanying notes. F-9 KENMAR GLOBAL TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------------- Note 6. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED) 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. See accompanying notes. F-10 KENMAR GLOBAL TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------------- Note 7. SUBSEQUENT EVENTS Effective March 1, 2004, the monthly Managing Owner brokerage commissions are equal to 1/12 of 10% (10% annually) of the Fund's beginning of month Net Asset Value on the first $25 million of Net Asset Value and 1/12 of 9% (9% annually) of the Fund's beginning of month Net Asset Value in excess of $25 million. Units purchased after March 1, 2004 and redeemed prior to the end of the twelfth month after such Units are sold are subject to the following redemption charges paid to the Managing Owner: 3% of Net Asset Value redeemed on or after the end of the first and on or before the end of the third month after purchase; 2.625% of Net Asset Value redeemed from the beginning of the fourth and on or before the end of the sixth month after purchase; 1.75% of Net Asset Value redeemed from the beginning of the seventh and on or before the end of the ninth month after purchase; and 0.875% of Net Asset Value redeemed from the beginning of the tenth and on or before the end of the twelfth month after purchase. Units purchased prior to March 1, 2004 remain subject to the previous schedule of redemption charges as described in Note 5. See accompanying notes. F-11 KENMAR GLOBAL TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) ------------------- Note 8. FINANCIAL HIGHLIGHTS The following information presents per unit operating performance data and other supplemental financial data for the years ended December 31, 2003, 2002 and 2001. This information has been derived from information presented in the financial statements.
2003 2002 2001 ---- ---- ---- PER UNIT PERFORMANCE (FOR A UNIT OUTSTANDING THROUGHOUT THE ENTIRE YEAR) Net asset value per unit at beginning of year $110.77 $ 96.48 $ 97.01 ------- ------- ------- INCOME FROM OPERATIONS: Gain from trading (1) 14.61 30.03 9.75 Net investment (loss) (1) (13.13) (15.09) (9.54) ------- ------- ------- Total income from operations 1.48 14.94 0.21 ------- ------- ------- Offering costs (1) (1.23) (0.65) (0.74) ------- ------- ------- Net asset value per unit at end of year $111.02 $110.77 $ 96.48 ======= ======= ======= TOTAL RETURN 0.23% 14.81% (0.55)% ======= ======= ======= SUPPLEMENTAL DATA RATIOS TO AVERAGE NET ASSET VALUE: Expenses prior to advisor profit shares (9.97)% (10.73)% (10.16)% Advisor profit shares (2.34)% (5.61)% (2.84)% ------- ------- ------- Total expenses (12.31)% (16.34)% (13.00)% ======= ======= ======= Net investment (loss) (2) (9.38)% (9.71)% (7.00)% ======= ======= =======
TOTAL RETURNS ARE CALCULATED BASED ON THE CHANGE IN VALUE OF A UNIT DURING THE YEAR. AN INDIVIDUAL UNITHOLDER'S TOTAL RETURNS AND RATIOS MAY VARY FROM THE ABOVE TOTAL RETURNS AND RATIOS BASED ON THE TIMING OF ADDITIONS AND REDEMPTIONS. ----------------------- (1) 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 gain from trading is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. (2) Excludes advisor profit shares. See accompanying notes. F-12 EXHIBIT INDEX Exhibit Number Description of Document Page Number -------------- ----------------------- ----------- 31.01 Certification of Kenneth A. Shewer, Chief E-2 Executive Officer, pursuant to Rules 13a-14 and 15(d)-14 of the Securities Exchange Act of 1934. 31.02 Certification of Maureen Howley, Senior Vice E-3 President and Chief Financial Officer, pursuant to Rules 13a-14 and 15(d)-14 of the Securities Exchange Act of 1934. 32.01 Certification of Kenneth A. Shewer, Chief E-4 Executive Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002 32.02 Certification of Maureen Howley, Senior Vice E-5 President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of The Sarbanes-Oxley Act of 2002 E-1