Attached files
file | filename |
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EX-31.01 - RJO GLOBAL TRUST | v179132_ex31-01.htm |
EX-14.01 - RJO GLOBAL TRUST | v179132_ex14-01.htm |
EX-32.02 - RJO GLOBAL TRUST | v179132_ex32-02.htm |
EX-31.02 - RJO GLOBAL TRUST | v179132_ex31-02.htm |
EX-32.01 - RJO GLOBAL TRUST | v179132_ex32-01.htm |
EX-13.01 - RJO GLOBAL TRUST | v179132_ex13-01.htm |
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2009
OR
¨ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to .
Commission
File Number: 000-22887
RJO
GLOBAL TRUST
(Exact
name of registrant as specified in its charter)
Delaware
|
36-4113382
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
222
S Riverside Plaza
Suite
900
Chicago,
IL 60606
(Address
of principal executive offices) (Zip Code)
(312)
373-5000
(Registrant’s
telephone number, including area code)
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
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act.
¨
Yes x
No
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
¨
Yes x
No
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.
x
Yes ¨ No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). ¨
Yes ¨ 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
Yes ¨ No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer , or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check One):
Large-accelerated
filer ¨ Accelerated
filer ¨ Non-accelerated
filer (Do not check if a smaller reporting company) ¨ Smaller reporting
company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
¨
Yes x
No
State the
aggregate market value of the units of the trust held by non-affiliates of the
registrant. The aggregate market value shall be computed by reference
to the price at which units were sold as of the last business day of the
registrant’s most recently completed second fiscal
quarter: $67,597,782 as of June 30, 2009.
DOCUMENTS
INCORPORATED BY REFERENCE
The sections
of the trust’s prospectus and prospectus supplement dated on May 1,
2009 and February 1, 2010 respectively, entitled “The Risks You Face”
and “The Trading Advisors” are hereby incorporated by reference into Item 1A of
this annual report on Form 10-K.
TABLE
OF CONTENTS
Part
I
|
||||
Item
1. Business
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2
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|||
Item
1A. Risk Factors
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5
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|||
Item
1B. Unresolved Staff Comments
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6
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|||
Item
2. Properties
|
6
|
|||
Item
3. Legal Proceedings
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6
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|||
Item
4. Submission of Matters to a Vote of Security Holders
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6
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|||
Part
II
|
||||
Item
5. Market for the Registrant’s Units and Related Security Holder Matters
and Issuer Purchases of Equity Securities
|
6
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|||
Item
6. Selected Financial Data
|
6
|
|||
Item
7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
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7
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|||
Item
7A. Quantitative and Qualitative Disclosures About Market
Risks
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13
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|||
Item
8. Financial Statements and Supplementary Data
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20
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|||
Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
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20
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|||
Item
9A(T). Controls and Procedures
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20
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|||
Item
9B. Other Information
|
21
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|||
Part
III
|
||||
Item
10. Directors, Executive Officers and Corporate Governance
|
21
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|||
Item
11. Executive Compensation
|
22
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|||
Item
12. Security Ownership of Certain Beneficial Owners and Management and
Related Unitholder Matters
|
22
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|||
Item
13. Certain Relationships and Related Transactions and Director
Independence
|
22
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|||
Item
14. Principal Accounting Fees and Services
|
22
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|||
Part
IV
|
||||
Item
15. Exhibits, Financial Statements, Schedules
|
23
|
1
Part
I
Item
1. Business
General
Development of Business: Narrative Description of Business
RJO
Global Trust (the “Trust”), formerly the JWH Global Trust, is a Delaware
statutory trust organized on November 12, 1996 under the Delaware Statutory
Trust Act. The business of the Trust is the speculative trading of
commodity interests, including futures contracts on currencies, interest rates,
energy and agricultural products, metals, commodity indices and stock indices,
spot and forward contracts on currencies and precious metals and exchanges for
physicals (“Commodity Interests”) pursuant to the trading instructions of
multiple independent commodity trading advisors. R.J. O’Brien Fund
Management, LLC (“RJOFM” or the “Managing Owner”) acquired the Managing Owner
interest in the Trust from Refco Commodity Management, Inc (“RCMI”) on November
30, 2006. The Managing Owner of the Trust was initially formed as an
Illinois corporation in November 2006, and became a Delaware Limited Liability
Company in July of 2007. The Managing Owner is registered as a
commodity pool operator under the Commodity Exchange Act, as amended (“CE Act”),
and is responsible for administering the business and affairs of the
Trust. The Managing Owner is an affiliate of R.J. O’Brien &
Associates LLC., the clearing broker for the Trust (“RJO” or the “Clearing
Broker”). As of December 31, 2009, trading decisions for the Trust
have been delegated to six independent commodity trading advisors: John W. Henry
& Company, Inc. (“JWH”), Abraham Trading Corp. (“ATC”), Global Advisors
(Jersey) Limited (“GAJL”), Conquest Capital Group (“CCG”), NuWave Investment
Management (“NW”) and Haar Capital Management (“HCM”) (each an
“Advisor” and collectively the “Advisors”), pursuant to advisory agreements
executed between the Trust and each Advisor (each an “Advisory Agreement” and
collectively the “Advisory Agreements”.)
RJO is a
“Futures Commission Merchant”, the Managing Owner is a “Commodity Pool Operator”
and the Advisors to the Trust are “Commodity Trading Advisors” (“CTAs”), as
those terms are used in the CE Act. As such, they are registered with
and subject to regulation by the Commodity Futures Trading Commission (“CFTC”)
and are each a member of the National Futures Association
(“NFA”). R.J. O’Brien Securities, LLC., an affiliate of RJOFM and the
lead selling agent for the Trust, is registered as a broker-dealer with the
Financial Industry Regulatory Authority (“FINRA”).
The
initial public offering of the Trust’s units of beneficial interest (“units”)
commenced on April 3, 1997. The initial offering price was $100 per
unit until the initial closing of the Trust on May 30, 1997, and thereafter the
offering price is the current net asset value (“NAV”) per unit of the Trust on
the last business day of the calendar month. The total amount of the
initial offering was $50,000,000. On September 24, 1997, a
registration statement was declared effective with the Securities and Exchange
Commission (the “SEC”) to register $155,000,000 of additional
units. A Post-Effective Amendment was declared effective with the SEC
on October 20, 1997 to deregister $3,120,049 of units which remained unsold upon
the termination of the initial offering of the units. On July 2, 2003
and on November 1, 2004, registration statements were declared effective with
the SEC to register $300,000,000 and $500,000,000 of additional
units. Due to the bankruptcy of Refco, Inc., the ultimate parent of
RCMI (the former managing owner of the Trust), the offering of the units was
suspended on October 17, 2005. The Trust filed two Post-Effective Amendments on
December 12, 2008 to de-register the remaining unsold units that were registered
under the July 2, 2003 and November 1, 2004 registration statements. On December
4, 2007 a registration statement was declared effective with the SEC to register
1,000,000 additional units.
The
Managing Owner is responsible for the preparation of monthly and annual reports
to the beneficial owners of the Trust (the “Beneficial Owners”), filing reports
required by the CFTC, the NFA, the SEC and any other federal or state agencies
having jurisdiction over the Trust’s operations; calculation of the NAV (meaning
the total assets less total liabilities of the Trust) and directing payment of
the management and incentive fees payable to the Advisors under the Advisory
Agreements.
The
Managing Owner provides suitable facilities and procedures for handling
redemptions, transfers, distributions of profits (if any) and, if necessary, the
orderly liquidation of the Trust. Although RJO acts as the Trust’s clearing
broker, the Managing Owner is responsible for selecting another clearing broker
in the event RJO is unable or unwilling to continue in that
capacity. The Managing Owner is further authorized, on behalf of the
Trust (i) to enter into a brokerage clearing agreement and related customer
agreements with other brokers, pursuant to which other brokers will render
clearing services to the Trust; (ii) to cause the Trust to pay
brokerage commissions at the rates provided for in the Trust’s prospectus dated
May 1, 2009 (the “Prospectus”); and supplement to the Prospectus dated February
1, 2010 (the “Supplement”); and (iii) to pay delivery, insurance, storage,
service and other fees and charges incidental to the Trust’s
trading. For the year ended December 31, 2009, $248,000 of
ongoing offering costs were paid or accrued in connection with filing of the
registration statement to keep the offering of units active.
2
The
Advisory Agreements between the Trust and the Advisors provide that each Advisor
has discretion in and responsibility for the selection of the Trust’s commodity
transactions with respect to that portion of the Trust’s assets allocated to
it. As of December 31, 2009, prior to quarter-end reallocation, JWH
was managing 17.05%, ATC 16.59%, GAJL 17.55%, CCG 15.30%, HCM 16.60% and NW
16.91% of the Trust’s assets. The Advisory Agreements with JWH, ATC, and GALP
commenced on November 1, 2008. The Advisory Agreements with NW commenced on
February 1, 2009. The Advisory Agreement with GALP was substituted for an
Advisory Agreement with GAJL on June 1, 2009 and Advisory Agreements with CCG
and HCM commenced on July 1, 2009. During 2009, the Trust
had an Advisory Agreement with Peninsula LP (“PLP”) that was
terminated on March 30, 2009 and an Advisory Agreement with AIS Futures
Management (“AIS”) that was terminated on June 30, 2009. The Trust
and JWH amended their Advisory Agreement as of September 29, 2000 to extend the
term of the Advisory Agreement until June 30, 2002 with automatic renewal for
three additional twelve-month terms (beginning January 1 and ending December 31
of each year) through June 2005, unless earlier terminated in accordance with
the termination provisions contained therein. On June 27, 2005 the
term of the Advisory Agreement was further extended to June 30, 2007, with
automatic renewal for additional 12-month periods. Another Advisory Agreement
with JWH was signed on September 26, 2008 which became effective November 1,
2008.
Pursuant
to the current Advisory Agreements in effect, the Trust pays each Advisor a
management fee of up to 0.16666% of the month-end net assets allocated to each
Advisor (up to 2.0% annually) and a quarterly incentive fee of 20%
of new trading profits, if any, attributable to assets under its
management (both fees are calculated after deduction of actual brokerage
commissions, incentive fee paid and management fee).
The
Advisory Agreements terminate automatically in the event that the Trust is
terminated, in accordance with the Eighth Amended and Restated Declaration and
Agreement of Trust. The Advisory Agreements may be terminated by the
Trust or the Managing Owner at any month-end upon five days’ prior written
notice to the Advisors. In addition, the Advisory Agreements may be
terminated by the Trust or the Managing Owner at any time, upon written notice
to an Advisor, in the event that (A) any person1 described as a
“principal” of the Advisor in the Prospectus or the Supplement ceases for any
reason to be an active “principal” of the Advisor; (B) an Advisor becomes
bankrupt or insolvent; (C) an Advisor is unable to use its trading systems or
methods as in effect on the date of its respective Advisory Agreement and as
modified for the benefit of the Trust; (D) the registration, as a CTA, of the
Advisor with the Financial Services Authority (“FSA,” as applicable), the CFTC
or its membership in the NFA is revoked, suspended, terminated, or not renewed,
or limited or qualified in any respect; (E) except as otherwise provided in its
Advisory Agreement, an Advisor merges or consolidates with, or sells or
otherwise transfers its advisory business, or all or a substantial portion of
its assets, any portion of its futures interest trading systems or methods, or
its goodwill to, any individual or entity; (F) if, at any time, the Advisor
violates any trading policy (as defined in the Advisory Agreements) or
administrative policy, except with the prior express written consent of the
Managing Owner; or (G) an Advisor fails in a material manner to perform any of
its obligations under its respective Advisory Agreement.
The
Advisors have the right to terminate their respective Advisory Agreement at any
time, upon thirty days’ written notice to the Trust in the event that (A) the
Managing Owner imposes additional trading limitation(s) in the form of one or
more trading policies (as defined in the Advisory Agreements) or administrative
policies that an Advisor does not consent to, such consent not to be
unreasonably withheld; (B) the Managing Owner objects to an Advisor implementing
a proposed material change to its respective trading program and the Advisor
certifies to the Managing Owner in writing that it believes such change is in
the best interests of the Trust;2 (C) the Managing Owner or
the Trust materially breaches an Advisory Agreement and does not correct the
breach within ten days of receipt of a written notice of such breach from the
counterparty Advisor; (D) the total Trust funds allocated to the Advisors’
management falls below a certain amount3 (after adding back
certain losses as specified in the Advisory Agreements) at any time; (E) the
Trust becomes bankrupt or insolvent, (F) the registration of the Managing Owner
with the CFTC as a commodity pool operator or its membership in the NFA is
revoked, suspended, terminated or not renewed, or limited or qualified in any
respect.4 If the
Managing Owner or Trust merges, consolidates or sells a substantial portion of
its assets pursuant to an Advisory Agreement, the counterparty Advisor may
terminate the Advisory Agreement upon prior written notice to the Managing Owner
and Trust. The Advisors may also terminate the Advisory Agreement on
sixty days written notice to the Managing Owner during any renewal
term.
The
Advisors and their principals, affiliates and employees are free to trade for
their own accounts and manage other commodity accounts during the term of the
Advisory Agreements and to use the same information and trading strategy which
the Advisor obtains, produces or utilizes in the performance of services for the
Trust. To the extent that an Advisor recommends similar or identical
trades to the Trust and other accounts, which it manages, the Trust may compete
with those accounts for the execution of the same or similar
trades.
2 CCG (but
not the other Advisors) is entitled to terminate its Advisory Agreement upon
thirty days’ notice if CCG deems one or more of the commodity brokers selected
by the Managing Owner materially deficient in its ability to process trades in
accordance with CCG’s trading program, and the parties cannot agree to a
substitute commodity broker.
4 JWH (but
not the other Advisors) is entitled to terminate its Advisory Agreement upon
thirty days’ notice if the Managing Owner overrides a trading instruction other
than as specified in Section 2(a) of JWH’s Advisory
Agreement.
3
The
Trust’s net assets are deposited in the Trust’s accounts with RJO, the Trust’s
clearing broker and currency dealer. For U.S. dollar deposits, 80% of
interest earned on the Trust’s assets, calculated by the average four-week
Treasury Bill rate, is paid to the Trust, while 20% of the return earned on cash
as a whole is retained by the clearing broker. For non-U.S. dollar
deposits, the current rate of interest is equal to a rate of one-month LIBOR
less 100 basis points. Any amounts received by RJO in excess of
amounts paid to the Trust are retained by RJO. To the
extent excess cash is not invested in securities, such cash will be subject to
the creditworthiness of the institution where such funds are
deposited.
As of
December 31, 2009 accounting services for the Trust are provided by SS&C
Technologies and Transfer Agency services are provided by Bank of New York
Mellon Corp. The Managing Owner has no employees other than their
officers and directors, all of whom are employees of the affiliated companies of
the Managing Owner.
Recent
Events
In 2005,
certain assets held by the Trust’s prior clearing broker, Refco Capital markets,
LTD (“RCM”), were determined to be illiquid. On October 31, 2005,
$57,544,206 of equity represented by $56,544,206 in illiquid assets held at RCM
plus $1,000,000 cash, was moved to a separate non-trading account (the
“Non-Trading Account”) and 2,273,288 in substitute units were issued to the
unitholders at that time, prorata to their share in the Trust. At
December 31, 2005, the illiquid assets ($56,544,206) were determined to be
impaired and were reduced by $39,580,944. This resulted in an impaired value of
illiquid assets of $16,963,262, based on management’s estimate at that
time.
Through
2006, the Trust received $10,319,317 from the prior clearing broker in
bankruptcy court and distributed $9,335,669 to unitholders in the manner as
described in (a) and (b) below.
Effective January 1, 2007, JWH Special
Circumstance LLC (the “LLC”), a limited liability company, was established to
pursue additional claims against RCM, and all Non-Trading Accounts were
transferred to the LLC. Any new funds received from RCM by the LLC,
will be distributed to unitholders who were investors in the Trust at the time of
the bankruptcy of RCM and Refco, Inc. U.S. Bank National Association (“US
Bank”) is the manager of the LLC. US Bank may make distributions to
the unitholders, as defined above, upon collection, sale, settlement or other
disposition of the bankruptcy claim and after payment of all fees and expenses
pro rata to the unitholders, as explained above, as follows:
|
(a)
|
Any
unitholder who had redeemed their entire interest in the Trust prior to
distribution shall receive cash (“Non Participating
Owners”).
|
(b)
|
Any
unitholder who had continued to own units in the Trust shall receive
additional units in the Trust at the then Net Asset Value of the Trust
(“Participating Owners”).
|
The
unitholders have no rights to request redemptions from the
LLC.
The LLC
has agreed to compensate US Bank, as manager, the following: (1) an initial
acceptance fee of $120,000, (2) an annual fee of
$25,000, (3) a distribution fee of $25,000 per
distribution, (4) out-of-pocket
expenses, and (5) an hourly fee for all personnel at the
then expected hourly rate ($350 per hour at the time the agreement
was executed).
Recoveries
by and distributions from the LLC are detailed in the chart below:
4
Recoveries
from RCM Distributions paid by US Bank from the LLC, and effect on
impaired value of assets held at RCM
|
||||||||||||||||||||||||
Amounts
Received
from
|
Balance
of
|
Collections
in
Excess
of
|
Cash
Distributions to
Non-Participating
|
Additional
Units in Trust for
Participating
Owners
|
||||||||||||||||||||
Date
|
RCM
|
Impaired
Value
|
Impaired
Value
|
Owners
|
Units
|
Dollars
|
||||||||||||||||||
12/29/06
|
$ | 10,319,318 | $ | 6,643,944 | $ | - | $ | 4,180,958 | 54,914 | $ | 5,154,711 | |||||||||||||
04/20/07
|
2,787,629 | 3,856,315 | - | - | - | - | ||||||||||||||||||
06/07/07
|
265,758 | 3,590,557 | - | - | - | - | ||||||||||||||||||
06/28/07
|
4,783,640 | - | 1,193,083 | - | - | - | ||||||||||||||||||
07/03/07
|
5,654 | - | 5,654 | - | - | - | ||||||||||||||||||
08/29/07
|
- | - | - | 2,787,947 | 23,183 | 1,758,626 | ||||||||||||||||||
09/19/07
|
2,584,070 | - | 2,584,070 | - | - | - | ||||||||||||||||||
12/31/07
|
2,708,467 | - | 2,708,467 | - | - | - | ||||||||||||||||||
03/28/08
|
1,046,068 | - | 1,046,068 | - | - | - | ||||||||||||||||||
04/29/08
|
- | - | - | 2,241,680 | 10,736 | 1,053,815 | ||||||||||||||||||
06/26/08
|
701,148 | - | 701,148 | - | - | - | ||||||||||||||||||
12/31/08
|
769,001 | - | 769,001 | - | - | - | ||||||||||||||||||
06/29/09
|
2,748,048 | - | 2,748,048 | - | - | - | ||||||||||||||||||
12/30/09
|
1,102,612 | - | 1,102,612 | - | - | - | ||||||||||||||||||
Totals
|
$ | 29,821,413 | $ | - | $ | 12,858,151 | $ | 9,210,585 | 88,833 | $ | 7,967,152 |
Financial
Information about Segments
The
Trust’s business constitutes only one segment for financial reporting purposes;
it is a Delaware statutory trust whose purpose is to trade, buy, sell, spread or
otherwise acquire, hold or dispose of commodity interests including futures
contracts on currencies, interest rates, energy and agricultural products,
metals and stock indices, spot and forward contracts on currencies and precious
metals and exchanges for physicals. The Trust does not engage in the
production or sale of any goods or services. The objective of the
Trust business is appreciation of its assets through speculative trading in such
commodity interests. Financial information about the Trust’s
business, as of December 31, 2009, is set forth under Items 6, 7, and 8
herein.
Financial
Information about Geographic Areas
Although
the Trust trades in the global futures and forward markets, it does not have
operations outside of the United States.
Available
Information
The Trust
files an annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to these reports with the Securities and
Exchange Commission (“SEC”). You may read and copy any document filed
by the Trust at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549 on official business days during the hours of 10:00 a.m.
to 3:00 p.m. Please call the SEC at 1-800-SEC-0330 for information on
the Public Reference Room. The Trust does not maintain an internet
website, however, links to certain of the Trust’s public filings may be found on
the Managing Owner’s website
at http://www.rjobrien.com/FundManagement. Additionally
the SEC maintains a website that contains annual, quarterly, and current
reports, proxy statements, and other information that issuers (including the
Trust) file electronically with the SEC. The SEC’s website address is
http://www.sec.gov.
The Trust
will provide paper copies of such reports and amendments to its
investors free of charge upon written request.
Item
1A. Risk Factors
The Trust
is in the business of the speculative trading of futures, forwards, and
options. For a detailed description of the risks that may affect the
Trust or the units offered by the Trust, see the section entitled “The Risks You
Face” set forth in the Prospectus and the Supplement filed with the SEC on May
1, 2009 (Registration Number 333-146177), and February 1, 2010 (Registration
Number 333-146177), respectively, and incorporated into this Form
10-K by reference.
Other
trading advisors who are not affiliated with the Trust may utilize trading
methods that are similar in some respects to those methods used by the Trust’s
Advisors. These other trading advisors could also be competing with
the Trust for the same or similar trades as requested by the Trust’s
Advisors.
5
Item
1B. Unresolved Staff Comments
None
Item
2. Properties
The Trust
does not utilize any physical properties in the conduct of its
business. The Managing Owner uses the offices of RJO at no additional
charge to the Trust, to perform its administration functions, and the Trust uses
the offices of RJO at no additional charge to the Trust, as its principal
administrative offices.
Item
3. Legal Proceedings
The Trust
is not a party to any material pending legal proceedings.
Item
4. Submission of Matters to a Vote of Security Holders
None
Part
II
Item
5. Market for the Registrant’s Units and Related Security Holder
Matters and Issuer Purchases of Equity Securities
(a)
|
(i)
There is no established public market for the units and none is expected
to develop.
|
(ii) As
of December 31, 2009, there were 560,798 units held in the
trading account by Beneficial Owners for an investment of $57,692,854
and 11,679 units held in the trading account by the Managing Owner
for an investment of $1,201,090 A total of 113,485 units had been
redeemed by Beneficial Owners and no units were redeemed by the
Managing Owner during the period of January 1, 2009 to December 31,
2009. The Trust’s Eighth Amended and Restated Declaration and
Agreement of Trust (filed under SEC Registration Number 333-146177) contains a
full description of redemption and distribution procedures. $101,103,855 worth
of Class A units and $103,138,909 worth of Class B units remain unsold as of
December 31, 2009.
(iii) To
date no distributions have been made to Beneficial Owners in the trading account
of the Trust. The Eighth Amended and Restated Declaration and
Agreement of Trust does not provide for regular or periodic cash distributions,
but gives the Managing Owner sole discretion of determining what distributions,
if any, the Trust will make to its Beneficial Owners. The Managing
Owner has not declared any such distributions to date, and does not currently
intend to declare such distribution.
(iv) The
Trust does not authorize the issuance of units under any employee compensation
plan (including any individual compensation arrangements).
(b)
|
The
Trust did not repurchase any units registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
during the period January 1, 2009 through December 31,
2009.
|
Item
6. Selected Financial Data
The
following Selected Financial Data is presented for the years ended December 31,
2005, 2006, 2007, 2008 and 2009 and is derived from the financial statements for
such fiscal years.
2005
|
2006
|
2007
|
2008
|
2009
|
||||||||||||||||
1
Revenues (000)
|
$ | 3,569 | $ | (15,853 | ) | $ | (4,425 | ) | $ | 38,321 | $ | (4,721 | ) | |||||||
2
Net Income (Loss) From Continuing Operations (000)
|
(20,433 | ) | (29,194 | ) | (12,427 | ) | 27,889 | (10,233 | ) | |||||||||||
3
Net Income (Loss) Non-Trading (000)
|
(39,879 | ) | (538 | ) | 5,510 | 1,807 | 1,303 | |||||||||||||
4
Net Income (Loss) Per Unit
|
(10 | ) | (19 | ) | (9 | ) | 34 | (30 | ) | |||||||||||
5
Total Assets (000)
|
223,617 | 140,705 | 83,423 | 92,007 | 69,523 | |||||||||||||||
6
Net Asset Value per Unit - Trading
|
113 | 94 | 85 | 119 | 103 |
6
Item
7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
(a)
|
Capital
Resources
|
The
Trust’s capital resources fluctuate based upon the purchase and redemption of
units and the gains and losses of the Trust’s trading
activities. During 2009, 15,140 Class A units ($1,627,869) and 413
Class B units ($45,000) were purchased by the Beneficial Owners. The
Managing Owner purchased no units during this time. For
the fiscal year ended December 31, 2009, the Beneficial Owners redeemed a total
of 112,495 Class A units for $12,474,861 and 990 Class B units for
$111,177. For the fiscal year ended December 31, 2008, the Beneficial
Owners redeemed a total of 183,863 units for $20,080,379 and the Managing Owner
redeemed a total of 9868 units for
$1,105,206.
The
Trust’s involvement in the futures and forward markets exposes the Trust to both
market risk — the risk arising from changes in the market value of the futures
and forward contracts held by the Trust — and credit risk — the risk that
another party to a contract will fail to perform its obligations according to
the terms of the contract. The Trust is exposed to a market risk
equal to the value of the futures and forward contracts purchased and
theoretically unlimited risk of loss on contracts sold short. The
Trading Advisors monitor the Trust’s trading activities and attempt to control
the Trust’s exposure to market risk by, among other things, refining their
respective trading strategies, adjusting position sizes of the Trust’s futures
and forward contacts and re-allocating Trust assets to different market
sectors. The Trust’s primary exposure to credit risk is its exposure
to the non-performance of the Trust’s forward currency broker. The
forward currency broker generally enters into forward contracts with large,
well-capitalized institutions and then enters into a back-to-back contract with
the Trust. The Trust also may trade on exchanges that do not have
associated clearing houses whose credit supports the obligations of its members
and operate as principals markets, in which case the Trust will be exposed to
the credit risk of the other party to such trades.
The
Trust’s trading activities involve varying degrees of off-balance sheet risk
whereby changes in the market values of the futures and forward contracts
underlying the financial instruments or the Trust’s satisfaction of the
obligations may exceed the amount recognized in the statement of financial
condition of the Trust.
The
amount of assets invested in the Trust generally does not affect its
performance, as typically this amount is not a limiting factor on the positions
acquired by the Advisors, and the Trust’s expenses are primarily charged as a
fixed percentage of its asset base, however large, or by number of investors. To
a lesser extent, some expenses are incurred as minimums regardless of the size
of the asset base, such as audit and legal fees.
The Trust
borrows only to a limited extent and only on a strictly short-term basis in
order to finance losses on non-U.S. dollar denominated trading positions pending
the conversion of the Trust’s dollar deposits. These borrowings are
at a prevailing short-term rate in the relevant currency. They have
been immaterial to the Trust’s operation to date and are expected to continue to
be so.
During
the fiscal year ended December 31, 2009, the Trust had no credit exposure to a
counterparty which is a foreign commodities exchange which was
material.
There are
no known material trends, favorable or unfavorable, that would affect, nor any
expected material changes, to the Trust’s capital resource arrangements at the
present time.
(b)
|
Liquidity
|
The
Trust’s net assets are held in brokerage accounts with RJO. Such
assets are used as margin to engage in trading and may be used as margin solely
for the Trust’s trading. Except in very unusual circumstances,
the Trust should be able to close out any or all of its open trading positions
and liquidate any or all of its securities holdings quickly and at market
prices. This should permit the Advisors to limit losses as well as
reduce market exposure on short notice should its programs indicate reducing
market exposure.
The Trust
earns interest on 100% of the Trust’s average daily balances on deposit
with RJO during each month at 80% of the average four-week Treasury
Bill rate for that month in respect of deposits denominated in
dollars. For deposits denominated in other currencies, the Trust
earns interest at a rate of one-month LIBOR less 100 basis
points. For the calendar year ended December 31, 2009, RJO had paid
or accrued to pay interest of $49,056 to the Trust. For the calendar
year ended December 31, 2008, the clearing broker paid or accrued to pay
interest of $926,298 to the Trust.
7
Most
United States commodity exchanges limit the amount of fluctuation in commodity
futures contract prices during a single trading day by
regulations. These regulations specify what are referred to as “daily
price fluctuation limits” or “daily limits”. The daily limits
establish the maximum amount the price of a futures contract may vary either up
or down from the previous day’s settlement price at the end of a trading
session. Once the daily limit has been reached in a particular
commodity, no trades may be made at a price beyond the
limit. Positions in the commodity could then be taken or liquidated
only if traders are willing to effect trades at or within the limit during the
period for trading on such day. Because the “daily limit” rule only
governs price movement for a particular trading day, it does not limit
losses. In the past, futures prices have moved the daily limit for
numerous consecutive trading days and thereby prevented prompt liquidation of
futures positions on one side of the market, subjecting commodity futures
traders holding such positions to substantial losses for those
days.
It is
also possible for an exchange or the CFTC to suspend trading in a particular
contract, order immediate settlement of a particular contract, or direct that
trading in a particular contract be for liquidation only.
There are
no known material trends, demands, commitments, events or uncertainties at the
present time that are reasonably likely to result in the Trust’s liquidity
increasing or decreasing in any material way, and there are no material unused
sources of liquid assets.
(c)
|
Results
of Operations
|
The
Trust’s success depends on the Advisors’ ability to recognize and capitalize on
major price movements and other profit opportunities in different sectors of the
world economy. Because of the speculative nature of its trading,
operational or economic trends have little relevance to the Trust’s results, and
its past performance is not necessarily indicative of its future
results. The Managing Owner believes, however, that there are certain
market conditions — for example, markets with major price movements — in which
the Trust has a better opportunity of being profitable than in
others.
JWH, ATC,
GAJL, CCG and NW are technical traders, and as such, their programs do not
predict price movements. No fundamental economic supply or demand analysis is
used in attempting to identify mispricings in the market, and no macroeconomic
assessments of the relative strengths of different national economies or
economic sectors is made. However, there are frequent periods during which
fundamental factors external to the market dominate prices. For the
discretionary Advisor, HCM, economic fundamentals and macroeconomic assessments
are made.
The
performance summaries set forth below outline certain major price trends which
JWH’s programs have identified for the Trust during the last three fiscal years,
until October 31, 2008, and for JWH, ATC, and GAJL, LP (the predecessor of GAJL)
from January 1, 2009 through January 31, 2009; for JWH, ATC, GAJL and NW from
February 1, 2009 through June 30, 2009; and for JWH, ATC, GAJL, CCG and NW from
July 1, 2009 through December 31, 2009. January through March also reflect the
opportunities captured on a fundamental basis by AIS and PLP and January through
June reflect the opportunities captured by AIS. The fact that certain trends or
market movements were captured does not imply that others, perhaps larger and
potentially more profitable trends or market movements, were not missed or that
the Advisors will be able to capture similar trends or movements in the
future. Moreover, the fact that the programs were profitable in
certain market sectors in the past does not mean that they will be so in the
future.
The
performance summaries are an outline description of how the Trust performed in
the past, not necessarily any indication of how it will perform in the
future. Furthermore, the general causes to which certain trends or
market movements are attributed may or may not in fact have caused such trends
or movements, as opposed to simply having occurred at about the same
time.
2009
The RJO
Global Trust Class A units posted a loss of (13.86%) for 2009. Class B units
posted a loss of (12.13%). The NAV per unit for Class A at year-end
was $102.84 and for Class B at year end was $104.91 (please see Note (1) AND
Note (9) in the notes to financial statements for more information with respect
to the calculation of Net Asset Value) compared to $119.39 per unit at the
beginning of the year. Beneficial Owners
purchased $1,627,869 worth of Class A units and $45,000
worth of Class B units in the Trust during 2009.
8
The first
quarter of 2009 began much as the fourth quarter of 2008 ended, with continued
broad market volatility. Stock markets and commodity markets remained
under pressure and declined in lock step during January, February, and early
March. Prices reversed and began climbing during the first week of
March as negative sentiment on the part of investors appeared to be at its
highest. Correlation between commodity prices and stock prices, with
few exceptions, remained unusually high during the quarter. The U.S.
dollar had an almost exact inverse relationship to stock and commodity prices
during the quarter. It actually strengthened against most major
foreign currencies as stocks and commodities sold off and then began to weaken
after stocks and commodities bottomed out. The results of fixed
income markets during the quarter told two stories. Short-term rates
remained low and in choppy markets as the Federal Reserve left Fed Fund targets
in the 0% to 0.25% range. Long-term rates, however, edged higher in
January and February as concerns over the inflationary impact of the
government’s stimulus packages drove down note and bond prices. Bond
and note holders received a big boost, however, in late March when the Fed
signaled that it would buy an enormous amount of medium and long-term notes in
an effort to keep mortgage rates low and to maintain a high level of liquidity
in the markets. The traders in the Trust who employ rule-based or
systematic approaches managed the volatility well and the performance was down
slightly until the sharp market reversals in March caused some slightly larger
losses. These managers employ methods that vary widely in terms of
investment time horizons. Those with shorter-term outlooks did a
little worse during January and February while the long-term down trends
established during the fall of 2008 remained in place, but managed the March
reversals better than the managers with longer-term styles.The managers of the
Trust who employ a more discretionary approach continued to struggle with the
unprecedented volatility and uncertainty that surrounded the markets during the
quarter. They posted small losses for the quarter as
well. It was a difficult quarter in general for the managed futures
industry. The Barclay Commodity Trading Advisor Index, a broad
measure of managed futures performance, lost ground each month during the
quarter. Approximately 8 out of every 10 managers in the industry
were showing negative year to date performance at quarter end. This
difficult period follows a strong performance period for the industry in
2008. Periods like this are to be expected from time to time, and the
first quarter profile was consistent with other losing periods from the
past. The objective of the Trust’s portfolio of managers is to
conserve capital during difficult periods like this using disciplined risk
management and a broad diversification of asset exposure, investment style, and
investment time frame.
In April,
stocks climbed a wall of worry, as the old axiom states about bull markets, by
posting a gain for a fourth consecutive
month. Stocks rallied 42% from their low in early
March. This has been their best three month showing since the
1930’s. To put the magnitude of the losses sustained by the market
over the last year and a half in perspective, the S&P would have to gain
another 62% from current levels to match the market high reached in October of
2007. This seems like a tough task in light of long-term interest
rates, which continued to rise during the quarter due to concerns over the
expanding budget deficit, and its potential long-term inflationary
implications. Interest rates fell back at the end June, however, as
markets digested tepid growth related statistics, and inflationary fears
subsided. This reversal took place after Treasury bond yields had
risen more than 60% in five months. Commodity markets began to firm in late
April and were able to mount a rally during most of May. Market
worries over the inflationary implications of the government’s massive stimulus
plan and other spending programs began to weaken the long- term treasury
markets. With rates rising and the dollar weakening against major
foreign currencies, commodities began to look like a good place to
invest. Historically commodities, during times of inflation or
currency depreciation, have been a good store of value. In June,
however, commodities sold off, and evidence is beginning to appear that would
indicate that the lock step relationship between commodities and the stock
market that has existed for the last year or so is beginning to break
up. In other words, commodity markets are beginning to respond to the
economics effecting their own specific situation rather than moving in tandem
with stock prices. This would create more diverse market movements
and would be a good thing for our strategies. The second quarter
continued to present a difficult environment as a whole for the managed futures
industry. The Barclay B Top 50 CTA Index, representing the
performance of the top 50 CTAs in the industry in terms of assets under
management, was down in two of the three months and lost approximately 2% during
the quarter. The index lost for consecutive quarters for only the
third time since its creation in 1987. The index has lost
approximately 3.5% for the year to date. The performance problem
seems to lie in the unstable nature of the market environment from a time frame
perspective. Short-term systems focusing on moves lasting less than a
week have struggled. Long-term strategies focused on price moves that
take months to evolve have refused to reverse. This may pay off over
time but for now it has created small losses. Only intermediate term
strategies focused on 4-6 week price movements have been able to adapt
appropriately and capture profits. The first eight months of the
Trust transferring to multi-CTA format has been challenging. The Trust’s
evolution to a multi- manager format came just after a very profitable period
for many different types of CTA strategies, particularly long-term trend
following. The charged markets of late 2008 and early 2009 exposed
problems with our initial discretionary managers and the trend following
strategies experienced a pull back that was to be expected. The Trust’s risk
control policies enabled the Trust to manage this risk
effectively. Today, the Trust’s portfolio is strongly positioned from
a diversification standpoint among sectors traded, investment styles, and
investment time horizons.
9
Economic
data was weak on an absolute basis during July, but on a relative basis there
was reason for hope. Housing data appeared to show signs of
stabilization. Corporate earnings showed some life. The
stock market posted strong gains for the month. Some commodities lead
by the grain and base metal sectors also showed strength later in the month. The
U.S. dollar was weaker across the board. The short-term manager, CCG,
performed best during the month capturing profits in stock, interest
rate, and currency markets. The longer-term strategies provided mixed
results: JWH, who employs only long-term trend following strategies,
was positive for the month. NW and ATC were negative for the month
reflecting the difficult conditions being dealt with by other leading
multi-strategy CTAs in the industry this year. HCM, the discretionary
manager, was about even on the month after a cautious start. GAJL, the commodity
only manager, was slightly negative for the month but was starting to gain
ground as the month drew to a close. During August, auto sales improved
dramatically thanks to the Government’s “Cash for Clunkers”
program. Housing sales also improved. The President
re-nominated Federal Reserve Chairman Bernanke based on his handling of the
crisis that unfolded last year. IPO activity increased and two large
corporate acquisitions took place at month end. These situations
taken together seem to reflect a market and economy returning to more solid
footing. This allowed stocks to turn in their most positive August
since 2000. Bond prices rose as well during the month as inflation
remained in check. Natural gas and corn were the weakest among
commodities. Action in the crude oil and the foreign currency markets
looked very similar during the month. Each traded in a range during
the month finishing on the low side. The short-term advisor, CCG,
posted negative returns for the month. Their short-term trading
strategy was frustrated by the range bound trading that persisted during the
month. JWH, NW, and ATC were all positive for the
month. This was due to the longer- term nature of their
systems. HCM, the new discretionary manager, was also positive for
the month capturing returns from a stronger sugar market. GAJL, the commodity
only manager, was also positive for the month on the back of stronger metals
markets. By September 30, the stock market finished its strongest
quarter since Q4 1998 and was up almost 20% for the year. It was up
almost 50% from its low in March of this year. It is interesting to
note that since World War II, the average size of stimulus packages implemented
by the government and the Federal Reserve to revive the economy has been 2.9% of
our Gross Domestic Product. This has come from the government
chipping in an average of 2.4% and the Fed has added 0.5% through easier
monetary policy. Thus far, to battle this recession, the government
has provided 10% in stimulus activity through fiscal measures while the Fed has
pumped in 9.5% for a total of 19.5% of assistance. That is more than
the average stimulus package by a factor of 6. No wonder the market
has rallied. The fact that the stimulus package has been delivered on
borrowed money has yet to trigger a response from the market. With
the stock market drifting higher and with other markets, particularly grains and
energy, mired in trading ranges, the Advisors did not have many opportunities
during the month. Four of the six managers were up slightly during
the month with two managers losing money. JWH, ATC, NW, and HCM were
profitable. GAJL and CCG lost money.
During
October, the stock market had its first losing month since March. An
odd result considering the market received its first bit of evidence that the
economy is turning around. Third quarter Gross Domestic Product was
reported to have grown at a 3.2% annualized pace. Much of the gain
was attributed to the government’s stimulus projects. For example,
the “Cash for Clunkers” program boosted auto sales while tax credits for home
buyers revived housing sales. For the fiscal year ended September 30,
the government reported a $1.4 trillion budget deficit, a record which
represents roughly 10% of our GDP. The budget deficit has kept
pressure on the U.S. dollar. The weaker U.S. dollar continues to help
our export sector whose goods and services are cheaper in the global market
place. Our traders have shifted positions in several key
areas. Across the board in multiple time frames our managers have
turned positive on most commodities. Grain, metals, and petroleum
markets have lead the way. Our managers also favor a weaker
U.S.dollar. HCM was our only profitable manager during the
month. Each of the others had small losses.
The stock
market climbed higher during the month of November as interest rates remained at
or near historic lows. The U.S. dollar edged lower and sits near its
lows for the year against major currencies. Gold made a new
historical high during the month just above $1,175 per ounce. It
should be noted that, on an inflation adjusted basis, gold traded at an
equivalent of $2,300 per ounce in 1980. Other commodities drifted
higher, supported by the weaker U.S. dollar. Grains and metals
markets seem to be the leaders while crude oil struggled to break out of a
trading range capped above $80 per barrel. The Trust turned in a
positive month during November. Four of the six managers made
money. Across the board, in multiple time frames, our managers remain
positive on most commodities. Grain, metals, and soft commodity
markets have led the way. Our managers hold mixed positions mixed in
the energy complex with a slightly negative bias due to the trading range in
crude related markets and the negative performance by natural
gas. Our managers favor a weaker U.S, dollar and remain positioned
for lower interest rates. A major reversal took place early in December when the
government released an employment report that showed unexpected improvement in
that area. Gold fell 5% that same day and interest rates instruments
began a month long slide (rates turned higher). Gold fell 12% during
the month and the total return on ten-year U.S. Treasuries was a negative
5.15%. The U.S. dollar also staged an impressive 7% rally reversing a
7-month trend of weakness. Several commodity sectors sold off in
sympathy to gold early in the month, but crawled higher as the year drew to a
close. Grains, crude markets, and industrial metals all recovered to
close near recent highs. The managed futures industry turned in its
first losing year since 1994 and its worst year overall since the inception of
the Barclay Top 50 CTA Index in 1987. The Trust turned in a losing
performance during December. Despite our diverse group of managers
and their diverse strategies, the Trust’s aggregate positions at the beginning
of the month were aligned for a weaker U.S.dollar, lower interest rates,
and stronger gold and commodity markets. The reversal of
those trends early in the month created problems for most of the
managers. HCM, our discretionary manager, made money by hanging on to
sugar and cocoa positions and dumping a falling silver position early in the
month. CCG was the most disappointing as their short-term strategy
was whipsawed during the month.
10
2008
The RJO
Global Trust posted a gain of 40.97% for 2008. The Net Asset Value per Unit at
year-end was $119.39 (please see Note (1) and Note (9) in the notes to financial
statements for more information with respect to the calculation of Net Asset
Value) compared to $84.69 per unit at the beginning of the year. The only
contribution to the Trust during 2008 was RJOFM’s purchase of $120,000 of
additional units.
The
Trust’s performance was positive for the first quarter of 2008. The
Trust’s trading in global equity futures was profitable during the
quarter. In January, the market began to adjust to the possibility of
a U.S. recession and a significant slowdown in global growth. By mid-month, many
of the world’s major stock markets were experiencing double-digit declines. The
Trust’s trading in global equity futures was profitable during January as U.S.
equities suffered through one of the worst Januarys on record. The rate of
decline slowed through February into early March, and then reversed to a modest
rally mid-March. There was similar strong performance in the interest rate
sector in January as both the long and the short end of the U.S. yield curve
rallied sharply in response to weakening economic data, declining stock prices
and monetary stimulus. The interest rate sector was unprofitable in February as
the psychology of the market shifted in February and the U.S. yield curve
steepened as long-term interest rates moved higher. This sector was at the
center of the storm in March as the U.S. Federal Reserve’s proposal of a
financial system overhaul, prompting meaningful price reversals and slight gains
for the Trust. Trading in currencies was profitable, though more challenging,
for the quarter as the dollar declined modestly in January, rallied
and then reversed again to continue the decline in February into March. The
Trust generated profits in most major currencies against the U.S. dollar.
Positions in both precious and base metals, led by silver and gold, were
profitable January and February, but with the modest market rally at the end of
March, these reversed and this sector was unprofitable for
March. The energy sector started the year off at a loss as crude and
crude products faltered in January from near record high prices. The
surge returned in February and continued into March. Crude oil soared to above
$100 and natural gas prices increased more than 7% and were responsible for a
majority of the profits. The bull market in grains and agricultural driven by a
weak dollar and demand for food related commodities, continued in January and
February supplying the greatest profits mid-quarter. The greatest performers
mid-quarter were bean oil +27%, coffee + 19%, wheat +15% and sugar
+14%. All reversed in March as grains’ bull market saw a correction
and performance drag on the Trust. Only corn bucked the reversal and finished
March higher.
The
Trust’s performance was negative for the second quarter of 2008. May and June
profitability was not enough to recover from losses suffered in April. With the
exception of the energy markets, which were profitable throughout the quarter,
the quarter was marked by trendless, range-bound markets in most cases. Crude,
crude products and natural gas continued to move higher on a weakened dollar and
geo-political tensions in the Middle East. The end of March rally in the global
indices sector continued through April, stabilized in May with volatility
declining and relatively tight trading ranges, and suffered a significant
decline during June. Higher energy prices, tighter monetary conditions and
continued stress in the financial sector depressed prices. The interest rate
sector experienced significant reversals in April. Throughout the
quarter, a seventh interest rate cut, combined with prospects of
higher inflation and more stable financial markets outweighed concerns over
slowing economic activity. Bond prices continued to slide through June, with the
trend being slightly disrupted by hawkish tones from central banks, declining
stock prices and the flight to quality. Throughout the quarter, positions in
European interest rates fared better than those in the U.S. and Asia. The
currency sector was very quiet throughout the quarter. After the U.S. dollar
staged a modest recovery in April, there was little evidence of demand for the
dollar during the rest of the quarter. The major currencies were unable to find
direction due to changing and conflicting signals on the economy and interest
rate differentials. The metals sector was negative for the quarter as markets
were directionless due to ebbing demand driven by a degree of stability in the
financial markets. The agriculture markets, particularly grains, were mixed to
profitable throughout the quarter. Grain prices moved higher on concerns of how
the Midwest floods would impact planting and future yields.
The
Trust’s performance was profitable for the third quarter of 2008. The
third quarter began what was one of the most unstable and volatile periods in
the history of the U.S. (and later global) financial markets. The cloud of the
U.S. housing and credit crisis started to mushroom and create further turmoil to
a point where, by quarter end, the world’s credit markets virtually seized up,
commodity prices plunged, some major stock indices declined by more than 10%,
and some of the largest U.S. financial institutions were pushed to extinction.
The Trust performance across all sectors was negative for July, but these major
market moves served as sources of the Trust’s positive August and September
performance as the portfolio shifted to reflect new trends in energy, metals and
the U.S. dollar. The currency sector was profitable during July and August with
the dollar surging 8% above the mid-July low. The dollar continued to strengthen
as LIBOR rates soared and led to a hoarding of dollars. By the end of the
quarter, the Trust was benefiting from the pronounced downward trend in global
equity prices. Crisis of confidence was punctuated by bankruptcies, mergers and
government bailout. The energy markets continued their decline through August
and by September, crude, crude oil products and natural gas were down more than
10% from August close. A weakening global economy and a strengthening U.S.
dollar have negatively impacted demand while supply side fundamentals have not
changed. With the crisis in the credit markets intensifying, global bonds
benefited from a flight to quality during August. During September, the bond
market was more challenging as sentiment shifted markedly and prompted a sharp
reversal. Metals continued their decline, influenced by the dollar rally and the
decline in demand for commodities. Gold and silver continued to move lower
however , towards the end of the quarter, gold began to break higher while the
other metals continued their decline. Agricultural markets which were
unprofitable in July and August turned positive in September as the Trust
benefited from short positions across the complex. The downtrends were supported
by weakening demand and a strong U.S. dollar.
11
The
Trust’s performance was profitable for the fourth quarter of 2008 as it
navigated through extreme volatility and capitalized on market moves of historic
proportions. November also marked the first month of trading with
four new, diverse trading advisors alongside JWH. The currency sector was the
best performing sector for the quarter as the U.S. dollar reasserted its status
as the world’s reserve currency. The Trust benefited from the strength of the
dollar vs. European currencies and its weakness vs. the Yen. Later in the
quarter, profits were earned in the Euro, Yen, Canadian dollar and Australian
dollar. The Global Indices sector was profitable in October and November as the
slide continued across the globe. This sector turned negative for the Trust as
the decline turned slightly upward by the end of December. The interest rate
sector produced flat results for the Trust as cross currents passing through the
markets affected rate trends. This sector turned profitable by the end of
December as yields continued a steady fall through year end. Energy
positions started the quarter off in positive territory, but turned slightly
unprofitable toward the end. Metals continued their decline from the
previous quarter, driven by continued turmoil in the financial markets. Gold and
silver lead the gains in October while aluminum and copper lead the gains in
November and December. The agricultural markets were positive throughout the
quarter reflecting the deteriorating prospects for the global economy and demand
for food, animal feed and bio-fuels.
2007
The JWH
Global Trust posted a loss of 9.77% for 2007. The Net Asset Value per
Unit at year-end was $84.69 (please see Note (1) and Note (9) in the notes to
the financial statements for more information with respect to the calculation of
Net Asset Value) compared to $93.86 per unit at the beginning of the
year. There were no contributions to the Trust during
2007.
The
Trust’s performance was negative for the first quarter of 2007. The
interest rate sector was the Trust’s best performing sector early in the
quarter, only for gains to be given back. On high volatility, the
European 10-year bond yields, U.K. two-year gilt, German debt, Japanese
government bonds and U.S. Treasuries fell, rallied and fell again during the
quarter. The currency sector was the Trust’s worst performing sector
during the quarter as currency markets whipsawed with extreme
volatility. The largest losses occurred in the British pound and the
yen with slight gains produced in the euro and Australian dollar. The
energy sector was positive for the quarter despite changing weather conditions
and predictions which caused extreme volatility within the
sector. Crude oil and London gas oil were the best performers while
natural gas was the worst performer. The metals sector was negative
for the quarter as precious metal prices reacted to fluctuations in the U.S.
dollar and the equity markets. The sector started the quarter with
negative results, moving to slightly positive performance mid-quarter before
reversing back with negative results. The equity indices sector was
negative for the quarter. Intra-month volatility early in the quarter
hurt the sector’s performance. The plunge in the Chinese equity
market sparked a global sell-off and drop in equity prices which continued
through the quarter. The agriculture sector was negative for the
quarter even with a mid-quarter rally. As global equity markets
plunged, investors took profits out of commodities. Slight gains were
achieved in corn and New York coffee and sugar.
The
Trust’s performance was positive for the second quarter. Global
financial markets recovered from the explosion in volatility that occurred at
the end of February and continued into March. The currency, interest
rate and indices sectors were the best performers for the
quarter. The euro reached a historical high against both the U.S.
dollar and the Japanese yen and the British pound reached a 25-year high against
the dollar. The global stock indices sector was positive for the
quarter driven by stronger-than-expected earnings, an
increase in mergers and acquisitions, economic growth in Europe, and benign
inflation in the U.S. Global interest rates sustained their steady
rise as economic growth continued in Europe and as the U.S. housing market began
to stabilize. The European government bonds led performance in this
sector. U.S. Treasuries also bolstered performance. The
energy sector was negative for the quarter with slight gains achieved in
June. Prices across this sector were range-bound earlier in the
quarter until increased terrorism fears combined with lower supplies in
petroleum-based products provided direction. The metals sector
started the quarter on a positive note, moved negatively mid-quarter to flat at
quarter-end. Volatility and whipsaw prices were most pronounced in
copper, gold and silver and affected overall sector performance. The
agriculture sector was negative for the quarter. Like the metals
sector, the agriculture sector started on a positive note and moved to negative
and then to flat at quarter-end. Most losses, at different intervals,
were in Chicago Board of Trade (“CBOT”) wheat, corn, New York coffee and
corn.
12
The
Trust’s performance was negative for the third quarter. Many of the
trends which contributed to second quarter gains were either disrupted or
ended. The U.S. sub-prime crisis spread globally and financial
markets were negatively impacted by rising volatility and trend
reversals. Gains in agriculture, energy and metals were not enough to
offset losses in currencies, interest rates and indices during the middle of the
quarter. Indices and currencies recovered into positive territory at
the end of the quarter while interest rates did not. This sector was
the only unprofitable sector by quarter-end.
The
Trust’s performance was positive for the fourth quarter. Apprehension
regarding the sub-prime crisis spilled into the last quarter of the
year. The Federal Reserve cut rates mid-quarter, and most markets
were directionless by the end of the quarter. 4 of the
6 sectors traded by the Trust were profitable for most of the quarter, with
metals, energy and agriculture sectors contributing the most.
(d)
|
Inflation
|
Inflation
does have an effect on commodity prices and the volatility of commodity markets;
however, continued inflation is not expected to have a material adverse effect
on the Trust’s operations or assets.
(e)
|
Off-Balance-Sheet
Arrangements
|
The Trust
does not have any off-balance-sheet arrangements (as defined in Regulation S-K
303(a)(4)(ii)) that have or are reasonably likely to have a current or future
effect on its financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
(f)
|
Tabular
Disclosure of Contractual
Obligations
|
The
business of the Trust is the speculative trading of commodity interests,
including futures contracts on currencies, interest rates, energy and
agricultural products, metals, commodity indices and stock indices, spot and
forward contracts on currencies and precious metals and exchanges for
physicals. The majority of the Trust’s futures and forward positions,
which may be categorized as “purchase obligations” under Item 303 of Regulation
S-K, are short-term. That is, they are held for less than one
year. Because the Trust does not enter into other long-term debt
obligations, capital lease obligations, operating lease obligations or other
long-term liabilities that would otherwise be reflected on the Trust’s Statement
of Financial Condition, a table of contractual obligations has not been
presented.
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk
Introduction
Past
Results Are Not Necessarily Indicative of Future Performance
The Trust
is a speculative commodity pool. The market sensitive instruments
held by it are acquired for speculative trading purposes, and all or
substantially all of the Trust’s assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive
instruments is integral, not incidental, to the Trust’s main line of
business. Market movements result in frequent changes in the fair
market value of the Trust’s open positions and, consequently, in its earnings
and cash flow. The Trust’s market risk is influenced by a wide
variety of factors, including the level and volatility of interest rates,
exchange rates, equity price levels, the market value of financial instruments
and contracts, the diversification effects among the Trust’s open positions and
the liquidity of the markets in which it trades.
The Trust
can acquire and/or liquidate both long and short positions in a wide range of
different markets. Consequently, it is not possible to predict how a
particular future market scenario will affect performance, and the Trust’s past
performance is not necessarily indicative of its future results.
Standard
of Materiality
Materiality
as used in this section, “Quantitative and Qualitative Disclosures About Market
Risk,” is based on an assessment of reasonably possible market movements and the
potential losses caused by such movements, taking into account the leverage,
optionality and multiplier features of the Trust’s market sensitive
instruments.
Quantifying
the Trust’s Trading Value at Risk
“Value at
Risk” is a measure of the maximum amount which the Trust could reasonably be
expected to lose in a given market sector. However, the inherent
uncertainty of the Trust’s speculative trading and the recurrence in the markets
traded by the Trust of market movements far exceeding expectations could result
in actual trading or non-trading losses far beyond the indicated Value at Risk
or the Trust’s experience to date (i.e., “risk of ruin”). In light of
the foregoing as well as the risks and uncertainties intrinsic to all future
projections, the inclusion of the quantification included in this section should
not be considered to constitute any assurance or representation that the Trust’s
losses in any market sector will be limited to Value at Risk or by the Trust’s
attempts to manage its market risk.
13
Quantitative
Forward-Looking Statements
The
following quantitative disclosures regarding the Trust’s market risk exposures
contain “forward-looking statements” within the meaning of the safe harbor from
civil liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act
and Section 21E of the Securities Exchange Act of 1934). All
quantitative disclosures in this section are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements of historical
fact.
The
Trust’s risk exposure in the various market sectors traded by the Advisors is
quantified below in terms of Value at Risk. Due to the Trust’s
mark-to-market accounting, any loss in the fair value of the Trust’s open
positions is directly reflected in the Trust’s earnings (realized or unrealized)
and cash flow (at least in the case of exchange-traded contracts in which
profits and losses on open positions are settled daily through variation
margin).
Exchange
maintenance margin requirements have been used by the Trust as the measure of
its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95% - 99% of any one-day
intervals. The maintenance margin levels are established by dealers
and exchanges using historical price studies as well as an assessment of current
market volatility (including the implied volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic estimate
of the maximum expected near-term one-day price fluctuation.
Maintenance
margin has been used rather than the more generally available initial margin,
because initial margin includes a credit risk component, which is not relevant
to Value at Risk.
In the
case of market sensitive instruments, which are not exchange traded (almost
exclusively currencies in the case of the Trust), the margin requirements for
the equivalent futures positions have been used as Value at Risk. In
those rare cases in which a futures-equivalent margin is not available, dealers’
margins have been used.
The fair
value of the Trust’s futures and forward positions does not have any optionality
component.
In
quantifying the Trust’s Value at Risk, 100% positive correlation in the
different positions held in each market risk category has been
assumed. Consequently, the margin requirements applicable to the open
contracts have simply been aggregated to determine each trading category’s
aggregate Value at Risk. The diversification effects resulting from
the fact that the Trust’s positions are rarely, if ever, 100% positively
correlated have not been reflected.
The
Trust’s Trading Value at Risk in Different Market Sectors
The
following tables indicate the average, highest and lowest amounts of trading
Value at Risk associated with the Trust’s open positions by market category for
fiscal years 2009 and 2008. All open position trading risk exposures
of the Trust have been included in calculating the figures set forth
below. During fiscal year 2009, the Trust’s average total
capitalization was approximately $74.7 million, and during fiscal year 2008, the
Trust’s average total capitalization was approximately $81.6
million.
14
FISCAL
YEAR 2009
|
Highest
|
Lowest
|
Average
|
% of
|
||||||||||||
Market
|
Value
|
Value
|
Value
|
Average
|
||||||||||||
Sector
|
at Risk*
|
at Risk*
|
at Risk*
|
Capitalization**
|
||||||||||||
Agriculture
|
$ | 1.9 | $ | 0.6 | $ | 1.1 | 1.5 | % | ||||||||
Currencies
|
$ | 1.2 | $ | 0.2 | $ | 0.6 | 0.8 | % | ||||||||
Energies
|
$ | 1.3 | $ | 0.2 | $ | 0.3 | 0.4 | % | ||||||||
Indices
|
$ | 1.3 | $ | 0.1 | $ | 0.5 | 0.6 | % | ||||||||
Interest
Rates
|
$ | 1.7 | $ | 0.5 | $ | 1.0 | 1.4 | % | ||||||||
Metals
|
$ | 3.1 | $ | 0.5 | $ | 2.5 | 3.3 | % | ||||||||
Total
|
$ | 10.6 | $ | 2.1 | $ | 6.0 | 8.0 | % |
FISCAL
YEAR 2008
|
Highest
|
Lowest
|
Average
|
% of
|
||||||||||||
Market
|
Value
|
Value
|
Value
|
Average
|
||||||||||||
Sector
|
at Risk*
|
at Risk*
|
at Risk*
|
Capitalization**
|
||||||||||||
Agriculture
|
$ | 3.6 | $ | 1.1 | $ | 1.2 | 1.5 | % | ||||||||
Currencies
|
$ | 3.7 | $ | 0.2 | $ | 1.6 | 2.0 | % | ||||||||
Energies
|
$ | 3.3 | $ | 0.5 | $ | 1.3 | 1.6 | % | ||||||||
Indices
|
$ | 1.8 | $ | 0.0 | $ | 0.9 | 1.1 | % | ||||||||
Interest
Rates
|
$ | 4.9 | $ | 1.5 | $ | 1.6 | 2.0 | % | ||||||||
Metals
|
$ | 3.2 | $ | 0.5 | $ | 0.8 | 1.0 | % | ||||||||
Total
|
$ | 20.5 | $ | 3.8 | $ | 7.4 | 9.2 | % |
* Average,
highest and lowest Value at Risk amounts relate to the month-end amounts for
each calendar month-end during the fiscal year. All amounts represent
millions of dollars committed to margin. Averages stated above do not account
for margin offsetting.
**
Average Capitalization is the average of the Trust’s capitalization at the end
of each fiscal month during the relevant fiscal year.
Material
Limitations on Value at Risk as an Assessment of Market Risk
The face
value of the market sector instruments held by the Trust is typically many times
the applicable maintenance margin requirement (maintenance margin requirements
generally range between approximately 1% and 10% of contract face value) as well
as many times the capitalization of the Trust. The magnitude of the
Trust’s open positions creates a “risk of ruin” not typically found in most
other investment vehicles. Because of the size of its positions,
certain market conditions - unusual, but historically recurring from time to
time - could cause the Trust to incur severe losses over a short period of
time. The foregoing Value at Risk table, as well as the past
performance of the Trust, gives no indication of this “risk of
ruin”.
Non-Trading
Risk
The Trust
has non-trading market risk on its foreign cash balances not needed for
margin. However, these balances (as well as any market risk they
represent) are immaterial. The Trust holds substantially all of its
assets in cash on deposit with RJO. The Trust has cash flow risk on
these cash deposits because if interest rates decline, so will the interest paid
out by RJO at 80% of the four-week Treasury Bill rate. As of December
31, 2009 and December 31, 2008, the Trust had approximately $59.5 million and
$83.5 million, respectively, in cash on deposit with RJO.
15
Qualitative
Disclosures Regarding Primary Trading Risk Exposures
The
following qualitative disclosures regarding the Trust’s market risk exposures —
except for (i) those disclosures that are statements of historical fact and (ii)
the descriptions of how the Trust and its Advisors manage the Trust’s primary
market risk exposures, constitute forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. The Trust’s primary market risk exposures as well as the
strategies used and to be used by the Trust’s Advisors for managing such
exposures are subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Trust’s risk controls to
differ materially from the objectives of such strategies. Government
interventions, defaults and expropriations, illiquid markets, the emergence of
dominant fundamental factors, political upheavals, changes in historical price
relationships, an influx of new market participants, increased regulation and
many other factors could result in material losses as well as in material
changes to the risk exposures and the risk management strategies of the
Trust. There can be no assurance that the Trust’s current market
exposure and/or risk management strategies will not change materially or that
any such strategies will be effective in either the short or long
term. Investors must be prepared to lose all or substantially all of
their investment in the Trust.
The
following were the primary trading risk exposures of the Trust as of December
31, 2009, by market sector.
Currencies. The
Trust’s currency exposure is to exchange rate fluctuations. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Trust trades in a number of
currencies, including cross-rates (i.e., positions between two currencies other
than the U.S. dollar). The Trust’s major exposures have typically
been in the dollar/yen, dollar/euro, dollar/Swiss franc, dollar/pound,
dollar/Canadian dollar positions, and recently dollar/Australian dollar,
dollar/Mexican peso and exposure to cross-rates positions such as euro/yen and
euro/pound positions.
Interest
Rates. Interest rate risk is a major market exposure of the
Trust. Interest rate movements directly affect the price of the
sovereign bond positions held by the Trust and indirectly the value of its stock
index and currency positions. Interest rate movements in one country
as well as relative interest rate movements between countries materially impact
the Trust’s profitability. The Trust’s primary interest rate exposure
is to interest rate fluctuations in the United States and the other G-7
countries. However, the Trust also takes positions in the government
debt of smaller nations — e.g., Australia. The Managing Owner
anticipates that G-7 interest rates will remain the primary market exposure of
the Trust in this sector for the foreseeable future.
Stock Indices. The
Trust’s primary equity exposure is to equity price risk in the G-7 countries
including the U.S. The stock index futures traded by the Trust are by
law limited to futures on broadly based indices. As of December 31,
2009, the Trust’s primary exposure was in the Mini-NASDAQ (U.S.) and the
EURO-STOXX 50 (Germany). The Trust is primarily exposed to the risk of adverse
price trends or trendless markets in the major U.S., European and Japanese
indices. (Trendless markets would not cause major market changes but
could make it difficult for the Trust to avoid being “whipsawed” into numerous
small losses.)
Metals. The
programs currently used for the Trust trade mainly precious and base
metals. The Trust’s primary metals market exposure is to price
fluctuations.
Agricultural. The Trust’s
primary commodities exposure is to agricultural price movements, which are often
directly affected by severe or unexpected weather conditions.
Cocoa, sugar, coffee, soybeans, live cattle and cotton accounted for
the substantial bulk of the Trust’s agricultural exposure as of December 31,
2009. To a lesser extent and in the past, the Trust has had market exposure to
wheat, orange juice, milk and hogs.
Energy. The Trust’s
primary energy market exposure is to gas and oil price movements, which
sometimes result from political developments in the Middle East. Oil
prices can be volatile and substantial profits and losses have been and may
continue to be experienced in this market.
Qualitative
Disclosures Regarding Non-Trading Risk Exposure
The
following were the only non-trading risk exposures of the Trust as of December
31, 2009 and December 31, 2008.
Foreign Currency
Balances. The Trust’s primary foreign currency balances are in
Japanese yen, British pounds and Canadian dollar.
16
Cash Position. The
Trust held substantially all its assets in cash at R.J. O’Brien &
Associates, earning interest at 75% of the average four-week Treasury Bill rate
(calculated daily) until April 30, 2009. As of May 1, 2009, the Trust earned 80%
of the average four-week Treasury Bill rate. By the second or third business day of each month, RJO credits the
Trust’s account holding U.S. dollar deposits with interest at the above
mentioned rates. Any amounts received by RJO in excess of amounts
paid to the Trust are retained by RJO.
Qualitative
Disclosures Regarding Means of Managing Risk Exposure
The
Manager Owner together with Liberty Funds Group monitors the Trust’s performance
and the concentration of its open positions, and consults with the Advisors
concerning the Trust’s overall risk profile. If the Managing Owner
felt it necessary to do so, the Managing Owner could require the Advisors to
close out individual positions as well as entire programs traded on behalf of
the Trust. However, any such intervention would be a highly unusual
event. The Managing Owner primarily relies on the Advisors’ own risk
control policies while maintaining a general supervisory overview of the Trust’s
market risk exposures.
Risk
Management
The
information below outlines the general risk management practices of each
Advisor. These descriptions are not intended to be exhaustive. For a detailed
description of the risks associated with the management practices of each
Advisor, see the section entitled “The Trading Advisors” set forth in the
Prospectus dated May 1, 2009, and filed with the SEC on May 1, 2009
(Registration Number 333-146177), and incorporated into this Form 10-K by
reference and the Supplement dated February 1, 2010 and filed with the SEC
February 1, 2010 (Registration Number 333-146177) and incorporated into this
Form 10-K by reference.
Abraham
Trading: A vital part of ATC's trading strategy is sound risk
management. The good times, when the markets are in trending periods,
will take care of themselves. ATC's trading strategy is designed to
endure the imminent non-trending periods in order to profit when trends in the
markets do occur. Each commodity interest is tracked on its own
merits, and a stop loss level is determined at the time a trade is
entered. Stops are designed to weed out losing trades quickly and
attempt to limit any loss to no more than a nominal percentage of the account's
net assets.
On
average, ATC utilizes approximately 20% of the nominal account value of
participating customers to meet initial margin requirements, although this
percentage may vary widely.
Since all
trading methods and strategies to be utilized by ATC are proprietary and
confidential, the foregoing discussion is necessarily of a general
nature.
Conquest
Capital: CCG sets its
trade size on a security inversely proportional to the level of recent
volatility of the security. Each new position for a market is sized
by calculating the number of contracts that would provide the desired dollar
volatility for that market for that system. CCG uses price volatility
instead of return volatility in its calculations and does not implement
pyramiding, scaling out of positions, and other methods of trading the equity
curve as part of its portfolio management rules.
CCG applies disciplined risk
control methods to its Macro trading program, which are incorporated in the
stop-loss and position size calculation for CCG systems. CCG selects
the level of exposure for the Macro program so that the maximum hypothetical
drawdown is below acceptable real-time drawdown levels. CCG selects
from the following risk measures: price volatility of positions at
the time of entry, maximum per trade risk from entry to stop, maximum per trade
risk from closing price to stop, portfolio maximum daily loss, portfolio maximum
consecutive daily drawdown, standard deviation of portfolio daily returns,
slippage as percentage of return, and liquidity.
CCG’s
trading programs have volatility-based stops for positions in the
market. Position sizes are based on price volatility to equalize risk
at the trade initiation time for all markets within each trading
program.
Global
Advisors (Jersey) Limited: GAJL and its
principals believe that money management discipline is a vital element of any
trading program. This discipline is comprised of the following major
components which are utilized in the program:
17
|
1.
|
Diversification
|
GAJL
trades primarily U.S. exchange-traded commodity futures and options on futures
contracts, and may trade on any United States and non-United States exchange
that has been designated as a “contract market” by the CFTC and on certain other
non-United States exchanges. “Commodity interests” include, but are
not limited to, contracts on and for physical commodities, currencies, money
market instruments and items which are now, or may hereafter be, the subject of
trading futures contracts, swaps, and other commodity-related
contracts. GAJL may also trade the cash and forward markets,
including the interbank market and exchange of futures for
physicals for its client accounts.
The
trading strategy is designed to gain exposure to opportunities in the majority
of actively traded market groups, while simultaneously limiting, to the extent
possible, the exposure in any one particular group. The intent of
this policy is to increase, on a discretionary basis, opportunities for gain,
decrease risk and provide more consistent returns. Especially in view
of the above, there may be times, due to market and other conditions, when
trading is not well diversified; in fact, on occasion, there may be a heavy
concentration of a given commodity (such as Brent crude) or a commodity complex
(such as energies) which could result in a greater return or risk to the
account.
|
2.
|
Risk
Management
|
GAJL
estimates that for the program, which targets 10% annualized volatility,
approximately 5%-10% of a client account’s net asset value on both an intraday
and overnight basis will be committed to margin at any one
time. However, margin usage may, from time to time, be greater or
less than this range, depending on market conditions, current margin
requirements and changes in account equity.
|
3.
|
Client
Rebalancing
|
GAJL
seeks to ensure that market risk and return are appropriately balanced across
clients in proportion to each client's account equity. GAJL regularly
balances clients' exposure to net position in each futures contract or option on
futures contract, accordingly.
Trades
are allocated during the month on a ticket-by-ticket basis according to volume
and price sequence parameters, determined near the beginning of the month with
client account equities. As the program's net contract positions are
added to or reduced, each client's exposure to the program’s net position in a
contract under this method may not exactly equal its proportionate level of risk
as represented by its account equity. To correct these risk
imbalances, at its discretion, GAJL makes trades on a regular basis which
rebalance client account risks to what they should be, given each client's
account equity. GAJL may simultaneously reduce a position for one
client while adding to a position for another client at prevailing market prices
to adjust each client’s risk to its appropriate level, given their account size
as a proportion of the program’s overall assets under
management. Discretion includes employing knowledge of a contract's
volatility and the size of the necessary rebalancing trades, and balancing that
need with the desire to minimize slippage and commissions for
clients. Near the beginning of each month, GAJL rebalances each
client account to reflect their proportion of the net equity in the
program.
Haar
Capital Management: HCM utilizes
certain risk management tools, including stop-loss orders and portfolio
diversification. HCM also manages risk by varying the size of
positions based in part on an assessment of market volatility. To
manage these risks, HCM evaluates the volatility and correlation across multiple
markets, as well as projected price behavior in response to specific
market-moving events, consistent with managing longer-term risks and evaluating
longer-term trends. No assurances can be made, however, that the
historical market correlations will occur or persist in all market
conditions.
John W.
Henry & Company: Stop-losses are
used in some models and managed by JWH in a proprietary manner to balance the
potential loss on any trade versus the opportunity for maximum
profit. Stop losses may not necessarily limit losses, since they
become market orders upon execution; as a result, a stop-loss order may not be
executed at the stop-loss price. Other models do not have any stop-loss
methodology but rely on market diversification and a change in directional
signals to offset risk. Risk in some programs may also be managed by varying
position size or risk levels for a market, based in part on assessment of market
volatility, while other programs will maintain position sizes in markets
regardless of changes in volatility. There are no systematic
constraints on portfolio volatility or the maximum drawdown for any program.
Volatility will not cause systematic adjustments to be made to existing
positions. Some programs consider volatility in determining the size of
positions initiated. Other programs do not consider volatility in determining
the size of positions initiated.
18
Modern
portfolio techniques are used in an effort to construct an overall diversified
portfolio for each JWH trading program. However, some programs will
have limited diversification because of their sector focus. These techniques
will attempt to take into account the volatility and correlation of the markets
that are included in the program. In an attempt to maintain diversification,
portfolio adjustments will be made to account for systematic changes identified
by JWH’s research in the relationships across markets. JWH at its sole
discretion may override computer-generated signals and may at times use
discretion in applying its quantitative models, which may affect performance
positively or negatively. This could occur, for example, when JWH
determines that markets are illiquid or erratic, such as may occur cyclically
during holiday seasons, or on the basis of irregularly occurring market
events.
Risk
management research and investment program analysis may suggest modifications
regarding the relative weighting among various contracts, modifying the style
and/or timing used by an investment program to trade a particular contract, the
addition or deletion of a contract traded by an investment program, or a change
in position size in relation to account equity. JWH’s research on
these and other issues has resulted in investment program modifications from
time to time in the past, and are expected to do so in the future.
Position
size adjustments relative to account equity are an integral part of
JWH’s investment strategy and historically have been made in a systematic manner
as the equity in the account from trading profits increases. JWH may
override indicated systematic position size adjustments when, in its discretion,
it deems that is warranted by its assessment of market conditions. In
the case of declines in equity, position sizes are generally maintained in spite
of any trading losses. Systematic methods for maintaining or adjusting the trade
size to equity in an account may affect performance and will alter the risk
exposure of the account, with leverage increasing in down markets until losses
are offset, and decreasing in profitable market conditions until systematic
adjustments are made.
Factors
that may affect decisions to adjust the size of a position in relation to
account equity include ongoing research, program volatility, current market
volatility, risk exposure, subjective judgment, and evaluation of these and
other general market conditions.
NuWave
Investment Management:
In addition to the subjective decision making authority reserved for its
principals, NW also maintains certain risk management procedures for determining
the appropriate quantity of contracts to be traded for an account of a given
size and for all accounts. NW may adjust its trading portfolios and
the position size of an order prior to placement, and/or after the initial
position is established, based on such factors as past market volatility, prices
of commodities, amount of risk, potential return and margin
requirements. The decision not to trade a certain futures interest at
certain times or to reduce the number of contracts traded in a particular
futures interest may result in missing significant profit opportunities that
otherwise might have been captured if NW depended solely on the computer-based
aspects of its trading strategy or on different trading strategies
altogether.
NW may,
at its discretion, adjust leverage in certain markets or entire
portfolios. Adjustments to certain positions or entire portfolios for
leverage may positively or negatively affect performance. In
addition, if an adjustment is made to one trading portfolio it is not
necessarily made to all portfolios. Factors which may affect the
decision to adjust leverage include research, portfolio diversification, current
market volatility, risk exposure, subjective judgment, and evaluation of other
general market conditions. No assurance is given that such leverage
adjustments will be financially beneficial, and such leverage adjustments may
actually result in lost opportunities or substantial losses.
New
client accounts such as the Trust may encounter certain risks related to the
initial investment of assets during account start-up periods. For
example, during an account’s start-up period, the level of diversification may
be lower than a previously existing account with a fully committed and
diversified portfolio. Also, a new account may commence trading in
markets which have experienced price movement in the account’s favor but then
subsequently retrace.
Since NW
considers preservation of initial assets paramount to producing trading results,
NW employs risk management techniques in an effort to reduce risk. These
techniques include attempts to trade multiple uncorrelated markets in an effort
to diversify as well as to limit the equity committed to each market and market
sector. In addition, NW prefers to initiate new client accounts
following periods of negative performance in order to protect initial
capital. No assurance can be given that such techniques will be
financially beneficial, and such techniques may actually result in lost
opportunities or substantial losses.
19
Item
8. Financial Statements and Supplementary Data
Reference
is made to the financial statements and the notes thereto filed as Exhibit 13.01
to this report.
The
following summarized (unaudited) quarterly financial information presents the
results of operations and other data for three-month periods ended March 31,
June 30, September 30 and December 31, 2009 and 2008.
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
2009
|
2009
|
2009
|
2009
|
|||||||||||||
Total
Trading Revenues (Loss)
|
$ | (2,140,261 | ) | $ | (765,378 | ) | $ | (188,857 | ) | $ | (1,626,486 | ) | ||||
Total
Trading Expenses
|
1,652,338 | 1,296,651 | 1,344,653 | 1,217,881 | ||||||||||||
Trading
Income (Loss)
|
(3,792,599 | ) | (2,062,029 | ) | (1,533,510 | ) | (2,844,367 | ) | ||||||||
Non-Trading
Income (Loss)
|
(489,501 | ) | 2,305,261 | (669,858 | ) | 157,084 | ||||||||||
Net
Income (Loss)
|
$ | (4,282,100 | ) | $ | 243,232 | $ | (2,203,368 | ) | $ | (2,687,283 | ) | |||||
Net
Income (Loss) per Trading Unit
|
||||||||||||||||
Class
A
|
$ | (5.79 | ) | $ | (3.33 | ) | $ | (2.57 | ) | $ | (4.86 | ) | ||||
Class
B
|
$ | (5.22 | ) | $ | (2.79 | ) | $ | (2.06 | ) | $ | (4.41 | ) | ||||
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
2008
|
2008
|
2008
|
2008
|
|||||||||||||
Total
Trading Revenues (Loss)
|
$ | 21,191,546 | $ | 1,247,596 | $ | (3,189,212 | ) | $ | 19,070,748 | |||||||
Total
Trading Expenses
|
1,724,515 | 1,660,935 | 1,598,257 | 5,447,926 | ||||||||||||
Trading
Income (Loss)
|
19,467,031 | (413,339 | ) | (4,787,469 | ) | 13,622,822 | ||||||||||
Non-Trading
Income (Loss)
|
934,473 | 450,677 | (113,413 | ) | 535,080 | |||||||||||
Net
Income (Loss)
|
$ | 20,401,504 | $ | 37,338 | $ | (4,900,882 | ) | $ | 14,157,902 | |||||||
Net
Income (Loss) per Trading Unit
|
$ | 23.22 | $ | (0.41 | ) | $ | (5.95 | ) | $ | 17.84 |
The Trust
has not disposed of any segments of its business.
Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Item
9A(T). Controls and Procedures
Evaluation of Disclosure Controls
and Procedures: Under the supervision and with the participation of the
management of R.J. O’Brien Fund Management, LLC., the Managing Owner of the
Trust at the time this annual report was filed, including the Managing Owner’s
Chief Executive Officer (the Trust’s principal executive officer) and Chief
Financial Officer (the Trust’s principal financial officer), have evaluated the
effectiveness of the design and operation of the Trust’s disclosure controls and
procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Exchange Act)
as of December 31, 2009. The Trust’s disclosure controls and
procedures are designed to provide reasonable assurance that information the
Trust is required to disclose in the reports that the Trust files or submits
under the Exchange Act are recorded, processed and summarized and reported
within the time period specified in the applicable rules and
forms. Based on this evaluation, the Chief Executive Officer and
Chief Financial Officer of the Managing Owner have concluded that the disclosure
controls and procedures of the Trust were effective at December 31,
2009.
Management's Report on Internal
Control Over Financial Reporting. The Managing Owner of the
Trust is responsible for establishing and maintaining adequate internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange
Act). The Managing Owner has assessed the effectiveness of the
Trust's internal control over financial reporting as of December 31,
2009. In making this assessment, the Managing Owner used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission, known as COSO, in Internal Control-Integrated
Framework. The Managing Owner has concluded that, as of December 31,
2009, the Trust's internal control over financial reporting is effective based
on these criteria. This report shall not be deemed to be filed for
purposes of Section 18 of the Exchange Act or otherwise subject to the
liabilities of that section. This annual report does not include an
attestation report of the Trust's independent registered public accounting firm
regarding internal control over financial reporting. Management's
report was not subject to attestation by the Trust's independent registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Trust to provide only management's report in this annual report.
20
Changes in Internal Control Over
Financial Reporting: There were no changes in the Trust’s
internal control over financial reporting, during the year ended December 31,
2009, that have materially affected, or are reasonably likely to materially
affect, the Trust’s internal control over financial reporting.
Limitations on the Effectiveness of
Controls: Any control system, no matter how well designed and operated,
can provide reasonable (not absolute) assurance that its objectives will be
met. Furthermore, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been
detected.
Item
9B. Other Information.
None.
Part
III
Item
10. Directors and Executive Officers of the Registrant
There are
no directors or executive officers of the Trust. As of December 31,
2009, the Trust was managed by its Managing Owner, R.J. O’Brien Fund Management,
LLC (“RJOFM”). The officers and directors of the Managing Owner as of December
31, 2009 were as follows:
R.J.
O’Brien Fund Management, LLC
Gerald Corcoran is Chief Executive
Officer and Director of RJOFM: Gerry Corcoran was appointed Chief
Executive Officer of RJO in June 2000 and was appointed as Chief Executive
Officer of RJOFM in November of 2006. He joined the RJO family in
1987 as Chief Financial Officer and served as Chief Operating Officer, a
position he was promoted to in 1992. He is also a member of the Board
of Directors. Prior to joining RJO, Mr. Corcoran served as controller
for the Chicago Sun-Times, the nation’s seventh largest daily
newspaper. He is a former member of the Chicago Mercantile Exchange
where he served on the Clearing House Committee. Mr. Corcoran also
serves on the Board of Directors of the Futures Industry Association (“FIA”) and
the National Futures Association (“NFA”). Mr. Corcoran has a Bachelor
of Business Administration from Loyola University and is a Certified Public
Accountant.
Thomas J. Anderson is Chief
Financial Officer and Director of RJOFM: Mr.
Anderson became the Chief Financial Officer of the Managing Owner on May 5, 2008
and became a principal of the Managing Owner on June 6, 2008. He also
serves as the Chief Financial Officer of R.J. O’Brien & Associates, LLC and
is a registered NFA principal since June 6, 2008 and an associated person and
NFA associate member since May 13, 2008 of R.J. O’Brien & Associates,
LLC. He joined R.J. O’Brien & Associates, LLC and the Managing
Owner in May 2008. Prior to serving in these positions, Mr. Anderson
served as Senior Vice President and Group Chief Operating officer for Newedge
Financial Inc. (formerly known as Calyon Financial Inc.), a derivatives
brokerage firm, from December 2006 to April 2008. From December 2000 through
December 2006, Mr. Anderson served as Newedge’s Senior Vice President and Chief
Financial Officer. Before joining Newedge, Mr. Anderson served in several
capacities (including Assistant Controller, Controller and Chief Financial
Officer) from July 1990 to December 2000 at Lind-Waldock & Company, a retail
futures brokerage firm. From September 1987 to July 1990, Mr. Anderson was a
Senior Auditor for Checkers, Simon & Rosner. Mr. Anderson is also
a registered representative of the lead selling agent.
Annette A. Cazenave is Senior Vice President and
Director of RJOFM: With RJOFM’s purchase of RCMI in December
of 2006, Ms. Cazenave joined RJOFM with over twenty-six years of comprehensive
experience in alternative asset management (futures, derivatives and hedge
funds) marketing and business management. Ms. Cazenave joined Cargill
in March of 2004. Previously, Ms. Cazenave was VP, Marketing and
Product Development, for Horizon Cash Management, LLC
(2002-2004). Prior to this, she was President and Principal of
Skylark Partners, Inc., in New York, a financial services consulting
firm. Additionally, Ms. Cazenave held senior level positions with
ED&F Man Funds Division (now Man Investments) in New York
(1986-1993). Ms. Cazenave began her career in 1979 as a sugar trader
and holds a B.A. from Drew University and an M.B.A. from Thunderbird, The
American Graduate School of International Management.
Each
officer and director holds such office until the election and qualification of
his or her successor or until his or her earlier death, resignation or
removal.
21
Section
16(a) Beneficial Ownership Reporting Compliance
The Trust
does not have any directors or officers of its own and no person is known to the
Trust to beneficially own more than 10% or the outstanding units.
Audit
Committee
The
Managing Owner created an audit committee on August 27, 2008. The
audit committee with respect to the Trust is comprised of Gerald Corcoran,
Thomas Anderson and Jamal Oulhadj. None of the directors are
considered to be independent as that term is used in Item 7(d)(3)(iv) of
Schedule 14A under the Exchange Act. Therefore, there is no Audit
Committee Financial Expert.
Code
of Ethics
The Trust
does not have any officers; therefore, it has not adopted a code of ethics
applicable to the Trust’s principal executive officer, principal financial
officer, principal accounting officer and persons performing similar
functions. The Managing Owner operates the Trust and has adopted a
code of ethics that applies to its principal executive officer, principal
financial officer, principal accounting officer and persons performing similar
functions. This code of ethics is included by reference in Exhibit
14.01 of this annual report.
Item
11. Executive Compensation
The Trust
has no officers or directors. The Managing Owner administers the
business and affairs of the Trust (exclusive of Trust trading decisions which
are made by the independent Advisors). The officers and directors of
the Managing Owner receive no compensation from the Trust for acting in their
respective capacities with the Managing Owner.
Item
12. Security Ownership of Certain Beneficial Owners and Management
and Related Unitholder Matters
(a)
|
As
of December 31, 2009, no person was known to the Trust to own beneficially
more than 5% of the outstanding
units.
|
(b)
|
As
of December 31, 2009, the Managing Owner beneficially held an ownership of
$1,201,090 (which is the equivalent of 11,679 units) or approximately
2.04% of the ownership of the Trust as of that
date.
|
(c)
|
As
of December 31, 2009, no arrangements were known to the Trust, including
any pledges by any person of units of the Trust or shares of its Managing
Owner or the parent of the Managing Owner, such that a change in control
of the Trust may occur at a subsequent
date.
|
Item
13. Certain Relationships and Related Transactions and Director
Independence
None. The
Trust does not have any directors or officers of its own nor is any person known
to have beneficial ownership of more than 5% of the outstanding
units.
Item
14. Principal Accounting Fees and Services
(a)
|
Audit
Fees
|
The Trust
paid CF & Co., L.L.P., the Trust’s independent registered public accounting
firm, $215,691 (which includes SOX 404 attestation work required during 2009)
and $149,601 respectively for the 2009 and 2008 audits and for professional
services rendered in connection with the audit of the Trust’s annual financial
statements filed with the Trust’s Form 10-Ks, the review of financial statements
included in the Trust’s Form 10-Q filings and review of other SEC
filings.
(b)
|
Audit-Related
Fees
|
The Trust
did not pay CF & Co., L.L.P. any amount in 2009 or 2008 for assurance
reviews and related professional services rendered in connection with the audit
or review of the Trust’s financial statements that are not covered by Item 14(a)
above.
22
(c)
|
Tax
Fees
|
The Trust
did not pay CF & Co., L.L.P. any amount in 2009 or 2008 for professional
services in connection with tax compliance, tax advice and tax
planning. The Trust engaged Deloitte & Touche LLP, which does not
provide audit services to the Trust, to provide professional services in
connection with tax compliance, tax advice and tax planning and paid Deloitte
& Touche LLP $125,000 for such services for 2009 and $135,000 for such
services for 2008. These fees consisted primarily of services
rendered in connection with the preparation of a Schedule K-1 to IRS Form 1065
for each unitholder.
(d)
|
All
Other Fees
|
None
(e)
|
Audit
Committee Pre-Approval Policies and
Procedures
|
|
(i)
|
The
audit committee with respect to the Trust has not developed pre-approval
policies as of the date of this report. Consequently, all audit
and non-audit services provided by CF & Co., L.L.P. must be approved
by the directors of the Managing
Owner.
|
(ii)
|
None
of the services described in Item 9(e)(2) through 9(e)(4) of Schedule 14A
of the Securities Exchange Act of 1934 were provided by CF & Co.,
L.L.P. therefore, no services were required to be approved by the board of
directors of the Managing Owner on behalf of the
Trust.
|
(f)
|
Less
than 50% of the hours expended on CF & Co., L.L.P.’s audit of the
Trust’s financial statements were attributable to the work of persons who
were not full-time, permanent employees of CF & Co.,
L.L.P.
|
Part
IV
Item
15. Exhibits, Financial Statements and Schedules
(a)
|
The
following documents are included
herein:
|
|
(1)
|
Financial
Statements:
|
|
a.
|
Report
of Independent Registered Public Accounting Firm — CF & Co.,
L.L.P.
|
|
b.
|
Consolidated
Statements of Financial Condition as of December 31, 2009 and
2008.
|
|
c.
|
Condensed
Consolidated Schedules of Investments as of December 31, 2009 and
2008.
|
|
d.
|
Consolidated
Statements of Operations, for the years ended December 31, 2009, 2008 and
2007.
|
|
e.
|
Consolidated
Statements of Changes in Unitholders’ Capital for the years ended December
31, 2009, 2008 and 2007.
|
|
f.
|
Notes
to Consolidated Financial
Statements.
|
(2)
|
All
financial statement schedules have been omitted either because the
information required by the schedules is not applicable, or because the
information required is contained in the financial statements herein or
the notes hereto.
|
(3)
|
Exhibits:
|
23
Index
to Exhibits
Exhibit
|
||
Number
|
Description of Document
|
|
1.01
|
Second
Amended and Restated Selling Agreement, dated as of November 5,
2008, among R.J. O’Brien Securities, LLC (the “Lead
Selling Agent”), RJO Global Trust (the “Registrant”), R.J. O’Brien Fund
Management LLC. (the “Managing Owner”) (1)
|
|
3.01
|
Eighth
Amended and Restated Declaration and Agreement of Trust, dated as of
September 26, 2008 (2)
|
|
3.02 |
First
Amendment to the Eighth Amended and Restated Declaration and Agreement of
Trust, dated February 5, 2010 (3)
|
|
3.03
|
Restated Certificate
of Trust (4)
|
|
10.01
|
Form
of Subscription Agreement and Power of Attorney (2)
|
|
10.02*
|
Amended
and Restated Advisory Agreement, made as of September 16, 2008, among JWH
Global Trust, R.J. O’Brien Fund Management, LLC, and John W. Henry &
Company, Inc. (5)
|
|
10.03*
|
Advisory
Agreement, made as of August 25, 2008, among JWH Global Trust, R.J.
O’Brien Fund Management, LLC, and Abraham Trading, L.P.
(5)
|
|
10.04*
|
Advisory
Agreement, made as of February 1, 2009, among RJO Global Trust, R.J.
O’Brien Fund Management, LLC, and NuWave Investment Management, LLC
(1)
|
|
10.05*
|
Advisory
Agreement, made as of June 1, 2009, among RJO Global Trust, R.J. O’Brien
Fund Management, LLC, and Global Advisors (Jersey) Limited
(6)
|
|
10.06*
|
Advisory
Agreement, made as of July 1, 2009, among RJO Global Trust, R.J. O’Brien
Fund Management, LLC, and Conquest Capital, LLC (6)
|
|
10.07*
|
Advisory
Agreement, made as of July 1, 2009, among RJO Global Trust,
R.J. O’Brien Fund Management, LLC, and Haar Capital Management, LLC
(6)
|
|
10.08
|
Customer
Agreement between the Registrant and R.J. O’Brien & Associates, Inc.,
dated as of September 27, 2006 (7)
|
|
13.01
|
Annual
Report to Unitholders for Fiscal Year 2008
|
|
14.01
|
R.J.
O’Brien Fund Management, LLC Code of Ethics
|
|
31.01
|
Rule
13a-14(a)/15d-14(a) Certifications of Principal Executive
Officer
|
|
31.02
|
Rule
13a-14(a)/15d-14(a) Certifications of Principal Financial
Officer
|
|
32.01
|
Section
1350 Certification of Chief Executive Officer
|
|
32.02
|
Section
1350 Certification of Chief Financial
Officer
|
*Confidential
Treatment was requested and granted with respect to the omitted portions of
these exhibits.
24
(1) Incorporated
by reference herein from the exhibit of the same description filed on March 30,
2009 with the Registrant’s annual report on Form 10-K.
(2) Incorporated
by reference herein from the exhibit of the same description filed on April 3,
2009 with Post-Effective Amendment No. 4 to the Registrant’s Registration
Statement on Form S-1 (Reg. No. 333-146177).
(3) Incorporated
by reference herein from the exhibit of the same description filed on February
8, 2010 on Form 8-K.
(4) Incorporated
by reference herein from the exhibit of the same description filed on September
30, 2008 on Form 8-K.
(5) Incorporated
by reference herein from the exhibit of the same description filed on October 6,
2008 with Post-Effective Amendment No. 2 to the Registrant’s Registration
Statement on Form S-1 (Reg. No. 333-146177).
(6) Incorporated
by reference herein from the exhibit of the same description filed on August 14,
2009 with the Registrant’s quarterly report on Form 10-Q.
(7) Incorporated
by reference herein from the exhibit of the same description filed on 2008 July
5, 2007 with the Registrant’s annual report on Form 10-K.
25
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date:
March 31, 2010
|
RJO
GLOBAL TRUST
|
|||
By:
R.J. O’Brien Fund Management, LLC
|
||||
(Managing
Owner)
|
||||
By:
|
/s/
Thomas
J Anderson
|
|||
Thomas
J Anderson
|
||||
Chief
Financial Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
Form 10-K has been signed below by the following persons on behalf of the
Registrant on March 31, 2010, and in the capacities indicated:
R.J.
O’Brien Fund Management, LLC.
Signatures
|
Title
|
|
/s/
Gerald Corcoran
|
Chief
Executive Officer and Director
|
|
Gerald
Corcoran
|
(principal
executive officer)
|
|
/s/
Thomas J Anderson
|
Chief
Financial Officer and Director
|
|
Thomas
J Anderson
|
(principal
financial and accounting officer)
|
|
/s/
Annette Cazenave
|
Senior
Vice President and Director
|
|
Annette
Cazenave
|
26