Exhibit 13.01

 

 

Dear Unitholder:

 

The RJO Global Trust (“Trust”) retains the services of RPM Risk and Portfolio Management Aktiebolag (“RPM”) to manage the Trust’s assets pursuant to RPM’s Evolving CTA Strategy.  The strategy accesses trend following, fundamental, and short-term trading strategies using Commodity Trading Advisors (“CTAs”) having relative short track records and somewhat lower assets under management.  These evolving managers have two to seven year track records with $20 million to $1 billion assets under management.  RPM believes that the managers generally are able to access a broader array of markets more efficiently and operate more nimble business organizations.  RPM’s research indicates that, on average, these managers have historically outperformed more established CTAs and, thus, this business phase is the most attractive period for CTAs from a risk/return perspective.  RPM targets a 13% annual volatility for the Trust using this strategy.

 

In 2016, during a challenging market environment, the Trust delivered negative performance, slightly worse than industry benchmarks.  However, in the beginning of the year, markets entered crisis mode and the Trust, once again, delivered crisis alpha profiting from favorable trading opportunities primarily in fixed income. The remainder of the year was characterized by choppy market conditions due to political uncertainty regarding Brexit and the US election.  The Trust was at the ready when the surprise Brexit vote sent shockwaves through the financial system.  The second half of the year was characterized by difficult trading conditions especially in bonds, metals and energy.  Performance was mixed across managers and sub strategies with fundamental managers and “hybrid” trend following managers generally outperforming.

Throughout the year the Trust allocated approximately 55% to trend following strategies.  The allocation varied over the year between as low as 40% up to 70% at times.  The balance was split between the two diversifying strategies, fundamental and short term.

RPM believes that in 2017, global growth is expected to accelerate driven by a positive impulse from the US which, in turn, will increase divergence in monetary policies between the US and other advanced economies.  CTAs should be able to profit from the accompanying trend environment, especially in fixed income and currency markets.  That being said, political uncertainties and financial risks remain high throughout the year. 

We thank you for your continued support.

 

Past performance is not indicative of future results.

 

 

 

RJO GLOBAL TRUST

 

Table of Contents

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Managing Owner and Beneficial Owners of RJO Global Trust and Subsidiaries:

 

 

RJO GLOBAL TRUST AND SUBSIDIARIES

Consolidated Statements of Financial Condition

Assets
		December 31,				December 31,
		2016				2015
Assets:
Equity in commodity Trading accounts:
Cash on deposit with broker		$	-			$	5,323,944
Unrealized gain on open contracts			-				3,414
Total due from broker			-				5,327,358
Cash and cash equivalents on deposit with affiliate			4,850,088				1,449,723
Cash on deposit with bank			67,326				92,621
Interest receivable			1,197				304
Receivable from US Bank			17,890				20,248
Total Assets		$	4,936,501			$	6,890,254
Liabilities and Unitholders' Capital
Liabilities:
Equity in commodity Trading accounts:
Options written on futures contracts (premiums received $0 and $7,356, respectively)		$	-			$	8,059
Accrued commissions			10,101				13,781
Accrued management fees			-				14,747
Accrued incentive fees			-				12,324
Accrued operating expenses			189,019				170,958
Accrued offering expenses			8,786				328
Redemptions payable-Trading			570,896				29,009
Distribution payable - Non-Trading			17,890				20,248
Total liabilities			796,692				269,454
Unitholders' capital:
Unitholders' capital (Trading):
Beneficial owners
Class A (82,359 and 110,812 units outstanding at December 31, 2016 and December 31, 2015, respectively)			4,064,794				6,437,129
Class B (839 and 955 units outstanding at December 31, 2016 and December 31, 2015, respectively)			48,612				63,836
Class C (0 and 0 units outstanding at December 31, 2016 and December 31, 2015, respectively)			-				-
Class D (0 and 0 units outstanding at December 31, 2016 and December 31, 2015, respectively)			-				-
Managing owner (535 Class A units outstanding at December 31, 2016 and December 31, 2015, respectively)			26,403				31,079
Total unitholders' capital			4,139,809				6,532,044
Non-Controlling Interests			-				88,756
Total Capital			4,139,809				6,620,800
Total Liabilities and Unitholders' Capital		$	4,936,501			$	6,890,254
Net asset value per unit:
Trading:
Class A		$	49.35			$	58.09
Class B		$	57.94			$	66.84

See accompanying notes to consolidated financial statements.

RJO GLOBAL TRUST AND SUBSIDIARIES

Condensed Consolidated Schedule of Investments

		December 31, 2016								December 31, 2015
		Percentage of								Percentage of
		Net Assets				Fair value				Net Assets				Fair value
Long Positions
Futures Positions
Agriculture			0.00	%		$	-				-0.17	%		$	(10,975	)
Currency			0.00	%			-				0.06	%			4,031
Energy			0.00	%			-				-0.43	%			(28,234	)
Indices			0.00	%			-				-0.05	%			(3,318	)
Interest rates			0.00	%			-				-0.16	%			(10,506	)
Total long positions on open contracts						$	-							$	(49,002	)
Short Positions
Futures Positions
Agriculture			0.00	%		$	-				-0.26	%		$	(17,425	)
Currency			0.00	%			-				0.33	%			21,518
Energy			0.00	%			-				0.89	%			59,088
Indices			0.00	%			-				-0.23	%			(15,231	)
Interest rates			0.00	%			-				0.03	%			1,694
Metals			0.00	%			-				0.04	%			2,772
Total short positions on open contracts						$	-							$	52,416
Total unrealized gain on open contracts						$	-							$	3,414
Short put options on futures contract
Interest rates (premiums received - $0 and $4,356, respectively)			0.00	%		$	-				-0.11	%		$	(7,440	)
Short call options on futures contracts
Interest rates (premiums received - $0 and $3,000, respectively)			0.00	%		$	-				-0.01	%		$	(619	)
Total options written on futures contracts						$	-							$	(8,059	)

 

See accompanying notes to consolidated financial statements.

 

RJO GLOBAL TRUST AND SUBSIDIARIES

Consolidated Statements of Operations

RJO GLOBAL TRUST AND SUBSIDIARIES

Consolidated Statement of Changes in Unitholders’ Capital

For the years ended December 31, 2016, 2015 and 2014

Unitholders' Capital (Trading)		Beneficial Owners - Trading Class A								Beneficial Owners - Trading Class B								Beneficial Owners - Trading Class C
		Units				Dollars				Units				Dollars				Units				Dollars
Balances at December 31, 2013			190,458			$	13,569,363				4,564			$	359,349				-			$	-
Trading loss			-				(970,141	)			-				(29,039	)			-				-
Unitholders redemptions			(54,789	)			(3,442,929	)			(3,543	)			(252,597	)			-				-
Balances at December 31, 2014			135,669				9,156,293				1,021				77,713				-				-
Trading income (loss)			-				(1,185,579	)			-				(9,030	)			-				20,020
Unitholders contributions			-				-				-				-				6,569				500,000
Unitholders redemptions			(24,857	)			(1,533,585	)			(66	)			(4,847	)			(6,569	)			(520,020	)
Balances at December 31, 2015			110,812				6,437,129				955				63,836				-				-
Trading loss			-				(818,494	)			-				(7,182	)			-				-
Unitholders' contributions			-				-				-				-				-				-
Unitholders redemptions			(28,453	)			(1,553,841	)			(116	)			(8,042	)			-				-
Balances at December 31, 2016			82,359			$	4,064,794				839			$	48,612				-			$	-

Unitholders' Capital (Trading)		Managing Owners - Trading Class A								Total Unitholders' Capital -Trading								Non-Controlling Interests
		Units				Dollars				Units				Dollars				Units				Dollars
Balances at December 31, 2013			535			$	38,117				195,557			$	13,966,829				-			$	-
Trading loss			-				(2,010	)			-				(1,001,190	)			-				-
Unitholders' redemptions			-				-				(58,332	)			(3,695,526	)			-				-
Balances at December 31, 2014			535				36,107				137,225				9,270,113				-				-
Trading loss			-				(5,028	)			-				(1,179,617	)			-				(11,244	)
Unitholders' contributions			-				-				6,569				500,000				-				100,000
Unitholders' redemptions			-				-				(31,492	)			(2,058,452	)			-				-
Balances at December 31, 2015			535				31,079				112,302				6,532,044				-				88,756
Trading loss			-				(4,676	)			-				(830,352	)			-				(6,008	)
Unitholders' contributions			-				-				-				-				-				-
Unitholders' redemptions			-				-				(28,569	)			(1,561,883	)			-				(82,748	)
Balances at December 31, 2016			535			$	26,403				83,733			$	4,139,809				-			$	-

Unitholders' Capital (LLC Equity/Non-Trading)		Participating Owners-								Nonparticipating Owners-								Total Unitholders' Capital-
		LLC Equity/Non-Trading								LLC Equity/Non-Trading								LLC Equity/Non-Trading
		Units				Dollars				Units				Dollars				Units				Dollars
Balances at December 31, 2013			171,234			$	89,652				2,102,054			$	1,100,572				2,273,288			$	1,190,224
Non-Trading income (loss)			-				(592	)			-				26,831				-				26,239
Reallocation due to Redemptions			(55,737	)			(27,256	)			55,737				27,256				-				-
Unitholders' distribution			-				-				-				-				-				-
Balances at December 31, 2014			115,497				61,804				2,157,791				1,154,659				2,273,288				1,216,463
Non-Trading loss			-				(36,957	)			-				(716,723	)			-				(753,680	)
Reallocation due to Redemptions			(21,106	)			(5,632	)			21,106				5,632				-				-
Unitholders' distribution			(94,391	)			(19,215	)			(2,178,897	)			(443,568	)			(2,273,288	)			(462,783	)
Balances at December 31, 2015			-				-				-				-				-				-
Non-Trading income (loss)			-				-				-				-				-				-
Reallocation due to Redemptions			-				-				-				-				-				-
Unitholders' distribution			-				-				-				-				-				-
Balances at December 31, 2016			-			$	-				-			$	-				-			$	-
Total Unitholders Capital at December 31, 2016																						$	4,139,809

		Unitholders'				Unitholders'
		Capital Trading Class A				Capital Trading Class B
Net asset value per unit at December 31, 2015		$	58.09			$	66.84
Net change per unit			(8.74	)			(8.90	)
Net asset value per unit at December 31, 2016		$	49.35			$	57.94

See accompanying notes to consolidated financial statements.

Notes to Consolidated Financial Statements –

December 31, 2016, 2015, 2014

 

(1)           General Information and Summary

 

The RJO Global Trust (the “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 U.S. and international futures, spot and forward contracts on currencies, interest rates, energy and agricultural products, metals and stock indices, hybrid instruments, swaps, any rights pertaining thereto and any options thereon or on physical commodities, as well as securities and any rights pertaining thereto and any options thereon, pursuant to the trading instructions of multiple independent commodity trading advisors (each a “Trading Advisor” and collectively, the “Trading Advisors”).

 

R.J. O’Brien Fund Management, LLC, the managing owner of the Trust (“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 has been registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity pool operator, and has been a member in good standing of the National Futures Association (“NFA”) in such capacity, since December 1, 2006.  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”) through its investment in RJ OASIS (as defined below).

Units of beneficial ownership of the Trust (“units”) commenced selling on April 3, 1997.  Effective July 1, 2011, the Managing Owner discontinued the public offering of the units and began offering the units on a private placement basis only.  The Trust filed a Post-Effective Amendment to its Registration Statement on Form S-1 with the Securities and Exchange Commission (the “SEC”) on July 5, 2011 to deregister the remaining units that were unsold under the public offering.  The Post-Effective Amendment was declared effective by the SEC on July 8, 2011.  Effective January 15, 2014, the Managing Owner began offering Class C and Class D units.  The Class A and Class B units are no longer offered.

Pursuant to an Investment Management Agreement dated August 30, 2013 (the “Investment Management Agreement”), the Managing Owner appointed RPM Risk & Portfolio Management Aktiebolag, a limited liability company organized under the laws of Sweden, as investment manager to the Trust (“RPM” or the “Investment Manager”).  RPM has been registered with the CFTC as a commodity trading advisor (CTA), and has been a member in good standing of the NFA in such capacity, since August 27, 2015.  Prior to August 27, 2015, RPM was exempt from registration as a CTA pursuant CFTC Rule 4.14(a)(10) as (i) during the course of any 12-month periods, it had not furnished commodity trading advice to more than 15 persons; and (ii) it did not hold itself out generally to the public as a CTA.  The Trust remains a multi-advisor commodity pool where trading decisions for the Trust are delegated to the Trading Advisors, representing the Investment Manager’s “Evolving Manager Program”.  RPM is responsible for selecting, monitoring, and replacing each commodity trading advisor available for its Evolving Manager Program.  RPM is also responsible for the Trust’s allocations to each Trading Advisor through the Trust’s investment in RJ OASIS (as defined below).  RPM may also add, remove or replace any Trading Advisor without the consent of or advance notice to investors.  Investors will be notified of any material change in the basic investment policies or structure of the Trust.

The Evolving Manager Program seeks to identity and select commodity trading advisors with shorter track records and with smaller assets under management who, in the opinion of the Investment Manager, appear to have potential for long-term over-performance relative to their respective peer group.  RPM may add, delete or modify such categories of investment strategies in line with its investment objective and policy.  The strategies include three broad based categories that are described as follows (each, an “Eligible Strategy”):

 

 

 

 

The Investment Manager will, in its discretion, determine the minimum or maximum target allocation or allocation range, or the manner in which to rebalance the Trust or adjust relative weightings of the Trust.  RPM has complete flexibility in allocation and reallocating the Trust’s capital in any manner that it may deem appropriate.  There can be no assurance as to which factors the Investment Manager may consider in making capital allocations for the Trust, or as to which allocation the Investment Manager may make.

The Trust is governed by the Tenth Amended and Restated Declaration and Agreement of Trust dated January 31, 2015 (the “Trust Agreement”).

On November 21, 2016, the Net Asset Value per Unit (as defined in the Trust Agreement) of the Class A Units declined to less than $50, after adding back all distributions.  Due to this decline in the Net Asset Value per Unit of the Class A Units, a legacy provision in the Trust Agreement from when the Trust was publicly offered was triggered, requiring RJOFM to liquidate all of the Trust’s open positions and suspend trading until after a Special Redemption Date (as defined in the Trust Agreement).  RJOFM declared December 30, 2016 as the Special Redemption Date in a notice to unitholders dated November 30, 2016, a copy of which is filed as Exhibit 20.01 hereto.  Pursuant to this notice, Class A unitholders had the opportunity to redeem their interest in the Trust by submitting a written redemption request to the Managing Owner by no later than December 28, 2016.  Following such date, in accordance with the Trust Agreement, if the Net Assets of the Trust (as defined in the Trust Agreement) were at least $1,000,000 and the Net Asset Value per Unit of the Class A Units was in excess of $25, the Trust could, in the discretion of the Managing Owner, resume trading.  After such date, the Net Assets of the Trust were $4,091,193 and the Net Asset Value per Unit of the Class A Units was $49.35 and the Managing Owner decided to resume the Trust’s trading through the Trust’s investment in the OASIS RPM Evolving CTA Series.

Prior to the Trust’s allocation to the OASIS RPM Evolving CTA Series on January 23, 2017, RPM delegated trading decisions for the Trust to six independent Trading Advisors:  Revolution Capital Management, LLC (“RCM”), PGR Capital LLP (“PGR”), ROW Asset Management, LLC (“ROW”), Turning Wheel Capital, Inc. (“TWC”), Claughton Capital, LLC (“Claughton”) and Degraves Capital Management PTY (“DCM”),  pursuant to advisory agreements executed between the Managing Member, and, as applicable, each Trading Company and each Trading Advisor (each an “Advisory Agreement” and collectively the “Advisory Agreements”).

The Advisory Agreements provide that each Trading Advisor has discretion in and responsibility for the selection of the Trading Company’s commodity transactions with respect to that portion of the Series’ assets allocated to it.  

As of November 21, 2016, on the date the Net Asset Value per Unit of the Class A units declined to less than $50 and prior to quarter-end reallocation, RCM was managing 14.29%, ROW 10.65%, TWC 5.03% and DCM 6.69% of the Trust’s assets, respectively.  Following the Trust’s resuming trading through its investment in the OASIS RPM Evolving CTA Series and as of January 23, 2017, the date of the Trust’s initial allocation to the OASIS RPM Evolving CTA Series and prior to the quarter-end reallocation, RPM delegated trading decisions for the Trust to three independent Trading Advisors: RCM, Claughton and DCM, pursuant to separate Advisory Agreements.  As of January 23, 2017, RCM was managing 38.56%, Claughton 7.72% and DCM 7.58%.

The Trust has no officers, directors or employees.  

 

RJO is a “futures commission merchant,” the Managing Owner is a “commodity pool operator” and the Trading Advisors to the Trust are “commodity trading advisors,” as those terms are used in the CE Act.  As such, they are registered with and subject to regulation by the CFTC and are each a member of NFA in such respective capacities.  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 SEC, and is a member of the Financial Industry Regulatory Authority (“FINRA”).

 

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 state agencies having jurisdiction over the Trust; calculation of the Trust’s net asset value (“NAV”) (meaning the total assets less total liabilities of the Trust) and directing payment of the management and incentive fees payable to the Investment Manager and Trading Advisors under the Investment Management Agreement and Advisory Agreements, as applicable.

The Trust will be terminated on December 31, 2026, unless terminated earlier upon the occurrence of one of the following:  (1) Beneficial Owners holding more than 50% of the outstanding units notify the Managing Owner to dissolve the Trust as of a specific date; (2) 120 days after the filing of a bankruptcy petition by or against the Managing Owner, unless the bankruptcy court approves the sale and assignment of the interests of the Managing Owner to a purchaser/assignor that assumes the duties of the Managing Owner; (3) 120 days after the notice of the retirement, resignation, or withdrawal of the Managing Owner, unless Beneficial Owners holding more than 50% of the outstanding units appoint a successor; (4) 90 days after the insolvency of the Managing Owner or any other event that would cause the Managing Owner to cease being managing owner of the Trust, unless Beneficial Owners holding more than 50% of the outstanding units appoint a successor; (5) dissolution of the Managing Owner; (6) insolvency or bankruptcy of the Trust; (7) a decrease in the NAV to less than $2,500,000; (8) dissolution of the Trust; or (9) any event that would make it unlawful for the existence of the Trust to be continued or require dissolution of the Trust.

 

A portion of 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, 100% of interest earned on the Trust’s assets, calculated by the average four-week Treasury bill rate, is paid to the Trust.  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.  On October 6, 2010, the Managing Owner appointed RJO Investment Management LLC (“RJOIM”), an affiliate of the Managing Owner, to manage the Trust’s cash deposited with Wells Fargo Bank, N.A. (“Wells”).  As of December 31, 2016, Wells held approximately $4,850,000 of the Trust’s assets.  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, 2016, accounting and transfer agency services for the Trust are provided by NAV Consulting, Inc., the Trust’s administrator.

In 2005, certain assets held by the Trust’s prior clearing broker, Refco Capital Markets, LTD (“REFCO, LTD”), were determined to be illiquid.  On October 31, 2005, $57,544,206 of equity 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, pro rata to their share in the Trust.  At December 31, 2005, the illiquid assets were determined to be impaired and were reduced by $39,580,944 for impairment, based on management’s estimate at that time.

 

Through 2006, the Trust received $10,319,318 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 REFCO, LTD, and all Non-Trading Accounts were transferred to the LLC.  Any new funds received from REFCO, LTD by the LLC will be distributed to unitholders who were investors in the Trust at the time of the bankruptcy of REFCO, LTD 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.

(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.

The unitholders have no rights to request redemptions from the LLC.

 

The LLC 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).

Effective as of June 15, 2015 (the “Termination Date”), the LLC was dissolved by US Bank.  US Bank effected the dissolution based upon their belief that substantially all of the LLC’s claims had been liquidated and the related proceeds had been distributed to the unitholders, and that the LLC was not likely to receive further significant recoveries related to such claims.  Accordingly, the LLC has ceased to carry on its business as of the Termination Date except insofar as may be necessary for the winding up of its business.  As of the Termination Date, the LLC has taken full account of its assets and liabilities, and has made payment or has otherwise provided for all of its remaining debts and liabilities.  US Bank has established a contingency reserve with all remaining funds from the LLC in its possession in the approximate amount of $475,000 to pay for any future wind up expenses of, or other claims made against, the LLC on or prior to June 15, 2017 (the “Reserve Termination Date”).  To the extent no claims or obligations of the LLC remain outstanding as of the Reserve Termination Date (as determined in US Bank’s reasonable discretion), US Bank will distribute the then remaining funds to the unitholders, provided, however, if the amount of remaining funds available for distribution does not significantly exceed the cost of making such distribution, US Bank reserves the right to donate the remaining amounts to a nationally recognized charity.

Accordingly, the LLC/Non-trading unitholders capital accounts were distributed to US Bank on the Termination Date.  Amounts estimated to be due to Participating Owners aggregating $17,890 are reflected as a distribution payable and a receivable from US Bank in the Consolidated Statements of Financial Condition.

  

(2)           Summary of Significant Accounting Policies

     

The accounting and reporting policies of the Trust conform to accounting principles generally accepted in the United States of America and to practices in the commodities industry.  The following is a description of the more significant of those policies that the Trust follows in preparing its consolidated financial statements.

 

(a)     Basis of Presentation

 

The accompanying consolidated financial statements of the Trust have been prepared in accordance with accounting principles generally accepted in the United States of America.  While the Trust is not registered, and is not required to be registered as an investment company under the Investment Company Act of 1940, as amended, it meets the definition of an investment company within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946, Financial Services - Investment Companies, and follows the accounting and reporting guidance therein.

(b)    Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Trust, its wholly-owned subsidiaries: the LLC through the Termination Date (see Note (1) above), the OASIS Centurion Investment Mgmt Series, OASIS Turing Wheel Capital Series, OASIS Claughton Capital Series, and OASIS Degraves Capital Mgmt PTY Series.  Through the liquidation date (see Note (1) above), the consolidated financial statements also include the controlling and majority equity interest in the OASIS Revolution Capital Mgmt Series, OASIS PGR Capital Series and OASIS ROW Asset Mgmt Series.  Through the liquidation date (see Note (1) above), interests in such series of RJ OASIS not wholly-owned by the Trust are shown as non-controlling interests.  All material intercompany transactions have been eliminated upon consolidation.

 

(c)    Revenue Recognition

 

Commodity futures contracts, forward contracts, physical commodities, and related options are recorded on their trade date.  All such transactions are recorded on a mark-to-market basis and measured at fair value daily.  Unrealized gains on open contracts reflected in the consolidated statements of financial condition represent the difference between original contract amount and fair value (as determined by exchange settlement prices for futures contracts and related options and cash dealer prices at a predetermined time for forward contracts, physical commodities, and their related options) as of the last business day of the reporting period or as of the last date of the consolidated financial statements.  As the broker has the right of offset, the Trust presents unrealized gains and losses on open futures contracts (the difference between contract trade price and quoted market price) as a net amount in the consolidated statements of financial condition.  Any change in net unrealized gain or loss on futures and forward contracts from the preceding period is reported in the consolidated statements of operations.  Gains or losses are realized when contracts are liquidated.

The Trust may write (sell) and purchase exchange listed options on commodities or financial instruments.  An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period.  The option premium is the total price paid or received for the option contract.  When the Trust writes an option, the premium received is recorded as a liability in the statement of financial condition and measured at fair value daily.  When the Trust purchases an option, the premium paid is recorded as an asset in the consolidated statements of financial condition and measured at fair value daily.  Realized gains (losses) and changes in unrealized gains (losses) on options contracts are included in the consolidated statements of operations.  When a written option expires or the Trust enters into a closing purchase transaction, the difference between the net premium received and any amount paid at expiration or on executing a closing purchase transaction, including commission, is recognized as a component of realized gain (loss) on closed positions.  When a purchased option is exercised, the proceeds on the sale of an underlying instrument (for a purchased put option), or the purchase cost of an underlying instrument (for a purchased call option) is adjusted by the amount of the premium paid.

 

For each series of RJ OASIS in which the Trust invests, that portion of the Trust’s net assets are deposited into an account of the relevant Trading Company held at RJO,  the clearing broker and currency dealer for each Trading Company.  For U.S. dollar deposits, 100% of interest earned on the series’ assets, calculated by the average four-week Treasury bill rate, is paid to the series.  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 series are retained by RJO.  On October 6, 2010, the Managing Owner appointed RJO Investment Management LLC (“RJOIM”), an affiliate of the Managing Owner, to manage the Trust’s cash deposited with Wells Fargo Bank, N.A. (“Wells”).  As of December 31, 2016, Wells held approximately $4,850,000 of the Trust’s assets.  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.

Fixed income securities are recorded at fair value, with changes in fair value recorded in the statement of operations as unrealized gain (loss) on fixed income securities.  Realized gains (losses) from liquidation of fixed income securities are determined on first-in, first-out (FIFO) basis.  Premiums and discounts on securities purchased are amortized over the lives of the respective instruments.  Interest income is recognized on the accrual basis.

(d)   Ongoing Offering Costs

 

Ongoing offering costs, subject to a ceiling of 0.50% of the Trust’s average month-end net assets, are paid by the Trust and accrued monthly.

 

(e)   Foreign Currency Transactions

 

Trading accounts in foreign currency denominations are susceptible to both movements in the underlying contract markets as well as fluctuation in currency rates.  Foreign currencies are translated into U.S. dollars for closed positions at an average exchange rate for the year, while year-end balances are translated at the year-end currency rates.  The impact of the translation is reflected in the consolidated statements of operations.

(f)   Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

(g)   Valuation of Assets Held at Refco Capital Markets, Ltd.

The Trust recorded an impairment charge against its assets held at REFCO, LTD at December 31, 2005, based on management’s estimate of fair value at that time.  Subsequent recoveries from REFCO, LTD were credited against the then book value of the claim.  On June 28, 2007, the Trust’s cumulative recoveries from REFCO, LTD exceeded the book value of the impaired assets held at REFCO, LTD, which resulted in no remaining book value for those assets.  All recoveries in excess of the book value of the impaired assets have been recorded as “Collections in excess of impaired value” on the Trust’s consolidated statements of operations.  As part of the winding down of the LLC, US Bank, as Manager of the LLC, has taken into full account the LLC’s liabilities and assets, and has made payment and otherwise provided for all remaining LLC’s debits and liabilities. 

(h)   Recent Pronouncements

On May 28, 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.  The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.  The standard permits the use of either the retrospective or cumulative effect transition method.  In July 2015, the FASB voted to delay the effective date of this ASU by one year.  The ASU will now be effective commencing with the Trust’s quarter ending March 31, 2018.  Early adoption of this ASU is allowed no sooner than the original effective date.  The Trust has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

 

(3)           Fees

 

Management fees are accrued and paid monthly by the relevant series’ Trading Company.  Incentive fees are accrued monthly and paid quarterly, as applicable, by the relevant series’ Trading Company.  Trading decisions for the period of these financial statements were made by the Trading Advisors.

Management fees and incentive fees were not due on the LLC net assets.  See Note (1).

Pursuant to the Trust Agreement, the Trust pays the Managing Owner a fee of 0.50% of the Trust’s month-end net assets on an annual basis.  

 

Pursuant to the Investment Management Agreement, the Trust pays RPM a monthly management fee at a rate of 0.0625% (a 0.75% annual rate) of the Trust’s month-end net asset calculated after determined and before reduction for any RPM management fees then being calculated and all other fees and expenses as of such month end, and before giving effect to any subscriptions for units in the Trust made as of the beginning of the month immediately following such month end and to any distributions or redemptions accrued during or as of such month end.

 

Pursuant to the Investment Management Agreement, RPM will receive from the Class C and D units a quarterly incentive fee of 10% of any “New Appreciation”, if any, of any New Assets.  “New Assets” are that portion of the assets contributed to the Trust from the date of the Investment Management Agreement.  New Appreciation in any quarter is equal to the amount by which the net asset value of the New Assets, prior to reduction for any accrued RPM performance fee, but after reduction for all other fees and expenses allocable to the New Assets (including the RPM management fee and management and incentive fees paid to the Trading Advisors, as described below), exceeds the cumulative trading profit as of any previous calendar quarter-end.  Interest income shall not be taken into account in calculating New Appreciation.  

 

Pursuant to the Trust’s agreements with the Trading Advisors, each Trading Advisor receives a monthly management fee at the rate ranging from 0.042% to 0.083% (a 0.5% to 1% annual rate) of the Trust’s month-end net assets calculated after deduction of brokerage fees, but before reduction for any incentive fee or other costs and before inclusion of new unitholder subscriptions and redemptions for the month.  

 

Pursuant to its Advisory Agreement, each Trading Advisor may also receive from the relevant series’ Trading Company a quarterly incentive fee ranging from 15% to 20% of the “New Trading Profit,” if any, of the Trust.  The incentive fee is based on the performance of each Trading Advisor’s portion of the assets allocated to them.  New Trading Profit in any quarter is equal to the “Trading Profit” for such quarter that is in excess of the highest level of such cumulative trading profit as of any previous calendar quarter-end.  Trading Profit is calculated by including realized and unrealized profits and losses, excluding interest income, and deducting the management fee and brokerage fee.  

For a description of the fees paid by the Trust to RJOIM, the Trust’s cash manager, see Note (9).

(4)           Income Taxes

 

It is expected that that the Trust will be treated as a “partnership” for both U.S. federal and state tax purposes.  As such, no provision for U.S. federal income taxes has been made in the accompanying consolidated financial statements as each beneficial owner is responsible for reporting income (loss) based on its pro rata share of the profits or losses of the Trust.  The only significant differences in financial and income tax reporting basis are ongoing offering costs.

The Trust files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions.  The Trust’s U.S. federal income tax returns for all tax years ended on or after December 31, 2013, remain subject to examination by the Internal Revenue Service.  The Trust’s state and local income tax returns are subject to examination by the respective state and local authorities over various statutes of limitations, generally ranging from three to five years from the date of filing.

 

(5)           Trading Activities and Related Risks

 

The Trust, through its indirect investment in the Trading Companies, engages in the speculative trading of U.S. and international futures contracts, options, and forward contracts (collectively derivatives).  These derivatives include both financial and non-financial contracts held as part of a diversified trading strategy.  The Trading Companies are exposed to both market risk - the risk arising from changes in the market value of the contract - and credit risk - the risk of failure by another party to perform according to the terms of a contract.

The purchase and sale of futures requires initial and on-going margin deposits with an FCM.  The Commodity Exchange Act requires an FCM to segregate or secure all customer transactions and assets from the FCM’s proprietary activities.  A customer’s cash and other property, such as U.S. Treasury Bills, deposited with an FCM are considered commingled with all other customer funds subject to the FCM’s segregation requirements.  In the event of an FCM’s insolvency, recovery may be limited to a customer’s pro rata share of segregated funds.  It is possible that the recovered amount could be less than the total of cash and other property deposited by the customer.

 

The Trust, through its indirect investment in the Trading Companies, has cash on deposit with the FCM in connection with its trading of forward contracts.  In the normal course of business, the Trust does not require collateral from such interbank market maker.  Due to forward contracts being traded in unregulated markets between principals, the Trust also assumes a credit risk, the risk of loss from counterparty non-performance.

 

For derivatives, risks arise from changes in the market value of the contracts.  Theoretically, the Trading Companies are exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.

 

A Trading Company, as writer of an option, has no control over whether the underlying instrument may be sold (called) and as a result bears the risk of an unfavorable change in the market value of the instrument underlying the written option.  There is also the risk the Trading Company may not be able to enter into a closing transaction because of an illiquid market.

The Trading Companies may purchase exchange-traded options.  As such, the relevant Trading Company pays a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option.  Purchased options expose the Trading Companies to a risk of loss limited to the premiums paid.

 

Net trading results from derivatives for the years ended December 31, 2016, 2015, and 2014, respectively, are reflected in the consolidated statements of operations and are equal to the gain or loss from trading less brokerage commissions.  Such trading results reflect the net gain or loss arising from the Trust’s speculative trading of futures contracts, options and forward contracts through its indirect investment with the Trading Companies.

The Trust, through its indirect investment in the trading Companies, invests its margin in fixed income securities as permitted by CFTC regulations regarding acceptable securities for investment of segregated assets and the RJOIM agreement with the Trust.  Such acceptable securities, include, but are not limited to, U.S. Treasury and government agencies’ securities, purchase agreements collateralized by U.S. Treasury and government agencies, corporate debt securities, and bank debt securities.  The Trust’s total investment in corporate debt securities, bank deposit securities, and certificate of deposits combined cannot exceed 40% of the Trust’s total assets.

The Beneficial Owners bear the risk of loss only to the extent of the market value of their respective investments in the Trust.

 

See Note (10) for further details on Derivative Instruments and Hedging Activities.

 

(7)           Operations

 

Redemptions

 

A beneficial owner may cause any or all of his or her units to be redeemed by the Trust effective as of the last business day of any month based on the net asset value per unit on such date on five business days’ written notice to NAV Consulting, Inc., the Trust’s administrator, or the Managing Owner.  Payment will generally be made within 10 business days of the effective date of the redemption.  The Trust Agreement contains a full description of redemption and distribution policies.   

 

Subscriptions

 

Investors that are eligible to participate in the private offering of the units may purchase units in the Trust pursuant to the terms of the Trust’s Confidential Private Placement Memorandum and disclosure document (the “Memorandum”) and a signed subscription form.  The Trust Agreement and the Memorandum contain a full description of subscription policies. 

 

(8)            Financial Highlights

 

The following financial highlights show the Trust’s financial performance of the Trading units for the periods ended December 31, 2016, 2015 or 2014.  Total return is calculated as the change in a theoretical beneficial owner’s investment over the entire period, and is not annualized.  Total return is calculated based on the aggregate return of the Trust’s Trading units taken as a whole.  As of December 31, 2015, no Class D units had been sold and, therefore, the Trust’s financial performance with respect to the Class D units is not reflected below.

 

		Class A												Class B												Class C
		2016				2015				2014				2016				2015				2014				2016				2015				2014
Per share operating performance:
Net asset value of Trading units, beginning of year		$	58.09			$	67.49			$	71.25			$	66.84			$	76.11			$	78.74			$	-			$	-			$	-
Total Trading income (loss):
Trading gain (loss)			(1.20	)			(1.38	)			5.31				(1.49	)			(1.59	)			6.08				-				-				-
Investment income			0.14				0.02				0.04				0.16				0.02				0.04				-				-				-
Expenses			(7.68	)			(8.04	)			(9.11	)			(7.57	)			(7.70	)			(8.75	)			-				-				-
Trading loss			(8.74	)			(9.40	)			(3.76	)			(8.90	)			(9.27	)			(2.63	)			-				-				-
Net asset value of Trading units, end of year		$	49.35			$	58.09			$	67.49			$	57.94			$	66.84			$	76.11			$	-			$	-			$	-
Total return:
Total return before incentive fees			(13.82	%)			(12.71	%)			(3.28	%)			(12.11	%)			(11.01	%)			(1.94	%)			-				5.22	%			-
Less incentive fee allocations			(1.22	%)			(1.22	%)			(1.99	%)			(1.20	%)			(1.17	%)			(1.41	%)			-				(1.22	%)			-
Total return			(15.04	%)			(13.93	%)			(5.27	%)			(13.31	%)			(12.18	%)			(3.35	%)			-				4.00	%			-
Ratios to average net assets:
Trading gain (loss)			(14.06	%)			(15.48	%)			(9.26	%)			(12.31	%)			(13.10	%)			(15.76	%)			-				3.93	%			-
Expenses:
Expenses, less incentive fees			(12.43	%)			(11.87	%)			(12.34	%)			(10.24	%)			(9.76	%)			(10.67	%)			-				(0.49	%)			-
Incentive fees			(1.22	%)			(1.22	%)			(1.99	%)			(1.20	%)			(1.17	%)			(1.41	%)			-				(1.22	%)			-
Total expenses			(13.65	%)			(13.09	%)			(14.33	%)			(11.44	%)			(10.93	%)			(12.08	%)			-				(1.71	%)			-

 

(10)         Derivative Instruments and Hedging Activities

 

The Trust does not utilize “hedge accounting” and instead “marks-to-market” its derivatives through operations.

Derivatives not designated as hedging instruments:

 

As of December 31, 2015
		Asset				Liability
Type of		Derivatives				Derivatives				Net
Futures Contracts		Fair Value				Fair Value				Fair Value
Agriculture		$	32,649			$	(61,049	)		$	(28,400	)
Currency			26,412				(863	)			25,549
Energy			104,889				(74,035	)			30,854
Indices			5,225				(23,774	)			(18,549	)
Interest rates			4,782				(21,653	)			(16,871	)
Metals			11,985				(9,213	)			2,772
		$	185,942			$	(190,587	)		$	(4,645	)

 

As of December 31, 2016, the Trust held no assets or liabilities reported at fair value.  The above reported fair values are included in equity in commodity trading accounts – net unrealized gain on open contracts and in purchased options on futures and written options on futures contracts in the consolidated statements of financial condition as of December 31, 2015. 

 

Trading gain (loss) for the following periods:

		Year ended December 31,
Type of Futures Contracts		2016				2015				2014
Agriculture		$	140,538			$	(177,298	)		$	(42,004	)
Currency			(117,250	)			(480,313	)			790,640
Energy			(165,154	)			687,431				126,535
Indices			(59,458	)			(226,266	)			(566,210	)
Interest rates			297,195				16,128				188,370
Metals			(133,786	)			15,436				21,168
		$	(37,915	)		$	(164,882	)		$	518,499

 

See Note (5) for additional information on the trading of derivatives not designed as hedging instruments and the related risks.

(11)         Offsetting

As indicated in Note (1), the Trust’s assets are currently indirectly allocated to each of the Trading Companies.  All of the Trading Companies utilize RJO as their clearing broker.  Each Trading Company has its own separate clearing agreement with RJO, under which each of the Trading Companies are subject to master netting agreements or similar arrangements that allow RJO to offset any assets of the individual entity by any liabilities of the individual Trading Company, as necessary, if RJO determines that the amount of margin is not appropriate or the Trading Company is not able to perform.  Each of the Trading Companies hold significant cash deposits with RJO, which can be and is used by the Trading Companies to settle any obligations due to RJO.  The master netting agreements or similar arrangements do not apply to amounts owed to/from different counterparties and they do not apply across different Trading Companies.

 

For financial reporting purposes, the Trust nets its similar derivative assets and liabilities that are subject to netting arrangements in the Statements of Financial Condition.  The following tables present the Trust’s derivative assets and liabilities by investment type and by counterparty, net of amounts available for offset under a master netting agreement, along with the related collateral received or pledged by the Trading Companies (cash on deposit with broker) as of December 31, 2016 and December 31, 2015:

 

		Offsetting of Derivative Assets
		As of December 31, 2016												As of December 31, 2015
		Gross Amounts of Recognized Assets				Gross Amounts Offset in the Statement of Financial Condition				Net Amounts of Assets Presented in the Statement of Financial Condition				Gross Amounts of Recognized Assets				Gross Amounts Offset in the Statement of Financial Condition				Net Amounts of Assets Presented in the Statement of Financial Condition
Description
Futures and forward contracts		$	-			$	-			$	-			$	185,942			$	(182,528	)		$	3,414
		$	-			$	-			$	-			$	185,942			$	(182,528	)		$	3,414

 

		Derivative Assets and Collateral Held by Counterparty
		As of December 31, 2016																As of December 31, 2015
		Net Amount of Assets in the Statement of Financial Condition																Net Amount of Assets in the Statement of Financial Condition
Individual Trading Companies (with derivative assets and  collateral held by RJO)						Gross Amounts Not Offset in the Statement of Financial Condition																Gross Amounts Not Offset in the Statement of Financial Condition
						Financial Instruments				Cash Collateral Received				Net Amount								Financial Instruments				Cash Collateral Received				Net Amount
OASIS PGR, LLC		$	-			$	-			$	-			$	-			$	(26,242	)		$	-			$	-			$	(26,242	)
OASIS ROW, LLC			-				-				-				-				11,674				-				-				11,674
OASIS TWC, LLC			-				-				-				-				(715	)			-				-				(715	)
OASIS Claughton, LLC			-				-				-				-				18,697				-				-				18,697
		$	-			$	-			$	-			$	-			$	3,414			$	-			$	-			$	3,414

		Offsetting of Derivative Liabilities
		As of December 31, 2016												As of December 31, 2015
										Net Amounts of Liabilities Presented in the Statement of Financial Condition												Net Amounts of Liabilities Presented in the Statement of Financial Condition
		Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statement of Financial Condition								Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statement of Financial Condition
Description
Futures and forward contracts		$	-			$	-			$	-			$	182,528			$	(182,528	)		$	-
Options written on futures contracts			-				-				-				8,059				-				8,059
		$	-			$	-			$	-			$	190,587			$	(182,528	)		$	8,059

 

		Derivative Liabilities and Collateral Pledged by Counterparty
		As of December 31, 2016																As of December 31, 2015
		Net Amount of Liabilities in the Statement of Financial Condition																Net Amount of Liabilities in the Statement of Financial Condition
Individual Trading Companies (with derivative liabilities and  collateral held by RJO)						Gross Amounts Not Offset in the Statement of Financial Condition																Gross Amounts Not Offset in the Statement of Financial Condition
						Financial Instruments				Cash Deposits Held by Broker				Net Amount								Financial Instruments				Cash Deposits Held by Broker				Net Amount
OASIS ROW, LLC		$	-			$	-			$	-			$	-			$	8,059			$	(8,059	)		$	-			$	-
		$	-			$	-			$	-			$	-			$	8,059			$	(8,059	)		$	-			$	-

 

(12)       Subsequent Events

 

 

The Trust expects to pay annual expenses of approximately 10.18% (for Class C units) to 15.03% (for Class D units) after taking into account estimated interest income of its average month-end assets.

 

Acknowledgment

 

To the best of my knowledge and belief, the information contained herein is accurate and complete.