EX-13.01 2 a07-9274_1ex13d01.htm EX-13.01

 

Exhibit 13.01

Message from the Managing Owner

Dear Unitholder:

The JWH Global Trust posted a loss of 18.7% for 2005.  The Net Asset Value at year-end was $120.73*** compared to $148.54 per unit at the beginning of the year.

The majority of the losses were realized in the currency sector coupled with smaller losses in the interest rate, agriculture and metals sectors. Although some markets had strong directional moves, the overall trading environment during the year was unfavorable for long-term trend following as volatility was a major factor in many markets. The combination of reversing market conditions and choppy price action throughout the year caused numerous portfolio shifts as the Trust attempted to find new trends in the market, while minimizing risk exposure.

The Trust’s performance in the first quarter was negative as the bulk of the losses were directly related to the strength of the U.S. dollar against most major currencies.  The weak dollar trend, which had dominated during the second half of 2004, began to reverse itself on diminishing expectations of a Yuan revaluation by the Chinese central bank.  Demand for the dollar also increased when the Federal Reserve raised interest rates by a quarter percentage point for the seventh time since June 2004. On February 16th Fed Chairman Alan Greenspan’s testimony, stating that the decline in long-term interest rates during the past year “remains a conundrum”, sparked inflationary fears worldwide and added to the Trust’s negative performance in the interest rate sector as the European, Japanese and U.S. bond markets sold-off. The Japanese sell-off was short lived as Japanese bonds rallied amid speculation that exports to the U.S. would drop.  The energy sector, the Trust’s best performer during the quarter, benefited from an increase in inflationary fears offset some of the previously discussed losses in the currency and interest rate sectors. Energies rallied as commodity prices surged to a 24-year high on speculation that rising domestic demand may outpace U.S. refinery production during peak summer demand.  Overall, the gains made in energies, indices and the agriculture sectors were not enough to offset the losses incurred in the currency, interest rate and metals sectors.

The Trust’s performance was positive during the second quarter as large gains in the currency and interest rate sectors more than offset losses in the Trust’s other sectors.  The energy sector, which had been the best performing sector in the first quarter, was the worst performing sector in the second quarter, as trends experienced sudden and strong reversals.  In April, energies experienced a sudden turnaround as supplies increased and OPEC boosted output in an effort to lower prices and ensure adequate inventories to meet summer fuel demands.  In contrast, the entire energy sector rallied in June as expectations increased that global demand for oil would reach record levels in the fourth quarter. The interest rate sector posted positive returns as the majority of the sector’s gains came from the strength in the German and Japanese fixed-income markets.  The benchmark German 10-year bund rose to a record high, as market conjecture grew that the European Central Bank would have to cut interest rates as the European economy slowed.  Further supporting the rally in the German bund was the rejection of the European Union Constitution in France.  The currency sector was the best performing sector during the quarter as the U.S. dollar posted its largest quarterly gain against the euro since 2001 as the market anticipated a quarter point increase by the Federal Reserve on June 30th. The dollar also benefited from the yield advantage against the Swiss franc and the euro.  In the agriculture sector, cotton, corn, wheat, soybeans and N.Y. coffee hindered the Trust’s returns as weather conditions wreaked havoc in the markets.  The metals sector was negative for the quarter as volatility in various markets limited the Trust’s ability to achieve returns. Overall, the gains made in the currency and interest rate sectors drove the Trust’s performance for the quarter.

The Trust’s performance was positive for the third quarter, despite volatile market conditions that resulted from terror attacks in London, a surprise devaluation of the Chinese Yuan and Hurricanes Dennis, Emily, Katrina and Rita.  Fears, over damage to oil rigs and refineries caused by the hurricanes in the Gulf Coast led to record high energy prices.  With positive returns in every market traded, the energy sector led performance during the quarter.  The interest rate and currency sectors were the Trust’s most unprofitable sectors during the quarter as volatility in the fixed income market and the U.S. dollar dominated both sectors. The dollar had been weakening over speculation that record high energy prices would slow U.S. economic growth. However, once it became evident that the Federal Reserve would continue to raise interest rates and thus keep its “yield advantage”, both the fixed-income sector and the U.S. dollar reversed their trends; the dollar rallied and fixed-income markets sold off.  The hurricanes also helped the metal sector to post positive returns for the quarter as record high energy costs also saw gold reach a 17-year high. The agriculture and indices sectors also posted positive returns, as N.Y. coffee and the Nikkei 225 (Osaka) led performance.  The Nikkei rose to a four year high on signs that the Japanese economy would continue to grow and on indications that land prices in Tokyo had risen for the first time in 15-years. Overall, four out of the six sectors were positive for the quarter.



 

The Trust was negative for the fourth quarter as the energy, interest rate and agriculture sectors suffered from strong and sudden reversals in trends. The energy sector was the Trust’s worst performer as energy prices retreated from record highs in the third quarter.  Not only did natural gas fall from record high levels set in September, but crude oil also fell from record highs set in August on signs that warmer than normal weather in the Northeastern region of the U.S. could reduce energy consumption.  The interest rate sector, which had been profiting from downward trending prices in the U.S., Europe and Japan, ended the quarter negative over fears of rising interest rates.  The sudden rally in Japanese and U.S. fixed-income markets was a result of Japanese Prime Minister Koizumi and other politicians stating that it was too early for the Bank of Japan to stop fighting deflation and a sudden optimism that inflation in the U.S. was contained as the Federal Reserve removed the term “accommodative” from its statement after raising rates at their December meeting. While the market reversals resulted in losses for both the interest rate and energy sectors for the quarter, the currency sector finished the quarter positive but only after losing most of the gains the sector achieved in October and November.  For the most of the quarter the currency sector profited, however, as expectations of further rate hikes from the Fed diminished, the sector gains were limited as the dollar suddenly weakened.  The metal sector benefited as gold reached an 18-year high and the prices of LME copper and LME aluminum rallied on increased demand and falling supplies. The agriculture sector was slightly negative for the quarter as N.Y. coffee and cotton were the main contributors to the underperformance in this sector. Overall, the combined gains in the currencies, indices and metals sectors were unable to offset the losses in the rest of the Trust’s sectors.

In conclusion, the Trust finished negative for the year as severe volatility hindered performance.  Although some markets did have definitive moves the severity of the sudden reversals that were experienced in many of the same markets hampered the Trust’s systematic trend following approach.

We thank you for your continued support.

Past performance is not indicative of future results.

 

Jeffrey R. Miceli

Chief Financial Officer

R. J. O’Brien Fund Management, Inc..

*** Please see section “General Information and Summary for explanation of Net Asset Value/unit pursuant to events of October, 2005.

 





 

 Report of Independent Registered Public Accounting Firm

The Board of Directors of Refco Commodity Management, Inc.and the Unitholders of JWH Global Trust:

We have audited the accompanying statement of financial condition of JWH Global Trust (the Trust) as of December 31, 2005 including the condensed schedule of investments as of December 31, 2005 and the related statement of operations and changes in unitholders’ capital for the year ended December 31, 2005. These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of JWH Global Trust as of December 31, 2005  and the results of its operations and changes in unitholders’ capital, for the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

/S/ CF & Co., L.L.P.

 

 

 

CF & CO., L.L.P.

 

Dallas, Texas

 November 7, 2006 except for Note (7) as to which the date is March 21, 2007.



 

Report of Independent Registered Public Accounting Firm

The Board of Directors of CIS Investments, Inc. and the Unitholders of JWH Global Trust:

We have audited the accompanying statement of financial condition of JWH Global Trust (the Trust) as of December 31, 2004 , including the condensed schedule of investments as of December 31, 2004 and the related statements of operations and changes in unitholders’ capital for each of the years in the two-year period ended December 31, 2004. These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of JWH Global Trust as of December 31, 2004  and the results of its operations and changes in unitholders’ capital, for each of the years in the two-year period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

Chicago, Illinois

March 9, 2005

 



JWH GLOBAL TRUST

Statements of Financial Condition

December 31, 2005 and 2004

 

Assets

 

2005

 

2004

 

Assets:

 

 

 

 

 

Equity in commodity trading accounts:

 

 

 

 

 

Cash on deposit with brokers

 

$

202,443,116

 

$

312,053,398

 

Unrealized gain on open contracts

 

2,590,858

 

22,802,365

 

Cash on deposit with former brokers, net of reserve of $39,580,944

 

16,963,262

 

—

 

Cash on deposit with bank

 

943,758

 

—

 

 

 

222,940,994

 

334,855,763

 

Receivable for units sold

 

—

 

7,210,442

 

Interest receivable

 

675,537

 

561,543

 

Total assets

 

$

223,616,531

 

$

342,627,748

 

Liabilities and Unitholders’ Capital

 

 

 

 

 

Liabilities:

 

 

 

 

 

Accrued commissions

 

$

1,563,331

 

$

1,667,412

 

Accrued management fees

 

338,586

 

558,459

 

Accrued incentive fees

 

—

 

4,531,999

 

Accrued offering expenses

 

3,482

 

136,802

 

Accrued operating expenses

 

348,965

 

90,000

 

Redemptions payable

 

4,723,667

 

3,602,667

 

Accrued legal fees - nontrading

 

116,991

 

—

 

Total liabilities

 

7,095,022

 

10,587,339

 

Unitholders’ capital (trading):

 

 

 

 

 

Beneficial owners (1,736,309 and 2,211,540 units outstanding at

 

 

 

 

 

December 31, 2005 and 2004, respectively)

 

196,142,238

 

328,509,395

 

Managing owner (24,017 and 23,773 units outstanding at

 

 

 

 

 

December 31, 2005 and 2004, respectively)

 

2,713,011

 

3,531,014

 

Unitholders’ capital (nontrading):

 

 

 

 

 

Beneficial owners (2,249,071 units outstanding at December 31, 2005)

 

17,478,064

 

—

 

Managing owner (24,217 units outstanding at December 31, 2005)

 

188,196

 

—

 

Total unitholders’ capital

 

216,521,509

 

332,040,409

 

Total liabilities and unitholders’ capital

 

$

223,616,531

 

$

342,627,748

 

 

See accompanying notes to financial statements.

F-1



JWH GLOBAL TRUST

Statements of Operations

Years ended December 31, 2005, 2004, and 2003

 

 

 

 

2005

 

2004

 

2003

 

Revenues (losses):

 

 

 

 

 

 

 

Gain (loss) on trading of commodity contracts:

 

 

 

 

 

 

 

Realized gain on closed positions

 

$

15,021,455

 

$

21,176,837

 

$

11,375,400

 

Change in unrealized gain (loss) on open positions

 

(20,211,508

)

12,110,774

 

4,341,361

 

Interest income

 

8,790,919

 

3,631,292

 

1,183,618

 

Foreign currency transaction gain (loss)

 

(31,403

)

(414,668

)

302,525

 

Total revenues

 

3,569,463

 

36,504,235

 

17,202,904

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Commission

 

16,578,015

 

15,407,292

 

7,634,418

 

Management fees

 

5,857,886

 

5,141,363

 

2,472,995

 

Incentive fees

 

133,027

 

5,419,877

 

2,344,357

 

Ongoing offering expenses

 

546,221

 

1,271,788

 

611,094

 

Other operating expenses

 

888,002

 

416,855

 

176,430

 

Total expenses

 

24,003,151

 

27,657,175

 

13,239,294

 

 

 

 

 

 

 

 

 

Nontrading net loss:

 

 

 

 

 

 

 

Loss on nontrading assets

 

(39,580,944

)

—

 

—

 

Legal fees

 

(297,002

)

—

 

—

 

Nontrading net loss:

 

(39,877,946

)

—

 

—

 

Net income (loss)

 

$

(60,311,634

)

$

8,847,060

 

$

3,963,610

 

 

 

 

 

 

 

 

 

Income (loss) per unit of beneficial ownership interest *

 

$

(27.81

)

$

(0.58

)

$

9.59

 

Income (loss) per unit of managing ownership interest *

 

$

(27.81

)

$

(0.58

)

$

9.59

 

*                    Represents the increase (decrease) in unit value during the year.

 

See accompanying notes to financial statements.

F-2



JWH GLOBAL TRUST

Statement of Changes in Unitholders’ Capital

Years ended December 31, 2005, 2004, and 2003

 

 

Beneficial
Owner Units
Trading

 

Managing
Owner
Units
Trading

 

Beneficial
Owner Units
Nontrading

 

Managing
Owner Units
Nontrading

 

Total

 

Beneficial
Owners
Trading

 

Managing
Owner
Trading

 

Beneficial
Owners
Nontrading

 

Managing
Owner
Nontrading

 

Total

 

Balances at December 31, 2002

 

453,878

 

5,755

 

—

 

—-

 

459,633

 

$

63,327,633

 

$

802,893

 

$

—

 

$

—

 

$

64,130,526

 

Net Income

 

 

 

 

 

 

 

 

 

0

 

3,900,071

 

63,539

 

 

 

 

 

3,963,610

 

Unitholders’ contribution

 

974,812

 

2,067

 

 

 

 

 

976,878

 

145,759,476

 

300,067

 

 

 

 

 

146,059,543

 

Unitholders’ redemptions

 

(47,581

)

(16

)

 

 

 

 

(47,597

)

(7,037,766

)

(2,613

)

 

 

 

 

(7,040,379

)

Balances as of December 31, 2003

 

1,381,109

 

7,806

 

—

 

—

 

1,388,914

 

$

205,949,414

 

$

1,163,886

 

$

—

 

$

—

 

$

207,113,300

 

Net Income

 

 

 

 

 

 

 

 

 

0

 

8,817,894

 

29,166

 

 

 

 

 

8,847,060

 

Unitholders’ contributions

 

1,035,357

 

16,064

 

 

 

 

 

1,051,421

 

141,451,430

 

2,350,103

 

 

 

 

 

143,801,533

 

Unitholders’ redemptions

 

(204,926

)

(97

)

 

 

 

 

(205,023

)

(27,709,343

)

(12,141

)

 

 

 

 

(27,721,484

)

Balances at December 31, 2004

 

2,211,540

 

23,773

 

—

 

—

 

2,235,312

 

$

328,509,395

 

$

3,531,014

 

$

—

 

$

—

 

$

332,040,409

 

Net loss

 

 

 

 

 

 

 

 

 

0

 

(20,191,944

)

(241,743

)

(39,453,131

)

(424,814

)

(60,311,634

)

Unitholders’ contributions

 

295,450

 

904

 

 

 

 

 

296,354

 

38,681,528

 

123,198

 

—

 

—

 

38,804,726

 

Unitholders’ reallocation

 

 

 

 

 

2,249,071

 

24,217

 

2,273,288

 

(56,931,195

)

(613,011

)

56,931,195

 

613,011

 

—

 

Unitholders’ redemptions

 

(770,681

)

(660

)

 

 

 

 

(771,341

)

(93,925,546

)

(86,447

)

—

 

—

 

(94,011,992

)

Balances at December 31, 2005

 

1,736,309

 

24,017

 

2,249,071

 

24,217

 

4,033,613

 

$

196,142,238

 

$

2,713,011

 

$

17,478,064

 

$

188,197

 

$

216,521,509

 

Net asset value per unit at December 31, 2005

 

 

 

 

 

 

 

 

 

 

 

$

112.96

 

$

112.96

 

$

7.77

 

$

7.77

 

$

120.73

 

Net asset value per unit at December 31, 2004

 

 

 

 

 

 

 

 

 

 

 

$

148.54

 

$

148.54

 

$

—

 

$

—

 

$

148.54

 

Net asset value per unit at December 31, 2003

 

 

 

 

 

 

 

 

 

 

 

$

149.12

 

$

149.12

 

$

—

 

$

—

 

$

149.12

 

 

See accompanying notes to the financial statements.

F-3



JWH GLOBAL TRUST

Condensed Schedule of Investments

December 31, 2005

 

 

 

Number of

 

Principal

 

Value/open

 

 

 

contracts

 

(notional)

 

trade equity

 

Long positions

 

 

 

 

 

 

 

Futures positions (2.5%)

 

 

 

 

 

 

 

Agriculture

 

560

 

$

7,111,667

 

$

1,211,972

 

Interest Rates

 

1,183

 

53,299,584

 

(77,250

)

Metals

 

1,723

 

92,446,095

 

8,283,119

 

Indices

 

326

 

42,909,706

 

1,408,235

 

Energy

 

196

 

26,835,120

 

(5,415,299

)

 

 

 

 

222,602,172

 

5,410,776

 

Forward positions (0.42%)

 

 

 

 

 

 

 

Currencies

 

28

 

413,711,125

 

910,781

 

 

 

 

 

 

 

 

 

Total long positions

 

 

 

$

636,313,297

 

$

6,321,557

 

 

 

 

 

 

 

 

 

Short positions

 

 

 

 

 

 

 

Futures positions (-2.58%)

 

 

 

 

 

 

 

Agriculture

 

826

 

$

15,796,669

 

$

(716,296

)

Interest Rates

 

4,475

 

932,659,568

 

(1,371,984

)

Metals

 

584

 

35,966,425

 

(3,806,813

)

Energy

 

768

 

36,784,731

 

315,722

 

 

 

 

 

1,021,207,393

 

(5,579,371

)

Forward positions (0.85%)

 

 

 

 

 

 

 

Currencies

 

16

 

177,861,577

 

1,848,673

 

 

 

 

 

 

 

 

 

Total short positions

 

 

 

$

1,199,068,970

 

$

(3,730,698

)

 

 

 

 

 

 

 

 

Total open contracts (1.2%)

 

 

 

 

 

$

2,590,858

 

Cash on deposit with brokers (93.5%)

 

 

 

 

 

202,443,116

 

Cash on deposit with former broker and bank (8.3%)

 

 

 

 

 

17,907,019

 

Other assets in excess of liabilities (-3.0%)

 

 

 

 

 

(6,419,484

)

Net assets (100.00%)

 

 

 

 

 

$

216,521,509

 

 

See accompanying notes to financial statements.

F-4



 

 

JWH GLOBAL TRUST

Condensed Schedule of Investments

December 31, 2004

 

 

 

Number of

 

Principal

 

Value/open

 

 

 

contracts

 

(notional)

 

trade equity

 

Long positions (9.33%)

 

 

 

 

 

 

 

Futures positions (0.91%)

 

 

 

 

 

 

 

Agriculture

 

722

 

$

12,859,932

 

$

1,790,266

 

Interest Rates

 

10,609

 

2,058,735,653

 

(1,432,741

)

Metals

 

1,349

 

66,175,745

 

1,447,713

 

Indices

 

2,156

 

85,811,001

 

1,227,940

 

 

 

 

 

2,223,582,331

 

3,033,178

 

Forward positions (8.42%)

 

 

 

 

 

 

 

Australian Dollar

 

2

 

26,414,568

 

1,087,522

 

Swiss Franc

 

3

 

215,310,191

 

4,189,581

 

European Euro

 

8

 

398,655,198

 

10,361,999

 

British Pound

 

9

 

338,854,550

 

735,062

 

Japanese Yen

 

4

 

429,442,381

 

11,591,154

 

 

 

 

 

1,408,676,888

 

27,965,318

 

 

 

 

 

 

 

 

 

Total long positions

 

 

 

$

3,632,259,219

 

$

30,998,496

 

 

 

 

 

 

 

 

 

Short positions (-2.46)

 

 

 

 

 

 

 

Futures positions (-.22%)

 

 

 

 

 

 

 

Agriculture

 

2,088

 

30,614,607

 

271,516

 

Energy

 

136

 

6,688,620

 

329,380

 

Interest Rates

 

1,364

 

328,860,400

 

(238,700

)

Metals

 

93

 

7,511,550

 

(668,700

)

Indices

 

68

 

7,621,154

 

(438,150

)

 

 

 

 

381,296,331

 

(744,654

)

 

 

 

 

 

 

 

 

Forward positions (-2.24%)

 

 

 

 

 

 

 

European Euro

 

2

 

70,576,894

 

(1,401,538

)

Japanese Yen

 

9

 

197,815,949

 

(3,952,838

)

Canadian Dollar

 

2

 

82,594,856

 

(2,097,101

)

 

 

 

 

350,987,699

 

(7,451,477

)

 

 

 

 

 

 

 

 

Total short positions

 

 

 

$

732,284,030

 

$

(8,196,131

)

 

 

 

 

 

 

 

 

Total open contracts (6.87%)

 

 

 

 

 

$

22,802,365

)

Cash on deposit with brokers (93.98%)

 

 

 

 

 

312,053,398

 

Other assets in excess of liabilities (-0.85%)

 

 

 

 

 

(2,815,354

)

Net assets (100.00%)

 

 

 

 

 

$

332,040,409

 

 

See accompanying notes to financial statements.

F-5



 

Notes to Financial Statements —

December 31, 2005, 2004, 2003

(1)     General Information and Summary

JWH Global Trust (the Trust), a Delaware statutory trust organized on November 12, 1996, was formed to engage in the speculative trading of 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 pursuant to the trading instructions of independent trading advisors. On August 31, 2005, Refco Group Ltd., LLC acquired the global brokerage operations of  Cargill Investor Services, Inc. (“CIS”).  CIS is the owner of CIS Investments, Inc. (“CISI”).  The Managing Owner of the Trust changed from CIS Investments Inc. to Refco Commodity Management, Inc (“RCMI”).  The clearing broker changed from CIS to Refco, LLC (Clearing Broker or Refco), an affiliate of RCMI.  The broker for forward contracts changed from CIS Financial Services, Inc. to Refco Capital Markets, Ltd. (Forwards Currency Broker or RCM), also an affiliate of RCMI.  The Clearing Broker and the Forwards Currency Broker collectively will be referred to as the Brokers.

Units of beneficial ownership of the Trust commenced selling on April 3, 1997 and trading began on June 2, 1997. The initial amount offered for investment was $50,000,000. On each of September 24, 1997, July 2, 2003 and on November 1, 2004, the Trust registered an additional $155,000,000, $300,000,000, and $500,000,000, respectively, for further investment and continued the offering. By December 31, 2005, a total of 3,597,413.53 units representing an investment for $464,343,620.43 of beneficial ownership interest had been sold in the combined offerings.  In addition, during the offerings, the Managing Owner purchased a total of 27,637.19 units, representing a total investment of $3,658,425.87.  Refer to the most current JWH Global Trust prospectus for further details of the offering.  Units are not currently being offered.

The Trust will be terminated on December 31, 2026, if none of the following occur prior to that date: (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) disassociation of the Managing Owner with the Trust; (3) bankruptcy of the Trust; (4), a decrease in the net asset value to less than $2,500,000; (5) a decline in the net asset value per unit to $50 or less; (6) dissolution of the Trust; or (7) any event that would make it unlawful for the existence of the Trust to be continued or require dissolution of the Trust.

On October 10, 2005, Refco, Inc., the ultimate parent of RCMI, announced that it had discovered through an internal review a receivable owed to Refco, Inc., by an entity controlled by Phillip R. Bennett, the then Chief Executive Officer and Chairman of the Board of Directors of Refco, Inc., in the amount of approximately $430 million.  Mr. Bennett has been charged with securities fraud in connection with this matter and various actions have been filed against Refco, Inc.  Thereafter, on October 13, 2005, Refco, Inc., announced that the liquidity within Refco Capital Markets, Ltd. (“RCM”) was no longer sufficient to continue operations, and that RCM had imposed a fifteen (15) day moratorium on all of its activities in an attempt to protect the value of that enterprise.

On October 17, 2005, Refco, Inc. and RCM filed for bankruptcy protection in the Southern District of New York.  Neither the Trust nor RCMI were covered by the filing.

Although the Trust’s assets were not held directly with Refco, Inc., an affiliated entity, Refco, did serve as the futures commission merchant.  Refco, LLC was not covered by the October 17, 2005 bankruptcy filing of Refco, Inc. but filed its own bankruptcy petition on November 25, 2005. In addition, a portion of the Trust’s assets (less than 20%, based net assets as of October 13, 2005) was on deposit with RCM at the time of the bankruptcy filing, exposing a number of the Trust’s foreign currency contracts and cash held at RCM to the risk of non-return of these assets.  While RCM has unwound any outstanding foreign currency contracts, the Trust does not expect that in the near future it will be able to access those assets or that its rights and/or claims in connection with RCM’s bankruptcy will be fully resolved.  .

In light of the events outlined herein, RCMI, managing owner of the Trust, moved the majority of the Trust’s assets from Refco to Lehman Brothers, Inc. and its affiliated entities (“Lehman”) to act in the capacity of clearing broker.  On or about October 18, 2005, the Trust had transferred the majority of all assets to Lehman.  Pending the resolution of the Trust’s rights and/or claims against RCM, the Trust will no longer have assets on deposit with RCM.

RCMI does not believe that the bankruptcy filings of Refco, Inc. and RCM will have a material impact upon the operations of the Trust or its ability to satisfy a request for redemption. In this regard,  the operations of the Trust,

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including the trading activities of the underlying asset manager, have continued with minimal interruption.  In particular, with respect to redemptions made as of October 31, 2005 and thereafter, the Trust has made payment in an amount that represented the proportionate share of the Trust’s net assets that are held at Lehman, while reserving payment with respect to the Trust’s assets currently held at RCM, plus a cash reserve in connection with expenses in pursuit its rights and/or claims against RCM and other potential third parties.  As such, the Trust has reserved payment with respect to approximately 18.2%  — 25% of any redemption proceeds until these monies held at RCM are remitted to the Trust or the Trust’s rights and/or claims against RCM and/or such potential third parties are resolved.

Generally, investors in the Trust may redeem units effective as of the last trading day of any month of the Trust based on the Net Asset Value per unit on such date with five business day’s prior written notice to the Managing Owner. Effective October 31, 2005, the Net Asset Value per unit was split into a ‘Trading account” and a “Non-Trading” account, the latter representing the assets held at RCMI plus $1,000,000 in cash in connection with expenses related to the collection of assets held at RCM and potential third party claims. On October 31, 2005, $57,544,206 of equity and 2,273,288.15 in substitute units were transferred to the Non-Trading account. The October 31, 2005 Net Asset Value was $139.11/unit. $113.80/unit (or 81.8% of total) was the amount in the Trading account and was redeemable. $25.31/unit (or 18.2% of total) was the amount in the Non-Trading account  All unitholders of record October 1, 2005 reatin their pro-rata right to the assets in the Non-Trading account with the equivalent number of units held in the Trust prior to RCM bankruptcy.  

(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 general practices in the commodities industry. The following is a description of the more significant of those policies that the Trust follows in preparing its financial statements.

(a)                      Revenue Recognition

Commodity futures contracts, forward contracts, physical commodities, and related options are recorded on the trade date. All such transactions are recorded on the identified cost basis and marked to market daily. Unrealized gains on open contracts reflected in the statements of financial condition represent the difference between original contract amount and market 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 year or as of the last date of the financial statements.

The Trust earned interest on its assets on deposit at the brokers at 100% of the 91-day Treasury bill rate for ervices, Inc. deposits denominated in U.S. dollars, and at the rates agreed between the Trust and CIS and CIS Financial Services for deposits denominated in other currencies. Assets at Lehman Brothers earn 75% of 91—day Treasury bill rate. For deposits denominated in other currencies, the Trust earns interest on Eurodollars, British pound sterling, and Swiss francs at a rate equal to Lehman Clearing House (“LCH”) less 25 basis points.  Deposits denominated in Japanese Yen earn 100% of LCH and Australian dollars earn interest at a rate of Sydney Futures Exchange Clearing House (‘SFECH”) less 125 basis points.

(b)               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 trading day of any month of the Trust based on the Net Asset Value per unit on such date on five days written notice to the Managing Owner. Payment will be made within ten business days of the effective date of the redemption. Any redemption made during the first eleven months of investment is subject to a 3% redemption penalty. Any redemption made in the twelfth month of investment or later will not be subject to any penalty. The Trust’s Sixth Amended and Restated Declaration and Agreement of Trust contains a full description of redemption and distribution policies. Investors who redeemed on or after October 31, 2005 will receive the Net Asset Value per unit represented by assets held in the trading account.

(c)                       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 expensed as incurred. Ongoing offering costs have not been incurred nor paid for the last quarter of 2005.

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(d)                      Commissions

Commodity brokerage commissions are typically paid for each trade transacted and are referred to as “round-turn commissions”. These commissions cover both the initial purchase (or sale) and the subsequent offsetting sale (or purchase) of a commodity futures contract. The Trust does not pay commodity brokerage commissions on a per-trade basis, but rather pays monthly flat-rate brokerage Fees. Effective July 1, 2003, the clearing broker lowered this fee from the annual rate of 6.5% (or approximately 0.542% per month) to 6.0% (or 0.50% per month) of the Trust’s month-end assets after reduction of the Management Fee. The clearing brokers receive these brokerage fees irrespective of the number of trades executed on the Trust’s behalf. The amount paid to the clearing broker is reduced by exchange fees paid by the Trust. The round-turn equivalent rate for commissions paid by the Trust for the years ended December 31, 2005, 2004, and 2003 was $27, $39, and  $38, respectively.

Certain large investors are eligible for a “Special Brokerage Fee Rate” of 4.5% per year. As of December 31, 2005, there were no such eligible investors in the Trust.

The Managing Owner, and/or, affiliates, acts as commodity brokers for the Trust. As such, the Managing Owner and affiliates receive all commossions that are reflected as such in the financial statements.

(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. Translation of foreign currencies into U.S. dollars for closed positions are translated 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 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.

Assets held by the Fund at RCM are reported at fair value as determined in good faith by the Managing Owner after consideration of all factors, data and information, including information from financial institutions with no affiliation to RCM, analysis of the current market which has developed to purchase RCM creditor claims, the current demand and willingness of third parties to purchase RCM claims and financial information received by the Managing Owner from RCM. The value assigned to this asset is based upon available information and does not necessarily represent amounts which might ultimately be realized. Furthermore, this value assumes that the Managing Owner would recommend selling these claims to a third party as opposed to holding RCM assets until the RCM estate makes a distribution to RCM customers and creditors which may or may not be the case. Because of the inherent uncertainty of valuation due to the inability to estimate recoverable RCM assets necessary to remit payment to customers and creditors as well as the uncertainty as the standing of the Fund vis-a vis other customers / creditors, the estimated fair value could be significantly higher or lower than the fair value assigned by the Investment Manager. Based upon this fair value methodology, the assets held by the Fund at RCM had a total value of $16,963,261.62 or 30 % of the net asset value at December 31, 2005.

(3)                     Fees

Management fees are accrued and paid monthly. Incentive fees are accrued monthly and paid quarterly. Trading decisions for the period of these financial statements were made by John W. Henry & Company, Inc. (JWH) utilizing four of its trading programs,  JWH GlobalAnalytics®, the Financial and Metals Portfolio, the International Foreign Exchange program and the Global Financial & Energy program.

Under signed agreement JWH receives a monthly management fee at the rate of 0.167% (a 2% annual rate) of the Trust’s month-end net assets calculated after deduction of a portion of the Brokerage Fee at an annual rate of

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1.25% of month-end Trust net assets, but before reduction for any incentive fee or other costs and before inclusion of purchases and redemptions for the month.

Also, under signed agreement the Trust pays to JWH a quarterly incentive fee equal to 20% of the new trading profits, if any, of the Trust. The incentive fee is based on the overall performance of the Trust, not individually in respect of the performance of the individual programs utilized by the Trust. This fee is also calculated by deducting a portion of the Brokerage Fees at an annual rate of 1.25%.

 Given the uncertainty of the outcome of RCM Bankruptcy case, for the month of October 2005, JWH management fees and selling commissions paid to brokers were charged to the Trust at 70% of the assets held at RCM. The Managing Owner, RCMI paid JWH and the brokers the difference in fees based on the other 30% of the assets held at RCM.

(4)                     Income Taxes

No provision for Federal income taxes has been made in the accompanying financial statements as each beneficial owner is responsible for reporting income (loss) based on the pro rata share of the profits or losses of the Trust. Generally, for both federal and state tax purposes, trusts, such as the JWH Global Trust, are treated as partnerships.

(5)                     Trading Activities and Related Risks

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

The purchase and sale of futures requires margin deposits with a Futures Commission Merchant (FCM). Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act (CEAct) requires an FCM to segregate 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 pro rata share of segregated funds available. It is possible that the recovered amount could be less than the total of cash and other property deposited.

The Trust has cash on deposit with an affiliate interbank market maker 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 Trust is exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.

Net trading results from derivatives for the years ended December 31, 2005, 2004, and 2003, are reflected in the statements of operations and equal gain from trading less brokerage commissions. Such trading results reflect the net gain arising from the Trust’s speculative trading of futures contracts and forward contracts.

The notional amounts of open contracts at December 31, 2005, as disclosed in the Condensed Schedule of Investments, do not represent the Trust’s risk of loss due to market and credit risk, but rather represent the Trust’s extent of involvement in derivatives at the date of the statement of financial condition.

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

(6)     Financial Highlights

The following financial highlights show the Trust’s financial performance for the period ended December 31, 2005. Total return is calculated as the change in a theoretical beneficial owner’s investment over the entire period — a percentage change in the net asset value from December 31, 2004 to December 31, 2005. Total return is calculated based on the aggregate return of the Trust taken as a whole.

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2005

 

2004

 

2003

 

 

 

 

 

 

 

 

 

Net Asset Value per unit at beginning of year

 

$

148.54

 

149.12

 

139.53

 

Loss per unit

 

(27.81

)

(0.58

)

9.59

 

Net Asset Value per unit at end of year

 

$

120.73

 

148.54

 

149.12

 

 

 

 

 

 

 

 

 

Total return:

 

 

 

 

 

 

 

Total return before incentive fee

 

(18.68

)%

1.44

%

9.57

%

Less incentive fee allocation

 

0.04

%

1.83

%

2.70

%

Total return

 

(18.72

)%

(0.39

)%

6.87

%

 

 

 

 

 

 

 

 

Ratios to average net assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income:

 

(20.79

)%

3.41

%

3.09

%

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Expenses less incentive fees

 

21.97

%

8.56

%

8.53

%

Incentive fees

 

0.05

%

2.09

%

1.83

%

Total expenses

 

22.02

%

10.65

%

10.36

%

 

The net income and expense ratios are computed based upon the weighted average net assets for the Trust for the period ended December 31, 2005, 2004 and 2003.

(7) Subsequent  events

On October 12, 2006, RCMI, R.J. O’Brien & Associates, Inc. (“RJO”), and RJO’s acquisition subsidiary, R.J. O’Brien Fund Management, Inc. (“RJOFM”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) that provides for, among other things, RJOFM to purchase RCMI’s managing owner interest in the Trust. The Asset Purchase Agreement also provided for RCMI to commence a proceeding under chapter 11 of the Bankruptcy Code and to obtain the Bankruptcy Court’s approval of the Asset Purchase Agreement and the transactions set forth therein.

RCMI filed a voluntary petition (the “RCMI Bankruptcy Petition”) in the United States Bankruptcy Court for the Southern District of New York on October 16, 2006, for relief under chapter 11 of title 11 of the United States Code. Contemporaneously with the filing of the RCMI Bankruptcy Petition, RCMI filed, a motion requesting that the Bankruptcy Court authorize RCMI to sell and assign substantially all of its assets, including its interest as managing owner of the Trust, pursuant to the terms of the Asset Purchase Agreement.  Pursuant to the terms of the Asset Purchase Agreement, as of October 13, 2006, all clearing functions have been moved from Lehman to RJO.  Additionally, RJOFM is the managing owner of the Trust.

On December 29, 2006 the Trust received a partial recovery from RCM  in the amount of $10,319,317.48.  Unitholders who have not redeemed trading assets will be issued additional units in the Trust as of December 31, 2006.  Unitholders who redeem or who have redeemed will be paid their portion of the proceeds.

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As of January 1, 2007, a special circumstances limited liability company was established to pursue additional claims against RCM.  Any funds obtained by the special circumstances limited liability company will be distributed to investors in the Trust prior to the bankruptcy of RCM and Refco, Inc.  Units are not currently being offered in the Trust.

Acknowledgment

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

 

By:

/s/ Jeffrey R. Miceli

 

 

Jeffrey R. Miceli

 

Chief Financial Officer

 

R. J. O’Brien Fund Management, Inc

 

The Managing Owner and Commodity Pool Operator of

 

JWH Global Trust

 

 

 

 

 

 

 

 

 

 

 

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