EX-13.01 2 v337324_ex13-01.htm EXHIBIT 13.01

 

Exhibit 13.01

 

Message from the Managing Owner

 

Dear Unitholder:

 

The RJO Global Trust Class A units posted a loss of (15.77%) for 2012, Class B units posted a loss of (14.06%). The NAV per unit for Class A at year-end was $76.92 and for Class B at year end was $83.34 (please see Note (1) and Note (9) in the notes to financial statements for more information with respect to the calculation of Net Asset Value) compared to $91.32 per Class A unit at the beginning of the year and $96.98 per unit for Class B. Beneficial Owners purchased $137,436 worth of Class A units and $4,404 worth of Class B units were transferred from Class A units in the Trust during 2012.

 

With short-term interest rates at or near zero and no implosion in the European debt saga, the stock market continued to drift higher with little resistance during January. Bonds were choppy but only slightly lower on the month as interest rates inched higher. Commodities were higher as a sector thanks to strength in crude oil, cattle, and soybean markets. Gold, corn, and natural gas markets were a drag on the sector finishing flat to lower on the month. In February, the stock market moved ahead on light volume during the month and posted its best February since 1997. Bonds and commodities also posted small gains to start the year. The managed futures industry continues to struggle. A violent reversal by grains, bonds, and some metals caused losses during the month. The Barclay Top 50 which is representative of all managed futures strategies and over 50% of the industry’s assets finished 2012 with its worst 36 month performance period since the index began in 1987. Erratic volatility, fluctuating volume, and government intervention in Europe, Asia, the U.S., and China have been blamed by traders for the difficult environment. The index finds itself two standard deviations from its positive historical average annual return. Some would argue that the U.S. Federal Reserve is already in the middle of its third round of quantitative easing. With short term interest rates continuing at or near zero and no further shocks in the European debt saga, the stock market continued a climb higher during March and posted its best first quarter in 14 years. Bonds were lower posting their worst quarter in two years. The commodity sector was lower on the month due to weakness in the energy, base metals, meats, and corn markets.

 

Stocks and commodities drifted lower during the month of April. Bonds rallied a bit leaving the 10-Year U.S. Treasury in positive territory for the year with a yield of 1.93%. Spain has now taken center stage in the European debt drama. Spain’s debt was downgraded as the country posted an unemployment rate of 24%, its worst in over 30 years. Domestically, concern is building over the slowing rate of growth in our economic recovery. The Fed has signaled that it is content with its current monetary policy and does not envision another round of quantitative easing to stimulate the economy. Volatility indicators remain on the low side of their “normal” range which is interesting given the potential for market problems building around the world. The Barclay Top 50, which is representative of all managed futures strategies and over 50% of the industry’s assets, was flat for the month and remains in negative territory for the year. The last 36 months for the managed futures index are among its worst ever. Many trend following strategies posted disappointing results during the month. Some short-term managers and counter trend strategies were modestly successful during the month. Stocks and commodities suffered through a very difficult month of May. Europe was again the catalyst for most of the concerns. Greece is on the brink of falling out of the Euro zone. A June 17th election holds little hope of electing a government with the resolve to take the disciplined action needed to correct the situation. In the meantime, market focus has sharpened with respect to Spain. As a result, the EAFE Index was down over 12% for the month. The S&P 500 lost 6%. The Dow Jones UBS Commodity Index lost over 9%, while cotton lost 20%, crude oil lost 18%, corn lost 12%, copper lost 12%, and gold lost 6%. In the midst of this chaos, the yield on the US Ten-Year Treasury reached a new all time low of just under 1.5%. Obviously, this has become a fearsome environment for global investors. For the first time since 2008, every one of the Trust’s managers and every sector traded were positive for the month. Trend following strategies led the way after dragging the portfolio down over the last several months. Long positions at the end of April in currencies and energy markets were reversed and traders were able to capture the moves down in those markets. Stocks and commodities rebounded during the latter part of June. The Greeks elected a new government which pledged to work with other European countries to implement austerity measure to cut debt and bring finances under control. At a summit of European leaders on the 29th of June, an agreement was made to support the banks and economies of Spain, Italy, and Portugal. All of this will be done with more debt which hardly seems a long term solution. The European agreement triggered a rally in stocks, commodities, and currencies. On the last trading day of June the Euro rallied 3%, crude oil gained 9%, and stocks surged 2.5%. That was the strongest day for the Euro and crude in almost 3 years. The U.S. 10 Year Treasury note finished the month at a yield of 1.58%. The yield hovers near its post war low of 1.49% which was touched during the first week of June as the U.S. continues to serve as a relative safe haven during these times of uncertainty.

 

37
 

 

Stocks, bonds, and commodity sectors each posted positive results during July. The U.S.10-Year Treasury posted a new record low yield during the latter part of the month at 1.38% as the U.S.continues to serve as a relative safe haven during these times of uncertainty. Five European countries have registered negative yields for their short to medium- term treasury securities. This would have been an unimaginable situation just a few years ago. Investors actually buy these securities certain that they will lose a certain amount of their principal at maturity. European governments and central banks have pledged to stay together and to do anything it takes to turn their collective economies around. Markets in general took this as good news but it remains to be seen if investors have confidence in governments to take the action needed that would truly make a difference in the long run. Stocks and commodity sectors crawled higher in August. Stocks rose a little over 2%. The S&P 500 has gained over 13% for the year to date. After climbing for the last 3 years, the S&P rests approximately 10% below its October 2007 peak. Oil has regained its losses from May and June and now trades in the mid-to-upper $90 per barrel range. The drought across the mid section of the U.S. has driven corn and soybean prices higher. Interest rates remain in a narrow trading range near historical lows. Stock and commodity sectors climbed higher in September. Stocks rose a little over 2.5% and the S&P 500 has now gained almost 16.5% for the year to date. The market has benefited from a Federal Reserve Bank dedicated to supporting a timid economic recovery at all costs. After climbing for the last 3 years, the S&P rests approximately 9% below its October 2007 peak. Oil touched a price of $100 dollars per barrel but immediately sold off $10 dollars and now trades in a range based in the low $90’s. The drought across the mid section of the U.S. has dramatically damaged corn and soybean crops. Prices remain at high levels as we approach the harvest season. Doubts about crop yields have kept volatility unusually high as well. Interest rates rose during the middle of the month but pressure subsided after weaker than expected economic news was revealed. Interest rates remain in a narrow trading range near historical lows.

 

Hurricane Sandy became the story at month-end October. Many markets were closed and others were very lethargic while the world watched the giant storm cripple New York City and the Northeastern seaboard of the United States. Commodities, stocks, and bonds all registered losses during the month. The markets also appeared to be stuck in gridlock as polls showed the U.S. Presidential race to be a “too close to call” proposition. There is too much economic and political pressure built up in the U.S., Europe, and Asia for the markets to tread water much longer. We look for capital flows to be much more pronounced following the election. With the Presidential election come and gone, we are staring at a fiscal cliff. Since late 2008 and early 2009, it seems that the market has been searching for and finding the next possible financial or political meltdown to fret over. With tension in the Middle East, economic problems and disagreement among members of the European community, and our own budget arguments, there has been no shortage of news to create a background of uncertainty for the various markets traded by the advisors in the Trust. Commodities, stocks, and bonds all registered small gains during November but volatility remains low. Volatility, however, has become more erratic in recent years. In other words, the volatility surrounding the markets has the ability to change very quickly. A higher volatility environment would be a welcome change for our advisors. Governments around the world have interfered dramatically with market activity during the last few years. This interference has suppressed market volatility and put off the ultimate response to ballooning global debt problems. It should have come as no surprise that the U.S. government allowed the “fiscal cliff” drama to hang over the market until the last day of 2012. Our leaders could not come to a constructive agreement on how to address the budget deficit or our country’s debt, so they compromised on tax increases and put off more difficult decisions on spending cuts. Stocks responded favorably gaining 1% in December and 16% for 2012. U.S. 10-year notes lost for the month but posted a 4.2% gain for 2012. The Dow Jones UBS commodity index was slightly negative for 2012 while the U.S. Dollar Index was virtually unchanged for the year.

 

We thank you for your continued support.

 

Past performance is not indicative of future results.

 

/s/ Jason T. Manumaleuna  
Jason T. Manumaleuna
Chief Financial Officer
R.J. O’Brien Fund Management, LLC

 

38
 

 

RJO GLOBAL TRUST

 

Table of Contents

 

Report of Independent Registered Public Accounting Firm – CF & Co., L.L.P. 40
   
Financial Statements:  
   
Consolidated Statements of Financial Condition as of December 31, 2012 and 2011 41
   
Condensed Consolidated Schedules of Investments as of December 31, 2012 and 2011 42
   
Consolidated Statements of Operations, for the years ended December 31, 2012, 2011, and 2010 43
   
Consolidated Statement of Changes in Unitholders’ Capital, for the years ended December 31, 2012, 2011, and 2010 44
   
Notes to Consolidated Financial Statements 45

 

39
 

 

  

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  

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

 

We have audited the accompanying consolidated statements of financial condition, including the condensed consolidated schedules of investments, of RJO Global Trust and Subsidiary (the “Trust”) as of December 31, 2012 and 2011 and the related consolidated statements of operations and changes in unitholders’ capital for each of the three years in the period ended December 31, 2012. 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. The Trust is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of RJO Global Trust and Subsidiary as of December 31, 2012 and 2011 and the results of their operations and changes in unitholders’ capital, for each of the three years in the period ended December 31, 2012, 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
 
March 22, 2013

 

 

 

40
 

 

RJO GLOBAL TRUST AND SUBSIDIARY

Consolidated Statements of Financial Condition

 

   December 31,   December 31, 
   2012   2011 
Assets          
           
Assets:          
Equity in commodity Trading accounts:          
Cash on deposit with broker  $2,216,652   $2,670,744 
Unrealized gain on open contracts   260,744    363,947 
Purchased options on futures contracts (premiums paid $753,417 and $33,376 respectively)   728,440    22,525 
Total due from broker   3,205,836    3,057,216 
Cash and cash equivalents on deposit with affiliate   8,659,507    9,596,823 
Cash on deposit with bank   696,111    648 
Fixed income securities (cost of $11,005,602 and $21,993,704, respectively), held by affiliate   11,003,681    21,870,890 
Interest receivable   9,207    123,363 
Cash on deposit with bank - Non-Trading   1,364,487    1,647,219 
Prepaid expenses - Non-Trading   76,392    95,825 
Total Assets  $25,015,221   $36,391,984 
           
Liabilities and Unitholders' Capital          
           
Liabilities:          
Equity in commodity Trading accounts:          
Options written on futures contracts (premiums received $978,634 and $14,375, respectively)  $884,242   $1,006 
           
Accrued commissions   54,558    111,034 
Accrued management fees   37,239    48,884 
Accrued operating expenses   209,592    217,118 
Redemptions payable-Trading   565,316    493,332 
Accrued legal fees- Non-Trading   2,364    500 
Accrued management fees to U.S. Bank-Non-Trading   10,418    31,715 
Distribution payable - Non-Trading   1,034    536,188 
Total liabilities   1,764,763    1,439,777 
           
Unitholders' capital:          
Unitholders' capital (Trading):          
Beneficial owners          
Class A (274,403 and 355,858 units outstanding at December 31, 2012 and December 31, 2011, respectively)   21,106,894    32,497,392 
Class B (8,103 and 12,697 units outstanding at December 31, 2012 and December 31, 2011, respectively)   675,323    1,231,294 
Managing owner (535 Class A units outstanding at December 31, 2012 and December 31, 2011, respectively)   41,153    48,857 
           
Unitholders' capital (LLC equity/Non-Trading):          
Participating owners (237,663 and 306,807 units outstanding at December 30, 2012 and December 31, 2011, respectively)   149,728    158,535 
Nonparticipating owners (2,035,625 and 1,966,481 units outstanding at December 30, 2012 and December 31, 2011, respectively)   1,277,360    1,016,129 
           
Total unitholders' capital   23,250,458    34,952,207 
           
Total Liabilities and Unitholders' Capital  $25,015,221   $36,391,984 
           
Net asset value per unit:          
Trading:          
Class A  $76.92   $91.32 
Class B  $83.34   $96.98 
LLC equity/Non-Trading  $0.63   $0.52 

 

See accompanying notes to consolidated financial statements.

  

41
 

 

RJO GLOBAL TRUST AND SUBSIDIARY

Condensed Consolidated Schedules of Investments

 

   December 31, 2012   December 31, 2011 
   Percentage of       Percentage of     
   Net Assets   Fair value   Net Assets   Fair value 
             
Long Positions                    
Fixed Income Securities                    
                     
Commercial Paper                    
South Korea                    
Financials (cost $999,316)   4.30%  $999,316    -   $- 
Australia                    
Financials (cost $999,542)   4.30%   999,542    -    - 
Chile                    
Financials (cost $999,222)   4.30%   999,222    -    - 
United States                    
Energy (cost $1,242,569)   -    -    3.56%   1,242,938 
Financials (cost $999,611 and $1,896,629, respectively)   4.30%   999,611    5.44%   1,899,873 
Total Commercial Paper   17.20%   3,997,691    9.00%   3,142,811 
                     
Corporate Bonds                    
United States                    
Financials (cost $6,822,060)   -    -    19.22%   6,717,547 
Australia                    
Financials (cost $1,504,227)   6.45%   1,500,105    -    - 
Great Britain                    
Energy (cost $1,527,135)   -    -    4.31%   1,506,885 
Total Corporate Bonds   6.45%   1,500,105    23.53%   8,224,432 
                     
Government Agencies                    
United States                    
US Government Agency (cost $5,500,084 and $10,499,879, respectively)   23.67%   5,502,285    30.04%   10,498,215 
                     
Short-Term Investment Funds                    
United States                    
Short-Term Investment Funds (cost $3,600 and $5,432, respectively)   0.02%   3,600    0.02%   5,432 
                     
Total Fixed Income Securities (cost $11,005,602 and $21,993,704, respectively)       $11,003,681        $21,870,890 
                     
Long Positions                    
Futures Positions                    
Agriculture   -1.04%  $(241,904)   0.01%  $3,573 
Currency   0.12%   28,665    0.03%   9,244 
Energy   0.33%   77,294    -0.34%   (119,410)
Indices   0.22%   50,444    0.05%   17,851 
Interest Rate   0.08%   19,455    0.40%   139,768 
Metals   0.08%   18,129    -0.23%   (80,138)
Forward Positions                    
Currency   -    -    -0.99%   (344,428)
                     
Total long positions on open contracts       $(47,917)       $(373,540)
                     
Short Positions                    
Futures Positions                    
Agriculture   1.39%  $324,276    0.02%  $6,835 
Currency   0.20%   47,442    -0.02%   (5,365)
Energy   -0.22%   (51,455)   0.64%   225,038 
Indices   -0.05%   (11,941)   -0.13%   (47,027)
Interest Rate   0.03%   7,003    -0.03%   (10,045)
Metals   -0.03%   (6,664)   0.21%   72,320 
Forward Positions                    
Currency   -    -    1.42%   495,731 
                     
Total short positions on open contracts       $308,661        $737,487 
                     
Total unrealized gain on open contracts       $260,744        $363,947 
                     
Long put options on future contracts                    
Agriculture (premiums paid - $437,577)   2.59%  $601,497    -    - 
Currency (premiums paid - $33,376)        -    0.06%   22,525 
Total long put options on futures contracts       $601,497        $22,525 
                     
Short put options on future contracts                    
Agriculture (premiums received -  $106,627)   -0.44%  $(102,345)   -   $- 
Currency (premiums received -  $73,421)   -0.41%   (95,775)   -    - 
Energy (premiums received -  $87,040)   -0.46%   (106,850)   -    - 
Indices  (premiums received - $39,900 and $14,375, respectively)   -0.09%   (21,850)   0.00%   (1,006)
Interest (premiums received -  $29,469)   -0.07%   (16,656)   -    - 
Metals (premiums received -  $6,300)   -0.02%   (4,550)   -    - 
                     
Total short put options on futures contracts       $(348,026)       $(1,006)
                     
Long call options on future contracts                    
Agriculture(premiums paid - $237,430)   0.46%  $107,423    -   $- 
Energy(premiums paid - $78,410)   0.08%   19,520    -    - 
Total long call options on futures contracts       $126,943        $- 
                     
Short call options on future contracts                    
Agriculture (premiums received -  $460,664)   -1.64%  $(380,603)   -   $- 
Currency (premiums received -  $83,423)   -0.31%   (71,913)   -    - 
Energy (premiums received -  $68,200)   -0.28%   (64,840)   -    - 
Indices (premiums received -  $16,800)   -0.05%   (12,000)   -    - 
Metals (premiums received -  $6,790)   -0.03%   (6,860)   -    - 
Total short call options on futures contracts       $(536,216)       $- 

 

See accompanying notes to consolidated financial statements.

 

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RJO GLOBAL TRUST AND SUBSIDIARY

Consolidated Statements of Operations

 

   Year Ended December 31, 
   2012   2011   2010 
             
Trading gain (loss):               
Gain (loss) on trading of commodity contracts:               
Realized gain (loss) on closed positions  $(2,335,648)  $353,195   $3,040,780 
Change in unrealized gain (loss) on open positions   (36,306)   (865,419)   464,878 
Foreign currency transaction gain (loss)   (27,149)   167,482    (39,241)
Total Trading gain (loss)   (2,399,103)   (344,742)   3,466,417 
                
Net investment income (loss):               
Interest income   207,562    292,141    69,977 
Realized gain (loss) on fixed income securities   (202,071)   (98,217)   - 
Change in unrealized gain (loss) on fixed income securities   126,325    (106,156)   (3,852)
Total net investment gain (loss)   131,816    87,768    66,125 
                
Expenses:               
Commissions - Class A   1,277,188    2,004,324    2,322,754 
Commissions - Class B   26,844    39,950    17,806 
Advisory fees paid to affiliate   51,521    62,625    13,087 
Management fees   481,644    705,342    930,774 
Incentive fees   29,872    155,519    278,042 
Ongoing offering expenses   37,640    114,267    135,000 
Operating expenses   566,360    848,733    936,000 
Total expenses   2,471,069    3,930,760    4,633,463 
                
Trading income (loss)   (4,738,356)   (4,187,734)   (1,100,921)
                
Non-Trading income (loss):               
Interest on Non-Trading reserve   315    2,927    8,774 
Collections in excess of impaired value   699,783    1,672,496    16,870,555 
Legal and administrative fees   (155,913)   (130,495)   (1,005,791)
Management fees paid to US Bank   (290,228)   (233,247)   (323,834)
Non-Trading income (loss)   253,957    1,311,681    15,549,704 
                
Net income (loss)  $(4,484,399)  $(2,876,053)  $14,448,783 

 

See accompanying notes to consolidated financial statements.

 

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RJO GLOBAL TRUST AND SUBSIDIARY

Consolidated Statement of Changes in Unitholders’ Capital

For the years ended December 31, 2012, 2011 and 2010

 

Unitholders' Capital (Trading)  Beneficial Owners - Trading Class A   Beneficial Owners - Trading Class B   Managing Owners - Trading Class A 
   Units   Dollars   Units   Dollars   Units   Dollars 
Balances at December 31, 2009   551,440   $56,711,089    9,358   $981,765    11,679   $1,201,090 
Trading income (loss)   -    (1,087,408)   -    12,220    -    (25,733)
Unitholders' contributions   54,776    5,337,442    6,432    658,669    -    - 
Transfers from Class A to Class B   (649)   (65,443)   633    65,443    -    - 
Unitholders' redemptions   (115,289)   (11,554,858)   (3,003)   (312,405)   -    - 
Balances at December 31, 2010   490,278    49,340,822    13,420    1,405,692    11,679    1,175,357 
Trading income (loss)   -    (3,983,977)   -    (104,084)   -    (99,673)
Unitholders' contributions   10,039    943,530    2,169    219,959    -    - 
Unitholders redemptions   (144,459)   (13,802,983)   (2,892)   (290,273)   (11,144)   (1,026,827)
Balances at December 31, 2011   355,858    32,497,392    12,697    1,231,294    535    48,857 
Trading income (loss)   -    (4,583,761)   -    (146,891)   -    (7,704)
Unitholders' contributions   1,574    137,436    -    -    -    - 
Transfers from Class A to Class B   (52)   (4,404)   49    4,404    -    - 
Unitholders' redemptions   (82,977)   (6,939,769)   (4,643)   (413,484)   -    - 
Balances at December 31, 2012   274,403   $21,106,894    8,103   $675,323    535   $41,153 

 

Unitholders' Capital (Trading)  Total Unitholders' Capital - Trading 
   Units   Dollars 
Balances at December 31, 2009   572,477   $58,893,944 
Trading income (loss)   -    (1,100,921)
Unitholders' contributions   61,208    5,996,111 
Transfers from Class A to Class B   (16)   - 
Unitholders' redemptions   (118,292)   (11,867,263)
Balances at December 31, 2010   515,377    51,921,871 
Trading income (loss)   -    (4,187,734)
Unitholders' contributions   12,208    1,163,489 
Unitholders' redemptions   (158,495)   (15,120,083)
Balances at December 31, 2011   369,090    33,777,543 
Trading income (loss)   -    (4,738,356)
Unitholders' contributions   1,574    137,436 
Transfers from Class A to Class B   (3)   - 
Unitholders' redemptions   (87,620)   (7,353,253)
Balances at December 31, 2012   283,041   $21,823,370 
           

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, 2009   512,964   $1,933,873    1,760,324   $6,635,368    2,273,288   $8,569,241 
Non-Trading income (loss)   -    3,236,859    -    12,312,845    -    15,549,704 
Reallocation due to Redemptions   (105,501)   (504,417)   105,501    504,417    -    - 
Unitholders' distribution   -    (3,928,806)   -    (16,076,112)   -    (20,004,918)
Balances at December 31, 2010   407,463    737,509    1,865,825    3,376,518    2,273,288    4,114,027 
Non-Trading income (loss)   -    148,123    -    1,163,558    -    1,311,681 
Reallocation due to Redemptions   (100,656)   (165,608)   100,656    165,608    -    - 
Unitholders' distribution   -    (561,489)   -    (3,689,555)   -    (4,251,044)
Balances at December 31, 2011   306,807    158,535    1,966,481    1,016,129    2,273,288    1,174,664 
Non-Trading income (loss)   -    23,115    -    230,842    -    253,957 
Reallocation due to Redemptions   (69,144)   (31,922)   69,144    31,922         - 
Unitholders' distribution   -    -    -    (1,533)   -    (1,533)
Balances at December 31, 2012   237,663   $149,728    2,035,625   $1,277,360    2,273,288   $1,427,088 
                               
Total Unitholders Capital at December 31, 2012                           $23,250,458 

 

   Unitholders' Capital   Unitholders' Capital   Unitholders' Capital 
   Trading Class A   Trading Class B   (LLC Equity/Non-Trading) 
Net asset value per unit at December 31, 2011  $91.32   $96.98   $0.52 
Net change per unit   (14.40)   (13.64)   0.11 
Net asset value per unit at December 31, 2012  $76.92   $83.34   $0.63 

 

See accompanying notes to consolidated financial statements.

 

44
 

 

Notes to Consolidated Financial Statements –

December 31, 2012, 2011, 2010

 

(1)General Information and Summary

 

RJO 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, commodity indices 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. Since December 1, 2006, R.J. O’Brien Fund Management, LLC (“RJOFM” or the “Managing Owner”) has been the Managing Owner of the Trust. R.J. O’Brien & Associates, LLC (“RJO”), an affiliate of RJOFM, is the clearing broker and the broker for forward contracts for the Trust. R.J. O’Brien Securities, LLC (“Selling Agent”) is the lead selling agent of the units of beneficial interest of the Trust (the “units”).

 

The Trust is a multi-advisor commodity pool where trading decisions for the Trust are delegated to five independent commodity trading advisors (each an “Advisor” and collectively the “Advisors”) as of December 31, 2012, pursuant to advisory agreements executed between the Trust and each Advisor (each an “Advisory Agreement” and collectively the “Advisory Agreements”).

 

Units of beneficial ownership of the Trust commenced selling on April 3, 1997.  Effective July 1, 2011, the Managing Owner determined to discontinue the public offering of the units and begin 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.

 

The Trust currently offers two classes of units on a private basis: Class A units and Class B units.  Class A units are subject to a selling commission.  Class B units are not charged a selling commission, and will only be offered to certain qualified investors participating in a program through certain financial advisors.  Both Class A and Class B units are traded pursuant to identical trading programs and differ only in respect to selling commissions.  See Note (8) for further detail regarding commissions.

 

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 net asset value to less than $2,500,000; (8) a decline in the net asset value per unit to $50 or less; (9) dissolution of the Trust; or (10) any event that would make it unlawful for the existence of the Trust to be continued or require dissolution of the Trust.

 

Prior to December 1, 2006, the managing owner of the Trust was Refco Commodity Management, Inc. (“RCMI”). An affiliate of RCMI, Refco Capital Markets, Ltd. (“RCM”) had held certain assets of the Trust, acting as the Trust’s broker of forward contracts during 2005. During that year, RCM experienced financial difficulties resulting in RCM’s inability to liquidate the assets. RCM filed for bankruptcy protection in October, 2005. As a result, the Trust held a bankruptcy claim against RCM.

 

Effective January 1, 2007, JWH Special Circumstance LLC (the “LLC”), a Delaware limited liability company, was established to pursue the claims against RCM. Any assets or liabilities held by the LLC are designated as “Non-Trading.” Any revenue earned or expenses incurred by the LLC are also designated as “Non-Trading.” The Trust is the sole member of the LLC and holds that membership for the benefit of the unitholders who were investors in the Trust at the time of the bankruptcy of RCM. 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 follows:

 

45
 

 

  (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 right 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).

 

See Note (6) for further detail regarding collection and distribution activity related to the assets held at RCM.

 

(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.

 

Reclassifications have been made to the Trust’s December 31, 2009 information to conform to the current presentation.

 

(b)Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Trust and its wholly-owned subsidiary, JWH Special Circumstances, LLC. 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 year 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.

 

46
 

 

At December 31, 2012, the Trust earns interest on 100% of the Trust’s average daily balances on deposit with RJO during each month at 100% of the average four-week Treasury Bill rate for that month in respect of deposits denominated in dollars. For deposits denominated in other currencies, the Trust earns interest at a rate of one-month LIBOR less 100 basis points. 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. The Trust also earns interest on cash and cash equivalents held at Wells Fargo Bank N.A. and managed by RJO Investment Management, LLC (“RJOIM”), an affiliate of the Managing Owner.

 

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 expensed as incurred.

 

(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 RCM at December 31, 2005, based on management’s estimate of fair value at that time.  Subsequent recoveries from RCM were credited against the then book value of the claim.  On June 28, 2007, the Trust’s cumulative recoveries from RCM exceeded the book value of the impaired assets held at RCM, 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.   Any future administrative and/or legal expenses associated with liquidation of the assets held at RCM have not been reflected as such future expenses are not capable of being estimated. See Note (6) for further details.

 

(h)Recent Pronouncement

 

In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11 “Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”) requiring disclosure of both gross and net information related to offsetting and related arrangements enabling users of its financial statements to understand the effect of those arrangements on the entity’s financial position. ASU 2011-11 is effective for interim and annual periods beginning on or after January 1, 2013. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. Adoption of ASU 2011-11 will expand the Trust’s disclosures, but will have no effect on the Trust’s net assets. At this time, management is evaluating any impact ASU 2011-11 may have on the Trust’s financial statements disclosures.

 

(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 the Advisors.

 

47
 

 

Pursuant to the Trust’s agreements with the Advisors, each Advisor receives a monthly management fee at the rate of up to 0.167% (a 2% 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. These management fees are not paid on the LLC net assets.

 

The Trust also pays the Advisors a quarterly incentive fee of up to 20% of the “New Trading Profit,” if any, of the Trust. The incentive fee is based on the performance of each 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.

 

(4)Income Taxes

 

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 the pro rata share of the profits or losses of the Trust. The LLC is also treated as a partnership. Generally, for both U.S. federal and state tax purposes, trusts, such as the RJO Global Trust, are treated as partnerships. 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 federal income tax returns for all tax years ended on or after December 31, 2008, 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, most ranging from three to five years from the date of filing.

 

(5)Trading Activities and Related Risks

 

The Trust engages in the speculative trading of U.S. and foreign futures contracts, options, and forward contracts (collectively derivatives) through the Advisors. 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 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 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.

 

The Trust, 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 Trust may not be able to enter into a closing transaction because of an illiquid market.

 

The Trust is a buyer of exchange-traded options. As such, the Trust 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 Trust to a risk of loss limited to the premiums paid.

 

Net trading results from derivatives for the years ended December 31, 2012, 2011, and 2010 are reflected in the consolidated statements of operations and equal 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.

 

48
 

 

The Trust’s primary exposure to fixed income securities are defined by the U.S. Commodity Futures Trading Commission (“CTFC”) guidelines of acceptable securities for investment of segregated assets. The scope of the acceptable securities by the CTFC are defined further by the RJOIM agreement with the Trust to include but 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.

 

See Note (11) for further details on Derivative Instruments and Hedging Activities.

 

(6)Assets Held at Refco Capital Markets, Ltd.

 

Effective October 31, 2005, $57,544,206 of equity and 2,273,288 in substitute units, which represented the assets held at RCM plus $1,000,000 in cash, were transferred to a Non-Trading account, as explained in Note 2(g). On December 31, 2005 the $56,544,206 of assets held at RCM were reduced by $39,580,944 for impairment to $16,963,262, or 30% of the original value of the assets. The table below summarizes all recoveries from RCM and distributions to redeemed and continuing unitholders.

 

Recoveries from RCM, Distributions paid by US Bank from the LLC, and effect on impaired value of assets held at RCM
   Amounts
Received from		   Balance of   Collections
in Excess of		   Cash Distributions to
Non-Participating		   Additional Units in Trust
for Participating Owners		 
Date  RCM   Impaired Value   Impaired Value   Owners   Units   Dollars 
12/29/06  $10,319,318   $6,643,944   $-   $4,180,958    54,914   $5,154,711 
04/20/07   2,787,629    3,856,315    -    -    -    - 
06/07/07   265,758    3,590,557    -    -    -    - 
06/28/07   4,783,640    -    1,193,083    -    -    - 
07/03/07   5,654    -    5,654    -    -    - 
08/29/07   -    -    -    2,787,947    23,183    1,758,626 
09/19/07   2,584,070    -    2,584,070    -    -    - 
12/31/07   2,708,467    -    2,708,467    -    -    - 
03/28/08   1,046,068    -    1,046,068    -    -    - 
04/29/08   -    -    -    2,241,680    10,736    1,053,815 
06/26/08   701,148    -    701,148    -    -    - 
12/31/08   769,001    -    769,001    -    -    - 
06/29/09   2,748,048    -    2,748,048    -    -    - 
12/30/09   1,102,612    -    1,102,612    -    -    - 
05/19/10   1,695,150    -    1,695,150    -    -    - 
06/04/10   14,329,450*   -    14,329,450*   -    -    - 
08/01/10   -    -    -    16,076,112    40,839    3,928,806 
10/15/10   282,790*   -    282,790*   -    -    - 
12/30/10   563,163*   -    563,163*   -    -    - 
06/02/11   343,664*   -    343,664*   -    -    - 
08/30/11   1,328,832*   -    1,328,832*   -    -    - 
12/01/11   -    -    -    3,689,555    6,168    561,489 
10/31/12   404,908*   -    404,908*   -    -    - 
12/05/12   294,875*   -    294,875*   -    -    - 
                               
Totals  $49,064,245   $-   $32,100,983   $28,976,252    135,840   $12,457,447 

 

*The collections on June 4, 2010 were from a settlement agreement reached with Cargill, Inc. and Cargill Investors Services, Inc. (together, "Cargill"). The gross collections of $15,300,000 on June 4, 2010, were reduced by $970,550, which represented Cargill's percentage of distributions, as defined in the Settlement Agreement. All subsequent collections are shown net and were reduced by Cargill's percentage of distributions at 57.25% of the gross collections.

 

49
 

 

(7)Fair Value Measurements

 

In accordance with the Fair Value Measurements Topic of the Financial Accounting Standards Board Accounting Standards Codification, the Trust established a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

 

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Trust has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The value of the Trust’s exchange-traded futures contracts and options fall into this category.

 

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. This category includes forward currency contracts, options on forward currency contracts and fixed income securities that the Trust values using models or other valuation methodologies derived from observable market data.

 

Level 3 inputs are unobservable inputs for an asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As of December 31, 2012 and December 31, 2011, the Trust did not have any Level 3 assets or liabilities.

 

An asset or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

 

The Trust’s exchange-traded futures contracts and options on futures contracts are valued based on quoted prices (unadjusted) in active markets for identical assets or liabilities. The Trust’s forward currency contracts and options on forward currency contracts are based on third-party quoted dealer values on the interbank market, based on similar assets or liabilities. The Trust’s fixed income securities are valued using inputs that are observable for the asset or liability, including prices of similar fixed income securities or present values of expected future cash flow models.

  

The following table presents the Trust’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 and 2011, respectively:

 

   December 31, 2012     
   Level 1   Level 2   Level 3   Total 
Assets                    
Unrealized gain on open contracts:                    
Futures positions  $260,744   $-   $-   $260,744 
Purchased options on futures contracts   728,440    -    -    728,440 
Fixed income securities   -    11,003,681    -    11,003,681 
    989,184    11,003,681    -    11,992,865 
Liabilities                    
Options written on futures contracts   884,242    -    -    884,242 
Total fair value  $104,942   $11,003,681   $-   $11,108,623 

 

   December 31, 2011     
   Level 1   Level 2   Level 3   Total 
Assets                    
Unrealized gain on open contracts:                    
Futures positions  $212,644   $-   $-   $212,644 
Forward currency positions   -    151,303    -    151,303 
Purchased options on futures contracts   22,525    -    -    22,525 
Fixed income securities   -    21,870,890    -    21,870,890 
Total assets   235,169    22,022,193    -    22,257,362 
                     
Liabilities                    
Options written on futures contracts   1,006    -    -    1,006 
Total fair value  $234,163   $22,022,193   $-   $22,256,356 

 

50
 

 

(8)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. Any redemption made during the first 11 months of investment is subject to a 1.5% redemption penalty, payable to the Managing Owner. Any redemption made in the twelfth month of investment or later will not be subject to any redemption penalty. The Trust’s Ninth Amended and Restated Declaration and Agreement of Trust, as amended (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.  An investment in the Trust does not include a beneficial interest or investment in the LLC.

 

Commissions

 

The Managing Owner and/or affiliates act as commodity brokers for the Trust through RJO. Commodity brokerage commissions are typically paid upon the completion or liquidation of a trade and are referred to as “round-turn commissions,” which cover both the initial purchase (or sale) and the subsequent offsetting sale (or purchase) of a commodity futures contract.

 

The Trust’s brokerage fee constitutes a “wrap fee” of 4.67% of the Trust’s month-end assets on an annual basis (0.38916% monthly) with respect to Class A units and 2.67% of the Trust’s month-end assets on an annual basis (0.225% monthly) with respect to Class B units, which covers the fees described below. “Brokerage fee” includes the following across each class of units:

 

Recipient  Nature of Payment  Class A Units   Class B Units 
Managing Owner  Managing Owner fee   0.75%   0.75%
Selling Agent  Selling commission   2.00%   0.00%
Managing Owner  Underwriting expenses   0.35%   0.35%
Managing Owner  Clearing, NFA, and exchange fees (capped at)   1.57%   1.57%
              
Totals      4.67%   2.67%

 

Commissions were not paid with respect to the LLC net assets.

 

(9)Financial Highlights

 

The following financial highlights show the Trust’s financial performance of the Trading units for the periods ended December 31, 2012, 2011 and 2010. 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.

 

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   Class A   Class B 
   2012   2011   2010   2012   2011   2010 
Per share operating performance:                              
Net asset value of Trading units, beginning of period  $91.32   $100.64   $102.84   $96.98   $104.75   $104.91 
Total Trading income (loss):                              
Trading gain (loss)   (7.26)   (0.27)   6.32    (7.78)   (0.28)   6.81 
Investment income   0.39    0.20    0.16    0.42    0.22    0.17 
Expenses   (7.53)   (9.25)   (8.68)   (6.28)   (7.71)   (7.14)
Trading income (loss)   (14.40)   (9.32)   (2.20)   (13.64)   (7.77)   (0.16)
Net asset value of Trading units, end of period  $76.92   $91.32   $100.64   $83.34   $96.98   $104.75 
                               
Total return:                              
Total return before incentive fees   (15.66)%   (8.88)%   (1.63)%   (13.95)%   (7.08)%   0.49%
Less incentive fee allocations   (0.11)%   (0.38)%   (0.51)%   (0.11)%   (0.34)%   (0.64)%
Total return   (15.77)%   (9.26)%   (2.14)%   (14.06)%   (7.42)%   (0.15)%
                               
Ratios to average net assets:                              
Trading income (loss)   (17.28)%   (10.32)%   (2.10)%   (15.40)%   (7.94)%   1.01%
Expenses:                              
Expenses, less incentive fees   (9.15)%   (9.30)%   (8.10)%   (7.19)%   (7.34)%   (6.19)%
Incentive fees   (0.11)%   (0.38)%   (0.51)%   (0.11)%   (0.34)%   (0.64)%
Total expenses   (9.26)%   (9.68)%   (8.61)%   (7.30)%   (7.68)%   (6.83)%

 

The calculations above do not include activity within the Trust’s Non-Trading Accounts.

 

The net income and expense ratios are computed based upon the weighted average net assets for the Trust for the periods ended December 31, 2012, 2011, and 2010. The amounts are not annualized.

 

(10)Cash Management Agreement with Affiliate.

 

On October 6, 2010, the Managing Owner retained RJOIM, an SEC registered investment adviser and an affiliate of the Managing Owner, as cash manager. The assets managed by RJOIM are held in segregated accounts in custody at Wells Fargo Bank, N.A. RJOIM is paid an annual fee, currently 0.20% calculated and accrued daily at a rate equal to 1/360 of the principal balance. As of December 31, 2012 the Trust’s deposits held by RJOIM consisted of cash of $8,659,507 and fixed income securities of $11,003,681. Advisory fees earned by RJOIM aggregated $51,521, $62,625, and $13,087 for the years ended December 31, 2012, 2011, and 2010 respectively.

 

(11)Derivative Instruments and Hedging Activities.

 

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

  

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Derivatives not designated as hedging instruments:

 

As of December 31, 2012

 

   Asset   Liability     
Type of  Derivatives   Derivatives   Net 
Futures Contracts  Fair Value   Fair Value   Fair Value 
             
Agriculture  $678,316   $(369,972)  $308,344 
Currency   94,041    (185,622)   (91,581)
Energy   76,522    (202,853)   (126,331)
Indices   60,504    (55,851)   4,653 
Interest Rates   30,579    (20,778)   9,801 
Metals   23,749    (23,693)   56 
   $963,711   $(858,769)  $104,942 

 

As of December 31, 2011

 

   Asset   Liability     
Type of  Derivatives   Derivatives   Net 
Futures Contracts  Fair Value   Fair Value   Fair Value 
             
Agriculture  $10,408   $-   $10,408 
Currency   527,500    (350,799)   176,701 
Energy   225,038    (119,410)   105,628 
Indices   17,851    (47,027)   (29,176)
Interest Rates   139,768    (10,045)   129,723 
Metals   72,320    (80,138)   (7,818)
   $992,885   $(607,419)  $385,466 

 

The above reported fair values are included in equity in commodity Trading accounts – 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, 2012 and 2011, respectively.

 

Trading gain (loss) for the following periods:

 

   Years Ended December 31, 
Type of Futures Contracts  2012   2011   2010 
Agriculture  $(361,619)  $(1,105,067)  $1,678,921 
Currency   (598,618)   (1,380,681)   1,582,144 
Energy   (483,184)   63,841    (1,308,951)
Indices   (655,571)   865,269    (773,614)
Interest Rates   162,682    935,552    2,380,917 
Metals   (462,793)   276,344    (93,000)
   $(2,399,103)  $(344,742)  $3,466,417 

 

See Note (5) for additional information on the Trust’s purpose for entering into derivatives not designed as hedging instruments and its overall risk management strategies.

 

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Acknowledgment

 

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

 

/s/ Jason T. Manumaleuna  
Jason T. Manumaleuna
Principal Financial Officer
R.J. O’Brien Fund Management, LLC
The Managing Owner and Commodity Pool Operator of
RJO Global Trust
March 22, 2013

  

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