10-Q 1 sf15596q.txt WORLD MONITOR TRUST--SERIES A -- FORM 10-Q -- JUNE 28, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28, 2002 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ______________________ Commission file number: 0-25785 WORLD MONITOR TRUST--SERIES A -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 13-3985040 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One New York Plaza, 13th Floor, New York, New York 10292 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 778-7866 N/A -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check CK whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _CK_ No __ PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) STATEMENTS OF FINANCIAL CONDITION (Unaudited)
June 28, December 31, 2002 2001 --------------------------------------------------------------------------------------------------- ASSETS Cash $5,106,205 $5,425,959 Net unrealized gain on open futures contracts 724,101 210,147 Accrued interest receivable 319 -- ---------- ------------ Total assets $5,830,625 $5,636,106 ---------- ------------ ---------- ------------ LIABILITIES AND TRUST CAPITAL Liabilities Commissions payable $ 29,519 $ 34,930 Management fees payable 8,335 919 Redemptions payable 1,866 8,618 ---------- ------------ Total liabilities 39,720 44,467 ---------- ------------ Commitments Trust capital Limited interests (61,774.190 and 70,712.634 interests outstanding) 5,732,261 5,531,871 General interests (632 and 764 interests outstanding) 58,644 59,768 ---------- ------------ Total trust capital 5,790,905 5,591,639 ---------- ------------ Total liabilities and trust capital $5,830,625 $5,636,106 ---------- ------------ ---------- ------------ Net asset value per limited and general interest ('Interests') $ 92.79 $ 78.23 ---------- ------------ ---------- ------------ --------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
2 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) Condensed Schedules of Investments (Unaudited)
June 28, 2002 December 31, 2001 -------------------------------- -------------------------------- Net Unrealized Net Unrealized Gain (Loss) Gain (Loss) as a % of Net Unrealized as a % of Net Unrealized Futures Contracts Trust Capital Gain (Loss) Trust Capital Gain (Loss) ------------------------------------------------------------------------------------------------------------- Futures contracts purchased: Stock indices $ -- $ 10,350 Interest rates 422,484 (59,552) Currencies 250,407 100,156 Commodities (2,903) (34,889) -------------- -------------- Net unrealized gain on futures contracts purchased 11.57% 669,988 0.29% 16,065 -------------- -------------- Futures contracts sold: Stock indices 28,968 -- Currencies -- 165,632 Commodities 25,145 28,450 -------------- -------------- Net unrealized gain on futures contracts sold 0.93 54,113 3.47 194,082 ------- -------------- ------ -------------- Net unrealized gain on futures contracts 12.50% $ 724,101 3.76% $210,147 ------- -------------- ------ -------------- ------- -------------- ------ -------------- Settlement Currency--Futures Contracts British pound 1.85% $ 107,424 (1.24)% $(69,132) Australian dollars 0.30 17,469 -- -- Euro 2.73 158,153 (0.46) (25,874) Japanese yen 0.55 31,880 2.17 121,044 U.S. dollar 7.07 409,175 3.29 184,109 ------- -------------- ------ -------------- Total 12.50% $ 724,101 3.76% $210,147 ------- -------------- ------ -------------- ------- -------------- ------ -------------- ------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
3 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) STATEMENTS OF OPERATIONS (Unaudited)
For the period from For the period from For the period from For the period from January 1, 2002 to January 1, 2001 to March 30, 2002 to March 31, 2001 to June 28, 2002 June 29, 2001 June 28, 2002 June 29, 2001 ------------------------------------------------------------------------------------------------------------------------------- REVENUES Net realized gain (loss) on commodity transactions $ 539,545 $ 345,031 $ 695,803 $ (57,451) Change in net unrealized gain on open commodity positions 513,954 (355,803) 542,020 (1,060,602) Interest income 54,515 211,742 26,393 76,735 --------------------- ----------- --------------------- --------------------- 1,108,014 200,970 1,264,216 (1,041,318) --------------------- ----------- --------------------- --------------------- EXPENSES Commissions 191,792 300,787 94,620 123,612 Management fees 49,422 38,752 24,382 15,925 --------------------- ----------- --------------------- --------------------- 241,214 339,539 119,002 139,537 --------------------- ----------- --------------------- --------------------- Net income (loss) $ 866,800 $(138,569) $ 1,145,214 $(1,180,855) --------------------- ----------- --------------------- --------------------- --------------------- ----------- --------------------- --------------------- ALLOCATION OF NET INCOME (LOSS) Limited interests $ 857,857 $(135,935) $ 1,133,260 $(1,167,051) --------------------- ----------- --------------------- --------------------- --------------------- ----------- --------------------- --------------------- General interests $ 8,943 $ (2,634) $ 11,954 $ (13,804) --------------------- ----------- --------------------- --------------------- --------------------- ----------- --------------------- --------------------- NET INCOME (LOSS) PER WEIGHTED AVERAGE LIMITED AND GENERAL INTEREST Net income (loss) per weighted average limited and general interest $ 12.96 $ (1.35) $ 17.81 $ (13.35) --------------------- ----------- --------------------- --------------------- --------------------- ----------- --------------------- --------------------- Weighted average number of limited and general interests outstanding 66,863 102,721 64,313 88,457 --------------------- ----------- --------------------- --------------------- --------------------- ----------- --------------------- --------------------- ------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN TRUST CAPITAL (Unaudited)
LIMITED GENERAL INTERESTS INTERESTS INTERESTS TOTAL ----------------------------------------------------------------------------------------------------- Trust capital--December 31, 2001 71,476.634 $5,531,871 $ 59,768 $5,591,639 Net income 857,857 8,943 866,800 Redemptions (9,070.444) (657,467) (10,067) (667,534) ---------- ---------- --------- ---------- Trust capital--June 28, 2002 62,406.190 $5,732,261 $ 58,644 $5,790,905 ---------- ---------- --------- ---------- ---------- ---------- --------- ---------- ----------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
4 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) NOTES TO FINANCIAL STATEMENTS JUNE 28, 2002 (Unaudited) A. General These financial statements have been prepared without audit. In the opinion of Prudential Securities Futures Management Inc. (the 'Managing Owner'), the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the financial position of World Monitor Trust--Series A ('Series A') as of June 28, 2002 and the results of its operations for the period from January 1, 2002 to June 28, 2002 ('Year-To-Date 2002'), January 1, 2001 to June 29, 2001 ('Year-To-Date 2001'), March 30, 2002 to June 28, 2002 ('Second Quarter 2002') and March 31, 2001 to June 29, 2001 ('Second Quarter 2001'). However, the operating results for the interim periods may not be indicative of the results expected for a full year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in Series A's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2001. B. Related Parties The Managing Owner of Series A is a wholly-owned subsidiary of Prudential Securities Incorporated ('PSI'), which, in turn, is an indirect wholly-owned subsidiary of Prudential Financial, Inc. The Managing Owner or its affiliates perform services for Series A, which include, but are not limited to: brokerage services; accounting and financial management; registrar, transfer and assignment functions; investor communications, printing and other administrative services. Except for costs related to brokerage services, PSI or its affiliates pay the costs of these services in addition to Series A's routine operational, administrative, legal and auditing costs. Additionally, PSI or its affiliates paid the costs associated with offering Series A's Interests. The costs charged to Series A for brokerage services for Year-To-Date 2002, Year-To-Date 2001, Second Quarter 2002 and Second Quarter 2001 were $191,792, $300,787, $94,620 and $123,612, respectively. Series A's assets are maintained either in trading or cash accounts with PSI, Series A's commodity broker, or, for margin purposes, with the various exchanges on which Series A is permitted to trade. PSI credits Series A monthly with 100% of the interest it earns on the average net assets in Series A's accounts. Series A, acting through its trading advisor, may execute over-the-counter, spot, forward and/or option foreign exchange transactions with PSI. PSI then engages in back-to-back trading with an affiliate, Prudential-Bache Global Markets Inc. ('PBGM'). PBGM attempts to earn a profit on such transactions. PBGM keeps its prices on foreign currency competitive with other interbank currency trading desks. All over-the-counter currency transactions are conducted between PSI and Series A pursuant to a line of credit. PSI may require that collateral be posted against the marked-to-market position of Series A. As of June 28, 2002, a non-U.S. affiliate of the Managing Owner owned 101.112 limited interests of Series A. C. Derivative Instruments and Associated Risks Series A is exposed to various types of risks associated with the derivative instruments and related markets in which it invests. These risks include, but are not limited to, risk of loss from fluctuations in the value of derivative instruments held (market risk) and the inability of counterparties to perform under the terms of Series A's investment activities (credit risk). Market Risk Trading in futures and forward contracts (including foreign exchange) involves entering into contractual commitments to purchase or sell a particular commodity at a specified date and price. The gross or face 5 amount of the contracts, which is typically many times that of Series A's net assets being traded, significantly exceeds Series A's future cash requirements since Series A intends to close out its open positions prior to settlement. As a result, Series A is generally subject only to the risk of loss arising from the change in the value of the contracts. As such, Series A considers the 'fair value' of its derivative instruments to be the net unrealized gain or loss on the contracts. The market risk associated with Series A's commitments to purchase commodities is limited to the gross or face amount of the contract held. However, when Series A enters into a contractual commitment to sell commodities, it must make delivery of the underlying commodity at the contract price and then repurchase the contract at prevailing market prices. Since the repurchase price to which a commodity can rise is unlimited, entering into commitments to sell commodities exposes Series A to unlimited risk. Market risk is influenced by a wide variety of factors, including government programs and policies, political and economic events, the level and volatility of interest rates, foreign currency exchange rates, the diversification effects among the derivative instruments Series A holds and the liquidity and inherent volatility of the markets in which Series A trades. Credit Risk When entering into futures or forward contracts, Series A is exposed to credit risk that the counterparty to the contract will not meet its obligations. The counterparty for futures contracts traded on United States and most foreign futures exchanges is the clearinghouse associated with the particular exchange. In general, clearinghouses are backed by their corporate members who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members (i.e., some foreign exchanges), it is normally backed by a consortium of banks or other financial institutions. On the other hand, if Series A enters into forward transactions, the sole counterparty is PSI, Series A's commodity broker. Series A has entered into a master netting agreement with PSI and, as a result, when applicable, presents unrealized gains and losses on open forward positions as a net amount in the statements of financial condition. The amount at risk associated with counterparty non-performance of all of Series A's contracts is the net unrealized gain included in the statements of financial condition; however, counterparty nonperformance on only certain of Series A's contracts may result in greater loss than nonperformance on all of Series A's contracts. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its obligations to Series A. The Managing Owner attempts to minimize both credit and market risks by requiring Series A and its trading advisor to abide by various trading limitations and policies. The Managing Owner monitors compliance with these trading limitations and policies, which include, but are not limited to, executing and clearing all trades with creditworthy counterparties; limiting the amount of margin or premium required for any one commodity or all commodities combined; and generally limiting transactions to contracts which are traded in sufficient volume to permit the taking and liquidating of positions. Additionally, pursuant to the advisory agreement among Series A, the Managing Owner and the trading advisor, Series A shall automatically terminate the trading advisor if the net asset value allocated to the trading advisor declines by 33 1/3% from the value at the beginning of any year or since the effective date of the advisory agreement (i.e., March 2000). Furthermore, the Second Amended and Restated Declaration of Trust and Trust Agreement provides that Series A will liquidate its positions, and eventually dissolve, if Series A experiences a decline in net asset value of 50% from the value at the beginning of any year or since the commencement of trading activities. In each case, the decline in net asset value is after giving effect for distributions, contributions and redemptions. The Managing Owner may impose additional restrictions (through modifications of trading limitations and policies) upon the trading activities of the trading advisor as it, in good faith, deems to be in the best interests of Series A. PSI, when acting as Series A's futures commission merchant in accepting orders for the purchase or sale of domestic futures contracts, is required by Commodity Futures Trading Commission ('CFTC') regulations to separately account for and segregate as belonging to Series A all assets of Series A relating to domestic futures trading and is not allowed to commingle such assets with other assets of PSI. At June 28, 2002, such segregated assets totalled $3,044,071. Part 30.7 of the CFTC regulations also requires PSI to secure assets of Series A related to foreign futures trading, which totalled $2,786,235 at June 28, 2002. There are no segregation requirements for assets related to forward trading. As of June 28, 2002, Series A's open futures contracts mature within five months. 6 D. Financial Highlights
Year-To-Date Year-To-Date Second Quarter Second Quarter 2002 2001 2002 2001 ------------- ------------- --------------- --------------- Performance per Interest Net asset value, beginning of period $ 78.23 $ 75.76 $ 74.29 $ 84.65 ------------- ------------- --------------- --------------- Net realized gain (loss) and change in net unrealized gain on commodity transactions 17.36 (2.32) 19.94 (11.77) Interest income .82 2.01 .41 .86 Expenses (3.62) (3.28) (1.85) (1.57) ------------- ------------- --------------- --------------- Increase (decrease) for the period 14.56 (3.59) 18.50 (12.48) ------------- ------------- --------------- --------------- Net asset value, end of period $ 92.79 $ 72.17 $ 92.79 $ 72.17 ------------- ------------- --------------- --------------- ------------- ------------- --------------- --------------- Total return 18.61% (4.74)% 24.90% (14.74)% Ratio to average net assets (annualized) Interest income 2.15% 5.34% 2.16% 4.65% Expenses 9.53% 8.56% 9.72% 8.46%
These financial highlights represent the overall results of Series A during Year-To-Date 2002, Year-To-Date 2001, Second Quarter 2002 and Second Quarter 2001. An individual limited owner's actual results may differ depending on the timing of redemptions. 7 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Series A commenced operations on June 10, 1998 with gross proceeds of $6,039,177 allocated to commodities trading. Interests in Series A continued to be offered weekly until Series A achieved its subscription maximum of $34,000,000 during November 1999. The Managing Owner suspended the offering of Interests in World Monitor Trust--Series B and World Monitor Trust--Series C and allowed all selling registrations to expire by April 30, 2002. As such, Interests owned in one series of World Monitor Trust may no longer be exchanged for Interests of one or more other series of World Monitor Trust. Interests in Series A may be redeemed on a weekly basis. Redemptions of limited interests for Year-To-Date 2002, Second Quarter 2002 and for the period from June 10, 1998 (commencement of operations) to June 28, 2002 were $657,467, $348,437 and $22,237,055, respectively. Redemptions of general interests for Year-To-Date 2002 and for the period from June 10, 1998 (commencement of operations) to June 28, 2002 were $10,067 and $206,807. No general interests were redeemed during Second Quarter 2002. Future redemptions will impact the amount of funds available for investment in commodity contracts in subsequent periods. At June 28, 2002, 100% of Series A's net assets were allocated to commodities trading. A significant portion of the net assets was held in cash, which was used as margin for Series A's trading in commodities. Inasmuch as the sole business of Series A is to trade in commodities, Series A continues to own such liquid assets to be used as margin. PSI credits Series A monthly with 100% of the interest it earns on the average net assets in Series A's accounts. The commodities contracts are subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. For example, commodity exchanges limit fluctuations in certain commodity futures contract prices during a single day by regulations referred to as 'daily limits.' During a single day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract for a particular commodity has increased or decreased by an amount equal to the daily limit, positions in the commodity can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Commodity futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent Series A from promptly liquidating its commodity futures positions. Since Series A's business is to trade futures and forward contracts, its capital is at risk due to changes in the value of these contracts (market risk) or the inability of counterparties to perform under the terms of the contract (credit risk). Series A's exposure to market risk is influenced by a number of factors, including the volatility of interest rates and foreign currency exchange rates, the liquidity of the markets in which the contracts are traded and the relationship among the contracts held. The inherent uncertainty of Series A's speculative trading, as well as the development of drastic market occurrences, could result in monthly losses considerably beyond Series A's experience to date and could ultimately lead to a loss of all or substantially all of investors' capital. The Managing Owner attempts to minimize these risks by requiring Series A and its trading advisor to abide by various trading limitations and policies, which include limiting margin amounts, trading only in liquid markets and permitting the use of stop loss provisions. See Note C to the financial statements for a further discussion on the credit and market risks associated with Series A's futures and forward contracts. Series A does not have, nor does it expect to have, any capital assets. Results of Operations The net asset value per Interest as of June 28, 2002 was $92.79, an increase of 18.61% from the December 31, 2001 net asset value per Interest of $78.23, and an increase of 24.90% from the March 29, 2002 net asset value per Interest of $74.29. Past performance is not necessarily indicative of future results. Series A's gross trading gains (losses) were $1,053,000 and $1,238,000 during Year-To-Date 2002 and Second Quarter 2002, compared to $(11,000) and $(1,118,000) during Year-To-Date 2001 and Second 8 Quarter 2001, respectively. Due to the nature of Series A's trading activities, a period to period comparison of its trading results is not meaningful. However, a detailed discussion of Series A's Second Quarter 2002 trading results is presented below. Quarterly Market Overview Despite reports by the Federal Reserve Board (the 'Fed') indicating that overall economic activity expanded at a moderate pace during the second quarter of 2002, investor sentiment remained bleak. Most major U.S. equity indices reached new lows as investor confidence worldwide was battered by reports of corporate leadership misconduct and accounting irregularities. Continued uncertainty in the Middle East and weaker than expected second quarter corporate earnings added to investor uncertainty. The U.S. dollar fell against most major foreign currencies during the quarter, while the price of interest rate instruments rose. In the U.S., residential real estate markets generally remained robust, but weakness persisted in most commercial markets. Retail sales were generally flat and labor markets remained weak. Consumer spending and manufacturing activity, which helped boost U.S. economic growth in previous quarters, remained stagnant at a relatively high level. Additionally, continued softness in the labor markets helped weaken consumer confidence. European and Asian economic activity mirrored that of the U.S., but to a lesser extent. Global equity markets moved sharply lower throughout the quarter as investor confidence collapsed in response to concerns about accounting transparency at some firms, heightened tension in the Middle East, and decreased corporate sales and profits. This resulted in investors re-evaluating their outlook for a near-term economic recovery. In the U.S., concerns that unannounced accounting problems will eliminate expected corporate profits continued to keep equity markets down. At quarter-end, the year-to-date returns for the S&P 500, the NASDAQ and the London FTSE were -14%, -25% and -10.75%, respectively. In bond markets, prices rose as interest rates fell in the U.S. on concerns regarding a weak economic recovery and declines in the equity markets. Additionally, declining equity markets led investors to switch allocations from equity markets to fixed income markets, which are perceived as the current safe haven for wealth. The Fed left interest rates unchanged at 1.75% in its two meetings this quarter, declaring that its economic outlook for the near future remained 'uncertain'. Other central banks, including the European Central Bank and the Bank of Japan, generally followed the lead of the Fed leaving rates unchanged and foreign bond markets rose as well. In foreign exchange markets, the U.S. dollar moved sharply lower against most major currencies throughout the quarter, falling to new lows against some currencies. Weak U.S. economic growth in relation to other economies and concerns regarding accounting irregularities in major U.S. corporations drove the dollar downward. Additionally, the decline in U.S. equity markets and investor confidence decreased the desire to hold U.S. assets driving the U.S. dollar lower against the euro, British pound, Swiss franc and Japanese yen. Gold and other precious metals soared throughout most of the quarter in response to weaknesses in the U.S. dollar and global equity markets and instability in the Middle East. Gold prices reversed at quarter-end as a result of profit taking by traders and sentiment that the U.S. dollar would be supported by U.S. and Japanese central banks. Quarterly Performance of Series A The following is a summary of performance for the major sectors in which Series A traded: Interest rates (+): Global bond markets rose as interest rates declined during the quarter in response to poor equity market performance. Long positions in U.S., European, British and Japanese bonds resulted in gains. Currencies (+): Long Japanese yen and Swiss franc positions resulted in gains as a weak U.S. economy and falling equity markets caused the U.S. dollar to fall. Indices (+): Short positions in the London FTSE and Euro DAX resulted in gains as equity indices fell amid concerns regarding U.S. economic recovery, accounting irregularities and weaker than expected corporate earnings. Grains (+): Gains resulted from short soybean positions which declined following a projected supply increase by the U.S. Department of Agriculture. 9 Metals (+): Long copper positions resulted in gains as copper rallied due to supply cutbacks initiated by some producers. Precious metals rallied in the wake of falling equity markets and weak economies resulting in gains for long gold and silver positions. Energies (-): Energy prices declined amid increased U.S. supplies suggesting ample supply for the summer season and anticipation that Russia would discontinue output restrictions. Long crude oil, gas oil and heating oil positions incurred losses. Series A's average net asset levels during Year-To-Date 2002 and Second Quarter 2002 have decreased from Year-To-Date 2001 and Second Quarter 2001, primarily due to redemptions during the second half of 2001 and Year-To-Date 2002 offset, in part, by favorable trading performance during Year-To-Date 2002. The declining asset levels have led to proportionate decreases in the amount of interest earned by Series A, as well as commissions incurred. Interest income is earned on the average net assets held at PSI and, therefore, varies monthly according to interest rates, trading performance and redemptions. Interest income decreased $157,000 and $50,000 during Year-To-Date 2002 and Second Quarter 2002, as compared to Year-To-Date 2001 and Second Quarter 2001, respectively due to lower interest rates during Year-To-Date 2002 as compared to Year-To-Date 2001, as well as the decrease in net assets as discussed above. Commissions are calculated on Series A's net asset value at the end of each week and, therefore, vary according to weekly trading performance and redemptions. Commissions decreased $109,000 and $29,000 during Year-To-Date 2002 and Second Quarter 2002, as compared to Year-To-Date 2001 and Second Quarter 2001, respectively due to the decrease in average net asset levels as discussed above. Effective December 6, 1999, the Eagle-Global System became the exclusive trading program used by Eagle Trading Systems, Inc. (the 'Trading Advisor') to trade Series A's assets. In conjunction with this change, the Managing Owner and the Trading Advisor voluntarily agreed to terminate the initial advisory agreement ('Initial Advisory Agreement') and enter into a new advisory agreement ('New Advisory Agreement') effective March 21, 2000. Pursuant to the New Advisory Agreement, the Trading Advisor was to be paid a weekly management fee at an annual rate of 1% of Series A's net asset value until the net asset value per Interest was at least $80 for a period of 10 consecutive business days, at which time the weekly management fee was to be increased to an annual rate of 2% (i.e., the rate pursuant to the Initial Advisory Agreement). Effective October 31, 2001, Series A sustained a net asset value per Interest greater than $80 for 10 consecutive business days. As a result, the Trading Advisor has been paid a weekly management fee at an annual rate of 2% since November 1, 2001. Additionally, although the term of the New Advisory Agreement commenced on March 21, 2000, the Trading Advisor must recoup all trading losses incurred under the Initial Advisory Agreement before an incentive fee is paid. Furthermore, the New Advisory Agreement resets the net asset value for purposes of its termination provisions (see Note C to the financial statements). The New Advisory Agreement may be terminated for a variety of reasons, including at the discretion of the Managing Owner. All trading decisions for Series A are made by the Trading Advisor. Management fees are calculated on Series A's net asset value at the end of each week and, therefore, are affected by weekly trading performance and redemptions. Management fees increased $11,000 and $8,000 during Year-To-Date 2002 and Second Quarter 2002 as compared to Year-To-Date 2001 and Second Quarter 2001, respectively. This is primarily due to the increase in management fee rate from an annual rate of 1% of Series A's net asset value to 2% offset, in part, by the decrease in average net asset levels as discussed above. Incentive fees are based on the 'New High Net Trading Profits' generated by the Trading Advisor, as defined in the advisory agreement among Series A, the Managing Owner and the Trading Advisor. No incentive fees were paid during Year-To-Date 2002 or Year-To-Date 2001. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information regarding quantitative and qualitative disclosures about market risk is not required pursuant to Item 305(e) of Regulation S-K. 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings--There are no material legal proceedings pending by or against Series A or the Managing Owner. Item 2. Changes in Securities--None Item 3. Defaults Upon Senior Securities--None Item 4. Submission of Matters to a Vote of Security Holders--None Item 5. Other Information--Effective May 2002, Steven Weinreb was elected by the Board of Directors of Prudential Securities Futures Management Inc. as Chief Financial Officer replacing Barbara Brooks. Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits 3.1 and 4.1-- Second Amended and Restated Declaration of Trust and Trust Agreements of World Monitor Trust dated as of March 17, 1998 (incorporated by reference to Exhibits 3.1 and 4.1 to Series A's Registration Statement on Form S-1, File No. 333-43033) 4.2-- Form of Request for Redemption (incorporated by reference to Exhibit 4.2 to Series A's Registration Statement on Form S-1, File No. 333-43033) 4.3-- Form of Exchange Request (incorporated by reference to Exhibit 4.3 to Series A's Registration Statement on Form S-1, File No. 333-43033) 4.4-- Form of Subscription Agreement (incorporated by reference to Exhibit 4.4 to Series A's Registration Statement on Form S-1, File No. 333-43033) 99.1-- Certificate pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the SARBANES-OXLEY Act of 2002 (filed herewith) (b) Reports on Form 8-K--None 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Series A has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WORLD MONITOR TRUST--SERIES A By: Prudential Securities Futures Management Inc. A Delaware corporation, Managing Owner By: /s/ Steven Weinreb Date: August 12, 2002 ---------------------------------------- Steven Weinreb Chief Financial Officer 12