-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FzmNwLCDbByqL79N9EA99FQgrcKgr6wnWx3AfJtxq9+2Zn8qopQSmxF14AaRk9Bq HxyA9pPlRpctm+iC36Hb1Q== 0000898733-99-000239.txt : 19990402 0000898733-99-000239.hdr.sgml : 19990402 ACCESSION NUMBER: 0000898733-99-000239 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLD MONITOR TRUST SERIES A CENTRAL INDEX KEY: 0001051822 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-43033 FILM NUMBER: 99581000 BUSINESS ADDRESS: STREET 1: ONE NEW YORK PLAZA 13TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10292-2013 BUSINESS PHONE: 2127787866 MAIL ADDRESS: STREET 1: ONE NEW YORK PLAZA 13TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10292-2013 10-K 1 WORLD MONITOR TRUST -- SERIES A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 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 333-43033 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 Securities registered pursuant to Section 12(b) of the Act: None - ------------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: Limited Interests - ------------------------------------------------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes CK No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ] DOCUMENTS INCORPORATED BY REFERENCE Second Amended and Restated Declaration of Trust and Trust Agreement of the Registrant dated as of March 17, 1998, included as part of the Registration Statement on Form S-1 (File No. 333-43033) filed with the Securities and Exchange Commission on March 23, 1998, pursuant to Rule 424(b) of the Securities Act of 1933, is incorporated by reference into Part IV of this Annual Report on Form 10-K Registrant's Annual Report to Interest holders for the year ended December 31, 1998 is incorporated by reference into Parts II and IV of this Annual Report on Form 10-K Index to exhibits can be found on pages 8 and 9. WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) TABLE OF CONTENTS
PART I PAGE Item 1 Business......................................................................... 3 Item 2 Properties....................................................................... 4 Item 3 Legal Proceedings................................................................ 4 Item 4 Submission of Matters to a Vote of Interest Holders.............................. 4 PART II Item 5 Market for the Registrant's Interests and Related Interest Holder Matters........ 4 Item 6 Selected Financial Data.......................................................... 4 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................... 5 Item 7A Quantitative and Qualitative Disclosures about Market Risk....................... 5 Item 8 Financial Statements and Supplementary Data...................................... 5 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................................................... 5 PART III Item 10 Directors and Executive Officers of the Registrant............................... 5 Item 11 Executive Compensation........................................................... 6 Item 12 Security Ownership of Certain Beneficial Owners and Management................... 6 Item 13 Certain Relationships and Related Transactions................................... 7 PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K................. 8 Financial Statements and Financial Statement Schedules........................... 8 Exhibits......................................................................... 8 Reports on Form 8-K.............................................................. 9 SIGNATURES.................................................................................. 10
2 PART I Item 1. Business General World Monitor Trust (the 'Trust') is a business trust organized under the laws of Delaware on December 17, 1997. The Registrant commenced trading operations on June 10, 1998 and will terminate on December 31, 2047 unless terminated sooner as provided in the Second Amended and Restated Declaration of Trust and Trust Agreement (the 'Trust Agreement'). The Trust was formed to engage in the speculative trading of a diversified portfolio of futures, forward and options contracts and may, from time to time, engage in cash and spot transactions. The trustee of the Trust is Wilmington Trust Company. The Trust's fiscal year for book and tax purposes ends on December 31. The Offering Beneficial interests in the Trust ('Interests') are being offered pursuant to Rule 415 of Regulation C under the Securities Act of 1933 in three separate and distinct series ('Series'): Series A, B and C. The assets of each Series are segregated from the other Series, separately valued and independently managed. Up to $100,000,000 of Interests ('Subscription Maximum'), $34,000,000 for Series A and $33,000,000 each for Series B and C, are being offered to investors who meet certain established suitability standards. A subscriber may purchase Interests in any one or a combination of Series. On June 10, 1998, Series A (the 'Registrant') completed its initial offering with gross proceeds of $6,039,177 from the sale of 59,631.775 limited interests and 760 general interests. Thereafter, or until the Subscription Maximum for each Series is sold, each Series' Interests will continue to be offered on a weekly basis ('Continuous Offering Period') at the net asset value per Interest. The Registrant is engaged solely in the business of commodity futures and forward trading; therefore, presentation of industry segment information is not applicable. Managing Owner The managing owner of the Registrant is Prudential Securities Futures Management Inc. (the 'Managing Owner'), a wholly owned subsidiary of Prudential Securities Incorporated ('PSI') which, in turn, is a wholly owned subsidiary of Prudential Securities Group Inc. PSI is the selling agent for the Registrant as well as the commodity broker of the Registrant. The Managing Owner is required to maintain at least a 1% interest in the capital, profits and losses of each Series so long as it is acting as the Managing Owner, and it will make such contributions (and in return will receive such general interests) as are necessary to effect this requirement. The Trading Advisor Each Series has its own professional commodity trading advisor that makes that Series' trading decisions. The Managing Owner, on behalf of the Registrant, entered into an advisory agreement with Eagle Trading Systems, Inc. ('Trading Advisor') to make the trading decisions for Series A. The advisory agreement may be terminated at the discretion of the Managing Owner. The Managing Owner has allocated 100% of the proceeds from the initial and continuous offering of Series A to the Trading Advisor and it is currently contemplated that the Trading Advisor will continue to be allocated 100% of additional capital raised for Series A during the Continuous Offering Period. Competition The Managing Owner and its affiliates have formed, and may continue to form, various entities to engage in the speculative trading of futures, forward and options contracts which have certain of the same investment policies as the Registrant. The Registrant is an open-end fund which will solicit the sale of additional Interests on a weekly basis until the Subscription Maximum is reached. As such, the Registrant may compete with other entities to attract new participants. In addition, to the extent that the Trading Advisor recommends similar or identical trades 3 to the Registrant and other accounts which it manages, the Registrant may compete with those accounts for the execution of the same or similar trades. Employees The Registrant has no employees. Management and administrative services for the Registrant are performed by the Managing Owner and its affiliates pursuant to the Trust Agreement as further discussed in Notes A, C and D to the Registrant's annual report to limited owners for the year ended December 31, 1998 ('Registrant's 1998 Annual Report') which is filed as an exhibit hereto. Item 2. Properties The Registrant does not own or lease any property. Item 3. Legal Proceedings There are no material legal proceedings pending by or against the Registrant or the Managing Owner. Item 4. Submission of Matters to a Vote of Interest Holders None PART II Item 5. Market for the Registrant's Interests and Related Interest Holder Matters Information with respect to the offering of Interests is incorporated by reference to Note A to the Registrant's 1998 Annual Report, which is filed as an exhibit hereto. A significant secondary market for the Interests has not developed, and it is not expected that one will develop in the future. There are also certain restrictions set forth in the Trust Agreement limiting the ability of an Interest holder to transfer Interests. However, Interests may be redeemed on a weekly basis, but are subject to a redemption fee if effected within one year of the effective date of purchase. Additionally, Interests owned in one Series may be exchanged, without any charge, for Interests of one or more other Series on a weekly basis for as long as Interests in those Series are being offered to the public. Exchanges and redemptions are calculated based on the applicable Series' then current net asset value per Interest as of the close of business on the Friday immediately preceding the week in which the exchange or redemption request is effected. There are no material restrictions upon the Registrant's present or future ability to make distributions in accordance with the provisions of the Trust Agreement. No distributions have been made since inception and no distributions are anticipated in the future. As of March 4, 1999, there were 1,051 holders of record owning 131,006.437 Interests which includes 1,400 General Interests. Item 6. Selected Financial Data The following table presents selected financial data of the Registrant for the period from June 10, 1998 (commencement of operations) to December 31, 1998. This data should be read in conjunction with the financial statements of the Registrant and the notes thereto on pages 2 through 9 of the Registrant's 1998 Annual Report which is filed as an exhibit hereto. Total revenues (including interest) $ 343,726 ---------------- ---------------- Net loss $ (171,858) ---------------- ---------------- Net loss per weighted average Interest $ (1.96) ---------------- ---------------- Total assets $ 10,904,807 ---------------- ---------------- Net asset value per Interest $ 98.31 ---------------- ----------------
4 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This information is incorporated by reference to pages 10 through 12 of the Registrant's 1998 Annual Report which is filed as an exhibit hereto. Item 7A. 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. Item 8. Financial Statements and Supplementary Data The financial statements are incorporated by reference to pages 2 through 9 of the Registrant's 1998 Annual Report which is filed as an exhibit hereto. Supplementary data specified by Item 302 of Regulation S-K (selected quarterly financial data) is not applicable. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Registrant There are no directors or executive officers of the Registrant. The Registrant is managed by the Managing Owner. The Managing Owner's directors and executive officers and any person holding more than ten percent of the Registrant's Interests ('Ten Percent Owners') are required to report their initial ownership of such Interests and any subsequent changes in that ownership to the Securities and Exchange Commission on Forms 3, 4 or 5. Such executive officers, directors and Ten Percent Owners are required by Securities and Exchange Commission regulations to furnish the Registrant with copies of all Forms 3, 4 or 5 they file. Tamara B. Wright, upon becoming a director, and the Massachusetts Bay Transportation Authority Retirement Fund, upon becoming a Ten Percent Owner, did not file Form 3 in a timely manner, but have subsequently filed and are now current in all filings. All other filing requirements were satisfied on a timely basis. In making these disclosures, the Registrant has relied solely on written representations of the Managing Owner's directors and executive officers or copies of the reports that they have filed with the Securities and Exchange Commission during and with respect to its most recent fiscal year. The directors and executive officers of Prudential Securities Futures Management Inc. and their positions with respect to the Registrant are as follows: Name Position Eleanor L. Thomas First Vice President Barbara J. Brooks Chief Financial Officer Steven Carlino Vice President, Chief Accounting Officer and Treasurer A. Laurence Norton, Jr. Director Guy S. Scarpaci Director Tamara B. Wright Senior Vice President and Director ELEANOR L. THOMAS, age 44, has been a Vice President of Prudential Securities Futures Management Inc. and Seaport Futures Management, Inc. since April 1993 and a First Vice President since October 1998. She is primarily responsible for origination, asset allocation, and due diligence for the managed futures group within PSI. She is also a First Vice President of PSI. Prior to joining PSI in March 1993, she was with MC Baldwin Financial Company from June 1990 through February 1993 and Arthur Andersen & Co. from 1986 through May 1990. Ms. Thomas is a certified public accountant. 5 BARBARA J. BROOKS, age 50, is the Chief Financial Officer of Prudential Securities Futures Management Inc. She is a Senior Vice President of PSI. She is also the Treasurer and Chief Financial Officer of Seaport Futures Management, Inc. and serves in various capacities for other affiliated companies. She has held several positions within PSI since April 1983. Ms. Brooks is a certified public accountant. STEVEN CARLINO, age 35, is a Vice President and Treasurer of Prudential Securities Futures Management Inc. He is a First Vice President of PSI. He is also a Vice President and Treasurer of Seaport Futures Management, Inc. and serves in various capacities for other affiliated companies. Prior to joining PSI in October 1992, he was with Ernst & Young for six years. Mr. Carlino is a certified public accountant. A. LAURENCE NORTON, JR., age 60, is a Director of Prudential Securities Futures Management Inc. He is an Executive Vice President of PSI and, since March 1994, has been the head of the International and Futures Divisions of PSI. He is also a Director of Seaport Futures Management, Inc. From October 1991 to March 1994, he held the position of Executive Director of Retail Development and Retail Strategies at PSI. Prior to joining PSI in 1991, Mr. Norton was a Senior Vice President and Branch Manager of Shearson Lehman Brothers. GUY S. SCARPACI, age 52, is a Director of Prudential Securities Futures Management Inc. He is a First Vice President of the Futures Division of PSI. He is also a Director of Seaport Futures Management, Inc. Mr. Scarpaci has been employed by PSI in positions of increasing responsibility since August 1974. TAMARA B. WRIGHT, age 40, is a Director and Senior Vice President of Prudential Securities Futures Management Inc. She is a Senior Vice President and Chief Administrative Officer for the International and Futures Divisions of PSI. She is also a Director and Senior Vice President of Seaport Futures Management, Inc. and serves in various capacities for other affiliated companies. Prior to joining PSI in July 1988, she was a manager with Price Waterhouse. During the fourth quarter of 1998, Steven Carlino replaced Barbara J. Brooks as Treasurer of Prudential Securities Futures Management Inc. and Seaport Futures Management, Inc. Additionally, during December 1998, Tamara B. Wright was elected a Senior Vice President and Director of Prudential Securities Futures Management Inc. and Seaport Futures Management, Inc. On March 26, 1999, Thomas M. Lane, Jr. resigned as President and Director of Seaport Futures Management, Inc. and Prudential Securities Futures Management Inc. There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing directors and/or executive officers have indefinite terms. Item 11. Executive Compensation The Registrant does not pay or accrue any fees, salaries or any other form of compensation to directors and officers of the Managing Owner for their services. Certain directors and officers of the Managing Owner receive compensation from affiliates of the Managing Owner, not from the Registrant, for services performed for various affiliated entities, which may include services performed for the Registrant; however, the Managing Owner believes that any compensation attributable to services performed for the Registrant is immaterial. (See also Item 13, Certain Relationships and Related Transactions, for information regarding compensation to the Managing Owner.) Item 12. Security Ownership of Certain Beneficial Owners and Management As of March 4, 1999, no director or executive officer of the Managing Owner owns directly or beneficially any interest in the voting securities of the Managing Owner. As of March 4, 1999, no director or executive officer of the Managing Owner owns directly or beneficially any of the Interests issued by the Registrant. 6 As of March 4, 1999, the following owners of limited interests beneficially own more than five percent (5%) of the limited interests issued by the Registrant:
Title Name and Address of Amount and Nature of Percent of of Class Beneficial Owner Beneficial Ownership Class - ------------------ --------------------------------- ----------------------------- ---------- Limited interests Massachusetts Bay Transportation 17,666.712 limited interests 14% Authority Retirement Fund 99 Summer Street, 17th Floor Boston, MA 02110-1200 Limited interests Mr. Jeffrey Chandler 7,506.004 limited interests 6% 162 S. Rancho Santa Fe Rd Encintitas, CA 92024-4372 Limited interests Mrs. Charlotte Quint Trustee 7,023.144 limited interests 5% For Benefit Of The Charlotte Quint Living Trust 38042 Signal Court Palm Desert, CA 92211-1403
Item 13. Certain Relationships and Related Transactions The Registrant has and will continue to have certain relationships with the Managing Owner and its affiliates. However, there have been no direct financial transactions between the Registrant and the directors or officers of the Managing Owner. Reference is made to Notes A, C and D to the financial statements in the Registrant's 1998 Annual Report which is filed as an exhibit hereto, which identify the related parties and discuss the services provided by these parties and the amounts paid or payable for their services. 7 PART IV
Page Number ------------ Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements and Report of Independent Accountants--incorporated by reference to the Registrant's 1998 Annual Report which is filed as an exhibit hereto Report of Independent Accountants 2 Financial Statements: Statements of Financial Condition--December 31, 1998 and 1997 3 Statement of Operations--Period from June 10, 1998 (commencement of operations) to December 31, 1998 4 Statement of Changes in Trust Capital--Year ended December 31, 1998 4 Notes to Financial Statements 5 2. Financial Statement Schedules All schedules have been omitted because they are not applicable or the required information is included in the financial statements or notes thereto. 3. Exhibits Description: 3.1 Second Amended and Restated Declaration of Trust and Trust Agreement of and World Monitor Trust dated as of March 17, 1998 (incorporated by 4.1-- reference to Exhibits 3.1 and 4.1 to Series A's Registration Statement on Form S-1, File No. 333-43033 dated as of March 23, 1998) 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 dated as of March 23, 1998) 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 dated as of March 23, 1998) 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 dated as of March 23, 1998) 10.1 Form of Escrow Agreement among the Trust, Prudential Securities Futures Management Inc., Prudential Securities Incorporated and The Bank of New York (incorporated by reference to Exhibit 10.1 to Series A's Registration Statement on Form S-1, File No. 333-43033 dated as of March 23, 1998) 10.2 Form of Brokerage Agreement among the Trust and Prudential Securities Incorporated (incorporated by reference to Exhibit 10.2 to Series A's Registration Statement on Form S-1, File No. 333-43033 dated as of March 23, 1998)
8 10.3 Form of Advisory Agreement among the Registrant, Prudential Securities Futures Management Inc., and the Trading Advisor (incorporated by reference to Exhibit 10.3 to Series A's Registration Statement on Form S-1, File No. 333-43033 dated as of March 23, 1998) 10.4 Form of Representation Agreement Concerning the Registration Statement and the Prospectus among the Trust, Prudential Securities Futures Management Inc., Prudential Securities Incorporated, Wilmington Trust Company and the Trading Advisor (incorporated by reference to Exhibit 10.4 to Series A's Registration Statement on Form S-1, File No. 333-43033 dated as of March 23, 1998) 10.5 Form of Net Worth Agreement between Prudential Securities Futures Management Inc. and Prudential Securities Incorporated (incorporated by reference to Exhibit 10.5 to Series A's Registration Statement on Form S-1, File No. 333-43033 dated as of March 23, 1998) 10.6 Form of Foreign Currency Addendum to Brokerage Agreement between the Trust and Prudential Securities Incorporated (incorporated by reference to Exhibit 10.6 to Series A's Quarterly Report on Form 10-Q, File No. 333-43033, for the quarter ended March 31, 1998) 13.1 Registrant's 1998 Annual Report (with the exception of the information and data incorporated by reference in Items 5, 7 and 8 of this Annual Report on Form 10-K, no other information or data appearing in the Registrant's 1998 Annual Report is to be deemed filed as part of this report) (filed herewith) 27.1 Financial Data Schedule (filed herewith) (b) Reports on Form 8-K--None No reports on Form 8-K were filed during the last quarter of the period covered by this report.
9 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant 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 Carlino Date: March 31, 1999 ---------------------------------------- Steven Carlino Vice President, Chief Accounting Officer and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities (with respect to the Managing Owner) and on the dates indicated. By: Prudential Securities Futures Management Inc. A Delaware corporation, Managing Owner By: /s/ Eleanor L. Thomas Date: March 31, 1999 ----------------------------------------- Eleanor L. Thomas First Vice President By: /s/ Barbara J. Brooks Date: March 31, 1999 ----------------------------------------- Barbara J. Brooks Chief Financial Officer By: /s/ Steven Carlino Date: March 31, 1999 ----------------------------------------- Steven Carlino Vice President and Treasurer By: Date: ----------------------------------------- A. Laurence Norton, Jr. Director By: /s/ Guy S. Scarpaci Date: March 31, 1999 ----------------------------------------- Guy S. Scarpaci Director By: /s/ Tamara B. Wright Date: March 31, 1999 ----------------------------------------- Tamara B. Wright Senior Vice President and Director 10 EX-13 2 ANNUAL REPORT 1998 - -------------------------------------------------------------------------------- World Monitor Trust--Series A Annual Report LETTER TO LIMITED OWNERS FOR WORLD MONITOR TRUST--SERIES A 1 PricewaterhouseCoopers (LOGO) PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 Telephone (212) 596 8000 Facsimile (212) 596 8910 Report of Independent Accountants January 26, 1999 To the Managing Owner and Limited Owners of World Monitor Trust--Series A In our opinion, the accompanying statements of financial condition and the related statements of operations and changes in trust capital present fairly, in all material respects, the financial position of World Monitor Trust--Series A at December 31, 1998 and 1997, and the results of its operations for the period from June 10, 1998 (commencement of operations) to December 31, 1998 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Managing Owner; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by the Managing Owner, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP 2 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) STATEMENTS OF FINANCIAL CONDITION
December 31, ------------------------- 1998 1997 - --------------------------------------------------------------------------------------------------- ASSETS Equity in commodity trading accounts: Cash $11,008,050 $ 1,000 Net unrealized loss on open commodity positions (103,243) -- ------------- ------- Total assets $10,904,807 $ 1,000 ------------- ------- ------------- ------- LIABILITIES AND TRUST CAPITAL Liabilities Commissions payable $ 74,604 $ -- Management fee payable 19,457 -- ------------- ------- Total liabilities 94,061 -- ------------- ------- Commitments Trust capital Limited interests (108,568.155 and 0 interests outstanding) 10,673,116 -- General interests (1,400.000 and 10 interests outstanding) 137,630 1,000 ------------- ------- Total trust capital 10,810,746 1,000 ------------- ------- Total liabilities and trust capital $10,904,807 $ 1,000 ------------- ------- ------------- ------- Net asset value per limited and general interests ('Interests') $ 98.31 $100.00 ------------- ------- ------------- ------- - --------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
3 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) STATEMENT OF OPERATIONS For the period from June 10, 1998 (commencement of operations) through December 31, 1998
- --------------------------------------------------------------------------------------------------- REVENUES Net realized gain on commodity transactions $ 174,935 Net unrealized loss on open commodity positions (103,243) Interest income 272,034 -------------------- 343,726 -------------------- EXPENSES Commissions 381,231 Management fees 98,289 Incentive fees 36,064 -------------------- 515,584 -------------------- Net loss $ (171,858) -------------------- -------------------- ALLOCATION OF NET LOSS Limited interests $ (170,904) -------------------- -------------------- General interests $ (954) -------------------- -------------------- NET LOSS PER WEIGHTED AVERAGE LIMITED AND GENERAL INTEREST Net loss per weighted average limited and general interest $ (1.96) -------------------- -------------------- Weighted average number of limited and general interests outstanding 87,552 -------------------- -------------------- - ---------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN TRUST CAPITAL
LIMITED GENERAL INTERESTS INTERESTS INTERESTS TOTAL - ----------------------------------------------------------------------------------------------------- Trust capital--December 31, 1997 10.000 $ -- $ 1,000 $ 1,000 Contributions 111,257.885 10,972,172 137,584 11,109,756 Net loss -- (170,904) (954 ) (171,858) Redemptions (1,299.730) (128,152) -- (128,152) ----------- ----------- --------- ----------- Trust capital--December 31, 1998 109,968.155 $10,673,116 $137,630 $10,810,746 ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- - ----------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
4 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) NOTES TO FINANCIAL STATEMENTS A. General The Trust, Trustee, Managing Owner and Affiliates World Monitor Trust (the 'Trust') is a business trust organized under the laws of Delaware on December 17, 1997. The Trust commenced trading operations on June 10, 1998 and will terminate on December 31, 2047 unless terminated sooner as provided in the Second Amended and Restated Declaration of Trust and Trust Agreement. The Trust was formed to engage in the speculative trading of a diversified portfolio of futures, forward and options contracts and may, from time to time, engage in cash and spot transactions. The trustee of the Trust is Wilmington Trust Company. The managing owner is Prudential Securities Futures Management Inc. (the 'Managing Owner'), a wholly owned subsidiary of Prudential Securities Incorporated ('PSI') which, in turn, is a wholly owned subsidiary of Prudential Securities Group Inc. PSI is the selling agent for the Trust as well as the commodity broker ('Commodity Broker') of the Trust. The Offering Beneficial interests in the Trust ('Interests') are being offered pursuant to Rule 415 of Regulation C under the Securities Act of 1933 in three separate and distinct series ('Series'): Series A, B and C. The assets of each Series are segregated from the other Series, separately valued and independently managed. Up to $100,000,000 of Interests ('Subscription Maximum'), $34,000,000 for Series A and $33,000,000 each for Series B and C, are being offered to investors who meet certain established suitability standards, with a minimum initial subscription of $5,000 per subscriber or, for any investment made on behalf of an individual retirement account, the minimum initial subscription is $2,000. A subscriber may purchase Interests in any one or a combination of Series although the minimum purchase for any single Series is $1,000. On June 10, 1998, Series A completed its initial offering with gross proceeds of $6,039,177 from the sale of 59,631.775 limited interests and 760 general interests. Thereafter, or until the Subscription Maximum for each Series is sold, each Series' Interests will continue to be offered on a weekly basis at the net asset value per Interest ('Continuous Offering Period'). Additional purchases may be made in $100 increments. The Managing Owner is required to maintain at least a 1% interest in the capital, profits and losses of each Series so long as it is acting as the Managing Owner, and it will make such contributions (and in return will receive such general interests) as are necessary to effect this requirement. The Trading Advisor Each Series has its own independent commodity trading advisor that makes that Series' trading decisions. The Managing Owner, on behalf of the Trust, entered into an advisory agreement with Eagle Trading Systems, Inc. ('Trading Advisor') to make the trading decisions for Series A. The advisory agreement may be terminated at the discretion of the Managing Owner. The Managing Owner has allocated 100% of the proceeds from the initial and continuous offering of Series A to the Trading Advisor and it is currently contemplated that the Trading Advisor will continue to be allocated 100% of additional capital raised for Series A during the Continuous Offering Period. Exchanges, Redemptions and Termination Interests owned in one Series may be exchanged, without any charge, for Interests of one or more other Series on a weekly basis for as long as Interests in those Series are being offered to the public. Exchanges are made at the applicable Series' then current net asset value per Interest as of the close of business on the Friday immediately preceding the week in which the exchange request is effected. The exchange of Interests is treated as a redemption of Interests in one Series (with the related tax consequences) and the simultaneous purchase of Interests in the Series exchanged into. Redemptions are permitted on a weekly basis. Interests redeemed on or before the end of the first and second successive six-month periods after their effective dates of purchase are subject to a redemption fee 5 of 4% and 3%, respectively, of the net asset value at which they are redeemed. Redemption fees are paid to the Managing Owner. In the event that the estimated net asset value per Interest of a Series at the end of any business day, after adjustments for distributions, declines by 50% or more since the commencement of trading activities or the first day of a fiscal year, the Series will terminate. B. Summary of Significant Accounting Principles Basis of accounting The books and records of Series A are maintained on the accrual basis of accounting in accordance with generally accepted accounting principles. Commodity futures and forward transactions are reflected in the accompanying statements of financial condition on trade date. The difference between the original contract amount and market value is reflected as net unrealized gain or loss. The market value of each contract is based upon the closing quotation on the exchange, clearing firm or bank on, or through, which the contract is traded. The weighted average number of limited and general interests outstanding was computed for purposes of disclosing net income per weighted average limited and general interest. The weighted average limited and general interests are equal to the number of Interests outstanding at period end, adjusted proportionately for Interests subscribed and redeemed based on their respective time outstanding during such period. Series A has elected not to provide a Statement of Cash Flows as permitted by Statement of Financial Accounting Standards No. 102, 'Statement of Cash Flows--Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale.' Income taxes Series A is treated as a partnership for Federal income tax purposes. As such, Series A is not required to provide for, or pay, any federal or state income taxes. Income tax attributes that arise from its operations are passed directly to the individual Interest holders including the Managing Owner. Series A may be subject to other state and local taxes in jurisdictions in which it operates. Profit and loss allocations and distributions Series A allocates profits and losses for both financial and tax reporting purposes to its Interest holders weekly on a pro rata basis based on each owner's Interests outstanding during the week. Distributions (other than redemptions of Interests) may be made at the sole discretion of the Managing Owner on a pro rata basis in accordance with the respective capital balances of the Interest holders; however, the Managing Owner does not presently intend to make any distributions. New Accounting Guidance In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities ('SFAS 133'), which Series A is required to adopt effective January 1, 2000. SFAS 133 establishes accounting and reporting standards for derivative instruments and for hedging activities and requires that an entity recognize all derivatives as assets or liabilities measured at fair value. Series A does not believe the effect of adoption will be material. C. Fees Organizational, offering, general and administrative costs PSI or its affiliates pay the costs of organizing Series A and offering its Interests as well as administrative costs incurred by the Managing Owner or its affiliates for services it performs for Series A. These costs include, but are not limited to, those discussed in Note D below. Routine legal, audit, postage and other routine third party administrative costs also are paid by PSI or its affiliates. Management and incentive fees Series A pays its Trading Advisor a management fee at an annual rate of 2% of Series A's net asset value allocated to its management. The management fee is determined weekly and the sum of such weekly amounts is paid monthly. Series A also pays its Trading Advisor a quarterly incentive fee equal to 23% of 6 such Trading Advisor's 'New High Net Trading Profits' (as defined in the advisory agreement). The incentive fee also accrues weekly. Commissions The Managing Owner and the Trust entered into a brokerage agreement (the 'Brokerage Agreement') with PSI to act as Commodity Broker for each Series whereby Series A pays a fixed fee for brokerage services rendered at an annual rate of 7.75% of Series A's net asset value. The fee is determined weekly and the sum of such weekly amounts is paid monthly. From this fee, PSI pays execution costs (including floor brokerage expenses, give-up charges and NFA, clearing and exchange fees), as well as compensation to employees who sell Interests. D. Related Parties The Managing Owner or its affiliates perform services for Series A which include but are not limited to: brokerage services, accounting and financial management, investor communications, printing and other administrative services. As further described in Note C, except for costs related to brokerage services, PSI or its affiliates pay the costs of these services in addition to costs of organizing the Trust and offering its Interests as well as the routine operational, administrative, legal and auditing fees. The costs charged to Series A for brokerage services for the period from June 10, 1998 (commencement of operations) to December 31, 1998 were $381,231. All of the proceeds of the offering of Series A are received in the name of Series A and are deposited at PSI. Series A's assets are maintained either in trading or cash accounts with PSI 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 earned on the average net assets on deposit at PSI. 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 each Series pursuant to a line of credit. PSI may require that collateral be posted against the marked-to-market position of Series A. As of December 31, 1998, a non-U.S. affiliate of the Managing Owner owns 101.112 limited interests of Series A. E. Income Taxes There have been no differences between the tax basis and book basis of Interest holders' capital since inception of the Trust. F. Credit and Market Risk Since Series A's business is to trade futures, forward (including foreign exchange transactions) and options 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 contracts (credit risk). Futures, forward and options contracts involve varying degrees of off-balance sheet risk; and changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the contracts (or commodities underlying the contracts) frequently result in changes in unrealized gain (loss) on open commodity positions reflected in the statements of financial condition. Series A's exposure to market risk is influenced by a number of factors including the relationships among the contracts held by Series A as well as the liquidity of the markets in which the contracts are traded. Futures and options contracts are traded on organized exchanges and are thus distinguished from forward contracts which are entered into privately by the parties. The credit risks associated with futures and options contracts are typically perceived to be less than those associated with forward contracts because exchanges typically provide clearinghouse arrangements in which the collective credit (subject to certain limitations) of the members of the exchanges is pledged to support the financial integrity of the exchange. On the other hand, Series A must rely solely on the credit of its broker (PSI) with respect to forward 7 transactions. Series A presents unrealized gains and losses on open forward positions as a net amount in the statements of financial condition because it has a master netting agreement with PSI. The Managing Owner attempts to minimize both credit and market risks by requiring the 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 (currently, PSI is the sole counterparty or broker); 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. The Managing Owner may impose additional restrictions (through modifications of such 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 the futures commission merchant in accepting orders for the purchase or sale of domestic futures and options 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 and options trading and is not to commingle such assets with other assets of PSI. At December 31, 1998, such segregated assets totalled $9,423,047. Part 30.7 of the CFTC regulations also requires PSI to secure assets of Series A related to foreign futures and options trading which totalled $1,843,816 at December 31, 1998. There are no segregation requirements for assets related to forward trading. As of December 31, 1998, all open futures and forward contracts mature generally within six months. As of December 31, 1998, gross contract amounts of open futures and forward contracts for Series A are: Financial Futures Contracts: Commitments to purchase $18,683,310 Commitments to sell 16,579,358 Currency Forward Contracts: Commitments to purchase 362,056 Other Futures Contracts: Commitments to sell 3,076,903 The gross contract amounts represent Series A's potential involvement in a particular class of financial instrument (if it were to take or make delivery on an underlying futures or forward contract). The gross contract amounts significantly exceed the future cash requirements as Series A intends to close out open positions prior to settlement and thus 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 futures and forward contracts to be the net unrealized gain or loss on the contracts. Thus, the amount at risk associated with counterparty nonperformance of all contracts is the net unrealized gain included in the statements of financial condition. The market risk associated with Series A's commitments to purchase commodities is limited to the gross contract amounts involved, while the market risk associated with its commitments to sell is unlimited since its potential involvement is to make delivery of an underlying commodity at the contract price; therefore, it must repurchase the contract at prevailing market prices. 8 The following table presents the fair value of futures and forward contracts at December 31, 1998, and also presents their average fair value and trading revenues for the period from June 10, 1998 (commencement of operations) through December 31, 1998.
Fair Value Average Fair Value ---------------------------- ------------------------ Trading Assets Liabilities Assets Liabilities Revenues ------------ ----------- -------- ----------- --------- Futures Contracts: Domestic exchanges Financial $ -- $ -- $ -- $ -- $ (44,325) Currencies -- -- 16,840 2,196 (335,203) Other 31,724 11,760 60,041 11,195 131,508 Foreign exchanges Financial 204,523 -- 166,705 2,820 698,360 Currencies -- -- -- -- 75,919 Other 34,326 -- 5,085 83,278 (161,602) Forward Contracts: Currencies -- 362,056 245,765 356,962 (292,965) ------------ ----------- -------- ----------- --------- $270,573 $ 373,816 $494,436 $ 456,451 $ 71,692 ------------ ----------- -------- ----------- --------- ------------ ----------- -------- ----------- ---------
9 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) 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. Additional contributions raised through the continuous offering for the period June 10, 1998 (commencement of operations) through December 31, 1998 resulted in additional gross proceeds to Series A of $5,071,579. Additional Interests of Series A will continue to be offered on a weekly basis at the net asset value per Interest until the Subscription Maximum of $34,000,000 is sold. At December 31, 1998, 100% of Series A's net assets were allocated to commodities trading. A significant portion of the net assets was held in cash which is 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, forward and options 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's Trading Advisor to abide by various trading limitations and policies. See Note F to the financial statements for a further discussion on the credit and market risks associated with Series A's futures, forward and options contracts. Series A does not have, nor does it expect to have, any capital assets. Redemptions of limited interests for the period from June 10, 1998 (commencement of operations) through December 31, 1998 were $128,152. Future redemptions and contributions will impact the amount of funds available for investment in commodity contracts in subsequent periods. Results of Operations Series A commenced trading operations on June 10, 1998, and as such, no comparative information to prior periods is available. The net asset value per Interest as of December 31, 1998 was $98.31, a decrease of 1.69% from the June 10, 1998 initial net asset value per Interest of $100.00. The MAR (Managed Accounts Reports) Fund/Pool Index return for the June through December 1998 period was 4.69%. MAR tracked the performance of 281 futures funds in 1998. Series A reported flat performance for the nearly seven months of trading in 1998. Gains in the financial and energy sectors failed to outpace losses in the currency, metal, grain, and index sectors. The financial sector proved most profitable for Series A with the majority of gains earned during the third quarter. The default of Russia on its sovereign debt and fear of similar risks in Latin America raised anxiety 10 across global financial markets in the third quarter. The subsequent flight to higher quality fixed income instruments and the abrupt widening of credit spreads exacerbated the situation. As a result, Series A's long positions in European, U.S. and Japanese fixed income futures provided profits which continued into the fourth quarter. Short positions in the energy sector also achieved gains when energy prices trended lower due to high inventories. Volatility characterized market activity across the currency, metal, grain, and index sectors. Following the considerable choppiness across the markets in the third quarter, Series A closed many of its positions and limited exposure. Fourth quarter attempts to establish currency positions, particularly the deutschemark and British pound, were liquidated with losses sustained as trends failed to materialize. As the year ended, Series A had relatively limited exposure to the markets. Interest income is earned on the average net assets held at PSI and, therefore, varies monthly according to interest rates, trading performance, contributions and redemptions. Interest income was $272,000 for the period from June 10, 1998 to December 31, 1998. Commissions are calculated on Series A's net asset value at the end of each week and therefore, vary according to weekly trading performance, contributions and redemptions. Commissions were $381,000 for the period from June 10, 1998 to December 31, 1998. All trading decisions for Series A are made by Eagle Trading Systems, Inc. (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, contributions and redemptions. Management fees were $98,000 for the period from June 10, 1998 to December 31, 1998. Incentive fees are based on the New High Net Trading Profits generated by the Trading Advisor, as defined in the Advisory Agreement among the Trust, the Managing Owner and the Trading Advisor. Incentive fees were $36,000 for the period from June 10, 1998 to December 31, 1998. New Accounting Guidance In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities ('SFAS 133'), which Series A is required to adopt effective January 1, 2000. SFAS 133 establishes accounting and reporting standards for derivative instruments and for hedging activities and requires that an entity recognize all derivatives as assets or liabilities measured at fair value. Series A does not believe the effect of adoption will be material. Year 2000 Risk Investment funds, like financial and business organizations and individuals around the world, depend on the smooth functioning of computer systems. The year 2000, however, holds the potential for a significant disruption in the operation of these systems. Many computer systems in use today cannot distinguish the year 2000 from the year 1900 because of the way in which dates are encoded. This is commonly known as the 'Year 2000 Problem.' Series A could be adversely affected if computer systems used by it or any third party with whom it has a material relationship do not properly perform date comparisons and calculations concerning dates on or after January 1, 2000, which in turn could have a negative impact on the handling or determination of trades and prices and the services provided to Series A. Series A has engaged third parties to perform primarily all of the services it needs. Accordingly, Series A's Year 2000 Problems, if any, are not its own but those that center around the ability of the Trustee, Managing Owner, Prudential Securities Incorporated, its Trading Advisor and any other third party with whom Series A has a material relationship (individually, a 'Service Provider,' and collectively, the 'Service Providers') to address and correct problems that may cause their systems not to function as intended as a result of the Year 2000 Problem. Series A has received assurances from its Managing Owner, Prudential Securities Incorporated and its Trading Advisor that they anticipate being able to continue their operations without any material adverse impact from the Year 2000 Problem. Although other Service Providers, such as Series A's Trustee, have not made similar representations to Series A, Series A has no reason to believe that these Service Providers will not take steps necessary to avoid any material adverse impact on Series A, though there can be no assurance that this will be the case. The costs or consequences of incomplete or untimely resolution of the Year 2000 Problem by the Service Providers, or by governments, exchanges, clearing houses, regulators, 11 banks and other third parties, are unknown to Series A at this time, but could have a material adverse impact on the operations of Series A. The Managing Owner will promptly notify Series A's limited owners in the event it determines that the Year 2000 Problem will have a material adverse impact on Series A's operations. Series A has considered various alternatives as a contingency plan. If the Year 2000 Problems are systemic, for example, the federal government, the banking system, exchanges or utilities are affected materially, there may be no adequate contingency plan for Series A to follow other than to suspend operations. If the Year 2000 Problems are related to one or more of the other Service Providers selected by Series A, Series A believes that each such Service Provider is prepared to address any Year 2000 Problems which arise that could have a material adverse impact on Series A's operations. Inflation Inflation has had no material impact on operations or on the financial condition of the Trust from inception through December 31, 1998. 12 - -------------------------------------------------------------------------------- I hereby affirm that, to the best of my knowledge and belief, the information contained herein relating to World Monitor Trust--Series A is accurate and complete. PRUDENTIAL SECURITIES FUTURES MANAGEMENT INC. (Managing Owner) By: Barbara J. Brooks Chief Financial Officer - -------------------------------------------------------------------------------- 13 OTHER INFORMATION The actual round-turn equivalent of brokerage commissions paid per contract for the period from June 10, 1998 (commencement of operations) to December 31, 1998 was $121. Series A's Annual Report on Form 10-K as filed with the Securities and Exchange Commission is available to limited owners without charge upon written request to: World Monitor Trust--Series A P.O. Box 2016 Peck Slip Station New York, New York 10272-2016 14 Peck Slip Station BULK RATE P.O. Box 2016 U.S. POSTAGE New York, NY 10272 PAID Automatic Mail PFT1/17152 EX-27 3 ART. 5 FDS FOR 10-K
5 The Schedule contains summary financial information extracted from the financial statements for World Monitor Trust-Series A and is qualified in its entirety by reference to such financial statements 1051822 World Monitor Trust-Series A 1 Dec-31-1998 Jun-10-1998 Dec-31-1998 7-Mos 11,008,050 (103,243) 0 0 0 10,904,807 0 0 10,904,807 94,061 0 0 0 0 10,810,746 10,904,807 0 343,726 0 0 515,584 0 0 0 0 0 0 0 0 (171,858) (1.96) 0 Registrant commenced operations June 10, 1998
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