-----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, IS/1s8btbrouW454EBzvuzojIAT9/I3j2qTFblYqFUj2aT5glGyS/nsICFZA6HiI QxGvi56Upz1nvWurWIJqjw== 0000898733-02-000202.txt : 20020415 0000898733-02-000202.hdr.sgml : 20020415 ACCESSION NUMBER: 0000898733-02-000202 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLD MONITOR TRUST SERIES C CENTRAL INDEX KEY: 0001051824 STANDARD INDUSTRIAL CLASSIFICATION: [6221] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-43043 FILM NUMBER: 02591938 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 sf15421k.txt WORLD MONITOR TRUST -- SERIES C -- 12/31/2001 10K 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, 2001 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: 0-25789 WORLD MONITOR TRUST--SERIES C - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3985042 - -------------------------------------------------------------------------------- (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 [CK] DOCUMENTS INCORPORATED BY REFERENCE Registrant's Annual Report to Interest holders for the year ended December 31, 2001 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 9 and 10. WORLD MONITOR TRUST--SERIES C (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.......................................................... 5 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..................................................................... 6 PART III Item 10 Directors and Executive Officers of the Registrant............................... 6 Item 11 Executive Compensation........................................................... 8 Item 12 Security Ownership of Certain Beneficial Owners and Management 8 Item 13 Certain Relationships and Related Transactions................................... 8 PART IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.................. 9 Financial Statements and Financial Statement Schedules........................... 9 Exhibits......................................................................... 9 Reports on Form 8-K.............................................................. 10 SIGNATURES.................................................................................. 11
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 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 Agreement'). The Trust consists of three separate and distinct series ('Series'): Series A, B and C. The assets of each Series are segregated from those of the other Series, separately valued and independently managed. Each Series 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. Series C (the 'Registrant') is engaged solely in the business of commodity futures and forward trading; therefore, presentation of industry segment information is not applicable. The Offering Beneficial interests in each Series ('Interests') are being offered once each week until each Series' subscription maximum has been issued either through sale or exchange or until the managing owner of the Registrant, Prudential Securities Futures Management Inc. (the 'Managing Owner'), suspends the offering of Interests. On June 10, 1998, a sufficient number of subscriptions for each Series had been received and accepted by the managing owner to permit each Series to commence trading. The Registrant completed its initial offering with gross proceeds of $5,706,177 from the sale of 56,301.770 limited interests and 760.000 general interests. General interests are sold exclusively to the managing owner. Series A was offered until it reached its subscription maximum of $34,000,000 during November 1999. Interests in Series B and Series C will continue to be offered on a weekly basis at the then current net asset value per Interest until the Managing Owner suspends the offering of Interests or the subscription maximum of $33,000,000 for each Series is sold ('Continuous Offering Period'). On February 25, 2002, the Managing Owner elected to suspend the offering of Interests in Series B and Series C upon the expiration of current selling registrations. The registration expired in many states on March 24, 2002 and all registrations will expire by April 30, 2002. While the Managing Owner does not anticipate doing so, it may, at its election, reinstate the offering of Interests in Series B and Series C in the future. During the Continuous Offering Period through December 31, 2001, the Registrant raised additional gross proceeds of $18,023,985. Managing Owner and its Affiliates The Managing Owner of the Registrant is a wholly-owned subsidiary of Prudential Securities Incorporated ('PSI'), which, in turn, is an indirect wholly-owned subsidiary of Prudential Financial, Inc. PSI is the selling agent for the Registrant, as well as its commodity broker. 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 general interests) as are necessary to meet this requirement. The Trading Advisor Each Series has its own independent commodity trading advisor that makes that Series' trading decisions. As of June 7, 2000, Hyman Beck & Company, Inc. ('Hyman Beck') ceased to serve as a trading advisor to the Registrant. The advisory agreement among the Registrant, the Managing Owner and Hyman Beck was automatically terminated when the assets allocated to Hyman Beck declined by greater than 33 1/3% from their initial allocation on June 10, 1998. On November 13, 2000, the Managing Owner entered into a new advisory agreement with Northfield Trading L.P. (the 'Trading Advisor'), an independent commodities trading advisor, to make the trading decisions for the Registrant. The new advisory agreement may be terminated for various reasons, including at the discretion of the Managing Owner. The management fee paid to the Trading Advisor equals 0.0385% 3 of the Registrant's allocated assets determined as of the close of business each Friday (an annual rate of 2%), the same previously paid to Hyman Beck. The quarterly incentive fee paid to the Trading Advisor equals 20% of the 'New High Net Trading Profits' as defined in the advisory agreement among the Registrant, the Managing Owner and the Trading Advisor as compared to 23% paid to Hyman Beck. Additionally, the Trading Advisor must recoup the cumulative trading losses of Hyman Beck before it is paid an incentive fee. Furthermore, since Series C's assets were not allocated to commodities trading from June 8, 2000 until the new Trading Advisor began trading, Series C was not subject to management fees or commissions during that period. The Managing Owner has allocated 100% of the proceeds from the initial and continuous offering of the Registrant to the Trading Advisor and it is currently contemplated that the Trading Advisor will continue to be allocated 100% of additional capital raised for the Registrant 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 Managing Owner suspends the offering of Interests or until the subscription maximum is reached. As such, the Registrant may compete with other entities, whether or not formed by the Managing Owner, to attract new participants. In addition, to the extent that the Trading Advisor recommends similar or identical trades 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, as well as with other market participants. 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 financial statements included in its annual report to limited owners for the year ended December 31, 2001 (the 'Registrant's 2001 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 and the use of proceeds is incorporated by reference to Note A to the Registrant's 2001 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 transacted within one year of the effective date of purchase. Additionally, Interests owned in one series of the Trust (Series A, B or C) 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. (See also Item 1, Business, for information regarding suspension of the offering of Interests.) Once the suspension of the offering of Interests takes effect, Interests owned in one series of the Trust may no longer be exchanged for Interests of one or more other Series. Exchanges and redemptions are calculated based on the applicable Series' then current net asset value per Interest as of the close of 4 business on the Friday immediately preceding the week in which the exchange or redemption request is effected. The Registrant did not sell any unregistered interests (i.e. general interests) exempt from registration under Section 4(2) of the Securities Act of 1933 during the year ended December 31, 2001. 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 21, 2002, there were 772 holders of record owning 71,843.746 Interests which include 743.000 general interests. Item 6. Selected Financial Data The following table presents selected financial data of the Registrant. This data should be read in conjunction with the financial statements of the Registrant and the notes thereto on pages 2 through 12 of the Registrant's 2001 Annual Report, which is filed as an exhibit hereto.
Period from June 10, 1998 (commencement of Year ended December 31, operations) to ------------------------------------------- December 31, 2001 2000 1999 1998 ----------- ----------- ----------- ----------------- Total revenues (including interest) $ (769,077) $(1,829,920) $ 68,782 $ 1,011,204 ----------- ----------- ----------- ----------------- ----------- ----------- ----------- ----------------- Net income/(loss) $(1,533,203) $(2,573,344) $(1,680,118) $ 465,857 ----------- ----------- ----------- ----------------- ----------- ----------- ----------- ----------------- Net income/(loss) per weighted average Interest $ (17.34) $ (17.03) $ (10.83) $ 5.80 ----------- ----------- ----------- ----------------- ----------- ----------- ----------- ----------------- Total assets $ 5,685,845 $ 9,850,243 $18,684,023 $11,384,130 ----------- ----------- ----------- ----------------- ----------- ----------- ----------- ----------------- Net asset value per Interest $ 74.67 $ 93.28 $ 95.98 $ 104.22 ----------- ----------- ----------- ----------------- ----------- ----------- ----------- -----------------
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This information is incorporated by reference to pages 13 through 17 of the Registrant's 2001 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 12 of the Registrant's 2001 Annual Report, which is filed as an exhibit hereto. 5 Selected unaudited quarterly financial data for the years ended December 31, 2001 and 2000 are summarized below:
For the period For the period For the period For the period from June 30, from September from January 1, from March 31, 2001 to 29, 2001 to 2001 to March 2001 to June 29, September 28, December 31, 30, 2001 2001 2001 2001 ---------------- ----------------- --------------- --------------- Total Revenues (including interest) $ 302,683 $ (552,416) $ 592,386 $(1,111,730) ---------------- ----------------- --------------- --------------- ---------------- ----------------- --------------- --------------- Total Revenues (including interest) less commissions $ 126,890 $ (709,480) $ 449,616 $(1,243,180) ---------------- ----------------- --------------- --------------- ---------------- ----------------- --------------- --------------- Net income (loss) $ 81,392 $ (750,105) $ 412,689 $(1,277,179) ---------------- ----------------- --------------- --------------- ---------------- ----------------- --------------- --------------- Net income (loss) per weighted average Interest $ .80 $ (8.18) $ 5.00 $ (16.41) ---------------- ----------------- --------------- --------------- ---------------- ----------------- --------------- ---------------
For the period For the period For the period For the period from July 1, from September from January 1, from April 1, 2000 to 30, 2000 to 2000 to March 2000 to June 30, September 29, December 31, 31, 2000 2000 2000 2000 ---------------- ----------------- --------------- --------------- Total Revenues (including interest) $ (3,610,226) $(1,155,268) $ 148,431 $ 2,787,143 ---------------- ----------------- --------------- --------------- ---------------- ----------------- --------------- --------------- Total Revenues (including interest) less commissions $ (3,917,191) $(1,345,858) $ 148,431 $ 2,693,707 ---------------- ----------------- --------------- --------------- ---------------- ----------------- --------------- --------------- Net income (loss) $ (3,996,291) $(1,394,956) $ 148,431 $ 2,669,472 ---------------- ----------------- --------------- --------------- ---------------- ----------------- --------------- --------------- Net income (loss) per weighted average Interest $ (21.18) $ (7.90) $ 1.11 $ 24.61 ---------------- ----------------- --------------- --------------- ---------------- ----------------- --------------- ---------------
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. All of these 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 and Ten Percent Owners 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. 6 The directors and executive officers of the Managing Owner and their positions with respect to the Registrant are as follows:
Name Position Alex H. Ladouceur Chairman of the Board of Directors and Director Eleanor L. Thomas President and Director Barbara J. Brooks Chief Financial Officer Guy S. Scarpaci Director Tamara B. Wright Senior Vice President and Director Thomas T. Bales Vice President David Buchalter Secretary
ALEX H. LADOUCEUR, born 1960, has been Chairman of the Board of Directors and a Director of the Managing Owner since November 2001 and also has held such positions with Seaport Futures Management, Inc. ('Seaport Futures'), an affiliate of the Managing Owner, since such date. Mr. Ladouceur joined PSI in August 2001 as Executive Vice President, Head of the Global Derivatives division. He is responsible for all operating activities of PSI's Global Derivatives division including sales and trading, foreign exchange, base and precious metals, and the trading floors. In addition, Mr. Ladouceur has responsibility for Alternative Investment Strategies. Mr. Ladouceur joined PSI from Credit Lyonnais Rouse Ltd. ('CLR'), where he served as president of their United States operations since 1992 and as a main board director of CLR in London since 1994. In 1998, he was appointed managing director of Global Cash Markets at CLR with responsibility for leading global market-making and sales for OTC products, including structured derivative products. Mr. Ladouceur earned his bachelor's degree in Economics from the University of Calgary in Alberta, Canada, and his master's degree in European Studies from the College of Europe in Bruges, Belgium. ELEANOR L. THOMAS, born 1954, has been a Director and President of the Managing Owner since September 2000 and was a Director and Executive Vice President from April 1999 to September 2000. She was a First Vice President of the Managing Owner and Seaport Futures from October 1998 to April 1999 and a Director and the President of Seaport Futures since such date. Ms. Thomas is a Senior Vice President and the Director of Alternative Investment Strategies at PSI. She is responsible for origination, asset allocation, due diligence, marketing and sales for the group's product offerings. 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. She graduated Summa Cum Laude from Long Island University with a B.A. in English Literature, and graduated Baruch College in 1986 with an M.B.A. in Accounting. Ms. Thomas is a certified public accountant. BARBARA J. BROOKS, born 1948, became the Treasurer and Chief Financial Officer of the Managing Owner in May 1990, at which time she also became the Treasurer and Chief Financial Officer of Seaport Futures. In 1998, she relinquished her position as Treasurer of the Managing Owner and Seaport Futures. She is a Senior Vice President of PSI and is the Vice President-Finance and the Chief Financial Officer of various entities affiliated with PSI. She has been employed by PSI since 1983. Ms. Brooks is a certified public accountant. GUY S. SCARPACI, born 1947, has been a Director of the Managing Owner since July 1987 and was Assistant Treasurer from May 1988 until December 1989. In addition, Mr. Scarpaci has been a Director of Seaport Futures since May 1989. Mr. Scarpaci was first affiliated with the Managing Owner in July 1987. Mr. Scarpaci has been employed by PSI in positions of increasing responsibility since August 1974, and he is currently a Senior Vice President of the Global Derivatives division. TAMARA B. WRIGHT, born 1959, has been a Senior Vice President of the Managing Owner and Seaport Futures since October 1998 and a Director of the Managing Owner since December 1998. She is also a Senior Vice President and the Chief Administrative Officer for the International Division at PSI. In this capacity, her responsibilities include financial management, risk management, systems implementation, employment matters and internal control policies and procedures. Previously, Mrs. Wright served as Director 7 of Consumer Markets Risk Management, where she led the Domestic and International Branch efforts in ensuring the timely resolution of audit, compliance and legal concerns. Prior to joining the firm, Mrs. Wright was a manager with PricewaterhouseCoopers LLP in its Management Consulting division in New York, New York. THOMAS T. BALES, born 1959, is a Vice President of the Managing Owner. He is also a Senior Vice President of Futures Administration in the Global Derivatives division for PSI, and he serves in various capacities for other affiliated companies. Prior to joining the Global Derivatives division, Mr. Bales served as in-house counsel in the Law Department of PSI from October 1987 through May 1996. Mr. Bales joined PSI in November 1981 as an Analyst in the Credit Analysis Department and later served as a Section Manager. DAVID BUCHALTER, born 1958, has been the Secretary of both the Managing Owner and Seaport Futures since October 1996. Mr. Buchalter is a Senior Vice President and is Senior Counsel in the Law Department of PSI. Prior to joining PSI in January 1992, Mr. Buchalter was associated with the law firm of Rosenman & Colin LLP from April 1988 to January 1992. Prior to that, from May 1983 through March 1988, Mr. Buchalter served as in-house counsel for Shearson Lehman Hutton, Inc. and its predecessor firm, E.F. Hutton & Co., Inc. Effective March 2001, A. Laurence Norton, Jr. resigned as a Director of both the Managing Owner and Seaport Futures. Additionally, Steven Carlino resigned as Vice President and Treasurer for both the Managing Owner and Seaport Futures effective March 2002. Effective November 2001, Alex H. Ladouceur was elected by the Board of Directors of the Managing Owner as Chairman of the Board and he has served as Chairman of the Board of Seaport Futures since November 2001. 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 21, 2002, 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 21, 2002, no director or executive officer of the Managing Owner owns directly or beneficially any of the Interests issued by the Registrant. As of March 21, 2002, no owners of limited interests beneficially own more than five percent (5%) of the limited interests issued by the Registrant. 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 2001 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, if any, for their services. 8 PART IV
Annual Report 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 2001 Annual Report, which is filed as an exhibit hereto Report of Independent Accountants 2 Financial Statements: Statements of Financial Condition--December 31, 2001 and 2000 3 Condensed Schedule of Investments--At December 31, 2001 4 Statements of Operations--Three years ended December 31, 2001 5 Statements of Changes in Trust Capital--Three years ended December 31, 2001 5 Notes to Financial Statements 6 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 the Registrant's Registration Statement on Form S-1, File No. 333-43043, dated as of March 23, 1998) 4.2 Form of Request for Redemption (incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-1, File No. 333-43043, dated as of March 23, 1998) 4.3 Form of Exchange Request (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-1, File No. 333-43043, dated as of March 23, 1998) 4.4 Form of Subscription Agreement (incorporated by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-1, File No. 333-43043, 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 the Registrant's Registration Statement on Form S-1, File No. 333-43043, dated as of March 23, 1998) 10.2 Form of Brokerage Agreement between the Trust and Prudential Securities Incorporated (incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-1, File No. 333-43043, dated as of March 23, 1998)
9 10.3 Form of Advisory Agreement among the Registrant, Prudential Securities Futures Management Inc., and Hyman Beck (incorporated by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form S-1, File No. 333-43043, dated as of March 23, 1998) 10.4 Form of Representation Agreement Concerning the Registration Statement and the Prospectus among the Registrant, Prudential Securities Futures Management Inc., Prudential Securities Incorporated, Wilmington Trust Company and the Trading Advisor (incorporated by reference to Exhibit 10.4 to the Registrant's Registration Statement on Form S-1, File No. 333-43043, dated as of March 23, 1998) 10.5 Form of Net Worth Agreement between Prudential Securities Futures Management Inc. and Prudential Securities Group Inc. (incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1, File No. 333-43043, 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 the Registrant's Quarterly Report on Form 10-Q, File No. 333-43043, for the quarter ended March 31, 1998) 10.7 Form of Amended and Restated Advisory Agreement dated October 31, 2000 among the Registrant, Prudential Securities Futures Management Inc. and Northfield Trading L.P. (incorporated by reference to Exhibit 10.7 to the Registrant's Form 10-K, File No. 0-25789, for the year ended December 31, 2000) 13.1 Registrant's 2001 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 2001 Annual Report is to be deemed filed as part of this report) (filed herewith) (b) Reports on Form 8-K--None
10 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 C By: Prudential Securities Futures Management Inc. A Delaware corporation, Managing Owner By: /s/ Barbara J. Brooks Date: March 28, 2002 ---------------------------------------- Barbara J. Brooks Chief Financial Officer
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/ Alex H. Ladouceur Date: March 28, 2002 ----------------------------------------- Alex H. Ladouceur Chairman of the Board of Directors and Director By: /s/ Eleanor L. Thomas Date: March 28, 2002 ----------------------------------------- Eleanor L. Thomas President and Director By: /s/ Barbara J. Brooks Date: March 28, 2002 ----------------------------------------- Barbara J. Brooks Chief Financial Officer (chief accounting officer) By: /s/ Guy S. Scarpaci Date: March 28, 2002 ----------------------------------------- Guy S. Scarpaci Director By: Date: ----------------------------------------- Tamara B. Wright Senior Vice President and Director
11 EX-13 3 sf15421a.txt WORLD MONITOR TRUST -- SERIES C -- 12/31/2001 ANNUAL LETTER TO LIMITED OWNERS FOR WORLD MONITOR TRUST--SERIES C 1 PricewaterhouseCoopers (LOGO) PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 Telephone (646) 471-4000 Facsimile (646) 471-4100 Report of Independent Accountants To the Managing Owner and Limited Owners of World Monitor Trust--Series C In our opinion, the accompanying statements of financial condition, including the condensed schedule of investments, 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 C at December 31, 2001 and 2000 and the results of its operations and changes in trust capital for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United States of America, 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 our opinion. /s/ PricewaterhouseCoopers LLP January 25, 2002, except for Note H, as to which the date is March 19, 2002 2 WORLD MONITOR TRUST--SERIES C (a Delaware Business Trust) STATEMENTS OF FINANCIAL CONDITION
December 31, --------------------------- 2001 2000 - -------------------------------------------------------------------------------------------- ASSETS Cash $5,467,182 $8,485,803 Net unrealized gain on open futures contracts 218,663 1,364,440 ------------ ---------- Total assets $5,685,845 $9,850,243 ------------ ---------- ------------ ---------- LIABILITIES AND TRUST CAPITAL Liabilities Commissions payable $ 33,998 $ 70,591 Redemptions payable 30,609 19,399 Management fees payable 9,946 24,235 ------------ ---------- Total liabilities 74,553 114,225 ------------ ---------- Commitments Trust capital Limited interests (74,266.692 and 103,274.013 interests outstanding) 5,545,728 9,633,406 General interests (878 and 1,100 interests outstanding) 65,564 102,612 ------------ ---------- Total trust capital 5,611,292 9,736,018 ------------ ---------- Total liabilities and trust capital $5,685,845 $9,850,243 ------------ ---------- ------------ ---------- Net asset value per limited and general interests ('Interests') $ 74.67 $ 93.28 ------------ ---------- ------------ ---------- - -------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
3 WORLD MONITOR TRUST--SERIES C (a Delaware Business Trust) Condensed Schedule of Investments At December 31, 2001
Net Unrealized Gain (Loss) as a % of Net Unrealized Futures Contracts Trust Capital Gain (Loss) - ------------------------------------------------------------------------------------------------------ Futures contracts purchased: Stock indices $ 5,543 Interest rates 1,047 Currencies 18,150 Commodities 11,410 -------------- Net unrealized gain on futures contracts purchased 0.64% 36,150 -------------- Futures contracts sold: Stock indices (1,571) Interest rates 94,839 Currencies 81,825 Commodities 7,420 -------------- Net unrealized gain on futures contracts sold 3.25 182,513 ------ -------------- Net unrealized gain on futures contracts 3.89% $218,663 ------ -------------- ------ -------------- Settlement Currency--Futures Contracts Euro 1.80% 101,142 Hong Kong dollar (0.12) (6,797) Japanese yen 0.04 2,252 U.S. dollar 2.17 122,066 ------ -------------- Total 3.89% $218,663 ------ -------------- ------ -------------- - ------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these statements.
4 WORLD MONITOR TRUST--SERIES C (a Delaware Business Trust) STATEMENTS OF OPERATIONS
Year Ended December 31, -------------------------------------------------------------- 2001 2000 1999 - --------------------------------------------------------------------------------------------------------- REVENUES Net realized gain (loss) on commodity transactions $ 54,273 $(2,966,111) $ (970,845) Change in net unrealized gain on open commodity positions (1,145,777) 415,646 218,373 Interest income 322,427 720,545 821,254 -------------------- ----------------- ----------------- (769,077) (1,829,920) 68,782 -------------------- ----------------- ----------------- EXPENSES Commissions 607,077 590,991 1,275,546 Management fees 157,049 152,433 329,595 Incentive fees -- -- 143,759 -------------------- ----------------- ----------------- 764,126 743,424 1,748,900 -------------------- ----------------- ----------------- Net loss $ (1,533,203) $(2,573,344) $(1,680,118) -------------------- ----------------- ----------------- -------------------- ----------------- ----------------- ALLOCATION OF NET LOSS Limited interests $ (1,515,619) $(2,531,322) $(1,655,869) -------------------- ----------------- ----------------- -------------------- ----------------- ----------------- General interests $ (17,584) $ (42,022) $ (24,249) -------------------- ----------------- ----------------- -------------------- ----------------- ----------------- NET LOSS PER WEIGHTED AVERAGE LIMITED AND GENERAL INTEREST Net loss per weighted average limited and general interest $ (17.34) $ (17.03) $ (10.83) -------------------- ----------------- ----------------- -------------------- ----------------- ----------------- Weighted average number of limited and general interests outstanding 88,445 151,116 155,131 -------------------- ----------------- ----------------- -------------------- ----------------- ----------------- - ---------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN TRUST CAPITAL
LIMITED GENERAL INTERESTS INTERESTS INTERESTS TOTAL - ----------------------------------------------------------------------------------------------------- Trust capital--December 31, 1998 108,363.103 $11,151,465 $141,740 $11,293,205 Contributions 110,965.263 11,497,940 122,462 11,620,402 Net loss (1,655,869) (24,249 ) (1,680,118) Redemptions (26,916.959) (2,765,590) -- (2,765,590) ----------- ----------- --------- ----------- Trust capital--December 31, 1999 192,411.407 18,227,946 239,953 18,467,899 Contributions 9,814.185 823,864 -- 823,864 Net loss (2,531,322) (42,022 ) (2,573,344) Redemptions (97,851.579) (6,887,082) (95,319 ) (6,982,401) ----------- ----------- --------- ----------- Trust capital--December 31, 2000 104,374.013 9,633,406 102,612 9,736,018 Contributions 3,607.238 323,014 -- 323,014 Net loss (1,515,619) (17,584 ) (1,533,203) Redemptions (32,836.559) (2,895,073) (19,464 ) (2,914,537) ----------- ----------- --------- ----------- Trust capital--December 31, 2001 75,144.692 $ 5,545,728 $ 65,564 $ 5,611,292 ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- - ----------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
5 WORLD MONITOR TRUST--SERIES C (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 consists of three separate and distinct series ('Series'): Series A, B and C. The assets of each Series are segregated from those of the other Series, separately valued and independently managed. Each Series 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 an indirect wholly-owned subsidiary of Prudential Financial, Inc. PSI is the selling agent for the Trust, as well as its commodity broker ('Commodity Broker'). The Offering Beneficial interests in each Series ('Interests') are being offered once each week until each Series' subscription maximum has been issued either through sale or exchange or until the Managing Owner suspends the offering of Interests. On June 10, 1998, a sufficient number of subscriptions for each Series had been received and accepted by the Managing Owner to permit each Series to commence trading. Series C completed its initial offering with gross proceeds of $5,706,177 from the sale of 56,301.770 limited interests and 760.000 general interests. General interests are sold exclusively to the Managing Owner. Series A was offered until it achieved its subscription maximum of $34,000,000 during November 1999. Interests in Series B and Series C will continue to be offered on a weekly basis at the then current net asset value per Interest until the Managing Owner suspends the offering of Interests (see Note H) or the subscription maximum of $33,000,000 for each Series is sold ('Continuous Offering Period'). Series B and Series C are offered to investors who meet certain established suitability standards, with a minimum initial subscription of $5,000 ($2,000 for an individual retirement account) per subscriber, although the minimum purchase for any single Series is $1,000. 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 general interests) as are necessary to meet this requirement. The Trading Advisor Each Series has its own independent commodity trading advisor that makes that Series' trading decisions. As of June 7, 2000, Hyman Beck & Company, Inc. ('Hyman Beck') ceased to serve as a trading advisor to Series C. The advisory agreement among Series C, the Managing Owner and Hyman Beck was automatically terminated when the assets allocated to Hyman Beck declined by greater than 33 1/3% from their initial allocation on June 10, 1998. On November 13, 2000, the Managing Owner entered into a new advisory agreement with Northfield Trading L.P. (the 'Trading Advisor'), an independent commodities trading advisor, to make the trading decisions for Series C. The new advisory agreement may be terminated for various reasons, including at the discretion of the Managing Owner. The management fee paid to the Trading Advisor equals 0.0385% of Series C's allocated assets determined as of the close of business each Friday (an annual rate of 2%), the same previously paid to Hyman Beck. The quarterly incentive fee paid to the Trading Advisor equals 20% of the 'New High Net Trading Profits' as defined in the advisory agreement among Series C, the Managing Owner and the Trading Advisor as compared to 23% paid to Hyman Beck. Additionally, the Trading Advisor must recoup the cumulative trading losses of Hyman Beck before it is paid an incentive fee. Furthermore, since Series C's assets were not allocated to commodities trading from June 8, 2000 until the new Trading Advisor began trading, Series C was not subject to management fees or commissions during that period. 6 The Managing Owner has allocated 100% of the proceeds from the initial and continuous offering of Series C 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 C during the Continuous Offering Period. Exchanges, Redemptions and Termination Interests owned in one series of the Trust (Series A, B or C) 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. Once the suspension of the offering of Interests takes effect (see Note H), Interests owned in one series of the Trust may no longer be exchanged for Interests of one or more other Series. 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 other Series. 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 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 Policies Basis of accounting The financial statements of Series C are prepared in accordance with accounting principles generally accepted in the United States of America. Commodity futures and/or 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 loss 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 C 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 C is treated as a partnership for Federal income tax purposes. As such, Series C 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 C may be subject to other state and local taxes in jurisdictions in which it operates. Profit and loss allocations and distributions Series C 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. Financial Reporting by Commodity Pools During March 2001, the Accounting Standards Executive Committee issued Statement of Position ('SOP') 01-1, Amendment to Scope of Statement of Position 95-2, Financial Reporting by Nonpublic 7 Investment Partnerships, to Include Commodity Pools, which is effective for financial statements issued for periods ending after December 15, 2001. This SOP amends SOP 95-2, Financial Reporting by Nonpublic Investment Partnerships, to include within its scope commodity pools such as Series C. Under the new requirements, Series C is required to present a condensed schedule of investments and certain other information in accordance with the American Institute of Certified Public Accountants' Audit and Accounting Guide 'Audits of Investment Companies.' The adoption of the requirements of SOP 01-1 has not had a material effect on Series C's financial position or results of operations. C. Fees Organizational, offering, general and administrative costs PSI or its affiliates paid the costs of organizing Series C and continue to pay the costs of offering its Interests, as well as administrative costs incurred by the Managing Owner or its affiliates for services they perform for Series C. 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 C paid Hyman Beck a management fee at an annual rate of 2% and a quarterly incentive fee equal to 23% of the 'New High Net Trading Profits' until June 2000 when Hyman Beck ceased to serve as trading advisor. As of November 13, 2000 a new advisory agreement was executed with the new Trading Advisor whereby Series C pays the new Trading Advisor a management fee at an annual rate of 2% and a quarterly incentive fee equal to 20% of the 'New High Net Trading Profits' as more fully discussed in Note A. The management fee is determined weekly and the sum of such weekly amounts is paid monthly. The incentive fee also accrues weekly. Commissions The Managing Owner and the Trust entered into a brokerage agreement with PSI to act as Commodity Broker for each Series whereby Series C pays a fixed fee for brokerage services rendered at an annual rate of 7.75% of Series C'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 C, 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. 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 offering Series C's Interests, as well as its routine operational, administrative, legal and auditing costs. The costs charged to Series C for brokerage services for the years ended December 31, 2001, 2000 and 1999 were $607,077, $590,991 and $1,275,546, respectively. All of the proceeds of the offering of Series C are received in the name of Series C and are deposited in trading or cash accounts at PSI. Series C's assets are maintained either with PSI or, for margin purposes, with the various exchanges on which Series C is permitted to trade. PSI credits Series C monthly with 100% of the interest it earns on the average net assets in Series C's accounts. Series C, 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 C pursuant to a line of credit. PSI may require that collateral be posted against the marked-to-market positions of Series C. As of December 31, 2001, a non-U.S. affiliate of the Managing Owner owned 172.024 limited interests of Series C. 8 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. Derivative Instruments and Associated Risks Series C 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 C'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 amount of the contracts, which is typically many times that of Series C's net assets being traded, significantly exceeds Series C's future cash requirements since Series C intends to close out its open positions prior to settlement. As a result, Series C is generally subject only to the risk of loss arising from the change in the value of the contracts. As such, Series C 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 C's commitments to purchase commodities is limited to the gross or face amount of the contracts held. However, when Series C 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 C 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 C holds and the liquidity and inherent volatility of the markets in which Series C trades. Credit risk When entering into futures or forward contracts, Series C 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 such exchanges. 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 C enters into forward transactions, the sole counterparty is PSI, Series C's commodity broker. Series C 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 C's contracts is the net unrealized gain included in the statements of financial condition. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its obligations to Series C. The Managing Owner attempts to minimize both credit and market risks by requiring Series C 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 C, the Managing Owner and the Trading Advisor, Series C 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. Furthermore, the Second Amended and Restated Declaration of Trust and Trust Agreement provides that Series C will liquidate its positions, and eventually dissolve, if Series C experiences a decline in the 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 9 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 interest of Series C. PSI, when acting as the 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 C all assets of Series C relating to domestic futures trading (subject to the opt out provisions discussed below) and is not allowed to commingle such assets with other assets of PSI. At December 31, 2001, such segregated assets totalled $2,973,467. Part 30.7 of the CFTC regulations also requires PSI to secure assets of Series C related to foreign futures trading which totalled $2,712,378 at December 31, 2001. There are no segregation requirements for assets related to forward trading. The CFTC promulgated rules that allow futures commission merchants to permit certain customers, including Series C, to opt out of segregation with regard to trading on certain exchanges, but PSI has not done so to date. If Series C were to opt out, its funds could be held in a broader and potentially riskier range of investments than are allowed for segregated funds. As of December 31, 2001, all open futures contracts mature within six months. The following table presents the fair value of futures contracts at December 31, 2000.
2000 -------------------------- Assets Liabilities ---------- ----------- Futures Contracts: Domestic exchanges Interest rates $ 690,183 $ -- Currencies 299,500 -- Commodities 29,920 14,700 Foreign exchanges Stock indices 38,411 13,862 Interest rates 212,658 -- Commodities 122,330 -- ---------- ----------- $1,393,002 $ 28,562 ---------- ----------- ---------- -----------
G. Financial Highlights
Year ended December 31, 2001 ----------------- Performance per Interest Net asset value, beginning of period $ 93.28 ----------------- Net realized gain and change in net unrealized gain on commodity transactions (13.51) Interest income 3.53 Expenses (8.63) ----------------- Net decrease for the period (18.61) ----------------- Net asset value, end of period $ 74.67 ----------------- ----------------- Total return (19.95)% Ratio to average net assets Interest income 4.11% Expenses 9.74%
These financial highlights represent the overall results of Series C during 2001. An individual limited owner's actual results may differ depending on the timing of contributions and redemptions. 10 H. Subsequent Event On February 25, 2002, the Managing Owner elected to suspend the offering of Interests in Series B and Series C upon the expiration of current selling registrations. The registration expired in many states on March 24, 2002 and all registrations will expire by April 30, 2002. While the Managing Owner does not anticipate doing so, it may, at its election, reinstate the offering of Interests in Series B and Series C in the future. 11 - ------------------------------------------------------------------------------- I hereby affirm that, to the best of my knowledge and belief, the information contained herein relating to World Monitor Trust--Series C is accurate and complete. PRUDENTIAL SECURITIES FUTURES MANAGEMENT INC. (Managing Owner) By: Barbara J. Brooks Chief Financial Officer - ------------------------------------------------------------------------------- 12 WORLD MONITOR TRUST--SERIES C (a Delaware Business Trust) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Series C commenced operations on June 10, 1998 with gross proceeds of $5,706,177 allocated to commodities trading. Additional contributions raised through the continuous offering for the years ended December 31, 2001 and 2000 and for the period from June 10, 1998 (commencement of operations) to December 31, 2001 resulted in additional gross proceeds to Series C of $323,014, $823,864 and $18,023,985, respectively. Additional Interests of Series C will continue to be offered on a weekly basis at the then current net asset value per Interest until the Managing Owner of Series C suspends the offering of Interests or the subscription maximum of $33,000,000 is sold. Interests in Series C may be redeemed on a weekly basis, but are subject to a redemption fee if transacted within one year of the effective date of purchase. Redemptions of limited interests and general interests for the year ended December 31, 2001 were $2,895,073 and $19,464, respectively; for the year ended December 31, 2000 were $6,887,082 and $95,319, respectively; and for the period from June 10, 1998 (commencement of operations) to December 31, 2001 were $12,683,279 and $114,783, respectively. Additionally, Interests owned in one series of the Trust (Series A, B or C) 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. Since Interests in Series A are no longer being offered, participants can no longer exchange their Interests from Series B and/or Series C into Series A; however, participants can currently continue to exchange their Interests from Series A into Series B and/or Series C. As further discussed in Note H to the financial statements, the Managing Owner elected to suspend the offering of Interests in Series B and Series C upon the expiration of current selling registrations. Once the suspension of the offering of Interests takes effect, Interests owned in one series of the Trust may no longer be exchanged for Interests of one or more other Series. Future contributions, redemptions and exchanges will impact the amount of funds available for investment in commodity contracts in subsequent periods. At December 31, 2001, 100% of Series C'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 C's trading in commodities. Inasmuch as the sole business of Series C is to trade in commodities, Series C continues to own such liquid assets to be used as margin. PSI credits Series C monthly with 100% of the interest it earns on the average net assets in Series C'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 C from promptly liquidating its commodity futures positions. Since Series C'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 contracts (credit risk). Series C'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 relationships among the contracts held. The inherent uncertainty of Series C's speculative trading, as well as the development of drastic market occurrences, could result in monthly losses considerably beyond Series C'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 C 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 F to the financial statements for a further discussion on the credit and market risks associated with Series C's futures and forward contracts. 13 Series C does not have, nor does it expect to have, any capital assets. Results of Operations The net asset value per Interest as of December 31, 2001 was $74.67, a decrease of 19.95% from the December 31, 2000 net asset value per Interest of $93.28, which was a decrease of 2.81% from the December 31, 1999 net asset value per Interest of $95.98. The Zurich Fund/Pool Qualified Universe Index (formerly the MAR Fund/Pool Index), which tracked the performance of 272 futures funds at December 31, 2001, returned 7.52% and 9.41% for the years ended December 31, 2001 and 2000, respectively. Past performance is not necessarily indicative of future results. Series C's gross trading losses were $1,092,000, $2,550,000 and $752,000 during the years ended December 31, 2001, 2000 and 1999, respectively. Due to the nature of Series C's trading activities, a period to period comparison of its trading results is not meaningful. Additionally, Series C did not participate in commodities trading during the period from the termination of Hyman Beck as a trading advisor to Series C to the commencement of trading activities by Northfield Trading L.P. as further discussed below. However, a detailed discussion of Series C's 2001 trading results is presented below. Net losses for Series C were experienced in the currency, energy and index sectors. Profits were the result of net gains in the interest rate sector. In foreign exchange markets, the U.S. dollar rose slightly against many foreign currencies during the first half of the year, reflecting expectations that some of those economies might be adversely affected by slower economic growth in the United States. Additionally, the U.S. dollar strengthened as investors around the globe felt that it was the safest currency in this time of economic uncertainty. Losses were incurred in long Mexican peso, euro and Swiss franc positions. The U.S. dollar fell against most major currencies during the third quarter, particularly the Japanese yen, the euro and the Swiss franc. The U.S. dollar's downward trend against many currencies accelerated after September 11th. As a result of the attacks, many investors switched exposure from the U.S. dollar to other currencies which rose against the U.S. dollar resulting in losses for short euro, Japanese yen and Swiss franc positions. The U.S. dollar strengthened slightly towards year-end amid hopes of an economic recovery in the U.S. Energy prices generally remained high throughout most of the first quarter of 2001. Crude oil prices increased in January as OPEC announced a likely 5% cut in production. During the second quarter, energy prices fell in response to growing inventory levels of crude oil and related products. Energy prices peaked sharply immediately after the September 11th attacks amid worries of a potential interruption in supplies. Prices soon reversed course as concerns of decreased demand caused by a global economic recession outweighed fears of scarcity. Two weeks after the attacks, oil prices plunged more than 12% to a 22-month low of $23 a barrel. OPEC leaders announced that with prices within their $22 to $28 a barrel target, they saw no need to alter output and assured that there will be no disruption in supplies. Fear of continued terrorist attacks, sluggish economies and mild winter weather continued to limit growth in global demand for oil during the fourth quarter. A coordinated cut in oil output by OPEC and non-OPEC producers was agreed upon as OPEC tried to regain control of crude oil prices. Natural gas and crude oil positions incurred losses during the first, third and fourth quarters of the year resulting in net losses for Series C in this sector. Equity markets performed poorly across the board during the first half of the year as foreign stock markets generally followed the downtrend of the U.S. markets. Technology stocks led this market downturn and the NASDAQ fell to its lowest level in nearly two years. Losses in the Dow Jones and NASDAQ brought these indices under the key 10,000 and 2,000 levels, respectively, with the DAX, FTSE, CAC-40 and Nikkei experiencing similar losses. Long Nikkei Dow and DAX positions resulted in losses during the second quarter. The terrorist attacks of September 11th further weakened the sluggish U.S. and global economies plunging equity markets downward throughout the world in the week following the attacks. In the week following the attacks, the Dow Jones industrial average suffered its worst weekly percentage loss since the Great Depression due to uncertainty about how the economy would perform as a result of these attacks and other threats of terrorism. U.S. equity indices recovered somewhat at the end of September as interest rate cuts by the U.S. Federal Reserve (the 'Fed') and fiscal stimuli by Congress combined to stimulate an economic rebound. Global equity markets followed suit rebounding from earlier lows as well. U.S. and global equity markets rallied in November amid positive developments in the war in Afghanistan and sentiment that the U.S. economy might be emerging from its recession. Equity markets reversed in December providing a negative return for the second consecutive year. Losses incurred in equity index positions 14 during the second quarter were sufficient to offset gains during the rest of the year, producing net losses for the index sector. In light of the rapid weakening in economic expansion and deterioration in business and consumer confidence, the Fed followed a relatively aggressive policy, lowering interest rates three times during the first quarter of 2001. Other central banks followed the Fed's lead lowering interest rates as well. Interest rate instruments trended upward throughout most of the second and third quarters as major central banks cut short-term interest rates in an attempt to bolster slowing economies. The bond market rally continued in the wake of September 11th as the Fed moved to inject liquidity into the economy, cutting interest rates 50 basis points on September 17th to 3%. This move was soon followed by the Central Bank of Canada, the European Central Bank and Swiss National Central Bank who also lowered their rates by 50 basis points. U.S. and European interest rate instruments began the fourth quarter up as data indicated persistent weakness in the U.S. economy. In an effort to stimulate the economy, the Fed lowered interest rates by 50 basis points in October and again in early November. The European Central Bank and the Bank of England each cut rates by 50 basis points in November. In mid-November, some positive economic news, the fall of Kabul, Afghanistan and an announcement by the U.S. Treasury regarding the cessation of sales of 30-year bonds, resulted in one of the greatest reversals the U.S. bond market has seen in recent times. Interest rates climbed sharply in the U.S. and Europe causing bond prices to fall. In December, the Fed lowered rates by another 25 basis points and bond prices climbed slightly. Gains resulted from long euro bond positions during the first, third and fourth quarters of the year. As of June 7, 2000, Hyman Beck ceased to serve as trading advisor to Series C. The advisory agreement among Series C, the Managing Owner and Hyman Beck was automatically terminated when the assets allocated to Hyman Beck declined by greater than 33 1/3% from their initial allocation on June 10, 1998. On November 13, 2000, the Managing Owner entered into a new advisory agreement with Northfield Trading L.P. (the 'Trading Advisor') to make the trading decisions for Series C. The management fee paid to the Trading Advisor equals 0.0385% of Series C's allocated assets determined as of the close of business each Friday (an annual rate of 2%), the same fee as was previously paid to Hyman Beck. The quarterly incentive fee paid to the Trading Advisor equals 20% of the 'New High Net Trading Profits' as defined in the advisory agreement among Series C, the Managing Owner and the Trading Advisor as compared to 23% paid to Hyman Beck. Additionally, the Trading Advisor must recoup the cumulative trading losses of Hyman Beck before it is paid an incentive fee. Furthermore, since Series C's assets were not allocated to commodities trading from June 8, 2000 until the new Trading Advisor began trading, Series C was not subject to management fees or commissions during that period. Fluctuations in overall average net asset levels have led to corresponding fluctuations in interest earned and commissions and management fees incurred by Series C, which are largely based on the level of net assets. Series C's average net asset levels were lower during the year ended December 31, 2001 versus 2000, primarily due to redemptions and unfavorable trading performance in 2001 offset, in part, by additional contributions in 2000 and 2001. Series C's average net asset levels were lower during the year ended December 31, 2000 versus 1999, primarily from redemptions. Interest income is earned on the average net assets held at PSI and, therefore, varies weekly according to weekly trading performance, contributions and redemptions. Interest income decreased by $398,000 during 2001 as compared to 2000, primarily due to fluctuations in net asset levels as discussed above, compounded by lower overall interest rates in 2001 versus 2000. Interest income decreased $101,000 during 2000 as compared to 1999 due to the fluctuations in net asset levels as discussed above, offset, in part, by higher overall interest rates in 2000 versus 1999. Commissions are calculated on Series C's net asset value at the end of each week and, therefore, vary according to weekly trading performance, contributions and redemptions. Commissions increased $16,000 during 2001 as compared to 2000, but decreased $685,000 during 2000 as compared to 1999 due to the fluctuations in average net asset levels, as well as the postponement of commissions charged to Series C by PSI on the net assets unallocated to commodities trading as discussed above. Management fees are calculated on Series C's net asset value at the end of each week and, therefore, are affected by weekly trading performance, contributions and redemptions. Management fees increased $5,000 during 2001 as compared to 2000, but decreased $177,000 during 2000 as compared to 1999 due to 15 the fluctuations in average net asset levels, as well as the termination of Hyman Beck as the trading advisor of Series C 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 C, the Managing Owner and the trading advisor. Incentive fees paid to Hyman Beck were approximately $144,000 for the year ended December 31, 1999. Series C did not incur an incentive fee during 2000 and 2001. Although Series C ended 1999 with an overall loss, incentive fees were generated by strong trading performance during the first six months of the year. The payment of these fees is not contingent upon future trading performance and, therefore, is unaffected by Series C's poor trading performance during the remainder of 1999, 2000 and 2001. Since their commencement of trading activities during November 2000, Northfield Trading L.P. has not earned an incentive fee. Financial Reporting by Commodity Pools During March 2001, the Accounting Standards Executive Committee issued Statement of Position ('SOP') 01-1, Amendment to Scope of Statement of Position 95-2, Financial Reporting by Nonpublic Investment Partnerships, to Include Commodity Pools, which is effective for financial statements issued for periods ending after December 15, 2001. This SOP amends SOP 95-2, Financial Reporting by Nonpublic Investment Partnerships, to include within its scope commodity pools such as Series C. Under the new requirements, Series C is required to present a condensed schedule of investments and certain other information in accordance with the American Institute of Certified Public Accountants' Audit and Accounting Guide 'Audits of Investment Companies.' The adoption of the requirements of SOP 01-1 has not had a material effect on Series C's financial position or results of operations. Inflation Inflation has had no material impact on operations or on the financial condition of Series C from inception through December 31, 2001. 16 OTHER INFORMATION The actual round-turn equivalent of brokerage commissions paid per contract for the year ended December 31, 2001 was $28. Series C'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 C/0TH Peck Slip Station P.O. Box 2303 New York, New York 10273-0005 17 2001 - ------------------------------------------------------------------------------- World Monitor Trust--Series C Annual Report 0TH Peck Slip Station BULK RATE P.O. Box 2303 U.S. POSTAGE New York, NY 10273-0005 PAID Automatic Mail -----END PRIVACY-ENHANCED MESSAGE-----