-----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, AwH/itHa+EciHKz2VD2MlHtuuJ3kL81rbt8pk/LQSJOxh2M9oVw/08gbrlO0AxuN 3bRCdnO5SxjK1CPzzfgG0A== 0000898733-03-000131.txt : 20030318 0000898733-03-000131.hdr.sgml : 20030318 20030318124335 ACCESSION NUMBER: 0000898733-03-000131 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030318 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLD MONITOR TRUST II SERIES D CENTRAL INDEX KEY: 0001090697 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-32685 FILM NUMBER: 03607317 BUSINESS ADDRESS: STREET 1: ONE NEW YORK PLAZA 13TH FL CITY: NEW YORK STATE: NY ZIP: 10292-2013 BUSINESS PHONE: 2127787866 MAIL ADDRESS: STREET 1: ONE NEW YORK PLAZA 13TH FL CITY: NEW YORK STATE: NY ZIP: 10292-2013 10-K 1 sf15932k.txt WORLD MONITOR TRUST II--SERIES D -- FORM 10-K -- DEC 31, 2002 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, 2002 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ______________________ Commission file number: 0-32685 WORLD MONITOR TRUST II--SERIES D - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-4058318 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 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] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes __ No CK DOCUMENTS INCORPORATED BY REFERENCE Prospectus, included as part of Post-Effective Amendment No. 4 to the Registration Statement on Form S-1 (File No. 333-83011), filed with the Securities and Exchange Commission (the 'SEC') on April 2, 2002, is incorporated by reference into Parts I, II and III of this Annual Report on Form 10-K Registrant's Annual Report to Interest holders for the year ended December 31, 2002 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 10 and 11. WORLD MONITOR TRUST II--SERIES D (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...................................... 6 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 Item 14 Controls and Procedures.......................................................... 9 PART IV Item 15 Exhibits, Financial Statement Schedules, and Reports on Form 8-K................. 10 Financial Statements and Financial Statement Schedules........................... 10 Exhibits......................................................................... 10 Reports on Form 8-K.............................................................. 11 SIGNATURES.................................................................................. 12 CERTIFICATIONS.............................................................................. 13
2 PART I Item 1. Business General World Monitor Trust II (the 'Trust') is a business trust organized under the laws of Delaware on April 22, 1999. The Trust consists of three separate and distinct series ('Series'): Series D, E and F. Series D, E and F commenced trading operations on March 13, 2000, April 6, 2000 and March 1, 2000, respectively, and each Series will continue to exist until terminated pursuant to the provisions of Article XIII of the Second Amended and Restated Declaration of Trust and Trust Agreement (the 'Trust Agreement'). 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. World Monitor Trust--Series D (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 Up to $50,000,000 of limited interests in each Series ('Limited Interests') are being offered (totalling $150,000,000) ('Subscription Maximum'). Limited Interests are being offered to investors who meet certain established suitability standards, with a minimum initial subscription of $5,000 ($2,000 for an individual retirement account), although the minimum purchase for any single Series is $1,000. General interests are also being sold exclusively to the Managing Owner. Limited Interests and general interests are sometimes collectively referred to as 'Interests'. Initially, the Limited Interests for each Series were offered for a period of up to 180 days after the date of the Prospectus ('Initial Offering Period') at $100 per Interest. The subscription minimum of $5,000,000 for each Series was reached during the Initial Offering Period permitting Series D, E and F to commence trading operations. The Registrant completed its initial offering on March 13, 2000 with gross proceeds of $5,279,158, which was fully allocated to commodities trading. Until the Subscription Maximum for each Series is reached, each Series' Limited Interests will continue to be offered on a weekly basis at the then current net asset value per Interest ('Continuous Offering Period'). During the Continuous Offering Period through December 31, 2002, Series D raised additional gross proceeds of $7,770,812 from the sales of Interests. Managing Owner and its Affiliates 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 an indirect wholly-owned subsidiary of Prudential Financial, Inc. ('Prudential'). PSI is the selling agent for the Registrant, as well as its commodity broker. In February 2003, Prudential and Wachovia Corp. ('Wachovia') announced an agreement to combine each company's respective retail securities brokerage and clearing operations within a new firm, which will be headquartered in Richmond, Virginia. Under the agreement, Prudential will have a 38% ownership interest in the new firm and Wachovia will own 62%. The transaction, which includes the securities brokerage, securities clearing, and debt capital markets operations of PSI, but does not include the equity sales, trading and research operations or commodity brokerage and derivative operations of PSI, is anticipated to close in the third quarter of 2003. The Managing Owner, as well as the commodity broker, will continue to be indirect wholly owned subsidiaries of Prudential. 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. 3 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 Registrant, entered into an advisory agreement with Bridgewater Associates, Inc. (the 'Trading Advisor') to make the trading decisions for the Registrant. The advisory agreement may be terminated for various reasons, including at the discretion of the Managing Owner. 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 Limited Interests on a weekly basis 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 for the year ended December 31, 2002 ('Registrant's 2002 Annual Report'), which is filed as an exhibit hereto. Other In addition to the description above, information is incorporated herein by reference to the Prospectus included as a part of Post-Effective Amendment No. 4 to the Registration Statement on Form S-1 (File No. 333-83011), filed with the SEC on April 2, 2002 (the 'Prospectus'), and found therein under the following headings: 'SERIES D-Bridgewater Associates' Trading Strategy,' 'TRADING LIMITATIONS AND POLICIES,' 'DUTIES AND COMMITMENTS OF THE MANAGING OWNER' and 'SUMMARY OF AGREEMENTS.' 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 Limited Interests and the use of proceeds is incorporated by reference to Note A to the Registrant's 2002 Annual Report, which is filed as an exhibit hereto and the Prospectus sections entitled 'THE OFFERING-The Current Offering Period' and '-Use of Proceeds.' A significant secondary market for the Limited Interests has not developed, and is not expected to 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, Limited Interests may be redeemed on a weekly basis, but 4 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 D, E or F) may be exchanged, without any charge, for Interests of one or more other Series on a weekly basis for as long as Limited 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. The following table presents sales of 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, 2002. Amount of ----------------------------------- Date of Sale Interests sold Cash received - --------------------------------------------------------------- February 25, 2002 60 $ 4,693 May 6, 2002 65 $ 5,568 May 20, 2002 85 $ 7,397 November 4, 2002 150 $13,815 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 7, 2003, there were 794 holders of record owning 89,458.421 Interests, which include 900 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 10 of the Registrant's 2002 Annual Report, which is filed as an exhibit hereto.
For the period from March 13, 2000 (commencement of Year ended December 31, operations) to ------------------------ December 31, 2002 2001 2000 ---------- ---------- -------------------- Total revenues (including interest) $1,311,418 $ (60,689) $(375,118) ---------- ---------- -------------------- ---------- ---------- -------------------- Net income (loss) $ 764,248 $(463,991) $(834,523) ---------- ---------- -------------------- ---------- ---------- -------------------- Net income (loss) per weighted average Interest $ 11.41 $ (8.54) $ (13.32) ---------- ---------- -------------------- ---------- ---------- -------------------- Total assets $7,623,129 $4,412,721 $6,176,069 ---------- ---------- -------------------- ---------- ---------- -------------------- Net asset value per Interest $ 93.17 $ 81.84 $ 87.49 ---------- ---------- -------------------- ---------- ---------- --------------------
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This information is incorporated by reference to pages 12 through 14 of the Registrant's 2002 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. 5 Item 8. Financial Statements and Supplementary Data The financial statements are incorporated by reference to pages 2 through 10 of the Registrant's 2002 Annual Report, which is filed as an exhibit hereto. Selected unaudited quarterly financial data for the year ended December 31, 2002 and 2001 is summarized below:
For the period For the period For the period from January 1, For the period from June 29, from September 2002 from March 30, 2002 to 28, 2002 to to March 29, 2002 to June 28, September 27, December 31, 2002 2002 2002 2002 - ---------------------------------------------------------------------------------------------------------- Total Revenues (including interest) $ 84,851 $1,116,350 $(426,122) $536,336 ---------------- ---------------- --------------- -------------- ---------------- ---------------- --------------- -------------- Total Revenues (including interest) less commissions and other transaction fees $ 18,833 $1,025,449 $(530,648) $419,675 ---------------- ---------------- --------------- -------------- ---------------- ---------------- --------------- -------------- Net income (loss) $(10,490) $ 980,509 $(576,304) $370,533 ---------------- ---------------- --------------- -------------- ---------------- ---------------- --------------- -------------- Net income (loss) per weighted average Interest $ (0.19) $ 15.13 $ (7.96) $ 4.85 ---------------- ---------------- --------------- -------------- ---------------- ---------------- --------------- --------------
For the period For the period For the period from January 1, For the period from June 30, from September 2001 from March 31, 2001 to 29, 2001 to to March 30, 2001 to June 29, September 28, December 31, 2001 2001 2001 2001 - ---------------------------------------------------------------------------------------------------------- Total Revenues (including interest) $ (567,179) $ 78,219 $ 184,773 $243,498 ---------------- ---------------- --------------- -------------- ---------------- ---------------- --------------- -------------- Total Revenues (including interest) less commissions and other transaction fees $ (655,737) $ 10,323 $ 125,135 $176,651 ---------------- ---------------- --------------- -------------- ---------------- ---------------- --------------- -------------- Net income (loss) $ (694,485) $(18,122) $ 100,199 $148,417 ---------------- ---------------- --------------- -------------- ---------------- ---------------- --------------- -------------- Net income (loss) per weighted average Interest $ (10.10) $ (0.34) $ 2.17 $ 3.05 ---------------- ---------------- --------------- -------------- ---------------- ---------------- --------------- --------------
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 Limited Interests ('Ten Percent Owners') are required to report their initial ownership of such Limited Interests and any subsequent changes in that ownership to the SEC on Forms 3, 4 or 5. Such executive officers, directors and Ten Percent Owners are required by SEC 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 6 Managing Owner's directors and executive officers and Ten Percent Owners or copies of the reports that they have filed with the SEC during and with respect to its most recent fiscal year. 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 Steven Weinreb Treasurer and Chief Financial Officer Guy S. Scarpaci Director Tamara B. Wright Senior Vice President and Director Thomas T. Bales Vice President Paul Waldman 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 and is an Executive Vice President and 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. 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. STEVEN WEINREB, born 1962, became the Treasurer and Chief Financial Officer of the Managing Owner in May 2002, at which time he also became the Treasurer and Chief Financial Officer of Seaport Futures. He is a Senior Vice President and Controller of PSI. Prior to joining PSI in May 1991, he was with the public accounting firms Deloitte & Touche from 1986 to 1991 and from 1984 to 1986 with Laventhol & Horwath. Mr. Weinreb graduated in 1984 from the State University of New York at Albany with a B.S. in Accounting. Mr. Weinreb 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 7 capacity, her responsibilities include financial management, risk management, systems implementation, employment matters and internal control policies and procedures. Previously, Mrs. Wright served as Director 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. PAUL WALDMAN, born 1957, became the Secretary of the Managing Owner in November 2002, at which time he also became the Secretary of Seaport Futures. Prior to being elected Secretary, Mr. Waldman had served as Assistant Secretary for both the Managing Owner and Seaport Futures since December 1997. He is a First Vice President and Associate General Counsel of PSI. Mr. Waldman is responsible for the day-to-day corporate governance of PSI and its subsidiary companies. Prior to joining PSI in September 1988, Mr. Waldman worked for E.A. Sheslow & Co., a specialist firm on the NYSE and American Stock Exchange in 1986, and for F.P. Quinn & Co., a member firm of the Chicago Board Options Exchange, from 1984 to 1985. Mr. Waldman received a B.A. in Journalism from the University of Georgia in 1979, an M.A. in Political Science from Boston University in 1981, and a Juris Doctor from New York Law School in 1992. He is admitted to the New York and Connecticut bars. Effective May 2002, Steven Weinreb was elected by the Board of Directors of the Managing Owner as Chief Financial Officer replacing Barbara Brooks. Effective November 2002, Paul Waldman was elected by the Board of Directors of the Managing Owner as Secretary replacing David Buchalter. 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 7, 2003, 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 7, 2003, no director or executive officer of the Managing Owner owns directly or beneficially any of the Limited Interests issued by the Registrant. As of March 7, 2003 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. 8 Reference is made to Notes A, C and D to the financial statements in the Registrant's 2002 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. Additionally, reference is made to the Prospectus section entitled 'SUMMARY OF AGREEMENTS--Brokerage Agreement.' Item 14. Controls and Procedures Within the 90 days prior to the date of this report, the Managing Owner carried out an evaluation, under the supervision and with the participation of the officers of the Managing Owner, including the Managing Owner's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Registrant's disclosure controls and procedures. Based upon that evaluation, the Managing Owner's Chief Executive Officer and Chief Financial Officer concluded that Registrant's disclosure controls and procedures are effective. There were no significant changes in the Registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. 9 PART IV
Annual Report Page Number ------------- Item 15. 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 2002 Annual Report, which is filed as an exhibit hereto Report of Independent Accountants 2 Financial Statements: Statements of Financial Condition--December 31, 2002 and 2001 3 Condensed Schedules of Investments--At December 31, 2002 and 2001 4 Statements of Operations--Years ended December 31, 2002 and 2001 and for the period from March 13, 2000 (commencement of operations) to December 31, 2000 5 Statements of Changes in Trust Capital--Three years ended December 31, 2002 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 (a) Description: 3.1 and 4.1--Second Amended and Restated Declaration of Trust and Trust Agreement of World Monitor Trust II dated as of March 28, 2002 (incorporated by reference to Exhibit 3.1 and 4.1 to Post-Effective Amendment No. 4 to the Registrant's Registration Statement on Form S-1, File No. 333-83011, filed on April 2, 2002) 4.2--Form of Request for Redemption (incorporated by reference to Exhibit 4.2 to Post-Effective Amendment No. 4 to the Registrant's Registration Statement on Form S-1, File No. 333-83011, filed on April 2, 2002) 4.3--Form of Exchange Request (incorporated by reference to Exhibit 4.3 to Post-Effective Amendment No. 4 to the Registrant's Registration Statement on Form S-1, File No. 333-83011, filed on April 2, 2002) 4.4--Form of Subscription Agreement (incorporated by reference to Exhibit 4.4 to Post-Effective Amendment No. 4 to the Registrant's Registration Statement on Form S-1, File No. 333-83011, filed on April 2, 2002) 10.1--Form of Escrow Agreement among the Trust, Managing Owner, PSI and the Chase Manhattan Bank (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1, File No. 333-83011, filed on September 17, 1999) 10.2--Form of Brokerage Agreement among the Trust and PSI (incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-1, File No. 333-83011, filed on September 17, 1999) 10 10.3--Form of Advisory Agreement among the Registrant, Managing Owner, and the Trading Advisor (incorporated by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form S-1, File No. 333-83011, filed on July 16, 1999) 10.4--Form of Representation Agreement Concerning the Registration Statement and the Prospectus among the Registrant, Managing Owner, PSI, 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. 333-83011, filed on September 17, 1999) 10.5--Form of Net Worth Agreement between the Managing Owner and Prudential Securities Group Inc. (incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1, File No. 333-83011, filed on September 17, 1999) 13.1--Registrant's 2002 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 2002 Annual Report is to be deemed filed as part of this report) (filed herewith) 99.1--Certificate pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the SARBANES-OXLEY Act of 2002 (filed herewith) (b) Reports on Form 8-K--None 11 SIGNATURES Pursuant to the requirements of 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 II--Series D By: Prudential Securities Futures Management Inc. A Delaware corporation, Managing Owner By: /s/ Steven Weinreb Date: March 18, 2003 ---------------------------------------- Steven Weinreb Treasurer and 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 18, 2003 ----------------------------------------- Alex H. Ladouceur Chairman of the Board of Directors and Director By: /s/ Eleanor L. Thomas Date: March 18, 2003 ----------------------------------------- Eleanor L. Thomas President and Director By: /s/ Steven Weinreb Date: March 18, 2003 ----------------------------------------- Steven Weinreb Treasurer and Chief Financial Officer (chief accounting officer) By: /s/ Guy S. Scarpaci Date: March 18, 2003 ----------------------------------------- Guy S. Scarpaci Director By: Date: ----------------------------------------- Tamara B. Wright Senior Vice President and Director 12 CERTIFICATIONS I, Eleanor L. Thomas, certify that: 1. I have reviewed this annual report on Form 10-K of World Monitor Trust II--Series D ('Series D'); 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of Series D as of, and for, the periods presented in this annual report; 4. Series D's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Series D and we have: a) designed such disclosure controls and procedures to ensure that material information relating to Series D, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of Series D's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the 'Evaluation Date'); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. Series D's other certifying officers and I have disclosed, based on our most recent evaluation, to Series D's auditors and the board of directors of the managing owner of Series D: a) all significant deficiencies in the design or operation of internal controls which could adversely affect Series D's ability to record, process, summarize and report financial data and have identified for Series D's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in Series D's internal controls; and 6. Series D's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 18, 2003 /s/ Eleanor L. Thomas -------------------------------------- Eleanor L. Thomas President (chief executive officer) of the managing owner of Series D I, Steven Weinreb, certify that: 1. I have reviewed this annual report on Form 10-K of World Monitor Trust II--Series D ('Series D'); 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 13 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of Series D as of, and for, the periods presented in this annual report; 4. Series D's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Series D and we have: a) designed such disclosure controls and procedures to ensure that material information relating to Series D, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of Series D's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the 'Evaluation Date'); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. Series D's other certifying officers and I have disclosed, based on our most recent evaluation, to Series D's auditors and the board of directors of the managing owner of Series D: a) all significant deficiencies in the design or operation of internal controls which could adversely affect Series D's ability to record, process, summarize and report financial data and have identified for Series D's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in Series D's internal controls; and 6. Series D's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 18, 2003 /s/ Steven Weinreb -------------------------------------- Steven Weinreb Chief Financial Officer of the managing owner of Series D 14 EX-13 3 sf15932a.txt WORLD MONITOR TRUST II--SERIES D -- ANNUAL REPORT -- DEC 31, 2002 2002 - -------------------------------------------------------------------------------- World Monitor Trust II-- Annual Series D Report LETTER TO LIMITED OWNERS FOR WORLD MONITOR TRUST II--SERIES D 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 II--Series D In our opinion, the accompanying statements of financial condition, including the condensed schedules 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 II--Series D at December 31, 2002 and 2001 and the results of its operations for the years ended December 31, 2002 and 2001 and for the period from March 13, 2000 (commencement of operations) to December 31, 2000, and changes in trust capital for each of the three years ended December 31, 2002, 2001 and 2000 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 February 24, 2003 2 WORLD MONITOR TRUST II--SERIES D (a Delaware Business Trust) STATEMENTS OF FINANCIAL CONDITION
December 31, --------------------------- 2002 2001 - ---------------------------------------------------------------------------------------------------- ASSETS Cash in commodity trading accounts $7,491,183 $ 4,474,005 Net unrealized gain (loss) on open futures contracts 131,946 (61,284) ------------ ----------- Total assets $7,623,129 $ 4,412,721 ------------ ----------- ------------ ----------- LIABILITIES AND TRUST CAPITAL Liabilities Accrued expenses $ 60,329 $ 52,055 Commissions and other transaction fees payable 41,392 22,857 Management fees payable 8,135 4,465 Redemptions payable -- 22,989 Unrealized loss on open forward contracts -- 14,433 ------------ ----------- Total liabilities 109,856 116,799 ------------ ----------- Commitments Trust capital Limited interests (79,736.725 and 51,950.299 interests outstanding) 7,429,420 4,251,727 General interests (900 and 540 interests outstanding) 83,853 44,195 ------------ ----------- Total trust capital 7,513,273 4,295,922 ------------ ----------- Total liabilities and trust capital $7,623,129 $ 4,412,721 ------------ ----------- ------------ ----------- Net asset value per limited and general interests $ 93.17 $ 81.84 ------------ ----------- ------------ -----------
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements. 3 WORLD MONITOR TRUST II--SERIES D (a Delaware Business Trust) Condensed Schedules of Investments
At December 31, -------------------------------------------------------------------- 2002 2001 -------------------------------- -------------------------------- Net Unrealized Net Unrealized Gain (Loss) Gain (Loss) as a % of Net Unrealized as a % of Net Unrealized Futures Contracts Trust Capital Gain (Loss) Trust Capital Gain (Loss) - ------------------------------------------------------------------------------------------------------------- Futures contracts purchased: Stock indices $ (30,745) $ 11,982 Interest rates 293,123 (67,480) Currencies 134,410 (107,230) Commodities (12,350) -- -------------- -------------- Net unrealized gain (loss) on futures contracts purchased 5.12% 384,438 (3.79)% (162,728) ------ -------------- ------ -------------- Futures contracts sold: Stock indices 1,984 (2,981) Interest rates (209,367) 15,412 Currencies (45,109) 78,413 Commodities -- 10,600 -------------- -------------- Net unrealized gain (loss) on futures contracts sold (3.36) (252,492) 2.36 101,444 ------ -------------- ------ -------------- Net unrealized gain (loss) on futures contracts 1.76% $ 131,946 (1.43)% $ (61,284) ------ -------------- ------ -------------- ------ -------------- ------ -------------- Forward currency contracts purchased (0.04)% $ (3,158) 0.11% $ 4,929 Forward currency contracts sold 0.04 3,158 (0.45) (19,362) ------ -------------- ------ -------------- Net unrealized loss on forward contracts 0.00% $ 0 (0.34)% $ (14,433) ------ -------------- ------ -------------- ------ -------------- ------ -------------- Settlement Currency--Futures Contracts British pound (1.44)% $ (107,988) 0.71% $ 30,369 Canadian dollar (0.56) (42,128) 0.48 20,535 Euro 2.30 172,455 (2.32) (99,368) Japanese yen (0.10) (7,306) 0.01 522 Australian dollar 0.05 3,790 (0.05) (2,248) Swiss franc 0.28 20,752 -- -- Swedish krona (0.00) (9) -- -- U.S. dollar 1.23 92,380 (0.26) (11,094) ------ -------------- ------ -------------- Total 1.76% $ 131,946 (1.43)% $ (61,284) ------ -------------- ------ -------------- ------ -------------- ------ -------------- Settlement Currency--Forward Contracts U.S. dollar 0.00% $ 0 (0.34)% $ (14,433) ------ -------------- ------ -------------- ------ -------------- ------ -------------- - ------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
4 WORLD MONITOR TRUST II--SERIES D (a Delaware Business Trust) STATEMENTS OF OPERATIONS
For the period from March 13, 2000 (commencement of Year ended December 31, operations) to ----------------------- December 31, 2002 2001 2000 - ------------------------------------------------------------------------------------------------------ REVENUES Net realized gain (loss) on commodity transactions $1,010,594 $ (93,119) $ (708,702) Change in net unrealized gain/loss on open commodity positions 207,663 (127,443) 51,726 Interest income 93,161 159,873 281,858 ---------- --------- -------------------- 1,311,418 (60,689) (375,118) ---------- --------- -------------------- EXPENSES Commissions and other transaction fees 378,109 282,939 303,680 General and administrative 139,590 119,513 119,152 Management fees 74,362 54,595 58,273 Incentive fees 5,791 -- 27,238 ---------- --------- -------------------- 597,852 457,047 508,343 General and administrative expenses borne by the Managing Owner and its affiliates (50,682) (53,745) (48,938) ---------- --------- -------------------- Net expenses 547,170 403,302 459,405 ---------- --------- -------------------- Net income (loss) $ 764,248 $(463,991) $ (834,523) ---------- --------- -------------------- ---------- --------- -------------------- ALLOCATION OF NET INCOME (LOSS) Limited interests $ 756,063 $(459,082) $ (824,648) ---------- --------- -------------------- ---------- --------- -------------------- General interests $ 8,185 $ (4,909) $ (9,875) ---------- --------- -------------------- ---------- --------- -------------------- NET INCOME (LOSS) PER WEIGHTED AVERAGE LIMITED AND GENERAL INTEREST Net income (loss) per weighted average limited and general interest $ 11.41 $ (8.54) $ (13.32) ---------- --------- -------------------- ---------- --------- -------------------- Weighted average number of limited and general interests outstanding 66,962 54,361 62,661 ---------- --------- -------------------- ---------- --------- -------------------- - ------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN TRUST CAPITAL
LIMITED GENERAL INTERESTS INTERESTS INTERESTS TOTAL - ------------------------------------------------------------------------------------------------------- Trust capital--December 31, 1999 10.000 $ -- $ 1,000 $ 1,000 Contributions 82,667.756 8,123,644 105,008 8,228,652 Net loss (824,648) (9,875 ) (834,523) Redemptions (13,494.445) (1,306,910) (35,592 ) (1,342,502) ----------- ----------- --------- ----------- Trust capital--December 31, 2000 69,183.311 5,992,086 60,541 6,052,627 Contributions 12,392.912 1,000,400 6,995 1,007,395 Net loss (459,082) (4,909 ) (463,991) Redemptions (29,085.924) (2,281,677) (18,432 ) (2,300,109) ----------- ----------- --------- ----------- Trust capital--December 31, 2001 52,490.299 4,251,727 44,195 4,295,922 Contributions 43,717.827 3,781,450 31,473 3,812,923 Net income 756,063 8,185 764,248 Redemptions (15,571.401) (1,359,820) -- (1,359,820) ----------- ----------- --------- ----------- Trust capital--December 31, 2002 80,636.725 $ 7,429,420 $ 83,853 $ 7,513,273 ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- - ------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
5 WORLD MONITOR TRUST II--SERIES D (a Delaware Business Trust) NOTES TO FINANCIAL STATEMENTS A. General The Trust, Trustee, Managing Owner and Affiliates World Monitor Trust II (the 'Trust') is a business trust organized under the laws of Delaware on April 22, 1999. The Trust consists of three separate and distinct series ('Series'): Series D, E and F. Series D, E and F commenced trading operations on March 13, 2000, April 6, 2000 and March 1, 2000, respectively, and each Series will continue to exist until terminated pursuant to the provisions of Article XIII of the Second Amended and Restated Declaration of Trust and Trust Agreement (the 'Trust Agreement'). 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, Prudential Securities Futures Management Inc. (the 'Managing Owner'), is a wholly-owned subsidiary of Prudential Securities Incorporated ('PSI') which, in turn, is an indirect wholly-owned subsidiary of Prudential Financial, Inc. ('Prudential'). PSI is the selling agent for the Trust, as well as its commodity broker ('Commodity Broker'). In February 2003, Prudential and Wachovia Corp. ('Wachovia') announced an agreement to combine each company's respective retail securities brokerage and clearing operations within a new firm, which will be headquartered in Richmond, Virginia. Under the agreement, Prudential will have a 38% ownership interest in the new firm and Wachovia will own 62%. The transaction, which includes the securities brokerage, securities clearing, and debt capital markets operations of PSI, but does not include the equity sales, trading and research operations or commodity brokerage and derivative operations of PSI, is anticipated to close in the third quarter of 2003. The Managing Owner, as well as the Commodity Broker, will continue to be indirect wholly owned subsidiaries of Prudential. The Offering Up to $50,000,000 of limited interests in each Series ('Limited Interests') are being offered (totalling $150,000,000) ('Subscription Maximum'). Limited Interests are being offered to investors who meet certain established suitability standards, with a minimum initial subscription of $5,000 ($2,000 for an individual retirement account), although the minimum purchase for any single Series is $1,000. General interests are also being sold exclusively to the Managing Owner. Limited Interests and general interests are sometimes collectively referred to as 'Interests'. Initially, the Limited Interests for each Series were offered for a period of up to 180 days after the date of the Prospectus ('Initial Offering Period') at $100 per Interest. The subscription minimum of $5,000,000 for each Series was reached during the Initial Offering Period permitting Series D, E and F to commence trading operations. Series D completed its initial offering on March 13, 2000 with gross proceeds of $5,279,158, which was fully allocated to commodities trading. Until the Subscription Maximum for each Series is reached, each Series' Limited Interests will continue to be offered on a weekly basis at the then current net asset value per Interest ('Continuous Offering Period'). 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. The Managing Owner, on behalf of Series D, entered into an advisory agreement with Bridgewater Associates, Inc. (the 'Trading Advisor') to make the trading decisions for Series D. The advisory agreement may be terminated for various reasons, including at the discretion of the Managing Owner. The Managing Owner has allocated 100% of the proceeds from the initial and continuous offering of Series D 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 D during the Continuous Offering Period. 6 Exchanges, Redemptions and Termination Interests owned in one series of the Trust (Series D, E or F) may be exchanged, without any charge, for Interests of one or more other Series on a weekly basis for as long as Limited 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 other Series. Redemptions are permitted on a weekly basis. Limited 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 automatically terminate. B. Summary of Significant Accounting Policies Basis of accounting The financial statements of Series D are prepared in accordance with accounting principles generally accepted in the United States of America. Such principles require the Managing Owner to make estimates and assumptions that affect the reported amounts of liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from these estimates. 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. Net unrealized gain or loss on open contracts denominated in foreign currencies and foreign currency holdings are translated into U.S. dollars at the exchange rates prevailing on the last business day of the year. Realized gains and losses on commodity transactions are recognized in the period in which the contracts are closed. The weighted average number of limited and general interests outstanding was computed for purposes of disclosing net income (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 D 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.' Certain balances from the prior period have been reclassified to conform with the current financial statement presentation. Income taxes Series D is treated as a partnership for Federal income tax purposes. As such, Series D 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 D may be subject to other state and local taxes in jurisdictions in which it operates. Profit and loss allocations and distributions Series D 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. 7 New Accounting Guidance In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45 ('FIN 45'), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, which Series D adopted at December 31, 2002. FIN 45 elaborates on the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. Consistent with standard business practices in the normal course of business, Series D has provided general indemnifications to the Managing Owner, its Trading Advisor and others when they act, in good faith, in the best interests of Series D. Series D is unable to develop an estimate of the maximum potential amount of future payments that could potentially result from any hypothetical future claim, but expects the risk of having to make any payments under these general business indemnifications to be remote. C. Fees Organizational and offering costs PSI or its affiliates paid the costs of organizing Series D and will continue to pay all costs of offering its Limited Interests. General and administrative costs Routine legal, audit, postage, and other routine third party administrative costs are paid by Series D. Additionally, Series D pays the administrative costs incurred by the Managing Owner or its affiliates for services they perform for Series D which include, but are not limited to, those costs discussed in Note D below. However, to the extent that general and administrative costs incurred by Series D exceed 1.5% of Series D's net asset value during the year (with a maximum of 1.25% attributable to other than legal and audit expenses) such amounts will be borne by the Managing Owner and its affiliates. Management and incentive fees Series D pays its Trading Advisor a management fee at an annual rate of 1.25% of the net asset value allocated to its management. The management fee is determined weekly and the sum of such weekly amounts is paid monthly. Series D also pays its Trading Advisor a quarterly incentive fee equal to 22% of 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 with PSI to act as Commodity Broker for each Series whereby Series D pays a fixed fee for brokerage services rendered at an annual rate of 6% of Series D's net asset value. The fee is determined weekly and the sum of such weekly amounts is paid monthly. Series D is also obligated to pay all floor brokerage expenses, give-up charges and NFA, clearing and exchange fees incurred in connection with Series D's commodity trading activities. D. Related Parties Series D reimburses the Managing Owner or its affiliates for services they perform for Series D, 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. However, to the extent that general and administrative expenses exceed 1.5% of Series D's net asset value during the year (with a maximum of 1.25% attributable to other than legal and audit expenses) such amounts will be borne by the Managing Owner and its affiliates. Because general and administrative expenses exceeded such limitations, a portion of the expenses related to services the Managing Owner performed for Series D, other than brokerage services, during the years ended December 31, 2002 and 2001 and the period from March 13, 2000 (commencement of operations) to December 31, 2000 have been borne by the Managing Owner and its affiliates. Additionally, PSI or its affiliates paid the costs of organizing Series D and will continue to pay all costs of offering its Limited Interests. 8 The expenses incurred by Series D for services performed by the Managing Owner and its affiliates for Series D were:
For the period from March 13, 2000 (commencement of Year ended December 31, operations) to ---------------------------- December 31, 2002 2001 2000 ------------ ------------ -------------------- Commissions $357,464 $262,448 $279,774 General and administrative 73,616 65,701 76,150 ------------ ------------ -------------------- 431,080 328,149 355,924 General and administrative expenses borne by the Managing Owner and its affiliates (50,682) (53,745) (48,938) ------------ ------------ -------------------- $380,398 $274,404 $306,986 ------------ ------------ -------------------- ------------ ------------ --------------------
Expenses payable to the Managing Owner and its affiliates (which are included in accrued expense) as of December 31, 2002 and 2001 were $4,880 and $922, respectively. All of the proceeds of the offering of Series D are received in the name of Series D and are deposited in trading or cash accounts at PSI. Series D's assets are maintained with PSI for margin purposes. Series D receives interest income on 100% of its average daily equity maintained in its accounts with PSI during each month at the 13-week Treasury bill discount rate. Series D, 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 D pursuant to a line of credit. PSI may require that collateral be posted against the marked-to-market positions of Series D. 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 D 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 D'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 D's net assets being traded, significantly exceeds Series D's future cash requirements since Series D intends to close out its open positions prior to settlement. As a result, Series D is generally subject only to the risk of loss arising from the change in the value of the contracts. As such, Series D 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 D's commitments to purchase commodities is limited to the gross or face amount of the contracts held. However, when Series D 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 D 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 9 diversification effects among the derivative instruments Series D holds and the liquidity and inherent volatility of the markets in which Series D trades. Credit risk When entering into futures or forward contracts, Series D is exposed to credit risk that the counterparty to the contract will not meet its obligations. The counterparty for futures contracts traded on United States and most foreign futures exchanges is the clearinghouse associated with the particular exchange. In general, clearinghouses are backed by their corporate members who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members (i.e., some foreign exchanges), it is normally backed by a consortium of banks or other financial institutions. On the other hand, there is concentration risk on forward transactions entered into by Series D as PSI, Series D's commodity broker, is the sole counterparty. Series D 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 D's contracts is the net unrealized gain included in the statements of financial condition; however, counterparty non-performance on only certain of Series D's contracts may result in greater loss than non-performance on all of Series D's contracts. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its obligations to Series D. The Managing Owner attempts to minimize both credit and market risks by requiring Series D 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 D, the Managing Owner and the Trading Advisor, Series D shall automatically terminate the Trading Advisor if the net asset value allocated to the Trading Advisor declines by 40% from the value at the beginning of any year or since the commencement of trading activities. Furthermore, the Trust Agreement of the Trust provides that Series D will liquidate its positions, and eventually dissolve, if Series D 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 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 D. PSI, when acting as Series D's futures commission merchant in accepting orders for the purchase or sale of domestic futures contracts, is required by Commodity Futures Trading Commission ('CFTC') regulations to separately account for and segregate as belonging to Series D all assets of Series D relating to domestic futures trading and is not permitted to commingle such assets with other assets of PSI. At December 31, 2002, such segregated assets totalled $2,584,851. Part 30.7 of the CFTC regulations also requires PSI to secure assets of Series D related to foreign futures trading which totalled $5,038,278 at December 31, 2002. There are no segregation requirements for assets related to forward trading. As of December 31, 2002, all of Series D's open futures contracts mature within one year. 10 G. Financial Highlights
Year ended December 31, ---------------------------- 2002 2001 ------------ ------------ Performance per Interest Net asset value, beginning of period $81.84 $87.49 ------------ ------------ Net realized gain (loss) and change in net unrealized gain/loss on commodity transactions 18.01 (1.01) Interest income 1.39 2.82 Net expenses (8.07) (7.46) ------------ ------------ Net increase (decrease) for the period 11.33 (5.65) ------------ ------------ Net asset value, end of period $93.17 $81.84 ------------ ------------ ------------ ------------ Total return 13.84% (6.46)% Ratio to average net assets Interest income 1.58% 3.63% Net expenses, including incentive fees of 0.10% during 2002 9.29% 9.16%
These financial highlights represent the overall results of Series D during 2002 and 2001. An individual limited owner's actual results may differ depending on the timing of contributions and redemptions. 11 - -------------------------------------------------------------------------------- I hereby affirm that, to the best of my knowledge and belief, the information contained herein relating to World Monitor Trust II--Series D is accurate and complete. PRUDENTIAL SECURITIES FUTURES MANAGEMENT INC. (Managing Owner) By: Steven Weinreb Chief Financial Officer - -------------------------------------------------------------------------------- 12 WORLD MONITOR TRUST II--SERIES D (a Delaware Business Trust) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Series D commenced operations on March 13, 2000 with gross proceeds of $5,279,158 allocated to commodities trading. Additional contributions raised through the continuous offering from the sales of Interests for the year ended December 31, 2002 and 2001 and for the period from March 13, 2000 (commencement of operations) to December 31, 2002 resulted in additional gross proceeds to Series D of $3,812,923, $1,007,395 and $7,770,812, respectively. Additional Limited Interests of Series D will continue to be offered on a weekly basis at the net asset value per Interest until the subscription maximum of $50,000,000 is sold. Limited Interests in Series D 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 for the years ended December 31, 2002 and 2001 and for the period from March 13, 2000 (commencement of operations) to December 31, 2002 were $1,359,820, $2,281,677 and $4,948,407, respectively. Redemptions of general interests for the year ended December 31, 2001 and for the period from March 13, 2000 (commencement of operations) to December 31, 2002 were $18,432 and $54,024, respectively. There were no redemptions of general interest for year ended December 31, 2002. Additionally, Interests owned in any series of the Trust (Series D, E or F) may be exchanged, without any charge, for Interests of one or more other Series on a weekly basis for as long as Limited Interests in those series are being offered to the public. Future contributions, redemptions and exchanges will impact the amount of funds available for investment in commodity contracts in subsequent periods. At December 31, 2002, 100% of Series D's net assets were allocated to commodities trading. A significant portion of the net assets was held in cash, which was used as margin for trading in commodities. Inasmuch as the sole business of Series D is to trade in commodities, Series D continues to own such liquid assets to be used as margin. PSI credits Series D with interest income on 100% of its average daily equity maintained in its accounts with PSI during each month at the 13-week Treasury bill discount rate. 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 D from promptly liquidating its commodity futures positions. Since Series D'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 D'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 D's speculative trading, as well as the development of drastic market occurrences, could result in monthly losses considerably beyond Series D'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 D 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 D's futures and forward contracts. Series D does not have, nor does it expect to have, any capital assets. 13 Results of Operations The net asset value per Interest as of December 31, 2002 was $93.17, an increase of 13.84% from the December 31, 2001 net asset value per Interest of $81.84, which was a decrease of 6.46% from the December 31, 2000 net asset value per Interest of $87.49. The CISDM Fund/Pool Qualified Universe Index (formerly known as the Zurich Fund/Pool Qualified Universe Index) returned 11.99% and 7.52% for the years ended December 31, 2002 and 2001, respectively. The CISDM Fund/Pool Qualified Universe Index is the dollar weighted, total return of all commodity pools tracked by Managed Accounts Reports, LLC. Past performance is not necessarily indicative of future results. Series D had trading gains (losses) before commissions and related fees of $1,218,000, $(221,000) and $(657,000) for the years ended December 31, 2002 and 2001 and for the period from March 13, 2000 (commencement of operations) to December 31, 2000, respectively. Due to the nature of Series D's trading activities a period to period comparison of its trading results is not meaningful. However, a detailed discussion of Series D's 2002 trading results is presented below. Net losses for Series D were experienced in the index and metals sectors. Profits were the result of gains in the currency and financial sectors. Equity indices began the year choppily due to a continuing weak economy and concerns about balance sheet reporting and accounting irregularities. Positive data and hopes of an economic recovery boosted stock markets towards the middle of the first quarter. However, as investor confidence collapsed in response to concerns about accounting transparency at some firms, heightened tension in the Middle East, and decreased corporate sales and profits, global equity markets moved sharply lower throughout the second quarter. In Japan, the Nikkei Index hit new lows in the third quarter as the economy continued to struggle with structural problems and the Japanese government prepared new fiscal policy initiatives. Equity markets rallied in mid-October, triggered by a surge of global economic optimism, but fell once again towards the end of the year providing a negative return for the third consecutive year. Overall, equity markets around the world showed poor performance for 2002. In the U.S., the Dow Jones Industrial Average was down 16.76% for the year while the S&P 500 was down 23.37%. The London FTSE returned a negative 24.48% and the Hong Kong Hang Seng Index ended the year down 18.21%. Long positions in the S&P 500, London FTSE and Tokyo TOPIX incurred losses in the second and third quarters of the year resulting in net losses for Series D in this sector. Base metals began the year on a rise as global economic activity showed signs of recovery but fell towards the end of the year due to weak economies and decreased industrial production. Long positions in copper resulted in gains in the second quarter as a result of supply cutbacks initiated by some producers. These gains were not sufficient to offset the losses incurred in copper positions the rest of the year resulting in net losses for Series D. In foreign exchange markets, the U.S. dollar began the year strong against most major foreign currencies as the U.S. economy exhibited signs of recovery. The trend reversed in the second quarter as weak U.S. economic growth in relation to other economies and concerns regarding accounting irregularities in major U.S. corporations drove the dollar downward. Most European currencies and the euro were weak early in the year but rallied in March amid hopes of an economic recovery. In the third quarter, the euro surpassed parity with the U.S. dollar as investors' desire for U.S. assets decreased, but ended the quarter lower. The British pound rose against the U.S. dollar early in the year amid perceived strength in the British economy and positive economic data. Towards the end of the year, the U.S. dollar began the quarter up amid evidence of a firming U.S. economy, but traded lower against many major foreign currencies in December. The market reacted to the sluggish U.S. economy, weaker foreign demand for the U.S. dollar and expectations of war with Iraq. Gains for long euro, Australian dollar and British pound currency positions during the first, second and fourth quarter offset losses incurred during the third quarter. This resulted in net gains for Series D. Global bond markets trended lower through most of the first quarter amid growing prospects for imminent interest rate hikes by central banks. In the U.S., interest rates rose towards the end of the first quarter in response to stronger than expected economic data and indications that the U.S. Federal Reserve Bank (the 'Fed') would lean towards increasing rates in the near future. The Fed kept rates unchanged at 1.75% throughout the first three quarters of the year. Other central banks, including the European Central Bank and the Bank of Japan, generally followed the lead of the Fed leaving rates unchanged and foreign bond markets rose. Global bond prices were slightly weaker at the start of the last quarter as interest rates rose in 14 response to the stock market rally and optimism on economic prospects. This trend reversed when the Fed cut interest rates by 50 basis points to 1.25%, a new 40-year low, at its first quarterly meeting in November. This was the first rate cut of 2002, following 11 cuts in 2001. The Fed also switched its economic outlook for the near future from a bias toward 'economic weakness' to 'balanced'. Long positions in European bonds during the last three quarters resulted in net gains for Series D. Fluctuations in overall average net asset levels have led to corresponding fluctuations in interest earned and commissions and management fees incurred by Series D, which are largely based on the level of net assets. Series D's average net asset levels were significantly higher during the year ended December 31, 2002 as compared to the prior year, primarily from additional contributions and favorable trading performance throughout 2002 offset, in part, by redemptions during 2002. Series D's average net asset levels were lower during the year ended December 31, 2001 as compared to the prior year, primarily from redemptions and unfavorable trading performance, as well as a full year of operations in 2001 as compared to approximately ten months in 2000 offset, in part, by contributions during 2001. Interest income is earned on the average daily equity maintained in its accounts with PSI at the 13-week Treasury bill discount rate and, therefore, varies weekly according to interest rates, trading performance, contributions and redemptions. Interest income decreased $67,000 for the year ended December 31, 2002 as compared to the prior year and decreased $122,000 for the year ended December 31, 2001 as compared to the prior period. These decreases were primarily due to declining interest rates throughout 2002 and 2001. In addition, the fluctuation in average net asset levels, as discussed above, effected the amount of interest income earned. Commissions are calculated on Series D's net asset level at the end of each week and, therefore, vary according to weekly trading performance, contributions and redemptions. Other transaction fees consist of National Futures Association, exchange and clearing fees, as well as floor brokerage costs and give-up charges, which are based on the number of trades the Trading Advisor executes, as well as which exchange, clearing firm or bank on, or through, which the contract is traded. Commissions and other transaction fees increased $95,000 for the year ended December 31, 2002 as compared to the prior year and decreased $21,000 for the year ended December 31, 2001 as compared to the prior period due to the fluctuation in net asset levels as discussed above. All trading decisions for Series D are made by the Trading Advisor. Management fees are calculated on Series D's net asset value at the end of each week and, therefore, are affected by weekly trading performance, contributions and redemptions. Management fees increased $20,000 for the year ended December 31, 2002 as compared to the prior year and decreased $4,000 for the year ended December 31, 2001 as compared to the prior period due to the fluctuation in average net asset levels as discussed above. Incentive fees are based on the 'New High Net Trading Profits' generated by the trading Advisor, as defined in the advisory agreement among Series D, the Managing Owner and the Trading Advisor. Incentive fees were $6,000 and $27,000 for the year ended December 31, 2002 and for the period from March 13, 2000 (commencement of operations) to December 31, 2000, respectively. There were no incentive fees earned for the year ended December 31, 2001. General and administrative expenses for the years ended December 31, 2002 and 2001 and for the period from March 13, 2000 (commencement of operations) to December 31, 2000 were $140,000, $120,000 and $119,000, respectively. These expenses include accounting, audit, tax, and legal fees, as well as printing and postage costs related to reports sent to limited owners and are before reimbursement of costs incurred by the Managing Owner on behalf of Series D. To the extent that general and administrative expenses exceed 1.5% of Series D's net asset value during the year (with a minimum of 1.25% attributable to other than legal and audit expenses) such amounts are borne by the Managing Owner and its affiliates. Because applicable expenses exceeded these limits, a portion of the expenses has been borne by the Managing Owner and its affiliates, resulting in a net cost to Series D of $89,000, $66,000 and $70,000, respectively. Inflation Inflation has had no material impact on operations or on the financial condition of Series D from inception through December 31, 2002. 15 OTHER INFORMATION The actual round-turn equivalent of brokerage commissions paid per contract for the year ended December 31 2002, was $64. Series D'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 II--Series D/0TH Peck Slip Station P.O. Box 2303 New York, New York 10273-0005 16 0TH PRESORTED Peck Slip Station STANDARD P.O. Box 2303 U.S. POSTAGE New York, NY 10273 PAID Automatic Mail PFT1/17152 EX-99 4 sf15932cer.txt CERTIFICATE PURSUANT TO THE SARBANES-OXLEY ACT OF 2002 Exhibit 99.1 CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned, Eleanor L. Thomas, President (chief executive officer) of the managing owner, Prudential Securities Futures Management Inc. (the 'Managing Owner'), of World Monitor Trust II--Series D ('Series D'), hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) Series D's Annual Report on Form 10-K for the period ending December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the 'Annual Report'), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of Series D. /s/ Eleanor L. Thomas - ------------------------------------------------------ Eleanor L. Thomas President (chief executive officer) of the Managing Owner March 18, 2003 The undersigned, Steven Weinreb, Chief Financial Officer of the managing owner, the Managing Owner, of Series D, hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) Series D's Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of Series D. /s/ Steven Weinreb - ------------------------------------------------------ Steven Weinreb Chief Financial Officer of the Managing Owner March 18, 2003 -----END PRIVACY-ENHANCED MESSAGE-----