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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 28, 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: 0-32687
WORLD MONITOR TRUST II-SERIES E
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-4058319
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(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
One New York Plaza, 13th Floor, New York, New York
10292
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 778-7866
N/A
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Former name, former address and former fiscal year, if changed since last report
Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _CK_ No ___
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WORLD MONITOR TRUST II--SERIES E
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<Table>
<Caption>
September 28, December 31,
2001 2000
- ----------------------------------------------------------------------------------------------------
ASSETS
Cash $ 7,372,481 $5,485,764
Net unrealized gain on open futures contracts 1,062,300 958,857
Unrealized gain on open forward contracts 7,781 --
Accrued interest receivable 930 --
------------- ------------
Total assets $ 8,443,492 $6,444,621
------------- ------------
------------- ------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Incentive fees payable $ 120,577 $ 238,625
Accrued expenses payable 41,096 47,623
Commissions and other transaction fees payable 40,349 36,522
Management fees payable 15,180 11,953
Net unrealized loss on open forward contracts -- 3,584
------------- ------------
Total liabilities 217,202 338,307
------------- ------------
Commitments
Trust capital
Limited interests (58,865.515 and 49,983.432 interests
outstanding) 8,112,689 6,016,047
General interests (824.300 and 750.000 interests outstanding) 113,601 90,267
------------- ------------
Total trust capital 8,226,290 6,106,314
------------- ------------
Total liabilities and trust capital $ 8,443,492 $6,444,621
------------- ------------
------------- ------------
Net asset value per limited and general interest ('Interests') $ 137.82 $ 120.36
------------- ------------
------------- ------------
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</Table>
The accompanying notes are an integral part of these statements.
2
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WORLD MONITOR TRUST II--SERIES E
(a Delaware Business Trust)
STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
For the period from
April 6, 2000
For the period from (commencement For the period from For the period from
January 1, 2001 to of operations) to June 30, 2001 to July 1, 2000 to
September 28, 2001 September 29, 2000 September 28, 2001 September 29, 2000
- ------------------------------------------------------------------------------------------------------------------------
REVENUES
Net realized gain (loss) on
commodity transactions $ 1,479,130 $(283,729) $ 562,370 $ 268,949
Change in net unrealized
gain/loss on open commodity
positions 114,808 (12,000) 819,612 (57,801)
Interest income 197,202 148,477 56,811 76,457
------------------- ------------------- ------------------- -------------------
1,791,140 (147,252) 1,438,793 287,605
------------------- ------------------- ------------------- -------------------
EXPENSES
Commissions and other
transaction fees 330,558 159,701 117,968 71,533
Management fees 101,234 49,263 35,802 25,204
Incentive fees 290,383 -- 120,577 --
General and administrative 47,876 38,196 18,466 18,979
------------------- ------------------- ------------------- -------------------
770,051 247,160 292,813 115,716
------------------- ------------------- ------------------- -------------------
Net income (loss) $ 1,021,089 $(394,412) $ 1,145,980 $ 171,889
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
ALLOCATION OF NET INCOME
(LOSS)
Limited interests $ 1,004,996 $(388,799) $ 1,129,981 $ 169,559
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
General interests $ 16,093 $ (5,613) $ 15,999 $ 2,330
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
NET INCOME (LOSS) PER WEIGHTED
AVERAGE LIMITED AND GENERAL
INTEREST
Net income (loss) per weighted
average limited and general
interest $ 18.28 $ (7.28) $ 19.57 $ 3.14
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
Weighted average number of
limited and general
interests outstanding 55,848 54,188 58,564 54,781
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
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</Table>
STATEMENT OF CHANGES IN TRUST CAPITAL
(Unaudited)
<Table>
<Caption>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
- -------------------------------------------------------------------------------------------------------
Trust capital--December 31, 2000 50,733.432 $ 6,016,047 $ 90,267 $ 6,106,314
Contributions 24,687.190 2,925,270 26,817 2,952,087
Net income 1,004,996 16,093 1,021,089
Redemptions (15,730.807) (1,833,624) (19,576 ) (1,853,200)
------------ ----------- --------- -----------
Trust capital--September 28, 2001 59,689.815 $ 8,112,689 $113,601 $ 8,226,290
------------ ----------- --------- -----------
------------ ----------- --------- -----------
- -------------------------------------------------------------------------------------------------------
</Table>
The accompanying notes are an integral part of these statements.
3
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WORLD MONITOR TRUST II--SERIES E
(a Delaware Business Trust)
NOTES TO FINANCIAL STATEMENTS
September 28, 2001
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of Prudential Securities Futures Management Inc. (the 'Managing Owner'), the
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to state fairly the financial position of World
Monitor Trust II--Series E ('Series E') as of September 28, 2001 and the results
of its operations for the periods from January 1, 2001 to September 28, 2001
('Year To Date 2001'), April 6, 2000 (commencement of operations) to September
29, 2000 ('Year To Date 2000'), June 30, 2001 to September 28, 2001 ('Third
Quarter 2001') and July 1, 2000 to September 29, 2000 ('Third Quarter 2000').
However, the operating results for the interim periods may not be indicative of
the results expected for a full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been omitted. It is suggested that
these financial statements be read in conjunction with the financial statements
and notes thereto included in Series E's annual report on Form 10-K filed with
the Securities and Exchange Commission for the year ended December 31, 2000.
B. Related Parties
The Managing Owner of Series E is a wholly-owned subsidiary of Prudential
Securities Incorporated ('PSI'), which, in turn, is a wholly-owned subsidiary of
Prudential Securities Group Inc. Series E pays the Managing Owner or its
affiliates for services they perform for Series E 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, the amount of general and administrative
expenses incurred by Series E is limited to 1.5% of its net asset value during
the year (with a maximum of 0.5% attributable to other than legal and audit
expenses). Because general and administrative expenses exceeded this limit, all
or a portion of the expenses related to services the Managing Owner performed
for Series E for Year To Date 2001, Year To Date 2000, Third Quarter 2001 and
Third Quarter 2000 have been borne by the Managing Owner and its affiliates.
Additionally, PSI or its affiliates paid the costs of organizing Series E and
continue to pay the costs of offering its limited interests as well as any third
party general and administrative expenses which exceed the limit discussed
above.
The costs incurred by Series E for services performed by the Managing Owner
and its affiliates for Series E were:
<Table>
<Caption>
Year To Date Year To Date Third Quarter Third Quarter
2001 2000 2001 2000
------------- ------------- -------------- --------------
Commissions $ 302,940 $ 147,760 $107,304 $ 75,505
General and administrative 13,406 -- 6,833 --
------------- ------------- -------------- --------------
$ 316,346 $ 147,760 $114,137 $ 75,505
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
</Table>
There are no expenses payable to the Managing Owner and its affiliates as of
September 28, 2001 and December 31, 2000.
All of the proceeds of the offering of Series E are received in the name of
Series E and deposited in trading or cash accounts at PSI, Series E's commodity
broker. Series E's assets are maintained with PSI or, for margin purposes, with
the various exchanges on which Series E is permitted to trade. Series E receives
interest income on 100% of its average daily equity maintained in cash in its
accounts with PSI during each month at the 13-week Treasury bill discount rate.
This rate is determined weekly by PSI and represents the rate awarded to all
bidders during each week's auction of 13-week Treasury bills.
Series E, 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.
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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 E pursuant to a line of credit. PSI may require that
collateral be posted against the marked-to-market positions of Series E.
As of September 28, 2001, a non-U.S. affiliate of the Managing Owner owns
54.284 limited interests of Series E.
C. Derivative Instruments and Associated Risks
Series E is exposed to various types of risk 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 E's investment activities (credit risk).
Market risk
Trading in futures and forward (including foreign exchange) contracts
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 E's net assets being
traded, significantly exceeds Series E's future cash requirements since Series E
intends to close out its open positions prior to settlement. As a result, Series
E is generally subject only to the risk of loss arising from the change in the
value of the contracts. As such, Series E 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 E's commitments to purchase commodities
is limited to the gross or face amount of the contracts held. However, when
Series E 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 E 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 E holds and the liquidity and inherent
volatility of the markets in which Series E trades.
Credit risk
When entering into futures or forward contracts, Series E 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 nonperformance 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, the sole counterparty to Series E's
forward transactions is PSI, Series E's commodity broker. Series E has entered
into a master netting agreement with PSI and, as a result, 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
nonperformance of all of Series E'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 E.
The Managing Owner attempts to minimize both credit and market risks by
requiring Series E 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 E, the Managing
Owner and the trading advisor, Series E 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 First Amended and Restated Declaration of
Trust and Trust Agreement of the Trust provides that Series E will liquidate its
positions, and eventually dissolve, if Series E experiences a decline in
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net asset value of 50% from the value at the beginning of any year or since the
commencement of trading activities. In each case, the decline in net asset value
is after giving effect for distributions, contributions and redemptions. The
Managing Owner may impose additional restrictions (through modifications of
trading limitations and policies) upon the trading activities of the trading
advisor as it, in good faith, deems to be in the best interests of Series E.
PSI, when acting as Series E'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 E all assets of Series E 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 September
28, 2001, such segregated assets totalled $3,115,990. Part 30.7 of the CFTC
regulations also requires PSI to secure assets of Series E related to foreign
futures trading which totalled $5,318,791 at September 28, 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 E, to opt out of segregation with regard to
trading on certain exchanges, but PSI has not done so to date. If Series E were
to opt out, its funds could be held in a broader and riskier range of
investments.
As of September 28, 2001, Series E's open futures and forward contracts
generally mature within one year, although certain interest rate futures
contracts have maturities as distant as March 2003.
At September 28, 2001 and December 31, 2000, the fair value of futures and
forward contracts was:
<Table>
<Caption>
September 28, 2001 December 31, 2000
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
Futures Contracts:
Domestic exchanges
Interest rates $ 390,740 $ -- $ 275,953 $ --
Currencies 109,022 61,439 260,258 28,675
Commodities 137,291 88,866 132,815 37,116
Foreign exchanges
Interest rates 445,117 20,395 309,325 --
Stock indices 33,412 10,339 68,667 5,300
Commodities 136,057 8,300 20,396 37,466
Forward Contracts:
Currencies 7,781 -- 33,172 36,756
---------- ----------- ---------- -----------
$1,259,420 $ 189,339 $1,100,586 $ 145,313
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</Table>
D. Financial Highlights
<Table>
<Caption>
Year To Date 2001 Third Quarter 2001
------------------ ------------------
Performance per Interest
Net asset value, beginning of period $ 120.36 $ 118.41
------------------ ------------------
Net realized gain (loss) and change in net unrealized
gain/loss on commodity transactions 27.76 23.40
Interest income 3.58 .97
Expenses (13.88) (4.96)
------------------ ------------------
Increase for the period 17.46 19.41
------------------ ------------------
Net asset value, end of period $ 137.82 $ 137.82
------------------ ------------------
------------------ ------------------
Total return 14.51% 16.39%
Ratio to average net assets
Interest income 3.91% 3.21%
Expenses, including 5.76% and 6.81% of incentive fees 15.28% 16.53%
</Table>
6
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WORLD MONITOR TRUST II--SERIES E
(a Delaware Business Trust)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Series E commenced operations on April 6, 2000 with gross proceeds of
$5,157,459 allocated to commodities trading. Additional contributions raised
through the continuous offering for the period from April 6, 2000 (commencement
of operations) to September 28, 2001 resulted in additional proceeds to Series E
of $3,667,585. Additional limited interests of Series E will continue to be
offered on a weekly basis at the net asset value per Interest until the
subscription maximum is sold.
Limited interests in Series E 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 Year To Date 2001, Third
Quarter 2001 and for the period from April 6, 2000 (commencement of operations)
to September 28, 2001 totalled $1,833,624, $583,370 and $2,636,035,
respectively. Since inception, the only redemptions of general interests
occurred during Second Quarter 2001 totalling $19,576. Additionally, Interests
owned in any series of World Monitor Trust II (Series D, E or F) may be
exchanged, without any charge, for Interests of one or more other series of
World Monitor Trust II on a weekly basis for as long as 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 September 28, 2001, 100% of Series E's net assets were allocated to
commodities trading. A significant portion of the net assets is held in cash
which is used as margin for trading in commodities. Inasmuch as the sole
business of Series E is to trade in commodities, Series E continues to own such
liquid assets to be used as margin. PSI credits Series E with interest income on
100% of its average daily equity maintained in cash in its accounts with PSI
during each month at the 13-week Treasury bill discount rate. This rate is
determined weekly by PSI and represents the rate awarded to all bidders during
each week's auction of 13-week Treasury bills.
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 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 E from promptly liquidating its commodity
futures positions.
Since Series E'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 E'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 E's
speculative trading as well as the development of drastic market occurrences
could result in monthly losses considerably beyond Series E'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
E and its trading advisor to abide by various trading limitations and policies
which include limiting margin amounts, trading only in liquid markets and
permitting the use of stop loss provisions. See Note C to the financial
statements for a further discussion of the credit and market risks associated
with Series E's futures and forward contracts.
Series E does not have, nor does it expect to have, any capital assets.
Results of Operations
After the attacks of September 11th, the Managing Owner contacted Series E's
trading advisor who reported that there was no material disruption to its
ability to follow its trading systems and to function
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normally. Additionally, there was no material disruption to the Managing Owner's
ability to maintain operations and perform its functions as a result of the
tragic events.
The net asset value per Interest as of September 28, 2001 was $137.82, an
increase of 14.51% from the December 31, 2000 net asset value per Interest of
$120.36 and an increase of 16.39% from the June 29, 2001 net asset value per
Interest of $118.41. Past performance is not necessarily indicative of future
results.
Series E's gross trading gains (losses) were approximately $1,594,000 and
$1,382,000 during Year To Date 2001 and Third Quarter 2001, respectively,
compared to $(296,000) and $211,000 for Year To Date 2000 and Third Quarter
2000, respectively. Due to the nature of Series E's trading activities, a period
to period comparison of its trading results is not meaningful. However, a
detailed discussion of Series E's Third Quarter 2001 trading results is
presented below.
Quarterly Market Overview
The pace of global economic activity remained slow throughout the third
quarter of 2001. Weakened business expenditure and efforts to reduce inventory
resulted in decreased manufacturing activity. Labor demand declined in most
sectors and the unemployment rate edged up to 4.9% in August. After a period of
strength, the U.S. dollar fell against most major foreign currencies,
particularly the Japanese yen, the euro and the Swiss franc. Global equity
markets fell throughout most of the quarter while short- and long-term interest
rates declined pushing bond prices higher. Consumer spending weakened slightly,
but generally remained strong through most of the quarter, supported in part by
low mortgage rates, tax rebates, declining energy prices and widespread
discounting of retail prices. Consumer confidence remained at moderately
favorable levels during the first two months of the quarter and helped moderate
economic weakness. Growth in many foreign industrial economies, including Japan
and much of Europe, weakened during the third quarter as well. Financial
conditions deteriorated markedly in Argentina and many other developing
countries.
The terrorist attacks of September 11th further weakened the sluggish U.S.
and global economies. Equity markets throughout the world plunged in the week
following the attacks. The Dow Jones industrial average suffered its worst
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 and fiscal stimuli by Congress
combined to help fuel an economic rebound. Global equity markets followed suit
rebounding from earlier lows as well.
The U.S. dollar's downward trend against many foreign currencies accelerated
after September 11th. As a result of the attacks, many investors switched
exposure from the U.S. dollar to other currencies such as the Swiss franc,
British pound and euro, all of which rose against the U.S. dollar.
U.S. and European interest rate instruments rose throughout most of the
quarter as data indicated persistent weakness in the U.S. economy. The U.S.
Federal Reserve lowered interest rates by 25 basis points in August in an effort
to stimulate the economy. Interest rate instruments continued to rally in the
wake of September 11th as the U.S. Federal Reserve 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 the Swiss National Central Bank who also lowered their rates
0.50%.
Energy prices began the quarter low, but peaked sharply immediately after the
September 11th attacks amid worries of a potential interruption in supplies.
Energy 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 see no need to alter output and assured that there will be no disruption in
supplies.
Quarterly Performance of Series E
The following is a summary of performance for the major sectors in which
Series E traded:
Interest rates (+): Long U.S., European and Australian bond positions
resulted in gains throughout the quarter as many central banks lowered interest
rates in an effort to boost weakening economies.
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Stock indices (+): The attacks on September 11th further weakened slowing
global economies and declining equity markets. Short positions in the Tokyo
TOPIX, Nikkei Dow and DAX indices resulted in gains for Series E.
Metals (+): Short copper and aluminum positions resulted in gains as fears of
a global economic recession and decreasing industrial production lowered prices
of industrial commodities.
Currencies (-): Long Japanese yen and long Japanese yen/British pound
cross-rate positions resulted in losses as the Bank of Japan intervened to stop
the recent appreciation of the yen in response to concerns regarding Japanese
exports.
Energies (-): Energy prices fell from their September 11th peak on concerns
that demand will wane due to weakening global economies. Long crude oil and
unleaded gas positions resulted in losses.
Series E commenced trading operations on April 6, 2000, and as such, a
comparison of Year To Date 2001 versus Year To Date 2000 operating results is
not meaningful. Additionally, increases in commissions and other transaction
fees and management fees during Third Quarter 2001 as compared to Third Quarter
2000 are primarily due to the effect of favorable trading performance during the
fourth quarter of 2000 and contributions during 2001 on Series E's net asset
values, offset, in part, by redemptions as further discussed below.
Interest income is earned on the average daily equity maintained in cash 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 was $197,000 and $148,000 for Year To Date 2001 and Year To Date
2000, respectively. Interest income decreased by $20,000 during Third Quarter
2001 as compared to Third Quarter 2000. The decrease, which was offset, in part,
by higher overall net asset levels in Third Quarter 2001 versus Third Quarter
2000 as discussed above, was primarily due to lower overall interest rates
during 2001 versus 2000.
Commissions are calculated on Series E's net asset value 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 for Year To Date 2001 and Year To
Date 2000 were $331,000 and $160,000, respectively. Commissions and other
transaction fees increased by $46,000 during Third Quarter 2001 as compared to
Third Quarter 2000 primarily due to the increase in average net asset levels as
discussed above.
All trading decisions for Series E are made by Graham Capital Management,
L.P. (the 'Trading Advisor'). Management fees are calculated on Series E's net
asset value at the end of each week and therefore, are affected by weekly
trading performance, contributions and redemptions. Management fees for Year To
Date 2001 and Year To Date 2000 were $101,000 and $49,000, respectively.
Management fees increased by $11,000 during Third Quarter 2001 as compared to
Third Quarter 2000 due to the increase 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 the Trust, the
Managing Owner and the Trading Advisor. Incentive fees generated for Year To
Date 2001 and Third Quarter 2001 were $290,000 and $121,000, respectively. No
incentive fee was incurred during Year To Date 2000.
General and administrative expenses were $48,000 and $38,000 for Year To Date
2001 and Year To Date 2000, respectively. General and administrative expenses
during Third Quarter 2001 were relatively comparable to those during Third
Quarter 2000. These expenses include reimbursement of costs incurred by the
Managing Owner on behalf of Series E, in addition to accounting, audit, tax and
legal fees as well as printing and postage costs related to reports sent to
limited owners. The total amount of general and administrative expenses charged
to Series E in any year is limited to 1.5% of its net asset value during such
year (with a maximum of 0.5% attributable to other than legal and audit
expenses). Because applicable expenses exceeded these limits, a portion of these
expenses have been borne by the Managing Owner and its affiliates.
9
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding quantitative and qualitative disclosures about market
risk is not required pursuant to Item 305(e) of Regulation S-K.
10
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings--There are no material legal proceedings pending by or
against the Registrant or the Managing Owner
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits--
3.1
and
4.1-- First Amended and Restated Declaration of Trust and Trust
Agreement of World Monitor Trust II dated as of May 15, 1999
(incorporated by reference to Exhibit 3.1 and 4.1 to Series E's
Registration Statement on Form S-1, File No. 333-83015)
4.2-- Form of Request for Redemption (incorporated by reference to
Exhibit 4.2 to Series E's Registration Statement on Form S-1,
File No. 33-83015)
4.3-- Form of Exchange Request (incorporated by reference to
Exhibit 4.3 to Series E's Registration Statement on
Form S-1, File No. 333-83015)
4.4-- Form of Subscription Agreement (incorporated by
reference to Exhibit 4.4 to Series E's
Registration Statement on Form S-1, File No.
333-83015)
(b) Reports on Form 8-K--None
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<Page>
SIGNATURES
Pursuant to the requirements 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 E
By: Prudential Securities Futures Management
Inc.A Delaware corporation, Managing Owner
By: /s/ Steven Carlino Date: November 9, 2001
----------------------------------------
Steven Carlino
Vice President and Treasurer
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