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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 30, 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: 0-23885
PRUDENTIAL SECURITIES STRATEGIC TRUST
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-7075398
- --------------------------------------------------------------------------------
(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 778-7866
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _CK_ No __
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
PRUDENTIAL SECURITIES STRATEGIC TRUST
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<Table>
<Caption>
September 30, December 31,
2001 2000
- ----------------------------------------------------------------------------------------------------
ASSETS
Cash $ 9,628,397 $13,240,014
Net unrealized gain on open futures contracts 353,472 75,883
Other receivable 5,718 895
------------- ------------
Total assets $ 9,987,587 $13,316,792
------------- ------------
------------- ------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Unrealized loss on open forward contracts $ 220,959 $ 11,692
Redemptions payable 122,400 222,610
Management fees payable 11,044 15,110
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Total liabilities 354,403 249,412
------------- ------------
Commitments
Trust capital
Limited interests (118,864.742 and 146,544.840 interests
outstanding) 9,536,823 12,936,640
General interests (1,201 and 1,481 interests outstanding) 96,361 130,740
------------- ------------
Total trust capital 9,633,184 13,067,380
------------- ------------
Total liabilities and trust capital $ 9,987,587 $13,316,792
------------- ------------
------------- ------------
Net asset value per limited and general interest ('Interests') $ 80.23 $ 88.28
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
</Table>
The accompanying notes are an integral part of these statements.
2
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PRUDENTIAL SECURITIES STRATEGIC TRUST
(a Delaware Business Trust)
STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
Nine months ended Three months ended
September 30, September 30,
--------------------------- -------------------------
2001 2000 2001 2000
- -------------------------------------------------------------------------------------------------------
REVENUES
Net realized gain (loss) on commodity
transactions $ (826,320) $(5,669,612) $ 92,737 $(2,470,209)
Change in net unrealized gain/loss on open
commodity positions 68,322 (3,388,833) 166,927 501,928
Interest income 329,897 819,863 80,421 243,691
----------- ----------- --------- -----------
(428,101) (8,238,582) 340,085 (1,724,590)
----------- ----------- --------- -----------
EXPENSES
Commissions 622,956 980,153 187,339 332,417
Management fees 112,666 178,808 34,166 57,151
----------- ----------- --------- -----------
735,622 1,158,961 221,505 389,568
----------- ----------- --------- -----------
Net income (loss) $(1,163,723) $(9,397,543) $ 118,580 $(2,114,158)
----------- ----------- --------- -----------
----------- ----------- --------- -----------
ALLOCATION OF NET INCOME (LOSS)
Limited interests $(1,152,080) $(9,303,550) $ 117,392 $(2,093,011)
----------- ----------- --------- -----------
----------- ----------- --------- -----------
General interests $ (11,643) $ (93,993) $ 1,188 $ (21,147)
----------- ----------- --------- -----------
----------- ----------- --------- -----------
NET INCOME (LOSS) PER WEIGHTED AVERAGE
LIMITED AND GENERAL INTEREST
Net income (loss) per weighted average
limited and general interest $ (8.67) $ (43.40) $ .96 $ (11.47)
----------- ----------- --------- -----------
----------- ----------- --------- -----------
Weighted average number of limited and
general interests outstanding 134,211 216,512 123,973 184,387
----------- ----------- --------- -----------
----------- ----------- --------- -----------
- -------------------------------------------------------------------------------------------------------
</Table>
STATEMENT OF CHANGES IN TRUST CAPITAL
(Unaudited)
<Table>
<Caption>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
- -----------------------------------------------------------------------------------------------------
Trust capital--December 31, 2000 148,025.840 $12,936,640 $130,740 $13,067,380
Net loss (1,152,080) (11,643 ) (1,163,723)
Redemptions (27,960.098) (2,247,737) (22,736 ) (2,270,473)
------------ ----------- --------- -----------
Trust capital--September 30, 2001 120,065.742 $ 9,536,823 $ 96,361 $ 9,633,184
------------ ----------- --------- -----------
------------ ----------- --------- -----------
- -----------------------------------------------------------------------------------------------------
</Table>
The accompanying notes are an integral part of these statements.
3
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PRUDENTIAL SECURITIES STRATEGIC TRUST
(a Delaware Business Trust)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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
Prudential Securities Strategic Trust (the 'Trust') as of September 30, 2001 and
the results of its operations for the nine and three months ended September 30,
2001 and 2000. However, the operating results for these interim periods may not
be indicative of the results expected for the 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 the Trust'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 is a wholly-owned subsidiary of Prudential Securities
Incorporated ('PSI'), which, in turn, is a wholly-owned subsidiary of Prudential
Securities Group Inc. The Managing Owner or its affiliates perform services for
the Trust, which include, but are not limited to: brokerage services; accounting
and financial management; registrar, transfer and assignment functions; investor
communications; printing and other administrative services. Except for costs
related to brokerage services, PSI or its affiliates bear the costs of these
services, as well as the Trust's routine operational, administrative, legal and
auditing costs, and costs paid to organize the Trust and offer its Interests.
The costs charged to the Trust for brokerage services for the nine and three
months ended September 30, 2001 and 2000 were $622,956, $980,153, $187,339 and
$332,417, respectively.
The Trust's assets are maintained either in trading or cash accounts at PSI
or, for margin purposes, with the various exchanges on which the Trust is
permitted to trade. PSI credits the Trust monthly with 80% of the interest it
earns on the average net assets in the Trust's accounts and retains the
remaining 20%.
The Trust, acting through its trading managers, executes 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 the Trust pursuant to a line of credit. PSI may require that collateral
be posted against the marked-to-market position of the Trust.
As of September 30, 2001, a non-U.S. affiliate of the Managing Owner owns
362.197 limited interests of the Trust.
C. Derivative Instruments and Associated Risks
The Trust 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 the Trust'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 the Trust's net assets being
traded, significantly exceeds the Trust's future cash requirements since the
Trust intends to close out its open positions prior to settlement. As a result,
the Trust is generally subject only to the risk of loss arising from the change
in the value of the contracts. As such, the Trust considers the 'fair value' of
its futures and forwards to be
4
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the net unrealized gain or loss on the contracts. The market risk associated
with the Trust's commitments to purchase commodities is limited to the gross or
face amount of the contracts held. However, when the Trust 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 the
Trust 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 the Trust holds and the liquidity and inherent
volatility of the markets in which the Trust trades.
Credit risk
When entering into futures and forward contracts, the Trust is exposed to
credit risk that the counterparty to the contract will not meet its obligations.
The counterparty for futures contracts traded on United States and most foreign
futures exchanges is the clearinghouse associated with such exchanges. In
general, clearinghouses are backed by their corporate members who are required
to share any financial burden resulting from the non-performance by one of their
members and, as such, should significantly reduce this credit risk. In cases
where the clearinghouse is not backed by the clearing members (i.e., some
foreign exchanges), it is normally backed by a consortium of banks or other
financial institutions. On the other hand, if the Trust enters into forward
transactions, the sole counterparty is PSI, the Trust's commodity broker. The
Trust 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 the Trust'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 the Trust.
The Managing Owner attempts to minimize both credit and market risks by
requiring the Trust and its trading managers 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 agreements among the Trust, the Managing
Owner and each trading manager, the Trust shall automatically terminate a
trading manager if the net asset value allocated to that trading manager
declines by 33 1/3% from the value at the beginning of any year or since the
initial allocation of assets to that trading manager. Furthermore, the Second
Amended and Restated Declaration of Trust and Trust Agreement provides that the
Trust will liquidate its positions, and eventually dissolve, if the Trust
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
and redemptions. The Managing Owner may impose additional restrictions (through
modifications of trading limitations and policies) upon the trading activities
of the trading managers as it, in good faith, deems to be in the best interests
of the Trust.
PSI, when acting as the Trust'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 the Trust all assets of the Trust 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
30, 2001, such segregated assets totalled $450,062. Part 30.7 of the CFTC
regulations also requires PSI to secure assets of the Trust related to foreign
futures trading, which totalled $9,531,807 at September 30, 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 the Trust, to opt out of segregation with regard to
trading on certain exchanges, but PSI has not done so to date. If the Trust were
to opt out, its funds could be held in a broader and riskier range of
investments.
As of September 30, 2001, the Trust's open futures and forward contracts
mature within one year.
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At September 30, 2001 and December 31, 2000, the fair values of futures and
forward contracts were:
<Table>
<Caption>
2001 2000
------------------------ --------------------------
Assets Liabilities Assets Liabilities
-------- ----------- ---------- -----------
Futures Contracts:
Domestic exchanges
Interest rates $169,469 $ 1,765 $ 23,200 $ 178,704
Stock indices 4,568 -- 17,350 --
Currencies 96,360 190,873 288,497 15,500
Commodities 9,100 500 -- 2,812
Foreign exchanges
Interest rates 244,907 15,253 31,675 88,797
Stock indices 55,533 32,433 20,397 15,369
Commodities 14,794 435 4,250 8,304
Forward Contracts:
Currencies -- 220,959 -- 11,692
-------- ----------- ---------- -----------
$594,731 $ 462,218 $ 385,369 $ 321,178
-------- ----------- ---------- -----------
-------- ----------- ---------- -----------
</Table>
D. Financial Highlights
<Table>
<Caption>
For the For the
Nine Months Ended Three Months Ended
September 30, 2001 September 30, 2001
------------------- -------------------
Performance per Interest
Net asset value, beginning of period $ 88.28 $ 79.33
---------- ----------
Net realized gain (loss) and change in net
unrealized gain/loss on commodity
transactions (5.00) 2.04
Interest income 2.43 .65
Expenses (5.48) (1.79)
---------- ----------
Increase (decrease) for the period (8.05) .90
---------- ----------
Net asset value, end of period $ 80.23 $ 80.23
---------- ----------
---------- ----------
Total return (9.12)% 1.13%
Ratio to average net assets
Interest income 3.94% 3.21%
Expenses 8.79% 8.83%
</Table>
6
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PRUDENTIAL SECURITIES STRATEGIC TRUST
(a Delaware Business Trust)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Trust commenced operations on May 1, 1996 with gross proceeds of
$12,686,200 allocated to commodities trading. Additional Interests were offered
monthly at the then current net asset value per Interest until the continuous
offering period expired on January 31, 1998. Additional contributions made
during the continuous offering period totalled $51,242,700 including $375,000 of
contributions from the Managing Owner.
The Trust Agreement provides that an Interest holder may redeem its Interests
as of the last day of any month at the then current net asset value per
Interest. Redemptions of limited interests for the nine and three months ended
September 30, 2001 were $2,247,737 and $490,949, respectively. Redemptions of
general interests for the nine and three months ended September 30, 2001 were
$22,736 and $4,947, respectively. Redemptions of limited and general interests
from May 1, 1996 (commencement of operations) to September 30, 2001 were
$51,444,248 and $408,173, respectively. Future redemptions will impact the
amount of funds available for investment in commodity contracts in subsequent
periods.
At September 30, 2001, 100% of the Trust's net assets were allocated to
commodities trading. A significant portion of the net assets of the Trust are
held in cash, which is used as margin for the Trust's trading in commodities.
Inasmuch as the sole business of the Trust is to trade in commodities, the Trust
continues to own such liquid assets to be used as margin. PSI credits the Trust
monthly with 80% of the interest it earns on the average net assets in these
accounts and retains the remaining 20%.
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 the Trust from promptly liquidating its commodity
futures positions.
Since the Trust'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). The Trust'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 the
Trust's speculative trading, as well as the development of drastic market
occurrences, could result in monthly losses considerably beyond the Trust'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 the Trust's trading managers 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 the Trust's futures and forward contracts.
The Trust 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 the Trust's
trading managers who reported that there was no material disruption to their
ability to follow their trading systems and to function 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.
7
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The net asset value per Interest as of September 30, 2001 was $80.23, a
decrease of 9.12% from the December 31, 2000 net asset value per Interest of
$88.28, and an increase of 1.13% from the June 30, 2001 net asset value per
Interest of $79.33. Past performance is not necessarily indicative of future
results.
The Trust's gross trading gains (losses) were $(758,000) and $260,000 during
the nine and three months ended September 30, 2001 compared to $(9,058,000) and
$(1,968,000) for the corresponding periods in the prior year. Due to the nature
of the Trust's trading activities, a period to period comparison of its trading
results is not meaningful. However, a detailed discussion of the Trust's current
quarter 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 Trust Performance
The following is a summary of performance for the major sectors in which the
Trust 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.
Energies (+): Energy prices fell from their September 11th peak on concerns
that demand will wane due to weakening global economies. Short natural gas
positions resulted in gains.
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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 (-): Short euro, Japanese yen, Australian dollar and Canadian
dollar positions incurred losses for the Trust as these currencies strengthened
against the U.S. dollar. The U.S. dollar continued to decline against foreign
currencies after September 11th as investors sought to decrease their exposure
to the dollar.
Indices (-): The attacks on September 11th further weakened slowing global
economies and declining equity markets. Long positions in the Tokyo TOPIX,
London FTSE and S&P 500 resulted in losses for the Trust.
Decreases in overall average net asset levels of the Trust have led to
corresponding decreases in interest earned and commissions and management fees
incurred by the Trust, which are largely based on the level of net assets. The
Trust's average net asset levels were significantly lower during the nine and
three months ended September 30, 2001 as compared to the corresponding period in
the prior year, primarily due to redemptions and unfavorable trading performance
during 2000 and the first two quarters of 2001.
At September 30, 2001, all trading decisions were made by Bridgewater
Associates, Inc. ('Bridgewater') and Gamma Capital Management, LLC ('Gamma'). As
of February 15, 2000, Willowbridge Associates Inc. ('Willowbridge') ceased to
serve as a trading manager to the Trust when the remaining assets allocated to
Willowbridge, after adjusting for redemptions, declined by greater than 33 1/3%
from their balance at the beginning of the year. On July 5, 2000, these assets
were reallocated to Gamma. As a result of these changes from February 16, 2000
through July 4, 2000, a portion of the Trust's assets were not allocated to
commodities trading and, as a result, were not subject to management fees and
commissions. The monthly management fees paid on traded assets and the quarterly
incentive fees paid on 'New High Net Trading Profits' (as defined in each
advisory agreement among the Trust, Managing Owner and each trading manager) to
each trading manager are as follows:
<Table>
<Caption>
Monthly Quarterly
Trading Management Incentive
Manager Fee Fee
- ----------------------- --------------------------------- ---------------------------------------
Bridgewater .9756% annually of traded assets 20% of 'New High Net Trading Profits'
Gamma 2% annually of traded assets 20% of 'New High Net Trading Profits'
Willowbridge 3% annually of traded assets 20% of 'New High Net Trading Profits'
</Table>
Additionally, Gamma must recoup the cumulative trading losses of Willowbridge
before it is paid an incentive fee. The advisory agreements may be terminated
for a variety of reasons, including at the discretion of the Managing Owner.
Interest income is earned on the equity balances held at PSI and, therefore,
varies monthly according to interest rates, trading performance and redemptions.
Interest income decreased by $490,000 and $163,000 for the nine and three months
ended September 30, 2001, respectively, as compared to the corresponding periods
in 2000. These decreases were primarily due to the decline in average net asset
levels, as discussed above, as well as the decline in interest rates during 2001
versus 2000.
Commissions are calculated on the Trust's net asset value at the beginning of
each month and, therefore, vary according to trading performance and
redemptions. Commissions decreased by $357,000 and $145,000 for the nine and
three months ended September 30, 2001, respectively, as compared to the
corresponding periods in 2000. These decreases were primarily due to the decline
in average net asset levels, offset, in part, by the fact that no commissions
were charged to the Trust by PSI on a portion of net assets while they were not
allocated to commodities trading, as discussed above.
Management fees are calculated on the net asset value allocated to each
trading manager at the end of each month and, therefore, are affected by trading
performance and redemptions. Management fees decreased by $66,000 and $23,000
for the nine and three months ended September 30, 2001, respectively, as
compared to the corresponding periods in 2000. These decreases were primarily
due to the decline in average net asset levels, as well as the change in the
rate paid to Gamma versus Willowbridge, offset, in part, by the lack of
management fees on a portion of net assets while they were not allocated to
commodities trading, as discussed above.
9
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Incentive fees are based on the 'New High Net Trading Profits' generated by
each trading manager, as defined in the advisory agreements among the Trust, the
Managing Owner and each trading manager. No incentive fees were paid during the
nine and three months ended September 30, 2001 or 2000.
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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings--There are no material legal proceedings pending by or
against the Trust 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--Second Amended and Restated Declaration of Trust and Trust
Agreement of the Trust dated as of December 14, 1995
(incorporated by reference to Exhibit 3.1 to 4.1 to the Trust's
Registration Statement on Form S-1, File No. 33-80443)
4.2--Subscription Agreement (incorporated by reference to
Exhibit 4.2 to the Trust's Registration Statement on
Form S-1, File No. 33-80443)
4.3--Request for Redemption (incorporated by reference to
Exhibit 4.3 to the Trust's Registration Statement on
Form S-1, File No. 33-80443)
(b) Reports on Form 8-K--None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Trust has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PRUDENTIAL SECURITIES STRATEGIC TRUST
By: Prudential Securities Futures Management Inc.
A Delaware corporation, Managing Owner
By: /s/ Steven Carlino Date: November 13, 2001
----------------------------------------
Steven Carlino
Vice President and Treasurer
12