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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 March 29, 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: 0-32687
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 (I.R.S. Employer Identification
incorporation or organization) 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 1. FINANCIAL STATEMENTS
WORLD MONITOR TRUST II--SERIES E
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<Table>
<Caption>
March 29, December 31,
2002 2001
- ----------------------------------------------------------------------------------------------------
ASSETS
Cash $ 9,944,906 $8,838,511
Net unrealized gain on open futures contracts 320,204 255,757
Accrued interest receivable 984 --
Subscriptions receivable -- 5,000
------------- ------------
Total assets $10,266,094 $9,099,268
------------- ------------
------------- ------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Commissions and other transaction fees payable $ 59,235 $ 45,475
Accrued expenses payable 51,796 61,754
Management fees payable 18,983 14,408
Unrealized loss on open forward contracts 4,794 9,674
Redemptions payable -- 60,681
Incentive fees payable -- 13,466
------------- ------------
Total liabilities 134,808 205,458
------------- ------------
Commitments
Trust capital
Limited interests (82,092.725 and 67,965.112 interests
outstanding) 9,997,328 8,787,237
General interests (1,100.000 and 824.300 interests outstanding) 133,958 106,573
------------- ------------
Total trust capital 10,131,286 8,893,810
------------- ------------
Total liabilities and trust capital $10,266,094 $9,099,268
------------- ------------
------------- ------------
Net asset value per limited and general interest ('Interests') $ 121.78 $ 129.29
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</Table>
2
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WORLD MONITOR TRUST II--SERIES E
(a Delaware Business Trust)
Condensed Schedules of Investments
(Unaudited)
<Table>
<Caption>
March 29, 2002 December 31, 2001
-------------------------------- --------------------------------
Net Unrealized Net Unrealized
Gain (Loss) Gain (Loss)
as a % of Net Unrealized as a % of Net Unrealized
Futures and Forward Contracts Trust Capital Gain (Loss) Trust Capital Gain (Loss)
- -------------------------------------------------------------------------------------------------------------
Futures contracts purchased:
Stock indices $ 11,143 $ --
Interest rates 13,970 4,010
Currencies 40,345 250,488
Commodities 117,835 51,792
-------------- --------------
Net unrealized gain on futures
contracts purchased 1.81% 183,293 3.44% 306,290
-------------- --------------
Futures contracts sold:
Interest rates 105,420 9,798
Stock indices 34,205 (12,058)
Currencies (1,345) 165,385
Commodities (1,369) (213,658)
-------------- --------------
Net unrealized gain (loss) on
futures contracts sold 1.35% 136,911 (0.56) (50,533)
------ -------------- ------ --------------
Net unrealized gain on futures
contracts 3.16% $ 320,204 2.88% $ 255,757
------ -------------- ------ --------------
------ -------------- ------ --------------
Forward currency contracts purchased:
Unrealized loss on forward
contracts (0.05)% $ (4,794) (0.11)% $ (9,674)
------ -------------- ------ --------------
------ -------------- ------ --------------
Settlement Currency--Futures Contracts
British pound 0.18% $ 18,098 0.41% $ 36,181
Japanese yen (0.29) (29,150) 2.30 205,027
Swedish krona 0.02 2,859 (0.01) (1,090)
U.S. dollar 2.25 227,565 0.18 15,639
Swiss francs (0.25) (25,712) -- --
Australian dollars 0.33 32,948 -- --
Euro 0.87 87,762 -- --
Hong Kong dollars 0.05 5,834 -- --
------ -------------- ------ --------------
Total 3.16% 320,204 2.88% $ 255,757
------ -------------- ------ --------------
------ -------------- ------ --------------
Settlement Currency--Forward Contracts
U.S. dollar (0.05)% (4,794) (0.11)% $ (9,674)
------ -------------- ------ --------------
------ -------------- ------ --------------
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The accompanying notes are an integral part of these statements.
</Table>
3
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WORLD MONITOR TRUST II--SERIES E
(a Delaware Business Trust)
STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
For the period from For the period from
January 1, 2002 to January 1, 2001 to
March 29, 2002 March 30, 2001
- --------------------------------------------------------------------------------------------------------
REVENUES
Net realized gain (loss) on commodity transactions $ (498,639) $ 1,041,516
Change in net unrealized gain/loss on open commodity
positions 69,327 (114,341)
Interest income 40,367 75,217
------------------- -------------------
(388,945) 1,002,392
------------------- -------------------
EXPENSES
Commissions and other transaction fees 148,010 98,586
Management fees 46,399 30,833
Incentive fees -- 169,806
General and administrative 31,081 30,356
------------------- -------------------
225,490 329,581
General and administrative expenses borne by the Managing
Owner and its affiliates (6,572) (7,143)
------------------- -------------------
Net expenses 218,918 322,438
------------------- -------------------
Net income (loss) $ (607,863) $ 679,954
------------------- -------------------
------------------- -------------------
ALLOCATION OF NET INCOME (LOSS)
Limited interests $ (599,617) $ 670,084
------------------- -------------------
------------------- -------------------
General interests $ (8,246) $ 9,870
------------------- -------------------
------------------- -------------------
NET INCOME (LOSS) PER WEIGHTED AVERAGE LIMITED AND
GENERAL INTEREST
Net income (loss) per weighted average limited and
general interest $ (8.06) $ 13.32
------------------- -------------------
------------------- -------------------
Weighted average number of limited and general interests
outstanding 75,387 51,048
------------------- -------------------
------------------- -------------------
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</Table>
STATEMENT OF CHANGES IN TRUST CAPITAL
(Unaudited)
<Table>
<Caption>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
- ------------------------------------------------------------------------------------------------------
Trust capital--December 31, 2001 68,789.412 $ 8,787,237 $106,573 $ 8,893,810
Contributions 15,773.490 1,984,560 35,631 2,020,191
Net income (599,617) (8,246 ) (607,863)
Redemptions (1,370.177) (174,852) -- (174,852)
------------ ----------- --------- -----------
Trust capital--March 29, 2002 83,192.725 $ 9,997,328 $133,958 $10,131,286
------------ ----------- --------- -----------
------------ ----------- --------- -----------
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</Table>
4
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WORLD MONITOR TRUST II--SERIES E
(a Delaware Business Trust)
NOTES TO FINANCIAL STATEMENTS
March 29, 2002
(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 March 29, 2002 and the results of
its operations for the periods from January 1, 2002 to March 29, 2002 ('First
Quarter 2002') and January 1, 2001 to March 30, 2001 ('First Quarter 2001').
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, 2001.
Certain balances from 2001 have been reclassified to conform with the current
financial statement presentation.
B. Related Parties
The Managing Owner of Series E is a wholly-owned subsidiary of Prudential
Securities Incorporated ('PSI'), which, in turn, is an indirect wholly-owned
subsidiary of Prudential Financial, Inc. Series E reimburses 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, to the extent that general and
administrative expenses exceed 1.5% of Series E's net asset value during the
year (with a maximum of 0.5% 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 E,
other than brokerage services, during First Quarter 2002 and First Quarter 2001
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.
The expenses incurred by Series E for services performed by the Managing
Owner and its affiliates for Series E were:
<Table>
<Caption>
First Quarter 2002 First Quarter 2001
------------------- -------------------
Commissions $ 139,364 $ 92,097
General and administrative 16,552 19,151
------------------- -------------------
155,916 111,248
General and administrative expenses borne by
the Managing Owner and its affiliates (6,572) (7,143)
------------------- -------------------
$ 149,344 $ 104,105
------------------- -------------------
------------------- -------------------
</Table>
Expenses payable to the Managing Owner and its affiliates as of March 29,
2002 and December 31, 2001 were $15,139 and $9,058, respectively.
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.
5
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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. 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 March 29, 2002, a non-U.S. affiliate of the Managing Owner owned 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 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 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 the particular exchange.
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
6
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40% from the value at the beginning of any year or since the commencement of
trading activities. Furthermore, the Second Amended and Restated Declaration of
Trust and Trust Agreement of World Monitor Trust II provides that Series E will
liquidate its positions, and eventually dissolve, if Series E 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 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 and is not allowed to commingle such assets with other
assets of PSI. At March 29, 2002, such segregated assets totalled $2,367,652.
Part 30.7 of the CFTC regulations also requires PSI to secure assets of Series E
related to foreign futures trading which totalled $7,897,458 at March 29, 2002.
There are no segregation requirements for assets related to forward trading.
As of March 29, 2002, Series E's open futures and forward contracts generally
mature within one year, although certain interest rate futures contracts have
maturities as distant as September 2003.
D. Financial Highlights
<Table>
<Caption>
First Quarter 2002 First Quarter 2001
------------------- -------------------
Performance per Interest
Net asset value, beginning of period $129.29 $120.36
------------------- -------------------
Net realized gain (loss) and change in net unrealized
gain/loss on commodity transactions (5.16) 17.96
Interest income .53 1.48
Net expenses (2.88) (6.28)
------------------- -------------------
Net increase (decrease) for the period (7.51) 13.16
------------------- -------------------
Net asset value, end of period $121.78 $133.52
------------------- -------------------
------------------- -------------------
Total return (5.81)% 10.93%
Ratio to average net assets (annualized)
Interest income 1.58% 4.84%
Net expenses, including 10.93% of incentive fees during
First Quarter 2001 8.53% 20.75%
</Table>
These financial highlights represent the overall results of Series E during
First Quarter 2002 and First Quarter 2001. An individual limited owner's actual
results may differ depending on the timing of contributions and redemptions.
7
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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 during First Quarter 2002 and for the period
from April 6, 2000 (commencement of operations) to March 29, 2002 resulted in
additional proceeds to Series E of $2,020,191 and $7,619,823, respectively.
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 of
$50,000,000 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 First Quarter 2002 and for the
period from April 6, 2000 (commencement of operations) to March 29, 2002
totalled $174,852, and $3,594,879, 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 March 29, 2002, 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.
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
The net asset value per Interest as of March 29, 2002 was $121.78, a decrease
of 5.81% from the December 31, 2001 net asset value per Interest of $129.29.
Past performance is not necessarily indicative of future results.
8
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Series E's gross trading gains (losses) were approximately $(429,000) and
$927,000 during First Quarter 2002 and First Quarter 2001, 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 First Quarter 2002 trading results is presented below.
Quarterly Market Overview
While the first quarter of 2002 was generally characterized by continued
weakness in global economies, there was definite evidence of economic recovery.
The combination of post September 11th economic activity, infusions of
government spending and unseasonably warm weather helped jumpstart the economy
during the first quarter. Jobless claims moderated to levels that suggested that
the labor market was no longer contracting, manufacturing activity increased
slightly and consumer spending and housing activity remained stable, helping the
economy achieve a 5.8% growth rate for the quarter. U.S. economic recovery
helped boost global growth, but to a lesser extent than in the U.S. The U.K.'s
economy expanded by 0.1% during the first quarter while economic activity in
Europe and Canada remained stable. The Japanese economy remained weak.
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 quarter in response to stronger
than expected economic data and indications that the Federal Reserve (the 'Fed')
would lean towards increasing rates in the near future. The Fed kept rates
unchanged at 1.75% during its two meetings this quarter, a marked change from
the eleven rate decreases in 2001. Additionally, the Fed shifted its perception
of the economy's 'balance of risks' from 'economic weakness' to 'balanced'
during the March 19th meeting. This reinforced comments made by Alan Greenspan,
the Fed's Chairman, during his congressional testimony where he stated that
recent evidence suggests an economic expansion is under way. European and
Australian interest rate instruments fell as well amid indications that the
global recession is showing signs of abatement. Conversely, Japanese interest
rates declined as a result of weak economic data in Japan despite the short-term
rise in the stock market.
Equity indices began the quarter choppily due to a continuing weak economy
and concerns about balance sheet reporting and accounting irregularities. Stock
markets climbed towards mid-quarter as a result of positive data and hopes of an
economic recovery. U.S. stock markets moved upward as a result of Fed Chairman
Alan Greenspan's testimony to Congress that economic expansion was well under
way. Despite continued weakness in the Japanese economy, the Nikkei rallied in
March to its highest level since August.
In foreign exchange markets, the U.S. dollar remained strong against most
major foreign currencies as the U.S. economy exhibited signs of recovery. The
Japanese yen started the quarter down against the U.S. dollar, but rose towards
quarter-end as a result of a rally in the Japanese stock market and investors
repatriating capital in anticipation of Japan's March 31st fiscal year-end. Most
European currencies and the euro were weak early in the quarter but rallied in
March amid hopes of an economic recovery.
Energy markets were volatile at the beginning of the quarter but rose toward
quarter-end as the escalating conflict in the Middle East prompted fears of an
interruption in supplies. This, together with hopes for increased U.S. energy
demand due to a recovering economy, reinforced the normal seasonal upward
pressure on energy prices. In particular, crude oil reached a six-month high at
the end of the quarter as the conflict in the Middle East gained momentum.
Expectations for colder March weather, together with concerns regarding the
safety of nuclear power plants, helped drive prices higher.
Quarterly Performance of Series E
The following is a summary of performance for the major sectors in which
Series E traded:
Stock indices (-): Short positions in the Nikkei Dow, Euro DAX, S&P 500 and
Topix resulted in losses as equity indices rose amid optimism regarding an
economic recovery.
Interest rates (-): Global bond markets fell on prospects of economic growth
and news in March that the U.S. Federal Reserve shifted their view on the
economy from weak to neutral. Long positions in U.S. and Japanese bonds incurred
losses.
Energies (-): Energy prices rose as the conflict in the Middle East
intensified resulting in losses for short crude oil, gas oil and unleaded
gasoline positions.
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Grains (-): Short wheat positions resulted in losses as wheat prices rose
buoyed by speculation of decreased supply for this season.
Metals (-): Base metals climbed as global economic activity showed signs of
recovery. Short positions in aluminum and zinc resulted in losses.
Currencies (+): Short Mexican Peso and Thai Baht/U.S. dollar cross-rate
positions resulted in gains as these currencies fell against the U.S. dollar due
to fear of uncertainty in emerging market economies.
Softs (+): Short sugar positions resulted in gains as prices fell on news
that the Brazilian sugar crop would be larger than expected.
Increases in commissions and other transaction fees and management fees
during First Quarter 2002 as compared to First Quarter 2001 are primarily due to
the effect of contributions during 2001 and First Quarter 2002 on Series E's
weekly net asset values offset, in part, by redemptions as well as unfavorable
trading performance during First Quarter 2002, 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 decreased $35,000 during First Quarter 2002 as compared to First
Quarter 2001 due to lower overall interest rates during First Quarter 2002
versus First Quarter 2001 offset, in part, by an increase in average net asset
levels during First Quarter 2002 versus First Quarter 2001, as discussed above.
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 increased $49,000 during First
Quarter 2002 as compared to First Quarter 2001 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 increased
$16,000 during First Quarter 2002 as compared to First Quarter 2001 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 Series E, the
Managing Owner and the Trading Advisor. Incentive fees generated during First
Quarter 2001 were $170,000. Series E did not incur an incentive fee during First
Quarter 2002.
General and administrative expenses were $31,000 and $30,000 for First
Quarter 2002 and First Quarter 2001, 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 E. To the extent that general
and administrative expenses exceed 1.5% of Series E's net asset value during the
year (with a maximum of 0.5% 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 these expenses
has been borne by the Managing Owner and its affiliates, resulting in a net cost
to Series E of $25,000 and $23,000 during First Quarter 2002 and 2001,
respectively.
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 Registrant or the Managing Owner
Item 2. Changes in Securities--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 period from
January 1, 2002 to March 29, 2002.
<Table>
<Caption>
Amount of
-------------------------------
Date of Sale Interests sold Cash received
--------------------------------------------------------
February 18, 2002 275.7 $35,631
</Table>
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 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 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 Post-Effective Amendment No. 4 to Series E's
Registration Statement on Form S-1, File No. 333-83015)
4.3-- Form of Exchange Request (incorporated by reference to
Exhibit 4.3 to Post-Effective Amendment No. 4 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 Post-Effective
Amendment No. 4 to Series E's Registration
Statement on Form S-1, File No. 333-83015)
(b) Reports on Form 8-K--None
11
<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/ Barbara J. Brooks Date: May 13, 2002
----------------------------------------
Barbara J. Brooks
Chief Financial Officer
12