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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 June 30, 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: 0-23885
PRUDENTIAL SECURITIES STRATEGIC TRUST
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-7075398
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One New York Plaza, 13th Floor, New York, New York 10292
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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 I. FINANCIAL STATEMENTS
PRUDENTIAL SECURITIES STRATEGIC TRUST
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<Table>
<Caption>
June 30, December 31,
2002 2001
- ---------------------------------------------------------------------------------------------------
ASSETS
Cash $ 9,477,400 $ 9,662,833
Net unrealized gain (loss) on open futures contracts 424,933 (95,924 )
Other receivable 3,103 2,120
----------- ------------
Total assets $ 9,905,436 $ 9,569,029
----------- ------------
----------- ------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Redemptions payable $ 158,603 $ 93,665
Management fees payable 10,783 10,694
Net unrealized loss on open forward contracts 8,712 21,053
----------- ------------
Total liabilities 178,098 125,412
----------- ------------
Commitments
Trust capital
Limited interests (103,966.718 and 113,584.560 interests
outstanding) 9,629,988 9,349,125
General interests (1,051 and 1,148 interests outstanding) 97,350 94,492
----------- ------------
Total trust capital 9,727,338 9,443,617
----------- ------------
Total liabilities and trust capital $ 9,905,436 $ 9,569,029
----------- ------------
----------- ------------
Net asset value per limited and general interest ('Interests') $ 92.63 $ 82.31
----------- ------------
----------- ------------
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<Caption>
The accompanying notes are an integral part of these statements.
</Table>
2
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PRUDENTIAL SECURITIES STRATEGIC TRUST
(a Delaware Business Trust)
Condensed Schedules of Investments
(Unaudited)
<Table>
<Caption>
June 30, 2002 December 31, 2001
-------------------------------- --------------------------------
Net Unrealized Net Unrealized
Gain (Loss) Gain (Loss)
as a % of Net Unrealized as a % of Net Unrealized
Futures Contracts Trust Capital Gain (Loss) Trust Capital Gain (Loss)
- -------------------------------------------------------------------------------------------------------------
Futures contracts purchased:
Stock indices $ (57,539) $ 36,704
Interest rates 424,115 (92,254)
Currencies 381,267 (192,533)
Commodities 25,638 (33,820)
-------------- --------------
Net unrealized gain (loss) on
futures contracts purchased 7.95% 773,481 (2.99)% (281,903)
-------------- --------------
Futures contracts sold:
Stock indices (114) --
Interest rates (302,453) 18,171
Currencies (45,981) 157,050
Commodities -- 10,758
-------------- --------------
Net unrealized gain (loss) on
futures contracts sold (3.58) (348,548) 1.97 185,979
------ -------------- ------ --------------
Net unrealized gain (loss) on
futures contracts 4.37% $ 424,933 (1.02)% $ (95,924)
------ -------------- ------ --------------
------ -------------- ------ --------------
Forward currency contracts purchased: --% $ -- (0.22)% $ (21,053)
Forward currency contracts sold: (0.09) (8,712) -- --
------ -------------- ------ --------------
Net unrealized loss on forward
contracts (0.09)% $ (8,712) (0.22)% $ (21,053)
------ -------------- ------ --------------
------ -------------- ------ --------------
Settlement Currency--Futures Contracts
British pound (1.02)% $ (99,695) 0.54% $ 51,697
Canadian dollar 0.49 48,221 0.37 34,908
Euro 1.41 137,273 (1.58) (148,945)
Japanese yen (0.08) (7,876) 0.05 4,424
Australian dollar 0.01 1,117 (0.03) (2,958)
Swiss franc (0.07) (7,250) 0.04 3,451
U.S. dollar 3.63 353,143 (0.41) (38,501)
------ -------------- ------ --------------
Total 4.37% $ 424,933 (1.02)% $ (95,924)
------ -------------- ------ --------------
------ -------------- ------ --------------
Settlement Currency--Forward Contracts
Euro (0.01)% $ (1,083) --% $ --
U.S. dollar (0.08) (7,629) (0.22) (21,053)
------ -------------- ------ --------------
Total (0.09)% $ (8,712) (0.22)% $ (21,053)
------ -------------- ------ --------------
------ -------------- ------ --------------
<Caption>
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The accompanying notes are an integral part of these statements.
</Table>
3
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PRUDENTIAL SECURITIES STRATEGIC TRUST
(a Delaware Business Trust)
STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
Six months ended Three months ended
June 30, June 30,
-------------------------- ------------------------
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------
REVENUES
Net realized gain (loss) on commodity
transactions $ 886,484 $ (919,057) $ 911,324 $(496,617)
Change in net unrealized gain/loss on open
commodity positions 533,198 (98,605) 263,493 402,435
Interest income 91,331 249,476 46,019 103,485
---------- ----------- ---------- ---------
1,511,013 (768,186) 1,220,836 9,303
---------- ----------- ---------- ---------
EXPENSES
Commissions 343,051 435,617 171,303 200,872
Management fees 62,517 78,500 31,253 36,613
---------- ----------- ---------- ---------
405,568 514,117 202,556 237,485
---------- ----------- ---------- ---------
Net income (loss) $1,105,445 $(1,282,303) $1,018,280 $(228,182)
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
ALLOCATION OF NET INCOME (LOSS)
Limited interests $1,094,384 $(1,269,472) $1,008,092 $(225,898)
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
General interests $ 11,061 $ (12,831) $ 10,188 $ (2,284)
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
NET INCOME (LOSS) PER WEIGHTED AVERAGE
LIMITED AND GENERAL INTEREST
Net income (loss) per weighted average
limited and general interest $ 9.93 $ (9.20) $ 9.37 $ (1.71)
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
Weighted average number of limited and
general interests outstanding 111,277 139,330 108,708 133,578
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
- ------------------------------------------------------------------------------------------------------
</Table>
STATEMENT OF CHANGES IN TRUST CAPITAL
(Unaudited)
<Table>
<Caption>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
- -----------------------------------------------------------------------------------------------------
Trust capital--December 31, 2001 114,732.560 $9,349,125 $94,492 $9,443,617
Net income 1,094,384 11,061 1,105,445
Redemptions (9,714.842) (813,521) (8,203) (821,724)
------------ ---------- --------- ----------
Trust capital--June 30, 2002 105,017.718 $9,629,988 $97,350 $9,727,338
------------ ---------- --------- ----------
------------ ---------- --------- ----------
<Caption>
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</Table>
4
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PRUDENTIAL SECURITIES STRATEGIC TRUST
(a Delaware Business Trust)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 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
Prudential Securities Strategic Trust (the 'Trust') as of June 30, 2002 and the
results of its operations for the six and three months ended June 30, 2002 and
2001. However, the operating results for the 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, 2001.
B. Related Parties
The Managing Owner is a wholly-owned subsidiary of Prudential Securities
Incorporated ('PSI'), which, in turn, is an indirect wholly-owned subsidiary of
Prudential Financial, Inc. 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 six months
ended June 30, 2002 and 2001 were $343,051 and $435,617, respectively, and for
the three months ended June 30, 2002 and 2001 were $171,303 and $200,872,
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 June 30, 2002, a non-U.S. affiliate of the Managing Owner owned 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 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 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
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in the value of the contracts. As such, the Trust considers the 'fair value' of
its futures and forwards to be 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 the particular exchange.
In general, clearinghouses are backed by their corporate members who are
required to share any financial burden resulting from the non-performance by one
of their members and, as such, should significantly reduce this credit risk. In
cases where the clearinghouse is not backed by the clearing members (i.e., some
foreign exchanges), it is normally backed by a consortium of banks or other
financial institutions. On the other hand, 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;
however, counterparty nonperformance on only certain of the Trust's contracts
may result in greater loss than nonperformance on all of the Trust's contracts.
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 interest
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 and is not allowed to commingle such assets with other
assets of PSI. At June 30, 2002, such segregated assets totalled $1,638,211.
Part 30.7 of the CFTC regulations also requires PSI to secure assets of the
Trust related to foreign futures trading, which totalled $8,264,122 at June 30,
2002. There are no segregation requirements for assets related to forward
trading.
As of June 30, 2002, the Trust's open futures and forward contracts mature
within one year.
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D. Financial Highlights
<Table>
<Caption>
For the Six Months For the Three Months
ended June 30, ended June 30,
------------------- ---------------------
2002 2001 2002 2001
------ ------- --------- ------
Performance per Interest
Net asset value, beginning of period $82.31 $ 88.28 $ 83.13 $80.99
------ ------- --------- ------
Net realized gain (loss) and change in net
unrealized gain/loss on commodity
transactions 13.14 (7.04) 10.94 (.65)
Interest income .82 1.78 .42 .77
Expenses (3.64) (3.69) (1.86) (1.78)
------ ------- --------- ------
Increase (decrease) for the period 10.32 (8.95) 9.50 (1.66)
------ ------- --------- ------
Net asset value, end of period $92.63 $ 79.33 $ 92.63 $79.33
------ ------- --------- ------
------ ------- --------- ------
Total return 12.54% (10.14)% 11.43% (2.05)%
Ratio to average net assets (annualized)
Interest income 1.95% 4.29% 1.93% 3.85%
Expenses 8.68% 8.83% 8.64% 8.85%
</Table>
These financial highlights represent the overall results of the Trust for
the six and three months ended June 30, 2002 and 2001. An individual limited
owner's actual results may differ depending on the timing of redemptions.
7
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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 six and three months ended
June 30, 2002 were $813,521 and $500,997, respectively. Redemptions of general
interests for the six and three months ended June 30, 2002 were $8,203 and
$5,028, respectively. Redemptions of limited and general interest from May 1,
1996 (commencement of operations) to June 30, 2002 were $52,701,314 and
$420,829, respectively. Future redemptions will impact the amount of funds
available for investment in commodity contracts in subsequent periods.
At June 30, 2002, 100% of the Trust's net assets were allocated to
commodities trading. A significant portion of the net assets of the Trust was
held in cash, which was 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
The net asset value per Interest as of June 30, 2002 was $92.63, an increase
of 12.54% from the December 31, 2001 net asset value per Interest of $82.31, and
an increase of 11.43% from the March 31, 2002 net asset value per Interest of
$83.13. Past performance is not necessarily indicative of future results.
The Trust's gross trading gains were $1,420,000 and $1,175,000 during the six
and three months ended June 30, 2002 compared to trading losses of $1,018,000
and $94,000 for the corresponding period in the prior year. Due to the nature of
the Trust's trading activities, a period to period comparison of its trading
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results is not meaningful. However, a detailed discussion of the Trust's current
quarter trading results is presented below.
Quarterly Market Overview
Despite reports by the Federal Reserve Board (the 'Fed') indicating that
overall economic activity expanded at a moderate pace during the second quarter
of 2002, investor sentiment remained bleak. Most major U.S. equity indices
reached new lows as investor confidence worldwide was battered by reports of
corporate leadership misconduct and accounting irregularities. Continued
uncertainty in the Middle East and weaker than expected second quarter corporate
earnings added to investor uncertainty. The U.S. dollar fell against most major
foreign currencies during the quarter, while the price of interest rate
instruments rose. In the U.S., residential real estate markets generally
remained robust, but weakness persisted in most commercial markets. Retail sales
were generally flat and labor markets remained weak. Consumer spending and
manufacturing activity, which helped boost U.S. economic growth in previous
quarters, remained stagnant at a relatively high level. Additionally, continued
softness in the labor markets helped weaken consumer confidence. European and
Asian economic activity mirrored that of the U.S., but to a lesser extent.
Global equity markets moved sharply lower throughout the quarter as investor
confidence collapsed in response to concerns about accounting transparency at
some firms, heightened tension in the Middle East, and decreased corporate sales
and profits. This resulted in investors re-evaluating their outlook for a
near-term economic recovery. In the U.S., concerns that unannounced accounting
problems will eliminate expected corporate profits continued to keep equity
markets down. At quarter-end, the year-to-date returns for the S&P 500, the
NASDAQ and the London FTSE were -14%, -25% and -10.75%, respectively.
In bond markets, prices rose as interest rates fell in the U.S. on concerns
regarding a weak economic recovery and declines in the equity markets.
Additionally, declining equity markets led investors to switch allocations from
equity markets to fixed income markets, which are perceived as the current safe
haven for wealth. The Fed left interest rates unchanged at 1.75% in its two
meetings this quarter, declaring that its economic outlook for the near future
remained 'uncertain'. Other central banks, including the European Central Bank
and the Bank of Japan, generally followed the lead of the Fed leaving rates
unchanged and foreign bond markets rose as well.
In foreign exchange markets, the U.S. dollar moved sharply lower against most
major currencies throughout the quarter, falling to new lows against some
currencies. Weak U.S. economic growth in relation to other economies and
concerns regarding accounting irregularities in major U.S. corporations drove
the dollar downward. Additionally, the decline in U.S. equity markets and
investor confidence decreased the desire to hold U.S. assets driving the U.S.
dollar lower against the euro, British pound, Swiss franc and Japanese yen.
Gold and other precious metals soared throughout most of the quarter in
response to weaknesses in the U.S. dollar and global equity markets and
instability in the Middle East. Gold prices reversed at quarter-end as a result
of profit taking by traders and sentiment that the U.S. dollar would be
supported by U.S. and Japanese central banks.
Quarterly Trust Performance
The following is a summary of performance for the major sectors in which the
Trust traded:
Currencies (+): Long Australian dollar, Canadian dollar, euro, British pound
and Japanese yen positions resulted in gains as a weak U.S. economy and falling
equity markets caused the U.S. dollar to fall.
Metals (+): Long copper positions resulted in gains as copper rallied due to
supply cutbacks initiated by some producers. Precious metals rallied in the wake
of falling equity markets and weak economies resulting in gains for long gold
and silver positions.
Indices (-): Long positions in the London FTSE, Italian MIB 30 and S&P 500
incurred losses as equity indices fell amid concerns regarding U.S. economic
recovery, accounting irregularities and weaker than expected corporate earnings.
Interest rates (-): Global bond markets rose as interest rates declined
during the quarter in response to poor equity market performance. Short
positions in U.S. and British bonds incurred losses.
9
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Energies (-): Energy prices declined amid increased U.S. supplies suggesting
ample supply for the summer season and anticipation that Russia would
discontinue output restrictions. Long crude oil and natural gas positions
incurred losses.
Decreases in the overall average net asset levels of the Trust have led to
corresponding decreases in interest earned, as well as 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 lower during the six and
three months ended June 30, 2002 as compared to the corresponding period in the
prior year, primarily due to redemptions and unfavorable trading performance
during 2001 offset, in part, by favorable trading performance in 2002.
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 $158,000 and $57,000 for the six and three months
ended June 30, 2002 as compared to the corresponding periods in 2001. This
decrease was primarily due to lower interest rates during 2002 as compared to
2001, as well as the decline in average net asset levels as discussed above.
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 $93,000 and $30,000 for the six and three
months ended June 30, 2002 as compared to the corresponding periods in 2001.
This decrease was due to the decline in average net asset levels as discussed
above.
At June 30, 2002, all trading decisions were made by Bridgewater Associates,
Inc. and Gamma Capital Management, LLC. 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 $16,000 and $5,000 for the six and three months ended June 30, 2002
as compared to the corresponding periods in 2001. This decrease was due to the
decline in average net asset levels as discussed above.
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
six and three months ended June 30, 2002 or 2001.
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 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--Effective May 2002, Steven Weinreb was elected by the
Board of Directors of Prudential Securities Futures Management Inc. as
Chief Financial Officer replacing Barbara Brooks.
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)
99.1-- Certificate pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the SARBANES-OXLEY Act of 2002
(filed herewith)
(b) Reports on Form 8-K--None
11
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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 Weinreb Date: August 14, 2002
----------------------------------------
Steven Weinreb
Chief Financial Officer
12