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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 March 31, 2003
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 __
Indicate by check CK whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes __ No _CK_
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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>
March 31, December 31,
2003 2002
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ASSETS
Cash in commodity trading accounts $ 8,205,738 $ 8,527,359
Net unrealized gain (loss) on open futures contracts (74,469) 56,102
Other receivable 2,226 1,335
----------- ------------
Total assets $ 8,133,495 $ 8,584,796
----------- ------------
----------- ------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Redemptions payable $ 212,374 $ 40,817
Management fees payable 8,421 9,132
Unrealized loss on open forward contracts 8,516 --
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Total liabilities 229,311 49,949
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Commitments
Trust capital
Limited interests (88,765.265 and 96,797.855 interests outstanding) 7,825,108 8,449,304
General interests (897 and 980 interests outstanding) 79,076 85,543
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Total trust capital 7,904,184 8,534,847
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Total liabilities and trust capital $ 8,133,495 $ 8,584,796
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Net asset value per limited and general interest $ 88.16 $ 87.29
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The accompanying notes are an integral part of these statements.
</Table>
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PRUDENTIAL SECURITIES STRATEGIC TRUST
(a Delaware Business Trust)
Condensed Schedules of Investments
(Unaudited)
<Table>
<Caption>
March 31, 2003 December 31, 2002
-------------------------------- --------------------------------
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 $ (5,742) $ (36,059)
Interest rates (29,300) 261,040
Currencies (40,237) 90,669
Commodities (22,766) (36,719)
-------------- --------------
Net unrealized gain (loss) on
futures contracts purchased (1.24)% (98,045) 3.27% 278,931
-------------- --------------
Futures contracts sold:
Stock indices -- 1,004
Interest rates 34,346 (175,554)
Currencies (10,770) (48,279)
-------------- --------------
Net unrealized gain (loss) on
futures contracts sold 0.30 23,576 (2.61) (222,829)
------ -------------- ------ --------------
Net unrealized gain (loss) on
futures contracts (0.94)% $ (74,469) 0.66% $ 56,102
------ -------------- ------ --------------
------ -------------- ------ --------------
Forward currency contracts purchased: (0.11)% $ (8,516) (0.04)% $ (3,158)
Forward currency contracts sold: 0.00 0 0.04 3,158
------ -------------- ------ --------------
Net unrealized gain (loss) on
forward contracts (0.11)% $ (8,516) 0.00% $ 0
------ -------------- ------ --------------
------ -------------- ------ --------------
Settlement Currency--Futures Contracts
British pound 0.77% $ 61,489 (1.03)% $ (87,605)
Canadian dollar (0.01) (929) (0.42) (36,264)
Euro (0.70) (55,463) 1.58 134,838
Japanese yen (0.20) (15,963) (0.21) (17,576)
Australian dollar 0.05 3,876 0.03 2,770
Swiss franc 0.06 4,618 0.20 16,844
Swedish krona (0.01) (765) 0.00 (164)
U.S. dollar (0.90) (71,332) 0.51 43,259
------ -------------- ------ --------------
Total (0.94)% $ (74,469) 0.66% $ 56,102
------ -------------- ------ --------------
------ -------------- ------ --------------
Settlement Currency--Forward Contracts
U.S. dollar (0.11)% $ (8,516) 0.00% $ 0
------ -------------- ------ --------------
------ -------------- ------ --------------
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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>
Three months ended March 31,
-----------------------------
2003 2002
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REVENUES
Net realized gain (loss) on commodity transactions $ 401,781 $ (24,840)
Change in net unrealized gain/loss on open commodity positions (139,087) 269,705
Interest income 27,878 45,312
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290,572 290,177
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EXPENSES
Commissions 154,427 171,748
Management fees 25,304 31,264
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179,731 203,012
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Net income $ 110,841 $ 87,165
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ALLOCATION OF NET INCOME
Limited interests $ 109,724 $ 86,292
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General interests $ 1,117 $ 873
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NET INCOME PER WEIGHTED AVERAGE
LIMITED AND GENERAL INTEREST
Net income per weighted average limited
and general interest $ 1.16 $ 0.77
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------------- -----------
Weighted average number of limited
and general interests outstanding 95,191 113,846
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</Table>
STATEMENT OF CHANGES IN TRUST CAPITAL
(Unaudited)
<Table>
<Caption>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
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Trust capital--December 31, 2002 97,777.855 $8,449,304 $85,543 $8,534,847
Net income 109,724 1,117 110,841
Redemptions (8,115.590) (733,920) (7,584) (741,504)
----------- ---------- --------- ----------
Trust capital--March 31, 2003 89,662.265 $7,825,108 $79,076 $7,904,184
----------- ---------- --------- ----------
----------- ---------- --------- ----------
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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
MARCH 31, 2003
(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 March 31, 2003 and
December 31, 2002 and the results of its operations for the three months ended
March 31, 2003 and 2002. 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, 2002.
As of January 31, 2003 Gamma was terminated as a trading manager to the
Trust. On February 11, 2003 the Managing Owner and the Trust entered into an
advisory agreement with Graham Capital Management, L.P. ('Graham') to manage a
portion of the Trust's assets. Pursuant to the advisory agreement, Graham is to
be paid a monthly management fee equal to 1/6 of 1% (approximately 2% annually)
and an incentive fee of 20% of the 'New High Net Trading Profits' on the portion
of Trust assets allocated to Graham, the same as was paid to Gamma. Graham does
not have to recoup Gamma's cumulative trading losses before earning any
incentive fees. The Trust did not incur commissions and management fees from the
period February 1, 2003 to February 13, 2003 on the portion of assets
unallocated to trading (i.e. the portion of assets previously managed by Gamma).
The advisory agreement may be terminated for a variety of reasons, including at
the discretion of the Managing Owner.
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 three months
ended March 31, 2003 and 2002 were $154,427 and $171,748, 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 March 31, 2003, a non-U.S. affiliate of the Managing Owner owned
116.497 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
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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
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 or settle in cash. 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
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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 March 31, 2003, such segregated assets
totalled $1,118,238. Part 30.7 of the CFTC regulations also requires PSI to
secure assets of the Trust related to foreign futures trading, which totalled
$7,013,031 at March 31, 2003. There are no segregation requirements for assets
related to forward trading.
As of March 31, 2003, the Trust's open futures and forward contracts
generally mature within one year.
D. Financial Highlights
<Table>
<Caption>
Three Months
Three Months Ended Ended
March 31, 2003 March 31, 2002
------------------- -----------------
Performance per Interest
Net asset value, beginning of period $ 87.29 $ 82.31
---------- -----------------
Net realized gain (loss) and change in
net unrealized gain/loss on commodity
transactions 2.47 2.20
Interest income 0.29 0.40
Expenses (1.89) (1.78)
---------- -----------------
Increase for the period 0.87 0.82
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Net asset value, end of period $ 88.16 $ 83.13
---------- -----------------
---------- -----------------
Total return 1.00% 1.00%
Ratio to average net assets (annualized)
Interest income 1.29% 1.96%
Expenses 8.33% 8.78%
</Table>
These financial highlights represent the overall results of the Trust for
the three months ended March 31, 2003 and 2002. An individual limited owner's
actual results may differ depending on the timing of redemptions.
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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 and general interests for the three
months ended March 31, 2003 were $733,920 and $7,584, respectively. Redemptions
of limited interests and general interests from May 1, 1996 (commencement of
operations), through March 31, 2003 were $54,059,627 and $434,597, respectively.
Future redemptions will impact the amount of funds available for investment in
commodity contracts in subsequent periods.
At March 31, 2003, 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
The net asset value per Interest as of March 31, 2003 was $88.16, an increase
of 1.00% from the December 31, 2002 net asset value per Interest of $87.29. Past
performance is not necessarily indicative of future results.
The Trust's gross trading gains were $263,000 during the three months ended
March 31, 2003 compared to trading gains of $245,000 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 results is not meaningful. However, a
detailed discussion of the Trust's current quarter trading results is presented
below.
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Quarterly Market Overview
Global economic activity for the first quarter of 2003 was characterized by
weakness and volatility. The U.S. economy exhibited signs of a slowdown as
consumers and businesses continued to reduce spending due to concerns regarding
the war in Iraq, SARS outbreak, high oil price premiums, weak corporate profits
and depressed global economies. With the exception of steady automobile orders
and existing home sales fueled by attractive interest rates, retail sales
continued to be sluggish. Labor market indicators were negative and
manufacturing contracted. Foreign economies generally mirrored that of the U.S.
In Europe and Asia, economic recovery appeared to have slowed, but Canada
recorded moderate economic expansion.
Indices: Major global equity markets rallied early in the quarter but slid on
fears of an impending war with Iraq, possible terrorism and geopolitical
tension. Anticipation of a quick decisive victory in Iraq resulted in a brief
market run up in mid-March. However, toward the end of the quarter, markets were
whipsawed as investors responded to every turn of military events in the Middle
East. Ultimately, the markets ended the quarter lower as investors awaited a
resolution. The Dow Jones Industrial Average closed down 4.2% and the S&P 500
dropped 3.2%. Several encouraging earnings reports boosted the Nasdaq Composite
resulting in a net gain of 0.42% for the quarter. Japan's Nikkei 225 stock index
hit a 20-year low at the end of the first quarter.
Interest rates: At both the January and March meetings, the U.S. Federal
Reserve left the federal funds rate unchanged at the 41-year low of 1.25%. In
mid-March, initial optimism for the Coalition Forces' success in Iraq resulted
in a shift by investors to junk bonds and stocks marking the worst setback for
the U.S. Treasury markets in 18 months. U.S. Treasury yields increased by 41
basis points from a 44-year low, incurring the biggest weekly increase in yield
since November 2001. Toward the end of the quarter, uncertainty about the war
led investors to take defensive positions, with the price of 10-year Treasury
notes ending the quarter up 3.81%. In Europe, the European Central Bank cut
interest rates by 0.25% in the beginning of March. The lowered interest rate
coupled with weak global economic growth prospects resulted in the strengthening
of European bond prices.
Currencies: Perceptions of quick success in Iraq boosted the U.S. dollar
versus many foreign currencies. However, concerns that the war would disrupt the
U.S. economy strengthened the euro against the U.S. dollar. For the first time
in three years the exchange rate between the euro and U.S. dollar reached $1.10.
As a result, the U.S. dollar ended the quarter down against the euro and the
Japanese yen. In Canada, the Bank of Canada increased its overnight interest
rate in March in response to inflation concerns, resulting in the strengthening
of the Canadian dollar.
Energies: Price increases in the world oil markets at the beginning of the
first quarter were fed by concerns of supply disruptions due to the conflict in
Iraq, civil strife in Venezuela, anticipation of a Nigerian strike and tensions
on the Korean peninsula. In mid-March, anticipation of a quick resolution of the
war in Iraq coupled with the end of an extended cold snap in the northeastern
United States led to a significant reversal in energy prices. However, at
quarter-end, fears of the possibility of a prolonged war in Iraq and low
supplies pushed energy futures prices higher despite the securing of Iraqi oil
wells.
Softs: Cocoa prices declined as a result of the continuing political
stability in the Ivory Coast. Expectations for less rain in the U.S. plains
states boosted wheat prices toward the end of the quarter and corn prices rose
as a result of bullish prospective planting and stocks data released by U.S.
Department of Agriculture. Soybean futures declined as a result of rain in key
growing regions in Southern Argentina and weaker overseas prices.
Quarterly Trust Performance
The following is a summary of performance for the major sectors in which the
Trust traded:
Currencies (+): The U.S. dollar fell against many foreign currencies amid
concerns that the war in Iraq would disrupt the U.S. economy. Long Australian
dollar, Canadian dollar and euro positions resulted in net gains.
Grain (+): Bullish prospecting planting and stocks data released by the U.S.
Department of Agriculture boosted corn prices and resulted in net gains for long
corn positions.
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Interest rates (+): Concerns around the war in Iraq, poor performance in the
equity markets and weak global economies strengthened European bond prices
resulting in net gains for long positions.
Metals (-): Gold declined from highs earlier in the year and long positions
resulted in net losses.
Indices (-): Long positions in the Mini S&P and Nasdaq resulted in net losses
as global equity markets declined due to uncertainty about the Middle East and
weak global economies.
Energies (-): Short natural gas positions resulted in net losses as prices
rose amid expectations of unseasonable cold weather in Northeastern U.S. and
sharp drawdown of storage levels.
Softs (-): Long cocoa positions resulted in net losses as the price of cocoa
declined due to continued political stability in the Ivory Coast.
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 three
months ended March 31, 2003 as compared to the corresponding period in the prior
year, primarily due to redemptions.
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 $17,000 for the three months ended March 31, 2003
as compared to the corresponding period in 2002. This decrease was primarily due
to lower interest rates during the first quarter of 2003 as compared to the
first quarter of 2002, 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 $17,000 for the three months ended March
31, 2003 as compared to the corresponding period in 2002. This decrease was due
to the decline in average net asset levels as discussed above and, to a lesser
extent, the change in trading advisors as discussed further in Note A.
Prior to January 31, 2003, all trading decisions were made by Bridgewater
Associates, Inc. and Gamma Capital Management, LLC ('Gamma'). Gamma was
terminated as a trading advisor to the Trust on January 31, 2003 and
replaced with Graham Capital Management, L.P. on February 11, 2003.
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 $6,000 for the
three months ended March 31, 2003 as compared to the corresponding period in
2002. This decrease was primarily due to the decline in average net asset levels
as discussed above and, to a lesser extent, the change in trading advisors as
discussed further in Note A.
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
three months ended March 31, 2003 or 2002.
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.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Managing Owner
carried out an evaluation, under the supervision and with the participation of
the officers of the Managing Owner, including the Managing Owner's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Trust's disclosure controls and procedures. Based
upon that evaluation, the Managing Owner's Chief Executive Officer and Chief
Financial Officer concluded that the Trust's disclosure controls and procedures
are effective. There were no significant changes in the Trust's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
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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--Gamma Capital Management, LLC was terminated as a
trading advisor to the Trust on January 31, 2003 and replaced with
Graham Capital Management, L.P. on February 11, 2003
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
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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: May 15, 2003
----------------------------------------
Steven Weinreb
Chief Financial Officer
CERTIFICATIONS
I, Eleanor L. Thomas, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Prudential
Securities Strategic Trust (the 'Trust');
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Trust as of, and for, the periods presented in this
quarterly report;
4. The Trust's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Trust and we
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the Trust, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the Trust's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the 'Evaluation
Date'); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Trust's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Trust's auditors and the board of
directors of the managing owner of the Trust:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Trust's
ability to record, process, summarize and report financial
data and have identified for the Trust's auditors any
material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Trust's
internal controls; and
6. The Trust's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: May 15, 2003 /s/ Eleanor L. Thomas
--------------------------------------
Eleanor L. Thomas
President (chief executive officer)
of the managing owner of the Trust
12
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I, Steven Weinreb, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Prudential
Securities Strategic Trust (the 'Trust');
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Trust as of, and for, the periods presented in this
quarterly report;
4. The Trust's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Trust and we
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the Trust, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the Trust's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the 'Evaluation
Date'); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Trust's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Trust's auditors and the board of
directors of the managing owner of the Trust:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Trust's
ability to record, process, summarize and report financial
data and have identified for the Trust's auditors any
material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Trust's
internal controls; and
6. The Trust's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: May 15, 2003 /s/ Steven Weinreb
--------------------------------------
Steven Weinreb
Chief Financial Officer
of the managing owner of the Trust
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