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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 27, 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: 0-25785
WORLD MONITOR TRUST--SERIES A
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(Exact name of Registrant as specified in its charter)
Delaware 13-3985040
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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
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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
WORLD MONITOR TRUST--SERIES A
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<Table>
<Caption>
June 27, December 31,
2003 2002
- ---------------------------------------------------------------------------------------------------
ASSETS
Cash in commodity trading accounts $5,943,469 $5,000,833
Net unrealized gain/(loss) on open futures contracts (248,829) 109,011
Accrued interest receivable 7,301 --
---------- ------------
Total assets $5,701,941 $5,109,844
---------- ------------
---------- ------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Commissions payable $ 34,059 $ 32,545
Management fees payable 9,310 8,628
Incentive fees 39,900 --
Redemptions payable 44,716 --
---------- ------------
Total liabilities 127,985 41,173
---------- ------------
Commitments
Trust capital
Limited interests (46,322.838 and 51,247.230 interests outstanding) 5,509,493 5,015,625
General interests (542 interests outstanding) 64,463 53,046
---------- ------------
Total trust capital 5,573,956 5,068,671
---------- ------------
Total liabilities and trust capital $5,701,941 $5,109,844
---------- ------------
---------- ------------
Net asset value per limited and general interest ('Interests') $ 118.94 $ 97.87
---------- ------------
---------- ------------
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The accompanying notes are an integral part of these statements.
</Table>
2
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WORLD MONITOR TRUST--SERIES A
(a Delaware Business Trust)
Condensed Schedules of Investments
(Unaudited)
<Table>
<Caption>
June 27, 2003 December 31, 2002
-------------------------------- --------------------------------
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 $ 35,912 $ --
Interest rates (260,574) 242,903
Currencies (66,050) 264,113
Commodities 39,878 (78,007)
-------------- --------------
Net unrealized gain (loss) on
futures contracts purchased (4.50)% (250,834) 8.46% 429,009
-------------- --------------
Futures contracts sold:
Currencies -- (223,100)
Commodities 2,005 (96,898)
-------------- --------------
Net unrealized gain (loss) on
futures contracts sold 0.04% 2,005 (6.31) (319,998)
------- -------------- ------ --------------
Net unrealized gain (loss) on
futures contracts (4.46)% $ (248,829) 2.15% $109,011
------- -------------- ------ --------------
------- -------------- ------ --------------
Forward currency contracts purchased: --% $ -- 0.14% $ 7,124
Forward currency contracts sold: -- -- (0.14)% (7,124)
------- -------------- ------ --------------
-- -- 0.00% $ 0
------- -------------- ------ --------------
------- -------------- ------ --------------
Settlement Currency--Futures Contracts
British pound (1.36)% $ (75,529) 0.96% $ 48,688
Australian dollars (2.03) (113,415) 0.48 24,298
Euro (1.66) (92,386) 1.80 91,105
Japanese yen 0.95 52,839 -- --
U.S. dollar (0.36) (20,338) (1.09) (55,080)
------- -------------- ------ --------------
Total (4.46)% $ (248,829) 2.15% $109,011
------- -------------- ------ --------------
------- -------------- ------ --------------
Settlement Currency--Forward Contracts
U.S. dollar 0.00% $ 0 0.00% $ 0
------- -------------- ------ --------------
------- -------------- ------ --------------
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The accompanying notes are an integral part of these statements.
</Table>
3
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WORLD MONITOR TRUST--SERIES A
(a Delaware Business Trust)
STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
For the period from For the period from For the period from For the period from
January 1, 2003 to January 1, 2002 to March 29, 2003 to March 30, 2002 to
June 27, 2003 June 28, 2002 June 27, 2003 June 28, 2002
- ------------------------------------------------------------------------------------------------------------------------
REVENUES
Net realized gain on commodity
transactions $ 1,649,765 $ 539,545 $ 1,194,173 $ 695,803
Change in net unrealized
gain/loss on open commodity
positions (357,840) 513,954 (194,181) 542,020
Interest income 39,722 54,515 20,261 26,393
--------------------- --------------------- --------------------- ---------------------
1,331,647 1,108,014 1,020,253 1,264,216
--------------------- --------------------- --------------------- ---------------------
EXPENSES
Commissions 202,526 191,792 105,214 94,620
Management fees 52,439 49,422 27,362 24,382
Incentive fees 39,900 -- 39,900 --
--------------------- --------------------- --------------------- ---------------------
294,865 241,214 172,476 119,002
--------------------- --------------------- --------------------- ---------------------
Net income $ 1,036,782 $ 866,800 $ 847,777 $ 1,145,214
--------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- --------------------- ---------------------
ALLOCATION OF NET INCOME
Limited interests $ 1,025,365 $ 857,857 $ 838,267 $ 1,133,260
--------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- --------------------- ---------------------
General interests $ 11,417 $ 8,943 $ 9,510 $ 11,954
--------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- --------------------- ---------------------
NET INCOME PER WEIGHTED AVERAGE
LIMITED AND GENERAL INTEREST
Net income per weighted average
limited and general interest $ 20.96 $ 12.96 $ 17.62 $ 17.81
--------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- --------------------- ---------------------
Weighted average number of
limited and general interests
outstanding 49,457 66,863 48,111 64,313
--------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- --------------------- ---------------------
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</Table>
STATEMENT OF CHANGES IN TRUST CAPITAL
(Unaudited)
<Table>
<Caption>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
- -----------------------------------------------------------------------------------------------------
Trust capital--December 31, 2002 51,789.230 $5,015,625 $ 53,046 $5,068,671
Net income 1,025,365 11,417 1,036,782
Redemptions (4,924.392) (531,497) -- (531,497)
---------- ---------- --------- ----------
Trust capital--June 27, 2003 46,864.838 $5,509,493 $ 64,463 $5,573,956
---------- ---------- --------- ----------
---------- ---------- --------- ----------
<Caption>
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The accompanying notes are an integral part of these statements.
</Table>
4
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WORLD MONITOR TRUST--SERIES A
(a Delaware Business Trust)
NOTES TO FINANCIAL STATEMENTS
JUNE 27, 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 World
Monitor Trust--Series A ('Series A') as of June 27, 2003 and December 31, 2002
and the results of its operations for the period from January 1, 2003 to June
27, 2003 ('Year-To-Date 2003'), January 1, 2002 to June 28, 2002 ('Year-To-Date
2002'), March 29, 2003 to June 27, 2003 ('Second Quarter 2003') and March 30,
2002 to June 28, 2002 ('Second Quarter 2002'). 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 A's Annual Report on Form 10-K filed with
the Securities and Exchange Commission for the year ended December 31, 2002.
In February 2003, Prudential Financial, Inc. ('Prudential') and Wachovia
Corp. ('Wachovia') announced an agreement to combine each company's respective
retail securities brokerage and clearing operations within a new firm, which
will be headquartered in Richmond, Virginia. Under the agreement, Prudential
will have a 38% ownership interest in the new firm and Wachovia will own 62%.
The transaction, which includes the securities brokerage, securities clearing,
and debt capital markets operations of Prudential Securities Incorporated
('PSI'), but does not include the equity sales, trading and research operations
or commodity brokerage and derivative operations of PSI (which were renamed
Prudential Equity Group, Inc. upon closing), closed July 1, 2003. The Managing
Owner, as well as the commodity broker, will continue to be indirect wholly
owned subsidiaries of Prudential.
B. Related Parties
The Managing Owner of Series A is a wholly-owned subsidiary of Prudential
Equity Group Inc. ('PEG'), which, in turn, is an indirect wholly-owned
subsidiary of Prudential Financial, Inc. The Managing Owner or its affiliates
perform services for Series A, 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, PEG or its affiliates
pay the costs of these services in addition to Series A's routine operational,
administrative, legal and auditing costs.
The costs charged to Series A for brokerage services for Year-To-Date 2003,
Year-To-Date 2002, Second Quarter 2003 and Second Quarter 2002 were $202,526,
$191,792, $105,214 and $94,620, respectively.
Series A's assets are maintained either in trading or cash accounts with PEG,
Series A's commodity broker, or, for margin purposes, with the various exchanges
on which Series A is permitted to trade. PEG credits Series A monthly with 100%
of the interest it earns on the average net assets in Series A's accounts.
Series A, acting through its trading advisor, may execute over-the-counter,
spot, forward and/or option foreign exchange transactions with PEG. PEG 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
PEG and Series A pursuant to a line of credit. PEG may require that collateral
be posted against the marked-to-market position of Series A.
C. Derivative Instruments and Associated Risks
Series A 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 Series A's investment activities (credit risk).
5
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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 A's net assets being
traded, significantly exceeds Series A's future cash requirements since Series A
intends to close out its open positions prior to settlement. As a result, Series
A is generally subject only to the risk of loss arising from the change in the
value of the contracts. As such, Series A 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 A's commitments to purchase commodities
is limited to the gross or face amount of the contract held. However, when
Series A 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 Series A 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 A holds and the liquidity and inherent
volatility of the markets in which Series A trades.
Credit Risk
When entering into futures or forward contracts, Series A 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, there is concentration risk on
forward transactions, entered into by Series A as PEG, Series A's commodity
broker, is the sole counterparty. Series A has entered into a master netting
agreement with PEG 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 Series A's contracts is the net unrealized gain
included in the statements of financial condition; however, counterparty
nonperformance on only certain of Series A's contracts may result in greater
loss than nonperformance on all of Series A's contracts. There can be no
assurance that any counterparty, clearing member or clearinghouse will meet its
obligations to Series A.
The Managing Owner attempts to minimize both credit and market risks by
requiring Series A 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 A, the Managing
Owner and the trading advisor, Series A shall automatically terminate the
trading advisor if the net asset value allocated to the trading advisor declines
by 33 1/3% from the value at the beginning of any year or since the effective
date of the advisory agreement (i.e., March 2000). Furthermore, the Second
Amended and Restated Declaration of Trust and Trust Agreement provides that
Series A will liquidate its positions, and eventually dissolve, if Series A
experiences a decline in 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 A.
PEG, when acting as Series A'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 A all assets of Series A relating to
domestic futures trading and is not allowed to commingle such assets with other
assets of PEG. At June 27, 2003, such segregated assets totalled $1,489,014.
Part 30.7 of the CFTC regulations also requires PEG to
6
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secure assets of Series A related to foreign futures trading, which totalled
$4,205,626 at June 27, 2003. There are no segregation requirements for assets
related to forward trading.
As of June 27, 2003, Series A's open futures contracts mature within four
months.
D. Financial Highlights
<Table>
<Caption>
Year-To-Date Year-To-Date Second Quarter Second Quarter
2003 2002 2003 2002
------------- ------------- --------------- ---------------
Performance per Interest
Net asset value, beginning of
period $ 97.87 $ 78.23 $101.39 $ 74.29
------------- ------------- --------------- ---------------
Net realized gain (loss) and
change in net unrealized
gain/loss on
commodity transactions 26.24 17.36 20.69 19.94
Interest income .81 .82 .42 .41
Expenses (5.98) (3.62) (3.56) (1.85)
------------- ------------- --------------- ---------------
Increase for the period 21.07 14.56 17.55 18.50
------------- ------------- --------------- ---------------
Net asset value, end of period $118.94 $ 92.79 $118.94 $ 92.79
------------- ------------- --------------- ---------------
------------- ------------- --------------- ---------------
Total return 21.53% 18.61% 17.31% 24.90%
Ratio to average net assets
(annualized)
Interest income 1.45% 2.15% 1.51% 2.16%
Expenses, including 1.45% and
2.97% of incentive fees during
Year-To-Date 2003 and Second
Quarter 2003, respectively. 10.74% 9.53% 12.85% 9.72%
</Table>
These financial highlights represent the overall results of Series A
during Year-To-Date 2003, Year-To-Date 2002, Second Quarter 2003 and Second
Quarter 2002. An individual limited owner's actual results may differ depending
on the timing of redemptions.
7
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WORLD MONITOR TRUST--SERIES A
(a Delaware Business Trust)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Series A commenced operations on June 10, 1998 with gross proceeds of
$6,039,177 allocated to commodities trading. Interests in Series A continued to
be offered weekly until Series A achieved its subscription maximum of
$34,000,000 during November 1999. The Managing Owner suspended the offering of
Interests in World Monitor Trust--Series B and World Monitor Trust--Series C and
allowed all selling registrations to expire by April 30, 2002. As such,
Interests owned in one series of World Monitor Trust may no longer be exchanged
for Interests of one or more other series of World Monitor Trust.
Interests in Series A may be redeemed on a weekly basis. Redemptions of
limited interests for Year-To-Date 2003, Second Quarter 2003 and for the period
from June 10, 1998 (commencement of operations) to June 27, 2003 were $531,497,
$261,672 and $23,868,937, respectively. While there were no redemptions of
general interests during Year-To-date 2003 and Second Quarter 2003, redemptions
of general interests for the period from June 10, 1998 (commencement of
operations) to June 27, 2003 were $217,115. No general interests were redeemed
during Second Quarter 2002. Future redemptions will impact the amount of funds
available for investment in commodity contracts in subsequent periods.
At June 27, 2003, 100% of Series A's net assets were allocated to commodities
trading. A significant portion of the net assets was held in cash, which was
used as margin for Series A's trading in commodities. Inasmuch as the sole
business of Series A is to trade in commodities, Series A continues to own such
liquid assets to be used as margin. PEG credits Series A monthly with 100% of
the interest it earns on the average net assets in Series A's accounts.
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 certain 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 A from promptly liquidating its commodity
futures positions.
Since Series A'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 contract
(credit risk). Series A'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 relationship among the contracts held. The inherent uncertainty of
Series A's speculative trading, as well as the development of drastic market
occurrences, could result in monthly losses considerably beyond Series A'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 A 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 on the credit and market risks
associated with Series A's futures and forward contracts.
Series A does not have, nor does it expect to have, any capital assets.
Results of Operations
The net asset value per Interest as of June 27, 2003 was $118.94, an increase
of 21.53% from the December 31, 2002 net asset value per Interest of $97.87, and
an increase of 17.31% from the March 28, 2003 net asset value per Interest of
$101.39. Past performance is not necessarily indicative of future results.
8
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Series A's gross trading gains were $1,292,000 and $1,000,000 during
Year-To-Date 2003 and Second Quarter 2003, compared to $1,053,000 and $1,238,000
during Year-To-Date 2002 and Second Quarter 2002, respectively. Due to the
nature of Series A's trading activities, a period to period comparison of its
trading results is not meaningful. However, a detailed discussion of Series A's
Second Quarter 2003 trading results is presented below.
Quarterly Market Overview
In the U.S., the beginning of the second quarter of 2003 saw few signs of
relief from a sluggish economy with a growth rate of 2.4 percent. Nominal GDP
continued to trend downward in hand with falling consumer and producer prices
and interest rates. Concerns about the slump in American telecom and internet
industries, accounting fraud and the largest budget deficit the U.S. has ever
faced have hampered investments in the U.S. Despite resolution to the war in
Iraq, consumer and business confidence remained tepid. Companies desiring to
improve profits remained unwilling to make big capital spending commitments or
increase their workforces and inventories. Orders to U.S. factories for
big-ticket items and production figures fell in April. In June, the unemployment
rate jumped to a nine-year high of 6.4 percent. Payroll slashes in manufacturing
and information industries generated the greatest job losses. As companies
attempted to do more with leaner workforces, overall productivity rose and
provided support for household income. The rise in income, combined with low
interest rates, reduced taxes, and availability of substantial home equity
spurred gains in consumer spending and increased sales of new homes. Toward the
end of the quarter, manufacturing rose slightly, but still indicated that the
sector shrank for the fourth straight month. Meanwhile, new orders for durable
goods, machinery, automobiles, electrical equipment, home supplies and computers
increased, reversing previous downward trends.
Global economies remained weak in the second quarter of 2003 and were further
hampered by the decline of the U.S. dollar which made overseas goods more
expensive, thus, curtailing demand. In May, Germany, Italy and the Netherlands
reported an unexpected contraction in their economies during the first three
months of the year with Germany and Netherlands experiencing a second quarter of
negative growth. The European Union stated that overall economic growth had
stalled and consequently, applied pressure on the central banks to ease interest
rates. Business investment dropped sharply while domestic demand remained bleak.
The Japanese economy continued to stumble as other Asian economies began to
recover from the effects of the SARS outbreak. Furthermore, fears of deflation
loomed over already troubled global economies.
Indices: Despite economic data indicating the worst is not yet over, global
equity markets surged in the second quarter of 2003. Spurred by the easing of
geopolitical tensions, massive short covering, excess liquidity, some positive
first quarter earnings reports, and optimism that economic recovery is near,
investors flocked toward equities. A rally in Japanese stocks was fueled
primarily by foreign mutual funds, hedge funds and other non-Japanese
institutional investors who invested more than ten times as much as local
investors in June. The Japanese Nikkei, London FTSE, Dow Jones Industrial
Average, NASDAQ and S&P 500 all ended the quarter higher.
Interest rates: Fixed income markets in May witnessed a drop in interest
rates of developed countries due to the U.S. Federal Reserve (the 'Fed')
deflation talk as well as institutions and hedge funds borrowing to purchase
longer maturities, possible Fed purchases of longer maturities, hedging by
mortgage investors as rates fell, and central banks buying dollars and investing
in Treasuries. The decline in interest rates led to gains in German, Japanese,
U.S. Treasury and Eurodollar bond prices. In June, the market reacted with
disappointment to the Fed's quarter-point cut in short-term interest rates and
as a result, intermediate and long-term rates rose. Investors in Japan moved
capital into the equity markets at the expense of U.S. Treasury and Japanese
bonds. Concern about deteriorating public finances in most large economies and a
renewed interest in equities in hopes of an economic recovery resulted in
falling bond prices through the quarter and the subsequent rising of long-term
rates.
Currencies: In the foreign exchange markets, the U.S. dollar moved sharply
lower against most major currencies during the quarter. Investors shifted their
focus from the war in Iraq to concerns about U.S. economic health with its
widening current account deficit and lower relative interest rate resulting in
the dollar's three-year low against the Canadian and Australian dollar and
four-year low against the Euro. The reversal of the U.S.'s strong dollar policy
by Treasury Secretary Snow led to a further sell off of the greenback leading to
a 4.5-year low against the Swiss franc.
9
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Energies: Energy price declines began in March and continued as the war in
Iraq became inevitable. Because supplies were secured and unthreatened by the
war, the prices of crude oil, unleaded gasoline and London gas oil were down in
April of 2003. Natural gas prices were largely unaffected by events in the
Middle East, Nigeria and Venezuela. In order to stave off the declining prices
and correct an oversupply as crude demand reached a seasonal low, OPEC members
agreed to cut current output by seven percent in April. Toward the end of the
quarter, energy prices, in general, were higher due to Nigeria's general
worker's strike, low U.S. oil inventory levels and expectations of U.S. economic
growth.
Quarterly Performance of Series A
The following is a summary of performance for the major sectors in which
Series A traded:
Interest rates (+): Weak global economies, fears of deflation and renewed
interest in equities resulted in falling global bond prices. Short U.S. Treasury
and European bond positions led to net gains.
Currencies (+): The U.S. dollar fell against many foreign currencies amid
concerns of a weak U.S. economy. The euro and British pound strengthened this
quarter resulting in net gains for long euro, euryen and British pound
positions.
Indices (+): Overall long positions in the Japanese Nikkei Dow, S&P 500 and
German DAX indices led to net gains as global equity markets rose throughout the
quarter.
Energies (+): Nigeria's general worker's strike, low U.S. oil inventory
levels and expectation of economic growth led to rising energy prices toward the
end of the quarter. Long positions crude oil, light crude oil and heating oil
resulted in net gains.
Grains (-): Corn and wheat prices continued to decline due to ideal weather
conditions and a strong harvest resulting in net losses for long positions.
Softs (-): World sugar prices have noticeably weakened through the quarter
resulting in net losses for long sugar positions.
Metals (-): Declines in manufacturing resulted in falling base metal prices.
Long positions in aluminum and copper resulted in net losses.
Series A's average net asset levels during Year-To-Date 2003 and Second
Quarter 2003 have increased from Year-To-Date 2002 and Second Quarter 2002,
primarily due to favorable trading performance during Year-To-Date 2003, and
Third Quarter 2002 offset, in part, by redemptions. The increase in average net
asset levels have led to proportionate increases in commissions and management
fees incurred.
Interest income is earned on the average net assets held at PEG and,
therefore, varies monthly according to interest rates, trading performance and
redemptions. Interest income decreased $15,000 and $6,000 during Year-To-Date
2003 and Second Quarter 2003, as compared to Year-To-Date 2002 and Second
Quarter 2002, respectively, due to the decrease in interest rates during 2002.
Commissions are calculated on Series A's net asset value at the end of each
week and, therefore, vary according to weekly trading performance and
redemptions. Commissions increased $11,000 during both Year-To-Date 2003 and
Second Quarter 2003, as compared to Year-To-Date 2002 and Second Quarter 2002,
due to the increase in average net asset levels as discussed above.
All trading decisions for Series A are made by Eagle-Global System (the
'Trading Advisor'). Management fees are calculated on Series A's net asset value
at the end of each week and, therefore, are affected by weekly trading
performance and redemptions. Management fees increased $3,000 during both
Year-To-Date 2003 and Second Quarter 2003 as compared to Year-To-Date 2002 and
Second Quarter 2002 due to the increase in average net asset levels as discussed
above.
Incentive fees are based on the 'New High Net Trading Profits' generated by
the Trading Advisor, as defined in the advisory agreement among the Trust, the
Managing Owner and the Trading Advisor. Series A incurred incentive fees of
$40,000 during the Second Quarter 2003. No incentive fees were incurred during
Year-To-Date 2002 and Second Quarter 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.
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ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by 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 Series A's disclosure controls and procedures. Based
upon that evaluation, the Managing Owner's chief executive officer and chief
financial officer concluded that Series A's disclosure controls and procedures
are effective.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings--There are no material legal proceedings pending by or
against Series A 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 2003, Ronald J. Ivans was elected by
the Board of Directors of Prudential Securities Futures Management Inc.
as Chief Financial Officer and Treasurer replacing Steven Weinreb.
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
Agreements of World Monitor Trust dated as of March 17, 1998
(incorporated by reference to Exhibits 3.1 and 4.1 to Series A's
Registration Statement on Form S-1, File No. 333-43033)
4.2--Form of Request for Redemption (incorporated by reference
to Exhibit 4.2 to Series A's Registration Statement on Form
S-1, File No. 333-43033)
4.3--Form of Exchange Request (incorporated by reference
to Exhibit 4.3 to Series A's Registration Statement
on Form S-1, File No. 333-43033)
4.4--Form of Subscription Agreement (incorporated by reference to
Exhibit 4.4 to Series A's Registration Statement on
Form S-1, File No. 333-43033)
31.1--Certification pursuant to Exchange Act Rules 13a-14 and
15d-14 (filed herewith)
31.2--Certification pursuant to Exchange Act Rules 13a-14 and
15d-14 (filed herewith)
32.1--Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the SARBANES-OXLEY Act
of 2002 (furnished herewith)
32.2--Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the SARBANES-OXLEY Act of 2002
(furnished herewith)
(b) Reports on Form 8-K--None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Series A
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WORLD MONITOR TRUST--SERIES A
By: Prudential Securities Futures Management Inc.
A Delaware corporation, Managing Owner
By: /s/ Ronald J. Ivans Date: August 11, 2003
----------------------------------------
Ronald J. Ivans
Chief Financial Officer
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