<Page>
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: 0-32687
WORLD MONITOR TRUST II--SERIES E
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-4058319
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 778-7866
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _CK_ No ___
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
<Page>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WORLD MONITOR TRUST II--SERIES E
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<Table>
<Caption>
June 27, December 31,
2003 2002
- ---------------------------------------------------------------------------------------------------
ASSETS
Cash in commodity trading accounts $52,522,844 $25,058,188
Net unrealized (loss) gain on open futures contracts (3,744,335) 1,772,644
Net unrealized gain on open forward contracts 74,932 43,721
Accrued interest receivable 53,351 --
----------- ------------
Total assets $48,906,792 $26,874,553
----------- ------------
----------- ------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Commissions and other transaction fees payable $ 255,795 $ 135,497
Accrued expenses payable 82,144 89,968
Management fees payable 80,998 43,883
Incentive fees payable 54,977 65,555
Redemptions payable 36,040 --
----------- ------------
Total liabilities 509,954 334,903
----------- ------------
Commitments
Trust capital
Limited interests (282,520.830 and 165,673.643 interests
outstanding) 47,787,914 26,238,737
General interests (3,600 and 1,900 interests outstanding) 608,924 300,913
----------- ------------
Total trust capital 48,396,838 26,539,650
----------- ------------
Total liabilities and trust capital $48,906,792 $26,874,553
----------- ------------
----------- ------------
Net asset value per limited and general interest $ 169.15 $ 158.38
----------- ------------
----------- ------------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</Table>
2
<Page>
WORLD MONITOR TRUST II--SERIES E
(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 and Forward Contracts Trust Capital Gain (Loss) Trust Capital Gain (Loss)
- -------------------------------------------------------------------------------------------------------------
Futures contracts purchased:
Stock indices $ (307,788) $ --
Interest rates (1,739,938) 421,731
Currencies (309,611) 989,817
Commodities (1,450,090) 204,590
-------------- --------------
Net unrealized (loss) gain on
futures contracts purchased (7.87)% (3,807,427) 6.09% 1,616,138
-------------- --------------
Futures contracts sold:
Stock indices -- 63,999
Interest rates -- (421)
Currencies 151,583 104,559
Commodities (88,491) (11,631)
-------------- --------------
Net unrealized gain on futures
contracts sold 0.13 63,092 0.59 156,506
------ -------------- ------ --------------
Net unrealized (loss) gain on
futures contracts (7.74)% $ (3,744,335) 6.68% $1,772,644
------ -------------- ------ --------------
------ -------------- ------ --------------
Forward currency contracts purchased 0.15% $ 74,932 0.01% $ 2,833
Forward currency contracts sold 0.00 -- 0.15 40,888
------ -------------- ------ --------------
Net unrealized gain on forward
contracts 0.15% $ 74,932 0.16% $ 43,721
------ -------------- ------ --------------
------ -------------- ------ --------------
Settlement Currency--Futures Contracts
British pound (0.93)% $ (448,452) 0.50% $ 133,017
Japanese yen 0.30 144,297 0.13 35,657
Canadian dollars 0.00 -- 0.52 137,683
U.S. dollar (5.41) (2,619,299) 3.48 923,280
Swiss francs 0.19 96,049 0.79 210,417
Australian dollars 0.40 191,758 0.16 41,875
Euro (2.28) (1,104,584) 1.10 290,715
Hong Kong dollars (0.01) (4,104) -- --
------ -------------- ------ --------------
Total (7.74)% $ (3,744,335) 6.68% $1,772,644
------ -------------- ------ --------------
------ -------------- ------ --------------
Settlement Currency--Forward Contracts
Swiss francs 0.15% $ 74,932 --% $ --
U.S. dollar -- -- 0.16 43,721
------ -------------- ------ --------------
Total 0.15% $ 74,932 0.16% $ 43,721
------ -------------- ------ --------------
------ -------------- ------ --------------
- -------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</Table>
3
<Page>
WORLD MONITOR TRUST II--SERIES E
(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 $ 8,760,786 $ 576,098 $ 4,093,207 $ 1,074,737
Change in net unrealized
gain/loss on open
commodity positions (5,485,768) 631,518 (2,803,943) 562,191
Interest income 235,202 89,803 134,772 49,436
------------------- ------------------- ------------------- -------------------
3,510,220 1,297,419 1,424,036 1,686,364
------------------- ------------------- ------------------- -------------------
EXPENSES
Commissions and other
transaction fees 1,278,853 339,239 765,294 191,229
Management fees 405,668 104,896 241,451 58,497
Incentive fees 258,190 67,776 54,977 67,776
General and administrative 68,982 62,165 35,866 31,084
------------------- ------------------- ------------------- -------------------
2,011,693 574,076 1,097,588 348,586
General and administrative
expenses borne by the
Managing Owner and its
affiliates -- (10,471) -- (3,899)
------------------- ------------------- ------------------- -------------------
Net expenses 2,011,693 563,605 1,097,588 344,687
------------------- ------------------- ------------------- -------------------
Net income $ 1,498,527 $ 733,814 $ 326,448 $ 1,341,677
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
ALLOCATION OF NET INCOME
Limited interests $ 1,480,758 $ 724,486 $ 319,123 $ 1,324,103
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
General interests $ 17,769 $ 9,328 $ 7,325 $ 17,574
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
NET INCOME PER WEIGHTED
AVERAGE LIMITED AND
GENERAL INTEREST
Net income per weighted
average limited and
general interest $ 6.48 $ 8.57 $ 1.20 $ 14.01
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
Weighted average number of
limited and general
interests outstanding 231,236 85,660 272,032 95,756
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
- -------------------------------------------------------------------------------------------------------------------
</Table>
STATEMENT OF CHANGES IN TRUST CAPITAL
(Unaudited)
<Table>
<Caption>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
- -----------------------------------------------------------------------------------------------------
Trust capital--December 31, 2002 167,573.643 $26,238,737 $300,913 $26,539,650
Contributions 134,826.125 23,021,451 290,242 23,311,693
Net income 1,480,758 17,769 1,498,527
Redemptions (16,278.938) (2,953,032) -- (2,953,032)
------------ ----------- --------- -----------
Trust capital--June 27, 2003 286,120.830 $47,787,914 $608,924 $48,396,838
------------ ----------- --------- -----------
------------ ----------- --------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</Table>
4
<Page>
WORLD MONITOR TRUST II--SERIES E
(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 II--Series E ('Series E') as of June 27, 2003 and December 31,
2002 and the results of its operations for the periods 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 these interim periods may not be indicative of the results
expected for a full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been omitted. It is suggested that
these financial statements be read in conjunction with the financial statements
and notes thereto included in Series E's annual report on Form 10-K filed with
the Securities and Exchange Commission for the year ended December 31, 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.
Series E's interests were offered until it substantially achieved its
subscription maximum of $50,000,000 on the sale of limited interests during June
2003.
B. Related Parties
The Managing Owner of Series E is a wholly-owned subsidiary of Prudential
Equity Group, Inc. ('PEG'), which, in turn, is an indirect wholly-owned
subsidiary of Prudential Financial, Inc. Series E reimburses the Managing Owner
or its affiliates for services they perform for Series E, which include, but are
not limited to: brokerage services; accounting and financial management;
registrar, transfer and assignment functions; investor communications; printing
and other administrative services. However, to the extent that general and
administrative expenses exceed 1.5% of Series E's net asset value during the
year (with a maximum of 0.5% attributable to other than legal and audit
expenses) such amounts will be borne by the Managing Owner and its affiliates.
Because general and administrative expenses during Year-To-Date 2002 and Second
Quarter 2002 exceeded such limitations, a portion of these expenses related to
services the Managing Owner performed for Series E, other than brokerage
services, have been borne by the Managing Owner and its affiliates.
Additionally, PEG or its affiliates paid the costs of organizing Series E and
offering its limited interests.
The expenses incurred by Series E for services performed by the Managing
Owner and its affiliates for Series E were:
5
<Page>
<Table>
<Caption>
Year-To-Date Year-To-Date Second Quarter Second Quarter
2003 2002 2003 2002
------------ ------------ -------------- --------------
Commissions $1,201,303 $315,092 $717,164 $175,728
General and administrative 41,598 33,103 20,800 16,551
------------ ------------ -------------- --------------
1,242,901 348,195 737,964 192,279
General and administrative expenses
borne by the Managing Owner and
its affiliates -- (10,471) -- (3,899)
------------ ------------ -------------- --------------
$1,242,901 $337,724 $737,964 $188,380
------------ ------------ -------------- --------------
------------ ------------ -------------- --------------
</Table>
Expenses payable to the Managing Owner and its affiliates as of June 27, 2003
and December 31, 2002 were $36,677 and $31,671, respectively.
All of the proceeds of the offering of Series E are received in the name of
Series E and deposited in trading or cash accounts at PEG, Series E's commodity
broker. Series E's assets are maintained with PEG for margin purposes. Series E
receives interest income on 100% of its average daily equity maintained in its
accounts with PEG during each month at the 13-week Treasury bill discount rate.
Series E, 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 E pursuant to a line of credit. PEG may require that collateral
be posted against the marked-to-market positions of Series E.
C. Derivative Instruments and Associated Risks
Series E is exposed to various types of risk associated with the derivative
instruments and related markets in which it invests. These risks include, but
are not limited to, risk of loss from fluctuations in the value of derivative
instruments held (market risk) and the inability of counterparties to perform
under the terms of Series E's investment activities (credit risk).
Market risk
Trading in futures and forward contracts (including foreign exchange)
involves entering into contractual commitments to purchase or sell a particular
commodity at a specified date and price. The gross or face amount of the
contracts, which is typically many times that of Series E's net assets being
traded, significantly exceeds Series E's future cash requirements since Series E
intends to close out its open positions prior to settlement. As a result, Series
E is generally subject only to the risk of loss arising from the change in the
value of the contracts. As such, Series E considers the 'fair value' of its
derivative instruments to be the net unrealized gain or loss on the contracts.
The market risk associated with Series E's commitments to purchase commodities
is limited to the gross or face amount of the contracts held. However, when
Series E enters into a contractual commitment to sell commodities, it must make
delivery of the underlying commodity at the contract price and then repurchase
the contract at prevailing market prices or settle in cash. Since the repurchase
price to which a commodity can rise is unlimited, entering into commitments to
sell commodities exposes Series E to unlimited risk.
Market risk is influenced by a wide variety of factors including government
programs and policies, political and economic events, the level and volatility
of interest rates, foreign currency exchange rates, the diversification effects
among the derivative instruments Series E holds and the liquidity and inherent
volatility of the markets in which Series E trades.
Credit risk
When entering into futures or forward contracts, Series E is exposed to
credit risk that the counterparty to the contract will not meet its obligations.
The counterparty for futures contracts traded on United States and most foreign
futures exchanges is the clearinghouse associated with the particular exchange.
In general, clearinghouses are backed by their corporate members who are
required to share any financial burden resulting from the nonperformance by one
of their members and, as such, should significantly reduce this credit risk. In
cases where the clearinghouse is not backed by the clearing members (i.e., some
foreign
6
<Page>
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 E as PEG, Series E's commodity broker, is
the sole counterparty. Series E has entered into a master netting agreement with
PEG and, as a result, presents unrealized gains and losses on open forward
positions as a net amount in the statements of financial condition. The amount
at risk associated with counterparty nonperformance of all of Series E's
contracts is the net unrealized gain included in the statements of financial
condition; however, counterparty non-performance on only certain of Series E's
contracts may result in greater loss than non-performance on all of Series E's
contracts. There can be no assurance that any counterparty, clearing member or
clearinghouse will meet its obligations to Series E.
The Managing Owner attempts to minimize both credit and market risks by
requiring Series E and its trading advisor to abide by various trading
limitations and policies. The Managing Owner monitors compliance with these
trading limitations and policies which include, but are not limited to,
executing and clearing all trades with creditworthy counterparties; limiting the
amount of margin or premium required for any one commodity or all commodities
combined; and generally limiting transactions to contracts which are traded in
sufficient volume to permit the taking and liquidating of positions.
Additionally, pursuant to the advisory agreement among Series E, the Managing
Owner and the trading advisor, Series E shall automatically terminate the
trading advisor if the net asset value allocated to the trading advisor declines
by 40% from the value at the beginning of any year or since the commencement of
trading activities. Furthermore, the Second Amended and Restated Declaration of
Trust and Trust Agreement of World Monitor Trust II provides that Series E will
liquidate its positions, and eventually dissolve, if Series E experiences a
decline in the net asset value of 50% from the value at the beginning of any
year or since the commencement of trading activities. In each case, the decline
in net asset value is after giving effect for distributions, contributions and
redemptions. The Managing Owner may impose additional restrictions (through
modifications of trading limitations and policies) upon the trading activities
of the trading advisor as it, in good faith, deems to be in the best interests
of Series E.
PEG, when acting as Series E's futures commission merchant in accepting
orders for the purchase or sale of domestic futures contracts, is required by
Commodity Futures Trading Commission ('CFTC') regulations to separately account
for and segregate as belonging to Series E all assets of Series E relating to
domestic futures trading and is not allowed to commingle such assets with other
assets of PEG. At June 27, 2003, such segregated assets totalled $15,213,215.
Part 30.7 of the CFTC regulations also requires PEG to secure assets of Series E
related to foreign futures trading which totalled $33,565,294 at June 27, 2003.
There are no segregation requirements for assets related to forward trading.
As of June 27, 2003, Series E's open futures and forward contracts generally
mature within one year, although certain interest rates and currency futures
contracts have maturities as distant as December 2004.
7
<Page>
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 $ 158.38 $ 129.29 $ 167.77 $ 121.78
------------ ------------ -------------- --------------
Net realized gain and change in
unrealized gain/loss on commodity
transactions 19.43 9.84 4.98 15.00
Interest income 1.01 1.04 0.49 0.51
Net expenses (9.67) (6.37) (4.09) (3.49)
------------ ------------ -------------- --------------
Net increase for the period 10.77 4.51 1.38 12.02
------------ ------------ -------------- --------------
Net asset value, end of period $ 169.15 $ 133.80 $ 169.15 $ 133.80
------------ ------------ -------------- --------------
------------ ------------ -------------- --------------
Total return 6.80% 3.49% 0.82% 9.87%
Ratio to average net assets
(annualized)
Interest income 1.18% 1.70% 1.14% 1.71%
Net expenses, including 1.29%,
1.28%, 0.47% and 2.35% of
incentive fees during
Year-To-Date 2003, Year-To-Date
2002, Second Quarter 2003 and
Second Quarter 2002, respectively 10.05% 10.68% 9.30% 11.93%
</Table>
These financial highlights represent the overall results of Series E 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 contributions and redemptions.
8
<Page>
WORLD MONITOR TRUST II--SERIES E
(a Delaware Business Trust)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Series E commenced operations on April 6, 2000 with gross proceeds of
$5,157,459 allocated to commodities trading. Additional contributions raised
through the continuous offering during Year-To-Date 2003, Second Quarter 2003
and for the period from April 6, 2000 (commencement of operations) to June 27,
2003 resulted in additional proceeds to Series E of $23,311,693, $9,465,680 and
$45,279,587, respectively. Series E's interests were offered until it
substantially achieved its subscription maximum of $50,000,000 on the sale of
limited interests during June 2003.
Limited interests in Series E may be redeemed on a weekly basis but are
subject to a redemption fee if transacted within one year of the effective date
of purchase. Redemptions of limited interests for Year-To-Date 2003, Second
Quarter 2003 and for the period from April 6, 2000 (commencement of operations)
to June 27, 2003 totalled $2,953,032, $1,145,003 and $8,863,690, respectively.
Since inception, the only redemptions of general interests occurred during
Second Quarter 2001 totalling $19,576. Additionally, Interests owned in any
series of World Monitor Trust II (Series D, E or F) may be exchanged, without
any charge, for interests of one or more other series of World Monitor Trust II
on a weekly basis for as long as interests in those series are being offered to
the public. Series E and World Monitor Trust II--Series F are no longer offered
to the public as those series substantially achieved their subscription maximums
during June 2003 and July 2003, respectively. In addition, as of the date of
this report, the offering of interests in World Monitor Trust II--Series D
('Series D') has been temporarily suspended, pending certain regulatory
approvals that the Managing Owner expects to obtain in the near future.
Accordingly, at this time, interests may not be exchanged. Exchanges from Series
E into Series D may resume once the requirements discussed above are complied
with. Future redemptions and exchanges will impact the amount of funds available
for investment in commodity contracts in subsequent periods.
At June 27, 2003, 100% of Series E's net assets were allocated to commodities
trading. A significant portion of the net assets is held in cash which is used
as margin for trading in commodities. Inasmuch as the sole business of Series E
is to trade in commodities, Series E continues to own such liquid assets to be
used as margin. PEG credits Series E with interest income on 100% of its average
daily equity maintained in its accounts with PEG during each month at the
13-week Treasury bill discount rate.
The commodities contracts are subject to periods of illiquidity because of
market conditions, regulatory considerations and other reasons. For example,
commodity exchanges limit fluctuations in commodity futures contract prices
during a single day by regulations referred to as 'daily limits.' During a
single day, no trades may be executed at prices beyond the daily limit. Once the
price of a futures contract for a particular commodity has increased or
decreased by an amount equal to the daily limit, positions in the commodity can
neither be taken nor liquidated unless traders are willing to effect trades at
or within the limit. Commodity futures prices have occasionally moved the daily
limit for several consecutive days with little or no trading. Such market
conditions could prevent Series E from promptly liquidating its commodity
futures positions.
Since Series E's business is to trade futures and forward contracts, its
capital is at risk due to changes in the value of these contracts (market risk)
or the inability of counterparties to perform under the terms of the contracts
(credit risk). Series E's exposure to market risk is influenced by a number of
factors including the volatility of interest rates and foreign currency exchange
rates, the liquidity of the markets in which the contracts are traded and the
relationships among the contracts held. The inherent uncertainty of Series E's
speculative trading as well as the development of drastic market occurrences
could result in monthly losses considerably beyond Series E's experience to date
and could ultimately lead to a loss of all or substantially all of investors'
capital. The Managing Owner attempts to minimize these risks by requiring Series
E and its trading advisor to abide by various trading limitations and policies
which include limiting margin amounts, trading only in liquid markets and
permitting the use of stop loss provisions. See Note C to the financial
statements for a further discussion of the credit and market risks associated
with Series E's futures and forward contracts.
Series E does not have, nor does it expect to have, any capital assets.
9
<Page>
Results of Operations
The net asset value per interest as of June 27, 2003 was $169.15, an increase
of 6.80% from the December 31, 2002 net asset value per interest of $158.38 and
an increase of 0.82% from the March 28, 2003 net asset value per interest of
$167.77. Past performance is not necessarily indicative of future results.
Series E's trading gains before commissions and related fees were $3,275,000,
$1,208,000, $1,289,000 and $1,637,000 during Year-To-Date 2003, Year-To-Date
2002, Second Quarter 2003 and Second Quarter 2002, respectively. Due to the
nature of Series E's trading activities, a period to period comparison of its
trading results is not meaningful. However, a detailed discussion of Series E's
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.
10
<Page>
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.
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 E
The following is a summary of performance for the major sectors in which
Series E 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 Australian dollar and euro strengthened
this quarter resulting in net gains for long euryen, euro, and Australian dollar
positions.
Metals (-): Declines in manufacturing resulted in falling base metal prices.
Long positions in copper, aluminum and nickel resulted in net losses.
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. Short natural gas and light crude oil positions resulted in
net losses.
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 (-): Net losses in short cotton positions resulted from unfavorable
weather conditions and high volatility in cotton markets.
Indices (-): Short positions in the German DAX, French MATCAC and Japanese
TOPIX indices led to net losses as global equity markets rose throughout the
quarter.
Series E's average net asset levels were significantly higher during
Year-To-Date 2003 as compared to Year-To-Date 2002 and Second Quarter 2003
compared to Second Quarter 2002, primarily from additional contributions and
favorable trading performance during 2002 and Year-To-Date 2003, partially
offset, by redemptions. The increasing asset levels have led to proportionate
increases in the amount of commissions and management fees incurred by Series E.
Interest income is earned on the average daily equity maintained with PEG at
the 13-week Treasury bill discount rate and, therefore, varies weekly according
to interest rates, trading performance, contributions and redemptions. Interest
income increased $145,000 and $85,000 during Year-To-Date 2003 as compared to
Year-To-Date 2002 and Second Quarter 2003 as compared to Second Quarter 2002,
respectively. These increases were due to the higher overall net asset levels,
as discussed above, offset, in part, by lower overall interest rates during
Year-To-Date 2003 versus Year-To-Date 2002.
Commissions are calculated on Series E's net asset value at the end of each
week and, therefore, vary according to weekly trading performance, contributions
and redemptions. Other transaction fees consist of National Futures Association,
exchange and clearing fees as well as floor brokerage costs and give-up charges,
which are based on the number of trades the trading advisor executes, as well as
which exchange, clearing firm or bank on, or through, which the contract is
traded. Commissions and other transaction fees increased $940,000 and $574,000
during Year-To-Date 2003 as compared to Year-To-Date 2002 and Second Quarter
2003 as compared to Second Quarter 2002, respectively, due to the increase in
average net asset levels as discussed above.
All trading decisions for Series E are made by Graham Capital Management,
L.P. (the 'Trading Advisor'). Management fees are calculated on Series E's net
asset value at the end of each week and, therefore, are
11
<Page>
affected by weekly trading performance, contributions and redemptions.
Management fees increased $301,000 and $183,000 during Year-To-Date 2003 as
compared to Year-To-Date 2002 and Second Quarter 2003 as compared to Second
Quarter 2002, respectively, due to the increase in average net asset levels as
discussed above.
Incentive fees are based on the 'New High Net Trading Profits' generated by
the Trading Advisor, as defined in the advisory agreement among Series E, the
Managing Owner and the Trading Advisor. Incentive fees incurred during
Year-To-Date 2003, Year-To-Date 2002, Second Quarter 2003 and Second Quarter
2002 were $258,000, $68,000, $55,000 and $68,000, respectively.
General and administrative expenses were $69,000, $62,000, $36,000 and
$31,000 for Year-To-Date 2003, Year-To-Date 2002, Second Quarter 2003 and Second
Quarter 2002, respectively. These expenses include accounting, audit, tax and
legal fees as well as printing and postage costs related to reports sent to
limited owners, and are before reimbursement of costs incurred by the Managing
Owner on behalf of Series E. To the extent that general and administrative
expenses exceed 1.5% of Series E's net asset value during the year (with a
maximum of 0.5% attributable to other than legal and audit expenses) such
amounts are borne by the Managing Owner and its affiliates. Because applicable
expenses exceeded these limits during Year-To-Date 2002 and Second Quarter 2002,
a portion of these expenses were borne by the Managing Owner and its affiliates,
resulting in a net cost to Series E of $52,000 and $27,000, respectively, during
those periods.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 305(c) of Regulation S-K requires disclosures during each interim
reporting period of material changes in the quantitative and qualitative market
risk information provided as of the end of the immediately preceding year. The
following information should be read in conjunction with Series E's Form 10-K as
filed with the Securities and Exchange Commission for the year ended December
31, 2002.
The following table presents the trading value at risk associated with Series
E's open positions by market sector at June 27, 2003 and December 31, 2002. All
open position trading risk exposures of Series E have been included in
calculating the figure set forth below. At June 27, 2003 and December 31, 2002,
Series E had total capitalizations of approximately $48.4 million and $26.5
million, respectively.
<Table>
<Caption>
June 27, 2003 December 31, 2002
----------------------------- ----------------------------
Value at % of Total Value at % of Total
Market Sector Risk Capitalization Risk Capitalization
- ------------------------------------------------------------------------------------------------------------
Interest rates $ 3,377,828 6.98% $1,024,799 3.86%
Currencies 597,861 1.23 1,459,415 5.50
Commodities 2,268,883 4.69 1,266,350 4.77
Stock indices 4,200,472 8.68 332,696 1.25
----------- ------- ---------- -------
Total $10,445,044 21.58% $4,083,260 15.38%
----------- ------- ---------- -------
----------- ------- ---------- -------
</Table>
The following table presents the average trading value at risk of Series E's
open positions by market sector for Year-To-Date 2003 and Second Quarter 2003.
<Table>
<Caption>
Year-To-Date 2003 Second Quarter 2003
-------------------------------- --------------------------------
Value at % of Average Total Value at % of Average Total
Market Sector Risk Capitalization Risk Capitalization
- ---------------------------------------------------------------------------------------------------------
Interest rates $1,593,201 3.99% $1,774,338 3.84%
Currencies 1,363,220 3.41 1,305,356 2.83
Commodities 1,286,380 3.22 1,152,465 2.50
Stock indices 2,417,633 6.05 2,919,263 6.33
---------- ------------------ ---------- ------------------
Total $6,660,434 16.67% $7,151,422 15.50%
---------- ------------------ ---------- ------------------
---------- ------------------ ---------- ------------------
</Table>
Based on average trading value at risk during Year-To-Date 2003 and Second
Quarter 2003 as well as value at risk at June 27, 2003, Series E experienced
some significant fluctuations in components of its value at risk, relative to
capitalization levels, as compared to value at risk at December 31, 2002.
12
<Page>
Throughout Year-To-Date 2003 and at June 27, 2003, there was a reduction in
average trading value at risk and value at risk, respectively, in the currencies
and commodities sectors as compared to the level at December 31, 2002. The
decline in the currencies sector was attributable to a reduction in a variety of
positions during a period of increasing average capitalization. At June 27, 2003
and throughout Year-To-Date 2003, Series E continues to have exposure from
positions in the Euro and in the local currencies of some G-8 countries, but
Series E had a reduced exposure in certain currencies of the G-8 countries as
well as to the Thailand thaibaht, the Swiss franc, and the Mexican peso after
December 31, 2002. The decline in the commodities sector is primarily
attributable to reduced exposure to the energy markets throughout Year-To-Date
2003.
Throughout Year-To-Date 2003 and at June 27, 2003, there was an increase in
average trading value at risk and value at risk, respectively, in the stock
indices sector as compared to the level at December 31, 2002. The increase was
primarily attributable to significant increases in the number of positions taken
in various stock indices including the NASDAQ 100, the S&P 500, the euro DAX and
the Tse Topix.
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 E's disclosure controls and procedures. Based
upon that evaluation, the Managing Owner's chief executive officer and chief
financial officer concluded that Series E's disclosure controls and procedures
are effective.
13
<Page>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--There are no material legal proceedings pending by
or against the Registrant or the Managing Owner
Item 2. Changes in Securities--The following table presents sales of
unregistered interests (i.e. general interests) exempt from
registration under Section 4(2) of the Securities Act of 1933 during
the period from January 1, 2003 to June 27, 2003.
<Table>
<Caption>
Amount of
-------------------------------
Date of Sale Interests sold Cash received
--------------------------------------------------------
February 10, 2003 700 $ 124,852
April 7, 2003 1,000 165,390
------- -------------
Total 1,700 $ 290,242
------- -------------
------- -------------
</Table>
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
Agreement of World Monitor Trust II dated as of March 28, 2002
(incorporated by reference to Exhibit 3.1 and 4.1 to Post-Effective
Amendment No. 4 to Series E's Registration Statement on Form S-1,
File No. 333-83015)
4.2--Form of Request for Redemption (incorporated by reference to
Exhibit 4.2 to Post-Effective Amendment No. 4 to Series E's
Registration Statement on Form S-1, File No. 333-83015)
4.3--Form of Exchange Request (incorporated by reference to
Exhibit 4.3 to Post-Effective Amendment No. 4 to Series E's
Registration Statement on Form S-1, File No. 333-83015)
4.4--Form of Subscription Agreement (incorporated by
reference to Exhibit 4.4 to Post-Effective Amendment No. 4
to Series E's Registration Statement on Form S-1, File
No. 333-83015)
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
14
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLD MONITOR TRUST II--SERIES E
By: Prudential Securities Futures Management Inc.
A Delaware corporation, Managing Owner
By: /s/ Ronald J. Ivans Date: August 11, 2003
----------------------------------------
Ronald J. Ivans
Chief Financial Officer
15