<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1996
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 33-80443
WILLOWBRIDGE STRATEGIC TRUST
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-7075398
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One New York Plaza, 14th Floor, New York, New York 10292
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 778-7866
Securities registered pursuant to Section 12(b) of the Act:
None
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Limited Interests
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark 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 mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [CK]
DOCUMENTS INCORPORATED BY REFERENCE
Second Amended and Restated Declaration of Trust and Trust Agreement of the
Registrant dated as of December 14, 1995, included as part of the Registration
Statement on Form S-1 (File No. 33-80443) filed with the Securities and Exchange
Commission on December 14, 1995, pursuant to Rule 424(b) of the Securities Act
of 1933, is incorporated by reference into Part IV of this Annual Report on Form
10-K
Annual Report to Interest holders for the period from May 1, 1996
(commencement of operations) to December 31, 1996 is incorporated by reference
into Parts II and IV of this Annual Report on Form 10-K
Index to exhibits can be found on pages 8 and 9.
<PAGE>
WILLOWBRIDGE STRATEGIC TRUST
(a Delaware Business Trust)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1 Business......................................................................... 3
Item 2 Properties....................................................................... 4
Item 3 Legal Proceedings................................................................ 4
Item 4 Submission of Matters to a Vote of Interest Holders.............................. 4
PART II
Item 5 Market for the Registrant's Interests and Related Interest Holder Matters........ 4
Item 6 Selected Financial Data.......................................................... 5
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 5
Item 8 Financial Statements and Supplementary Data...................................... 5
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 5
PART III
Item 10 Directors and Executive Officers of the Registrant............................... 5
Item 11 Executive Compensation........................................................... 6
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 7
Item 13 Certain Relationships and Related Transactions................................... 7
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
Financial Statements and Financial Statement Schedules........................... 8
Exhibits......................................................................... 8
Reports on Form 8-K.............................................................. 9
SIGNATURES.................................................................................. 10
</TABLE>
2
<PAGE>
PART I
Item 1. Business
General
Willowbridge Strategic Trust (the ``Trust'') was organized under the Delaware
Business Trust Statute on October 16, 1995 and commenced trading operations on
May 1, 1996. The Trust will terminate on December 31, 2015 unless terminated
sooner as provided in the Second Amended and Restated Declaration of Trust and
Trust Agreement (the ``Trust Agreement''). The Trust was formed to engage in the
speculative trading of commodity futures, options and forward contracts. The
Trustee of the Trust is Wilmington Trust Company.
The Trust is offering a maximum of $100,000,000 of limited interests. On May
1, 1996, the Trust completed its initial offering with gross proceeds of
$12,686,200 from the sale of 125,352 limited interests and 1,510 general
interests (collectively, ``Interests''). Additional Interests are being offered
monthly at the then current net asset value per Interest until no later than
January 31, 1998 but in no event after $100,000,000 in limited interests are
sold (the ``Continuous Offering Period''). A minimum initial contribution of
$5,000 ($2,000 for an IRA account) is required for each new limited owner unless
Prudential Securities Futures Management Inc. (the ``Managing Owner''), in its
sole discretion, approves a contribution of a lesser amount. Existing limited
owners are permitted to make additional contributions in increments of not less
than $100 during the Continuous Offering Period.
During the Continuous Offering Period through March 1, 1997, the Registrant
accepted additional subscriptions for an aggregate of 276,162 limited interests
and 2,887 general interests resulting in additional proceeds to the Registrant
of $27,517,000.
All trading decisions for the Registrant are being made by Willowbridge
Associates Inc. (the ``Trading Manager''), an independent commodity trading
manager which manages the Registrant's assets pursuant to five trading programs
developed by the Trading Manager. The Managing Owner retains the authority to
override trading instructions that violate the Registrant's trading policies.
The Registrant is engaged solely in the business of commodity futures,
options and forward trading; therefore, presentation of industry segment
information is not applicable.
Managing Owner
The Managing Owner, Prudential Securities Futures Management Inc., is a
wholly-owned subsidiary of Prudential Securities Incorporated (``PSI''), which,
in turn, is a wholly-owned subsidiary of Prudential Securities Group Inc. PSI is
the principal underwriter and selling agent for the Trust's Interests as well as
the commodity broker (``Commodity Broker'') of the Trust. The Managing Owner is
required to maintain at least a 1% interest in the Trust so long as it is acting
as the Managing Owner. Therefore, it must contribute to the Trust between
$101,000 and $1,010,000 depending upon the total number of limited interests
sold. In return, it is entitled to a proportionate number of general interests
with at least a 1% interest in the profits and losses of the Trust.
Competition
The Managing Owner and its affiliates have formed, and may continue to form,
various entities to invest in the speculative trading of futures, forward and
options contracts which have certain of the same investment policies as the
Registrant.
The Registrant is an open-end fund which currently solicits the sale of
additional Interests on a monthly basis until the Continuous Offering Period
expires. As such, the Registrant may compete with other entities to attract new
participants. In addition, to the extent that the Trading Manager recommends
similar or identical trades to the Registrant and other accounts which it
manages, the Registrant may compete with those accounts for the execution of the
same or similar trades.
3
<PAGE>
Employees
The Registrant has no employees. Management and administrative services for
the Registrant are performed by the Managing Owner and its affiliates pursuant
to the Trust Agreement. See Notes A, C and D to the Registrant's annual report
to limited owners for the year ended December 31, 1996 (``Registrant's 1996
Annual Report'') which is filed as an exhibit hereto.
Item 2. Properties
The Registrant does not own or lease any property.
Item 3. Legal Proceedings
There are no material legal proceedings pending by or against the Registrant
or the Managing Owner.
Item 4. Submission of Matters to a Vote of Interest Holders
None
PART II
Item 5. Market for the Registrant's Interests and Related Interest Holder
Matters
As of March 3, 1997, there were 1,733 holders of record owning 377,767
Interests which include 4,397 general interests. A significant secondary market
for the Interests has not developed, and it is not expected that one will
develop in the future. There are also certain restrictions set forth in the
Trust Agreement limiting the ability of an Interest holder to transfer
Interests. Redemptions are permitted monthly, on at least 10 days' prior written
notice, commencing with the end of the first full month of Trust trading
activity, May 31, 1996. Redemptions are at the net asset value per Interest,
however, Interests redeemed on or prior to the end of the first and second
successive six-month periods after their purchase are subject to redemption
charges of 4% and 3%, respectively, of the net asset value at which they are
redeemed. These redemption charges are paid to the Managing Owner. Partial
redemptions are permitted. Consequently, holders of Interests may not be able to
liquidate their investments in the event of an emergency or for any other
reason.
There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the Trust
Agreement. No distributions have been made since inception and no distributions
are anticipated in the future.
4
<PAGE>
Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the financial statements of the
Registrant and the notes thereto on pages 2 through 9 of the Registrant's 1996
Annual Report which is filed as an exhibit hereto.
<TABLE>
<CAPTION>
Period from May 1, 1996
(commencement of operations)
to December 31, 1996
----------------------------
<S> <C>
Net realized gain on commodity transactions $ 3,130,423
----------------
----------------
Net unrealized gain on open
commodity positions $ 354,215
----------------
----------------
Interest income $ 663,866
----------------
----------------
Commissions $ 1,033,462
----------------
----------------
Management fees $ 409,964
----------------
----------------
Incentive fees $ 414,894
----------------
----------------
Net income $ 2,290,184
----------------
----------------
Allocation of net income:
Limited interests $ 2,268,174
----------------
----------------
General interests $ 22,010
----------------
----------------
Net income per weighted average Interest $ 10.79
----------------
----------------
Total assets $ 27,823,974
----------------
----------------
Redemptions $ 2,292,016
----------------
----------------
Net asset value per Interest $ 103.47
----------------
----------------
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 10 and 11 of the
Registrant's 1996 Annual Report which is filed as an exhibit hereto.
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 9
of the Registrant's 1996 Annual Report which is filed as an exhibit hereto.
Supplementary data specified by Item 302 of Regulation S-K (selected
quarterly financial data) is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Reference is made to the Registrant's Current Report on Form 8-K dated May
14, 1996, as filed with the Securities and Exchange Commission on May 16, 1996
regarding the change in the Registrant's certifying accountant from Deloitte &
Touche LLP to Price Waterhouse LLP.
PART III
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The
Registrant is managed by the Managing Owner.
5
<PAGE>
The Managing Owner's directors and executive officers and any person holding
more than ten percent of the Registrant's Interests (``Ten Percent Owners'') are
required to report their initial ownership of such Interests and any subsequent
changes in that ownership to the Securities and Exchange Commission on Forms 3,
4 or 5. Such executive officers, directors and Ten Percent Owners are required
by Securities and Exchange Commission regulations to furnish the Registrant with
copies of all Forms 3, 4 or 5 they file. All of these filing requirements were
satisfied on a timely basis. In making these disclosures, the Registrant has
relied solely on written representations of the Managing Owner's directors and
executive officers or copies of the reports that they have filed with the
Securities and Exchange Commission during and with respect to its most recent
fiscal year.
The directors and executive officers of Prudential Securities Futures
Management Inc. and their positions with respect to the Registrant are as
follows:
Name Position
James M. Kelso President and Director
Barbara J. Brooks Treasurer and Chief Financial Officer
Steven Carlino Vice President and Chief Accounting Officer
A. Laurence Norton, Jr. Director
Guy S. Scarpaci Director
JAMES M. KELSO, age 42, is the President and a Director of Prudential
Securities Futures Management Inc. He is a Senior Vice President of Futures
Administration of PSI. He is also the President and a Director of Seaport
Futures Management, Inc. and serves in various capacities for other affiliated
companies. He has held several positions within PSI since July 1981.
BARBARA J. BROOKS, age 48, is the Treasurer and Chief Financial Officer of
Prudential Securities Futures Management Inc. She is a Senior Vice President of
PSI. She is also the Treasurer and Chief Financial Officer of Seaport Futures
Management, Inc. and serves in various capacities for other affiliated
companies. She has held several positions within PSI since April 1983. Ms.
Brooks is a certified public accountant.
STEVEN CARLINO, age 33, is a Vice President of Prudential Securities Futures
Management Inc. He is a First Vice President of PSI. He is also a Vice President
of Seaport Futures Management, Inc. and serves in various capacities for other
affiliated companies. Prior to joining PSI in October 1992, he was with Ernst &
Young for six years. Mr. Carlino is a certified public accountant.
A. LAURENCE NORTON, JR., age 58, is a Director of Prudential Securities
Futures Management Inc. He is an Executive Vice President of PSI and head of its
Futures Division. He is also a Director of Seaport Futures Management, Inc. Most
recently, he held the position of Executive Director of Retail Development and
Retail Strategies at PSI. Prior to joining PSI in 1991, Mr. Norton was a Senior
Vice President and Branch Manager of Shearson Lehman Brothers.
GUY S. SCARPACI, age 50, is a Director of Prudential Securities Futures
Management Inc. He is a First Vice President of the Futures Division of PSI. He
is also a Director of Seaport Futures Management, Inc. Mr. Scarpaci has been
employed by PSI in positions of increasing responsibility since August 1974.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and/or executive officers
have indefinite terms.
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the Managing Owner for their services.
Certain directors and officers of the Managing Owner receive compensation from
affiliates of the Managing Owner, not from the Registrant, for services
performed for various affiliated entities, which may include services performed
for the Registrant; however, the Managing Owner believes that any compensation
attributable to services performed for the Registrant is immaterial. (See also
Item 13, Certain Relationships and Related Transactions, for information
regarding compensation to the Managing Owner.)
6
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 3, 1997, no director or executive officer of the Managing Owner
owns directly or beneficially any interest in the voting securities of the
Managing Owner.
As of March 3, 1997, no director or executive officer of the Managing Owner
owns directly or beneficially any of the Interests issued by the Registrant.
As of March 3, 1997, no owners of Interests beneficially own more than five
percent (5%) of the Interests issued by the Registrant.
Item 13. Certain Relationships and Related Transactions
The Registrant has and will continue to have certain relationships with the
Managing Owner and its affiliates. However, there have been no direct financial
transactions between the Registrant and the directors or officers of the
Managing Owner.
Reference is made to Notes A, C and D to the financial statements in the
Registrant's 1996 Annual Report which is filed as an exhibit hereto, which
identify the related parties and discuss the services provided by these parties
and the amounts paid or payable for their services.
7
<PAGE>
PART IV
<TABLE>
<CAPTION>
Page
Number
------------
<S> <C> <C> <C>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements and Reports of Independent Accountants--Incorporated
by reference to the Registrant's 1996 Annual Report which is filed as an
exhibit hereto
Reports of Independent Accountants:
Report of Independent Accountants as of December 31, 1996 and for the
period from May 1, 1996 (commencement of operations) to December 31, 1996 2
Independent Auditors' Report as of December 31, 1995 2A
Financial Statements:
Statements of Financial Condition--December 31, 1996 and 1995 3
Statement of Operations--Period from May 1, 1996 (commencement of
operations) to December 31, 1996 4
Statements of Changes in Trust Capital--Year ended December 31, 1996 4
Notes to Financial Statements 5
2. Financial Statement Schedules
All schedules have been omitted because they are not applicable or the
required information is included in the financial statements or notes
thereto.
3. Exhibits
Description:
3.1 Second Amended and Restated Declaration of Trust and Trust Agreement of
and the Registrant dated as of January 31, 1996 (incorporated by reference to
4.1 Exhibits 3.1 and 4.1 of Registrant's Registration Statement on Form S-1,
File No. 33-08443)
4.2 Subscription Agreement (incorporated by reference to Exhibit 4.2 of
Registrant's Registration Statement on Form S-1, File No. 33-08443)
4.3 Request for Redemption (incorporated by reference to Exhibit 4.3 of
Registrant's Registration Statement on Form S-1, File No. 33-08443)
10.1 Form of Escrow Agreement among the Registrant, Prudential Securities
Futures Management Inc., Prudential Securities Incorporated and The Bank
of New York (incorporated by reference to Exhibit 10.1 of the
Registrant's Registration Statement on Form S-1, File No. 33-08443)
10.2 Brokerage Agreement between the Registrant and Prudential Securities
Incorporated (incorporated by reference to Exhibit 10.2 of the
Registrant's Registration Statement on Form S-1, File No. 33-08443)
10.3 Advisory Agreement, among the Registrant, Prudential Securities Futures
Management Inc. and Willowbridge Associates, Inc. (incorporated by
reference to Exhibit 10.3 of the Registrant's Registration Statement on
Form S-1, File No. 33-08443)
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C>
10.4 Representation Agreement Concerning the Registration Statement and the
Prospectus among the Registrant, Prudential Securities Futures Management
Inc., Prudential Securities Incorporated, Wilmington Trust Company and
Willowbridge Associates Inc. (incorporated by reference to Exhibit 10.4
of the Registrant's Registration Statement on Form S-1, File No.
33-08443)
10.5 Net Worth Agreement between Prudential Securities Futures Management Inc.
and Prudential Securities Group Inc. (incorporated by reference to
Exhibit 10.5 of the Registrant's Registration Statement on Form S-1, File
No. 33-08443)
10.6 Secured Demand Note between Prudential Securities Group Inc. and
Prudential Securities Futures Management Inc. (incorporated by reference
to Exhibit 10.6 of the Registrant's Registration Statement on Form S-1,
File No. 33-08443)
10.7 Secured Demand Note Collateral Agreement between Prudential Securities
Futures Management Inc. and Prudential Securities Group Inc.
(incorporated by reference to Exhibit 10.7 of the Registrant's
Registration Statement on Form S-1, File No. 33-08443)
10.8 Form of Foreign Currency Addendum to Brokerage Agreement between the
Registrant and Prudential Securities Incorporated (incorporated by
reference to Exhibit 10.8 of the Registrant's Quarterly Report on Form
10-Q for the period ended June 30, 1996)
13 Registrant's 1996 Annual Report (with the exception of the information
and data incorporated by reference in Items 7 and 8 of this Annual Report
on Form 10-K, no other information or data appearing in the Registrant's
1996 Annual Report is to be deemed filed as part of this report) (filed
herewith)
16.1 Letter dated May 15, 1996 from Deloitte & Touche LLP to the Securities
and Exchange Commission regarding change in certifying accountant
(incorporated by reference to Exhibit 16.1 to the Registrant's Current
Report on Form 8-K dated May 14, 1996)
27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K--None
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
</TABLE>
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Willowbridge Strategic Trust
By: Prudential Securities Futures Management Inc.
A Delaware corporation, Managing Owner
By: /s/ Steven Carlino Date: March 27, 1997
----------------------------------------
Steven Carlino
Vice President and Chief Accounting
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the Managing Owner) and on the
dates indicated.
By: Prudential Securities Futures Management Inc.
A Delaware corporation, Managing Owner
By: /s/ James M. Kelso Date: March 27, 1997
-----------------------------------------
James M. Kelso
President and Director
By: /s/ Barbara J. Brooks Date: March 27, 1997
-----------------------------------------
Barbara J. Brooks
Treasurer and Chief Financial Officer
By: /s/ Steven Carlino Date: March 27, 1997
-----------------------------------------
Steven Carlino
Vice President
By: /s/ A. Laurence Norton, Jr. Date: March 27, 1997
-----------------------------------------
A. Laurence Norton, Jr.
Director
By: /s/ Guy S. Scarpaci Date: March 27, 1997
-----------------------------------------
Guy S. Scarpaci
Director
10
<PAGE>
1996
- --------------------------------------------------------------------
Willowbridge Strategic Trust Annual
Report
<PAGE>
WILLOWBRIDGE STRATEGIC TRUST
LETTER TO THE INTEREST HOLDERS FOR THE PERIOD MAY 1, 1996
THROUGH DECEMBER 31, 1996
1
<PAGE>
1177 Avenue of the Americas Telephone 212 596 7000
New York, NY 10036 Facsimile 212 596 8910
Price Waterhouse LLP (LOGO)
Report of Independent Accountants
January 29, 1997
To the Managing Owner and
Limited Owners of
Willowbridge Strategic Trust
In our opinion, the accompanying statement of financial condition and the
related statements of operations and of changes in trust capital present
fairly, in all material respects, the financial position of
Willowbridge Strategic Trust (the ``Trust'') at December 31, 1996, the
results of its operations for the period from May 1, 1996 to
December 31, 1996 and the changes in its trust capital for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles. The financial statements are the responsibility of
the managing owner; our responsibility is to express an opinion
on these financial statements based on our audit. We conducted
our audit of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by the
managing owner, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
2
<PAGE>
<PAGE>
Deloitte &
Touche LLP
--------------------------------------------------------
Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Interestholders of
Willowbridge Strategic Trust:
We have audited the accompanying statement of financial condition of
Willowbridge Strategic Trust as of December 31, 1995. This financial statement
is the responsibility of the Trust's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of financial condition is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of financial condition. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement of financial
condition presentation. We believe that our audit of the statement of financial
condition provides a reasonable basis for our opinion.
In our opinion, such statement of financial condition presents fairly, in all
material respects, the financial position of Willowbridge Strategic Trust as of
December 31, 1995 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
October 14, 1996
- -----------------
Deloitte Touche
Tohmatsu
International
- -----------------
2A
<PAGE>
WILLOWBRIDGE STRATEGIC TRUST
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1995
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
ASSETS
Equity in commodity trading accounts:
Cash $27,465,535 $ 1,000
Net unrealized gain on open commodity positions 354,215 --
------------- ------------
Net equity 27,819,750 1,000
Other receivable 4,224 --
------------- ------------
Total assets $27,823,974 $ 1,000
------------- ------------
------------- ------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Redemptions payable $ 359,352 $ --
Management fee payable 69,560 --
Incentive fee payable 414,894 --
------------- ------------
Total liabilities 843,806 --
------------- ------------
Commitments
Trust capital
Limited interests (258,057 and 0 interests outstanding) 26,700,158 --
General interests (2,706.31 and 10 interests outstanding) 280,010 1,000
------------- ------------
Total trust capital 26,980,168 1,000
------------- ------------
Total liabilities and trust capital $27,823,974 $ 1,000
------------- ------------
------------- ------------
Net asset value per limited and general interests (``Interests'') $ 103.47 $ 100.00
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
WILLOWBRIDGE STRATEGIC TRUST
(a Delaware Business Trust)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Period from
May 1, 1996
(commencement of
operations) to
December 31,
1996
<S> <C>
- ---------------------------------------------------------------------------------------------------
REVENUES
Net realized gain on commodity transactions $ 3,130,423
Net unrealized gain on open commodity positions 354,215
Interest income 663,866
--------------------------
4,148,504
--------------------------
EXPENSES
Commissions 1,033,462
Incentive fees 414,894
Management fees 409,964
--------------------------
1,858,320
--------------------------
Net income $ 2,290,184
--------------------------
--------------------------
ALLOCATION OF NET INCOME
Limited interests $ 2,268,174
--------------------------
--------------------------
General interests $ 22,010
--------------------------
--------------------------
NET INCOME PER WEIGHTED AVERAGE LIMITED AND GENERAL INTEREST
Net income per weighted average limited and general interest $ 10.79
--------------------------
--------------------------
Weighted average number of limited and general interests outstanding 212,276.447
--------------------------
--------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN TRUST CAPITAL
<TABLE>
<CAPTION>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Initial trust capital--December 31, 1995 10.00 $ -- $ 1,000 $ 1,000
Contributions 283,101.20 26,724,000 257,000 26,981,000
Net income -- 2,268,174 22,010 2,290,184
Redemptions (22,347.89) (2,292,016) -- (2,292,016)
----------- ----------- --------- -----------
Trust capital--December 31, 1996 260,763.31 $26,700,158 $280,010 $26,980,168
----------- ----------- --------- -----------
----------- ----------- --------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
WILLOWBRIDGE STRATEGIC TRUST
(a Delaware Business Trust)
NOTES TO FINANCIAL STATEMENTS
A. General
Willowbridge Strategic Trust (the ``Trust'') was organized under the Delaware
Business Trust Statute on October 16, 1995 and commenced trading operations on
May 1, 1996. The Trust will terminate on December 31, 2015 unless terminated
sooner as provided in the Second Amended and Restated Declaration of Trust and
Trust Agreement (the ``Trust Agreement''). The Trust was formed to engage in the
speculative trading of commodity futures, options and forward contracts. The
Trustee of the Trust is Wilmington Trust Company. The managing owner is
Prudential Securities Futures Management Inc. (the ``Managing Owner''), a
wholly-owned subsidiary of Prudential Securities Incorporated (``PSI''), which,
in turn, is a wholly-owned subsidiary of Prudential Securities Group Inc. PSI is
the principal underwriter and selling agent for the Trust's interests (the
``Interests'') as well as the commodity broker (``Commodity Broker'') of the
Trust.
The Trust is offering a maximum of $100,000,000 of limited interests. On May
1, 1996, the Trust completed its initial offering with gross proceeds of
$12,686,200 from the sale of 125,352 limited interests and 1,510 general
interests. Additional Interests are being offered monthly at the then current
net asset value per Interest until no later than January 31, 1998 but in no
event after $100,000,000 in limited interests are sold (the ``Continuous
Offering Period''). A minimum initial contribution of $5,000 ($2,000 for an IRA
account) is required for each new limited owner unless the Managing Owner, in
its sole discretion, approves a contribution of a lesser amount. Existing
limited owners are permitted to make additional contributions in increments of
not less than $100 during the Continuous Offering Period.
The Managing Owner is required to maintain at least a 1% interest in the
Trust so long as it is acting as the Managing Owner. Therefore, it must
contribute to the Trust between $101,000 and $1,010,000 depending upon the total
number of limited interests sold during the Initial & Continuous Offering
Periods. In return, it is entitled to a proportionate number of general
interests with at least a 1% interest in the profits and losses of the Trust.
The Managing Owner, on behalf of the Trust, entered into an agreement (the
``Advisory Agreement'') with Willowbridge Associates Inc., an independent
commodity trading manager (the ``Trading Manager'') to make the Trust's
commodities trading decisions. The Managing Owner has made 100% of the Trust's
assets available for trading by the Trading Manager; however, the Managing Owner
retains the authority to override trading instructions that violate the Trust's
trading policies. The Advisory Agreement is for an initial term of approximately
one year and may be renewed thereafter for additional successive one-year terms.
The Managing Owner retains the right to retain additional or substitute
commodity trading managers at its discretion.
B. Summary of Significant Accounting Principles
Basis of Accounting
The books and records of the Trust are maintained on the accrual basis of
accounting in accordance with generally accepted accounting principles.
Commodity futures and forward transactions are reflected in the accompanying
statements of financial condition on trade date. The difference between the
original contract amount and market value is reflected as net unrealized gain or
loss. Options transactions are reflected in the statements of financial
condition at market value, which is inclusive of the net unrealized gain or
loss. The market value of each contract is based upon the closing quotation on
the exchange, clearing firm or bank on, or through, which the contract is
traded.
The weighted average number of limited and general interests outstanding was
computed for purposes of disclosing net income per weighted average limited and
general interest. The weighted average limited and general interests are equal
to the number of Interests outstanding at period end, adjusted proportionately
for Interests subscribed and redeemed based on their respective time outstanding
during such period.
5
<PAGE>
<PAGE>
The Partnership has elected not to provide a Statement of Cash Flows as
permitted by Statement of Financial Accounting Standards No. 102, ``Statement of
Cash Flows--Exemption of Certain Enterprises and Classification of Cash Flows
from Certain Securities Acquired for Resale.''
Income taxes
The Trust is treated as a partnership for Federal income tax purposes. As
such, the Trust is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the individual Interest holders. The Trust may be subject to other
state and local taxes in jurisdictions in which it operates.
Profit and loss allocation, subscriptions, distributions and redemptions
Net realized profits or losses for tax purposes are allocated first to
Interest holders who redeem Interests to the extent the amounts received on
redemption are greater than or are less than the amounts paid for the redeemed
Interests by the Interest holders. Net realized profits or losses remaining
after these allocations are allocated to each Interest holder in proportion to
such Interest holder's capital account at year-end. Net income or loss for
financial reporting purposes is allocated monthly for all Interest holders on a
pro rata basis based on each Interest holder's number of Interests outstanding
during the month.
Distributions (other than on redemptions of Interests) are made at the sole
discretion of the Managing Owner on a pro rata basis in accordance with the
respective capital accounts of the Interest holders. No distributions have been
made since inception.
Additional Interests are being offered monthly at their month-end NAV per
Interest until the Continuous Offering Period is terminated as discussed in Note
A.
Redemptions are permitted as of the last business day of each month, on at
least 10 days' prior written notice. Redemptions are at the then current net
asset value per Interest; however, Interests redeemed on or prior to the end of
the first and second successive six-month periods after their purchase are
subject to redemption charges of 4% and 3%, respectively, of the net asset value
at which they are redeemed. These redemption charges are paid to the Managing
Owner. Partial redemptions are permitted.
C. Fees
Organizational, offering, and general and administrative costs
PSI or its affiliates pay the costs of organizing the Trust and offering its
Interests as well as administrative costs incurred by the Managing Owner or its
affiliates for services it performs for the Trust. These costs include, but are
not limited to, those discussed in Note D below. Routine legal, audit, postage
and other third party costs are also paid by PSI or its affiliates.
Management and incentive fees
The Trust pays the Trading Manager a monthly management fee of 1/4 of 1% (3%
per annum) of the Trust's net asset value as of the last day of each month and a
quarterly incentive fee of 20% of ``New High Net Trading Profits'' (as defined
in the Advisory Agreement).
Commissions
The Managing Owner, on behalf of the Trust, entered into an agreement (the
``Brokerage Agreement'') with PSI to act as Commodity Broker whereby the Trust
pays a fixed monthly fee for brokerage and other services rendered. The monthly
fee is equal to .64583 of 1% (7.75% per annum) of the Trust's net asset value as
of the first day of each month. From this fee, PSI pays all of the Trust's
execution (i.e., floor brokerage expenses, give-up charges and NFA, clearing and
exchange fees) and account maintenance costs, as well as compensation to
employees who sell Interests in the Trust.
D. Related Parties
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.
One hundred percent of the proceeds of this offering are received in the
Trust's name and deposited in cash in segregated trading accounts at PSI and
will remain there for as long as the Trust's Brokerage
6
<PAGE>
Agreement with PSI remains in effect. PSI credits the Trust monthly with 80% of
the interest it earns on the equity in these accounts and retains the remaining
20%.
The costs charged to the Trust for brokerage services for the period from May
1, 1996 (commencement of operations) to December 31, 1996 were $1,033,462.
In connection with the Trust's interbank transactions, PSI engages in foreign
currency forward transactions with the Trust and an affiliate of PSI who, as
principal, attempts to earn a profit on the bid-ask spreads (which must be
competitive) on any foreign currency forward transactions entered into between
the Trust and PSI, on the one hand, and PSI and such affiliate on the other. In
connection with its trading of foreign currencies in the interbank market, PSI
may arrange bank lines of credit at major international banks. To the extent
such lines of credit are arranged, PSI does not charge the Trust for maintaining
such lines of credit, but requires margin deposits with respect to forward
contract transactions.
E. Income Taxes
There are no differences between the tax basis and book basis of Interest
holders' capital for the period from May 1, 1996 (commencement of operations) to
December 31, 1996.
F. Credit and Market Risk
Since the Trust's business is to trade futures, forward and options
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).
Futures, forward and options contracts involve varying degrees of off-balance
sheet risk; and changes in the level of volatility of interest rates, foreign
currency exchange rates or the market values of the contracts (or commodities
underlying the contracts) frequently result in changes in the Trust's unrealized
gain (loss) on open commodity positions reflected in the statements of financial
condition. The Trust's exposure to market risk is influenced by a number of
factors including the relationships among the contracts held by the Trust as
well as the liquidity of the markets in which the contracts are traded.
Futures and options contracts are traded on organized exchanges and are thus
distinguished from forward contracts which are entered into privately by the
parties. The credit risks associated with futures and options contracts are
typically perceived to be less than those associated with forward contracts
because exchanges typically provide clearinghouse arrangements in which the
collective credit (subject to certain limitations) of the members of the
exchanges is pledged to support the financial integrity of the exchange. On the
other hand, the Trust must rely solely on the credit of its broker (PSI) with
respect to forward transactions.
The Managing Owner attempts to minimize both credit and market risks by
requiring the Trust's Trading Manager 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 (currently, PSI is the sole
counterparty or broker); 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. The Managing Owner may impose additional
restrictions (through modifications of such trading limitations and policies)
upon the trading activities of the Trading Manager as it, in good faith, deems
to be in the best interests of the Trust.
PSI, when acting as the Trust's futures commission merchant in accepting
orders for the purchase or sale of domestic futures and options contracts, is
required by Commodity Futures Trading Commission (``CFTC'') regulations to
separately account for and segregate as belonging to the Trust all assets of the
Trust relating to domestic futures and options trading and not to commingle such
assets with other assets of PSI. At December 31, 1996, such segregated assets
totalled $23,463,181. Part 30.7 of the CFTC regulations also requires PSI to
secure assets of the Trust related to foreign futures and options trading which
totalled $4,356,569 at December 31, 1996. There are no segregation requirements
for assets related to forward trading.
7
<PAGE>
As of December 31, 1996, all open futures contracts mature within nine
months.
As of December 31, 1996, gross contract amounts of open futures contracts
are:
<TABLE>
<S> <C>
Financial Futures Contracts:
Commitments to purchase $ 61,090,445
Commitments to sell $ 22,255,035
Currency Futures Contracts:
Commitments to purchase $ 2,891,650
Commitments to sell $ 12,957,888
Other Futures Contracts:
Commitments to purchase $ 11,829,016
Commitments to sell $ 3,189,296
</TABLE>
The gross contract amounts represent the Trust's potential involvement in a
particular class of financial instrument (if it were to take or make delivery on
an underlying futures or options contract). The gross contract amounts
significantly exceed the future cash requirements as the Trust intends to close
out open positions prior to settlement and thus 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, forward and options contracts
to be the net unrealized gain or loss on the contracts (plus premiums on
options). Thus, the amount at risk associated with counterparty nonperformance
of all contracts is the net unrealized gain included in the statements of
financial condition. The market risk associated with the Trust's commitments to
purchase commodities is limited to the gross contract amounts involved, while
the market risk associated with its commitments to sell is unlimited since the
Trust's potential involvement is to make delivery of an underlying commodity at
the contract price; therefore, it must repurchase the contract at prevailing
market prices.
The following table presents the average fair value of futures and options
contracts during the year ended December 31, 1996 and the related fair value of
such contracts as of December 31, 1996.
<TABLE>
<CAPTION>
Average Fair Value Fair Value
Assets Liabilities Assets Liabilities
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 120,518 $ 41,843 $ 27,000 $ 96,094
Currencies 426,724 98,904 151,650 56,533
Other 373,360 423,556 204,414 160,312
Foreign exchanges
Financial 997,596 33,195 73,065 84,446
Other 81,644 23,941 307,291 11,820
Options Contracts:
Domestic exchanges
Financial 15,606 -- -- --
Currencies 60,060 -- -- --
Other 17,520 -- -- --
Foreign exchanges
Financial 5,650 -- -- --
------------ ------------ ------------ ------------
$2,098,678 $ 621,439 $ 763,420 $ 409,205
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
8
<PAGE>
The following table presents the net realized gains (losses) and the net
unrealized gains (losses) of futures and options contracts for the period from
May 1, 1996 (commencement of operations) through December 31, 1996.
<TABLE>
<CAPTION>
Net Realized
Gains Net Unrealized
(Losses) Gains (Losses) Total
------------ --------------- -----------
<S> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 522,445 $ (69,094) $ 453,351
Currencies 638,502 95,117 733,619
Other (1,875,153) 44,102 (1,831,051)
Foreign exchanges
Financial 4,491,095 (11,381) 4,479,714
Other (39,746) 295,471 255,725
Options Contracts:
Domestic exchanges
Financial (146,094) -- (146,094)
Currencies (195,150) -- (195,150)
Other (181,779) -- (181,779)
Foreign exchanges
Financial (83,697) -- (83,697)
------------ --------------- -----------
$ 3,130,423 $ 354,215 $ 3,484,638
------------ --------------- -----------
------------ --------------- -----------
</TABLE>
9
<PAGE>
WILLOWBRIDGE STRATEGIC TRUST
(a Delaware Business Trust)
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 are offered
monthly at the then current net asset value per Interest until no later than
January 31, 1998 but in no event after $100,000,000 in limited interests are
sold.
At December 31, 1996, 100% of the Trust's net assets were allocated to
commodities trading. A significant portion of the net assets 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 equity 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, forward and options
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 Managing Owner attempts to minimize these risks
by requiring the Trust's Trading Manager to abide by various trading limitations
and policies. See Note F to the financial statements for a further discussion of
the credit and market risks associated with the Trust's futures, forward and
options contracts.
Redemptions of limited interests for the period from May 1, 1996
(commencement of operations) through December 31, 1996 were $2,292,016.
Additional contributions raised through the continuous offering resulted in
additional gross proceeds to the Trust of $14,295,800 for the period from May 1,
1996 (commencement of operations) to December 31, 1996 and $13,221,200 for
January 1, 1997 through March 1, 1997. Future redemptions and contributions will
impact the amount of funds available for investment in commodity contracts in
subsequent periods.
The Trust does not have, nor does it expect to have, any capital assets.
Results of Operations
The Trust commenced trading on May 1, 1996 posting a gain of 3.47% for the
period ended December 31, 1996. The MAR (Managed Account Reports) Fund/Pool
Index, which tracked the performance of 420 futures funds, returned 9.45% for
the comparable period in 1996, outperforming the Trust. The net asset value per
Interest as of December 31, 1996 was $103.47. Past performance is not
necessarily indicative of future results.
The international interest rate, stock index and currency sectors were the
solid performers in 1996, especially during the fourth quarter. In the financial
sector, German, French and Japanese bond positions were profitable. With
sluggish economic growth in Europe and Japan and only moderate U.S. growth, the
Trust profited from rising bond prices in the major international countries as
the financial markets adjusted to slower rates of growth in the second half of
1996. In the stock index sector, long U.S. stock index positions posted gains as
U.S. stock prices rose on expectations that moderate U.S. economic growth would
be accompanied by continuing low rates of inflation.
In the energy sector, tight supplies of natural gas drove prices higher also
impacting crude and heating oil. Long positions in these commodities were
profitable. The grain sector was profitable early in the year due to rising
international demand and historically low reserves; however, especially
favorable weather
10
<PAGE>
conditions in the second half of the year increased crop expectations, causing
grain prices to decline. Thus, the Trust's long positions experienced losses. In
the soft sector, coffee and cotton positions were unprofitable as changing
expectations in their growing conditions caused widely volatile price moves.
Interest income is earned on the equity balances held at PSI and, therefore,
varies monthly according to interest rates, trading performance, contributions
and redemptions. Interest income was $663,866 for the period from May 1, 1996
(commencement of operations) through December 31, 1996.
Commissions are calculated on the Trust's net asset value at the beginning of
each month and, therefore, vary according to trading performance, contributions
and redemptions. Commissions for the period from May 1, 1996 through December
31, 1996 were $1,033,462.
All trading decisions for the Trust are made by Willowbridge Associates Inc.,
the Trading Manager. Management fees are calculated on the Trust's net asset
value at the end of each month and, therefore, are affected by trading
performance, contributions and redemptions. Management fees for the period from
May 1, 1996 through December 31, 1996 were $409,964.
Incentive fees are based on the New High Net Trading Profits generated by the
Trading Manager, as defined in the Advisory Agreement between the Trust, the
Managing Owner and the Trading Manager. Incentive fees earned during the period
from May 1, 1996 through December 31, 1996 were $414,894.
Inflation
Inflation has had no material impact on operations or on the financial
condition of the Trust from inception through December 31, 1996.
11
<PAGE>
- --------------------------------------------------------------------------------
I hereby affirm that, to the best of my knowledge and belief, the
information contained herein relating to Willowbridge Strategic Trust is
accurate and complete.
PRUDENTIAL SECURITIES
FUTURES MANAGEMENT INC.
(Managing Owner)
By: Barbara J. Brooks
Treasurer and Chief Financial Officer
- --------------------------------------------------------------------------------
12
<PAGE>
OTHER INFORMATION
The actual round-turn equivalent of brokerage commissions paid per contract
for the year ended December 31, 1996 was $49.
The Trust's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available to limited interest holders without charge upon
written request to:
Willowbridge Strategic Trust
P.O. Box 2016
Peck Slip Station
New York, New York 10272-2016
13
<PAGE>
Peck Slip Station BULK RATE
P.O. Box 2016 U.S. POSTAGE
New York, NY 10272 PAID
Automatic Mail
WILLO/17225
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Willowbridge Strategic Trust
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0001005006
<NAME> Willowbridge Strategic Trust
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Dec-31-1996
<PERIOD-TYPE> 12-Mos
<CASH> 27,465,535
<SECURITIES> 354,215
<RECEIVABLES> 4,224
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,823,974
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,823,974
<CURRENT-LIABILITIES> 843,806
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,980,168
<TOTAL-LIABILITY-AND-EQUITY> 27,823,974
<SALES> 0
<TOTAL-REVENUES> 4,148,504
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,858,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,290,184
<EPS-PRIMARY> 103.47
<EPS-DILUTED> 0
</TABLE>
