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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, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-25785
WORLD MONITOR TRUST--SERIES A
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(Exact name of registrant as specified in its charter)
Delaware 13-3985040
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One New York Plaza, 13th Floor, New York, New York 10292
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 778-7866
Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
Limited Interests
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(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 [ ]
DOCUMENTS INCORPORATED BY REFERENCE
Second Amended and Restated Declaration of Trust and Trust Agreement of the
Registrant dated as of March 17, 1998, included as part of the Registration
Statement on Form S-1 (File No. 333-43033) filed with the Securities and
Exchange Commission on March 23, 1998, 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
Registrant's Annual Report to Interest holders for the year ended December
31, 1999 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 11 and 12.
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WORLD MONITOR TRUST--SERIES A
(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
<CAPTION>
PART II
<S> <C> <C>
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 7A Quantitative and Qualitative Disclosures about Market Risk....................... 5
Item 8 Financial Statements and Supplementary Data...................................... 8
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 8
<CAPTION>
PART III
<S> <C> <C>
Item 10 Directors and Executive Officers of the Registrant............................... 8
Item 11 Executive Compensation........................................................... 10
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 10
Item 13 Certain Relationships and Related Transactions................................... 10
<CAPTION>
PART IV
<S> <C> <C>
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K................. 11
Financial Statements and Financial Statement Schedules........................... 11
Exhibits......................................................................... 11
Reports on Form 8-K.............................................................. 12
SIGNATURES.................................................................................. 13
</TABLE>
2
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PART I
Item 1. Business
General
World Monitor Trust (the 'Trust') is a business trust organized under the
laws of Delaware on December 17, 1997. The Trust commenced trading operations on
June 10, 1998 and will terminate on December 31, 2047 unless terminated sooner
as provided in the Second Amended and Restated Declaration of Trust and Trust
Agreement (the 'Trust Agreement'). The Trust consists of three separate and
distinct series ('Series'): Series A, B and C. The assets of each Series are
segregated from the other Series, separately valued and independently managed.
Each Series was formed to engage in the speculative trading of a diversified
portfolio of futures, forward and options contracts and may, from time to time,
engage in cash and spot transactions. The trustee of the Trust is Wilmington
Trust Company. The Trust's fiscal year for book and tax purposes ends on
December 31.
The Offering
Beneficial interests in each Series ('Interests') are being offered once each
week until each Series' subscription maximum has been issued either through sale
or exchange. On June 10, 1998, a sufficient number of subscriptions for each
Series had been received and accepted by the managing owner to permit each
Series to commence trading. Series A (the 'Registrant') completed its initial
offering with gross proceeds of $6,039,177 from the sale of 59,631.775 limited
interests and 760 of general interests.
Series A was offered until it achieved its subscription maximum of
$34,000,000 during November 1999. Interests in Series B and Series C will
continue to be offered on a weekly basis at the net asset value per Interest
until the subscription maximum of $33,000,000 for each Series is sold
('Continuous Offering Period').
The Registrant is engaged solely in the business of commodity futures,
forward and options trading; therefore, presentation of industry segment
information is not available.
Managing Owner and its Affiliates
The managing owner of the Registrant 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 selling agent for the Registrant as
well as the commodity broker of the Registrant. The Managing Owner is required
to maintain at least a 1% interest in the capital, profits and losses of each
Series so long as it is acting as the Managing Owner, and it will make such
contributions (and in return will receive such general interests) as are
necessary to effect this requirement.
The Trading Advisor
Each Series has its own professional commodity trading advisor that makes
that Series' trading decisions. The Managing Owner has allocated 100% of the
proceeds from the initial and continuous offering of the Registrant to its
trading advisor. The Managing Owner, on behalf of the Registrant, initially
entered into an advisory agreement (the 'Initial Advisory Agreement') with Eagle
Trading Systems, Inc. ('Trading Advisor') to make the trading decisions for the
Registrant utilizing both the Eagle-Global System and the Eagle-FX System.
Effective December 6, 1999, the Eagle-Global System became the exclusive
trading program used by the Trading Advisor to trade the Registrant's assets. In
conjunction with this change, the Managing Owner and the Trading Advisor
voluntarily agreed to terminate the Initial Advisory Agreement and enter into a
new advisory agreement (the 'New Advisory Agreement') effective March 21, 2000.
Pursuant to the New Advisory Agreement, the Trading Advisor will be paid a
weekly management fee at an annual rate of 1% of the Registrant's net asset
value until the net asset value per Interest is at least $80 for a period of at
least 10 consecutive business days, at which time the weekly management fee will
be increased to an annual rate of 2% (i.e. the rate pursuant to the Initial
Advisory Agreement). Additionally, although the term of the New
3
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Advisory Agreement commenced on March 21, 2000, the Trading Advisor must recoup
all trading losses incurred under the Initial Advisory Agreement before an
incentive fee is paid. The New Advisory Agreement may be terminated at the
discretion of the Managing Owner.
Competition
The Managing Owner and its affiliates have formed, and may continue to form,
various entities to engage in the speculative trading of futures, forward and
options contracts which have certain of the same investment policies as the
Registrant.
The Registrant was an open-end fund which solicited the sale of Interests on
a weekly basis until its subscription maximum was reached. As such, the
Registrant no longer competes with other entities to attract new participants.
However, to the extent that the Trading Advisor 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.
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 as further discussed in Notes A, C and D to the
Registrant's annual report to limited owners for the year ended December 31,
1999 ('Registrant's 1999 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
Information with respect to the offering of Interests is incorporated by
reference to Note A to the Registrant's 1999 Annual Report, which is filed as an
exhibit hereto.
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. However, Interests may be redeemed on a
weekly basis, but are subject to a redemption fee if effected within one year of
the effective date of purchase. Additionally, Interests owned in one Series may
be exchanged, without any charge, for Interests of one or more other Series on a
weekly basis for as long as Interests in those Series are being offered to the
public. Since Interests in Series A are no longer being offered, participants
can no longer exchange their Interests from Series B and/or Series C into Series
A; however, participants can currently continue to exchange their Interests from
Series A to Series B and/or Series C. Exchanges and redemptions are calculated
based on the applicable Series' then current net asset value per Interest as of
the close of business on the Friday immediately preceding the week in which the
exchange or redemption request is effected.
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.
As of March 21, 2000, there were 1,624 holders of record owning 301,788.137
Interests which includes 3,081 General Interests.
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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 1999
Annual Report which is filed as an exhibit hereto.
<TABLE>
<CAPTION>
Year ended Period from June 10, 1998
December 31, (commencement of operations)
1999 to December 31, 1998
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<S> <C> <C>
Total revenues (including interest) $(3,514,892 ) $ 343,726
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Net loss $(5,211,460 ) $ (171,858)
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Net loss per weighted average Interest $ (27.31 ) $ (1.96)
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Total assets $27,511,754 $ 11,266,863
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Net asset value per Interest $ 77.25 $ 98.31
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</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 12 through 14 of the
Registrant's 1999 Annual Report which is filed as an exhibit hereto.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Introduction
Past Results Not Necessarily Indicative of Future Performance
The Registrant is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and
substantially all of the Registrant's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Registrant's main line of business.
Market movements result in frequent changes in the fair market value of the
Registrant's open positions and, consequently, in its earnings and cash flow.
The Registrant's market risk is influenced by a wide variety of factors,
including the level and volatility of interest rates, exchange rates, equity
price levels, the market value of financial instruments and contracts, the
diversification effects among the Registrant's open positions and the liquidity
of the markets in which it trades.
The Registrant rapidly acquires and liquidates both long and short positions
in a wide range of different markets. Consequently, it is not possible to
predict how a particular futures market scenario will affect performance, and
the Registrant's past performance is not necessarily indicative of future
results.
Value at Risk is a measure of the maximum amount which the Registrant could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Registrant's speculative trading and the recurrence in the
markets traded by the Registrant of market movements far exceeding expectations
could result in actual trading or non-trading losses far beyond the indicated
Value at Risk or the Registrant's experience to date (i.e., 'risk of ruin'). In
light of the foregoing, as well as the risks and uncertainties intrinsic to all
future projections, the inclusion of the quantification included in this section
should not be considered to constitute any assurance or representation that the
Registrant's losses in any market sector will be limited to Value at Risk or by
the Registrant's attempts to manage its market risk.
Standard of Materiality
Materiality as used in this section, 'Quantitative and Qualitative
Disclosures About Market Risk,' is based on an assessment of reasonably possible
market movements and the potential losses caused by such movements, taking into
account the leverage, optionality and multiplier features of the Registrant's
market sensitive instruments.
5
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Quantifying the Registrant's Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Registrant's market risk
exposures contain 'forward-looking statements' within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
The Registrant's risk exposure in the various market sectors traded by the
Trading Advisor is quantified below in terms of Value at Risk. Due to the
Registrant's mark-to-market accounting, any loss in the fair value of the
Registrant's open positions is directly reflected in the Registrant's earnings
(realized or unrealized) and cash flow (whereby profits and losses on open
positions of exchange-traded contracts are settled daily through variation
margin).
Exchange maintenance margin requirements have been used by the Registrant as
the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
interval. The maintenance margin levels are established by dealers and exchanges
using historical price studies as well as an assessment of current market
volatility (including the implied volatility of the options on a given futures
contract) and economic fundamentals to provide a probabilistic estimate of the
maximum expected near-term one-day price fluctuation. Maintenance margin has
been used rather than the more generally available initial margin, because
initial margin includes a credit risk component which is not relevant to Value
at Risk.
In quantifying the Registrant's Value at Risk, 100% positive correlation in
the different positions held in each market risk category has been assumed.
Consequently, the margin requirements applicable to the open contracts have
simply been aggregated to determine each trading category's aggregate Value at
Risk. The diversification effects resulting from the fact that the Registrant's
positions are rarely, if ever, 100% positively correlated have not been
reflected.
The Registrant's Trading Value at Risk in Different Market Sectors
The following table indicates the trading Value at Risk associated with the
Registrant's open positions by market sector at December 31, 1999. All open
position trading risk exposures of the Registrant have been included in
calculating the figures set forth below. At December 31, 1999, the Registrant's
total capitalization was approximately $25.0 million.
<TABLE>
<CAPTION>
Value at % of Total
Market Sector Risk Capitalization
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<S> <C> <C>
Interest Rates $ 658,154 2.63%
Stock Indices 490,048 1.96
Commodities 238,700 .96
Currencies 8,943 .04
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Total $1,395,845 5.59%
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</TABLE>
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Registrant is
typically many times the applicable maintenance margin requirement (maintenance
margin requirements generally range between approximately 1% and 10% of the
contract face value), as well as, many times the total capitalization of the
Registrant. The magnitude of the Registrant's open positions creates a 'risk of
ruin' not typically found in most other investment vehicles. Because of the size
of its positions, certain market conditions, although unusual, but historically
recurring from time to time, could cause the Registrant to incur severe losses
over a short period of time. The foregoing Value at Risk table, as well as the
past performance of the Registrant, give no indication of this 'risk of ruin.'
6
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Non-Trading Risk
The Registrant is subject to non-trading market risk on foreign cash balances
not needed for margin. However, as of December 31, 1999, the Registrant had no
foreign cash balances.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Registrant's market risk
exposures--except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Registrant manages its primary market
risk exposures--constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Registrant's primary market risk exposures as well as
the strategies used and to be used by the Managing Owner and the Trading Advisor
for managing such exposures are subject to numerous uncertainties, contingencies
and risks, any one of which could cause the actual results of the Registrant's
risk controls to differ materially from the objectives of such strategies.
Government interventions, defaults and expropriations, illiquid markets, the
emergence of dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market participants, increased
regulation and many other factors could result in material losses as well as in
material changes to the risk exposures and the risk management strategies of the
Registrant. There can be no assurance that the Registrant's current market
exposure and/or risk management strategies will not change materially or that
any such strategies will be effective in either the short- or long-term.
Investors must be prepared to lose all or substantially all of their investment
in the Registrant.
The primary trading risk exposures of the Registrant at December 31, 1999, by
market sector, were:
Interest Rates. Interest rate movements directly affect the price of
sovereign bond positions held by the Registrant and indirectly affect the value
of its stock index positions. Interest rate movements in one country, as well
as, relative interest rate movements between countries may materially impact the
Registrant's profitability. The Registrant's primary interest rate exposure is
to interest rate fluctuations in the U.S. and other G-7 countries. The Managing
Owner anticipates that G-7 interest rates will remain the primary market
exposure of the Registrant in the foreseeable future. The changes in interest
rates which have the most effect on the Registrant are changes in long-term, as
opposed to short-term, rates. Most of the speculative positions held by the
Registrant are in medium- to long-term instruments. Consequently, even a
material change in short-term rates would have little effect on the Registrant
were the medium- to long-term rates to remain steady.
Stock Indices. The Registrant's equity exposure is due to equity price risk
in various indices including the S&P 500 (U.S.), FTSE 100 (Britain), and the DAX
(Germany). The stock index futures traded by the Registrant are, by law, limited
to futures on broadly based indices.
Commodities. The Trading Advisor of the Registrant trades a variety of
precious and base metals and grain contracts. At year-end, the Registrant's
commodities exposure is in copper, silver and aluminum within the base metals
market and in corn and wheat in the grain sector.
Currencies. The currency sector Value at Risk exclusively represents foreign
margin amounts converted into U.S. dollars with an incremental adjustment to
reflect the exchange rate risk inherent to the dollar-based Registrant in
expressing Value at Risk in a functional currency other than U.S. dollars.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Managing Owner and the Trading Advisor, severally,
attempt to manage the risk of the Registrant's open positions is essentially the
same in all market categories traded.
The Trading Advisor attempts to minimize market risk exposure by applying its
own risk management trading policies. In general, the Trading Advisor's
portfolio is diversified, consisting of a wide variety of contracts traded in
both domestic and foreign markets. Additionally, stop or limit orders may, at
the Trading Advisor's discretion, be given with respect to initiating or
liquidating positions in order to seek to limit losses or secure profits.
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The Managing Owner attempts to minimize market risks by requiring the
Registrant 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, 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 the Registrant, the Managing Owner and Trading
Advisor, the Registrant shall automatically terminate the Trading Advisor if the
net asset value allocated to the Trading Advisor declines by 33 1/3% from the
value at the beginning of any year or since the commencement of trading
activities. Furthermore, the Trust Agreement provides that the Registrant will
liquidate its positions, and eventually dissolve, if the Registrant 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 the net asset value is after giving effect for distributions, contributions
and redemptions. The Managing Owner may impose additional restrictions (through
modifications of such 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 the Registrant.
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 10
of the Registrant's 1999 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
None
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.
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 (other than Alan J. Brody who did not file Form 4 in
a timely manner upon becoming a beneficial owner but subsequently filed and is
now current in all filings). In making these disclosures, the Registrant has
relied solely on written representations of the Managing Owner's directors and
executive officers and Ten Percent Owners 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
Joseph A. Filicetti President and Director
Eleanor L. Thomas Executive Vice President and Director
Barbara J. Brooks Chief Financial Officer
Steven Carlino Vice President and Treasurer
Alan J. Brody Director
A. Laurence Norton, Jr. Director
Guy S. Scarpaci Director
Tamara B. Wright Senior Vice President and Director
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JOSEPH A. FILICETTI, age 37, is the President and a Director of Prudential
Securities Futures Management Inc. He had been a Vice President of Prudential
Securities Futures Management Inc. and Seaport Futures Management, Inc. from
October 1998 to March 1999. In April 1999, Mr. Filicetti was named to his
current positions at Prudential Securities Futures Management Inc. and became an
Executive Vice President and a Director of Seaport Futures Management, Inc. Mr.
Filicetti is also a Vice President of PSI and the Director of Sales and
Marketing for its managed futures department. Prior to joining PSI, Mr.
Filicetti was with Rotella Capital Management as Director of Sales and Marketing
from September 1996 through September 1998, and was with Merrill Lynch as a
market maker trading bonds from July 1992 to August 1996.
ELEANOR L. THOMAS, age 45, is the Executive Vice President and a Director of
Prudential Securities Futures Management Inc. and is the President and a
Director of Seaport Futures Management, Inc. She is primarily responsible for
origination, asset allocation, and due diligence for the managed futures
department within PSI. She is also a First Vice President of PSI. Prior to
joining PSI in March 1993, she was with MC Baldwin Financial Company from June
1990 through February 1993 and Arthur Andersen & Co. from 1986 through May 1990.
Ms. Thomas is a certified public accountant.
BARBARA J. BROOKS, age 51, is the Chief Financial Officer of Prudential
Securities Futures Management Inc. She is a Senior Vice President of PSI. She is
also the 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 36, is a Vice President and Treasurer of Prudential
Securities Futures Management Inc. He is a First Vice President of PSI. He is
also a Vice President and Treasurer 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.
ALAN J. BRODY, age 48 is a Director of Prudential Securities Futures
Management Inc. and Seaport Futures Management, Inc. Mr. Brody has been a Senior
Vice President and Director of International Sales and Marketing for PSI since
1996. Based in London, Mr. Brody is currently responsible for the marketing and
sales of all PSI products and services to international clientele throughout the
firm's global branch system. Additionally, Mr. Brody has overall responsibility
for the managed futures department within PSI. Prior to joining PSI, Mr. Brody
was an Executive Director and Senior Vice President with Lehman Brothers'
Financial Services Division in London and President of Lehman Brothers' Futures
Asset Management Corp. from 1990 to 1996. Prior to joining Lehman Brothers, Mr.
Brody served as President and Chief Executive Officer of Commodity Exchange Inc.
from 1980 to 1989. Earlier in his career, Mr Brody was associated with the law
firm of Baer, Marks and Upham from 1977 to 1980.
A. LAURENCE NORTON, JR., age 61, is a Director of Prudential Securities
Futures Management Inc. He is an Executive Vice President of PSI and, since
March 1994, has been the director of the International and Futures Divisions of
PSI. He is also a Director of Seaport Futures Management, Inc. and is a member
of PSI's Operating Committee. From October 1991 to March 1994, 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 53, 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.
TAMARA B. WRIGHT, age 41, is a Director and Senior Vice President of
Prudential Securities Futures Management Inc. She is a Senior Vice President and
Chief Administrative Officer for the International and Futures Divisions of PSI.
She is also a Director and Senior Vice President of Seaport Futures Management,
Inc. and serves in various capacities for other affiliated companies. Prior to
joining PSI in July 1988, she was a manager with Price Waterhouse.
Effective April 1999, Eleanor L. Thomas and Joseph A. Filicetti were elected
as Directors of both Prudential Securities Futures Management Inc. and Seaport
Futures Management, Inc. In addition, Mr. Filicetti was elected as President of
Prudential Securities Futures Management Inc. replacing Thomas M. Lane, Jr. and
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Ms. Thomas was elected as the Executive Vice President of Prudential Securities
Futures Management Inc. Additionally, Alan J. Brody was elected as a Director of
Prudential Securities Futures Management Inc. and Seaport Futures Management,
Inc. during May 1999.
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.)
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 21, 2000, 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 21, 2000, the following director is the only director or
executive officer of the Managing Owner who owns directly or beneficially any of
the Interests issued by the Registrant.
<TABLE>
<CAPTION>
Title Name of Amount and Nature of Percent of
of Class Beneficial Owner Beneficial Ownership Class
- ------------------ --------------------------------- ----------------------------- ----------
<S> <C> <C> <C>
Limited interests Alan J. Brody 249.687 limited interests .08%
</TABLE>
As of March 21, 2000, the following owner of limited interests beneficially
owns more than five percent (5%) of the limited interests issued by the
Registrant:
<TABLE>
<CAPTION>
Title Name and Address of Amount and Nature of Percent of
of Class Beneficial Owner Beneficial Ownership Class
- ------------------ --------------------------------- ----------------------------- ----------
<S> <C> <C> <C>
Limited interests Massachusetts Bay Transportation 17,666.712 limited interests 6%
Authority Retirement Fund
99 Summer Street, 17th Floor
Boston, MA 02110-1200
</TABLE>
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, except for the purchase of limited
interests by one of the directors which did not exceed $60,000, 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 1999 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.
10
<PAGE>
PART IV
<TABLE>
<CAPTION>
Page
Number
------------
<C> <S> <C>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements and Report of Independent Accountants--incorporated
by reference to the Registrant's 1999 Annual Report which is filed as an
exhibit hereto
Report of Independent Accountants 2
Financial Statements:
Statements of Financial Condition--December 31, 1999 and 1998 3
Statement of Operations--Year ended December 31, 1999 and for the period
from June 10, 1998 (commencement of operations) to December 31, 1998 4
Statement of Changes in Trust Capital--Two years ended December 31, 1999 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 World Monitor Trust dated as of March 17, 1998 (incorporated by
4.1 reference to Exhibits 3.1 and 4.1 to the Registrant's Registration
Statement on Form S-1, File No. 333-43033 dated as of March 23, 1998)
4.2 Form of Request for Redemption (incorporated by reference to Exhibit 4.2
to the Registrant's Registration Statement on Form S-1, File No.
333-43033 dated as of March 23, 1998)
4.3 Form of Exchange Request (incorporated by reference to Exhibit 4.3 to
the Registrant's Registration Statement on Form S-1, File No. 333-43033
dated as of March 23, 1998)
4.4 Form of Subscription Agreement (incorporated by reference to Exhibit 4.4
to the Registrant's Registration Statement on Form S-1, File No.
333-43033 dated as of March 23, 1998)
10.1 Form of Escrow Agreement among the Trust, Prudential Securities Futures
Management Inc., Prudential Securities Incorporated and The Bank of New
York (incorporated by reference to Exhibit 10.1 to the Registrant's
Registration Statement on Form S-1, File No. 333-43033 dated as of March
23, 1998)
10.2 Form of Brokerage Agreement among the Trust and Prudential Securities
Incorporated (incorporated by reference to Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1, File No. 333-43033
dated as of March 23, 1998)
</TABLE>
11
<PAGE>
<TABLE>
<C> <S> <C>
10.3 Form of Advisory Agreement among the Registrant, Prudential Securities
Futures Management Inc., and the Trading Advisor (incorporated by
reference to Exhibit 10.3 to the Registrant's Registration Statement on
Form S-1, File No. 333-43033 dated as of March 23, 1998)
10.4 Form of Representation Agreement Concerning the Registration Statement
and the Prospectus among the Trust, Prudential Securities Futures
Management Inc., Prudential Securities Incorporated, Wilmington Trust
Company and the Trading Advisor (incorporated by reference to Exhibit
10.4 to the Registrant's Registration Statement on Form S-1, File No.
333-43033 dated as of March 23, 1998)
10.5 Form of Net Worth Agreement between Prudential Securities Futures
Management Inc. and Prudential Securities Incorporated (incorporated by
reference to Exhibit 10.5 to the Registrant's Registration Statement on
Form S-1, File No. 333-43033 dated as of March 23, 1998)
10.6 Form of Foreign Currency Addendum to Brokerage Agreement between the
Trust and Prudential Securities Incorporated (incorporated by reference
to Exhibit 10.6 to the Registrant's Quarterly Report on Form 10-Q, File
No. 333-43033, for the quarter ended March 31, 1998)
10.7 Form of Advisory Agreement among the Registrant, Prudential Securities
Futures Management Inc., and the Trading Advisor dated March 21, 2000
(filed herewith)
13.1 Registrant's 1999 Annual Report (with the exception of the information
and data incorporated by reference in Items 5, 7 and 8 of this Annual
Report on Form 10-K, no other information or data appearing in the
Registrant's 1999 Annual Report is to be deemed filed as part of this
report) (filed herewith)
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>
12
<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.
World Monitor Trust--Series A
By: Prudential Securities Futures Management Inc.
A Delaware corporation, Managing Owner
By: /s/ Steven Carlino Date: March 30, 2000
----------------------------------------
Steven Carlino
Vice President and Treasurer
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/ Joseph A. Filicetti Date: March 30, 2000
-----------------------------------------
Joseph A. Filicetti
President and Director
By: /s/ Eleanor L. Thomas Date: March 30, 2000
-----------------------------------------
Eleanor L. Thomas
Executive Vice President and Director
By: /s/ Barbara J. Brooks Date: March 30, 2000
-----------------------------------------
Barbara J. Brooks
Chief Financial Officer
By: /s/ Steven Carlino Date: March 30, 2000
-----------------------------------------
Steven Carlino
Vice President and Treasurer
By: /s/ Alan J. Brody Date: March 30, 2000
-----------------------------------------
Alan J. Brody
Director
By: Date:
-----------------------------------------
A. Laurence Norton, Jr.
Director
By: /s/ Guy S. Scarpaci Date: March 30, 2000
-----------------------------------------
Guy S. Scarpaci
Director
By: Date:
-----------------------------------------
Tamara B. Wright
Senior Vice President and Director
13
<PAGE>
1999
- --------------------------------------------------------------------------------
World Monitor Trust--Series A Annual
Report
<PAGE>
LETTER TO LIMITED OWNERS FOR
WORLD MONITOR TRUST--SERIES A
1
<PAGE>
PricewaterhouseCoopers (LOGO)
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Telephone (212) 596 8000
Facsimile (212) 596 8910
Report of Independent Accountants
To the Managing Owner and
Limited Owners of
World Monitor Trust--Series A
In our opinion, the accompanying statements of financial condition and the
related statements of operations and changes in trust capital present fairly, in
all material aspects, the financial position of World Monitor Trust--Series A at
December 31, 1999 and 1998, and the results of its operations for the year ended
December 31, 1999 and the period from June 10, 1998 (commencement of operations)
to December 31, 1998 in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Managing Owner; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States 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 audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
January 28, 2000
2
<PAGE>
WORLD MONITOR TRUST--SERIES A
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
-----------------------------
1999 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
ASSETS
Cash $26,587,416 $11,008,050
Net unrealized gain on open futures contracts 924,338 258,813
------------- -----------
Total assets $27,511,754 $11,266,863
------------- -----------
------------- -----------
LIABILITIES AND TRUST CAPITAL
Liabilities
Net unrealized loss on open forward contracts $ 2,211,068 $ 362,056
Commissions payable 185,065 74,604
Management fees payable 48,596 19,457
Redemptions payable 83,436 --
------------- -----------
Total liabilities 2,528,165 456,117
------------- -----------
Commitments
Trust capital
Limited interests (320,147.380 and 108,568.155 interests
outstanding) 24,729,908 10,673,116
General interests (3,284.000 and 1,400.000 interests outstanding) 253,681 137,630
------------- -----------
Total trust capital 24,983,589 10,810,746
------------- -----------
Total liabilities and trust capital $27,511,754 $11,266,863
------------- -----------
------------- -----------
Net asset value per limited and general interest ('Interests') $ 77.25 $ 98.31
------------- -----------
------------- -----------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
WORLD MONITOR TRUST--SERIES A
(a Delaware Business Trust)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the period
from
June 10, 1998
(commencement of
Year ended operations) to
December 31, December 31,
1999 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
REVENUES
Net realized gain (loss) on commodity transactions $(3,253,798 ) $ 174,935
Net unrealized loss on open commodity positions (1,183,487 ) (103,243)
Interest income 922,393 272,034
------------ -----------------
(3,514,892 ) 343,726
------------ -----------------
EXPENSES
Commissions 1,348,655 381,231
Management fees 347,528 98,289
Incentive fees 385 36,064
------------ -----------------
1,696,568 515,584
------------ -----------------
Net loss $(5,211,460 ) $(171,858)
------------ -----------------
------------ -----------------
ALLOCATION OF NET LOSS
Limited interests $(5,154,378 ) $(170,904)
------------ -----------------
------------ -----------------
General interests $ (57,082 ) $ (954)
------------ -----------------
------------ -----------------
NET LOSS PER WEIGHTED AVERAGE LIMITED AND GENERAL INTEREST
Net loss per weighted average limited and general interest $ (27.31 ) $ (1.96)
------------ -----------------
------------ -----------------
Weighted average number of limited and general interests
outstanding 190,828 87,552
------------ -----------------
------------ -----------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN TRUST CAPITAL
<TABLE>
<CAPTION>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Trust capital--December 31, 1997 10.000 $ -- $ 1,000 $ 1,000
Contributions 111,257.885 10,972,172 137,584 11,109,756
Net loss -- (170,904) (954 ) (171,858)
Redemptions (1,299.730) (128,152) -- (128,152)
----------- ----------- --------- -----------
Trust capital--December 31, 1998 109,968.155 10,673,116 137,630 10,810,746
Contributions 255,845.193 23,000,355 190,540 23,190,895
Net loss -- (5,154,378) (57,082 ) (5,211,460)
Redemptions (42,381.968) (3,789,185) (17,407 ) (3,806,592)
----------- ----------- --------- -----------
Trust capital--December 31, 1999+ 323,431.380 $24,729,908 $253,681 $24,983,589
----------- ----------- --------- -----------
----------- ----------- --------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
WORLD MONITOR TRUST--SERIES A
(a Delaware Business Trust)
NOTES TO FINANCIAL STATEMENTS
A. General
The Trust, Trustee, Managing Owner and Affiliates
World Monitor Trust (the 'Trust') is a business trust organized under the
laws of Delaware on December 17, 1997. The Trust commenced trading operations on
June 10, 1998 and will terminate on December 31, 2047 unless terminated sooner
as provided in the Second Amended and Restated Declaration of Trust and Trust
Agreement. The Trust consists of three separate and distinct series ('Series'):
Series A, B and C. The assets of each Series are segregated from the other
Series, separately valued and independently managed. Each Series was formed to
engage in the speculative trading of a diversified portfolio of futures, forward
and options contracts and may, from time to time, engage in cash and spot
transactions. 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 selling agent for the Trust as well as the commodity broker ('Commodity
Broker') of the Trust.
The Offering
Beneficial interests in each Series ('Interests') are being offered once each
week until each Series' subscription maximum has been issued either through sale
or exchange. On June 10, 1998, a sufficient number of subscriptions for each
Series had been received and accepted by the Managing Owner to permit each
Series to commence trading. Series A completed its initial offering with gross
proceeds of $6,039,177 from the sale of 59,631.775 limited interests and 760 of
general interests.
Series A was offered until it achieved its subscription maximum of
$34,000,000 during November 1999. Series B and Series C will continue to be
offered to investors who meet certain established suitability standards, with a
minimum initial subscription of $5,000 ($2,000 for an individual retirement
account) per subscriber, although the minimum purchase for any single Series is
$1,000. Interests in Series B and Series C will continue to be offered on a
weekly basis at the net asset value per Interest ('Continuous Offering Period')
until the subscription maximum of $33,000,000 for each Series is sold.
Additional purchases may be made in $100 increments.
The Managing Owner is required to maintain at least a 1% interest in the
capital, profits and losses of each Series so long as it is acting as the
Managing Owner, and it will make such contributions (and in return will receive
such general interests) as are necessary to effect this requirement.
The Trading Advisor
Each Series has its own independent commodity trading advisor that makes that
Series' trading decisions. The Managing Owner has allocated 100% of the proceeds
from the initial and continuous offering of Series A to its trading advisor. The
Managing Owner, on behalf of the Trust, initially entered into an advisory
agreement (the 'Initial Advisory Agreement') with Eagle Trading Systems, Inc.
('Trading Advisor') to make the trading decisions for Series A utilizing both
the Eagle-Global System and the Eagle-FX System.
Effective December 6, 1999, the Eagle-Global System became the exclusive
trading program used by the Trading Advisor to trade Series A's assets. In
conjunction with this change, the Managing Owner and the Trading Advisor
voluntarily agreed to terminate the Initial Advisory Agreement and enter into a
new advisory agreement (the 'New Advisory Agreement') effective March 21, 2000
as more fully discussed in Note G.
Exchanges, Redemptions and Termination
Interests owned in one Series may be exchanged, without any charge, for
Interests of one or more other Series on a weekly basis for as long as Interests
in those Series are being offered to the public. Since Interests in Series A are
no longer being offered, participants can no longer exchange their Interests
from Series B and/or Series C into Series A; however, participants can currently
continue to exchange their Interests from Series A to Series B and/or Series C.
Exchanges are made at the applicable Series' then current net asset value per
Interest as of the close of business on the Friday immediately preceding the
5
<PAGE>
week in which the exchange request is effected. The exchange of Interests is
treated as a redemption of Interests in one Series (with the related tax
consequences) and the simultaneous purchase of Interests in the Series exchanged
into.
Redemptions are permitted on a weekly basis. Interests redeemed on or before
the end of the first and second successive six-month periods after their
effective dates of purchase are subject to a redemption fee of 4% and 3%,
respectively, of the net asset value at which they are redeemed. Redemption fees
are paid to the Managing Owner.
In the event that the estimated net asset value per Interest of a Series at
the end of any business day, after adjustments for distributions, declines by
50% or more since the commencement of trading activities or the first day of a
fiscal year, the Series will terminate.
B. Summary of Significant Accounting Policies
Basis of accounting
The financial statements of Series A are prepared 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. 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.
Series A 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.'
Certain balances from the prior period have been reclassified to conform with
the current financial statement presentation.
Income taxes
Series A is treated as a partnership for Federal income tax purposes. As
such, Series A 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 including the Managing Owner. Series
A may be subject to other state and local taxes in jurisdictions in which it
operates.
Profit and loss allocations and distributions
Series A allocates profits and losses for both financial and tax reporting
purposes to its Interest holders weekly on a pro rata basis based on each
owner's Interests outstanding during the week. Distributions (other than
redemptions of Interests) may be made at the sole discretion of the Managing
Owner on a pro rata basis in accordance with the respective capital balances of
the Interest holders; however, the Managing Owner does not presently intend to
make any distributions.
6
<PAGE>
Accounting for Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ('SFAS') No. 133, Accounting for Derivative
Instruments and Hedging Activities, which Series A adopted effective October 1,
1999. SFAS 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities and requires that an entity recognize all
derivatives as assets or liabilities measured at fair value. SFAS No. 133
supersedes SFAS No. 119, Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments and SFAS No. 105, Disclosure of Information
about Financial Instruments with Off-Balance Sheet Risk and Financial
Instruments with Concentrations of Credit Risk which required the disclosure of
average aggregate fair values and contract/notional values, respectively, of
derivative financial instruments for an entity like Series A which carries its
assets at fair value. The adoption of SFAS No. 133 has not had a material effect
on the carrying value of assets and liabilities within the financial statements.
C. Fees
Organizational, offering, general and administrative costs
PSI or its affiliates paid the costs of organizing Series A and offering its
Interests and pays the administrative costs incurred by the Managing Owner or
its affiliates for services it performs for Series A. These costs include, but
are not limited to, those discussed in Note D below. Routine legal, audit,
postage and other routine third party administrative costs also are paid by PSI
or its affiliates.
Management and incentive fees
Through March 2000, Series A paid its Trading Advisor a
management fee at an annual rate of 2% of Series A's net asset value
allocated to its management at which time the rate was changed as
described in Note G. The management fee is determined weekly
and the sum of such weekly amounts is paid monthly. Series A
also pays its Trading Advisor a quarterly incentive fee equal to 23% of such
Trading Advisor's 'New High Net Trading Profits' (as defined in the advisory
agreement). The incentive fee also accrues weekly.
Commissions
The Managing Owner and the Trust entered into a brokerage agreement with PSI
to act as Commodity Broker for each Series whereby Series A pays a fixed fee for
brokerage services rendered at an annual rate of 7.75% of Series A's net asset
value. The fee is determined weekly and the sum of such weekly amounts is paid
monthly. From this fee, PSI pays execution costs (including floor brokerage
expenses, give-up charges and NFA, clearing and exchange fees), as well as
compensation to employees who sell Interests.
D. Related Parties
The Managing Owner or its affiliates perform services for Series A which
include but are not limited to: brokerage services, accounting and financial
management, registrar, transfer and assignment functions, investor
communications, printing and other administrative services. As further described
in Note C, except for costs related to brokerage services, PSI or its affiliates
pay the costs of these services in addition to Series A's routine operational,
administrative, legal and auditing costs.
The costs charged to Series A for brokerage services for the year ended
December 31, 1999 and the period from June 10, 1998 (commencement of operations)
to December 31, 1998 were $1,348,655 and $381,231, respectively.
All of the proceeds of the offering of Series A were received in the name of
Series A and were deposited at PSI. Series A's assets are maintained either in
trading or cash accounts with PSI or, for margin purposes, with the various
exchanges on which Series A is permitted to trade. PSI credits Series A monthly
with 100% of the interest earned on the average net assets in Series A's
accounts.
Series A, acting through its Trading Advisor, may execute over-the-counter,
spot, forward and/or option foreign exchange transactions with PSI. PSI then
engages in back-to-back trading with an affiliate, Prudential-Bache Global
Markets Inc. ('PBGM'). PBGM attempts to earn a profit on such transactions. PBGM
keeps its prices on foreign currency competitive with other interbank currency
trading desks. All over-the-counter currency transactions are conducted between
PSI and each Series pursuant to a line of credit. PSI may require that
collateral be posted against the marked-to-market position of Series A.
7
<PAGE>
As of December 31, 1999, a non-U.S. affiliate of the Managing Owner owns
101.112 limited interests of Series A. Additionally, a director of the Managing
Owner owns 249.687 limited interests of Series A.
E. Income Taxes
There have been no differences between the tax basis and book basis of
Interest holders' capital since inception of the Trust.
F. Credit and Market Risk
Since Series A's business is to trade futures, forward (including foreign
exchange transactions) 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 or 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 unrealized gain (loss)
on open futures and forward positions reflected in the statements of financial
condition. Series A's exposure to market risk is influenced by a number of
factors including the relationships among the contracts held by Series A 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, Series A must rely solely on the credit of its broker (PSI) with
respect to forward transactions. Series A presents unrealized gains and losses
on open forward positions, if any, as a net amount in the statements of
financial condition because it has a master netting agreement with PSI.
The Managing Owner attempts to minimize both credit and market risks by
requiring Series A and its Trading Advisor to abide by various trading
limitations and policies. The Managing Owner monitors compliance with these
trading limitations and policies which include, but are not limited to,
executing and clearing all trades with creditworthy counterparties (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. Additionally, pursuant
to the Advisory Agreement among Series A, the Managing Owner and the Trading
Advisor, Series A shall automatically terminate the Trading Advisor if the net
asset value allocated to the Trading Advisor declines by 33 1/3% from the value
at the beginning of any year or since the commencement of trading activities.
Furthermore, the Second Amended and Restated Declaration of Trust and Trust
Agreement provides that Series A will liquidate its positions, and eventually
dissolve, if Series A experiences a decline in 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 such trading limitations and
policies) upon the trading activities of the Trading Advisor as it, in good
faith, deems to be in the best interests of Series A.
PSI, when acting as the 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 Series A all assets of Series A relating to
domestic futures and options trading and is not to commingle such assets with
other assets of PSI. At December 31, 1999, such segregated assets totalled
$24,234,466. Part 30.7 of the CFTC regulations also requires PSI to secure
assets of Series A related to foreign futures and options trading which totalled
$3,277,288 at December 31, 1999. There are no segregation requirements for
assets related to forward trading.
As of December 31, 1999, all open futures and forward contracts mature within
six months.
Gross contract amounts represent Series A's potential involvement in a
particular class of financial instrument (if it were to take or make delivery on
an underlying futures or forward contract). Gross contract amounts significantly
exceed future cash requirements as Series A intends to close out open positions
prior
8
<PAGE>
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, Series A considers the
'fair value' of its futures and forward contracts to be the net unrealized gain
or loss on the contracts. 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 Series A'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 its potential involvement is to make delivery of an underlying
commodity at the contract price; therefore, it must repurchase the contract at
prevailing market prices.
As of December 31, 1998, gross contract amounts of open futures and forward
contracts for Series A were:
Interest Rate Futures:
Commitments to purchase $18,683,310
Commitments to sell 16,579,358
Currency Forwards:
Commitments to purchase 362,056
Commodity Futures:
Commitments to sell 3,076,903
The following table presents the fair value of futures and forward contracts at
December 31, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
1999 1998
-------------------------- ------------------------
<S> <C> <C> <C> <C>
Assets Liabilities Assets Liabilities
---------- ----------- -------- -----------
Futures Contracts:
Domestic exchanges
Interest rates $ 255,937 $ -- $ -- $ --
Stock indices 160,500 -- -- --
Commodities 1,963 49,265 31,724 11,760
Foreign exchanges
Interest rates 25,510 32,558 204,523 --
Stock indices 425,095 -- -- --
Commodities 137,156 -- 34,326 --
Forward Contracts:
Currencies 88,948 2,300,016 -- 362,056
---------- ----------- -------- -----------
$1,095,109 $ 2,381,839 $270,573 $ 373,816
---------- ----------- -------- -----------
---------- ----------- -------- -----------
</TABLE>
The following table presents the average fair value and trading revenues of
futures and forward contracts for the period from June 10, 1998 (commencement of
operations) through December 31, 1998.
<TABLE>
<CAPTION>
Average
Fair Value
---------------------------------- Trading
Assets Liabilities Revenues
------------------ ----------- ---------
<S> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Stock indices $ -- $ -- $(44,325)
Currencies 16,840 2,196 (335,203)
Commodities 60,041 11,195 131,508
Foreign exchanges
Interest rates 149,855 605 741,756
Stock indices 16,850 2,215 32,523
Commodities 5,085 83,278 (161,602)
Forward Contracts:
Currencies 245,765 356,962 (292,965)
------------------ ----------- ---------
$494,436 $ 456,451 $ 71,692
------------------ ----------- ---------
------------------ ----------- ---------
</TABLE>
9
<PAGE>
G. Subsequent Event
In conjunction with the change in the trading programs utilized by the
Trading Advisor as discussed in Note A, the Managing Owner and the Trading
Advisor voluntarily agreed to terminate the Initial Advisory Agreement and enter
into a New Advisory Agreement effective March 21, 2000. Pursuant to the New
Advisory Agreement, the Trading Advisor will be paid a weekly management fee at
an annual rate of 1% of Series A's net asset value until the net asset value per
Interest is at least $80 for a period of 10 consecutive business days, at which
time the weekly management fee will be increased to an annual rate of 2% (i.e.
the rate pursuant to the Initial Advisory Agreement). Additionally, although the
term of the New Advisory Agreement commenced on March 21, 2000, the Trading
Advisor must recoup all trading losses incurred under the Initial Advisory
Agreement before an incentive fee is paid. The New Advisory Agreement may be
terminated at the discretion of the Managing Owner.
10
<PAGE>
- --------------------------------------------------------------------------------
I hereby affirm that, to the best of my knowledge and belief, the
information contained herein relating to World Monitor Trust--Series A is
accurate and complete.
PRUDENTIAL SECURITIES
FUTURES MANAGEMENT INC.
(Managing Owner)
By: Barbara J. Brooks
Chief Financial Officer
- --------------------------------------------------------------------------------
11
<PAGE>
WORLD MONITOR TRUST--SERIES A
(a Delaware Business Trust)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Series A commenced operations on June 10, 1998 with gross proceeds of
$6,039,177 allocated to commodities trading. Interests in Series A continued to
be offered weekly until Series A achieved its subscription maximum of
$34,000,000 during November 1999. Interests in Series A 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 the year
ended December 31, 1999 and for the period from June 10, 1998 (commencement of
operations) through December 31, 1999 were $3,789,185 and $3,917,337,
respectively. Additionally, Interests owned in one Series may be exchanged,
without any charge, for Interests of one or more other Series on a weekly basis
for as long as Interests in those Series are being offered to the public. Since
Interests in Series A are no longer being offered, participants can no longer
exchange their Interests from Series B and/or Series C into Series A; however,
participants can currently continue to exchange their Interests from Series A to
Series B and/or Series C. Future redemptions and exchanges will impact the
amount of funds available for investment in commodity contracts in subsequent
periods.
At December 31, 1999, 100% of Series A's net assets were allocated to
commodities trading. A significant portion of the net assets was held in cash
which is used as margin for Series A's trading in commodities. Inasmuch as the
sole business of Series A is to trade in commodities, Series A continues to own
such liquid assets to be used as margin. PSI credits Series A monthly with 100%
of the interest it earns on the average net assets in Series A's accounts.
The commodities contracts are subject to periods of illiquidity because of
market conditions, regulatory considerations and other reasons. For example,
commodity exchanges limit fluctuations in certain commodity futures contract
prices during a single day by regulations referred to as 'daily limits.' During
a single day, no trades may be executed at prices beyond the daily limit. Once
the price of a futures contract for a particular commodity has increased or
decreased by an amount equal to the daily limit, positions in the commodity can
neither be taken nor liquidated unless traders are willing to effect trades at
or within the limit. Commodity futures prices have occasionally moved the daily
limit for several consecutive days with little or no trading. Such market
conditions could prevent Series A from promptly liquidating its commodity
futures positions.
Since Series A's business is to trade futures, 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
contract (credit risk). Series A's exposure to market risk is influenced by a
number of factors including the volatility of interest rates and foreign
currency exchange rates, the liquidity of the markets in which the contracts are
traded and the relationship among the contracts held. The inherent uncertainty
of Series A's speculative trading as well as the development of drastic market
occurrences could result in monthly losses considerably beyond Series A's
experience to date and could ultimately lead to a loss of all or substantially
all of investors' capital. The Managing Owner attempts to minimize these risks
by requiring Series A and its Trading Advisor to abide by various trading
limitations and policies which include limiting margin amounts trading only in
liquid markets and utilizing stop loss provisions. See Note F to the financial
statements for a further discussion on the credit and market risks associated
with Series A's futures, forward and options contracts.
Series A does not have, nor does it expect to have, any capital assets.
Results of Operations
Series A commenced trading operations on June 10, 1998, and as such,
comparative analysis of the 1999 full year results versus the 1998 partial year
results is not meaningful. Additionally, Series A's asset levels have
continually increased since the commencement of operations in June 1998,
primarily from additional contributions. These rising asset levels have led to
proportionate increases in the amount of interest earned by Series A as well as
the commissions and management fees incurred.
12
<PAGE>
As of December 31, 1999, Series A reported a net asset value per Interest of
$77.25, a decrease of 21.42% from the December 31, 1998 net asset value per
Interest of $98.31, which was a decrease of 1.69% from the June 10, 1998 initial
net asset value per Interest of $100.00. These returns compare negatively to the
MAR (Managed Accounts Reports) Fund/Pool Index which returned a gain of 1.48% in
1999 and a gain of 4.74% for the June 1998 through December 1998 period. MAR
tracked the performance of 317 and 281 futures funds in 1999 and 1998,
respectively.
Series A's negative performance in 1999 was attributable to losses in the
currency, metal, and financial sectors. Gains were achieved in the energy,
grain, and index sectors.
By far the largest losses were experienced in the currency sector. Series A
suffered from the volatility and range bound nature of many currencies in which
it invests. Currency sector positions added profits in the first quarter, but
failed to add gains in subsequent quarters. In the second quarter, Series A
experienced losses in the Singapore dollar, Japanese yen, and Australian dollar.
Increased volatility drove losses in the Singapore dollar. In Japan, as the
economy strengthened, officials feared a premature strengthening of the yen
might inhibit growth, thus, causing the Bank of Japan to intervene by selling
yen, causing long yen positions to incur losses. Influenced by Asia's economic
recovery, the Australian dollar began to rise; however, as gold prices fell to a
record low, commodity based currencies like the Australian dollar tumbled,
leading to losses in long positions. The Australian dollar reversed in the third
quarter as it rose, along with the Canadian dollar, when the price of gold
surged in September. Short Canadian and Australian dollar positions recorded
losses. During the third quarter, long Swiss franc, euro and British pound
positions lost money. In Europe, despite sluggish German exports and a rapidly
expanding money supply, a strong economy made possible a rate hike by the
European Central Bank. Additionally, the Bank of England shocked markets with a
25 basis point interest rate hike. The Swiss franc bottomed out early in the
quarter after trading passed an 8-year low against the U.S. dollar. The Swiss
franc fell again in the fourth quarter when the Swiss National Bank added
liquidity to their domestic money market in an attempt to keep interest rates
from rising due to millennium-related liquidity concerns. The euro also fell
amid fears that the European economic recovery was stagnating. Also pressuring
the euro was the continuing strength of the U.S. economy and concerns over the
slow pace of German economic reforms. Finally, strong economic data from Canada
pushed the Canadian dollar higher against the U.S. dollar during the last week
of December. Short Canadian dollar positions lost value.
The currency sector losses were primarily incurred through the use of the
Eagle-FX System, one of the two trading programs used by Series A's trading
advisor, Eagle Trading Systems, Inc. (the 'Trading Advisor'), to trade Series
A's assets. Effective December 6, 1999, the Eagle-Global System became the
exclusive trading program used by the Trading Advisor to trade Series A's
assets. In conjunction with this change, the Managing Owner and the Trading
Advisor voluntarily agreed to terminate the initial advisory agreement (the
'Initial Advisory Agreement') and enter into a new advisory agreement (the 'New
Advisory Agreement') effective March 21, 2000. Pursuant to the New Advisory
Agreement, the Trading Advisor will be paid a weekly management fee at an annual
rate of 1% of Series A's net asset value until the net asset value per Interest
is at least $80 for a period of 10 consecutive business days, at which time the
weekly management fee will be increased to an annual rate of 2% (i.e. the rate
pursuant to the Initial Advisory Agreement). Additionally, although the term of
the New Advisory Agreement commenced on March 21, 2000, the Trading Advisor must
recoup all trading losses incurred under the Initial Advisory Agreement before
an incentive fee is paid.
Long positions in the energy sector, specifically crude oil and derivative
products, provided gains in the second, third and fourth quarters as prices rose
throughout 1999. In the first quarter, energy markets surged as OPEC announced
substantial cuts in crude oil exports. Crude oil prices continued to rally into
the second quarter as extremely hot U.S. weather drove increased utility demand
during June and following statements by Saudi Arabian and Mexican oil ministers
reporting a high degree of compliance with OPEC production cuts. These
production cuts continued to prove beneficial for oil markets throughout the
third and fourth quarters.
Interest income is earned on the average net assets held at PSI and,
therefore, varies monthly according to interest rates, trading performance,
contributions and redemptions. Interest income was $922,000 and $272,000 for the
year ended December 31, 1999 and for the period from June 10, 1998 to December
31, 1998, respectively. As discussed above, the increase in interest income
during 1999 versus 1998 was due primarily to the difference in the 1999 and 1998
periods covered as well as the increasing net assets as a
13
<PAGE>
result of additional contributions. However, lower overall interest rates in
1999 as compared with interest rates in 1998 offset some of the increase.
Commissions are calculated on Series A's net asset value at the end of each
week and therefore, vary according to weekly trading performance, contributions
and redemptions. Commissions were $1,349,000 and $381,000 for the year ended
December 31, 1999 and the period from June 10, 1998 to December 31, 1998,
respectively.
All trading decisions for Series A are made by the Trading Advisor.
Management fees are calculated on Series A's net asset value at the end of each
week and therefore, are affected by weekly trading performance, contributions
and redemptions. Management fees were $348,000 and $98,000 for the year ended
December 31, 1999 and the period from June 10, 1998 to December 31, 1998,
respectively.
Incentive fees are based on the New High Net Trading Profits generated by the
Trading Advisor, as defined in the Advisory Agreement among the Trust, the
Managing Owner and the Trading Advisor. Incentive fees were negligible for the
year ended December 31, 1999. Incentive fees were $36,000 for the period from
June 10, 1998 to December 31, 1998.
Accounting for Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ('SFAS') No. 133, Accounting for Derivative
Instruments and Hedging Activities, which Series A adopted effective October 1,
1999. SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities and requires that an entity recognize all
derivatives as assets or liabilities measured at fair value. SFAS No. 133
supersedes SFAS No. 119, Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments and SFAS No. 105, Disclosure of Information
about Financial Instruments with Off-Balance Sheet Risk and Financial
Instruments with Concentrations of Credit Risk which required the disclosure of
average aggregate fair values and contract/notional values, respectively, of
derivative financial instruments for an entity like Series A which carries its
assets at fair value. The adoption of SFAS No. 133 has not had a material effect
on the carrying value of assets and liabilities within the financial statements.
Year 2000 Risk
The arrival of year 2000 was much anticipated and raised serious concerns
about whether or not computer systems around the world would continue to
function properly and the degree of 'Year 2000 Problems' that would have to be
resolved.
Series A engages third parties such as the Trading Advisor and Commodity
Broker to perform primarily all of the services it needs and also relies on
other third parties such as governments, exchanges, clearinghouses, vendors, and
banks. Series A has not experienced any material adverse impact on operations
related to Year 2000 Problems. While Series A believes that it has mitigated its
Year 2000 risk, Series A cannot guarantee that an as yet unknown Year 2000
failure will not have a material adverse effect on Series A's operations.
Inflation
Inflation has had no material impact on operations or on the financial
condition of the Trust from inception through December 31, 1999.
14
<PAGE>
OTHER INFORMATION
The actual round-turn equivalent of brokerage commissions paid per contract
for the year ended December 1999 was $119.
Series A's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available to limited owners without charge upon written
request to:
World Monitor Trust--Series A
P.O. Box 2016
Peck Slip Station
New York, New York 10272-2016
15
<PAGE>
Peck Slip Station BULK RATE
P.O. Box 2016 U.S. POSTAGE
New York, NY 10272 PAID
Automatic Mail
PFT1/17152
WORLD MONITOR TRUST
ADVISORY AGREEMENT
ADVISORY AGREEMENT (the "Agreement") dated as of the 21st day of
March, 2000, by and among World Monitor Trust - Series A, a Delaware
business trust (the "Trust"), Prudential Securities Futures Management
Inc., a Delaware corporation (the "Managing Owner")
and Eagle Trading Systems, Inc., a Delaware corporation (the "Advisor").
W I T N E S S E T H :
WHEREAS, the Trust and Series A has been organized primarily for the
purpose of trading, buying, selling, spreading or otherwise acquiring,
holding or disposing of futures, forward and options
contracts. Other transactions also
may be effected from time to time, including among others, those as more
fully identified in Exhibit A hereto. The foregoing commodities and other
transactions are collectively referred to as "Commodities"; and
WHEREAS, the Managing Owner is authorized to utilize the services of
one or more professional commodity trading advisors
in connection with the Commodities trading activities of the various
Series (as defined below) of the Trust; and
WHEREAS, the Advisor's present business includes the management of
Commodities accounts for its clients; and WHEREAS, the Advisor is
registered as a commodity trading advisor under the
United States Commodity Exchange Act, as amended (the "CE Act"), and
is a member of the National Futures Association
(the "NFA") as a commodity trading advisor and will maintain such
registration and membership for the term of this Agreement; and
WHEREAS, pursuant to an agreement dated March 24, 1998 (the "Initial
Agreement"), the Advisor managed the assets of Series A using its Eagle
Global System and Eagle-FX System from the date of Series A's initial closing
until December 5, 1999, and by mutual consent because of performance related
issues with the Eagle-FX System, solely pursuant to the Eagle Global System
from December 6, 1999 until March 20, 2000; and
WHEREAS, the Initial Agreement was voluntarily terminated by its terms
on March 20, 2000; and
WHEREAS, the Trust and the Advisor desire to enter into this Agreement
in order to set forth the modified terms and conditions upon which the
Advisor will continue to render and implement commodity
advisory services on behalf of the Trust during the term of this Agreement;
NOW, THEREFORE, the parties agree as follows:
1. Duties of the Advisor.
(a) Appointment. The Trust hereby appoints the Advisor, and the
Advisor hereby accepts appointment, as its limited
attorney-in-fact to exercise discretion
to invest and reinvest in Commodities during
the term of this Agreement the portion of the Trust's Net Asset Value (as
defined in the Prospectus) which is comprised of the assets attributable
to the Trust's Series A Interests allocated to the Advisor (the
"Series A Allocated Assets") on the terms and conditions and
for the purposes set forth herein. This limited power-of-attorney is a
continuing power and shall continue in effect with respect to the
Advisor until terminated hereunder. The Advisor shall have
sole authority and responsibility for independently directing the
investment and reinvestment in Commodities of the
Series A Allocated Assets for the term of
this Agreement pursuant to the trading programs, methods, systems, strategies
described in Exhibit A hereto, which the Trust and the Managing
Owner have selected to be utilized by the Advisor in
trading the Series A Allocated Assets
(collectively referred to as the Advisor's
"Trading Approach"), subject to the trading
policies and limitations as set forth
in the Trust's Prospectus and attached hereto
as Exhibit B (the "Trading Policies and Limitations"), as the same may
be modified from time to time and provided in writing to the Advisor. The
portion of the Series A Allocated Assets
to be allocated by the Advisor at any point
in time to one or more of the various
trading strategies comprising the Advisor's Trading Approach will be
determined as set forth in Exhibit A hereto, as it may be amended from
time to time, with the consent of the parties, it being understood
that trading gains and losses automatically will alter the agreed
upon allocations. Upon receipt of a
new allocation, the Advisor will determine
and, if required, adjust its trading in light of the new allocation.
(b) Allocation of Responsibilities. The Managing Owner will have the
responsibility for the management of any portion of the Series A Allocated
Assets that are not invested in Commodities. The Advisor will use its good
faith and best efforts in determining the investment and reinvestment in
Commodities of the Series A Allocated Assets in compliance with
the Trading Policies and Limitations, and
<PAGE>
in accordance with the Advisor's Trading Approach.
In the event that the Managing Owner shall, in its sole
discretion, determine in good faith following
consultation appropriate under the circumstances with the
Advisor that any trading instruction issued by the Advisor violates the
Trust's Trading Policies and Limitations, then the Managing Owner, following
reasonable notice to the Advisor appropriate under the circumstances,
may override such trading instruction and shall be responsible therefor.
Nothing herein shall be construed to prevent the Managing Owner from imposing
any limitation(s) on the trading activities of the Trust beyond those
enumerated in the Prospectus if the Managing Owner
determines that such limitation(s) are
necessary or in the best interests of the
Trust, in which case the Advisor will adhere to such limitations
following written notification thereof.
(c) Trading Approach. The Advisor agrees that at least 90% of the
gains and income, if any, generated by its Trading Approach for
Series A will be from buying and selling Commodities, as described
in Exhibit D hereto.
(d) Modification of Trading Approach. In the event the Advisor
requests to use, or the Managing Owner requests the Advisor to use, a trading
program, system, method or strategy other than or in addition to the trading
programs, systems, methods or strategies comprising the Trading Approach in
connection with trading for the Trust (including, without limitation,
the deletion or addition of an agreed upon trading program, system,
method or strategy to the then agreed upon Trading Approach), either in
whole or in part, the Advisor may not
do so and/or shall not be required to do so,
as appropriate, unless both the Managing Owner and the Advisor consent
thereto in writing.
(e) Notification of Material Changes. The Advisor also agrees to give
the Trust prior written notice of any proposed material change in its Trading
Approach, and agrees not to make any material change in such Trading
Approach (as applied to the Trust) over the objection of the Managing
Owner, it being understood that the Advisor shall be
free to institute non-material changes
in its Trading Approach (as applied to the
Trust) without prior written notification. Without limiting the
generality of the foregoing, refinements to the
Advisor's Trading Approach, the deletion (but
not the addition) of commodities (other than the addition of commodities then
being traded (i) on organized domestic commodities exchanges, (ii) on
foreign commodities exchanges recognized by the Commodity Futures Trading
Commission as providing customer protections comparable to those
provided on domestic exchanges, or (iii) in the interbank foreign currency
market) to or from the Advisor's Trading Approach, and variations in
the leverage principles and policies utilized by the
Advisor, shall not be deemed a material change in the Advisor's Trading
Approach, and prior approval of the Managing Owner shall not be required
therefor. The utilization of forward markets in addition to those
enumerated in Exhibit D hereto would be deemed a material
change to the Advisor's Trading Approach and prior approval shall be required
therefor.
Subject to adequate assurances of confidentiality, the Advisor agrees that
it will discuss with the Managing Owner upon request any trading methods,
programs, systems or strategies used by it for trading
customer accounts which differ from the Trading Approach used for the Trust,
provided, that nothing contained in this Agreement shall require the Advisor to
disclose what it deems to be proprietary or confidential information.
(f) Request for Information. The Advisor agrees to provide the Trust
with any reasonable information concerning the Advisor that the Trust may
reasonably request (other than the identity of its customers or proprietary
or confidential information concerning the Trading Approach), subject to
receipt of adequate assurances of confidentiality by
the Trust, including, but not limited to, information regarding any change in
control, key personnel, Trading Approach and financial condition which the
Trust reasonably deems to be material to the Trust; the Advisor also shall
notify the Trust of any such matters the Advisor, in its reasonable judgment,
believes may be material to the Trust relating to the Advisor and its Trading
Approach. During the term of this Agreement, the Advisor agrees to provide the
Trust with updated monthly information related to the Advisor's
performance results within a reasonable period of time after the
end of the month to which it relates.
(g) Notice of Errors. The Advisor is responsible for promptly reviewing
all oral and written confirmations it receives to
determine that the Commodities trades were made in accordance with the
Advisor's instructions. If the Advisor determines that an error was made in
connection with a trade or that a trade was made other than in
accordance with the Advisor's instructions, the Advisor shall
promptly notify the Managing Owner of this fact, and shall utilize its best
efforts to cause the error or discrepancy to be corrected.
<PAGE>
(h) Liability. Neither the Advisor nor any employee, director, officer or
shareholder of the Advisor, nor any person who controls the Advisor,
shall be liable to the Managing Owner, its officers,
directors, shareholders or employees, or any person who controls the Managing
Owner, or the Trust or the owners of
Series A Interests ("Limited Owners"), or any of their respective
successors or assignees under this Agreement, except by
reason of acts or omissions in material breach of this Agreement or due to
their misconduct or negligence or by reason of their not having acted in good
faith in the reasonable belief that such actions or omissions were in the best
interests of the Trust; it being understood that the Advisor makes no
guarantee of profit nor offers any protection against loss, and that all
purchases and sales of Commodities shall be for the account and risk
of the Trust, and the Advisor shall incur no liability for
trading profits or losses resulting therefrom provided the Advisor would
not otherwise be liable to the Trust under the terms hereof.
(i) Initial Allocation, Additional Allocations, and Reallocations.
Initially, the Series A Allocated Assets will be equal to
the Series A Allocated Assets as of the close of business on March 20, 2000.
Thereafter, subject to Section 12(a) below, the Trust may, (A)
reallocate the Series A Allocated Assets away from the Advisor
to another commodity trading advisor (an "Other Advisor"), or (B)
reallocate the Series A Allocated Assets to the Advisor away from an
Other Advisor in an amount which will not, in the aggregate, cause the assets
allocated to the Advisor by the Managing Owner to exceed $34,000,000.
(j) Delivery of Disclosure Document. The Advisor agrees to provide to
the Managing Owner any amendment, supplement, or
update to the Disclosure Document attached hereto as Exhibit D.
2. Indemnification.
(a) The Advisor. Subject to the provisions of Section 3, the Advisor,
and each officer, director, shareholder and employee of the Advisor, and each
person who controls the Advisor, shall be indemnified, defended, and
held harmless by the Trust and the Managing Owner, from and against
any and all claims, losses, judgments, liabilities, damages, costs,
expenses (including, without limitation, reasonable investigatory
and attorneys' fees) and amounts paid in settlement of
any claims in compliance with the conditions specified below (collectively,
"Losses") sustained by the Advisor (i) in connection with any acts or
omissions of the Advisor, or any of its officers, directors or
employees relating to its management of the Series A Allocated Assets,
including in connection with this Agreement or otherwise as a result of the
Advisor's performance of services on behalf of the Trust or its role as trading
advisor to Series A Allocated Assets and (ii) as a result
of a material breach of this Agreement by the Trust or the
Managing Owner, provided that, (i) such Losses were not the result of
negligence, misconduct or a material breach of this Agreement on the
part of the Advisor, and its officers, directors, shareholders and
employees, and each person controlling the Advisor, (ii) the Advisor,
and its officers, directors, shareholders and employees, and
each person controlling the Advisor, acted in good faith and
in a manner reasonably believed by it and them to be in or not opposed to
the best interests of the Trust and (iii) any such
indemnification will only be recoverable from the Series A Allocated
Assets and the assets of the Managing Owner and not
from any other assets of any other Series of the Trust, provided
further, that no indemnification shall be permitted under this Section 2
for amounts paid in settlement if either (A) the
Advisor fails to notify the Trust of the terms of any settlement proposed, at
least fifteen (15) days before any amounts are paid, or (B) the Trust does not
approve the amount of the settlement within fifteen (15) days (such
approval not to be withheld unreasonably). Notwithstanding the
foregoing, the Trust shall, at all times, have the right to offer
to settle any matter with the approval of the Advisor (which
approval shall not be withheld unreasonably) and if the Trust successfully
negotiates a settlement and tenders payment therefor to the party claiming
indemnification (the "Indemnitee") the Indemnitee must either use its
best efforts to dispose of the matter in accordance with the terms and
conditions of the proposed settlement or the Indemnitee may
refuse to settle the matter and continue its defense in which latter event
the maximum liability of the Trust to the Indemnitee shall be the amount of said
proposed settlement. Any indemnification under this Section 2, unless
ordered by a court, shall be made by the Trust only as authorized in the
specific case and only upon a determination by mutually acceptable
independent legal counsel in a written opinion that indemnification
is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct set forth hereunder.
(b) Default Judgments and Confessions of Judgment. None of the
foregoing provisions for indemnification shall be
applicable with respect to default judgments or confessions of judgment
entered into by the Indemnitee, with its
knowledge, without the prior consent of the Trust.
<PAGE>
(c) Procedure. In the event that an Indemnitee under this Section 2 is
made a party to an action, suit or proceeding alleging both matters for which
indemnification can be made hereunder and matters for which
indemnification may not be made hereunder, such Indemnitee
shall be indemnified only for that portion of the Losses incurred in such
action, suit or proceeding which relates to
the matters for which indemnification can be made.
(d) Expenses. Expenses incurred in defending a threatened or pending
civil, administrative or criminal action, suit or
proceeding against an Indemnitee shall
be paid by the Trust in advance of the final
disposition of such action, suit
or proceeding if (i) the legal action, suit or
proceeding, if sustained, would entitle
the Indemnitee to indemnification pursuant to
the terms of this Section 2, and (ii) the Advisor undertakes to repay the
advanced funds to the Trust in cases in
which the Indemnitee is not entitled to indemnification pursuant to this
Section 2, and (iii) in the case of advancement of
expenses by the Trust, the Indemnitee obtains a written opinion of
mutually acceptable independent legal counsel that advancing such
expenses is proper in the circumstances.
3. Limits on Claims.
(a) Prohibited Acts. The Advisor agrees that it will not take any of the
following actions against the Trust: (i) seek a decree or order by a court
having jurisdiction in the premises (A) for relief
in respect of the Trust in an involuntary case or proceeding under the
Federal Bankruptcy Code or any other federal or state bankruptcy, insolvency,
reorganization, rehabilitation, liquidation or similar law or (B) adjudging
the Trust a bankrupt or insolvent, or seeking reorganization, rehabilitation,
liquidation, arrangement, adjustment or composition of or in respect of the
Trust under the Federal Bankruptcy Code or
any other applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Trust or of any substantial part
of any of its properties, or ordering the winding up or
liquidation of any of its affairs, or (ii) seek a petition for relief,
reorganization or to take advantage of any law referred to in
the preceding clause or (iii) file an involuntary petition for bankruptcy
(collectively, "Bankruptcy or Insolvency Action").
(b) Limited Assets Available. In addition, the Advisor agrees that for
any obligations due and owing to it by the Trust, the Advisor will look solely
and exclusively to Series A Allocated Assets or
to the assets of the Managing Owner, if it has liability in its capacity as
Managing Owner, to satisfy its claims and will
not seek to attach or otherwise assert a claim against the other assets of
the Trust, whether there is a Bankruptcy or Insolvency Action taken or
otherwise. The parties agree that this provision will survive the
termination of this Agreement, whether terminated in a Bankruptcy
or Insolvency Action or otherwise.
(c) No Limited Owner Liability. This Agreement has been made and
executed by and on behalf of the Trust and the Managing Owner for the
benefit of the Series A Interests of the Trust and the obligations of
the Trust and/or the Managing Owner set forth herein are not
binding upon any of the Limited Owners individually but are binding only upon
the assets and property identified above and no resort shall be had to the
assets of other Series issued by the Trust or the Limited Owners'
personal property for the satisfaction of any obligation or claim hereunder.
(d) Subordination Agreement. The Advisor agrees and consents (the
"Consent") to look solely to each Series for which brokerage and clearing
services are being performed ("Series A") and assets (the "Series A
Assets") of Series A and to the Managing Owner and its
assets for payment. The Series A
Assets include only those funds and other assets that are paid, held or
distributed to the Trust on account of and for the benefit of the
Series A, including, without limitation, funds delivered to the Trust for
the purchase of interests in Series A. In furtherance of the Consent,
the Advisor agrees that (i) any debts, liabilities, obligations,
indebtedness, expenses and claims of any nature and of all kinds
and descriptions (collectively, "Claims") incurred, contracted for or
otherwise existing arising from, related to or in connection
with the Trust and its assets and Series A and the Series A Assets, shall
be subject to the following limitations:
(1) Subordination of certain claims and rights. (i)
except as set forth below, the Claims, if any, of
the Advisor (the "Subordinated Claims") shall be expressly subordinate and
junior in right of payment to any and all other Claims against the Trust and
any Series thereof, and any of their respective assets, which may arise as a
matter of law or pursuant to any contract; provided, however, that the
Advisor's Claims (if any) against Series A
shall not be considered Subordinated Claims with respect to enforcement
against and distribution and repayment from Series A,
the Series A Assets and the Managing Owner and its assets; and provided
further that the Advisor's valid Claims, if any, against Series A shall be
pari passu and equal in right of repayment and distribution with all other
valid Claims against Series A and (ii)
the Advisor will not take, demand or receive from any Series or the Trust
or any of their
<PAGE>
respective assets (other than Series A, the Series A
Assets and the Managing Owner and its assets) any payment
for the Subordinated Claims;
(2) the Claims of the Advisor with respect to Series A
shall only be asserted and enforceable against Series A, the Series A
Assets and the Managing Owner and its assets; and such
Claims shall not be asserted or enforceable for any reason whatsoever against
any other Series, the Trust generally or any of their respective assets;
(3) if the Claims of the Advisor against Series A or
the Trust are secured in whole or in part, the Advisor hereby waives (under
section 1111(b) of the Bankruptcy Code (11 U.S.C. S 1111(b)) any right to have
any deficiency Claims (which deficiency Claims may arise in the event such
security is inadequate to satisfy such Claims) treated
as unsecured Claims against the Trust or any Series (other than Series A), as
the case may be;
(4) in furtherance of the foregoing, if and to the
extent that the Advisor receives monies in connection with the Subordinated
Claims from a Series or the Trust (or their respective assets), other than
Series A, the Series A Assets and the Managing Owner and
its assets, the Advisor shall be deemed to hold such monies in trust and shall
promptly remit such monies to the Series or the Trust that paid such amounts
for distribution by the Series or the Trust in accordance with the terms
hereof; and
(5) the foregoing Consent shall apply at all times
notwithstanding that the Claims are satisfied, and notwithstanding that
the agreements in respect of such Claims are terminated, rescinded or
canceled.
4. Obligations of the Trust, the Managing Owner and the Advisor.
(a) The Registration Statement and Prospectus. Each of the Trust and
the Managing Owner agrees to cooperate and use its good faith, or and best
efforts in connection with the taking of such actions
not inconsistent with this Agreement as the Managing Owner may determine
to be necessary or advisable in order to comply with applicable regulatory
requirements. The Advisor agrees to make all necessary disclosures regarding
itself, its officers and principals, trading performance, Trading Approach,
customer accounts (other than the names of customers, unless
such disclosure is required by law or regulation) and otherwise as
may be requested, in the reasonable judgment of the Managing
Owner, to be made in order to manage the Trust and correspond with the
Interestholders. No description of, or other information relating to, the
Advisor may be distributed by the Managing Owner without the prior written
consent of the Advisor; provided that, distribution of performance information
relating to Series A's account shall not require consent
of the Advisor.
(b) Advisor Not A Promoter. The parties acknowledge that the Advisor
has not been, either alone or in conjunction with Prudential Securities
Incorporated ("Prudential Securities") or its affiliates,
an organizer or promoter of the Trust, and it is not intended by
the parties that the Advisor shall have any liability as such.
(c) Representation Agreement. The parties agree that the
Representation Agreement relating to the offering of the
Series A Interests which was executed simultaneous to the
Initial Agreement (a copy of which is attached as Exhibit C)
remains in full force and effect notwithstanding the termination of the
Initial Agreement.
5. Advisor Independence.
(a) Independent Contractor. The Advisor shall for all purposes herein
be deemed to be an independent contractor with respect to the Trust, the
Managing Owner and each other commodity trading advisor that may in the future
provide commodity trading advisory services to the Trust and Prudential
Securities, and shall, unless otherwise expressly authorized,
have no authority to act for or to represent the Trust, the
Managing Owner, any other commodity trading advisor
or Prudential Securities in any way or otherwise be deemed to be a
general agent, joint venturer or partner of the Trust, the Managing Owner, any
other commodity trading advisor or Prudential Securities, or in any way be
responsible for the acts or omissions of the Trust, the
Managing Owner, any other commodity trading advisor or Prudential
Securities as long as it is acting independently of such persons.
(b) Unauthorized Activities. Without limiting the obligations of the
Trust set forth under this Agreement, nothing herein
contained shall be deemed to require
the Trust to take any action contrary to its
Trust Agreement or Certificate of Trust or any applicable statute, regulation
or rule of any exchange or self-regulatory organization.
(c) Purchase of Interests. Any of the Advisor, its principals, and
employees may, in its discretion, purchase Interests in the Trust.
<PAGE>
(d) Confidentiality. The Trust and the Managing Owner acknowledge
that the Trading Approach of the Advisor is the confidential property of the
Advisor. Nothing in this Agreement shall require the Advisor to disclose the
confidential or proprietary details of its Trading Approach. The Trust and the
Managing Owner further agree that they will keep confidential and will not
disseminate the Advisor's trading advice to the Trust, except
as, and to the extent that, it may be
determined by the Managing Owner to be (i)
necessary for the monitoring of the
business of the Trust, including the
performance of brokerage services by
the Trust's commodity broker(s) or (ii) expressly
required by law or regulation.
6. Commodity Broker.
All Commodities trades for the account of the Trust shall be made
through such commodity broker or brokers as the Managing
Owner directs or otherwise as may be agreed upon in accordance with such
order execution procedures as are agreed upon between the Advisor and the
Managing Owner. The Advisor shall not have any authority or responsibility in
selecting or supervising any broker for execution of Commodities trades of the
Trust or for negotiating commission rates to be charged therefor. The Advisor
shall not be responsible for determining that any such bank or broker used
in connection with any Commodities transactions meets the financial
requirements or standards imposed by the Trust's Trading Policies and
Limitations. At the present time it is contemplated that
the Trust will execute and clear all Commodities trades
through Prudential Securities. The Advisor may, however, with the
consent of the Managing Owner, execute transactions at
such other broker(s), and upon such terms and conditions, as the Advisor and
the Managing Owner agree if such broker(s) agree to "give up" all such
transactions to Prudential Securities for clearance. To the
extent that the Trust determines to utilize a broker or
brokers other than Prudential Securities, it will consult with the Advisor
prior to directing it to utilize such broker(s), and
will not retain the services of such
broker(s) over the reasonable objection of the Advisor.
7. Fees.
In consideration of and in compensation for the performance of the
Advisor's services under this Agreement, the Advisor
shall receive from Series A a weekly
management fee (the "Management Fee") and a quarterly incentive fee
(the "Incentive Fee") based on Series A 's Allocated Assets, as follows:
(a) A Management Fee equal to 1/52 of 1% of Series A 's Allocated
Assets determined as of the close of business each
Friday (an annual rate of 1%) until
the Net Asset Value per Interest at the close of business on any business
day is at least $80 per Interest for a period of at
least 10 consecutive business days, at
which time the weekly Management Fee will be increased to 1/26 of 1%
(an annual rate of 2%). The sum of the amounts
determined each Friday will be paid monthly. For purposes of determining
the Management Fee, any distributions, redemptions, or reallocation
of the Series A's Allocated Assets
made as of the last Friday of a week shall be added back to Series A's
Allocated Assets and there shall be no reduction for (i)
the accrued Management Fees being calculated, or (ii) any accrued but
unpaid incentive fees due the Advisor under paragraph (b) below
for the quarter in which such fees are being computed, or
(iii) any accrued but unpaid extraordinary expenses (as defined in
the Trust Agreement). The Management Fee determined for any week in
which an Advisor manages Series A's Allocated
Assets for less than a full week shall be
prorated, such proration to be calculated on
the basis of the number of days in
the week Series A Allocated Assets were under
the Advisor's management as compared to the total number of days in such
week, such proration to include appropriate adjustments for any funds taken
away from the Advisor's management during the week for reasons other
than distributions or redemptions, including but not limited to the
reduction of Series A 's Allocated
Assets allocated to the Advisor's management
resulting from the payment of extraordinary expenses or distributions.
(b) An incentive fee of twenty three percent (23%) (the "Incentive
Fee") of "New High Net Trading Profits" (as hereinafter defined) generated on
Series A 's Allocated Assets, including realized and
unrealized gains and losses thereon,
as of the close of business on the last
Friday of each calendar quarter (the
"Incentive Measurement Date"). This fee will
accrue weekly.
New High Net Trading Profits (for purposes of
calculating the Advisor's Incentive Fee only) will be computed as of
the Incentive Measurement Date and
will include such profits (as outlined below) since the Incentive
Measurement Date of the most recent preceding calendar
quarter for which an incentive fee was earned (or, with respect to the first
Incentive Fee since September 25, 1998,
the last date at which the Advisor earned an incentive fee under the Initial
Agreement (the "Incentive Measurement Period").
New High Net Trading Profits for any Incentive Measurement Period will
be the net profits, if any, from Series A 's trading
during such period (including (i) realized trading profit (loss) plus
or minus (ii) the change in unrealized trading
profit (loss) on open positions) and will be calculated after the
determination
<PAGE>
of Series A 's fixed brokerage fee and the
Advisor's weekly Management Fee, and the operating expenses
for which Series A is responsible, but before deduction of
any Incentive Fees payable during the Incentive Measurement Period.
New High Net Trading Profits will not include interest earned or credited
on Series A 's assets and will be adjusted (either increased or decreased, as
the case may be) to reflect extraordinary expenses (e.g.,
litigation, costs or damages) paid during an Incentive Measurement
Period. New High Net Trading Profits will be generated only to
the extent that the Advisor's cumulative New High Net
Trading Profits exceed the highest level of cumulative New High Net
Trading Profits achieved by the Advisor as of a
previous Incentive Measurement Date. Except as set forth below,
net losses from prior quarters (and in the case of the
first incentive fee, from the Initial Agreement) must be recouped before New
High Net Trading Profits can be generated.
If a withdrawal or distribution occurs at any date that is not an Incentive
Measurement Date, the date of the withdrawal or distribution will be treated as
if it were an Incentive Measurement Date, but any Incentive Fee accrued in
respect of the withdrawn assets on such
date shall not be paid to the Advisor until the next scheduled Incentive
Measurement Date. New High Net Trading Profits for an Incentive
Measurement Period shall exclude capital contributions to Series A in an
Incentive Measurement Period, distributions or redemptions payable by
Series A during an Incentive Measurement Period, as
well as losses, if any, associated with redemptions during the Incentive
Measurement Period and prior to the Incentive Measurement Date (i.e.,
reduction in loss carryforward). In calculating New High Net Trading Profits,
incentive fees paid for a previous Incentive Measurement Period
will not reduce cumulative New High Net Trading Profits in subsequent periods.
Notwithstanding any other provision of this Agreement which may be
interpreted to the contrary, it is the intent of the parties that all
cumulative losses existing at the date of the termination of
the Initial Agreement must be recouped consistent with the calculations and
provisions of this Agreement before the first Incentive Fee under
this Agreement will be due and owing.
(c) Timing of Payment. Management Fees and Incentive Fees shall be
paid within fifteen (15) business days following
the end of the period for which they
are payable. The first incentive fee which
may be due and owing to the Advisor
in respect of any New Trading Profits will be
due and owing as of the last Friday
of the first calendar quarter during which
the Trading Advisor managed the
Allocated Assets for at least forty five (45)
days. If an Incentive Fee shall have
been paid by the Trust to the Advisor in
respect of any calendar quarter and the
Advisor shall incur subsequent losses on the
Series A Allocated Assets the
Advisor shall nevertheless be entitled to
retain amounts previously paid to it in
respect of New High Net Trading Profits.
(d) Fee Data. The Advisor will be provided by the Managing Owner
with the data used by the Managing Owner to compute
the foregoing fees within ten (10)
business days of the end of the relevant period.
(e) Third Party Payments. Neither the
Advisor, nor any of its officers,
directors, employees or stockholders, shall
receive any commissions, compensation, remuneration or payments
whatsoever from any broker with
which the Trust carries an account for
transactions executed in the Trust's
account. The parties acknowledge that a
spouse of any of the foregoing persons
may receive floor brokerage commissions in
respect of trades effected pursuant
to the Advisor's Trading Approach on behalf
of the Trust, which payment shall
not violate the preceding sentence.
8. Term and Termination.
(a) Term. This Agreement shall commence on the date hereof and,
unless sooner terminated, shall continue in effect
until the close of business on December 31, 2000. Thereafter, unless this
Agreement is terminated pursuant to
paragraphs (b), (c) or (d) of this Section 8,
this Agreement shall be renewed
automatically on the same terms and
conditions set forth herein for successive
additional one-year terms, each of which
shall commence on the first day of the
month subsequent to the conclusion of the
preceding twelve (12) month term.
Subject to Section 8(d)(iv) hereof, the
automatic renewal(s) set forth in the
preceding sentence hereof shall not be
affected by (i) any reallocation of the
Series A Allocated Assets away from the
Advisor pursuant to this Agreement, or
(ii) the retention of Other Advisors
following a reallocation, or otherwise.
(b) Automatic Termination. This Agreement shall terminate
automatically in the event that the Trust is terminated. In
addition, this Agreement shall terminate automatically in the event that the
Series A Allocated Assets declines as of the end of any business day
by 33 1/3% from the Series A Allocated
Assets (i) as of the first day of this
Agreement, or (ii) as of the first day of any
calendar year, as adjusted on
<PAGE>
an ongoing basis by (A) any decline(s) in
the Series A Allocated Assets caused by
distributions, redemptions, permitted
reallocations, and withdrawals, and (B)
additions to the Series A Allocated
Assets caused by additional allocations to
the Advisor's management.
(c) Optional Termination Right of Trust.
This Agreement may be terminated
at any time at the election of the Managing
Owner in its sole discretion upon at
least thirty (30) days' prior written notice
to the Advisor. The Managing Owner
will use its best efforts to cause any
termination to occur as of a month-
end. This Agreement also may be terminated upon
prior written notice, appropriate
under the circumstances, to the Advisor in
the event that: (A) the Managing
Owner determines in good faith following
consultation appropriate under the
circumstances with the Advisor that the
Advisor is unable to use its agreed
upon Trading Approach to any material extent, as
such Trading Approach may be
refined or modified in the future in
accordance with the terms of this Agreement
for the benefit of the Trust; (B) the
Advisor's registration as a commodity
trading advisor under the CE Act, or
membership as a commodity trading
advisor with the NFA is revoked, suspended,
terminated or not renewed; (C) the
Managing Owner determines in good faith
following consultation appropriate
under the circumstances with the Advisor that
the Advisor has failed to conform,
and after receipt of written notice,
continues to fail to conform in any
material respect, to (i) any of the Trust's Trading
Policies and Limitations, or (ii) the
Advisor's Trading Approach; (D) there is an
unauthorized assignment of this
Agreement by the Advisor; (E) the Advisor
dissolves, merges or consolidates with
another entity or sells a substantial portion
of its assets, any portion of its
Trading Approach utilized by the Trust or its
business goodwill, in each instance
without the consent of the Managing Owner;
(F) either Menachem Sternberg or
Liora Sternberg is not in control of the
Advisor's trading activities for the
Trust; (G) the Advisor becomes bankrupt (admitted or
decreed) or insolvent, (H) for
any other reason, the Managing Owner
determines in good faith that such
termination is essential for the protection
of the Trust and the Series A Interests,
including, without limitation a good faith
determination by the Managing
Owner that the Advisor has breached a
material obligation to the Trust under
this Agreement relating to the trading of the
Series A Allocated Assets.
(d) Optional Termination Right of Advisor.
The Advisor shall have the right
to terminate this Agreement at any time upon
written notice to the Trust,
appropriate under the circumstances, in the
event (i) of the receipt by the
Advisor of an opinion of independent counsel
satisfactory to the Advisor and the
Trust that by reason of the Advisor's
activities with respect to the Trust, it
is required to register as an investment adviser
under the Investment Advisers Act
of 1940 and it is not so registered; (ii)
that the registration of the Managing
Owner as a commodity pool operator under the
CE Act, or its NFA membership
as a commodity pool operator is revoked,
suspended, terminated or not renewed;
(iii) the Managing Owner (x) imposes
additional trading limitation(s) pursuant
to Section 1 of this Agreement which the
Advisor does not agree to follow in its
management of the Series A Allocated Assets,
or (y) overrides trading instructions of the Advisor or does not
consent to a material change to the
Trading Approach requested by the Advisor;
(iv) if the amount of the Series A
Allocated Assets decreases to less than $1
million as the result of redemptions,
but not trading losses, as of the close of
business on any Friday; (v) the
Managing Owner elects (pursuant to Section 1
of this Agreement) to have the
Advisor use a different Trading Approach in
the Advisor's management of Trust
assets from that which the Advisor is then
using to manage such assets and the
Advisor objects to using such different
Trading Approach; (vi) there is an
unauthorized assignment of this Agreement by
the Trust or the Managing
Owner; (vii) there is a material breach of
this Agreement by the Trust and/or the
Managing Owner after giving written notice to
the Managing Owner which
identifies such breach and such material
breach has not been cured within 10
days following receipt of such notice by the
Managing Owner; (viii) an Other
Advisor is allocated a portion of the Series
A Assets; or (ix) other good cause is
shown and the written consent of the Managing
Owner is obtained (which shall
not be withheld unreasonably).
(e) Termination Fees. In the event that this
Agreement is terminated with
respect to, or by, the Advisor pursuant to
this Section 8 or the Managing Owner
allocates the Trust's assets to Other
Advisors, the Advisor shall be entitled
to, and the Trust shall pay, the Management Fee
and the Incentive Fee, if any,
which shall be computed (i) with respect to
the Management Fee, on a pro rata
basis, based upon the portion of the month
for which the Advisor had the Series
A Allocated Assets under management, and (ii)
with respect to the Incentive Fee,
if any, as if the effective date of
termination was the last day of the then
current calendar quarter. The rights of the Advisor
to fees earned through the earlier to
occur of the date of expiration or
termination shall survive this Agreement until
satisfied.
<PAGE>
(f) Termination and Open Positions. Once
terminated, the Advisor shall
have no responsibility for existing
positions, including delivery issues, if
any, which may result from such positions.
9. Liquidation of Positions.
The Advisor agrees to liquidate open
positions in the amount that the Managing
Owner informs the Advisor, in writing via
telecopy or other equivalent means,
that the Managing Owner considers necessary
or advisable to liquidate in order
to (i) effect any termination or reallocation
pursuant to Sections 1 or 8, respectively, or (ii) fund its pro rata share
of any redemption, distribution or
Trust expense. The Managing Owner shall not,
however, have authority to
instruct the Advisor as to which specific
open positions to liquidate, except as
provided in Section 1 hereof. The Managing
Owner shall provide the Advisor
with such reasonable prior notice of such
liquidation as is practicable under the
circumstances and will endeavor to provide at
least three (3) days' prior notice.
In the event that losses incurred by the
Advisor exceed the amount of the Series
A Allocated Assets, the Managing Owner agrees
to cover such excess losses from
its assets, but in no event from the assets
of the other Series issued by the Trust.
10. Other Accounts of the Advisor.
(a) Management of Other Accounts. Subject to
paragraph (c) of this Section
10, the Advisor shall be free to manage and
trade accounts for other investors
(including other public and private commodity
pools) during the term of this
Agreement and to use the same or other
information and Trading Approach
utilized in the performance of services for
the Trust for such other accounts so
long as the Advisor's ability to carry out
its obligations and duties to the Trust
pursuant to this Agreement is not materially
impaired thereby. In addition, the
Advisor, and its shareholders, directors,
officers and employees, as applicable,
also will be permitted to trade in
Commodities using the Trading Approach or
otherwise for their own accounts, so long as
the Advisor's ability to carry out its
obligations and duties to the Trust pursuant
to this Agreement is not materially impaired thereby.
(b) Acceptance of Additional Capital.
Furthermore, so long as the Advisor is
performing services for the Trust, it agrees
that it will not accept additional
capital for management in the Commodities
markets if doing so would have a
reasonable likelihood of resulting in the
Advisor having to modify materially its
agreed upon Trading Approach being used for
the Trust in a manner which
might reasonably be expected to have a
material adverse effect on the Trust.
Without limiting the generality of the
foregoing, it is understood that this
paragraph shall not prohibit the acceptance
of additional capital, which
acceptance requires only routine adjustments
to trading patterns in order to
comply with speculative position limits or
daily trading limits.
(c) Equitable Treatment of Accounts. The
Advisor agrees, in its management
of accounts other than the account of the
Trust, that it will not knowingly or
deliberately favor any other account managed
or controlled by it or any of its
principals or affiliates (in whole or in
part) over the Trust. The preceding
sentence shall not be interpreted to preclude
(i) the Advisor from charging
another client fees which differ from the
fees to be paid to it hereunder, or (ii) an
adjustment by the Advisor in the
implementation of any agreed upon Trading
Approach in accordance with the procedures
set forth in Section 1 hereof which
is undertaken by the Advisor in good faith in
order to accommodate additional
accounts. The Advisor, upon reasonable
request and receipt of adequate
assurances of confidentiality, shall provide
the Managing Owner with an
explanation of the differences, if any, in
performance between the Trust and any
other similar account pursuant to the same
Trading Approach for which the
Advisor or any of its principals or
affiliates acts as a commodity trading
advisor (in whole or in part), provided, however,
that the Advisor may, in its discretion,
withhold from any such inspection the
identity of the client for whom any
such account is maintained.
(d) Inspection of Records. Upon the
reasonable request of, and upon
reasonable notice from, the Managing Owner,
the Advisor shall permit the
Managing Owner to review at the Advisor's
offices during normal business
hours such trading records as it reasonably
may request for the purpose of
confirming that the Trust has been treated
equitably with respect to advice
rendered during the term of this Agreement by
the Advisor for other accounts
managed by the Advisor, which the parties
acknowledge to mean that the
Managing Owner may inspect, subject to such
restrictions as the Advisor may
reasonably deem necessary or advisable so as
to preserve the confidentiality of
proprietary information and the identity of
its clients, all trading records of the
Advisor as it reasonably may request during
normal business hours. The
Advisor may, in its discretion, withhold from
any such report or inspection the
identity of the client for whom any such
account is maintained and in any event,
the Trust and the Managing Owner shall keep
all such
<PAGE>
information obtained by them from the Advisor confidential unless
disclosure thereof is legally required
or has been made public..
11. Speculative Position Limits.
If, at any time during the term of this
Agreement, it appears to the Advisor
that it may be required to aggregate the Trust's
Commodities positions with the
positions of any other accounts it owns or
controls for purposes of applying the
speculative position limits of the Commodity
Futures Trading Commission ("CFTC"), any exchange, self-regulatory body,
or governmental authority, the
Advisor promptly will notify the Managing
Owner if the Trust's positions under
its management are included in an aggregate
amount which equals or exceeds
the applicable speculative limit. The
Advisor agrees that, if its trading
recommendations pursuant to its agreed upon
Trading Approach are altered
because of the potential application of
speculative position limits, the Advisor
will modify its trading instructions to the
Trust and its other accounts in a
good faith effort to achieve an equitable
treatment of all accounts; to wit, the
Advisor will liquidate Commodities positions and/or
limit the taking of new positions in
all accounts it manages, including the Trust,
as nearly as possible in proportion
to the assets available for trading of the
respective accounts (including
"notional" equity) to the extent necessary to
comply with applicable speculative
position limits. The Advisor presently
believes that its Trading Approach
for the management of the Trust's account, assuming
that the allocation is not more
than $34,000,000, can be implemented for the
benefit of the Trust notwithstanding the possibility that, from
time to time, speculative position limits
may become applicable.
<PAGE>
12. Redemptions, Distributions, Reallocations
and Additional Allocations.
(a) Notice. The Managing Owner agrees to
give the Advisor at least one (1)
business day prior notice of any proposed
redemptions, exchanges, distributions,
reallocations, additional allocations, or
withdrawals.
(b) Allocations. Redemptions, exchanges,
withdrawals, and distributions of
Series A Interests shall be charged against
Series A Allocated Assets.
13. Brokerage Confirmations and Reports.
The Managing Owner will instruct the Trust's
commodity broker or brokers to
furnish the Advisor with copies of all trade
confirmations, daily equity runs, and
monthly trading statements relating to the
Series A Allocated Assets. The
Advisor will maintain records and will
monitor all open positions relating
thereto; provided, however, that the Advisor
shall not be responsible for any
errors by the Trust's brokers. The Managing
Owner also will furnish the
Advisor with a copy of the form of all
reports, including but not limited to,
monthly, quarterly and annual reports, sent
to the Limited Owners, and copies
of all reports filed with the SEC, the CFTC
and the NFA. The Advisor shall, at
the Managing Owner's request, make a good
faith effort to provide the
Managing Owner with copies of all trade
confirmations (if the broker is other
than Prudential Securities), daily equity
runs, monthly trading reports or other
reports sent to the Advisor by the Trust's
commodity broker regarding the Trust,
and in the Advisor's possession or control,
as the Managing Owner deems
appropriate, if the Managing Owner cannot
obtain such copies on its own
behalf. Upon request, the Managing Owner
will provide the Advisor with
accurate information with respect to the
Series A Allocated Assets.
14. The Advisor's Representations and
Warranties.
The Advisor represents and warrants that:
(a) it has full capacity and authority to
enter into this Agreement, and to
provide the services required of it
hereunder;
(b) it will not by entering into this
Agreement and by acting as a commodity
trading advisor to the Trust, (i) be required
to take any action contrary to its
incorporating or other formation documents or
any applicable statute, law or
regulation of any jurisdiction or (ii) breach
or cause to be breached any
undertaking, agreement, contract, statute,
rule or regulation to which it is
a party or by which it is bound which, in the
case of (i) or (ii), would materially
limit or materially adversely affect its
ability to perform its duties under
this Agreement;
(c) it is duly registered as a commodity
trading advisor under the CE Act and
is a member of the NFA as a commodity trading
advisor and it will maintain and
renew such registration and membership during
the term of this Agreement;
(d) a copy of its most recent Commodity
Trading Advisor Disclosure
Document as required by Part 4 of the CFTC's
regulations has been
provided to the Managing Owner on behalf of the Trust in
the form of Exhibit D hereto (and
the Managing Owner acknowledges receipt of
such Disclosure Document on
behalf of the Trust) and, except as disclosed
in such Disclosure Document, all
information in such Disclosure Document
(including, but not limited to,
background, performance, trading methods and
trading systems) is true,
complete and accurate in all material
respects and is in conformity in all
material respects with the provisions of the
CE Act, as amended, including the
rules and regulations thereunder;
(e) the Series A Allocated Assets should not,
in the reasonable judgment of
the Advisor, result in the Advisor being
required to alter its Trading Approach to
a degree which would be expected to have a
material adverse effect on the Trust; and
(f) neither the Advisor, nor its
stockholders, directors, officers, employees,
agents, principals, affiliates, nor any of
its or their respective successors or
assigns: (i) shall knowingly use or
distribute for any purpose whatsoever
any list containing the names and/or residence
addresses of, and/or other information
about, the Limited Owners of the Trust; nor
(ii) shall solicit any person it or they
know is a Limited Owner of the Trust for the
purpose of soliciting commodity
business from such Limited Owner, unless such
Limited Owner shall have first
contacted the Advisor or is already a client
of the Advisor or a prospective client
with which the Advisor has commenced
discussions or is introduced or referred
to the Advisor by an unaffiliated agent other
than in violation of clause (i).
(g) its business operations and any services
provided pursuant to this Agreement will not be materially interrupted
by the advent of the Year 2000 date.
The within representations and warranties
shall be continuing during the term
of this Agreement, and, if at any time, any
event has occurred which would
make or tend to make any of the foregoing not
true in any material respect with
respect to the Advisor, the Advisor promptly
will notify the Trust in writing thereof.
<PAGE>
15. The Managing Owner's Representations and
Warranties.
The Managing Owner represents and warrants on
behalf of the Trust and itself that:
(a) each has the full capacity and authority
to enter into this Agreement and to perform its obligations hereunder;
(b) it will not, by acting as managing owner
to the Trust or by entering into
this Agreement, and the Trust will not (i) be
required to take any action contrary
to its incorporating or other formation
documents or any applicable statute, law
or regulation of any jurisdiction, or (ii)
breach or cause to be breached (A) any
undertaking, agreement, contract, statute,
rule or regulation to which it or the
Trust is a party or by which it or the Trust
is bound, or (B) any order of any
court or governmental or regulatory agency
having jurisdiction over it or the
Trust, which in the case of (i) or (ii) would
materially limit or materially
adversely affect the performance of its or
the Trust's duties under this
Agreement;
(c) it is registered as a commodity pool
operator under the CE Act and is a
commodity pool operator member of the NFA,
and it will maintain and renew
such registration and membership during the
term of this Agreement;
(d) this Agreement has been duly and validly
authorized, executed and delivered, and is a valid and binding
agreement, enforceable against each of
them, in accordance with its terms; and
(e) on the date hereof, it is, and during the
term of this Agreement, it will be
(i) in the case of the Trust, a duly formed
and validly existing Delaware Business
Trust, and (ii) in the case of the Managing
Owner, a duly formed and validly
existing corporation, in each case, in good
standing under the laws of the State
of Delaware, and in good standing and
qualified to do business in each
jurisdiction in which the nature and conduct
of its business requires such
qualification and where the failure to be so
qualified would materially adversely
affect its ability to perform its obligations
under this Agreement.
The within representations and warranties
shall be continuing during the term
of this Agreement, and, if at any time, any
event has occurred which would
make or tend to make any of the foregoing not
true in any material respect, the
Managing Owner promptly will notify the
Advisor in writing.
16. Assignment.
This Agreement may not be assigned by any of
the parties hereto without the
express prior written consent of the other
parties hereto, except that the Advisor
need not obtain the consent of any Other
Advisor.
17. Successors.
This Agreement shall be binding upon and
inure to the benefit of the parties
hereto and the successors and permitted
assignees of each of them, and no other
person (except as otherwise provided herein)
shall have any right or obligation
under this Agreement. The terms "successors"
and "assignees" shall not include any purchasers, as such, of
Interests.
18. Amendment or Modification or Waiver.
This Agreement may not be amended or
modified, nor may any of its
provisions be waived, except upon the prior written
consent of the parties hereto, except
that an amendment to, a modification of, or a
waiver of any provision of the
Agreement as to the Advisor need not be
consented to by any Other Advisor.
19. Notices.
Except as otherwise provided herein, all
notices required to be delivered under
this Agreement shall be effective only if in
writing and shall be deemed given by
the party required to provide notice when
received by the party to whom notice is
required to be given and shall be delivered
personally or by registered mail,
postage prepaid, return receipt requested, or
by telecopy, as follows (or to such
other address as the party entitled to notice
shall hereafter designate by written
notice to the other parties):
If to the Managing Owner or the Trust:
c/o Prudential Securities Futures Management Inc.
One New York Plaza, 13th floor
New York, New York 10292-2013
Attention: Eleanor L. Thomas
Facsimile: (212) 778-3694
and in either case with a copy to:
Rosenman & Colin LLP and Prudential Securities Incorporated
575 Madison Avenue One New York Plaza, 13th Floor
New York, New York 10022 New York, New York 10292-2013
Attention: Fred M. Santo, Esq. Attention: Guy Scarpaci
Facsimile: (212) 940-7079 Facsimile: (212) 214-7678
<PAGE>
If to the Advisor:
Eagle Trading Systems Inc.
47 Hulfish Street, Suite 410
Princeton, New Jersey 08542
Attention: Menachem Sternberg
Facsimile: (609) 688-2099
20. Governing Law.
Each party agrees that this Agreement shall
be governed by and construed in
accordance with the laws of the State of New
York without regard to conflict of laws principles.
21. Survival.
The provisions of this Agreement shall
survive the termination of this
Agreement with respect to any matter arising
while this Agreement was in effect.
22. Disclosure Document Modifications.
The Advisor shall promptly furnish the
Managing Owner with a copy of all
modifications to its Disclosure Document when
available for distribution. Upon
receipt of any modified Disclosure Document
by the Managing Owner, the
Managing Owner will provide the Advisor with
an acknowledgement of receipt thereof.
23. Promotional Literature.
Each party agrees that prior to using any
promotional literature in which
reference to the other parties hereto is
made, it shall furnish in advance a
copy of such information to the other parties and
will not make use of any
promotional literature containing references
to such other parties to which such
other parties object, except as otherwise
required by law or regulation.
24. No Waiver.
No failure or delay on the part of any party
hereto in exercising any right, power
or remedy hereunder shall operate as a waiver
thereof, nor shall any single or
partial exercise of any such right, power or
remedy preclude any other or further
exercise thereof or the exercise of any other
right, power or remedy. Any waiver
granted hereunder must be in writing and
shall be valid only in the specific
instance in which given.
25. No Liability of Limited Owners.
This Agreement has been made and executed by
and on behalf of the Trust, and
the obligations of the Trust and/or the
Managing Owner set forth herein are not
binding upon any of the Limited Owners
individually, but rather, are binding
only upon the assets and property of the
Trust, and, to the extent provided
herein, upon the assets and property of the
Managing Owner.
26. Headings.
Headings to Sections herein are for the
convenience of the parties only, and are
not intended to be or to affect the meaning
or interpretation of this Agreement.
27. Complete Agreement.
Except as otherwise provided herein, this
Agreement and the Representation
Agreement constitute the entire agreement
between the parties with respect to
the matters referred to herein, and no other
agreement, verbal or otherwise,
shall be binding upon the parties hereto.
28. Counterparts.
This Agreement may be executed in one or more
counterparts, each of which
shall be deemed an original and all of which,
when taken together, shall
constitute one original instrument.
26. Arbitration, Remedies.
Each party hereto agrees that any dispute
relating to the subject matter of this
Agreement shall be settled and determined by
arbitration in the City of New
York pursuant to the rules of NFA or, if NFA
should refuse to accept the matter,
the American Arbitration Association.
IN WITNESS WHEREOF, this Agreement has been
executed for and on behalf
of the undersigned as of the day and year
first above written.
WORLD MONITOR TRUST - Series A PRUDENTIAL SECURITIES
FUTURES MANAGEMENT, INC.
By: PRUDENTIAL SECURITIES
FUTURES MANAGEMENT INC.
Its: Managing Owner By: /s/ Joseph A. Filicetti
Joseph A. Filicetti
President
By: /s/ Eleanor L. Thomas
Eleanor L. Thomas
Executive Vice-President
EAGLE TRADING SYSTEMS INC.
By: /s/ Menachem Sternberg
Menachem Sternberg
Chairman
<PAGE>
EXHIBIT A
SERIES A TRADING SYSTEM
TRADING SYSTEM OF EAGLE TRADING SYSTEMS INC.
The Advisor's will make its trading decisions
for Series A according to its Eagle-
Global System as described in Exhibit D as
amended from time to time.
<PAGE>
EXHIBIT B
TRADING LIMITATIONS AND POLICIES
The following limitations and policies are
applicable to assets representing the
Series A Allocated Assets of the Trust as a
whole and at the outset to the Advisor
individually; since the Advisor initially
will manage 100% of the Trust's Series A
Allocated Assets, such application of the
limitations and policies is identical
initially for the Series A Allocated Assets
of the Trust and the Advisor. The
Advisor sometimes may be prohibited from
taking positions for the Series A
Allocated Assets which it would otherwise
acquire due to the need to comply with
these limitations and policies. The Managing
Owner will monitor compliance
with the trading limitations and policies set
forth below, and it may impose
additional restrictions (through modification
of such limitations and policies)
upon the trading activities of the Advisor,
as it, in good faith, deems appropriate
in the best interests of the Series A
Interests of the Trust, subject to the
terms of the Advisory Agreement.
The Managing Owner will not approve a
material change in the following
trading limitations and policies without
obtaining the prior written approval of
Limited Owners owning more than 50% of the
Series A Interests. The
Managing Owner may, however, impose
additional trading limitations on
the trading activities of the Series A Interests
of the Trust without obtaining such
approval if the Managing Owner determines
such additional limitations to be
necessary in the best interests of the Series
A Interests of the Trust.
Trading Limitations
The Series A Interests of the Trust will not:
(i) engage in pyramiding its
commodities positions (i.e., the use of
unrealized profits on existing
positions to provide margin for the acquisition of
additional positions in the same or a
related commodity), but may take into account
open trading equity on existing
positions in determining generally whether to
acquire additional commodities
positions; (ii) borrow or loan money (except
with respect to the initiation or
maintenance of commodities positions or
obtaining lines of credit for the trading
of forward currency contracts; provided,
however, that the Series A Interests of
the Trust is prohibited from incurring any
indebtedness on a non-recourse
basis); (iii) permit rebates to be received
by the Managing Owner or its affiliates,
or permit the Managing Owner or any affiliate
to engage in any reciprocal
business arrangements which would circumvent
the foregoing prohibition;
(iv) permit the Advisor to share in any
portion of the commodity brokerage fees
paid by the Series A Interests of the Trust;
(v) commingle its assets, except as
permitted by law; or (vi) permit the churning
of its commodity accounts.
The Series A Interests of the Trust will
conform in all respects to the rules,
regulations and guidelines of the markets on
which its trades are executed.
Trading Policies
Subject to the foregoing limitations, the
Advisor has agreed to abide by the
trading policies of the Series A Interests of
the Trust, which currently are as
follows:
(1) Series A Allocated Assets will generally
be invested in contracts which are
traded in sufficient volume which, at the
time such trades are initiated, are
reasonably expected to permit entering and
liquidating positions.
(2) Stop or limit orders may, in the
Advisor's discretion, be given with
respect to initiating or liquidating positions in
order to attempt to limit losses or secure
profits. If stop or limit orders are used,
no assurance can be given, however,
that Prudential Securities will be able to
liquidate a position at a specified stop or
limit order price, due to either the
volatility of the market or the inability
to trade because of market limitations.
(3) The Series A Interests of the Trust
generally will not initiate an open
position in a futures contract (other than a
cash settlement contract) during any
delivery month in that contract, except when
required by exchange rules, law or
exigent market circumstances. This policy
does not apply to forward and cash
market transactions.
(4) The Series A Interests of the Trust may
occasionally make or accept
delivery of a commodity including, without
limitation, currencies. The Series A
Interests of the Trust also may engage in EFP
transactions involving currencies
and metals and other commodities.
(5) The Series A Interests of the Trust may,
from time to time, employ trading
techniques such as spreads, straddles and
conversions.
(6) The Series A Interests of the Trust will
not initiate open futures or option
positions which would result in net long or
short positions requiring as margin
or premium for outstanding positions in
excess of 15% of the Trust's Series A
Allocated Assets for any one commodity, or in
excess of 66(% of the Trust's
<PAGE>
Series A Allocated Assets for all commodities
combined. Under certain market
conditions, such as an inability to liquidate
open commodities positions because
of daily price fluctuations, the Managing
Owner may be required to commit
Allocated Assets as margin in excess of the
foregoing limits and in such case the
Managing Owner will cause the Advisor to
reduce its open futures and option
positions to comply to these limits before
initiating new commodities positions.
(7) To the extent the Series A Interests of
the Trust engages in transactions in
forward currency contracts other than with or
through Prudential Securities
and/or PBFI, the Series A Interests of the
Trust will only engage in such
transactions with or through a bank which as
of the end of its last fiscal year
had an aggregate balance in its capital,
surplus and related accounts of at least
$100,000,000, as shown by its published
financial statements for such year, and
through other broker-dealer firms with an
aggregate balance in its capital,
surplus and related accounts of at least
$50,000,000.
<PAGE>
EXHIBIT C
[REPRESENTATION AGREEMENT]
<PAGE>
EXHIBIT D
[ATTACH LATEST DISCLOSURE DOCUMENT]
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for World Monitor Trust-Series A
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 1051822
<NAME> World Monitor Trust-Series A
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<PERIOD-TYPE> 12-Mos
<CASH> 26,587,416
<SECURITIES> 924,338
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,511,754
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,511,754
<CURRENT-LIABILITIES> 2,528,165
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 24,983,589
<TOTAL-LIABILITY-AND-EQUITY> 27,511,754
<SALES> 0
<TOTAL-REVENUES> (3,514,892)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,696,568
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,211,460)
<EPS-BASIC> (27.31)
<EPS-DILUTED> 0
</TABLE>
