<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 26, 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: 333-43041
WORLD MONITOR TRUST--SERIES B
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3985041
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One New York Plaza, 13th Floor, New York, New York 10292
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 778-7866
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _CK_ No __
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
WORLD MONITOR TRUST--SERIES B
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 26, December 31,
1999 1998
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
ASSETS
Equity in commodity trading accounts:
Cash $15,415,131 $11,239,221
Net unrealized gain on open commodity positions 359,975 318,838
------------- ------------
Net equity 15,775,106 11,558,059
Accrued interest receivable 59,395 --
------------- ------------
Total assets $15,834,501 $11,558,059
------------- ------------
------------- ------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Incentive fees payable $ 85,590 $ 60,812
Commissions payable 82,723 76,364
Management fees payable 22,864 20,626
------------- ------------
Total liabilities 191,177 157,802
------------- ------------
Commitments
Trust capital
Limited interests (134,372.998 and 100,451.891 interests
outstanding) 15,436,545 11,249,078
General interests (1,800 and 1,350 interests outstanding) 206,779 151,179
------------- ------------
Total trust capital 15,643,324 11,400,257
------------- ------------
Total liabilities and trust capital $15,834,501 $11,558,059
------------- ------------
------------- ------------
Net asset value per limited and general interest ('Interests') $ 114.88 $ 111.98
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
2
<PAGE>
WORLD MONITOR TRUST--SERIES B
(a Delaware Business Trust)
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the period from
January 1, 1999
through
March 26,
1999
<S> <C>
- ----------------------------------------------------------------------------------------------------
REVENUES
Net realized gain on commodity transactions $ 599,886
Change in net unrealized gain on open commodity positions 41,137
Interest income 148,824
-------------------
789,847
-------------------
EXPENSES
Commissions 239,909
Management fees 61,951
Incentive fees 67,874
-------------------
369,734
-------------------
Net income $ 420,113
-------------------
-------------------
ALLOCATION OF NET INCOME
Limited interests $ 415,763
-------------------
-------------------
General interests $ 4,350
-------------------
-------------------
NET INCOME PER WEIGHTED AVERAGE LIMITED AND GENERAL INTEREST
Net income per weighted average limited and general interest $ 3.58
-------------------
-------------------
Weighted average number of limited and general interests outstanding 117,507
-------------------
-------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN TRUST CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Trust capital--December 31, 1998 101,801.891 $11,249,078 $151,179 $11,400,257
Contributions 36,371.059 3,998,364 51,250 4,049,614
Net income -- 415,763 4,350 420,113
Redemptions (1,999.952) (226,660) -- (226,660)
------------ ----------- --------- -----------
Trust capital--March 26, 1999 136,172.998 $15,436,545 $206,779 $15,643,324
------------ ----------- --------- -----------
------------ ----------- --------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
WORLD MONITOR TRUST--SERIES B
(a Delaware Business Trust)
NOTES TO FINANCIAL STATEMENTS
MARCH 26, 1999
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the financial
position of World Monitor Trust--Series B ('Series B') as of March 26, 1999 and
the results of its operations for the period from January 1, 1999 to March 26,
1999 (the 'First Quarter'). However, the operating results from this interim
period may not be indicative of the results expected for a full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
Series B's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1998 (the 'Annual Report').
B. Related Parties
The managing owner of Series B 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. The Managing Owner or its affiliates perform services for
Series B which include but are not limited to: brokerage services, accounting
and financial management, registrar, transfer and assignment functions, investor
communications, printing and other administrative services. Except for costs
related to brokerage services, PSI or its affiliates pay the costs of these
services in addition to costs of organizing Series B and offering its Interests
as well as the routine operational, administrative, legal and auditing fees. As
described in the Annual Report, all commissions for brokerage services are paid
to PSI.
All of the proceeds of the offering of Series B are received in the name of
Series B and are deposited in trading or cash accounts at PSI, Series B's
commodity broker. Series B's assets are maintained either with PSI or, for
margin purposes, with the various exchanges on which Series B is permitted to
trade. PSI credits Series B monthly with 100% of the interest it earns on the
average net assets in Series B's accounts.
Series B, 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 Series B pursuant to a line of credit. PSI may require that collateral
be posted against the marked-to-market positions of Series B.
As of March 26, 1999, a non-U.S. affiliate of the Managing Owner owns
101.245 limited interests of Series B.
C. Credit and Market Risk
Since Series B'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 commodity positions reflected in the statements of financial condition.
Series B's exposure to market risk is influenced by a number of factors
including the relationships among the contracts held by Series B as well as the
liquidity of the markets in which the contracts are traded.
4
<PAGE>
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 B must rely solely on the credit of its broker (PSI) with
respect to forward transactions. Series B 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 the 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. 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 B.
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 B all assets of Series B relating to
domestic futures and options trading and is not to commingle such assets with
other assets of PSI. At March 26, 1999, such segregated assets totalled
$14,117,043. Part 30.7 of the CFTC regulations also requires PSI to secure
assets of Series B related to foreign futures and options trading which totalled
$1,658,063 at March 26, 1999. There are no segregation requirements for assets
related to forward trading.
As of March 26, 1999, all open futures contracts mature within six months.
As of March 26, 1999 and December 31, 1998, gross contract amounts of open
futures contracts for Series B were:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Financial Futures Contracts:
Commitments to purchase $37,907,568 $20,828,796
Commitments to sell 74,396,832 33,695,952
Currency Futures Contracts:
Commitments to purchase 3,853,180 2,212,998
Commitments to sell 21,294,788 4,951,649
Other Futures Contracts:
Commitments to purchase 5,622,993 95,361
Commitments to sell 629,080 2,291,372
</TABLE>
The gross contract amounts represent Series B's potential involvement in a
particular class of financial instrument (if it were to take or make delivery on
an underlying futures contract). The gross contract amounts significantly exceed
the future cash requirements as Series B intends to close out open positions
prior to settlement and thus is generally subject only to the risk of loss
arising from the change in the value of the contracts. As such, Series B
considers the 'fair value' of its futures 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
B'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.
5
<PAGE>
At March 26, 1999 and December 31, 1998, the fair value of open futures
contracts was:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Domestic exchanges
Financial $ 24,219 $ 23,813 $ 25,309 $ --
Currencies 139,094 4,550 156,861 4,900
Other 166,928 14,600 9,860 19,030
Foreign exchanges
Financial 219,253 72,943 230,845 45,758
Other 8,900 82,513 77,834 112,183
-------- ----------- -------- -----------
$558,394 $ 198,419 $500,709 $ 181,871
-------- ----------- -------- -----------
-------- ----------- -------- -----------
</TABLE>
The following table presents the average fair value and trading revenues of
futures contracts during the First Quarter:
<TABLE>
<CAPTION>
Average Fair Value
------------------------ Trading
Assets Liabilities Revenues
-------- ----------- --------
<S> <C> <C> <C>
Domestic exchanges
Financial $ 37,629 $ 10,617 $ 33,581
Currencies 191,194 51,949 191,653
Other 61,287 12,935 165,373
Foreign exchanges
Financial 245,379 55,626 375,698
Other 59,054 96,914 (125,282)
-------- ----------- --------
$594,543 $ 228,041 $641,023
-------- ----------- --------
-------- ----------- --------
</TABLE>
6
<PAGE>
WORLD MONITOR TRUST--SERIES B
(a Delaware Business Trust)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Series B commenced operations on June 10, 1998 with gross proceeds of
$5,709,093 allocated to commodities trading. Additional contributions raised
through the continuous offering for the period from June 10, 1998 (the
commencement of operations) through March 26, 1999 resulted in additional gross
proceeds to Series B of $8,927,447. Additional Interests of Series B will
continue to be offered on a weekly basis at the net asset value per Interest
until the subscription maximum of $33,000,000 is sold.
At March 26, 1999, 100% of Series B'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 B's trading in commodities. Inasmuch as the
sole business of Series B is to trade in commodities, Series B continues to own
such liquid assets to be used as margin. PSI credits Series B monthly with 100%
of the interest it earns on the average net assets in Series B'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 B from promptly liquidating its commodity
futures positions.
Since Series B's business is to trade futures, forward and options contracts,
its capital is at risk due to changes in the value of these contracts (market
risk) or the inability of counterparties to perform under the terms of the
contracts (credit risk). Series B's exposure to market risk is influenced by a
number of factors including the volatility of interest rates and foreign
currency exchange rates, the liquidity of the markets in which the contracts are
traded and the relationships among the contracts held. The inherent uncertainty
of Series B's speculative trading as well as the development of drastic market
occurrences could result in monthly losses considerably beyond Series B'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 B's trading advisor to abide by various trading limitations
and policies. See Note C to the financial statements for a further discussion on
the credit and market risks associated with Series B's futures, forward and
options contracts.
Redemptions of limited interests during the First Quarter were $226,660.
Redemptions of limited interests from June 10, 1998 (commencement of operations)
through March 26, 1999 were $472,982. Future redemptions and contributions will
impact the amount of funds available for investment in commodity contracts in
subsequent periods.
Series B does not have, nor does it expect to have, any capital assets.
Results of Operations
Series B commenced trading operations on June 10, 1998, and as such, no
comparative information is available for 1998.
The net asset value per Interest as of March 26, 1999 was $114.88, an
increase of 2.59% from the December 31, 1999 net asset value per Interest of
$111.98.
First Quarter trading resulted in net gains. Profits were generated in the
financial, index, energy and currency sectors. Losses were incurred in the metal
sector. Long positions in the index sector benefited from a global rally in
equities. In the financial sector, the German bund and new Euribor contracts
showed strength in the Euro's opening month, adding small profits. A slide in
U.S. Treasury bond contracts added the largest share of profits in the financial
sector. Long-term interest rate trading in Australian and European bonds was
uniformly profitable as their rates followed those in the U.S. The metal sector
rallied until events in Kosovo caused a sharp reversal, resulting in small
losses.
7
<PAGE>
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 approximately $149,000 for
the First Quarter.
Commissions are calculated on Series B's net asset value at the end of each
week and therefore, vary according to weekly trading performance, contributions
and redemptions. Commissions were approximately $240,000 for the First Quarter.
All trading decisions for Series B are made by Eclipse Capital Management,
Inc. (the 'Trading Advisor'). Management fees are calculated on Series B's net
asset value at the end of each week and therefore, are affected by weekly
trading performance, contributions and redemptions. Management fees were
approximately $62,000 for the First Quarter.
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 for the First Quarter
were approximately $68,000.
Year 2000 Risk
A discussion of Year 2000 risk and its effect on the operations of Series B
is included in Series B's Annual Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding quantitative and qualitative disclosures about market
risk is not required pursuant to Item 305(e) of Regulation S-K.
8
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--There are no material legal proceedings pending by or
against the Registrant or the Managing Owner.
Item 2. Changes in Securities-- Effective April 1999, Eleanor L. Thomas and
Joseph A. Filicetti have been elected by the
Board of Directors of the Managing Owner as
directors. In addition, Mr. Filicetti has also
been elected by the Board of Directors as
President of the Managing Owner replacing Thomas
M. Lane. Mr. Filicetti joined PSI in September
1998 and is the Director of Sales and Marketing
for Managed Futures. Ms. Thomas was elected by
the Board of Directors of the Managing Owner as
Executive Vice President. Ms. Thomas joined PSI
in February 1993 and is primarily responsible for
origination, asset allocation, and due diligence
for Managed Futures.
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits--
3.1
and
4.1-- Second Amended and Restated Declaration of Trust and Trust
Agreements of World Monitor Trust dated as of March 17, 1998
(incorporated by reference to Exhibits 3.1 and 4.1 to Series B's
Registration Statement on Form S-1, File No. 333-43041)
4.2-- Form of Request for Redemption (incorporated by reference
to Exhibit 4.2 to Series B's Registration Statement on Form
S-1, File No. 333-43041)
4.3-- Form of Exchange Request (incorporated by reference
to Exhibit 4.3 to Series B's Registration Statement
on Form S-1, File No. 333-43041)
4.4-- Form of Subscription Agreement (incorporated
by reference to Exhibit 4.4 to Series B's
Registration Statement on Form S-1, File No.
333-43041)
27.1--Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K--None
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLD MONITOR TRUST--SERIES B
By: Prudential Securities Futures Management Inc.
A Delaware corporation, Managing Owner
By: /s/ Steven Carlino Date: May 10, 1999
----------------------------------------
Steven Carlino
Vice President and Treasurer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for World Monitor Trust--Series B
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 1051823
<NAME> World Monitor Trust--Series B
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-26-1999
<PERIOD-TYPE> 3-Mos
<CASH> 15,415,131
<SECURITIES> 359,975
<RECEIVABLES> 59,395
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,834,501
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,834,501
<CURRENT-LIABILITIES> 191,177
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15,643,324
<TOTAL-LIABILITY-AND-EQUITY> 15,834,501
<SALES> 0
<TOTAL-REVENUES> 789,847
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 369,734
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 420,113
<EPS-PRIMARY> 3.58
<EPS-DILUTED> 0
</TABLE>
