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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended: December 31, 1998
or
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-26932
THE MILLBURN WORLD RESOURCE TRUST
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(Exact name of registrant as specified in its charter)
Delaware 06-6415-583
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o MILLBURN RIDGEFIELD CORPORATION
411 West Putnam Avenue
Greenwich, Connecticut 06830
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(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 625-7554
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: UNITS OF BENEFICIAL
INTEREST
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(Title of Class)
Indicate by check mark whether the registrant (1) 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 X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations 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. [X]
Aggregate market value of the voting and non-voting common equity held by
non-affiliates as of February 28, 1999: $65,720,768
Documents Incorporated by Reference
None
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TABLE OF CONTENTS
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Page
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PART I
Item 1. Business...................................................................... 1
Item 2. Properties.................................................................... 2
Item 3. Legal Proceedings............................................................. 2
Item 4. Submission of Matters to a Vote of Security Holders........................... 2
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters........................................................... 3
Item 6. Selected Financial Data....................................................... 3
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................... 5
Item 7A. Quantitative and Qualitative Disclosures About Market Risk................... 7
Item 8. Financial Statements and Supplementary Data................................... 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................................... 11
PART III
Item 10. Directors and Executive Officers of the Registrant............................ 11
Item 11. Executive Compensation........................................................ 13
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................................... 14
Item 13. Certain Relationships and Related Transactions................................ 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K................................................................... 14
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PART I
Item 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
The Millburn World Resource Trust (the "Trust") is a business trust
organized June 7, 1995 pursuant to a Declaration of Trust and Trust Agreement
(the "Trust Agreement"), under the Delaware Business Trust Act. Between July 12,
1995 and September 11, 1995 (the "Initial Offering"), units of beneficial
interest in the Trust (the "Units") were publicly offered at an initial price of
$1,000 per Unit. The proceeds of the Initial Offering and interest thereon were
held in escrow until September 13, 1995 at which time an aggregate of
$15,141,664 was turned over to the Trust and the Trust commenced operations.
Units continue to be offered on a monthly basis at Net Asset Value per unit. The
offering is registered under the Securities Act of 1933, as amended. PaineWebber
Incorporated acts as principal selling agent on a best efforts basis. A total of
$93,393,477 of Units have been sold to the public as of December 31, 1998.
The Trust engages in speculative trading in the futures, options and
forward markets.
Millburn Ridgefield Corporation (the "Managing Owner"), a Delaware
corporation, is the managing owner and the commodity trading advisor for the
Trust. The Managing Owner invested $400 in the Trust as an initial capital
contribution to the Trust and $155,005 in the Trust at the outset of trading and
subsequently has contributed an additional $417,000 as of December 31, 1998.
After reflecting net income of $97,422 and profit share of $0, this investment
totaled (after deductions for redemptions) $873,631, as of December 31, 1998.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership's business constitutes only one segment, i.e., a
speculative commodity pool. The Partnership does not engage in sales of goods
and services.
(c) NARRATIVE DESCRIPTION OF BUSINESS
The Trust engages in the speculative trading of futures, options on
futures and forward contracts. The Trust's sole trading advisor is the Managing
Owner. The Managing Owner trades the Trust's assets in the agricultural, metals,
energy, interest rate and stock indices futures and futures options markets and
in the currency markets, trading primarily forward contracts in the interbank
market. Pursuant to the Trust Agreement, the Managing Owner receives a flat-rate
monthly brokerage fee equal to 0.75 of 1% of the month-end Net Assets (a 9.0%
annual rate). The Managing Owner retains the right to charge less than the
annual brokerage rate of 9% to those subscribers who either invest $1,000,000 or
more in the Units or subscribe without incurring the selling commission paid by
the Managing Owner. The Managing Owner also receives a profit share equal to
17.5% of any new trading profit as defined, determined as of the end of each
calendar quarter. The quarterly profit share is calculated net of brokerage fees
and administrative expenses and excluding interest income.
Prudential Securities Incorporated and PaineWebber Incorporated (the
"Brokers") act as the primary futures brokers for the Trust. The Trust executes
currency forward trades with Prudential Securities Incorporated. The Trust pays
"bid asked" spreads on its forward trades, as such spreads are incorporated into
the pricing of forward contracts. The Managing Owner monitors the Trust's trades
to ensure that the prices it receives are competitive.
The Trust's organizational and initial offering costs, $600,000, were
advanced by the Managing Owner, for which it was reimbursed by the Trust in 24
equal monthly installments. The reimbursement of these costs was completed in
the year ended December 31, 1997. The Trust will pay any extraordinary expenses
which it may incur.
The Trust is open-ended and offers Units on a continuing basis at net
asset value as of the first day of each month. Unitholders may redeem any or all
of their Units upon 10 business days' written notice to the Managing Owner at
their net asset value as of the last day of any month. Units redeemed on or
prior to the end of the first and second successive six-month periods after
their sale will pay a redemption charge of 4% and 3%, respectively, of the net
asset value at which they are redeemed (3% and 2%, respectively, in the case of
subscriptions for $1,000,000 or more). These redemption charges are paid to the
Managing Owner. Requests for redemption will be honored and payment will be
made, except in the event of highly unusual market disruptions, within 15
business days of the effective date of redemption.
The Trust's assets not deposited as margin are maintained, unless
applicable foreign regulations require otherwise, only in instruments authorized
by the CFTC for the investment of "customer segregated funds."
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REGULATION
Under the Commodity Exchange Act, as amended (the "CEA"), commodity
exchanges and futures trading are subject to regulation by the Commodity Futures
Trading Commission (the "CFTC"). National Futures Association ("NFA"), a
"registered futures association" under the CEA, is the only non-exchange
self-regulatory organization for futures industry professionals. The CFTC has
delegated to NFA responsibility for the registration of "commodity trading
advisors," "commodity pool operators," "futures commission merchants,"
"introducing brokers" and their respective associated persons and "floor
brokers" and "floor traders." The CEA requires commodity pool operators and
commodity trading advisors, such as the Managing Owner, and commodity brokers or
futures commission merchants, such as the Brokers and the Managing Owner, to be
registered and to comply with various reporting and record keeping requirements.
The CFTC may suspend a commodity pool operator's or trading advisor's
registration if it finds that its trading practices tend to disrupt orderly
market conditions or in certain other situations. In the event that the
registration of the Managing Owner as a commodity pool operator or a commodity
trading advisor were terminated or suspended, the Managing Owner would be unable
to continue to manage the business of the Trust. Should the Managing Owner's
registration be suspended, termination of the Trust might result.
As members of NFA, the Managing Owner and the Brokers are subject to
NFA standards relating to fair trade practices, financial condition and customer
protection. As the self-regulatory body of the futures industry, NFA promulgates
rules governing the conduct of futures industry professionals and disciplines
those professionals which do not comply with such standards.
In addition to such registration requirements, the CFTC and certain
commodity exchanges have established limits on the maximum net long or net short
position which any person may hold or control in particular commodities. The
CFTC has adopted a rule requiring all domestic commodity exchanges to submit for
approval speculative position limits for all futures contracts traded on such
exchanges. Most exchanges also limit the changes in futures contract prices that
may occur during a single trading day. Currency forward contracts are not
subject to regulation by any United States Government agency.
(i) through (xii) - not applicable.
(xiii) the Trust has no employees.
(d) Financial information about foreign and
DOMESTIC OPERATIONS AND EXPORT SALES
The Trust does not engage in material operations in foreign countries
(although it does trade in foreign currency forward contracts), nor is a
material portion of its revenues derived from foreign customers.
Item 2. PROPERTIES
The Trust does not own or use any physical properties in the conduct of
its business. The Managing Owner or an affiliate perform all administrative
services for the Trust from their offices.
Item 3. LEGAL PROCEEDINGS
The Managing Owner is not aware of any pending legal proceedings to
which either the Trust is a party or to which any of its assets are subject. In
addition there are no pending material legal proceedings involving the Managing
Owner.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION.
There is no trading market for the Units, and none is likely to
develop. Units may be redeemed upon business 10 days' written notice to the
Managing Owner at their net asset value as of the last day of any month, subject
to certain early redemption charges.
(b) HOLDERS.
As of December 31, 1998, there were 2,843 holders of Units.
(c) DIVIDENDS.
No distributions or dividends have been made on the Units, and the
Managing Owner has no present intention to make any.
(d) RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM
REGISTERED SECURITIES.
Registrant has made no sales of unregistered securities within the past
three years.
REG. S-K ITEM 701(F)
(1) The use of proceeds information is being disclosed for Registration
Statement No. 33-90756 declared effective on July 12, 1995 and Registration
Statement No. 333-50209, filed pursuant to Rule 429 under the Securities Act of
1933, declared effective May 18, 1998.
(4)(iv) For the account of the issuer, the amount of Units sold as of
December 31, 1998 is $93,393,477; and the aggregate offering price of the amount
sold as of December 31, 1998 is $93,393,477.
(vi) The net offering proceeds to the issuer totaled $93,393,477.
(vii) From the effective date of the Registration Statements to
December 31, 1998, the amount of net offering proceeds to the issuer
for commodity futures and forward trading totaled $93,393,477.
Item 6. SELECTED FINANCIAL DATA
The following is a summary of operations for the fiscal years 1998,
1997 and 1996 and for the period from September 13, 1995 to December 31, 1995,
and total assets of the Trust at December 31, 1998, 1997, 1996 and 1995. The
Partnership commenced trading operations on September 13, 1995.
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For the Year Ended For the Year Ended For the Year Ended
December 31, 1998 December 31, 1997 December 31, 1996
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Revenue:
Net realized and unrealized trading gain
(loss), net of brokerage commissions of
$6,528,321, $6,057,327, $3,998,675 and
$548,790 in 1998, 1997, 1996 and 1995, $578,319 $ (945,912) $5,143,118
respectively
Interest income 3,810,780 3,467,544 2,115,972
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4,389,099 2,521,632 7,259,090
Foreign exchange gain (loss) (198,930) 62,685 (72,910)
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Total income $4,190,169 $2,584,317 $7,186,180
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Expenses:
Profit share - - 695,667 829,081
Administrative expenses 581,101 345,473 519,753
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Total expenses 581,101 $1,041,140 $1,348,834
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Net Income $3,609,068 $1,543,177 $5,837,346
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Total assets $76,437,649 $74,862,554 $58,916,566
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Total limited partners' capital $72,947,006 $72,794,694 $54,723,006
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Net asset value per Unit $1,234.38 $1,182.43 $1,150.14
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Redemption value per Unit $1,234.38 $1,182.43 $1,154.81
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Increase in net asset value per Unit $51.95 $32.29 $99.45
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Increase in redemption value per Unit $51.95 $27.62 $82.47
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For the period September 13, 1995
to December 31, 1995
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Revenue:
Net realized and unrealized trading gain
(loss), net of brokerage commissions of
$6,528,321, $6,057,327, $3,998,675 and
$548,790 in 1998, 1997, 1996 and 1995, $ 2,733.790
respectively
Interest income 303,229
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3,037,019
Foreign exchange gain (loss) (9,539)
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Total income 3,027,480
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Expenses:
Profit share 460,840
Administrative expenses 59,492
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Total expenses 520,332
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Net Income $ 2,507,148
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Total assets $27,177,664
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Total limited partners' capital $25,201,890
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Net asset value per Unit $ 1,050.69
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Redemption value per Unit $ 1,072.34
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Increase in net asset value per Unit $50.69
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Increase in redemption value per Unit $72.34
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is made to "Item 6. SELECTED FINANCIAL DATA" and "Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA." The information contained therein
is essential to, and should be read in conjunction with, the following analysis.
CAPITAL RESOURCES
Units are offered for sale as of the beginning, and may be redeemed as
of the end, of each month.
The amount of capital raised for the Trust should not have a
significant impact on its operations, as the Trust has no significant capital
expenditure or working capital requirements other than for monies to pay trading
losses, brokerage commissions and charges. Within broad ranges of
capitalization, the Managing Owner's trading positions should increase or
decrease in approximate proportion to the size of the Trust.
The Trust raises additional capital only through the sale of Units and
trading profits (if any) and does not engage in borrowing.
The Trust trades futures, options and forward contracts on interest
rates, commodities, currencies, metals, energy and stock indices. Risk arises
from changes in the value of these contracts (market risk) and the potential
inability of counterparties or brokers to perform under the terms of their
contracts (credit risk). Market risk is generally to be measured by the face
amount of the futures positions acquired and the volatility of the markets
traded. The credit risk from counterparty non-performance associated with these
instruments is the net unrealized gain, if any, on these positions. The risks
associated with exchange-traded contracts are generally perceived to be less
than those associated with over-the-counter transactions, because exchanges
typically (but not universally) provide clearinghouse arrangements in which the
collective credit (in some cases limited in amount, in some cases not) of the
members of the exchange is pledged to support the financial integrity of the
exchange. In over-the-counter transactions, on the other hand, traders must rely
solely on the credit of their respective individual counterparties. Margins
which may be subject to loss in the event of a default, are generally required
in exchange trading, and counterparties may require margin in the
over-the-counter markets.
The Managing Owner has procedures in place to control market risk,
although there can be no assurance that they will, in fact, succeed in doing so.
These procedures primarily focus on (1) limiting trading to markets which the
Managing Owner believes are sufficiently liquid in respect of the amount of
trading contemplated; (2) diversifying positions among various markets; (3)
limiting the assets committed as margin, generally within a range of 15% to 35%
of an account's Net Assets at exchange minimum margins, (including imputed
margins on forward positions) although the amount committed to margin at any
time may be substantially higher; (4) prohibiting pyramiding (that is, using
unrealized profits in a particular market as margin for additional positions in
the same market); and (5) changing the equity utilized for trading by an account
solely on a controlled periodic basis rather than as an automatic consequence of
an increase in equity resulting from trading profits. The Trust controls credit
risk by dealing exclusively with large, well capitalized financial institutions,
such as the Brokers, as brokers and counterparties.
Due to the nature of the Trust's business, substantially all its assets
are represented by cash, United States government obligations and short-term
foreign sovereign debt obligations, while the Trust maintains its market
exposure through open futures and forward contract positions.
The Trust's futures contracts are settled by offset and are cleared by
the exchange clearinghouse function. Open futures positions are marked to market
each trading day and the Trust's trading accounts are debited or credited
accordingly. Options on futures contracts are settled either by offset or by
exercise. If an option on a future is exercised, the Trust is assigned a
position in the underlying future which is then settled by offset. The Trust's
spot and forward currency transactions conducted in the interbank market are
settled by netting offsetting positions held with the same counterparty; net
positions are then settled by entering into offsetting positions and by cash
payments.
LIQUIDITY
The Trust's assets are generally held as cash or cash equivalents which
are used to margin the Trust's futures positions and withdrawn, as necessary, to
pay redemptions and expenses. Other than potential market-imposed limitations on
liquidity, due, for example, to daily price fluctuation limits, which are
inherent in the Trust's futures and forward trading, the Trust's assets are
highly liquid and are expected to remain so. During its operations through
December 31, 1998, the Trust experienced no meaningful periods of illiquidity in
any of the numerous markets traded by the Managing Owner.
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RESULTS OF OPERATIONS
PERFORMANCE SUMMARY
The Trust's success depends on the Managing Owner's ability to
recognize and capitalize on trends and other profit opportunities in different
sectors of the world economy. The Managing Owner's trading methods are
confidential, so that substantially the only information that can be furnished
regarding the Trust's results of operations is its performance record. Unlike
most operating businesses, general economic or seasonal conditions have no
direct effect on the profit potential of the Trust, while, at the same time, its
past performance is not necessarily indicative of future results. Because of the
speculative nature of its trading, operational or economic trends have little
relevance to the Trust's results. The Managing Owner believes, however, that
there are certain market conditions -- for example, markets with strong price
trends -- in which the Trust has a better opportunity of being profitable than
in others.
1998
During 1998, the Trust achieved gross trading gains of $7,106,640.
Brokerage fees of 6,528,321 were paid or accrued. The Trust paid no Profit
Shares. Interest income of $3,810,780 resulted in net income (after deduction
for administrative expenses) of $3,609,068 and a 4.4% increase in the Net Asset
Value per Unit.
During 1998, the trust was profitable. Against a low inflation
background, trading in interest rate futures was highly profitable, particularly
during the third quarter when "flight to quality" produced sizable gains on long
positions in U.S., European and Japanese interest rate futures. Short positions
in Japanese government bond futures near year-end were also very profitable when
the bond yield rebounded from an historically low level. Energy trading was also
very profitable as short positions in crude oil, heating oil, London gas oil and
unleaded gas benefited from the declining energy prices that reflected
continuing slack demands worldwide combined with lack of production restraint
from both OPEC and non-OPEC producers. Grain trading was fractionally
profitable. Currency trading, while registering mixed results in various
sectors, was slightly unprofitable overall. Trading on both sides of dollar/yen
produced excellent results, but these gains were more than offset by losses on
trading the European currencies against the dollar. Meanwhile, gains from
trading exotic currencies were offset by losses in cross rate trading. Stock
index trading lost money as gains in Hong Kong and U.S. index positioning fell
short of losses in trading Japanese and Australian indices. Volatile,
non-trending price action in copper futures resulted in losses in metal trading.
In the softs sector, volatile swings in coffee and cocoa prices generated losses
that overwhelmed the significant gains that were made in short sugar positions.
1997
During 1997, the Trust achieved gross trading gains of $5,111,415.
Brokerage fees of $6,057,327 and Profit Shares of $695,667 were paid or accrued.
Interest income of $3,467,544 resulted in net income (after deduction for
administrative expenses, but without reduction for organizational and initial
offering cost reimbursement payments) of $1,543,177 and a 2.8% increase in the
Net Asset Value per Unit.
During 1997, the Trust was profitable. For the year, financial markets'
trading (interest rates, currencies, and stock indices) was profitable. However,
substantial losses resulted from trading the non-financial sectors, especially
metals. The majority of currency trading profits occurred in dollar trading
versus the Japanese yen and European community currency bloc. In the interest
rate sector, trading of the Japanese government bond future was profitable, and
gains were also produced in trading futures for the Euro-yen, U.S. treasury
note, Spanish government bond, Italian bond, and Australian bond. Trading of the
German bond and Pibor futures produced notable losses. Stock index futures
trading was profitable for Japan's Topix and Nikkei, Korea's Hang Seng, and
Australia's All Ordinaries. In the non-financial component of the Trust's
portfolio, metal futures trading was negative, particularly due to losses from
London aluminum and nickel. Trading in softs also was generally negative as
sizable losses were produced in sugar, orange juice and cocoa. However, gains
from coffee positions countered these losses to large extent. In the energy
sector, gains in natural gas served to counterbalance losses in crude oil,
heating oil, unleaded gas, and London gas oil. Trading of grain futures was
slightly negative for the year.
1996
During 1996, the Trust achieved gross trading gains of $9,141,793.
Brokerage Fees of $3,998,675 and Profit Shares of $829,081 were paid or accrued.
Interest income of $2,115,972 resulted in net income (after deduction for
administrative expenses, but without reduction for organizational and initial
offering cost reimbursement payments) of $5,837,346 and a 7.69% increase in the
Net Asset Value per Unit (for redemption purposes).
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January 1996 began with major gains continuing in the energy sector,
but the upward price trends in these markets reversed sharply later in the month
and resulted in a small loss. February saw the Trust incur its worst monthly
drawdown as all six sectors traded by World Resource Portfolio sustained losses
- -- an unusual result. In the next two months, the Trust managed comparatively
minor gains and then in May a loss of (7.88)% was sustained, as all sectors
except energy were unprofitable. In June, a soaring energy market produced gains
which almost offset May's losses. In July, the Trust incurred slight losses as
energy trading was unprofitable. The following five months, August through
December, produced profits in each month as major trends occurred in the
interest rate and currency markets.
Inflation may be a significant factor in the Trust's profitability in
light of the Trust's trading in energy, agricultural and metals markets.
However, inflationary cycles can give rise to types of price movements which can
either have a favorable or an adverse impact on the Trust's profitability.
THE YEAR 2000 COMPUTER ISSUE
Many existing computer systems use only two digits to refer to a year.
This technique can cause the systems to treat the year 2000 as 1900, an effect
commonly known as the "Year 2000 Problem." The Trust, like other financial and
business organizations, depends on the smooth functioning of computer systems
and could be adversely affected if the computer systems on which it relies do
not properly process and calculate date-related information concerning dates on
or after January 1, 2000.
The Managing Owner administers the business of the Trust through
various systems and processes maintained by the Managing Owner. The Managing
Owner's modifications for Year 2000 compliance are proceeding and are expected
to be completed, with respect to mission-critical systems, by April 1999, and,
with respect to other systems, by July 1999. The expenses incurred to date by
the Managing Owner in preparing for Year 2000 compliance have not had a material
adverse impact on the Managing Owner's financial position, and the expenses to
be incurred in becoming fully Year 2000 compliant are not expected to have a
material adverse impact on the Managing Owner's financial position. The Trust
itself has no systems or information technology applications relevant to its
operations and, thus, has no expenses related to addressing the Year 2000
Problem.
In addition to the Managing Owner, the Trust is dependent on the
capability of the various exchanges, Clearing Brokers and other third parties
with which the Trust has material relationships to prepare adequately for the
Year 2000 Problem and its impact on their systems and processes. The major U.S.
futures exchanges participated in the Futures Industry Association Y2K Beta Test
during September 1998 and will participate in the Futures Industry Association
Y2K industry-wide test for Year 2000 compliance during the first and second
quarters of 1999. The Futures Industry Association Y2K Tests are to test links
with outside entities. The Clearing Brokers are addressing their Year 2000
issues and will participate in the Futures Industry Association Y2K
industry-wide test for Year 2000 compliance during the first and second quarters
of 1999. The Managing Owner is currently implementing procedures to monitor the
progress of the Clearing Brokers, exchanges and other third parties with which
the Trust has a material relationship in addressing their Year 2000 issues.
The most likely and most significant risk to the Trust associated with
the lack of Year 2000 readiness is the failure of third parties, including the
Clearing Brokers, exchanges, foreign exchange counterparties and various
regulators to resolve their Year 2000 issues in a timely manner . This risk
could involve the temporary inability to transfer funds electronically or to
determine the Net Asset Value of the Trust, in which case it could become
impossible for the Trust to continue trading activities and sales could be
suspended and/or redemption payments delayed until the Trust's assets could be
valued and/or funds could be transferred. If the Managing Owner believes, prior
to December 31, 1999, that any third party has failed to resolve a Year 2000
issue likely to have a material adverse impact on the Trust, the Managing Owner
will attempt to close any Trust positions carried by such third party or exposed
to such third party's failure to resolve its Year 2000 issue and to cease
trading with or through such third party until such issue is resolved.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTRODUCTION
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE
The Trust is a speculative commodity pool. Unlike an operating company,
the risk of market sensitive instruments is integral, not incidental, to the
Trust's main line of business.
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Market movements result in frequent changes in the fair market value of
the Trust's open positions and, consequently, in its earnings and cash flow. The
Trust'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 Trust's open positions and the liquidity of the markets in which it
trades.
The Trust can rapidly acquire and/or liquidate both long and short
positions in a wide range of different markets. Consequently, it is not possible
to predict how a particular future market scenario will affect performance, and
the Trust's past performance is not necessarily indicative of its future
results.
Value at Risk is a measure of the maximum amount which the Trust could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Trust's speculative trading and the recurrence in the markets
traded by the Trust of market movements far exceeding expectations could result
in actual trading or non-trading losses far beyond the indicated Value at Risk
or the Trust'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 Trust's
losses in any market sector will be limited to Value at Risk or by the Trust's
attempts to manage its market risk.
QUANTIFYING THE TRUST'S TRADING VALUE AT RISK
QUANTITATIVE FORWARD-LOOKING STATEMENTS
THE FOLLOWING QUANTITATIVE DISCLOSURES REGARDING THE TRUST'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 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934). ALL
QUANTITATIVE DISCLOSURES IN THIS SECTION ARE DEEMED TO BE FORWARD-LOOKING
STATEMENTS FOR PURPOSES OF THE SAFE HARBOR, EXCEPT FOR STATEMENTS OF HISTORICAL
FACT.
The Trust's risk exposure in the various market sectors traded by the
Managing Owner is quantified below in terms of Value at Risk. Due to the Trust's
mark-to-market accounting, any loss in the fair value of the Trust's open
positions is directly reflected in the Trust's earnings (realized or unrealized)
and cash flow (at least in the case of exchange-traded contracts in which
profits and losses on open positions are settled daily through variation
margin).
Exchange maintenance margin requirements have been used by the Trust as
the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed 95-99% of the maximum one-day losses in the fair
value of any given contract incurred during the time period over which
historical price fluctuations are researched for purposes of establishing margin
levels. 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.
In the case of market sensitive instruments which are not exchange
traded (almost exclusively currencies in the case of the Trust), dealers'
margins have been used as Value at Risk.
The fair value of the Trust's futures and forward positions does not
have any optionality component. However, the Managing Owner also trades
commodity options on behalf of the Trust. The Value at Risk associated with
options is reflected in the following table as the margin requirement
attributable to the instrument underlying each option.
In quantifying the Trust'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 Trust's
positions are rarely, if ever, 100% positively correlated have not been
reflected.
THE TRUST'S TRADING VALUE AT RISK IN DIFFERENT MARKET SECTORS
The following table indicates the trading Value at Risk associated with
the Trust's open positions by market category as of December 31, 1998. As of
December 31, 1998, the Trust's total capitalization was approximately $73.8
million.
-8-
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------
% OF TOTAL
MARKET SECTOR VALUE AT RISK CAPITALIZATION
- ------------- ------------- --------------
<S> <C> <C>
Interest Rates $ 2.9 million 3.9%
Currencies $ 4.4 million 5.9%
Stock Indices $ 2.3 million 3.1%
Metals $ 1.9 million 2.6%
Commodities $ 1.7 million 2.3%
Energies $ 1.9 million 2.6%
-------------- --------------
Total $ 15.1 million 20.4%
-------------- --------------
-------------- --------------
</TABLE>
MATERIAL LIMITATIONS ON VALUE AT RISK
AS AN ASSESSMENT OF MARKET RISK
The face value of the market sector instruments held by the Trust is
typically many times the applicable maintenance margin requirement (maintenance
margin requirements generally ranging between approximately 1% and 10% of
contract face value) as well as many times the capitalization of the Trust. The
magnitude of the Trust'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 -- unusual, but historically recurring from time to
time -- could cause the Trust to incur severe losses over a short period of
time. The foregoing Value at Risk table -- as well as the past performance of
the Trust -- give no indication of this "risk of ruin."
NON-TRADING RISK
The Trust has non-trading market risk on its foreign cash balances not
needed for margin. However, these balances (as well as any market risk they
represent) are immaterial.
The Trust also has non-trading cash flow risk as a result of holding a
substantial portion (approximately 88%) of its assets in U.S. Treasury bills and
other short-term debt instruments (as well as any market risk they represent)
for margin and cash management purposes. Although the Managing Owner does not
anticipate that, even in the case of major interest rate movements, the Trust
would sustain a material mark-to-market loss on its securities positions, if
short-term interest rates decline so will the Trust's cash management income.
The Trust also maintains a portion (approximately 3%) of its assets in cash in
interest-bearing bank accounts. These cash balances are also subject (as well as
any market risk they represent) to cash flow risk, which is not material.
QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES
THE FOLLOWING QUALITATIVE DISCLOSURES REGARDING THE TRUST'S MARKET RISK
EXPOSURES -- EXCEPT FOR (i) THOSE DISCLOSURES THAT ARE STATEMENTS OF HISTORICAL
FACT AND (ii) THE DESCRIPTIONS OF HOW THE MANAGING OWNER MANAGES THE TRUST'S
PRIMARY MARKET RISK EXPOSURES -- CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT. THE TRUST'S PRIMARY MARKET RISK EXPOSURES AS WELL AS
THE STRATEGIES USED AND TO BE USED BY THE MANAGING OWNER FOR MANAGING SUCH
EXPOSURES ARE SUBJECT TO NUMEROUS UNCERTAINTIES, CONTINGENCIES AND RISKS, ANY
ONE OF WHICH COULD CAUSE THE ACTUAL RESULTS OF THE TRUST'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 TRUST.
THERE CAN BE NO ASSURANCE THAT THE TRUST'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 TRUST.
The following were the primary trading risk exposures of the Trust as
of December 31, 1998, by market sector.
INTEREST RATES. Interest rate risk is the principal market exposure of
the Trust. Interest rate movements directly affect the price of the sovereign
bond positions held by the Trust and indirectly the value of its stock index and
currency positions. Interest rate movements in one country as well as relative
interest rate movements between countries materially
-9-
<PAGE>
impact the Trust's profitability. The Trust's primary interest rate exposure is
to interest rate fluctuations in the United States and the other G-7 countries.
However, the Trust also takes positions in futures contracts on the government
debt of smaller nations -- E.G., Spain. The Managing Owner anticipates that G-7
interest rates will remain the primary market exposure of the Trust for the
foreseeable future. The changes in interest rates which have the most effect on
the Trust are changes in long-term, as opposed to short-term, rates. Most of the
speculative positions held by the Trust are in medium- to long-term instruments.
Consequently, even a material change in short-term rates would have little
effect on the Trust were the medium- to long-term rates to remain steady.
CURRENCIES. The Trust's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Trust trades in a large number of currencies,
including cross-rates -- I.E., positions between two currencies other than the
U.S. dollar. However, the Trust's major exposures have typically been in the
dollar/yen, dollar/mark and dollar/pound positions. The Managing Owner does not
anticipate that the risk profile of the Trust's currency sector will change
significantly in the future, although it is difficult at this point to predict
the effect of the introduction of the Euro on the Managing Owner's currency
trading strategies.
STOCK INDICES. The Trust's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Trust are by
law limited to futures on broadly based indices. As of December 31, 1998, the
Trust's primary exposures were in the Simex (Singapore), Nikkei (Japan) and Hang
Sang (Hong Kong) stock indices. The Trust is primarily exposed to the risk of
adverse price trends or static markets in the major U.S., European and Asian
indices. (Static markets would not cause major market changes but would make it
difficult for the Trust to avoid numerous small losses.)
METALS. The World Resource program used for the Trust trades precious
and base metals. The Trust's primary metals market exposure is to fluctuations
in the price of gold aluminum, copper and zinc.
COMMODITIES. The Trust's primary commodities exposure is to
agricultural price movements which are often directly affected by severe or
unexpected weather conditions. Grains, coffee, sugar, cotton and cocoa accounted
for the substantial bulk of the Trust's commodities exposure as of December 31,
1998. In the past, the Trust has had material market exposure to live cattle,
orange juice and the soybean complex and may do so again in the future. However,
the Trust will maintain an emphasis on grains, coffee, sugar, cotton and cocoa,
in which the Trust has historically taken its largest commodity positions.
ENERGY. The Trust's primary energy market exposure is to gas and oil
price movements, often resulting from political developments in the Middle East.
Although the Managing Owner trades natural gas, oil is the dominant energy
market exposure of the Trust. Oil prices are currently depressed, but they can
be volatile and substantial profits and losses have been and are expected to
continue to be experienced in this market.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following were the only non-trading risk exposures of the Trust as
of December 31, 1998.
FOREIGN CURRENCY BALANCES. The Trust's primary foreign currency
balances are in Japanese yen, German marks, British pounds and Canadian and Hong
Kong dollars. The Trust controls the non-trading risk of these balances by
regularly converting these balances back into dollars (no less frequently than
twice a month).
SECURITIES POSITIONS. The Trust's only market exposure in instruments
held other than for trading is in its securities portfolio. The Trust holds only
cash or interest-bearing, credit risk-free, short-term paper -- typically U.S.
Treasury instruments with durations no longer than 1 year. Violent fluctuations
in prevailing interest rates could cause immaterial mark-to-market losses on the
Trust's securities, although substantially all of these short-term instruments
are held to maturity.
QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE
The Managing Owner attempts to control risk through the systematic
application of its trading method, which includes a multi-system approach to
price trend recognition, an analysis of market volatility, the application of
certain money management principles, which may be revised from time to time, and
adjusting leverage or portfolio size. In addition, the Managing Owner limits its
trading to markets which it believes are sufficiently liquid in respect of the
amount of trading it contemplates conducting.
-10-
<PAGE>
The Managing Owner develops trading systems using various classes of
quantitative models and data such as price, volume and interest rates, and tests
those systems in numerous markets against historical data to simulate trading
results. the Managing Owner then analyses the profitability of the systems
looking at such features as the percentage of profitable trades, the worst
losses experienced, the average giveback of maximum profits on profitable trades
and risk adjusted returns. The performance of all systems in the market are then
ranked, and three or four systems are selected which make decisions in different
ways at different times. This multi-system approach ensures that the total risk
intended to be taken in a market is spread over several different strategies.
The Managing Owner also attempts to assess market volatility as a means
of monitoring and evaluating risk. In doing so, the Managing Owner uses a
volatility overlay system which measures the risk in a portfolio's position in a
market and signals a decrease in position size when risk increases and an
increase in position size when risk decreases. The Managing Owner's volatility
overlay maintains overall portfolio risk and distribution of risk across markets
within designated ranges.
The Managing Owner's risk management also focuses on money management
principles applicable to a portfolio as a whole rather than to individual
markets. The first principle is reducing overall portfolio volatility through
diversification among markets. The Managing Owner seeks a portfolio in which
returns from trading in different markets are not highly correlated, that is, in
which returns are not all positive or negative at the same time. Additional
money management principles include limiting the assets committed as margin or
collateral, generally within a range of 15% to 35% of an account's net assets;
avoiding the use of unrealized profits in a particular market as margin for
additional positions in the same market; and changing the equity used for
trading an account solely on a controlled periodic basis, not automatically due
to an increase in equity from trading profits.
Another important risk management function is the careful control of
leverage or portfolio size. Leverage levels are determined by simulating the
entire portfolio over the past five or ten years to determine the worst case
experienced by the portfolio in the simulation period. The worst case or
peak-to-trough drawdown, is measured from a daily high in portfolio assets to
the subsequent daily low whether that occurs days, weeks or months after the
daily high. If the Managing Owner considers the drawdown too severe, it reduces
the leverage or portfolio size.
The Managing Owner determines asset allocation among markets and
position size on the basis of the money management principals and trading data
research discussed above and the market experience of the Managing Owner's
principals. From time to time the Managing Owner may adjust the size of a
position, long or short, in any given market. Decisions to make such adjustments
require the exercise of judgment and may include consideration of the volatility
of the particular market; the pattern of price movements, both inter-day and
intra-day; open interest; volume of trading; changes in spread relationships
between various forward contracts; and overall portfolio balance and risk
exposure.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements required by this item are included as Exhibit
13.01 to this report.
The supplementary financial information specified by Item 302 of
Regulation S-K is not applicable.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on
accounting and financial disclosure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a,b) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Trust has no directors or executive officers. The Trust is
controlled and managed by the Managing Owner under a delegation of authority by
the Trust's Trustee, Wilmington Trust Company.
Millburn Ridgefield Corporation, the Managing Owner, is a Delaware
corporation organized in May 1982 to manage discretionary accounts in futures
and forward markets. It is the corporate successor to a futures trading and
advisory
-11-
<PAGE>
organization which has been continuously managing assets in the currency and
futures markets using quantitative, systematic techniques since 1971.
The principals and senior officers of Millburn Ridgefield Corporation
as of December 31, 1998 are as follows:
Harvey Beker, age 45. Mr. Beker is President, Co-Chief Executive
Officer and a Director of Millburn Ridgefield and The Millburn Corporation, and
a partner of ShareInVest Research L.P. He received a Bachelor of Arts degree in
economics from New York University in 1974 and a Master of Business
Administration degree in finance from NYU in 1975. From June 1975 to July 1977,
Mr. Beker was employed by Loeb Rhoades, Inc. where he developed and traded
silver arbitrage strategies. From July 1977 to June 1978, Mr. Beker was a
futures trader at Clayton Brokerage Co. of St. Louis. Mr. Beker has been
employed by The Millburn Corporation since June 1978. During his tenure at
Millburn, he has been instrumental in the development of the research, trading
and operations areas. Mr. Beker became a principal of the firm in 1982.
George E. Crapple, age 54. Mr. Crapple is Co-Chief Executive Officer
and a Director of Millburn Ridgefield and a Director of The Millburn Corporation
and a partner of ShareInVest Research L.P. In 1966 he graduated with honors from
the University of Wisconsin where his field of concentration was economics and
he was elected to Phi Beta Kappa. In 1969 he graduated from Harvard Law School,
MAGNA CUM LAUDE, where he was a member of the Harvard Law Review. He was a
lawyer with Sidley & Austin, Chicago, Illinois, from 1969 until April 1, 1983,
as a partner since 1975, specializing in commodities, securities, corporate and
tax law. He was first associated with Millburn Ridgefield in 1976 and joined
Millburn Ridgefield Corporation on April 1, 1983 on a full-time basis. Mr.
Crapple is a member of the Board of Directors and a former Chairman of the
Eastern Regional Business Conduct Committee of the NFA, Vice-Chairman of the
Board of Directors, member of the Executive Committee of the Managed Funds
Association, a member of the Financial Products Advisory Committee of the CFTC
and a former member of the Board of Directors and Nominating Committee of the
Futures Industry Association.
Gregg R. Buckbinder, age 40. Mr. Buckbinder is Senior Vice President
and Chief Operating Officer of Millburn Ridgefield and The Millburn Corporation.
He graduated CUM LAUDE from Pace University in 1980 with a B.B.A. in accounting
and received an M.S. in taxation from Pace in 1988. He joined Millburn in
January 1998 from Odyssey Partners, L.P. where he was responsible for the
operation, administration and accounting of the firm's merchant banking and
managed account businesses. Mr. Buckbinder was employed by Tucker Anthony, a
securities broker and dealer, from 1985 to 1990 where he was First Vice
President and Controller, and from 1983 to 1984 where he designed and
implemented various operations and accounting systems. He was with the public
accounting firm of Ernst & Whinney from 1984 to 1985 as a manager in the tax
department and from 1980 to 1983 as a senior auditor, with an emphasis on
clients in the financial services business. He is a Certified Public Accountant
and a member of the American Institute of Certified Public Accountants.
Mark B. Fitzsimmons, age 51. Mr. Fitzsimmons is a Senior Vice-President
of The Managing Owner and The Millburn Corporation and a partner of ShareInVest
Research L.P. His responsibilities include both marketing and investment
strategy. He graduated SUMMA CUM LAUDE from the University of Bridgeport,
Connecticut in 1970 with a B.S. in economics. His graduate work was done at the
University of Virginia, where he received a certificate of candidacy for a Ph.D.
in economics in 1973. He joined The Managing Owner in January 1990 from Morgan
Stanley & Co. Incorporated where he was a Principal and Manager of institutional
foreign exchange sales and was involved in strategic trading for the firm. From
1977 to 1987 he was with Chemical Bank New York Corporation, first as a Senior
Economist in Chemical's Foreign Exchange Advisory Service and later as a
Vice-President and Manager of Chemical's Corporate Trading Group. While at
Chemical he also traded both foreign exchange and fixed income products. From
1973 to 1977 Mr. Fitzsimmons was employed by the Federal Reserve Bank of New
York, dividing his time between the International Research Department and the
Foreign Exchange Department.
Barry Goodman, age 41. Mr. Goodman is an Executive Vice-President,
Director of Trading and Co-Director of Research of The Managing Owner and The
Millburn Corporation and a partner of ShareInVest Research L.P. His
responsibilities include overseeing the firm's trading operation and managing
its trading relationships, as well as the design and implementation of trading
systems. He graduated MAGNA CUM LAUDE from Harpur College of the State
University of New York in 1979 with a B.A. in economics. From 1980 through late
1982 he was a commodity trader for E. F. Hutton & Co., Inc. At Hutton he also
designed and maintained various technical indicators and coordinated research
projects pertaining to the futures markets. He joined The Managing Owner in 1982
as Assistant Director of Trading.
Dennis B. Newton, age 47. Mr. Newton is a Senior Vice-President of The
Managing Owner. His primary responsibilities are in administration and
marketing. Prior to joining The Managing Owner in September 1991, Mr. Newton
-12-
<PAGE>
was President of Phoenix Asset Management, Inc., a registered commodity pool
operator from April 1990 to August 1991. Prior to his employment with Phoenix,
Mr. Newton was a Director of Managed Futures with Prudential-Bache Securities
Inc. from September 1987 to March 1990. Mr. Newton joined Prudential-Bache from
Heinold Asset Management, Inc. where he was a member of the senior management
team. Heinold was a pioneer and one of the largest sponsors of funds utilizing
futures and currency forward trading.
Grant N. Smith, age 47. Mr. Smith is an Executive Vice-President and
Co-Director of Research of The Managing Owner and The Millburn Corporation and a
partner of ShareInVest Research L.P. He is responsible for the design, testing
and implementation of quantitative trading strategies, as well as for planning
and overseeing the computerized decision- support systems of the firm. He
received a B.S. degree from the Massachusetts Institute of Technology in 1974
and an M.S. degree from M.I.T. in 1975. While at M.I.T. he held several teaching
and research positions in the computer science field and participated in various
projects relating to database management. He joined The Managing Owner in 1975.
Malcolm H. Wiener, age 63. Mr. Wiener is the founder of Millburn
Ridgefield, The Millburn Corporation and ShareInVest Research L.P., serves as an
adviser to these entities and is a major investor in funds managed by Millburn
Ridgefield and ShareInVest Research L.P. He does not, however, have investment
or operational authority or responsibility for any of these entities or
supervisory authority over their officers or employees. Mr. Wiener graduated
MAGNA CUM LAUDE from Harvard College in 1957, where his field of concentration
was Economics and he was elected to Phi Beta Kappa. From 1957 to 1960 he served
as an officer in the United States Navy. Mr. Wiener graduated from the Harvard
Law School in 1963 and practiced law in New York City specializing in corporate
law and financial transactions until 1973. Mr. Wiener began research on and the
trading of futures contracts pursuant to systematic trading methods and money
management principles in 1971 and the management on a full time basis of private
funds in this area in 1973. He is the author of numerous papers on the history
of trade and is a member of the Council on Foreign Relations. He serves on the
boards or visiting committees of various non-profit institutions including the
Kennedy School of Government and the Wiener Center for Social Policy at Harvard
University, the Harvard Art Museums, the Metropolitan Museum in New York, the
Museum of Fine Arts in Boston, the American School of Classical Studies in
Athens and the Council on Economic Priorities in New York.
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
None.
(d) FAMILY RELATIONSHIPS
None.
(e) BUSINESS EXPERIENCE
See Item 10 (a,b) above.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None.
(g) PROMOTERS AND CONTROL PERSONS
The Managing Owner is the sole promoter and control person of the
Trust.
Item 11. EXECUTIVE COMPENSATION
The Trust has no directors or officers. None of the directors or
officers of the Managing Owner receive "other compensation" from the Trust. The
Managing Owner makes all trading decisions on behalf of the Trust. The Managing
Owner receives monthly brokerage commissions of 0.75 of 1% of the Net Assets
(which is reduced to 0.58 of 1% of Net Assets for Unitholders who invest more
than $1 million in the Trust) and a quarterly profit share of 17.5% of any new
trading profit as defined.
-13-
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Trust knows of no person who owns beneficially more than 5% of the
Units. All of the Trust's managing owner interest is held by the Managing Owner.
(b) SECURITY OWNERSHIP OF MANAGEMENT
Under the terms of the Trust Agreement, the Trust's affairs are managed
by the Managing Owner, which has discretionary authority over the Trust's
trading. The Managing Owner's managing owner interest was valued at $873,631 as
of December 31, 1998, 1.18% of the Partnership's total equity, the equivalent of
707.75 Units.
(c) CHANGES IN CONTROL
None.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Item 11. EXECUTIVE COMPENSATION" and "Item 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT." The Trust allocated to the
Managing Owner $6,528,321 in brokerage fees and $0 in profit share for the year
ended December 31, 1998. The Managing Owners' managing owner interest showed an
allocation of gain of $97,422 for the year ended December 31, 1998. The Trust is
prohibited from making any loans.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
The following are included with the 1998 Report of Independent
Accountants, a copy of which is filed hereto as Exhibit 13.01.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Affirmation of Millburn Ridgefield Corporation F-1
Report of Independent Accountants F-2
Statements of Financial Condition As
of December 31, 1998 and 1997 F-3
Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 F-4
Statements of Changes in Trust Capital for the years
ended December 31, 1998, 1997 and 1996 F-5
Notes to Financial Statements F-6
</TABLE>
(a)(2) FINANCIAL STATEMENT SCHEDULES
All Schedules are omitted for the reason that they are not required or
are not applicable because equivalent information has been included in the
financial statements or the notes thereto.
(a)(3) EXHIBITS AS REQUIRED BY ITEM 601 OF REGULATION S-K
The following exhibits are included herewith.
DESIGNATION DESCRIPTION
13.01 1998 Report of Independent Accountants
-14-
<PAGE>
27.01 Financial Data Schedule
The following exhibits are incorporated by reference from Amendment No.
1 to the Registration Statement (File No. 33-90756) filed on June 27, 1995 on
Form S-1 under the Securities Act of 1933.
3.02 Certificate of Trust of the Trust.
10.01 Form of Subscription Agreement and Power of Attorney.
The following exhibits are incorporated by reference from
Post-Effective Amendment No. 1 to the Registration Statement (File No. 33-90756)
filed on March 1, 1996 on Form S-1 under the Securities Act of 1933.
10.02 Selling Agreement among the Trust, the Managing Owner
and the Principal Selling Agents (includes a form of
Additional Selling Agent and Correspondent Selling
Agent Agreement).
10.03(a) Customer Agreement among the Trust, the Managing Owner
and a Principal Selling Agent in its capacity as a
futures commission merchant.
10.03(b) Customer Agreement among the Trust, the Managing Owner
and a Principal Selling Agent in its capacity as a
futures commission merchant.
10.04 Escrow Agreement between the Trust and Chemical Bank,
N.A.
The following exhibit is incorporated by reference from Post-Effective
Amendment No. 5 to the Registration Statement (File No. 33-90756) filed February
18, 1997 on Form S-1 under the Securities Act of 1933.
3.01 Amended and Restated Declaration of Trust and Trust
Agreement
(b) REPORTS ON FORM 8-K
No report on Form 8-K was filed by the Partnership during the quarter
ended December 31, 1998.
-15-
<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, in the City of
Greenwich and State of Connecticut on the 26th day of March, 1999.
THE MILLBURN WORLD RESOURCE TRUST
By: The Managing Owner Corporation,
Managing Owner
By /s/ Harvey Beker
---------------------------------
Harvey Beker
President
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
Managing Owner of the Registrant in the capacities and on the date indicated.
Title with
Signature General Partner Date
- --------- --------------- ----
/s/ Harvey Beker President, Co-Chief March 26, 1999
- ----------------------- Executive Officer and Director
Harvey Beker (Principal Financial and Accounting
Officer)
/s/ George E. Crapple Vice-Chairman Co-Chief Executive March 26, 1999
- ----------------------- Executive Officer and Director
George E. Crapple (Principal Executive Officer)
(Being the principal executive officer, the principal financial and
accounting officer, and a majority of the directors of Millburn Ridgefield
Corporation)
Millburn Ridgefield Corporation Managing Owner of Registrant
March 26, 1999
By /s/ Harvey Beker
-----------------------------
Harvey Beker
President
-16-
<PAGE>
Exhibit 13.01
THE MILLBURN WORLD RESOURCE TRUST
FINANCIAL STATEMENTS
For the years ended
December 31, 1998, 1997 and 1996
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
INDEX
<TABLE>
<CAPTION>
Pages
<S> <C>
Affirmation of Millburn Ridgefield Corporation F-1
Independent Accountants Report F-2
Financial Statements:
Statements of Financial Condition as of December 31, 1998 and 1997 F-3
Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996 F-4
Statements of Changes in Trust Capital for the Years Ended
December 31, 1998, 1997 and 1996 F-5
Notes to Financial Statements F-6-F-11
</TABLE>
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
AFFIRMATION OF MILLBURN RIDGEFIELD CORPORATION
In compliance with the Commodity Futures Trading Commission's regulations, I
hereby affirm that to the best of my knowledge and belief, the information
contained in the statements of financial condition of The Millburn World
Resource Trust, as of December 31, 1998 and 1997 and the related statements of
operations and changes in Trust capital for the years ended December 31, 1998,
1997 and 1996 are complete and accurate.
GEORGE E. CRAPPLE, VICE CHAIRMAN
MILLBURN RIDGEFIELD CORPORATION
MANAGING OWNER OF THE MILLBURN WORLD RESOURCE TRUST
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Unitholders of
The Millburn World Resource Trust:
In our opinion, the accompanying statements of financial condition as of
December 31, 1998 and 1997, and the related statements of operations and the
statements of changes in Trust capital for the years ended December 31, 1998,
1997 and 1996 present fairly, in all material respects, the financial position
of The Millburn World Resource Trust, as of December 31, 1998 and 1997, and the
results of its operations for each of the three years then ended, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Trust's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
New York, New York PricewaterhouseCoopers LLP
January 20, 1999
F-2
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
STATEMENTS OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS: 1998 1997
----------------- -----------------
<S> <C> <C>
Equity in trading accounts:
Cash $ 3,646,692 $ 2,105,808
Investments in U.S. Treasury bills - at value (amortized
cost $19,502,626 and $16,490,244 at December 31,
1998 and 1997, respectively) (Note 2) 19,502,626 16,490,244
Options owned, at market value (cost $396,056
at December 31, 1997) - 559,110
Unrealized appreciation on open contracts 6,974,974 4,753,326
Unrealized depreciation on open contracts (1,457,528) -
----------------- -----------------
Total equity in trading accounts 28,666,764 23,908,488
Money market fund 2,278,968 9,944,556
Investment in U.S. Treasury bills - at value (amortized cost
$45,491,917 and $41,009,510 at December 31,
1998 and 1997, respectively) (Note 2) 45,491,917 41,009,510
----------------- -----------------
Total assets $ 76,437,649 $ 74,862,554
----------------- -----------------
----------------- -----------------
LIABILITIES AND TRUST CAPITAL:
Accounts payable and accrued expenses $ 62,706 $ 73,925
Redemptions payable to unitholders, net (Note 9) 2,066,608 773,980
Accrued brokerage fees (Note 4) 487,698 443,746
----------------- -----------------
Total liabilities 2,617,012 1,291,651
----------------- -----------------
Trust capital (Notes 4, 9 and 10):
Managing Owner interest 873,631 776,209
Unitholders, (59,096.099 and 61,563.868 Units of Beneficial
Interest outstanding at December 31, 1998 and 1997,
respectively) 72,947,006 72,794,694
----------------- -----------------
Total Trust capital 73,820,637 73,570,903
----------------- -----------------
Total liabilities and Trust capital $ 76,437,649 $ 74,862,554
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------ --------------
<S> <C> <C> <C>
Income (Note 2):
Net gains (losses) on trading of futures,
forward and option contracts:
Realized gains (losses):
Futures and forwards $ 5,390,695 $ 4,123,599 $ 7,778,511
Options 1,114,879 (486,783) 750,368
Change in unrealized appreciation
(depreciation):
Futures and forwards 764,120 1,548,085 489,201
Options (163,054) (73,486) 123,713
-------------- ------------- --------------
7,106,640 5,111,415 9,141,793
Less, Brokerage fees (Note 4) 6,528,321 6,057,327 3,998,675
-------------- ------------- --------------
Net realized and unrealized gains
(losses) on trading of futures,
forward and option contracts 578,319 (945,912) 5,143,118
Interest income 3,810,780 3,467,544 2,115,972
Foreign exchange gain (loss) (198,930) 62,685 (72,910)
-------------- ------------- --------------
Total income 4,190,169 2,584,317 7,186,180
-------------- ------------- --------------
Expenses (Note 2):
Profit share (Note 4) - 695,667 829,081
Administrative expenses 581,101 345,473 519,753
-------------- ------------- -------------
581,101 1,041,140 1,348,834
-------------- ------------- -------------
Net income $ 3,609,068 $ 1,543,177 $ 5,837,346
-------------- ------------- -------------
-------------- ------------- -------------
Net income per Unit of
Beneficial Interest (Note 10) $ 51.95 $ 32.29 $ 99.45
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
STATEMENTS OF CHANGES IN TRUST CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
NEW PROFITS
MEMO
UNITHOLDERS ACCOUNT MANAGING OWNER TOTAL
------------- ----------- ---------------- -------------
<S> <C> <C> <C> <C>
Trust Capital at December 31, 1995 $ 25,201,890 $ - $ 730,387 $ 25,932,277
Proceeds from sale of 30,447.310 Units of
Beneficial Interest 31,099,099 - 217,000 31,316,099
Net income 5,735,662 712 100,972 5,837,346
Redemptions (6,951.474 Units of Beneficial Interest) (7,313,645) - (460,840) (7,774,485)
Limited Partnership Units (97.608) allocated - - - -
Managing Owner's Profit Share - 829,081 - 829,081
Transfer from New Profits Memo Account to
Managing Owner - (829,793) 829,793 -
Trust capital at December 31, 1996 54,723,006 - 1,417,312 56,140,318
Proceeds from sale of 22,517.798 Units
of Beneficial Interest 26,834,427 7,679 115,000 26,957,106
Net income 1,469,088 323 73,766 1,543,177
Redemptions (8,664.831 Units of Beneficial
Interest) (10,231,827) (8,002) (1,525,536) (11,765,365)
Limited Partnership Units (131.370) allocated - - - -
Managing Owner's Profit Share - 695,667 - 695,667
Transfer from New Profits Memo Account
to Managing Owner - (695,667) 695,667 -
------------- ---------- -------------- -------------
Trust capital at December 31, 1997 72,794,694 - 776,209 73,570,903
Proceeds from sale of (9,536.800) Units of
Beneficial Interest 11,163,820 - - 11,163,820
Net income 3,511,646 97,422 3,609,068
Redemptions (12,173.848) Units of Beneficial
Interest) (14,523,154) - - (14,523,154)
Limited Partnership Units (169.279) allocated - - - -
------------- ---------- -------------- -------------
Trust capital at December 31, 1998 $ 72,947,006 $ - $ 873,631 $ 73,820,637
------------- ---------- -------------- -------------
------------- ---------- -------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
The Millburn World Resource Trust (the "Trust") was organized on June 7,
1995 under the Delaware Business Trust Act. The Trust is engaged in
speculative trading in the futures, options and forward markets. The
instruments that are traded by the Trust are volatile and involve a high
degree of risk. The Trust commenced trading operations on September 13,
1995.
Millburn Ridgefield Corporation (the "Managing Owner") has agreed to make
additional capital contributions, subject to certain possible exceptions in
order to maintain its capital account at not less than 1% of the total
capital accounts of the Trust. The Managing Owner and the holders of the
Units of Beneficial Interest ("Units") issued by the Trust will share in
any profits and losses of the Trust in proportion to the percentage
interest owned by each, before brokerage commissions and profit share
allocations. There are 63,400 Units authorized for sale.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. INVESTMENTS
Open options, futures and forward contracts are valued at market
value.
Realized gains (losses) and changes in unrealized appreciation
(depreciation) on futures, forward and option contracts are
recognized in the periods in which the contracts are closed or the
changes occur, and are included in the statements of operations in
net gains (losses) on trading of futures, forward and option
contracts.
Investments in U.S. government obligations are valued at cost plus
amortized discount which approximates value. Amortization of discount
is reflected as interest income.
b. FOREIGN CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are
translated at quoted prices of such currencies. Purchases and sales
of investments are translated at the exchange rate prevailing when
such transactions occurred.
c. INCOME TAXES
Income taxes have not been provided, as each Unitholder is
individually liable for the taxes, if any, on his share of the
Trust's income and expenses.
F-6
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
d. ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues
and expenses during the period. Actual results could differ from
these estimates.
e. RIGHT OF OFFSET:
The customer agreements between the Trust and certain brokers give
the Trust the legal right to net unrealized gains and losses.
Unrealized gains and losses related to transactions with these
brokers are reflected on a net basis in the equity in trading
accounts in the statements of financial condition.
3. ORGANIZATION AND OFFERING COSTS:
Organizational and initial offering costs (exclusive of selling
commissions), estimated at $600,000, were advanced by the Managing Owner
and were reimbursed by the Trust in 24 equal monthly installments, subject
to a provision that the monthly installments received during any fiscal
year did not in the aggregate exceed 0.167 of 1% (a 2% annual rate) of the
month-end Net Asset Value of the Trust as of each of the months elapsed
during such fiscal year including the month of determination. The
reimbursement of these costs was completed in the year ended December 31,
1997. The total costs were deducted from Trust capital upon commencement of
trading, and reduced the redemption value per Unit to the extent that the
reimbursement payments were made to the Managing Owner. The Managing Owner
also pays, from its own funds, selling commissions on all sales of Units.
4. TRUST AGREEMENT:
The Trust Agreement provides that the Managing Owner shall control, conduct
and manage the business of the Trust, and may make all trading decisions.
The Trust pays brokerage fees to the Managing Owner at the annual rate of
9.0% of the Trust's average month-end Net Assets of Unitholders interests
(prior to reduction for accrued brokerage fees or Profit Share). The
Managing Owner retains the right to charge less than the annual brokerage
rate of 9% to those subscribers who either invest $1,000,000 or more in the
Units or subscribe without incurring the selling commission paid by the
Managing Owner.
F-7
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. TRUST AGREEMENT (CONTINUED):
The Managing Owner, not the Trust, will pay all routine costs of executing
and clearing the Trust's futures and options trades, including brokerage
commissions payable to the clearing brokers.
Profit Share equal to 17.5% of any New Trading Profits (as defined) in
excess of the highest cumulative level of Trading Profit as of any previous
calendar quarter-end is added to the New Profits Memo Account. A transfer
from such account to the Managing Owner's capital account is made to the
extent taxable capital gains are allocated to the Managing Owner.
The Trust pays its legal, accounting, auditing, printing, postage and
similar administrative expenses (including the Trustee's fees, the charges
of an outside accounting services agency and the expenses of updating the
Prospectus), as well as extraordinary costs.
5. TRADING ACTIVITIES:
All of the derivatives, owned by the Trust, including options, futures and
forwards, are held for trading purposes. The results of the Trust's trading
activity are shown in the statements of operations. The fair value of the
derivative financial instruments, at December 31, 1998 and 1997,
respectively, was $5,517,446 and $5,312,436. The average fair value during
the periods then ended (calculated on a monthly basis), approximated
$4,407,653 and $3,510,394, respectively.
The Trust conducts its trading activities with various brokers acting
either as a broker or counterparty to various transactions. At December 31,
1998 and 1997, respectively, cash and treasury bills, aggregating
$23,149,318 and $18,596,052, included in the Trust's equity in trading
accounts are held by such brokers in segregated accounts as required by
U.S. Commodity Futures Trading Commission's regulations.
6. DERIVATIVE INSTRUMENTS:
The Trust is party to derivative financial instruments in the normal course
of its business. These financial instruments include forwards, futures and
options, whose value is based upon an underlying asset, index, or reference
rate, and generally represent future commitments to exchange currencies or
cash flows, or to purchase or sell other financial instruments at specific
terms at specified future dates. These instruments may be traded on an
exchange or over-the-counter. Exchange traded instruments are standardized
and include futures and certain options. Each of these instruments is
subject to various risks similar to those related to the underlying
financial instruments including market and credit risk.
F-8
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. DERIVATIVE INSTRUMENTS:
Market risk is the potential change in the value of the instruments traded
by the Trust due to market changes, including interest and foreign exchange
rate movements and fluctuations in commodity or security prices. Market
risk is directly impacted by the volatility and liquidity in the markets in
which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit risk
is normally reduced to the extent that an exchange or clearing organization
acts as a counterparty to futures or options transactions, since typically
the collective credit of the members of the exchange is pledged to support
the financial integrity of the exchange. In the case of over-the-counter
transactions, the Trust must rely solely on the credit of the individual
counterparties. The Trust's risk of loss in the event of counterparty
default is typically limited to the amounts recognized in the statement of
financial condition, not to the contract or notional amounts of the
instruments.
7. OPEN DERIVATIVE INSTRUMENTS (CONTRACTS) AT DECEMBER 31, 1998 AND 1997:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------------------------- ------------------------------------------
NOTIONAL OR CONTRACTUAL NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS AMOUNT OF COMMITMENTS
----------------------------------------- ------------------------------------------
TO PURCHASE TO SELL TO PURCHASE TO SELL
--------------------- --------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Financial instruments $ 93,685,000 $ 372,011,000 $ 308,387,000 $ 89,641,000
Stock indices 7,448,000 17,333,000 600,000 17,726,000
Currencies* 49,459,000 32,720,000 16,768,000 48,924,000
Energy -- 18,327,000 -- 33,784,000
Agricultural 11,304,000 24,688,000 21,519,000 21,184,000
Metals 1,295,000 30,190,000 -- 30,027,000
------------- --------------- ------------- -------------
$ 163,191,000 $ 495,269,000 $ 347,274,000 $ 241,286,000
------------- --------------- ------------- -------------
------------- --------------- ------------- -------------
</TABLE>
*Currencies include offsetting commitments to purchase and sell the same
currency on the same date in the future. These commitments are economically
offsetting but are not, as a technical matter, offset in the forward market
until the settlement date.
F-9
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. OPEN DERIVATIVE INSTRUMENTS (CONTRACTS) AT DECEMBER 31, 1998 AND 1997
(CONTINUED):
The notional or contractual amounts of these derivative instruments, while
not recorded in the financial statements reflect the extent of the Trust's
involvement in these instruments.
<TABLE>
<CAPTION>
NOTIONAL OR CONTRACTUAL UNREALIZED APPRECIATION
AMOUNT OF COMMITMENTS (DEPRECIATION)
-------------------------------------- ---------------------------------
TO PURCHASE TO SELL GROSS NET
----------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1998:
Exchange traded $ 113,732,000 $ 462,549,000 $ 8,180,903 $ 6,717,476
Non-exchange traded 49,459,000 32,720,000 637,335 (1,200,030)
----------------- --------------- ------------- ---------------
$ 163,191,000 $ 495,269,000 $ 8,818,238 $ 5,517,446
----------------- --------------- ------------- ---------------
----------------- --------------- ------------- ---------------
DECEMBER 31, 1997:
Exchange traded $ 331,269,000 $ 192,362,000 $ 5,134,786 $ 4,431,017
Non-exchange traded 16,005,000 48,924,000 691,714 485,363
----------------- --------------- ------------- ---------------
$ 347,274,000 $ 241,286,000 $ 5,826,500 $ 4,916,380***
----------------- --------------- -------------- ---------------
----------------- --------------- -------------- ---------------
</TABLE>
***Includes net unrealized appreciation on exchange traded options of $163,054.
8. TERMINATION:
The Trust will terminate on December 31, 2025 or at an earlier date if
certain conditions occur as defined in the Declaration of Trust and Trust
Agreement.
9. REDEMPTIONS:
Units may be redeemed, at the option of any Unitholder, at Net Asset Value
(as defined) as of the close of business on the last business day of any
calendar month on ten business days' written notice to the Managing Owner.
Persons who redeem Units at or prior to the end of the first and second
successive six-month periods after such Units are sold will be assessed
redemption charges of 4% and 3%, respectively (3% and 2%, respectively, in
the case of subscriptions of $1,000,000 or more), of their redeemed Units'
Net Asset Value as of the date of redemption. All redemption charges will
be paid to the Managing Owner.
F-10
<PAGE>
THE MILLBURN WORLD RESOURCE TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. NET ASSET VALUE PER UNIT:
Changes in net asset value per Unit during the years ended December 31,
1998, 1997 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------- ----------- ------------
<S> <C> <C> <C>
Net realized and unrealized gains (losses)
on futures, forwards and options $ 8.32 $ (19.79) $ 87.62
Interest income 54.85 72.56 36.05
Foreign exchange gain (loss) (2.86) 1.31 (1.24)
Profit share expense - (14.56) (14.12)
Administrative expenses (8.36) (7.23) (8.86)
------------ ----------- -----------
Net income per unit 51.95 32.92 99.45
Net asset value per Unit, beginning of year 1,182.43 1,150.14 1,050.69
------------ ----------- -----------
Net asset value per Unit,
end of year $ 1,234.38 $ 1,182.43 $ 1,150.14
------------ ----------- -----------
------------ ----------- -----------
Redemption value per Unit
(before redemption charge) $ 1,234.38 $ 1,182.43 $ 1,154.81
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
11. SUBSEQUENT EVENTS:
Effective January 1, 1999, approximately $2,050,000 and $200,000 in
redemptions and subscriptions, respectively, were made by unitholders.
F-11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Millburn
World Resource Trust Statements of Finanacial Condition as of December 31, 1998
and 1999 and statements of operations for the years ended December 31, 1998,
1997 and 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,646,692
<SECURITIES> 67,273,511
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 76,437,649
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 76,437,649
<CURRENT-LIABILITIES> 2,617,012
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 73,820,637
<TOTAL-LIABILITY-AND-EQUITY> 76,437,649
<SALES> 0
<TOTAL-REVENUES> 11,495,739
<CGS> 0
<TOTAL-COSTS> 6,528,321
<OTHER-EXPENSES> 581,101
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,609,068
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,609,068
<EPS-PRIMARY> 51.95
<EPS-DILUTED> 51.95
</TABLE>
