-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A8/S4uASDWapEcvyy9C/xxQIjq5il+ycNKxGENtPN65uU9gKgyzO2pUi7VZBMhdg 2Z/yqBiN5wcW0s+8u0okcQ== 0000898733-97-000920.txt : 19971117 0000898733-97-000920.hdr.sgml : 19971117 ACCESSION NUMBER: 0000898733-97-000920 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL BACHE CAPITAL RETURN FUTURES FUND L P CENTRAL INDEX KEY: 0000846176 STANDARD INDUSTRIAL CLASSIFICATION: [6221] IRS NUMBER: 133516796 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18417 FILM NUMBER: 97718442 BUSINESS ADDRESS: STREET 1: ONE NEW YORK PLAZA STREET 2: 13TH FL CITY: NEW YORK STATE: NY ZIP: 10292 BUSINESS PHONE: 2127787866 MAIL ADDRESS: STREET 1: ONE NEW YORK PLAZA STREET 2: 13TH FL CITY: NEW YORK STATE: NY ZIP: 10292 10-Q 1 P-B CAPITAL RETURN FUTURES FUND L.P. 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 September 30, 1997 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ______________________ Commission file number: 0-18417 PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 13-3516796 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) One New York Plaza, 14th Floor, New York, New York 10292 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 778-7866 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 __ Part I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P. (a limited partnership) STATEMENTS OF FINANCIAL CONDITION (Unaudited)
September 30, December 31, 1997 1996 - ---------------------------------------------------------------------------------------------------- ASSETS Equity in commodity trading accounts: Cash $ 3,814,903 $ 4,416,242 U.S. Treasury bills, at amortized cost 12,459,134 13,869,729 Net unrealized gain on open commodity positions 479,566 417,876 ------------- ------------ Total assets $16,753,603 $18,703,847 ------------- ------------ ------------- ------------ LIABILITIES AND PARTNERS' CAPITAL Liabilities Redemptions payable $ 579,838 $ 664,958 Management fees payable 55,595 62,075 Accrued expenses 38,640 61,858 Due to affiliates 36,583 19,472 ------------- ------------ Total liabilities 710,656 808,363 ------------- ------------ Commitments Partners' capital Limited partners (115,834 and 129,302 units outstanding) 15,882,388 17,716,405 General partner (1,171 and 1,307 units outstanding) 160,559 179,079 ------------- ------------ Total partners' capital 16,042,947 17,895,484 ------------- ------------ Total liabilities and partners' capital $16,753,603 $18,703,847 ------------- ------------ ------------- ------------ Net asset value per limited and general partnership unit ('Units') $ 137.11 $ 137.02 ------------- ------------ ------------- ------------ - ---------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements
2 PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P. (a limited partnership) STATEMENTS OF OPERATIONS (Unaudited)
Nine months ended Three months ended September 30, September 30, -------------------------- ----------------------- 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------ REVENUES Net realized gain (loss) $1,591,464 $ (942,317) $ 718,826 $(711,775) Change in net unrealized gain (400,823) 754,060 (316,926) 798,669 Interest from U.S. Treasury bills 513,406 528,471 169,711 162,693 ---------- ----------- --------- --------- 1,704,047 340,214 571,611 249,587 ---------- ----------- --------- --------- EXPENSES Commissions 1,049,360 1,068,008 341,622 325,121 Management fees 526,513 531,170 171,460 162,161 General and administrative 109,742 122,383 40,368 44,114 ---------- ----------- --------- --------- 1,685,615 1,721,561 553,450 531,396 ---------- ----------- --------- --------- Net income (loss) $ 18,432 $(1,381,347) $ 18,161 $(281,809) ---------- ----------- --------- --------- ---------- ----------- --------- --------- ALLOCATION OF NET INCOME (LOSS) Limited partners $ 18,247 $(1,343,329) $ 17,979 $(278,991) ---------- ----------- --------- --------- ---------- ----------- --------- --------- General partner $ 185 $ (38,018) $ 182 $ (2,818) ---------- ----------- --------- --------- ---------- ----------- --------- --------- NET INCOME (LOSS) PER WEIGHTED AVERAGE LIMITED AND GENERAL PARTNERSHIP UNIT Net income (loss) per weighted average limited and general partnership unit $ .15 $ (9.39) $ .15 $ (2.01) ---------- ----------- --------- --------- ---------- ----------- --------- --------- Weighted average number of limited and general partnership units outstanding 125,822 147,056 121,234 139,986 ---------- ----------- --------- --------- ---------- ----------- --------- --------- - ------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Unaudited)
LIMITED GENERAL UNITS PARTNERS PARTNER TOTAL - ---------------------------------------------------------------------------------------------------- Partners' capital--December 31, 1996 130,609 $17,716,405 $179,079 $17,895,484 Net income 18,247 185 18,432 Redemptions (13,604) (1,852,264) (18,705) (1,870,969) -------- ----------- -------- ----------- Partners' capital--September 30, 1997 117,005 $15,882,388 $160,559 $16,042,947 -------- ----------- -------- ----------- -------- ----------- -------- ----------- - ---------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements
3 PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (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 Prudential-Bache Capital Return Futures Fund L.P. (the 'Partnership') as of September 30, 1997 and the results of its operations for the nine and three months ended September 30, 1997 and 1996. However, the operating results for the interim periods may not be indicative of the results expected for a full year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with 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 the Partnership's Annual Report on Form 10-K as filed with the Securities and Exchange Commission for the year ended December 31, 1996 (the 'Annual Report'). Certain balances from the prior period have been reclassified to conform with the current financial statement presentation. B. Related Parties Seaport Futures Management, Inc. (the 'General Partner') and its affiliates perform services for the Partnership 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. The costs incurred for these services for the nine months ended September 30, 1997 and 1996 were:
1997 1996 ------------------------------------------------------------------------------- Commissions $1,049,360 $1,068,008 General and administrative 67,638 71,641 ---------- ---------- $1,116,998 $1,139,649 ---------- ---------- ---------- ----------
The costs incurred for these services for the three months ended September 30, 1997 and 1996 were:
1997 1996 ------------------------------------------------------------------------------- Commissions $ 341,622 $ 325,121 General and administrative 22,546 25,857 ---------- ---------- $ 364,168 $ 350,978 ---------- ---------- ---------- ----------
The Partnership maintains its trading and cash accounts at Prudential Securities Incorporated ('PSI'), the Partnership's commodity broker and an affiliate of the General Partner. Approximately 75% of the Partnership's net asset value is invested in interest-bearing U.S. Government obligations (primarily U.S. Treasury bills), a significant portion of which is utilized for margin purposes for the Partnership's commodity trading activities. As described in the Annual Report, all commissions for brokerage services are paid to PSI. In connection with the Partnership's interbank transactions, PSI engages in foreign currency forward transactions with the Partnership and an affiliate of PSI who, as principal, attempts to earn a profit on the bid-ask spreads (which must be competitive) on any foreign currency forward transactions entered into between the Partnership and PSI, on the one hand, and PSI and such affiliate on the other. In connection with its trading of foreign currencies in the interbank market, PSI may arrange bank lines of credit at major international banks. To the extent such lines of credit are arranged, PSI does not charge the Partnership for maintaining such lines of credit, but requires margin deposits with respect to forward contract transactions. 4 C. Credit and Market Risk Since the Partnership's business is to trade futures, forward and options contracts, its capital is at risk due to changes in the value of these contracts (market risk) or the inability of counterparties to perform under the terms of the contracts (credit risk). Futures, forward and options contracts involve varying degrees of off-balance sheet risk; and changes in the level of volatility of interest rates, foreign currency exchange rates or the market values of the contracts (or commodities underlying the contracts) frequently result in changes in the Partnership's unrealized gain (loss) on open commodity positions reflected on the statements of financial condition. The Partnership's exposure to market risk is influenced by a number of factors including the relationships among the contracts held by the Partnership as well as the liquidity of the markets in which the contracts are traded. Futures and options contracts are traded on organized exchanges and are thus distinguished from forward contracts which are entered into privately by the parties. The credit risks associated with futures and options contracts are typically perceived to be less than those associated with forward contracts, because exchanges typically provide clearinghouse arrangements in which the collective credit (subject to certain limitations) of the members of the exchanges is pledged to support the financial integrity of the exchange. On the other hand, the Partnership must rely solely on the credit of its broker (PSI) with respect to forward transactions. The Partnership presents unrealized gains and losses on open forward positions as a net amount in the statements of financial condition because it has a master netting agreement with PSI. The General Partner attempts to minimize both credit and market risks by requiring the Partnership's trading manager to abide by various trading limitations and policies. The General Partner 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 General Partner may impose additional restrictions (through modifications of such trading limitations and policies) upon the trading activities of the trading manager as it, in good faith, deems to be in the best interests of the Partnership. PSI, when acting as the Partnership's futures commission merchant in accepting orders for the purchase or sale of domestic futures and options contracts, is required by Commodity Futures Trading Commission ('CFTC') regulations to separately account for and segregate as belonging to the Partnership all assets of the Partnership relating to domestic futures and options trading and is not to commingle such assets with other assets of PSI. At September 30, 1997 and December 31, 1996, such segregated assets totalled $9,152,425 and $17,277,553, respectively. Part 30.7 of the CFTC regulations also requires PSI to secure assets of the Partnership related to foreign futures and options trading which totalled $7,618,890 and $1,148,057 at September 30, 1997 and December 31, 1996, respectively. There are no segregation requirements for assets related to forward trading. As of September 30, 1997 and December 31, 1996, the Partnership's open forward contracts mature within three months but open futures contracts mature within one year. At September 30, 1997 and December 31, 1996, gross contract amounts of open futures and forward contracts are:
September 30, December 31, 1997 1996 ------------- ------------ Financial Futures Contracts: Commitments to purchase $99,800,734 $37,638,257 Commitments to sell $ 2,076,783 $ 8,448,337 Currency Forward Contracts: Commitments to purchase $10,252,400 $14,780,831 Commitments to sell $20,152,802 $21,404,866
5
September 30, December 31, 1997 1996 ------------- ------------ Currency Futures Contracts: Commitments to purchase $ -- $ 1,527,963 Commitments to sell $ -- $ 2,058,838 Other Futures Contracts: Commitments to purchase $ 4,630,989 $ 419,159 Commitments to sell $ 4,388,380 $ 2,628,405
The gross contract amounts represent the Partnership's potential involvement in a particular class of financial instrument (if it were to take or make delivery on an underlying futures or forward contract). The gross contract amounts significantly exceed the future cash requirements as the Partnership intends to close out open positions prior to settlement and thus is generally subject only to the risk of loss arising from the change in the value of the contracts. As such, the Partnership considers the 'fair value' of its futures and forward contracts to be the net unrealized gain or loss on the contracts. Thus, the amount at risk associated with counterparty nonperformance of all contracts is the net unrealized gain included in the statements of financial condition. The market risk associated with the Partnership's commitments to purchase commodities is limited to the gross contract amounts involved, while the market risk associated with its commitments to sell is unlimited since the Partnership's potential involvement is to make delivery of an underlying commodity at the contract price; therefore, it must repurchase the contract at prevailing market prices. At September 30, 1997 and December 31, 1996, the fair values of futures and forward contracts were:
September 30, 1997 December 31, 1996 ------------------------ ------------------------ Fair Value Fair Value ------------------------ ------------------------ Assets Liabilities Assets Liabilities -------- ----------- -------- ----------- Futures Contracts: Domestic exchanges Financial $ 32,813 $ 24,788 $ 13,200 $ 13,625 Currencies -- -- 74,723 175 Other 149,645 240,647 80,797 1,456 Foreign exchanges Financial 611,881 5,530 129,424 143,249 Other -- 26,096 -- -- Forward Contracts: Currencies 98,017 115,729 522,582 244,345 -------- ----------- -------- ----------- $892,356 $ 412,790 $820,726 $ 402,850 -------- ----------- -------- ----------- -------- ----------- -------- -----------
6 The following table presents the average fair values of futures and forward contracts during the nine months ended September 30, 1997 and 1996, respectively.
Nine months ended Nine months ended September 30, 1997 September 30, 1996 -------------------------- -------------------------- Average Fair Value Average Fair Value -------------------------- -------------------------- Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- Futures Contracts: Domestic exchanges Financial $ 89,070 $ 11,333 $ 90,709 $ 18,173 Currencies 76,204 18,248 71,951 8,747 Other 243,948 109,636 56,121 11,079 Foreign exchanges Financial 278,438 58,875 420,394 25,480 Currencies 1,324 160 -- -- Other 3,818 3,972 -- -- Forward Contracts: Currencies 579,391 218,918 461,052 435,051 ---------- ----------- ---------- ----------- $1,272,193 $ 421,142 $1,100,227 $ 498,530 ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
The following table presents the average fair values of futures and forward contracts during the three months ended September 30, 1997 and 1996, respectively.
Three months ended Three months ended September 30, 1997 September 30, 1996 -------------------------- -------------------------- Average Fair Value Average Fair Value -------------------------- -------------------------- Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- Futures Contracts: Domestic exchanges Financial $ 194,234 $ 7,963 $ 5,025 $ 44,223 Currencies 103,180 31,585 55,040 6,423 Other 387,674 248,847 98,586 4,137 Foreign exchanges Financial 479,327 22,900 662,064 12,017 Currencies 3,311 400 -- -- Other 7,963 8,877 -- -- Forward Contracts: Currencies 435,119 206,766 323,266 301,406 ---------- ----------- ---------- ----------- $1,610,808 $ 527,338 $1,143,981 $ 368,206 ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
7 The following table presents the net realized gains (losses) and the change in net unrealized gains/losses of futures and forward contracts during the nine months ended September 30, 1997 and 1996, respectively.
Nine months ended September 30, 1997 Nine months ended September 30, 1996 ------------------------------------------------ ----------------------------------------------- Change in Change in Net Realized Net Unrealized Net Realized Net Unrealized Gains (Losses) Gains/Losses Total Gains (Losses) Gains/Losses Total -------------- -------------- ---------- -------------- -------------- --------- Futures Contracts: Domestic exchanges Financial $ (51,456) $ 8,450 $ (43,006) $ 163,856 $ (160,882) $ 2,974 Currencies 99,050 (74,548) 24,502 128,971 104,370 233,341 Other (404,036) (170,343) (574,379) 149,273 109,242 258,515 Foreign exchanges Financial 574,924 620,176 1,195,100 (559,723) 695,890 136,167 Other (56,130) (26,096) (82,226) -- -- -- Forward Contracts: Currencies 961,657 (295,949) 665,708 (797,668) 315,942 (481,726) Foreign Currencies 467,455 (462,513) 4,942 (27,026) (310,502) (337,528) -------------- -------------- ---------- -------------- -------------- --------- $1,591,464 $ (400,823) $1,190,641 $ (942,317) $ 754,060 $(188,257) -------------- -------------- ---------- -------------- -------------- --------- -------------- -------------- ---------- -------------- -------------- ---------
The following table presents the net realized gains (losses) and the change in net unrealized gains/losses of futures and forward contracts during the three months ended September 30, 1997 and 1996, respectively.
Three months ended September 30, 1997 Three months ended September 30, 1996 ------------------------------------------------ ----------------------------------------------- Change in Change in Net Realized Net Unrealized Net Realized Net Unrealized Gains (Losses) Gains/Losses Total Gains (Losses) Gains/Losses Total -------------- -------------- ---------- -------------- -------------- --------- Futures Contracts: Domestic exchanges Financial $ 129,763 $ (131,744) $ (1,981) $ (200,357) $ (7,669) $(208,026) Currencies 33,760 (70,752) (36,992) (62,854) 25,911 (36,943) Other (203,678) (249,066) (452,744) 120,540 39,382 159,922 Foreign exchanges Financial 550,189 505,775 1,055,964 (110,522) 965,854 855,332 Currencies -- -- -- -- -- -- Other (66,540) (42,696) (109,236) -- -- -- Forward Contracts: Currencies 275,332 (328,443) (53,111) (443,102) (185,290) (628,392) Foreign Currencies -- -- -- (15,480) (39,519) (54,999) -------------- -------------- ---------- -------------- -------------- --------- $ 718,826 $ (316,926) $ 401,900 $ (711,775) $ 798,669 $ 86,894 -------------- -------------- ---------- -------------- -------------- --------- -------------- -------------- ---------- -------------- -------------- ---------
8 PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P. (a limited partnership) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Partnership commenced operations on May 12, 1989 with gross proceeds of $139,151,000. After accounting for organizational and offering costs, the Partnership's net proceeds were $137,151,000. At the inception of the Partnership, sixty percent of the net proceeds was allocated to commodities trading activity and forty percent was placed in reserve and invested in investment grade interest-bearing obligations ('Reserve Assets'). On June 30, 1994, the Reserve Assets matured and the resulting proceeds were allocated to commodities trading. As of September 30, 1997, 100% of the Partnership's total net assets were allocated to commodities trading. A significant portion of the net asset value was held in U.S. Treasury bills (which represented approximately 75% of the net asset value prior to redemptions payable) and cash, which are used as margin for the Partnership's trading in commodities. Inasmuch as the sole business of the Partnership is to trade in commodities, the Partnership will continue to own such liquid assets to be used as margin. The percentage that U.S. Treasury bills bears to the net asset value varies each day, and from month to month, as the market value of commodity interests change. The balance of the net asset value is held in cash. All interest earned on the Partnership's interest-bearing funds is paid to the Partnership. The commodities contracts are subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. For example, commodity exchanges limit fluctuations in commodity futures contract prices during a single day by regulations referred to as 'daily limits.' During a single day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract for a particular commodity has increased or decreased by an amount equal to the daily limit, positions in the commodity can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Commodity futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent the Partnership from promptly liquidating its commodity futures positions. Since the Partnership's business is to trade futures, forward and options contracts, its capital is at risk due to changes in the value of these contracts (market risk) or the inability of counterparties to perform under the terms of the contracts (credit risk). The General Partner attempts to minimize these risks by requiring the Partnership's trading manager 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 the Partnership's futures, forward and options contracts. Redemptions by limited partners recorded for the nine and three months ended September 30, 1997 were $1,852,264 and $574,079, respectively. Redemptions by the General Partner recorded for the nine and three months ended September 30, 1997 were $18,705 and $5,759, respectively. Redemptions by limited partners and the General Partner from commencement of operations, May 12, 1989, through September 30, 1997 totalled $140,043,911 and $1,595,790, respectively. Future redemptions will impact the amount of funds available for investment in commodity contracts in subsequent periods. John W. Henry & Co., Inc. (the 'Trading Manager') determined that its Yen Financial Portfolio no longer met its original investment objectives and therefore, terminated its Yen Financial Portfolio effective March 31, 1997. Accordingly, as of April 1, 1997, the Managing Owner reallocated assets previously traded pursuant to the Yen Financial Portfolio (representing approximately 32% of the Partnership's assets) to the Trading Manager's Original Investment Program. The Partnership does not have, nor does it expect to have, any capital assets. Results of Operations The net asset value per Unit as of September 30, 1997 was $137.11, an increase of .07% from the December 31, 1996 net asset value per Unit of $137.02. 9 July's positive performance resulted from gains in the financial, currency and metal sectors. Profits were somewhat offset by losses in the soft, index, grain and energy sectors. Following the Federal Reserve Chairman's generally upbeat congressional testimony on the state of the U.S. economy, investor sentiment soared, sending U.S. bond prices higher and the yield on the benchmark 30-year U.S. Treasury bond down to levels not seen in 18 months. Positions in U.S. Treasuries, Australian 10-year bonds and Eurodollar bonds resulted in strong gains as did positions in Japanese Government bonds. In the currency sector, strong gains were seen in Deutsche mark and Swiss franc positions as the U.S. dollar soared in response to investors exchanging their marks and francs for U.S. dollars. Positions in the Japanese yen and British pound were unprofitable. In the metal sector, as the Australian central bank sold approximately 60% of their gold reserves, prices tumbled profiting the Partnership's short positions in gold and silver. Losses were experienced in the soft sector as shifting inventory expectations and fickle weather patterns altered investor sentiment, specifically in cotton, cocoa and coffee. In the index sector, losses were seen in the Nikkei Dow and the Australian stock index. In the grain sector, corn positions experienced losses as the short-term weather outlook caused fluctuations in the market. Finally, in the energy sector, losses were incurred in light crude oil and heating oil positions as the market failed to establish firm direction. August's negative performance resulted from losses in the currency, energy, financial, metal and grain sectors. Profits were taken in the index and soft sectors. The currency markets proved to be a major detractor to the Partnership's overall performance. The Deutsche mark's weakness over the past few months had contributed to some decent gains, but its strength in August against the U.S. dollar and British pound contributed to the Partnership's negative performance. The Swiss franc also added to the Partnership's losses as it rose against the U.S. dollar. In the financial sector, August began with sharp sell-offs in the U.S. and German bond markets driven by fears of inflation and higher interest rates. Reverberations were also felt across the European financial markets. This turnaround in the bull bond market resulted in losses in U.S., French and German bond positions. In the energy sector, positions were unprofitable as light crude oil and heating oil prices fell due, in part, to downward pressures related to the recent return of Iraqi oil to world markets. Losses were somewhat offset by gains in world stock indices. As the Japanese Nikkei continued to decline, the Partnership capitalized on its short positions. Positions in cotton, coffee, gold and copper were profitable as well. September's negative performance resulted from losses in the currency, soft, energy, index and grain sectors. Positions in the financial and metal sectors were profitable. Currency sector positions dampened September performance for the Partnership as the U.S. dollar lost ground versus other currencies including the Deutsche mark, Swiss franc and British pound. In the soft sector, significant price moves resulted in losses for the Partnership. Coffee declined, plunging 9.3% in a single day's trading, on expectations of new supplies from Brazil and the transfer of European coffee beans to the U.S. market. Sugar prices also dropped amid projections of large Brazilian exports following the elimination of the sugar export tax. Positions in cocoa were unprofitable as well. In the energy sector, the price of crude oil fell in response to the buildup of inventories from summer lows, causing losses for the Partnership. In the bond market, the main factor in September was the drop in U.S. long-term interest rates from 6.75% to 6.40%. This fall in U.S. interest rates impacted bond prices around the world, contributing profits to the Partnership for the month. Anticipation of an increase in silver demand drove prices up approximately 11%. As a result, the Partnership was able to capture profits. Copper positions were profitable as well. Interest income is earned on U.S. Treasury Bills. Funds available for investment in U.S. Treasury Bills vary based on monthly trading performance and redemptions. Interest income decreased by approximately $15,000 for the nine months, but increased by approximately $7,000 for the three months ended September 30, 1997 as compared to the same periods in 1996. These fluctuations were due to the effect of a gradually declining net asset value during the first nine months of 1996 resulting from poor trading performance, capped by a very strong fourth quarter, as well as the effect of redemptions on the funds available for investment in U.S. Treasury bills. Commissions are calculated on the net asset value on the first day of each month and, therefore, vary based on monthly trading performance and redemptions. Commissions decreased by approximately $19,000 for the nine months, but increased by approximately $17,000 for the three months ended September 30, 1997 as compared to the same periods in 1996. Similar to the fluctuations in interest income discussed above, these fluctuations were due to the effect of trading performance and redemptions on the monthly net asset values. 10 All trading decisions are currently made by John W. Henry & Company, Inc. (the 'Trading Manager'). Management fees are calculated on the net asset value as of the end of each month and, therefore, are affected by trading performance and redemptions. Management fees decreased by approximately $5,000 for the nine months, but increased by approximately $9,000 for the three months ended September 30, 1997 as compared to the same periods in 1996. Similar to the fluctuations in interest income discussed above, these fluctuations were due to the effect of trading performance and redemptions on the monthly net asset values. Incentive fees are based on New High Net Trading Profits generated by the Trading Manager, as defined in the Advisory Agreement between the Partnership, the General Partner and the Trading Manager. No incentive fees were earned for the nine months ended September 30, 1997 and 1996. General and administrative expenses decreased by approximately $13,000 and $4,000 for the nine and three months ended September 30, 1997, respectively, as compared to the same periods in 1996. These expenses include reimbursements of costs incurred by the General Partner on behalf of the Partnership in addition to accounting, audit, tax and legal fees, as well as printing and postage costs related to reports sent to limited partners. The decreases were attributable to a reduction in overall costs associated with administering the Partnership. 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings--There are no material legal proceedings pending by or against the Registrant or the General Partner. Item 2. Changes in Securities--None 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 4.1 Agreement of Limited Partnership of the Registrant, dated as of January 26, 1989, as amended and restated as of March 15, 1989. (Incorporated by reference to Exhibits 3.1 and 4.1 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 1989) 4.2 Subscription Agreement. (Incorporated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 1989) 4.3 Request for Redemption. (Incorporated by reference to Exhibit 4.3 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 1989) 27 Financial Data Schedule (filed herewith) (b) Reports on Form 8-K--None 12 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. Prudential-Bache Capital Return Futures Fund L.P. By: Seaport Futures Management, Inc. A Delaware corporation, General Partner By: /s/ Steven Carlino Date: November 14, 1997 ---------------------------------------- Steven Carlino Vice President Chief Accounting Officer for the Registrant 13 EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 The Schedule contains summary financial information extracted from the financial statements for P-B Capital Return Futures Fund L.P. and is qualified in its entirety by reference to such financial statements 0000846176 P-B Capital Return Futures Fund L.P. 1 Dec-31-1997 Jan-1-1997 Sep-30-1997 9-Mos 3,814,903 12,459,134 0 0 0 16,753,603 0 0 16,753,603 710,656 0 0 0 0 16,042,947 16,753,603 0 1,704,047 0 0 1,685,615 0 0 0 0 0 0 0 0 18,432 .15 0
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