-----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, Hse07lSYYYgKB0/RK0cMNf8mHwx7BocYsp98stGyE+sCD5aVf8g/WFslcT/1A50l fKmXQxAqSTf7vq+bRBVuVA== 0000898733-96-000650.txt : 19960816 0000898733-96-000650.hdr.sgml : 19960816 ACCESSION NUMBER: 0000898733-96-000650 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL BACHE CAPITAL RETURN FUTURES FUND 2 L P CENTRAL INDEX KEY: 0000851786 STANDARD INDUSTRIAL CLASSIFICATION: OIL ROYALTY TRADERS [6792] IRS NUMBER: 133533120 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18418 FILM NUMBER: 96612380 BUSINESS ADDRESS: STREET 1: ONE NEW YORK PLAZA CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128047866 10-Q 1 P-B CAPITAL RETURN FUTURES FUND 2, 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 June 30, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ______________________ Commission file number: 0-18418 PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 13-3533120 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) One New York Plaza, 13th Floor New York, New York 10292 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 778-7866 N/A - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check CK whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes CK No __ Part I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P. (a limited partnership) STATEMENTS OF FINANCIAL CONDITION (Unaudited)
June 30, December 31, 1996 1995 - ---------------------------------------------------------------------------------------------------- ASSETS Equity in commodity trading accounts: Cash $ 6,563,447 $16,630,972 U.S. Treasury bills, at amortized cost 22,289,551 15,519,076 Net unrealized gain on open commodity positions 936,424 872,394 ------------- ------------ Total assets $29,789,422 $33,022,442 ------------- ------------ ------------- ------------ LIABILITIES AND PARTNERS' CAPITAL Liabilities Redemptions payable $ 533,475 $ 1,143,534 Management fees payable 87,519 97,931 Accrued expenses 55,556 45,374 Due to affiliates 52,491 63,134 Incentive fees payable 14,719 -- Options, at market -- 3,000 ------------- ------------ Total liabilities 743,760 1,352,973 ------------- ------------ Commitments Partners' capital Limited partners (145,591 and 151,718 units outstanding) 28,755,130 29,692,794 General partner (1,471 and 10,100 units outstanding) 290,532 1,976,675 ------------- ------------ Total partners' capital 29,045,662 31,669,469 ------------- ------------ Total liabilities and partners' capital $29,789,422 $33,022,442 ------------- ------------ ------------- ------------ Net asset value per limited and general partnership unit (``Units'') $ 197.51 $ 195.71 ------------- ------------ ------------- ------------ - ---------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements
2 PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P. (a limited partnership) STATEMENTS OF OPERATIONS (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, -------------------------- ------------------------- 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------- REVENUES Net realized gain on commodity transactions $1,642,326 $11,289,584 $1,369,240 $8,273,693 Change in net unrealized gain on open commodity positions 55,792 (1,550,138) (301,569) (5,592,033) Interest from U.S. Treasury bills 543,940 712,937 271,454 393,827 ---------- ----------- ---------- ---------- 2,242,058 10,452,383 1,339,125 3,075,487 ---------- ----------- ---------- ---------- EXPENSES Commissions 1,308,385 1,403,068 622,160 752,814 Management fees 549,180 614,833 261,342 326,787 Incentive fees 47,687 365,789 14,719 178,977 General and administrative 80,030 78,176 20,018 36,381 ---------- ----------- ---------- ---------- 1,985,282 2,461,866 918,239 1,294,959 ---------- ----------- ---------- ---------- Net income $ 256,776 $ 7,990,517 $ 420,886 $1,780,528 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- ALLOCATION OF NET INCOME (LOSS) Limited partners $ 262,777 $ 7,574,304 $ 416,676 $1,682,792 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- General partner $ (6,001) $ 416,213 $ 4,210 $ 97,736 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- NET INCOME PER WEIGHTED AVERAGE LIMITED AND GENERAL PARTNERSHIP UNIT Net income per weighted average limited and general partnership unit $ 1.65 $ 41.95 $ 2.81 $ 9.68 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- Weighted average number of limited and general partnership units outstanding 155,791 190,470 149,763 183,999 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- - -----------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Unaudited)
LIMITED GENERAL UNITS PARTNERS PARTNER TOTAL - ----------------------------------------------------------------------------------------------------- Partners' capital--December 31, 1995 161,818 $29,692,794 $ 1,976,675 $31,669,469 Net income (loss) -- 262,777 (6,001) 256,776 Redemptions (14,756) (1,200,441) (1,680,142) (2,880,583) -------- ----------- ----------- ----------- Partners' capital--June 30, 1996 147,062 $28,755,130 $ 290,532 $29,045,662 -------- ----------- ----------- ----------- -------- ----------- ----------- ----------- - ----------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements
3 PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996 (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 2, L.P. (the ``Partnership'') as of June 30, 1996 and the results of its operations for the six and three months ended June 30, 1996 and 1995. 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 filed with the Securities and Exchange Commission for the year ended December 31, 1995 (the ``Annual Report''). Certain balances from the prior period have been reclassified to conform with the current financial statement presentation. B. Related Parties Prudential Securities 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 six months ended June 30, 1996 and 1995 were:
1996 1995 - --------------------------------------------------------------------------- Commissions $1,308,385 $1,403,068 General and administrative 34,302 43,780 ---------- ---------- $1,342,687 $1,446,848 ---------- ---------- ---------- ----------
The costs incurred for these services for the three months ended June 30, 1996 and 1995 were:
1996 1995 - --------------------------------------------------------------------------- Commissions $ 622,160 $ 752,814 General and administrative 5,902 20,085 ---------- ---------- $ 628,062 $ 772,899 ---------- ---------- ---------- ----------
The General Partner is a wholly-owned subsidiary of Prudential Securities Incorporated (``PSI''). The Partnership maintains its trading and cash accounts at PSI, the Partnership's commodity broker. Approximately 75% of the 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. When the Partnership engages in forward foreign currency transactions, it trades with PSI who simultaneously engages in back-to-back transactions with an affiliate who, pursuant to the Partnership's prospectus, is obligated to charge a competitive price. 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 managers 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 managers as it, in good faith, deems to be in the best interest 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 June 30, 1996 and December 31, 1995, such segregated assets totalled $22,350,062 and $26,171,977, 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 $7,021,602 and $7,008,411 at June 30, 1996 and December 31, 1995, respectively. There are no segregation requirements for assets related to forward trading. As of June 30, 1996 and December 31, 1995, the Partnership's open forward and options contracts mature within three months, but open futures contracts mature within nine months and one year, respectively. 5 At June 30, 1996 and December 31, 1995, gross contract amounts of open futures, forward and options contracts are:
June 30, December 31, 1996 1995 ------------ ------------ Financial Futures Contracts: Commitments to purchase $104,363,236 $359,544,988 Commitments to sell $ 24,869,599 $25,500,889 Currency Forward Contracts: Commitments to purchase $ 22,815,528 $ 372,619 Commitments to sell $ 37,905,133 $17,163,772 Currency Futures and Options Contracts: Commitments to purchase $ 6,003,800 $14,350,975 Commitments to sell $ 22,421,847 $28,217,838 Other Futures Contracts: Commitments to purchase $ 280,356 -- Commitments to sell $ 16,921,955 $ 3,593,525
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, forward or options 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, forward and options contracts to be the net unrealized gain or loss on the contracts (plus premiums on options). Thus, the amount at risk associated with counterparty nonperformance of all contracts is the net unrealized gain included in the statements of financial condition. The market risk associated with the 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 June 30, 1996 and December 31, 1995, the fair values of futures, forward and options contracts were:
June 30, 1996 December 31, 1995 -------------------------- -------------------------- Fair Value Fair Value -------------------------- -------------------------- Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- Futures Contracts: Domestic exchanges Financial $ -- $ 126,000 $ 461,831 $ -- Currencies 51,841 132,955 133,670 338,563 Other 495,735 960 795 100 Foreign exchanges Financial 253,708 24,497 785,691 9,984 Other 1,794 -- -- -- Forward Contracts: Currencies 457,317 39,559 211,673 372,619 Options Contracts: Domestic exchanges Currencies -- -- -- 3,000 ---------- ----------- ---------- ----------- $1,260,395 $ 323,971 $1,593,660 $ 724,266 ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
6 The following table presents the average fair values of futures, forward and options contracts during the six months ended June 30, 1996 and 1995, respectively.
Six months ended Six months ended June 30, 1996 June 30, 1995 -------------------------- -------------------------- Average Fair Value Average Fair Value -------------------------- -------------------------- Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- Futures Contracts: Domestic exchanges Financial $ 467,057 $ 20,927 $ 554,431 $ 53,981 Currencies 343,855 211,024 115,450 82,616 Other 85,594 47,975 174,773 61,495 Foreign exchanges Financial 502,418 57,497 915,869 27,262 Other 319 6,087 15,193 -- Forward Contracts: Currencies 794,756 337,127 2,603,762 767,438 Options Contracts: Domestic exchanges Currencies 10,752 4,582 105,775 96,365 ---------- ----------- ---------- ----------- $2,204,751 $ 685,219 $4,485,253 $ 1,089,157 ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
The following table presents the average fair values of futures, forward and options contracts during the three months ended June 30, 1996 and 1995, respectively.
Three months ended Three months ended June 30, 1996 June 30, 1995 -------------------------- -------------------------- Average Fair Value Average Fair Value -------------------------- -------------------------- Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- Futures Contracts: Domestic exchanges Financial $ 472,228 $ 36,622 $ 393,827 $ 15,788 Currencies 296,054 136,585 143,396 136,843 Other 145,461 16,119 37,248 103,196 Foreign exchanges Financial 199,238 55,429 799,212 29,123 Other 558 10,653 26,587 -- Forward Contracts: Currencies 877,606 320,994 4,147,697 428,914 Options Contracts: Domestic exchanges Currencies 11,472 4,534 170,954 72,297 ---------- ----------- ---------- ----------- $2,002,617 $ 580,936 $5,718,921 $ 786,161 ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
7 The following table presents the net realized gains (losses) and the change in net unrealized gains/losses of futures, forward and options contracts during the six months ended June 30, 1996 and 1995, respectively.
Six months ended June 30, 1996 Six months ended June 30, 1995 ----------------------------------------------- ----------------------------------------------- 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 $ 1,358,838 $ (587,831) $ 771,007 $ 2,489,210 $ (500,987) $ 1,988,223 Currencies 679,828 123,779 803,607 962,468 189,558 1,152,026 Other (137,394) 494,080 356,686 100,850 (481,885) (381,035) Foreign exchanges Financial (1,100,681) (546,496) (1,647,177) 4,014,219 (896,515) 3,117,704 Other (24,496) 1,794 (22,702) 122,154 -- 122,154 Forward Contracts: Currencies 792,064 578,704 1,370,768 4,671,630 199,279 4,870,909 Options Contracts: Domestic exchanges Currencies 74,167 (8,238) 65,929 (1,070,947) (59,588) (1,130,535) -------------- -------------- ----------- -------------- -------------- ----------- $ 1,642,326 $ 55,792 $ 1,698,118 $ 11,289,584 $ (1,550,138) $ 9,739,446 -------------- -------------- ----------- -------------- -------------- ----------- -------------- -------------- ----------- -------------- -------------- -----------
The following table presents the net realized gains (losses) and the change in net unrealized gains/losses of futures, forward and options contracts during the three months ended June 30, 1996 and 1995, respectively.
Three months ended June 30, 1996 Three months ended June 30, 1995 ----------------------------------------------- ---------------------------------------------- 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 $ 955,388 $ (752,000) $ 203,388 $1,639,516 $ (78,124) $1,561,392 Currencies 520,148 (208,919) 311,229 48,492 133,431 181,923 Other 234,676 506,865 741,541 (391,676) 70,940 (320,736) Foreign exchanges Financial (1,006,083) (61,038) (1,067,121) 2,459,329 (611,414) 1,847,915 Other (24,496) 1,794 (22,702) 70,552 (58,456) 12,096 Forward Contracts: Currencies 686,357 243,467 929,824 4,743,082 (5,154,856) (411,774) Options Contracts: Domestic exchanges Currencies 3,250 (31,738) (28,488) (295,602) 106,446 (189,156) -------------- -------------- ----------- -------------- -------------- ---------- $ 1,369,240 $ (301,569) $ 1,067,671 $8,273,693 $ (5,592,033) $2,681,660 -------------- -------------- ----------- -------------- -------------- ---------- -------------- -------------- ----------- -------------- -------------- ----------
8 PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, 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 October 6, 1989 with gross proceeds of $101,010,000. After accounting for organizational and offering costs, the Partnership's net proceeds were $99,010,000. At the inception of the Partnership, sixty percent of the net proceeds was allocated to trading activity and forty percent was placed in reserve and invested in investment grade interest-bearing obligations (``Reserve Assets''). On January 3, 1995, the Reserve Assets matured and the resulting proceeds were allocated to commodities trading. As of June 30, 1996, 100% of the Partnership's 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 continues 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 managers 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 six and three months ended June 30, 1996 were $1,200,441 and $528,142, respectively. Redemptions by the General Partner recorded for the six and three months ended June 30, 1996 were $1,680,142 and $5,333, respectively. Redemptions by limited partners and the General Partner from commencement of operations, October 6, 1989, through June 30, 1996 totalled $112,281,034 and $1,680,142, respectively. Future redemptions will impact the amount of funds available for investment in commodity contracts in subsequent periods. 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 June 30, 1996 was $197.51, an increase of .92% from the December 31, 1995 net asset value per Unit of $195.71. The Partnership's performance was positive in the month of April. Profits were earned in the currencies, stock indices, grains, metals and energies sectors. Losses were incurred in the financials and softs sectors. Relatively high U.S. bond yields in April attracted investors to the U.S. dollar, strengthening the dollar against the German mark and Swiss franc. Positions in the mark and franc resulted in gains while positions in the Japanese yen resulted in losses. Positions in the Nikkei were profitable as the stock indices sector received support from institutional buyers lured into the equities market by deregulation. A run-up in commodity prices occurred in April which generated profits in corn positions and profits were taken by 9 expectations of a poor wheat crop. Profits were generated in gold and silver although metals markets in general remained trendless. Profits were reaped in light crude oil as prices soared and refiners rushed to meet the summertime demand for gasoline. Except for the U.S. sector, positions in interest rates were unprofitable as global markets responded to the threat of U.S. inflation. The Partnership's performance was negative in the month of May. Profits earned in the currencies, grains and meats sectors were offset by losses in the stock indices, financials, metals, energies and softs sectors. Among the factors affecting foreign exchange markets in May were the continued strength of the U.S. dollar against most major currencies and a comparatively vigorous U.S. economy. Gains were made in Swiss Franc and Japanese yen positions. In the grains sector, export demand was strong and worries about the weather conditions for spring planting replaced earlier concerns about devastated winter crops. Profits were reaped in corn and wheat positions. In the financials sector, bond markets remained volatile as investors struggled to interpret conflicting U.S. economic reports out of Washington. Losses were taken in French, British and Australian bond positions. The energy markets felt political pressure to keep oil prices down and Iraq reached an agreement with the U.N. on the sale of crude oil to raise money for humanitarian purposes, which compounded the effect on prices. Positions in crude and heating oil were unprofitable. In the metals sector, profits in gold positions were offset by losses in silver and nickel positions. The Partnership's performance was positive in the month of June. Profits were earned in the metals, currencies and energies sectors. Losses were incurred in the financials, stock indices and softs sectors. Moderate gains were achieved as metal and currency profits offset losses in the highly volatile stock index and global interest rate markets. Positions in gold and silver were profitable as world supplies improved, presumably the result of selling by central banks. Gold hit a seven-month low early in June, breaking a trading range of $390 to $400 an ounce that had lasted several months. In the currency markets, the U.S. dollar reached a 28-month high against the Japanese yen early in June, ending down somewhat at month's end, as investors turned to higher yielding European currencies such as the British pound. Positions in the Japanese yen and British pound were profitable. In the bond markets, gains in the Japanese government bond, Italian bond and British short sterling failed to offset losses in other sectors. Losses were sustained in global equity indices. Interest income from U.S. Treasury bills for the six and three months ended June 30, 1996 decreased by approximately $169,000 and $122,000 as compared to the same periods in 1995 due to the effect of redemptions on the funds available for investment in U.S. Treasury bills as well as a decrease in interest rates in 1996. 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 $95,000 and $131,000 for the six and three months ended June 30, 1996 as compared to the same periods in 1995 primarily due to the effect of redemptions on the monthly net asset values. All trading decisions are currently being made by John W. Henry & Co., Inc., Welton Investment System Corp. and Analytic/TSA Investors Inc. (formerly called TSA Capital Management) (the ``Trading Managers''). Management fees are calculated on the net asset value allocated to each Trading Manager as of the end of each month and, therefore, are affected by trading performance and redemptions. Management fees decreased by approximately $66,000 and $65,000 for the six and three months ended June 30, 1996 as compared to the same periods in 1995 primarily due to the effect of redemptions on the monthly net asset values. Incentive fees are based on the New High Net Trading Profits generated by each Trading Manager, as defined in the Advisory Agreements between the Partnership, the General Partner and each Trading Manager. Trading performance resulted in incentive fees of approximately $48,000 and $15,000 for the six and three months ended June 30, 1996 and approximately $366,000 and $179,000 for the six and three months ended June 30, 1995, respectively. General and administrative expenses increased by approximately $2,000 for the six months ended June 30, 1996 but decreased by approximately $16,000 for the three months ended June 30, 1996 as compared to the same periods in 1995. These expenses include reimbursement 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. These variances were primarily due to a reduction in overall costs associated with administrating the Partnership. 10 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 June 8, 1989 as amended and restated as of July 21, 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 Registration Statement on Form S-1, File No. 33-29039) 4.3 Request for Redemption (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-1, File No. 33-29039) 27 Financial Data Schedule (filed herewith) (b) Reports on Form 8-K-- Registrant's Current Report on Form 8-K dated May 14, 1996, as filed with the Securities and Exchange Commission on May 16, 1996, relating to Item 4 regarding the change in the Registrant's certifying accountant from Deloitte & Touche LLP to Price Waterhouse LLP. 11 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 hereunto duly authorized. Prudential-Bache Capital Return Futures Fund 2, L.P. By: Prudential Securities Futures Management Inc.A Delaware corporation, General Partner By: /s/ Steven Carlino Date: August 14, 1996 ---------------------------------------- Steven Carlino Vice President Chief Accounting Officer for the Registrant 12 EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 The Schedule contains summary financial information extracted from the financial statements for P-B Capital Return Futures Fund 2, L.P. and is qualified in its entirety by reference to such financial statements 0000851786 P-B Capital Return Futures Fund 2, L.P. 1 Dec-31-1996 Jan-1-1996 Jun-30-1996 6-Mos 6,563,447 23,225,975 0 0 0 29,789,422 0 0 29,789,422 743,760 0 0 0 0 29,045,662 29,789,422 0 2,242,058 0 0 1,985,282 0 0 0 0 0 0 0 0 256,776 1.65 0
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