-----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, QldHuOeLdPM7nqdmEs1q5cneGJ0tQvo/VLOgv26QnPLiwSBVaCYWLRlwOHRiWNlf D4xwgm69tkVfNF7wdZbspA== /in/edgar/work/0000898733-00-000807/0000898733-00-000807.txt : 20001114 0000898733-00-000807.hdr.sgml : 20001114 ACCESSION NUMBER: 0000898733-00-000807 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL BACHE CAPITAL RETURN FUTURES FUND 2 L P CENTRAL INDEX KEY: 0000851786 STANDARD INDUSTRIAL CLASSIFICATION: [6221 ] IRS NUMBER: 133533120 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18418 FILM NUMBER: 759496 BUSINESS ADDRESS: STREET 1: ONE NEW YORK PLAZA CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128047866 10-Q 1 0001.txt P-B CAPITAL RETURN FUTURES FUND 2, L.P. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 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 of (I.R.S. Employer Identification No.) incorporation or organization) One New York Plaza, 13th Floor New York, New York 10292 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 778-7866 N/A - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check CK whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes CK No __ 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)
September 30, December 31, 2000 1999 - ---------------------------------------------------------------------------------------------------- ASSETS Cash $ 3,358,441 $ 4,573,677 Net unrealized gain (loss) on open futures and options contracts (248,933) 582,280 U.S. Treasury bills, at amortized cost 9,733,817 14,715,473 Net premiums paid on options -- 83,238 ------------- ------------ Total assets $12,843,325 $19,954,668 ------------- ------------ ------------- ------------ LIABILITIES AND PARTNERS' CAPITAL Liabilities Redemptions payable $ 678,976 $ 935,402 Net unrealized loss on open forward contracts 80,888 59,834 Due to affiliates 56,018 40,762 Accrued expenses payable 45,316 60,689 Management fees payable 22,124 34,924 Premiums received on options 10,845 -- ------------- ------------ Total liabilities 894,167 1,131,611 ------------- ------------ Commitments Partners' capital Limited partners (62,912 and 81,738 units outstanding) 11,829,568 18,634,742 General partner (636 and 826 units outstanding) 119,590 188,315 ------------- ------------ Total partners' capital 11,949,158 18,823,057 ------------- ------------ Total liabilities and partners' capital $12,843,325 $19,954,668 ------------- ------------ ------------- ------------ Net asset value per limited and general partnership unit ('Units') $ 188.03 $ 227.98 ------------- ------------ ------------- ------------ - ---------------------------------------------------------------------------------------------------- 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)
Nine Months Three Months Ended September 30, Ended September 30, -------------------------- -------------------------- 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------ REVENUES Net realized gain (loss) on commodity transactions $(1,262,870) $1,827,008 $ (620,817) $ 784,809 Change in net unrealized gain/loss on open commodity positions (852,267) (535,064) (169,207) (760,278) Interest from U.S. Treasury bills 499,230 577,625 150,118 195,891 ----------- ---------- ----------- ---------- (1,615,907) 1,869,569 (639,906) 220,422 ----------- ---------- ----------- ---------- EXPENSES Commissions 957,248 1,368,779 268,371 434,730 Management fees 247,635 364,240 68,875 114,403 Incentive fees -- 180,115 -- 54,589 General and administrative 102,717 117,641 34,605 35,983 ----------- ---------- ----------- ---------- 1,307,600 2,030,775 371,851 639,705 ----------- ---------- ----------- ---------- Net loss $(2,923,507) $ (161,206) $(1,011,757) $ (419,283) ----------- ---------- ----------- ---------- ----------- ---------- ----------- ---------- ALLOCATION OF NET LOSS Limited partners $(2,894,256) $ (159,594) $(1,001,633) $ (415,090) ----------- ---------- ----------- ---------- ----------- ---------- ----------- ---------- General partner $ (29,251) $ (1,612) $ (10,124) $ (4,193) ----------- ---------- ----------- ---------- ----------- ---------- ----------- ---------- NET LOSS PER WEIGHTED AVERAGE LIMITED AND GENERAL PARTNERSHIP UNIT Net loss per weighted average limited and general partnership unit $ (39.37) $ (1.69) $ (15.07) $ (4.63) ----------- ---------- ----------- ---------- ----------- ---------- ----------- ---------- Weighted average number of limited and general partnership units outstanding 74,257 95,244 67,159 90,558 ----------- ---------- ----------- ---------- ----------- ---------- ----------- ---------- - ------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Unaudited)
LIMITED GENERAL UNITS PARTNERS PARTNER TOTAL - ----------------------------------------------------------------------------------------------------- Partners' capital--December 31, 1999 82,564 $18,634,742 $ 188,315 $18,823,057 Net loss (2,894,256) (29,251) (2,923,507) Redemptions (19,016) (3,910,918) (39,474) (3,950,392) -------- ----------- --------- ----------- Partners' capital--September 30, 2000 63,548 $11,829,568 $ 119,590 $11,949,158 -------- ----------- --------- ----------- -------- ----------- --------- ----------- - ----------------------------------------------------------------------------------------------------- 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 SEPTEMBER 30, 2000 (Unaudited) A. General These financial statements have been prepared without audit. In the opinion of Prudential Securities Futures Management Inc. (the 'General Partner'), 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 September 30, 2000 and the results of its operations for the nine and three months ended September 30, 2000 and 1999. 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, 1999. New Accounting Guidance In June 2000, the Financial Accounting Standards Board ('FASB') issued Statement No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities--an amendment of FASB Statement No. 133 ('SFAS 138'), which became effective for the Partnership on July 1, 2000. SFAS 138 amends the accounting and reporting standards of FASB Statement No. 133 for certain derivative instruments and certain hedging activities. SFAS 138 has not had a material effect on the carrying value of assets and liabilities within the financial statements. B. Related Parties The General Partner is a wholly owned subsidiary of Prudential Securities Incorporated ('PSI'). 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 and three months ended September 30, 2000 and 1999 were:
For the three months For the nine months ended ended September 30, September 30, ----------------------------- ------------------------- 2000 1999 2000 1999 ------------------------------------------------------------ Commissions $ 957,248 $1,368,779 $268,371 $434,730 General and administrative 52,747 50,847 17,693 15,062 ---------- ---------- -------- -------- $1,009,995 $1,419,626 $286,064 $449,792 ---------- ---------- -------- -------- ---------- ---------- -------- --------
The Partnership's assets are maintained either in trading or cash accounts with PSI, the Partnership's commodity broker, or for margin purposes, with the various exchanges on which the Partnership is permitted to trade. The Partnership, acting through its trading managers, executes over-the-counter, spot, forward and/or option foreign exchange transactions with PSI. PSI then engages in back-to-back trading with an affiliate, Prudential-Bache Global Markets Inc. ('PBGM'). PBGM attempts to earn a profit on such transactions. PBGM keeps its prices on foreign currency competitive with other interbank currency trading desks. All over-the-counter currency transactions are conducted between PSI and the Partnership pursuant to a line of credit. PSI may require that collateral be posted against the marked-to-market positions of the Partnership. 4 C. Derivative Instruments and Associated Risks The Partnership is exposed to various types of risk associated with the derivative instruments and related markets in which it invests. These risks include, but are not limited to, risk of loss from fluctuations in the value of derivative instruments held (market risk) and the inability of counterparties to perform under the terms of the Partnership's investment activities (credit risk). Market risk Trading in futures and forward (including foreign exchange transactions) contracts involves entering into contractual commitments to purchase or sell a particular commodity at a specified date and price. The gross or face amount of the contracts, which is typically many times that of the Partnership's net assets being traded, significantly exceeds the Partnership's future cash requirements since the Partnership intends to close out its open positions prior to settlement. As a result, the Partnership 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. The market risk associated with the Partnership's commitments to purchase commodities is limited to the gross or face amount of the contracts held. However, when the Partnership enters into a contractual commitment to sell commodities, it must make delivery of the underlying commodity at the contract price and then repurchase the contract at prevailing market prices. Since the repurchase price to which a commodity can rise is unlimited, entering into commitments to sell commodities exposes the Partnership to unlimited risk. Trading in options involves the payment or receipt of a premium and the corresponding right or obligation, as the case may be, to either purchase or sell the underlying commodity for a specified price during a limited period of time. Purchasing options involves the risk that the underlying commodity does not change price as expected, so that the option expires worthless and the premium is lost. On the other hand, selling options involves unlimited risk because the Partnership is exposed to the potentially unlimited price movement in the underlying commodity. Market risk is influenced by a wide variety of factors including government programs and policies, political and economic events, the level and volatility of interest rates, foreign currency exchange rates, the diversification effects among the derivative instruments the Partnership holds and the liquidity and inherent volatility of the markets in which the Partnership trades. Credit risk When entering into futures, forward and options contracts, the Partnership is exposed to credit risk that the counterparty to the contract will not meet its obligations. The counterparty for futures and options contracts traded in the United States and on most foreign futures and options exchanges is the clearinghouse associated with such exchanges. In general, clearinghouses are backed by the corporate members of the clearinghouse who are required to share any financial burden resulting from the nonperformance by one of its members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members (i.e., some foreign exchanges), it is normally backed by a consortium of banks or other financial institutions. On the other hand, the sole counterparty to the Partnership's forward transactions is PSI, the Partnership's commodity broker. The Partnership has entered into a master netting agreement with PSI and, as a result, presents unrealized gains and losses on open forward positions as a net amount in the statements of financial condition. The amount at risk associated with counterparty nonperformance of all of the Partnership's contracts is the net unrealized gain (plus premiums paid on options) included in the statements of financial condition. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its obligations to the Partnership. The General Partner attempts to minimize both credit and market risks by requiring the Partnership and its 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. Additionally, pursuant to each Advisory Agreement among the Partnership, the General Partner and each trading manager, the General Partner shall automatically terminate a trading manager if the net asset value allocated to the trading manager declines by 33 1/3% since the commencement of its trading activities or from the value at the beginning of any year (except for Welton Investment 5 Corporation for which automatic termination relates only to a decline from the commencement of trading activities). Furthermore, the Amended and Restated Agreement of Limited Partnership provides that the Partnership will liquidate its positions, and eventually dissolve, if the Partnership experiences a decline in the net asset value to less than 50% of the value at commencement of trading activities. In each case, the decline in net asset value is after giving effect for distributions and redemptions. 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 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, 2000, such segregated assets totalled $9,847,781. 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 $2,984,699 at September 30, 2000. There are no segregation requirements for assets related to forward trading. As of September 30, 2000, the Partnership's open futures, forward and options contracts mature within one year. At September 30, 2000 and December 31, 1999, the fair value of open futures, forward and options contracts was:
2000 1999 ------------------------ ------------------------ Assets Liabilities Assets Liabilities -------- ----------- -------- ----------- Futures Contracts: Domestic exchanges Interest rates $ 49,833 $ 6,844 $ 78,005 $ -- Stock indices -- 32,350 75,245 5,420 Currencies 29,450 122,091 76,089 30,830 Commodities 38,360 120,910 52,327 24,170 Foreign exchanges Interest rates 13,213 46,113 116,588 1,038 Stock indices 25,696 27,218 81,199 1,899 Commodities 35,601 77,050 168,686 26,889 Forward Contracts: Currencies 102,467 183,355 14,912 74,746 Options Contracts: Domestic exchanges Interest rates -- 3,125 -- -- Stock indices -- 3,600 95,700 -- Currencies -- 3,813 -- -- Commodities -- 8,817 13,050 1,125 -------- ----------- -------- ----------- $294,620 $ 635,286 $771,801 $ 166,117 -------- ----------- -------- ----------- -------- ----------- -------- -----------
6 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 trading 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 September 30, 2000, 100% of the Partnership's total net assets was allocated to commodities trading. A significant portion of the net asset value was held in U.S. Treasury bills (which represented approximately 77% 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 total net assets varies each day, and from month to month, as the market values of commodity interests change. The balance of the net assets 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 certain commodity futures contract prices during a single day by regulations referred to as 'daily limits.' During a single day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract for a particular commodity has increased or decreased by an amount equal to the daily limit, positions in the commodity can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Commodity futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent 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 Partnership's exposure to market risk is influenced by a number of factors including the volatility of interest rates and foreign currency exchange rates, the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of the Partnership's speculative trading as well as the development of drastic market occurrences could result in monthly losses considerably beyond the Partnership's experience to date and could ultimately lead to a loss of all or substantially all of investors' capital. The general partner attempts to minimize these risks by requiring the Partnership and its trading managers to abide by various trading limitations and policies, which include limiting margin amounts, trading only in liquid markets and utilizing stop loss provisions. See Note 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 recorded for the nine and three months ended September 30, 2000 were and $3,910,918 and $672,204, respectively, for the limited partners and $39,474 and $6,772, respectively, for the general partner, and from commencement of operations, October 6, 1989, through September 30, 2000, totalled $130,922,714 for the limited partners and $1,868,422 for the general partner. 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 September 30, 2000 was $188.03, a decrease of 17.52% from the December 31, 1999 net asset value per Unit of $227.98 and a decrease of 7.42% from the June 30, 2000 net asset value per Unit of $203.10. The Partnership had gross trading gains/(losses) of approximately $(2,115,137) and $(790,024) during the nine and three months ended September 30, 2000, respectively, compared to $1,291,944 and $24,531 for the corresponding periods in the prior year. Due to the nature of the Partnership's trading activities, a period 7 to period comparison of its trading results is not meaningful. However, a detailed discussion of the Partnership's current quarter trading results is presented below. Quarterly Market Overview U.S. economic activity expanded at a moderate pace at the beginning of the third quarter and showed signs of slowing down near quarter-end. Growth in consumer spending slowed from the outsized gains earlier in the year, and sales of new homes dropped from earlier highs. However, business spending continued to surge and industrial production trended upward. Even though expansion in employment slowed considerably in recent months, labor markets remained tight by historical standards and some measures of labor compensation continued to accelerate. The recent decrease in consumer spending resulted from moderate growth of real disposable income in recent months coupled with dips in stock market valuation. Nevertheless, consumer sentiment continued to be buoyant. Consumer prices, as measured by the CPI, increased in June in response to a surge in energy prices, but climbed only modestly in July and August. U.S. Treasury markets were choppy throughout the quarter but ended slightly higher, while Japanese government bonds fell sharply on news of a 25 basis point rate hike. The U.S. Federal Reserve Bank maintained interest rates at 6.50% throughout the quarter due to increasing indications of a slow down in aggregate demand and rising productivity. Conversely, there was a shift by other European and Asian central banks toward tighter domestic monetary policy. At its monetary policy meeting held in August, the Bank of Japan (BOJ) decided to raise rates from 0% to 0.25%. In February 1999, the BOJ adopted a zero interest rate policy, unprecedented both in and out of Japan, to counter the possibility of mounting deflationary pressure and prevent further deterioration of Japan's economy. Over the past year and a half, Japan's economy substantially improved; consequently, the BOJ felt confident that Japan's economy had reached the stage where deflation was no longer an immediate threat. The BOJ's increase in short-term interest rates in August caused the yen to rally sharply against the British pound and U.S. dollar. The U.S. dollar was strong against most major currencies at the beginning of the quarter. The end of September brought a sharp reversal to this trend following intervention by the G-7 central banks to support the euro. This move drove the euro up 5% against the U.S. dollar and the Japanese yen. The euro surged to a high of above $0.90 after the initial wave of euro buying before settling down more than $0.02 below its intervention peaks. Global equity markets experienced choppiness in July and August before declining in September. This was due to growing concern over near record energy costs and warnings of earning shortfalls, particularly from U.S. technology companies. Energy prices continued their upward trend throughout the quarter. In August, the American Petroleum Institute reported that crude inventories were at a 24-year low and by month's end the price per barrel had moved to over $33. On September 22nd, the U.S. announced that it would release 30 million barrels of oil from the U.S. strategic petroleum reserve over the next month in an effort to cap surging energy prices; crude oil prices fell by $2 a barrel. Quarterly Partnership Performance The following is a summary of performance for the major sectors in which the Partnership traded: Interest rates (-): Losses were incurred in long domestic, Japanese and European bond positions as the slowing global economy and an interest rate hike by the European Central Bank resulted in choppy bond markets. Stock indices (-): The global economic slowdown negatively affected the major indices. Long positions in the S&P 500, European DAX, Nikkei Dow, Nasdaq, Sydney Futures Exchange and London FTSE resulted in losses. Currencies (-): Long positions in the euro, British pound, Swiss franc and New Zealand dollar yielded losses despite a brief rally after intervention by the European Central Bank and other G-7 central banks to boost the failing euro. Increasing European productivity and growth coupled with rising energy prices have been the contributing factors to weakening foreign currencies. 8 Energies (-): Short light crude oil, heating oil and natural gas resulted in losses as the energy sector continued to push prices higher driven by demand and uncertainty regarding future production and supply levels. Interest income is earned on the Partnership's investments in U.S. Treasury bills and varies monthly according to interest rates as well as the effect of trading performance and redemptions on the level of interest-bearing funds. Interest income from U.S. Treasury bills decreased by approximately $78,000 and $46,000, respectively, for the nine and three months ended September 30, 2000 compared to the same periods in 1999. These declines in interest income were the result of fewer funds being invested in U.S. Treasury bills principally due to weak trading performance since October 1999 and redemptions. These declines were partially offset by higher interest rates during the nine and three months ended September 30, 2000 versus the corresponding periods in 1999. Commissions paid to PSI are calculated on the Partnership's net asset value on the first day of each month and, therefore, vary monthly according to trading performance and redemptions. Commissions decreased by approximately $412,000 and $166,000 for the nine and three months ended September 30, 2000 as compared to the same periods in 1999 principally due to the effect of weak trading performance since October 1999 and redemptions on the monthly net asset values. All trading decisions are currently being made by Welton Investment Corporation, Eclipse Capital Management, Inc. ('Eclipse'), Trendlogic Associates, Inc. and Gaiacorp Ireland Limited. Management fees are calculated on the portion of the Partnership's 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 $117,000 and $46,000 for the nine and three months ended September 30, 2000 as compared to the same periods in 1999 due to fluctuations in monthly net asset values as described in the discussion on commissions above. Incentive fees are based on the New High Net Trading Profits generated by each trading manager, as defined in each Advisory Agreement among the Partnership, the General Partner and each trading manager. Eclipse generated sufficient trading profits to earn incentive fees of approximately $180,000 and $55,000 during the nine and three months ended September 30, 1999. No incentive fees were incurred by the Partnership during the nine and three months ended September 30, 2000. General and administrative expenses decreased by approximately $15,000 and $1,000 for the nine and three months ended September 30, 2000 as compared to the same periods in 1999. 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. New Accounting Guidance In June 2000, FASB issued SFAS 138 which became effective for the Partnership on July 1, 2000. SFAS 138 amends the accounting and reporting standards of FASB Statement No. 133 for certain derivative instruments and certain hedging activities. SFAS 138 has not had a material effect on the carrying value of assets and liabilities within the financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information regarding quantitative and qualitative disclosures about market risk is not required pursuant to Item 305(e) of Regulation S-K. 9 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--Effective September 2000, Eleanor L. Thomas was elected by the Board of Directors as President of Prudential Securities Futures Management Inc. replacing Joseph A. Filicetti. 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-- No reports on Form 8-K were filed during the quarter. 10 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: November 13, 2000 ---------------------------------------- Steven Carlino Vice President and Treasurer 11 EX-27 2 0002.txt 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 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-31-2000 Jan-1-2000 Sep-30-2000 9-Mos 3,358,441 9,484,884 0 0 0 0 0 0 12,843,325 894,167 0 0 0 0 11,949,158 12,843,325 0 (1,615,907) 0 0 1,307,600 0 0 0 0 0 0 0 0 (2,923,507) (39.37) 0
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