10-K 1 0001.txt P-B CAPITAL RETURN FUTURES FUND 2, L.P. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 (I.R.S. Employer Identification No.) of 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 Securities registered pursuant to Section 12(b) of the Act: None ---------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest ---------------------------------------------------------------------------- (Title of class) Indicate by check mark 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__ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [CK] DOCUMENTS INCORPORATED BY REFERENCE Registrant's Annual Report to Limited Partners for the year ended December 31, 2000 is incorporated by reference into Parts II and IV of this Annual Report on Form 10-K Index to exhibits can be found on pages 8 through 10. PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P. (a limited partnership) TABLE OF CONTENTS
PART I PAGE Item 1 Business......................................................................... 3 Item 2 Properties....................................................................... 3 Item 3 Legal Proceedings................................................................ 3 Item 4 Submission of Matters to a Vote of Limited Partners.............................. 4 PART II Item 5 Market for the Registrant's Units and Related Limited Partner Matters............ 4 Item 6 Selected Financial Data.......................................................... 4 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................... 4 Item 7A Quantitative and Qualitative Disclosures About Market Risk....................... 4 Item 8 Financial Statements and Supplementary Data...................................... 4 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................................................... 5 PART III Item 10 Directors and Executive Officers of the Registrant............................... 5 Item 11 Executive Compensation........................................................... 6 Item 12 Security Ownership of Certain Beneficial Owners and Management................... 7 Item 13 Certain Relationships and Related Transactions................................... 7 PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K................. 8 Financial Statements and Financial Statement Schedules........................... 8 Exhibits......................................................................... 8 Reports on Form 8-K.............................................................. 10 SIGNATURES.................................................................................. 11
2 PART I Item 1. Business General Prudential-Bache Capital Return Futures Fund 2, L.P. (the 'Registrant'), a Delaware limited partnership, was formed on June 8, 1989 and will terminate on December 31, 2009 unless terminated sooner under the provisions of the Amended and Restated Agreement of Limited Partnership (the 'Partnership Agreement'). The Registrant was formed to engage primarily in the speculative trading of a portfolio consisting primarily of commodity futures, forward and options contracts. Physical commodities also may be traded from time to time. On October 6, 1989, the Registrant completed its offering having raised $101,010,000 from the sale of 1,000,000 units of limited partnership interest and 10,100 units of general partnership interest (collectively, 'Units') which resulted in net proceeds to the Registrant of $99,010,000. The Registrant's fiscal year for book and tax purposes ends on December 31. All trading decisions for the Registrant are currently being made by Welton Investment Corporation, Eclipse Capital Management, Inc., Appleton Capital Management (formerly known as Gaiacorp Ireland Limited) and Trendlogic Associates, Inc., independent commodity trading managers (collectively, the 'Trading Managers'). The General Partner retains the authority to override trading instructions that violate the Registrant's trading policies. The Registrant is engaged solely in the business of commodity futures, forward and options trading; therefore, presentation of industry segment information is not applicable. General Partner and its Affiliates The general partner of the Registrant is Prudential Securities Futures Management Inc. (the 'General Partner'), which is a wholly owned subsidiary of Prudential Securities Incorporated ('PSI'), the Registrant's commodity broker. PSI is a wholly owned subsidiary of Prudential Securities Group Inc. ('PSGI'). The General Partner is required to maintain at least a 1% interest in the Registrant as long as it is acting as the Registrant's general partner. Competition The General Partner and its affiliates have formed and may continue to form various entities to engage in the speculative trading of futures, forward and options contracts which, in part, have certain of the same investment policies as the Registrant. The Registrant is a closed-end fund which does not currently, and does not intend in the future to, solicit the sale of additional Units. As such, the Registrant does not compete with other entities to attract new fund participants. However, to the extent that the Trading Managers recommend similar or identical trades to the Registrant and the other accounts which they manage, the Registrant may compete with those accounts for the execution of the same or similar trades, as well as with other market participants. Employees The Registrant has no employees. Management and administrative services for the Registrant are performed by the General Partner and its affiliates pursuant to the Partnership Agreement as further discussed in Notes A, C and D to the Registrant's financial statements included in its annual report to limited partners for the year ended December 31, 2000 ('Registrant's 2000 Annual Report') which is filed as an exhibit hereto. Item 2. Properties The Registrant does not own or lease any property. Item 3. Legal Proceedings There are no material legal proceedings pending by or against the Registrant or the General Partner. 3 Item 4. Submission of Matters to a Vote of Limited Partners None PART II Item 5. Market for the Registrant's Units and Related Limited Partner Matters On October 6, 1989, the Registrant completed its offering. A significant secondary market for the Units has not developed, and it is not expected that one will develop in the future. There are also certain restrictions set forth in the Partnership Agreement limiting the ability of a partner to transfer Units. However, the Partnership Agreement provides that a limited partner may redeem units as of the last business day of any calendar quarter at the then current net asset value per Unit. Consequently, holders of Units may not be able to liquidate their investments in the event of an emergency or for any other reason. There are no material restrictions upon the Registrant's present or future ability to make distributions in accordance with the provisions of the Partnership Agreement. No distributions have been made since inception and no distributions are anticipated in the future. As of March 12, 2001, there were 737 holders of record owning 61,423 Units, including 615 units of general partnership interest. Item 6. Selected Financial Data The following table presents selected financial data of the Registrant. This data should be read in conjunction with the financial statements of the Registrant and the notes thereto on pages 2 through 9 of the Registrant's 2000 Annual Report which is filed as an exhibit hereto.
Year ended December 31, ------------------------------------------------------------------------ 2000 1999 1998 1997 1996 ------------ ------------ ------------ ------------ ------------ Total revenue (including interest) $ 938,800 $ 1,490,997 $ 654,083 $ 7,625,240 $ 9,760,109 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss) $ (712,434) $(1,077,632) $(2,564,349) $ 3,308,428 $ 5,247,292 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss) per weighted average Unit $ (9.95) $ (11.57) $ (22.84) $ 25.75 $ 35.04 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total assets $14,316,560 $19,954,668 $25,030,894 $32,378,581 $33,622,033 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net asset value per Unit $ 222.83 $ 227.98 $ 240.34 $ 259.66 $ 233.09 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This information is incorporated by reference to pages 11 through 13 of the Registrant's 2000 Annual Report which is filed as an exhibit hereto. Item 7A. 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. Item 8. Financial Statements and Supplementary Data The financial statements are incorporated by reference to pages 2 through 9 of the Registrant's 2000 Annual Report which is filed as an exhibit hereto. 4 Selected unaudited quarterly financial data for the years ended December 31, 2000 and 1999 are summarized below:
First Second Third Fourth Quarter Quarter Quarter Quarter ----------- ----------- ----------- ----------- 2000: Total revenues (including interest) $ (312,979) $ (663,022) $ (639,906) $ 2,554,707 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total revenues (including interest) less commissions $ (685,798) $ (979,080) $ (908,277) $ 2,310,510 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income (loss) $ (816,446) $(1,095,304) $(1,011,757) $ 2,211,073 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income (loss) per weighted average Interest $ (9.89) $ (14.99) $ (15.07) $ 34.79 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 1999: Total revenues (including interest) $ 405,404 $ 1,243,743 $ 220,422 $ (378,572) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total revenues (including interest) less commissions $ (71,203) $ 786,301 $ (214,308) $ (775,802) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income (loss) $ (261,395) $ 519,472 $ (419,283) $ (916,426) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income (loss) per weighted average Interest $ (2.61) $ 5.46 $ (4.63) $ (10.57) ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Registrant There are no directors or executive officers of the Registrant. The Registrant is managed by the General Partner. The General Partner's directors and executive officers and any persons holding more than 10% of the Registrant's Units ('Ten Percent Owners') are required to report their initial ownership of such Units and any subsequent changes in that ownership to the Securities and Exchange Commission on Forms 3, 4, or 5. Such executive officers, directors and Ten Percent Owners are required by Securities and Exchange Commission regulations to furnish the Registrant with copies of all Forms 3, 4 and 5 they file. All of these filing requirements were satisfied on a timely basis. In making these disclosures, the Registrant has relied solely on written representations of the General Partner's directors and executive officers or copies of the reports that they have filed with the Securities and Exchange Commission during and with respect to its most recent fiscal year. The directors and executive officers of Prudential Securities Futures Management Inc. and their positions with respect to the Registrant are as follows: Name Position ---------------------------- ---------------------------------------- Eleanor L. Thomas President and Director Barbara J. Brooks Chief Financial Officer Steven Carlino Vice President and Treasurer A. Laurence Norton, Jr. Director Guy S. Scarpaci Director Tamara B. Wright Senior Vice President and Director ELEANOR L. THOMAS, age 46, has been the President of Prudential Securities Futures Management Inc. since September 2000 and a Director since April 1999. She has also been the President and a Director of Seaport Futures Management, Inc. (an affiliate of the General Partner) since April 1999. She has held various 5 positions of increasing responsibility in both Prudential Securities Futures Management Inc. and Seaport Futures Management, Inc. since joining PSI in 1993. She is a First Vice President of PSI and the director of the Futures and Hedge Fund Group within PSI. Prior to joining PSI in March 1993, she was with MC Baldwin Financial Company from June 1990 through February 1993 and Arthur Anderson & Co. from 1986 through May 1990. Ms. Thomas is a certified public accountant. BARBARA J. BROOKS, age 52, is the Chief Financial Officer of Prudential Securities Futures Management Inc. She is a Senior Vice President of PSI. She is also the Chief Financial Officer of Seaport Futures Management, Inc. and serves in various capacities for other affiliated companies. She has held several positions within PSI since April 1983. Ms. Brooks is a certified public accountant. STEVEN CARLINO, age 37, is a Vice President and Treasurer of Prudential Securities Futures Management Inc. He is a Senior Vice President of PSI. He is also a Vice President and Treasurer of Seaport Futures Management, Inc. and serves in various capacities for other affiliated companies. Prior to joining PSI in October 1992, he was with Ernst & Young for six years. Mr. Carlino is a certified public accountant. A. LAURENCE NORTON, JR., age 62, is a Director of Prudential Securities Futures Management Inc. He is an Executive Vice President of PSI and, since March 1994, has been the director of the Futures Division of PSI. He is also a Director of Seaport Futures Management, Inc. and is a member of PSI's Operating Committee. From October 1991 to March 1994, he held the position of Executive Director of Retail Development and Retail Strategies at PSI. Prior to joining PSI in 1991, Mr. Norton was a Senior Vice President and Branch Manager of Shearson Lehman Brothers. GUY S. SCARPACI, age 54, is a Director of Prudential Securities Futures Management Inc. He is a First Vice President of the Futures Division of PSI. He is also a Director of Seaport Futures Management, Inc. Mr. Scarpaci has been employed by PSI in positions of increasing responsibility since August 1974. TAMARA B. WRIGHT, age 42, is a Director and a Senior Vice President of Prudential Securities Futures Management Inc. She is a Senior Vice President and Chief Administrative Officer for the International Division of PSI. She is also a Director and a Senior Vice President of Seaport Futures Management, Inc. and serves in various capacities for other affiliated companies. Prior to joining PSI in July 1988, she was a manager with Price Waterhouse. Effective July 2000, Joseph A. Filicetti resigned as President and as a Director of Prudential Securities Futures Management Inc. Effective September 2000, Eleanor L. Thomas was elected by the Board of Directors of Prudential Securities Futures Management Inc. as President replacing Joseph A. Filicetti. Additionally, Joseph A. Filicetti resigned as Executive Vice President and as a Director of Seaport Futures Management, Inc. Effective February 2001, Alan J. Brody resigned as a Director of both Prudential Securities Futures Management Inc. and Seaport Futures Management, Inc. Additionally, effective March 30, 2001, A. Laurence Norton, Jr. will resign as a Director of both Prudential Securities Futures Management Inc. and Seaport Futures Management, Inc. There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing directors and/or executive officers have indefinite terms. Item 11. Executive Compensation The Registrant does not pay or accrue any fees, salaries or any other form of compensation to directors and officers of the General Partner for their services. Certain directors and officers of the General Partner receive compensation from affiliates of the General Partner, not from the Registrant, for services performed for various affiliated entities, which may include services performed for the Registrant; however, the General Partner believes that any compensation attributable to services performed for the Registrant is immaterial. (See also Item 13, Certain Relationships and Related Transactions, for information regarding compensation to the General Partner.) 6 Item 12. Security Ownership of Certain Beneficial Owners and Management As of March 12, 2001, no director or officer of the General Partner owns directly or beneficially any interest in the voting securities of the General Partner. As of March 12, 2001, no director or officer of the General Partner owns directly or beneficially any of the Units issued by the Registrant. As of March 12, 2001, no partner beneficially owns more than five percent (5%) of the limited partnership units issued by the Registrant. Item 13. Certain Relationships and Related Transactions The Registrant has and will continue to have certain relationships with the General Partner and its affiliates. However, there have been no direct financial transactions between the Registrant and the directors or officers of the General Partner. Reference is made to Notes A, C and D to the financial statements in the Registrant's 2000 Annual Report which is filed as an exhibit hereto, which identify the related parties and discuss the services provided by these parties and the amounts paid or payable for their services. 7 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Page in Annual Report (a) 1. Financial Statements and Report of Independent Accountants--incorporated by reference to the Registrant's 2000 Annual Report which is filed as an exhibit hereto Report of Independent Accountants 2 Financial Statements: Statements of Financial Condition--December 31, 2000 and 1999 3 Statements of Operations--Three years ended December 31, 2000 4 Statements of Changes in Partners' Capital--Three years ended December 31, 2000 4 Notes to Financial Statements 5 2. Financial Statement Schedules All schedules have been omitted because they are not applicable or the required information is included in the financial statements or notes thereto. 3. Exhibits Description: 3.1 Agreement of Limited Partnership of the Registrant, dated as of June 8, and 1989 as amended and restated as of July 21, 1989 (incorporated by 4.1 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) 10.1 Escrow Agreement, dated July 21, 1989 among the Registrant, Prudential Securities Futures Management Inc. (formerly known as P-B Futures Management, Inc.), Prudential Securities Incorporated (formerly known as Prudential-Bache Securities Inc.) and Bankers Trust Company (incorporated by reference to Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 1989) 10.2 Brokerage Agreement dated October 6, 1989 between the Registrant and Prudential Securities Incorporated (formerly known as Prudential-Bache Securities Inc.) (incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 1989) 10.3 Advisory Agreement dated July 21, 1989 among the Registrant, Prudential Securities Futures Management Inc. (formerly known as P-B Futures Management, Inc.), Eclipse Capital Management, Inc., C.M. Wilson & Associates, Inc. and John W. Henry & Company, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 1989)
8 10.4 Representation Agreement Concerning the Registration Statement and the Prospectus, dated as of July 21, 1989 among the Registrant, Prudential Securities Futures Management Inc. (formerly known as P-B Futures Management, Inc.), Prudential Securities Incorporated (formerly known as Prudential-Bache Securities Inc.), Eclipse Capital Management, Inc., C.M. Wilson & Associates, Inc. and John W. Henry & Company, Inc. (incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 1989) 10.5 Net Worth Agreement, dated as of July 21, 1989 between Prudential Securities Futures Management Inc. (formerly known as P-B Futures Management, Inc.) and Prudential Securities Group Inc. (incorporated by reference to Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 1989) 10.6 Promissory Note issued by Prudential Securities Group Inc. to Prudential Securities Futures Management Inc. (formerly known as P-B Futures Management, Inc.), dated October 6, 1989 (incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 1989) 10.10 Addendum to Advisory Agreement dated October 1, 1990 among the Registrant, Prudential Securities Futures Management Inc. (formerly known as P-B Futures Management, Inc.), Eclipse Capital Management, Inc. and John W. Henry & Co., Inc. (incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991) 10.11 Advisory Agreement dated May 1, 1994 among the Registrant, Prudential Securities Futures Management, Inc. and Welton Investment Corporation (formerly known as Welton Investment Services Corporation) (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994) 10.12 Advisory Agreement dated January 1, 1995 among the Registrant, Prudential Securities Futures Management Inc. and Analytic/TSA Capital Management (incorporated by reference to Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994) 10.13 Addendum to Brokerage Agreement dated January 1, 1995 among the Regis- trant, Prudential Securities Futures Management Inc. and Prudential Securities Incorporated (incorporated by reference to Exhibit 10.13 to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1995) 10.14 Form of Foreign Currency Addendum to Brokerage Agreement between the Registrant and Prudential Securities Incorporated (incorporated by reference to Exhibit 10.13 to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1996) 10.15 Advisory Agreement, dated July 1, 1997, among the Registrant, Prudential Securities Futures Management Inc. and Eclipse Capital Management, Inc. (incorporated by reference to Exhibit 10.15 to Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1997) 10.16 Advisory Agreement, dated September 1, 1998, among the Registrant, Prudential Securities Futures Management Inc. and Trendlogic Associates, Inc. (incorporated by reference to Exhibit 10.16 to Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1998)
9 10.17 Advisory Agreement, dated September 1, 1998, among the Registrant, Prudential Securities Futures Management Inc. and Appleton Capital Management (formerly known as Gaiacorp Ireland Limited) (incorporated by reference to Exhibit 10.17 to Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1998) 10.18 Amendment to Advisory Agreement, dated September 1, 1998, among the Reg- istrant, Prudential Securities Futures Management Inc. and Welton Investment Corporation (incorporated by reference to Exhibit 10.18 to Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1998) 13.1 Registrant's 2000 Annual Report (with the exception of the information and data incorporated by reference in Items 1, 7 and 8 of this Annual Report on Form 10-K, no other information or data appearing in the Registrant's 2000 Annual Report is to be deemed filed as part of this report) (filed herewith) (b) Reports on Form 8-K--None
10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 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: March 29, 2001 ---------------------------------------- Steven Carlino Vice President and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities (with respect to the General Partner) and on the dates indicated. By: Prudential Securities Futures Management Inc. A Delaware corporation, General Partner By: /s/ Eleanor L. Thomas Date: March 29, 2001 ----------------------------------------- Eleanor L. Thomas President and Director By: /s/ Barbara J. Brooks Date: March 29, 2001 ----------------------------------------- Barbara J. Brooks Chief Financial Officer By: /s/ Steven Carlino Date: March 29, 2001 ----------------------------------------- Steven Carlino Vice President and Treasurer By: /s/ A. Laurence Norton, Jr. Date: March 29, 2001 ----------------------------------------- A. Laurence Norton, Jr. Director By: /s/ Guy S. Scarpaci Date: March 29, 2001 ----------------------------------------- Guy S. Scarpaci Director By: /s/ Tamara B. Wright Date: March 29, 2001 ----------------------------------------- Tamara B. Wright Senior Vice President and Director 11