-----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, TD4MRHNOY2lDSGx6wdwzVr+wA8i8Ek5HlKssb3y5zGXXWYNDO/g4JoDBIYcNe0Y6 VC70mMv5hTXUXx3eIuiBeg== 0000898733-96-000992.txt : 19961118 0000898733-96-000992.hdr.sgml : 19961118 ACCESSION NUMBER: 0000898733-96-000992 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 000-18418 FILM NUMBER: 96663699 BUSINESS ADDRESS: STREET 1: ONE NEW YORK PLAZA CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128047866 10-Q 1 PRU-BACHE 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 September 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 of (I.R.S. Employer 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)
September 30, December 31, 1996 1995 - ---------------------------------------------------------------------------------------------------- ASSETS Equity in commodity trading accounts: Cash $ 6,023,646 $16,630,972 U.S. Treasury bills, at amortized cost 20,663,385 15,519,076 Net unrealized gain on open commodity positions 2,517,581 872,394 Options, at market 70,000 -- ------------- ------------ Total assets $29,274,612 $33,022,442 ------------- ------------ ------------- ------------ LIABILITIES AND PARTNERS' CAPITAL Liabilities Redemptions payable $ 1,336,917 $ 1,143,534 Management fees payable 169,422 97,931 Accrued expenses 44,393 45,374 Due to affiliates 37,068 63,134 Options, at market -- 3,000 ------------- ------------ Total liabilities 1,587,800 1,352,973 ------------- ------------ Commitments Partners' capital Limited partners (138,885 and 151,718 units outstanding) 27,409,920 29,692,794 General partner (1,403 and 10,100 units outstanding) 276,892 1,976,675 ------------- ------------ Total partners' capital 27,686,812 31,669,469 ------------- ------------ Total liabilities and partners' capital $29,274,612 $33,022,442 ------------- ------------ ------------- ------------ Net asset value per limited and general partnership unit (``Units'') $ 197.36 $ 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)
Nine Months Three Months Ended September 30, Ended September 30, -------------------------- ------------------------- 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------- REVENUES Net realized gain (loss) on commodity transactions $ 643,905 $11,970,102 $ (998,421) $ 680,518 Change in net unrealized gain/loss on open commodity positions 1,629,512 (2,329,121) 1,573,720 (778,983) Interest from U.S. Treasury bills 824,799 1,061,614 280,859 348,677 ---------- ----------- ---------- ---------- 3,098,216 10,702,595 856,158 250,212 ---------- ----------- ---------- ---------- EXPENSES Commissions 1,915,509 2,111,730 607,124 708,662 Management fees 802,593 910,803 253,413 295,970 Incentive fees 47,687 365,789 -- -- General and administrative 97,583 123,196 17,553 45,020 ---------- ----------- ---------- ---------- 2,863,372 3,511,518 878,090 1,049,652 ---------- ----------- ---------- ---------- Net income (loss) $ 234,844 $ 7,191,077 $ (21,932) $ (799,440) ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- ALLOCATION OF NET INCOME (LOSS) Limited partners $ 241,064 $ 6,821,604 $ (21,713) $ (752,700) ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- General partner $ (6,220) $ 369,473 $ (219) $ (46,740) ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- NET INCOME (LOSS) PER WEIGHTED AVERAGE LIMITED AND GENERAL PARTNERSHIP UNIT Net income (loss) per weighted average limited and general partnership unit $ 1.54 $ 38.96 $ (.15) $ (4.63) ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- Weighted average number of limited and general partnership units outstanding 152,881 184,563 147,062 172,751 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ---------- - -----------------------------------------------------------------------------------------------------
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) -- 241,064 (6,220) 234,844 Redemptions (21,530) (2,523,938) (1,693,563) (4,217,501) -------- ----------- ----------- ----------- Partners' capital--September 30, 1996 140,288 $27,409,920 $ 276,892 $27,686,812 -------- ----------- ----------- ----------- -------- ----------- ----------- ----------- - -----------------------------------------------------------------------------------------------------
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, 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 September 30, 1996 and the results of its operations for the nine and three months ended September 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 nine months ended September 30, 1996 and 1995 were:
1996 1995 - --------------------------------------------------------------------------- Commissions $1,915,509 $2,111,730 General and administrative 59,039 85,924 ---------- ---------- $1,974,548 $2,197,654 ---------- ---------- ---------- ----------
The costs incurred for these services for the three months ended September 30, 1996 and 1995 were:
1996 1995 - --------------------------------------------------------------------------- Commissions $ 607,124 $ 708,662 General and administrative 17,504 42,144 ---------- ---------- $ 624,628 $ 750,806 ---------- ---------- ---------- ----------
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 September 30, 1996 and December 31, 1995, such segregated assets totalled $21,871,036 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 $7,180,069 and $7,008,411 at September 30, 1996 and December 31, 1995, respectively. There are no segregation requirements for assets related to forward trading. As of September 30, 1996 and December 31, 1995, the Partnership's open forward and options contracts mature within three months, and open futures contracts mature within nine months and one year, respectively. 5 At September 30, 1996 and December 31, 1995, gross contract amounts of open futures, forward and options contracts are:
September 30, December 31, 1996 1995 ------------- ------------ Financial Futures Contracts: Commitments to purchase $302,674,950 $359,544,988 Commitments to sell $ 9,076,406 $25,500,889 Currency Forward Contracts: Commitments to purchase $ 34,014,283 $ 372,619 Commitments to sell $ 38,113,143 $17,163,772 Currency Futures and Options Contracts: Commitments to purchase $ 8,817,876 $14,350,975 Commitments to sell $ 13,810,101 $28,217,838 Other Futures Contracts: Commitments to purchase $ 524,866 -- Commitments to sell $ 28,609,645 $ 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 September 30, 1996 and December 31, 1995, the fair values of futures, forward and options contracts were:
September 30, 1996 December 31, 1995 -------------------------- -------------------------- Fair Value Fair Value -------------------------- -------------------------- Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- Futures Contracts: Domestic exchanges Financial $ 750 $ 204,531 $ 461,831 $ -- Currencies 95,544 122,207 133,670 338,563 Other 456,608 1,305 795 100 Foreign exchanges Financial 2,132,358 72,643 785,691 9,984 Other 9,500 -- -- -- Forward Contracts: Currencies 400,196 176,689 211,673 372,619 Options Contracts: Domestic exchanges Currencies 70,000 -- -- 3,000 ---------- ----------- ---------- ----------- $3,164,956 $ 577,375 $1,593,660 $ 724,266 ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
6 The following table presents the average fair values of futures, forward and options contracts during the nine months ended September 30, 1996 and 1995, respectively.
Nine months ended Nine months ended September 30, 1996 September 30, 1995 -------------------------- -------------------------- Average Fair Value Average Fair Value -------------------------- -------------------------- Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- Futures Contracts: Domestic exchanges Financial $ 334,843 $ 67,562 $ 395,518 $ 55,307 Currencies 274,254 183,700 198,666 126,241 Other 110,124 43,304 148,428 43,047 Foreign exchanges Financial 947,290 51,694 727,939 49,200 Other 1,644 4,434 10,635 -- Forward Contracts: Currencies 678,762 351,167 1,961,744 685,307 Options Contracts: Domestic exchanges Currencies 25,214 3,239 74,043 67,571 ---------- ----------- ---------- ----------- $2,372,131 $ 705,100 $3,516,973 $ 1,026,673 ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
The following table presents the average fair values of futures, forward and options contracts during the three months ended September 30, 1996 and 1995, respectively.
Three months ended Three months ended September 30, 1996 September 30, 1995 -------------------------- -------------------------- Average Fair Value Average Fair Value -------------------------- -------------------------- Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- Futures Contracts: Domestic exchanges Financial $ 19,758 $ 163,783 $ 97,011 $ 50,963 Currencies 96,848 123,197 348,432 184,470 Other 249,454 24,544 65,217 356 Foreign exchanges Financial 1,552,421 34,738 265,140 89,054 Other 4,000 432 -- -- Forward Contracts: Currencies 420,466 297,837 354,940 436,507 Options Contracts: Domestic exchanges Currencies 44,218 78 -- 290 ---------- ----------- ---------- ----------- $2,387,165 $ 644,609 $1,130,740 $ 761,640 ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
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 nine months ended September 30, 1996 and 1995, respectively.
Nine months ended September 30, 1996 Nine months ended September 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 $ 505,338 $ (665,612) $ (160,274) $ 2,007,104 $ (774,769) $ 1,232,335 Currencies 596,691 178,230 774,921 1,535,793 28,705 1,564,498 Other (71,605) 454,608 383,003 (166,390) (365,080) (531,470) Foreign exchanges Financial (363,635) 1,284,008 920,373 3,518,698 (872,969) 2,645,729 Other (24,036) 9,500 (14,536) 122,154 -- 122,154 Forward Contracts: Currencies (88,470) 384,453 295,983 6,003,633 (285,420) 5,718,213 Options Contracts: Domestic exchanges Currencies 89,622 (15,675) 73,947 (1,050,890) (59,588) (1,110,478) -------------- -------------- ---------- -------------- -------------- ----------- $ 643,905 $1,629,512 $2,273,417 $ 11,970,102 $ (2,329,121) $ 9,640,981 -------------- -------------- ---------- -------------- -------------- ----------- -------------- -------------- ---------- -------------- -------------- -----------
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 September 30, 1996 and 1995, respectively.
Three months ended September 30, 1996 Three months ended September 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 $ (853,500) $ (77,781) $ (931,281) $ (482,106) $ (273,782) $(755,888) Currencies (83,137) 54,451 (28,686) 573,325 (160,853) 412,472 Other 65,789 (39,472) 26,317 (267,240) 116,805 (150,435) Foreign exchanges Financial 737,046 1,830,506 2,567,552 (495,521) 23,546 (471,975) Other 460 7,706 8,166 -- -- -- Forward Contracts: Currencies (880,534) (194,252) (1,074,786) 1,332,003 (484,699) 847,304 Options Contracts: Domestic exchanges Currencies 15,455 (7,438) 8,017 20,057 -- 20,057 -------------- -------------- ----------- -------------- -------------- --------- $ (998,421) $1,573,720 $ 575,299 $ 680,518 $ (778,983) $ (98,465) -------------- -------------- ----------- -------------- -------------- --------- -------------- -------------- ----------- -------------- -------------- ---------
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 September 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 71% 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 nine and three months ended September 30, 1996 were $2,523,938 and $1,323,497, respectively. Redemptions by the General Partner recorded for the nine and three months ended September 30, 1996 were $1,693,563 and $13,420, respectively. Redemptions by limited partners and the General Partner from commencement of operations, October 6, 1989, through September 30, 1996 totalled $113,604,531 and $1,693,563, 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 September 30, 1996 was $197.36, an increase of .84% from the December 31, 1995 net asset value per Unit of $195.71. The Partnership's net asset value declined in the month of July. Profits earned in the financials, softs and meats sectors were offset by losses in the metals, stock indices, currencies, energies and grains sectors. July was notable for remarkable market volatility across numerous sectors effecting the global equity index, currency, energy, grain and metal markets. Whipsawed by a volatile U.S. stock market, global bond markets recovered somewhat by month's end as reports indicated a slowing U.S. economy. Long positions in German, British, French, Italian and Australian bonds produced gains. In the softs sector, long exposure to sugar and coffee was profitable. Positions in gold, silver and copper were unprofitable as were positions in global stock indices. In foreign exchange markets, strong U.S. Producer Price Inflation data reported on July 12th began a sell-off in U.S. equities that was partially responsible for a general weakness in the U.S. dollar. 9 German mark positions were profitable as the mark strengthened on better than expected employment data in Germany. However, Japanese yen and French franc positions were unprofitable. In the energies sector, positions in natural gas incurred losses while light crude and heating oil trades were flat. The Partnership's performance was slightly negative in the month of August. Profits earned in the financials, stock indices, and energies sectors were offset by losses in the currencies, metals, softs and grains sectors. In the financials sector, positions in Japanese and Australian bonds were profitable. Japanese government bonds benefited from a key report indicating the business outlook for the Japanese economy had worsened. With fears of rising rates abated, bond prices of that nation hit new contract highs. In the energies sector, positions in light crude oil, heating oil and natural gas were profitable. Crude oil soared as increasing demand from developing nations, low inventories worldwide and a potentially disruptive hurricane season caused concern. In the currencies sector, positions in the Australian dollar, German mark, British pound and Swiss franc were unprofitable. The U.S. dollar, German mark and Japanese yen fluctuated as investors responded to various economic reports and policy decisions on interest rates. In the metals sector, positions in nickel, gold and silver were unprofitable. The Partnership's performance was positive in the month of September. Profits earned in the financials, metals, energies and meats sectors offset losses in the currencies, stock indices, softs and grains sectors. In the financials sector, positions in German, Italian, French and Japanese bonds were profitable. Bond markets remained unsettled for much of the month, prior to the U.S. Federal Reserve Board's policy committee meeting on interest rates. The Committee's decision to keep short-term interest rates at current levels did little to diminish expectations of higher U.S. rates down the road. Weighing that outlook against increasing pressure in Europe and Japan to keep rates low, central banks moved assets into the higher yielding U.S. bond market. In the metals sector, positions in gold, silver, aluminum and nickel were profitable. Investors were net sellers in gold on news of the International Monetary Fund's plan to sell five million ounces from its own reserves to help pay the debts of the poorest nations. In the energies sector, prices continued their upward climb as positions in heating and light crude oil were profitable. In the currencies sector, Swiss franc, German mark and Japanese yen positions were unprofitable. During the month, the U.S. dollar continued to strengthen against both European and Japanese currencies. The market expected a widening interest rate spread which rallied the dollar higher. Interest income from U.S. Treasury bills for the nine and three months ended September 30, 1996 decreased by approximately $237,000 and $68,000 as compared to the same periods in 1995 primarily due to lower interest rates in 1996 and less funds available for investment in U.S. Treasury bills during 1996 due to redemptions. 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 $196,000 and $102,000 for the nine and three months ended September 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 $108,000 and $43,000 for the nine and three months ended September 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 $366,000 for the nine months ended September 30, 1996 and September 30, 1995, respectively. No incentive fees were earned in the third quarter of 1996 or 1995. General and administrative expenses decreased by approximately $26,000 and $27,000 for the nine and three months ended September 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--None 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: November 14, 1996 ---------------------------------------- Steven Carlino Vice President Chief Accounting Officer for the Registrant 12 EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 The Schedule contains summary financial information extracted from the financial statements for Pru-Bache Capital Return Futures Fund 2, L.P. and is qualified in its entirety by reference to such financial statements 0000851786 Pru-Bache Capital Return Futures Fund 2, L.P. 1 Dec-31-1996 Jan-1-1996 Sep-30-1996 9-Mos 6,023,646 23,250,966 0 0 0 29,274,612 0 0 29,274,612 1,587,800 0 0 0 0 27,686,812 29,274,612 0 3,098,216 0 0 2,863,372 0 0 0 0 0 0 0 0 234,844 1.54 0
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