<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-18417
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3516796
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One New York Plaza, 14th Floor, New York, New York
10292
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 778-7866
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _CK_ No __
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
ASSETS
Equity in commodity trading accounts:
Cash $ 3,814,903 $ 4,416,242
U.S. Treasury bills, at amortized cost 12,459,134 13,869,729
Net unrealized gain on open commodity positions 479,566 417,876
------------- ------------
Total assets $16,753,603 $18,703,847
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable $ 579,838 $ 664,958
Management fees payable 55,595 62,075
Accrued expenses 38,640 61,858
Due to affiliates 36,583 19,472
------------- ------------
Total liabilities 710,656 808,363
------------- ------------
Commitments
Partners' capital
Limited partners (115,834 and 129,302 units outstanding) 15,882,388 17,716,405
General partner (1,171 and 1,307 units outstanding) 160,559 179,079
------------- ------------
Total partners' capital 16,042,947 17,895,484
------------- ------------
Total liabilities and partners' capital $16,753,603 $18,703,847
------------- ------------
------------- ------------
Net asset value per limited and general partnership unit ('Units') $ 137.11 $ 137.02
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
2
<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
-------------------------- -----------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
REVENUES
Net realized gain (loss) $1,591,464 $ (942,317) $ 718,826 $(711,775)
Change in net unrealized gain (400,823) 754,060 (316,926) 798,669
Interest from U.S. Treasury bills 513,406 528,471 169,711 162,693
---------- ----------- --------- ---------
1,704,047 340,214 571,611 249,587
---------- ----------- --------- ---------
EXPENSES
Commissions 1,049,360 1,068,008 341,622 325,121
Management fees 526,513 531,170 171,460 162,161
General and administrative 109,742 122,383 40,368 44,114
---------- ----------- --------- ---------
1,685,615 1,721,561 553,450 531,396
---------- ----------- --------- ---------
Net income (loss) $ 18,432 $(1,381,347) $ 18,161 $(281,809)
---------- ----------- --------- ---------
---------- ----------- --------- ---------
ALLOCATION OF NET INCOME (LOSS)
Limited partners $ 18,247 $(1,343,329) $ 17,979 $(278,991)
---------- ----------- --------- ---------
---------- ----------- --------- ---------
General partner $ 185 $ (38,018) $ 182 $ (2,818)
---------- ----------- --------- ---------
---------- ----------- --------- ---------
NET INCOME (LOSS) PER WEIGHTED AVERAGE
LIMITED AND GENERAL PARTNERSHIP UNIT
Net income (loss) per weighted average
limited and general partnership unit $ .15 $ (9.39) $ .15 $ (2.01)
---------- ----------- --------- ---------
---------- ----------- --------- ---------
Weighted average number of
limited and general partnership units
outstanding 125,822 147,056 121,234 139,986
---------- ----------- --------- ---------
---------- ----------- --------- ---------
- ------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
UNITS PARTNERS PARTNER TOTAL
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Partners' capital--December 31, 1996 130,609 $17,716,405 $179,079 $17,895,484
Net income 18,247 185 18,432
Redemptions (13,604) (1,852,264) (18,705) (1,870,969)
-------- ----------- -------- -----------
Partners' capital--September 30, 1997 117,005 $15,882,388 $160,559 $16,042,947
-------- ----------- -------- -----------
-------- ----------- -------- -----------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the financial
position of Prudential-Bache Capital Return Futures Fund L.P. (the
'Partnership') as of September 30, 1997 and the results of its operations for
the nine and three months ended September 30, 1997 and 1996. However, the
operating results for the interim periods may not be indicative of the results
expected for a full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission for the year ended December 31, 1996 (the 'Annual Report').
Certain balances from the prior period have been reclassified to conform with
the current financial statement presentation.
B. Related Parties
Seaport Futures Management, Inc. (the 'General Partner') and its affiliates
perform services for the Partnership which include, but are not limited to:
brokerage services, accounting and financial management, registrar, transfer and
assignment functions, investor communications, printing and other administrative
services.
The costs incurred for these services for the nine months ended September 30,
1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
-------------------------------------------------------------------------------
Commissions $1,049,360 $1,068,008
General and administrative 67,638 71,641
---------- ----------
$1,116,998 $1,139,649
---------- ----------
---------- ----------
</TABLE>
The costs incurred for these services for the three months ended September
30, 1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
-------------------------------------------------------------------------------
Commissions $ 341,622 $ 325,121
General and administrative 22,546 25,857
---------- ----------
$ 364,168 $ 350,978
---------- ----------
---------- ----------
</TABLE>
The Partnership maintains its trading and cash accounts at Prudential
Securities Incorporated ('PSI'), the Partnership's commodity broker and an
affiliate of the General Partner. Approximately 75% of the Partnership's net
asset value is invested in interest-bearing U.S. Government obligations
(primarily U.S. Treasury bills), a significant portion of which is utilized for
margin purposes for the Partnership's commodity trading activities. As described
in the Annual Report, all commissions for brokerage services are paid to PSI.
In connection with the Partnership's interbank transactions, PSI engages in
foreign currency forward transactions with the Partnership and an affiliate of
PSI who, as principal, attempts to earn a profit on the bid-ask spreads (which
must be competitive) on any foreign currency forward transactions entered into
between the Partnership and PSI, on the one hand, and PSI and such affiliate on
the other. In connection with its trading of foreign currencies in the interbank
market, PSI may arrange bank lines of credit at major international banks. To
the extent such lines of credit are arranged, PSI does not charge the
Partnership for maintaining such lines of credit, but requires margin deposits
with respect to forward contract transactions.
4
<PAGE>
C. Credit and Market Risk
Since the Partnership's business is to trade futures, forward and options
contracts, its capital is at risk due to changes in the value of these contracts
(market risk) or the inability of counterparties to perform under the terms of
the contracts (credit risk).
Futures, forward and options contracts involve varying degrees of off-balance
sheet risk; and changes in the level of volatility of interest rates, foreign
currency exchange rates or the market values of the contracts (or commodities
underlying the contracts) frequently result in changes in the Partnership's
unrealized gain (loss) on open commodity positions reflected on the statements
of financial condition. The Partnership's exposure to market risk is influenced
by a number of factors including the relationships among the contracts held by
the Partnership as well as the liquidity of the markets in which the contracts
are traded.
Futures and options contracts are traded on organized exchanges and are thus
distinguished from forward contracts which are entered into privately by the
parties. The credit risks associated with futures and options contracts are
typically perceived to be less than those associated with forward contracts,
because exchanges typically provide clearinghouse arrangements in which the
collective credit (subject to certain limitations) of the members of the
exchanges is pledged to support the financial integrity of the exchange. On the
other hand, the Partnership must rely solely on the credit of its broker (PSI)
with respect to forward transactions. The Partnership presents unrealized gains
and losses on open forward positions as a net amount in the statements of
financial condition because it has a master netting agreement with PSI.
The General Partner attempts to minimize both credit and market risks by
requiring the Partnership's trading manager to abide by various trading
limitations and policies. The General Partner monitors compliance with these
trading limitations and policies which include, but are not limited to,
executing and clearing all trades with creditworthy counterparties (currently,
PSI is the sole counterparty or broker); limiting the amount of margin or
premium required for any one commodity or all commodities combined; and
generally limiting transactions to contracts which are traded in sufficient
volume to permit the taking and liquidating of positions. The General Partner
may impose additional restrictions (through modifications of such trading
limitations and policies) upon the trading activities of the trading manager as
it, in good faith, deems to be in the best interests of the Partnership.
PSI, when acting as the Partnership's futures commission merchant in
accepting orders for the purchase or sale of domestic futures and options
contracts, is required by Commodity Futures Trading Commission ('CFTC')
regulations to separately account for and segregate as belonging to the
Partnership all assets of the Partnership relating to domestic futures and
options trading and is not to commingle such assets with other assets of PSI. At
September 30, 1997 and December 31, 1996, such segregated assets totalled
$9,152,425 and $17,277,553, respectively. Part 30.7 of the CFTC regulations also
requires PSI to secure assets of the Partnership related to foreign futures and
options trading which totalled $7,618,890 and $1,148,057 at September 30, 1997
and December 31, 1996, respectively. There are no segregation requirements for
assets related to forward trading.
As of September 30, 1997 and December 31, 1996, the Partnership's open
forward contracts mature within three months but open futures contracts mature
within one year.
At September 30, 1997 and December 31, 1996, gross contract amounts of open
futures and forward contracts are:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Financial Futures Contracts:
Commitments to purchase $99,800,734 $37,638,257
Commitments to sell $ 2,076,783 $ 8,448,337
Currency Forward Contracts:
Commitments to purchase $10,252,400 $14,780,831
Commitments to sell $20,152,802 $21,404,866
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Currency Futures Contracts:
Commitments to purchase $ -- $ 1,527,963
Commitments to sell $ -- $ 2,058,838
Other Futures Contracts:
Commitments to purchase $ 4,630,989 $ 419,159
Commitments to sell $ 4,388,380 $ 2,628,405
</TABLE>
The gross contract amounts represent the Partnership's potential involvement
in a particular class of financial instrument (if it were to take or make
delivery on an underlying futures or forward contract). The gross contract
amounts significantly exceed the future cash requirements as the Partnership
intends to close out open positions prior to settlement and thus is generally
subject only to the risk of loss arising from the change in the value of the
contracts. As such, the Partnership considers the 'fair value' of its futures
and forward contracts to be the net unrealized gain or loss on the contracts.
Thus, the amount at risk associated with counterparty nonperformance of all
contracts is the net unrealized gain included in the statements of financial
condition. The market risk associated with the Partnership's commitments to
purchase commodities is limited to the gross contract amounts involved, while
the market risk associated with its commitments to sell is unlimited since the
Partnership's potential involvement is to make delivery of an underlying
commodity at the contract price; therefore, it must repurchase the contract at
prevailing market prices.
At September 30, 1997 and December 31, 1996, the fair values of futures and
forward contracts were:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------------ ------------------------
Fair Value Fair Value
------------------------ ------------------------
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 32,813 $ 24,788 $ 13,200 $ 13,625
Currencies -- -- 74,723 175
Other 149,645 240,647 80,797 1,456
Foreign exchanges
Financial 611,881 5,530 129,424 143,249
Other -- 26,096 -- --
Forward Contracts:
Currencies 98,017 115,729 522,582 244,345
-------- ----------- -------- -----------
$892,356 $ 412,790 $820,726 $ 402,850
-------- ----------- -------- -----------
-------- ----------- -------- -----------
</TABLE>
6
<PAGE>
The following table presents the average fair values of futures and forward
contracts during the nine months ended September 30, 1997 and 1996,
respectively.
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
-------------------------- --------------------------
Average Fair Value Average Fair Value
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 89,070 $ 11,333 $ 90,709 $ 18,173
Currencies 76,204 18,248 71,951 8,747
Other 243,948 109,636 56,121 11,079
Foreign exchanges
Financial 278,438 58,875 420,394 25,480
Currencies 1,324 160 -- --
Other 3,818 3,972 -- --
Forward Contracts:
Currencies 579,391 218,918 461,052 435,051
---------- ----------- ---------- -----------
$1,272,193 $ 421,142 $1,100,227 $ 498,530
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
The following table presents the average fair values of futures and forward
contracts during the three months ended September 30, 1997 and 1996,
respectively.
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1997 September 30, 1996
-------------------------- --------------------------
Average Fair Value Average Fair Value
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 194,234 $ 7,963 $ 5,025 $ 44,223
Currencies 103,180 31,585 55,040 6,423
Other 387,674 248,847 98,586 4,137
Foreign exchanges
Financial 479,327 22,900 662,064 12,017
Currencies 3,311 400 -- --
Other 7,963 8,877 -- --
Forward Contracts:
Currencies 435,119 206,766 323,266 301,406
---------- ----------- ---------- -----------
$1,610,808 $ 527,338 $1,143,981 $ 368,206
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
7
<PAGE>
The following table presents the net realized gains (losses) and the change
in net unrealized gains/losses of futures and forward contracts during the nine
months ended September 30, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Nine months ended September 30, 1997 Nine months ended September 30, 1996
------------------------------------------------ -----------------------------------------------
Change in Change in
Net Realized Net Unrealized Net Realized Net Unrealized
Gains (Losses) Gains/Losses Total Gains (Losses) Gains/Losses Total
-------------- -------------- ---------- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ (51,456) $ 8,450 $ (43,006) $ 163,856 $ (160,882) $ 2,974
Currencies 99,050 (74,548) 24,502 128,971 104,370 233,341
Other (404,036) (170,343) (574,379) 149,273 109,242 258,515
Foreign exchanges
Financial 574,924 620,176 1,195,100 (559,723) 695,890 136,167
Other (56,130) (26,096) (82,226) -- -- --
Forward Contracts:
Currencies 961,657 (295,949) 665,708 (797,668) 315,942 (481,726)
Foreign Currencies 467,455 (462,513) 4,942 (27,026) (310,502) (337,528)
-------------- -------------- ---------- -------------- -------------- ---------
$1,591,464 $ (400,823) $1,190,641 $ (942,317) $ 754,060 $(188,257)
-------------- -------------- ---------- -------------- -------------- ---------
-------------- -------------- ---------- -------------- -------------- ---------
</TABLE>
The following table presents the net realized gains (losses) and the change
in net unrealized gains/losses of futures and forward contracts during the three
months ended September 30, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Three months ended September 30, 1997 Three months ended September 30, 1996
------------------------------------------------ -----------------------------------------------
Change in Change in
Net Realized Net Unrealized Net Realized Net Unrealized
Gains (Losses) Gains/Losses Total Gains (Losses) Gains/Losses Total
-------------- -------------- ---------- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 129,763 $ (131,744) $ (1,981) $ (200,357) $ (7,669) $(208,026)
Currencies 33,760 (70,752) (36,992) (62,854) 25,911 (36,943)
Other (203,678) (249,066) (452,744) 120,540 39,382 159,922
Foreign exchanges
Financial 550,189 505,775 1,055,964 (110,522) 965,854 855,332
Currencies -- -- -- -- -- --
Other (66,540) (42,696) (109,236) -- -- --
Forward Contracts:
Currencies 275,332 (328,443) (53,111) (443,102) (185,290) (628,392)
Foreign Currencies -- -- -- (15,480) (39,519) (54,999)
-------------- -------------- ---------- -------------- -------------- ---------
$ 718,826 $ (316,926) $ 401,900 $ (711,775) $ 798,669 $ 86,894
-------------- -------------- ---------- -------------- -------------- ---------
-------------- -------------- ---------- -------------- -------------- ---------
</TABLE>
8
<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership commenced operations on May 12, 1989 with gross proceeds of
$139,151,000. After accounting for organizational and offering costs, the
Partnership's net proceeds were $137,151,000. At the inception of the
Partnership, sixty percent of the net proceeds was allocated to commodities
trading activity and forty percent was placed in reserve and invested in
investment grade interest-bearing obligations ('Reserve Assets'). On June 30,
1994, the Reserve Assets matured and the resulting proceeds were allocated to
commodities trading.
As of September 30, 1997, 100% of the Partnership's total net assets were
allocated to commodities trading. A significant portion of the net asset value
was held in U.S. Treasury bills (which represented approximately 75% of the net
asset value prior to redemptions payable) and cash, which are used as margin for
the Partnership's trading in commodities. Inasmuch as the sole business of the
Partnership is to trade in commodities, the Partnership will continue to own
such liquid assets to be used as margin.
The percentage that U.S. Treasury bills bears to the net asset value varies
each day, and from month to month, as the market value of commodity interests
change. The balance of the net asset value is held in cash. All interest earned
on the Partnership's interest-bearing funds is paid to the Partnership.
The commodities contracts are subject to periods of illiquidity because of
market conditions, regulatory considerations and other reasons. For example,
commodity exchanges limit fluctuations in commodity futures contract prices
during a single day by regulations referred to as 'daily limits.' During a
single day, no trades may be executed at prices beyond the daily limit. Once the
price of a futures contract for a particular commodity has increased or
decreased by an amount equal to the daily limit, positions in the commodity can
neither be taken nor liquidated unless traders are willing to effect trades at
or within the limit. Commodity futures prices have occasionally moved the daily
limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating its commodity
futures positions.
Since the Partnership's business is to trade futures, forward and options
contracts, its capital is at risk due to changes in the value of these contracts
(market risk) or the inability of counterparties to perform under the terms of
the contracts (credit risk). The General Partner attempts to minimize these
risks by requiring the Partnership's trading manager to abide by various trading
limitations and policies. See Note C to the financial statements for a further
discussion on the credit and market risks associated with the Partnership's
futures, forward and options contracts.
Redemptions by limited partners recorded for the nine and three months ended
September 30, 1997 were $1,852,264 and $574,079, respectively. Redemptions by
the General Partner recorded for the nine and three months ended September 30,
1997 were $18,705 and $5,759, respectively. Redemptions by limited partners and
the General Partner from commencement of operations, May 12, 1989, through
September 30, 1997 totalled $140,043,911 and $1,595,790, respectively. Future
redemptions will impact the amount of funds available for investment in
commodity contracts in subsequent periods.
John W. Henry & Co., Inc. (the 'Trading Manager') determined that its Yen
Financial Portfolio no longer met its original investment objectives and
therefore, terminated its Yen Financial Portfolio effective March 31, 1997.
Accordingly, as of April 1, 1997, the Managing Owner reallocated assets
previously traded pursuant to the Yen Financial Portfolio (representing
approximately 32% of the Partnership's assets) to the Trading Manager's Original
Investment Program.
The Partnership does not have, nor does it expect to have, any capital
assets.
Results of Operations
The net asset value per Unit as of September 30, 1997 was $137.11, an
increase of .07% from the December 31, 1996 net asset value per Unit of $137.02.
9
<PAGE>
July's positive performance resulted from gains in the financial, currency
and metal sectors. Profits were somewhat offset by losses in the soft, index,
grain and energy sectors. Following the Federal Reserve Chairman's generally
upbeat congressional testimony on the state of the U.S. economy, investor
sentiment soared, sending U.S. bond prices higher and the yield on the benchmark
30-year U.S. Treasury bond down to levels not seen in 18 months. Positions in
U.S. Treasuries, Australian 10-year bonds and Eurodollar bonds resulted in
strong gains as did positions in Japanese Government bonds. In the currency
sector, strong gains were seen in Deutsche mark and Swiss franc positions as the
U.S. dollar soared in response to investors exchanging their marks and francs
for U.S. dollars. Positions in the Japanese yen and British pound were
unprofitable. In the metal sector, as the Australian central bank sold
approximately 60% of their gold reserves, prices tumbled profiting the
Partnership's short positions in gold and silver. Losses were experienced in the
soft sector as shifting inventory expectations and fickle weather patterns
altered investor sentiment, specifically in cotton, cocoa and coffee. In the
index sector, losses were seen in the Nikkei Dow and the Australian stock index.
In the grain sector, corn positions experienced losses as the short-term weather
outlook caused fluctuations in the market. Finally, in the energy sector, losses
were incurred in light crude oil and heating oil positions as the market failed
to establish firm direction.
August's negative performance resulted from losses in the currency, energy,
financial, metal and grain sectors. Profits were taken in the index and soft
sectors. The currency markets proved to be a major detractor to the
Partnership's overall performance. The Deutsche mark's weakness over the past
few months had contributed to some decent gains, but its strength in August
against the U.S. dollar and British pound contributed to the Partnership's
negative performance. The Swiss franc also added to the Partnership's losses as
it rose against the U.S. dollar. In the financial sector, August began with
sharp sell-offs in the U.S. and German bond markets driven by fears of inflation
and higher interest rates. Reverberations were also felt across the European
financial markets. This turnaround in the bull bond market resulted in losses in
U.S., French and German bond positions. In the energy sector, positions were
unprofitable as light crude oil and heating oil prices fell due, in part, to
downward pressures related to the recent return of Iraqi oil to world markets.
Losses were somewhat offset by gains in world stock indices. As the Japanese
Nikkei continued to decline, the Partnership capitalized on its short positions.
Positions in cotton, coffee, gold and copper were profitable as well.
September's negative performance resulted from losses in the currency, soft,
energy, index and grain sectors. Positions in the financial and metal sectors
were profitable. Currency sector positions dampened September performance for
the Partnership as the U.S. dollar lost ground versus other currencies including
the Deutsche mark, Swiss franc and British pound. In the soft sector,
significant price moves resulted in losses for the Partnership. Coffee declined,
plunging 9.3% in a single day's trading, on expectations of new supplies from
Brazil and the transfer of European coffee beans to the U.S. market. Sugar
prices also dropped amid projections of large Brazilian exports following the
elimination of the sugar export tax. Positions in cocoa were unprofitable as
well. In the energy sector, the price of crude oil fell in response to the
buildup of inventories from summer lows, causing losses for the Partnership. In
the bond market, the main factor in September was the drop in U.S. long-term
interest rates from 6.75% to 6.40%. This fall in U.S. interest rates impacted
bond prices around the world, contributing profits to the Partnership for the
month. Anticipation of an increase in silver demand drove prices up
approximately 11%. As a result, the Partnership was able to capture profits.
Copper positions were profitable as well.
Interest income is earned on U.S. Treasury Bills. Funds available
for investment in U.S. Treasury Bills vary based on monthly
trading performance and redemptions. Interest income decreased by
approximately $15,000 for the nine months, but increased by
approximately $7,000 for the three months ended September 30,
1997 as compared to the same periods in 1996. These fluctuations were
due to the effect of a gradually declining net asset value during
the first nine months of 1996 resulting from poor trading performance,
capped by a very strong fourth quarter, as well as the effect of
redemptions on the funds available for investment in U.S. Treasury bills.
Commissions are calculated on the net asset value on the first day of each
month and, therefore, vary based on monthly trading performance and redemptions.
Commissions decreased by approximately $19,000 for the nine months, but
increased by approximately $17,000 for the three months ended September 30, 1997
as compared to the same periods in 1996. Similar to the fluctuations in interest
income discussed above, these fluctuations were due to the effect of trading
performance and redemptions on the monthly net asset values.
10
<PAGE>
All trading decisions are currently made by John W. Henry & Company, Inc.
(the 'Trading Manager'). Management fees are calculated on the net asset value
as of the end of each month and, therefore, are affected by trading
performance and redemptions. Management fees decreased by approximately
$5,000 for the nine months, but increased by approximately $9,000
for the three months ended September 30, 1997 as compared to the same periods in
1996. Similar to the fluctuations in interest income discussed above, these
fluctuations were due to the effect of trading performance and redemptions on
the monthly net asset values.
Incentive fees are based on New High Net Trading Profits generated by the
Trading Manager, as defined in the Advisory Agreement between the Partnership,
the General Partner and the Trading Manager. No incentive fees were earned for
the nine months ended September 30, 1997 and 1996.
General and administrative expenses decreased by approximately $13,000 and
$4,000 for the nine and three months ended September 30, 1997, respectively, as
compared to the same periods in 1996. These expenses include reimbursements of
costs incurred by the General Partner on behalf of the Partnership in addition
to accounting, audit, tax and legal fees, as well as printing and postage costs
related to reports sent to limited partners. The decreases were attributable to
a reduction in overall costs associated with administering the Partnership.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--There are no material legal proceedings pending by or
against the Registrant or the General Partner.
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
4.1 Agreement of Limited Partnership of the Registrant, dated
as of January 26, 1989, as amended and restated as of
March 15, 1989. (Incorporated by reference to Exhibits 3.1
and 4.1 to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1989)
4.2 Subscription Agreement. (Incorporated by
reference to Exhibit 4.2 to the Registrant's
Annual Report on Form 10-K for the period ended
December 31, 1989)
4.3 Request for Redemption. (Incorporated
by reference to Exhibit 4.3 to the
Registrant's Annual Report on Form
10-K for the period ended December 31,
1989)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K--None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Prudential-Bache Capital Return Futures Fund L.P.
By: Seaport Futures Management, Inc.
A Delaware corporation, General Partner
By: /s/ Steven Carlino Date: November 14, 1997
----------------------------------------
Steven Carlino
Vice President
Chief Accounting Officer for the
Registrant
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for P-B Capital Return Futures Fund L.P.
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000846176
<NAME> P-B Capital Return Futures Fund L.P.
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Sep-30-1997
<PERIOD-TYPE> 9-Mos
<CASH> 3,814,903
<SECURITIES> 12,459,134
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,753,603
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,753,603
<CURRENT-LIABILITIES> 710,656
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 16,042,947
<TOTAL-LIABILITY-AND-EQUITY> 16,753,603
<SALES> 0
<TOTAL-REVENUES> 1,704,047
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,685,615
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,432
<EPS-PRIMARY> .15
<EPS-DILUTED> 0
</TABLE>
