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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, 1997
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 0-18417
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3516796
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(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
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(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
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Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(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
Agreement of Limited Partnership of the Registrant, dated January 26, 1989,
included as part of the Registration Statement on Form S-1 (File No. 33-26777)
filed with the Securities and Exchange Commission on January 31, 1989 pursuant
to Rule 424(b) of the Securities Act of 1933, and amended and restated as of
March 15, 1989, is incorporated by reference into Part IV of this Annual Report
on Form 10-K
Registrant's Annual Report to Limited Partners for the year ended December
31, 1997 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 7 through 9.
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PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)
TABLE OF CONTENTS
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PART I PAGE
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Item 1 Business......................................................................... 3
Item 2 Properties....................................................................... 3
Item 3 Legal Proceedings................................................................ 3
Item 4 Submission of Matters to a Vote of Limited Partners.............................. 3
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 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................... 6
Item 13 Certain Relationships and Related Transactions................................... 6
PART IV.. 8
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.................. 7
Financial Statements and Financial Statement Schedules........................... 7
Exhibits......................................................................... 7
Reports on Form 8-K.............................................................. 9
SIGNATURES ................................................................................. 10
</TABLE>
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PART I
Item 1. Business
General
Prudential-Bache Capital Return Futures Fund L.P. (the 'Registrant'), a
Delaware limited partnership, was formed on January 26, 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 in the speculative trading of a
portfolio consisting primarily of commodity futures, forward and options
contracts. On May 12, 1989, the Registrant completed its offering and raised
$139,151,000 from the sale of 1,377,053 units of limited partnership interest
and 14,457 units of general partnership interest (collectively, 'Units') which
resulted in net proceeds to the Registrant of $137,151,000. The Registrant's
fiscal year for book and tax purposes ends on December 31.
Since July 1994, all trading decisions for the Registrant have been made by
John W. Henry & Company, Inc. (the 'Trading Manager'), an independent
commodities trading manager. 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
The general partner of the Registrant is Seaport Futures Management, Inc.
(the 'General Partner') which is an affiliate of Prudential Securities
Incorporated ('PSI'), the Registrant's commodity broker. Both the General
Partner and PSI are wholly owned subsidiaries 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 Manager recommends similar
or identical trades to the Registrant and other accounts which it manages, the
Registrant may compete with those accounts for the execution of the same or
similar trades.
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. See Notes A, C and D to the Registrant's annual
report to limited partners for the year ended December 31, 1997 ('Registrant's
1997 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.
Item 4. Submission of Matters to a Vote of Limited Partners
None
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PART II
Item 5. Market for the Registrant's Units and Related Limited Partner Matters
As of March 5, 1998, there were 1,354 holders of record owning 115,031 Units,
including 1,151 units of general partnership interest. 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. The
Partnership Agreement does, however, provide that a limited partner may only
redeem its units as of the last business day of any full 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.
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 1997
Annual Report which is filed as an exhibit hereto.
<TABLE>
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Year ended December 31,
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1997 1996 1995 1994 1993
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Net realized gain (loss) $ 1,602,156 $ 3,400,298 $ 7,231,676 $(5,337,170) $ 9,568,847
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Change in net unrealized gain $ 1,234,209 $ (470,820) $ 24,602 $ (189,239) $ (382,252)
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Commissions $ 1,377,622 $ 1,416,851 $ 1,725,325 $ 1,616,313 $ 2,028,878
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Management fees $ 695,451 $ 715,244 $ 882,190 $ 750,008 $ 862,168
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Incentive fees $ 12,998 $ -- $ 437,793 $ -- $ 616,838
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Net income (loss) $ 1,278,585 $ 1,330,842 $ 4,963,090 $(7,333,588) $ 6,614,407
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Allocation of net income
(loss):
Limited partners $ 1,265,788 $ 1,341,731 $ 4,814,944 $(7,164,969) $ 6,494,501
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General partner $ 12,797 $ (10,889) $ 148,146 $ (168,619) $ 119,906
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Net income (loss) per
weighted average Unit $ 10.34 $ 9.23 $ 28.30 $ (27.40) $ 14.41
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Total assets $17,444,499 $18,703,847 $20,553,690 $21,732,249 $56,492,082
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Redemptions $ 2,162,884 $ 3,052,033 $ 5,181,142 $14,539,167 $21,687,018
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Net asset value per Unit $ 147.88 $ 137.02 $ 126.19 $ 101.79 $ 129.56
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 10 and 11 of the
Registrant's 1997 Annual Report which is filed as an exhibit hereto.
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 9
of the Registrant's 1997 Annual Report which is filed as an exhibit hereto.
Supplementary data specified by Item 302 of Regulation S-K (selected
quarterly financial data) is not applicable.
4
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Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Reference is made to the Registrant's Current Report on Form 8-K dated May
14, 1996, as filed with the Securities and Exchange Commission on May 16, 1996
regarding the change in the Registrant's certifying accountant from Deloitte &
Touche LLP to Price Waterhouse LLP.
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 ten percent 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 Seaport Futures Management, Inc. and
their positions with respect to the Registrant are as follows:
Name Position
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Thomas M. Lane, Jr. President and Director
Barbara J. Brooks Treasurer and Chief Financial Officer
Steven Carlino Vice President and Chief Accounting Officer
A. Laurence Norton, Jr. Director
Guy S. Scarpaci Director
THOMAS M. LANE, JR., age 49, is the President and a Director of Seaport Futures
Management, Inc. He is also the President and Director of Prudential Securities
Futures Management Inc. Mr. Lane has been a Senior Vice President of Futures
Sales and Execution Services in the Futures Division since joining PSI in
September 1995. Prior to joining PSI, Mr. Lane was employed by Merrill Lynch as
the Vice President of Group Future Sales and Marketing from November 1983 until
September 1995, and prior to that, Imperial Chemical as a Marketing Manager.
BARBARA J. BROOKS, age 49, is the Treasurer and Chief Financial Officer of
Seaport Futures Management, Inc. She is a Senior Vice President of PSI. She is
also the Treasurer and Chief Financial Officer of Prudential Securities 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 34, is a Vice President of Seaport Futures Management, Inc.
He is a First Vice President of PSI. He is also a Vice President of Prudential
Securities 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 59, is a Director of Seaport Futures Management,
Inc. He is an Executive Vice President of PSI and head of its Futures Division.
He is also a Director of Prudential Securities Futures Management Inc. Most
recently, 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.
5
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GUY S. SCARPACI, age 51, is a Director of Seaport Futures Management, Inc. He is
a First Vice President of the Futures Division of PSI. He is also a Director of
Prudential Securities Futures Management Inc. Mr. Scarpaci has been employed by
PSI in positions of increasing responsibility since August 1974.
During December 1997, Thomas M. Lane, Jr. replaced James M. Kelso as
President and Director of 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 officers and directors 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.)
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 5, 1998, 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 5, 1998, no director or officer of the General Partner owns
directly or beneficially any of the Units issued by the Registrant.
As of March 5, 1998, no partner beneficially owns more than 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 1997 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.
6
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PART IV
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Page in
Annual Report
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements and Report of Independent
Accountants--incorporated by reference to the Registrant's 1997
Annual Report which is filed as an exhibit hereto
Reports of Independent Accountants:
Report of Independent Accountants at December 31, 1997 and 1996 and
for the years then ended 2
Independent Auditors' Report for the year ended December 31, 1995 2A
Financial Statements:
Statements of Financial Condition--December 31, 1997 and 1996 3
Statements of Operations--Three years ended December 31, 1997 4
Statements of Changes in Partners' Capital--Three years ended
December 31, 1997 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
the notes thereto.
3. Exhibits:
3.1 Agreement of Limited Partnership of the Registrant, dated as of
and January 26, 1989 as amended and restated as of March 15, 1989
4.1 (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)
10.1 Escrow Agreement, dated March 17, 1989 among the Registrant, Seaport
Futures Management, Inc., 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 May 12, 1989 between the Registrant and
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 March 17, 1989 among the Registrant,
Seaport Futures Management, Inc., and Tiverton Trading 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)
</TABLE>
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<TABLE>
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10.4 Advisory Agreement, dated September 1, 1990 between the Registrant,
Seaport Futures Management, Inc. and John W. Henry & Co., Inc.
(incorporated by reference to Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990)
10.5 Representation Agreement Concerning the Registration Statement and
the Prospectus, dated as of March 17, 1989 among the Registrant,
Seaport Futures Management, Inc., Prudential-Bache Securities Inc.
and Tiverton Trading 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 Net Worth Agreement, dated as of March 17, 1989 between Seaport
Futures Management, Inc. and Prudential Securities Group Inc.
(incorporated by reference to Exhibit 10.6 to the Registrant's
Annual Report on Form 10-K for the period ended December 31, 1989)
10.7 Promissory Note issued by Prudential Securities Group Inc. to
Seaport Futures Management, Inc., dated May 12, 1989 (incorporated
by reference to Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K for the period ended December 31, 1989)
10.8 Letter of Credit and Reimbursement Agreement among the Registrant,
Seaport Futures Management, Inc., Prudential Securities Group Inc.
and Citibank, N.A. dated March 17, 1989 (incorporated by reference
to Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1989)
10.9 Secured Demand Note Collateral Agreement dated February 15, 1991
between Seaport Futures Management, Inc. and Prudential Securities
Group Inc. (incorporated by reference to Exhibit 28.2 to the
Registrant's 10-Q for the period ended March 31, 1991)
10.10 Advisory Agreement, dated January 1, 1992 among the Registrant,
Seaport Futures Management, Inc. and Chang-Crowell Management
Corporation (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 Amendment No 1 to Letter of Credit and Reimbursement Agreement dated
October 24, 1989 among the Registrant, Citibank, N.A., Seaport
Futures Management, Inc. and Prudential Securities Group Inc.
(incorporated by reference to Exhibit 10.11 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991)
10.12 Amendment No 2 to Letter of Credit and Reimbursement Agreement dated
January 22, 1990 among the Registrant, Citibank, N.A., Seaport
Futures Management, Inc. and Prudential Securities Group Inc.
(incorporated by reference to Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991)
10.13 Amendment No 3 to Letter of Credit and Reimbursement Agreement dated
February 15, 1991 among the Registrant, Citibank, N.A., Seaport
Futures Management, Inc. and Prudential Securities Group Inc.
(incorporated by reference to Exhibit 10.13 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991)
</TABLE>
8
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10.14 Amendment No 4 to Letter of Credit and Reimbursement Agreement dated
March 28, 1991 among the Registrant, Citibank, N.A., Seaport Futures
Management, Inc. and Prudential Securities Group Inc. (incorporated
by reference to Exhibit 28.1 to the Registrant's Quarterly Report on
Form 10-Q for the period ended March 31, 1991)
10.15 Amendment No 5 to Letter of Credit and Reimbursement Agreement dated
April 15, 1993 among the Registrant, Citibank, N.A., Seaport Futures
Management, Inc. and Prudential Securities Group Inc. (incorporated
by reference to Exhibit 10.15 to the Registrant's Quarterly Report
on Form 10-Q for the period ended March 31, 1993)
10.16 Amendment to Advisory Agreement dated June 30, 1994 among the
Registrant, Seaport Futures Management, Inc. and John W. Henry &
Company, Inc. (incorporated by reference to Exhibit 10.16 to the
Registrant's Quarterly Report on Form 10-Q for the period ended June
30, 1994)
10.17 Addendum to Brokerage Agreement dated July 1, 1994 among the
Registrant, Seaport Futures Management, Inc. and Prudential
Securities Incorporated (incorporated by reference to Exhibit 10.17
to the Registrant's Quarterly Report on Form 10-Q for the period
ended September 30, 1994)
10.18 Form of Foreign Currency Addendum to Brokerage Agreement between the
Registrant and Prudential Securities Incorporated (incorporated by
reference to Exhibit 10.16 of the Registrant's Quarterly Report on
Form 10-Q for the period ended March 31, 1996)
13.1 Registrant's 1997 Annual Report (with the exception of the
information and data incorporated by reference in Items 7 and 8 of
this Annual Report on Form 10-K, no other information or data
appearing in the Registrant's 1997 Annual Report is to be deemed
filed as part of this report) (filed herewith)
16.1 Letter dated May 14, 1996 from Deloitte & Touche LLP to the
Securities and Exchange Commission regarding change in certifying
accountant (incorporated by reference to Exhibit 16.1 to the
Registrant's Current Report on Form 8-K dated May 14, 1996)
27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
period covered by this report
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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 L.P.
By: Seaport Futures Management, Inc.
A Delaware corporation, General Partner
By: /s/ Steven Carlino Date: March 30, 1998
--------------------------------------------
Steven Carlino
Vice President and Chief Accounting Officer
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: Seaport Futures Management, Inc.
A Delaware corporation, General Partner
By: /s/ Thomas M. Lane, Jr. Date: March 30, 1998
-------------------------------------
Thomas M. Lane, Jr.
President and Director
By: /s/ Barbara J. Brooks Date: March 30, 1998
-------------------------------------
Barbara J. Brooks
Treasurer and Chief Financial Officer
By: /s/ Steven Carlino Date: March 30, 1998
-------------------------------------
Steven Carlino
Vice President
By: Date: March , 1998
-------------------------------------
A. Laurence Norton, Jr.
Director
By: /s/ Guy S. Scarpaci Date: March 30, 1998
--------------------------------------
Guy S. Scarpaci
Director
10
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1997
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Prudential-Bache Annual
Capital Return Futures Report
Fund L.P.
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PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
March 1998
Dear Limited Partner:
Enclosed is the Annual Report of Prudential-Bache Capital Return Futures Fund
L.P. (the 'Fund') for the year ended December 31, 1997, including audited
financial statements for the Fund which contain, among other things, the
operating results for the year.
The Fund posted a gain of 7.93% in 1997, while the MAR (Managed Account
Reports) Fund/Pool Index, which tracked the performance of 315 futures funds in
1997, returned 9.34%. At year-end, the Fund's net asset value per unit was
$147.88*. Past performance is not necessarily indicative of future results.
The Fund was profitable in 1997 as gains were achieved in the currency,
financial, metal and index sectors. Gains were somewhat offset by losses in the
energy, soft and grain sectors. Further information with respect to the Fund's
performance is included in the section of the report entitled 'Management's
Discussion and Analysis of Financial Condition and Results of Operations'.
Effective March 31, 1997, John W. Henry & Company, Inc. (the 'Trading
Manager') terminated its Yen Financial Portfolio. Accordingly, as
of April 1, 1997 the General Partner reallocated assets previously
traded pursuant to the Yen Financial Portfolio to the Trading
Manager's Original Program. We believe this change will
effectively compliment the performance of the Fund.
We value your continued participation as a Limited Partner of the Fund.
Should you have any questions, please contact your Prudential Securities
Financial Advisor. For account status inquiries, contact Prudential Securities
Client Services at 1-800-535-2077.
Sincerely,
Thomas M. Lane, Jr.
President and Director
Seaport Futures Management, Inc.
* As of March 25, 1998, the estimated net asset value per unit was $136.62.
1
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1177 Avenue of the Americas Telephone 212 596 7000
New York, NY 10036 Facsimile 212 596 8910
Price Waterhouse LLP (LOGO)
Report of Independent Accountants
January 26, 1998
To the General Partner and
Limited Partners of
Prudential-Bache Capital Return Futures Fund L.P.
In our opinion, the accompanying statements of financial condition and the
related statements of operations and changes in partners' capital present
fairly, in all material respects, the financial position of Prudential-Bache
Capital Return Futures Fund L.P. at December 31, 1997 and 1996, and the results
of its operations for the years then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
general partner; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by the general partner, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
2
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Deloitte &
Touche LLP
(LOGO)
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Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of
Prudential-Bache Capital Return Futures Fund L.P.
We have audited the accompanying statements of operations and of changes in
partners' capital of Prudential-Bache Capital Return Futures Fund L.P. for the
year ended December 31, 1995. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the results of operations and changes in partners' capital of
Prudential-Bache Capital Return Futures Fund L.P. for the year ended December
31, 1995 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
January 29, 1996
2A
<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
ASSETS
Equity in commodity trading accounts:
Cash $ 3,259,537 $ 4,416,242
U.S. Treasury bills, at amortized cost 13,007,441 13,869,729
Net unrealized gain on open commodity positions 1,177,521 417,876
----------- -----------
Total assets $17,444,499 $18,703,847
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable $ 291,915 $ 664,958
Management fees payable 57,913 62,075
Accrued expenses 52,908 61,858
Due to affiliates 17,580 19,472
Incentive fee payable 12,998 --
----------- -----------
Total liabilities 433,314 808,363
----------- -----------
Commitments
Partners' capital
Limited partners (113,880 and 129,302 units outstanding) 16,840,972 17,716,405
General partner (1,151 and 1,307 units outstanding) 170,213 179,079
----------- -----------
Total partners' capital 17,011,185 17,895,484
----------- -----------
Total liabilities and partners' capital $17,444,499 $18,703,847
----------- -----------
----------- -----------
Net asset value per limited and general partnership unit ('Units') $ 147.88 $ 137.02
----------- -----------
----------- -----------
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1997 1996 1995
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
REVENUES
Net realized gain $1,602,156 $3,400,298 $7,231,676
Change in net unrealized gain 1,234,209 (470,820) 24,602
Interest from U.S. Treasury bills 676,690 694,789 931,320
---------- ---------- ----------
3,513,055 3,624,267 8,187,598
---------- ---------- ----------
EXPENSES
Commissions 1,377,622 1,416,851 1,725,325
Management fees 695,451 715,244 882,190
Incentive fees 12,998 -- 437,793
General and administrative 148,399 161,330 179,200
---------- ---------- ----------
2,234,470 2,293,425 3,224,508
---------- ---------- ----------
Net income $1,278,585 $1,330,842 $4,963,090
---------- ---------- ----------
---------- ---------- ----------
ALLOCATION OF NET INCOME
Limited partners $1,265,788 $1,341,731 $4,814,944
---------- ---------- ----------
---------- ---------- ----------
General partner $ 12,797 $ (10,889) $ 148,146
---------- ---------- ----------
---------- ---------- ----------
NET INCOME PER WEIGHTED AVERAGE LIMITED AND GENERAL
PARTNERSHIP UNIT
Net income per weighted average limited and general
partnership unit $ 10.34 $ 9.23 $ 28.30
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of limited and general
partnership units outstanding 123,618 144,158 175,382
---------- ---------- ----------
---------- ---------- ----------
- ----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
LIMITED GENERAL
UNITS PARTNERS PARTNER TOTAL
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Partners' capital--December 31, 1994 194,864 $ 19,216,892 $ 617,835 $ 19,834,727
Net income 4,814,944 148,146 4,963,090
Redemptions (39,416) (5,181,142) -- (5,181,142)
-------- ------------ --------- ------------
Partners' capital--December 31, 1995 155,448 18,850,694 765,981 19,616,675
Net income (loss) 1,341,731 (10,889) 1,330,842
Redemptions (24,839) (2,476,020) (576,013) (3,052,033)
-------- ------------ --------- ------------
Partners' capital--December 31, 1996 130,609 17,716,405 179,079 17,895,484
Net income 1,265,788 12,797 1,278,585
Redemptions (15,578) (2,141,221) (21,663) (2,162,884)
-------- ------------ --------- ------------
Partners' capital--December 31, 1997 115,031 $ 16,840,972 $ 170,213 $ 17,011,185
-------- ------------ --------- ------------
-------- ------------ --------- ------------
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
A. General
Prudential-Bache Capital Return Futures Fund L.P. (the 'Partnership') is a
Delaware limited partnership formed on January 26, 1989 which will terminate on
December 31, 2009 unless terminated sooner under the provisions of the Amended
and Restated Agreement of Limited Partnership (the 'Partnership Agreement'). On
May 12, 1989, the Partnership completed its offering and raised $139,151,000
from the sale of 1,377,053 units of limited partnership interest and 14,457
units of general partnership interest. The Partnership was formed to engage in
the speculative trading of commodity futures, forward and options contracts. The
general partner of the Partnership is Seaport Futures Management, Inc. (the
'General Partner') which is an affiliate of Prudential Securities Incorporated
('PSI'), the Partnership's commodity broker. Both the General Partner and PSI
are wholly owned subsidiaries of Prudential Securities Group Inc. ('PSGI'). The
General Partner is required to maintain at least a 1% interest in the
Partnership as long as it is acting as the Partnership's general partner.
During the three years ended December 31, 1997, 100% of the Partnership's
assets were allocated for commodity trading purposes (referred to as the
Partnership's 'Traded Assets'). The General Partner generally maintains not less
than 75% of the Traded Assets 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. The
remaining 25% of the Traded Assets is held in cash in commodity trading
accounts.
Since July 1994, all trading decisions for the Partnership have been made by
John W. Henry & Company, Inc. (the 'Trading Manager'), an independent
commodities trading manger. The General Partner retains the authority to
override trading instructions that violate the Partnership's trading policies.
B. Summary of Significant Accounting Policies
Basis of accounting
The books and records of the Partnership are maintained on the accrual basis
of accounting in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partner to make estimates and
assumptions that affect the reported amounts of liabilities at the date of the
financial statements and the reported amounts of expenses during the reporting
period. Actual results could differ from those estimates.
Commodity futures and forward transactions are reflected in the accompanying
statements of financial condition on trade date. The difference between the
original contract amount and market value is reflected as net unrealized gain or
loss. The market value of each contract is based upon the closing quotation on
the exchange, clearing firm or bank on, or through, which the contract is
traded.
To the extent practicable, the Partnership invests a significant portion of
its Traded Assets in U.S. Treasury bills to fulfill original margin
requirements. U.S. Treasury bills are carried at amortized cost which
approximates market. Interest on these obligations accrues for the benefit of
the Partnership.
The weighted average number of limited and general partnership units
outstanding was computed for purposes of disclosing net income per weighted
average limited and general partnership unit. The weighted average limited and
general partnership units are equal to the number of Units outstanding at
year-end, adjusted proportionately for the Units redeemed based on their
respective time outstanding during such year.
The Partnership has elected not to provide a Statement of Cash Flows as
permitted by Statement of Financial Accounting Standard No. 102, 'Statement of
Cash Flows--Exemption of Certain Enterprises and Classification of Cash Flows
from Certain Securities Acquired for Resale.'
Income taxes
The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from the Partnership's operations
are passed directly to the individual partners. The Partnership may be subject
to other state and local taxes in jurisdictions in which it operates.
5
<PAGE>
Profit and loss allocations, distributions and redemptions
Net realized profits or losses for tax purposes are allocated first to
partners who redeem Units to the extent the amounts received on redemption are
greater than or are less than the amounts paid for the redeemed Units by the
partners. Net realized profits or losses remaining after these allocations are
allocated to each partner in proportion to such partner's capital account at
year-end. Net income or loss for financial reporting purposes is allocated
quarterly to all partners on a pro rata basis based on each partner's number of
Units outstanding during the quarter.
Distributions (other than on redemptions of Units) are made at the sole
discretion of the General Partner on a pro rata basis in accordance with the
respective capital accounts of the partners. No distributions have been made
since inception.
The Partnership Agreement provides that a limited partner may redeem its
units as of the last business day of any full calendar quarter at the then
current net asset value per Unit.
C. Costs, Fees and Expenses
Commissions
The General Partner, on behalf of the Partnership, entered into an agreement
with PSI to act as commodity broker for the Partnership. The Partnership pays
PSI monthly fees equal to 2/3 of 1% (an 8% annual rate) of the Partnership's net
asset value as of the first day of each month.
Management and incentive fees
The Partnership pays the Trading Manager a monthly management fee of 1/3 of
1% (a 4% annual rate) of the Partnership's net asset value as of the last day of
each month and a quarterly incentive fee of 15% of the 'New High Net Trading
Profits' (as defined in the Advisory Agreement among the Partnership, the
General Partner and the Trading Manager).
General and administrative expenses
In addition to the costs, fees and expenses previously discussed, the
Partnership reimburses the General Partner and its affiliates for actual
Partnership operating expenses payable by, or allocable to, the Partnership. The
amount of reimbursement from the Partnership is limited by the provisions of the
Partnership Agreement. The Partnership also pays amounts directly to unrelated
parties for certain operating expenses.
D. Related Parties
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 services and other administrative services.
The costs incurred for these services for the years ended December 31, 1997,
1996 and 1995 were:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
----------------------------------------
Commissions $1,377,622 $1,416,851 $1,725,325
General and administrative 91,077 92,346 111,364
---------- ---------- ----------
Total $1,468,699 $1,509,197 $1,836,689
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Partnership maintains its trading and cash accounts at PSI, the
Partnership's commodity broker. Except for the portion of assets that is
deposited as margin to maintain forward currency contract positions as further
discussed below, the Partnership's assets are maintained either with PSI or, for
margin purposes, with the various exchanges on which the Partnership is
permitted to trade.
The Partnership, acting through its Trading Manager, executes
over-the-counter, spot, forward and/or option foreign exchange transactions with
PSI. PSI then engages in back-to-back trading with an affiliate,
Prudential-Bache Global Markets Inc. ('PBGM'). PBGM attempts to earn a profit on
such transactions. PBGM keeps its prices on foreign currency competitive with
other interbank currency trading desks. All over-the-counter currency
transactions are conducted between PSI and the Partnership pursuant to a line of
credit. PSI may require that collateral be posted against the marked-to-market
positions of the Partnership.
6
<PAGE>
E. Income Taxes
The following is a reconciliation of net income for financial reporting
purposes to net income for tax reporting purposes for the years ended December
31, 1997, 1996 and 1995, respectively:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
-----------------------------------------
Net income per financial statements $1,278,585 $1,330,842 $ 4,963,090
Change in unrealized gain/loss on nonregulated
commodity positions and foreign currencies (532,445) 709,383 14,371
---------- ---------- -----------
Tax basis net income $ 746,140 $2,040,225 $ 4,977,461
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The differences between the tax and book bases of partners' capital are
primarily attributable to the cumulative effect of the book to tax income
adjustments.
F. 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 in 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 at 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
December 31, 1997 and 1996, such segregated assets totalled $9,141,872 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 $7,946,743 and $1,148,057 at December 31, 1997 and 1996,
respectively. There are no segregation requirements for assets related to
forward trading.
As of December 31, 1997, the Partnership's open forward contracts mature
within three months and open futures contracts mature within one year.
7
<PAGE>
<PAGE>
At December 31, 1997 and 1996, gross contract amounts of open futures and
forward contracts are:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Currency Forward Contracts:
Commitments to purchase $8,299,224 $14,780,831
Commitments to sell 21,741,261 21,404,866
Currency Futures Contracts:
Commitments to purchase -- 1,527,963
Commitments to sell -- 2,058,838
Financial Futures Contracts:
Commitments to purchase 64,953,831 37,638,257
Commitments to sell 28,551,074 8,448,337
Other Futures Contracts:
Commitments to purchase 3,287,779 419,159
Commitments to sell 7,476,710 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 December 31, 1997 and 1996, the fair value of open futures and forwards
contracts was:
<TABLE>
<CAPTION>
1997 1996
------------------------- -----------------------
<S> <C> <C> <C> <C>
Assets Liabilities Assets Liabilities
---------- ----------- -------- -----------
Futures Contracts:
Domestic exchanges
Financial $ 80,344 $ -- $ 13,200 $ 13,625
Currencies -- -- 74,723 175
Other 611,279 68,124 80,797 1,456
Foreign exchanges
Financial 250,118 66,494 129,424 143,249
Other 16,249 1,735 -- --
Forward Contracts:
Currencies 622,474 266,590 522,582 244,345
---------- ----------- -------- -----------
$1,580,464 $ 402,943 $820,726 $ 402,850
---------- ----------- -------- -----------
---------- ----------- -------- -----------
</TABLE>
8
<PAGE>
<PAGE>
The following table presents the average fair value of futures and forward
contracts during the year ended December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
<S> <C> <C> <C> <C>
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
Futures Contracts:
Domestic exchanges
Financial $ 92,498 $ 12,619 $ 83,801 $ 16,095
Currencies 59,637 14,160 107,987 6,777
Other 255,036 105,041 68,075 9,742
Foreign exchanges
Financial 354,783 52,688 624,117 30,627
Other 5,821 4,653 -- --
Forward Contracts:
Currencies 662,980 233,373 640,634 373,816
---------- ----------- ---------- -----------
$1,430,755 $ 422,534 $1,524,614 $ 437,057
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
The following table presents the Partnership's trading revenues for the
three years ended December 31, 1997.
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 210,426 $ 81,856 $ 624,688
Currencies 24,502 545,421 686,767
Other (555,667) 430,200 (284,497)
Foreign exchanges
Financial 1,128,447 1,816,042 1,817,842
Currencies -- (445,409) (394,837)
Other (109,842) -- 7,256
Forward Contracts:
Currencies 2,131,390 1,031,787 4,799,059
Foreign Currencies 7,109 (530,419) --
---------- ---------- ----------
$2,836,365 $2,929,478 $7,256,278
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
9
<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)
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 December 31, 1997, 100% of the Partnership's total net assets was
allocated to commodities trading. A significant portion of the net asset value
was held in U.S. Treasury bills (which represented approximately 75% of the net
asset value prior to redemptions payable) and cash, which are used as margin for
the Partnership's trading in commodities. Inasmuch as the sole business of the
Partnership is to trade in commodities, the Partnership continues to own such
liquid assets to be used as margin.
The percentage that U.S. Treasury bills bear to the net asset value varies
each day, and from month to month, as the market value of commodity interests
changes. 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 F 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 years ended December 31,
1997, 1996 and 1995 were $2,141,221, $2,476,020 and $5,181,142, respectively.
Redemptions by the General Partner for the years ended December 31, 1997 and
1996 were $21,663 and $576,013, respectively. Redemptions by limited partners
and the General Partner from the commencement of operations, May 12, 1989,
through December 31, 1997 totalled $140,332,868 and $1,598,748, 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 December 31, 1997 was $147.88, an increase
of 7.93% from the December 31, 1996 net asset value per Unit of $137.02, which
was an increase of 8.58% from the December 31, 1995 net asset value per Unit of
$126.19. The MAR (Managed Account Reports) Fund/Pool Index, which tracked the
performance of 315 futures funds in 1997, returned 9.34%, outperforming the
Partnership. Past performance is not necessarily indicative of future results.
The Partnership was profitable in 1997 as gains were achieved in the
currency, financial, metal and index sectors. Gains were somewhat offset by
losses in the energy, soft and grain sectors.
In the currency sector, the Japanese yen weakened throughout the year as a
result of volatility in the Asian market which resulted in gains. Additionally,
the Partnership had strong gains in Deutsche marks, which weakened in world
markets along with other European currencies, as hopes rose for the fruition of
the European Monetary Union. Financial sector positions profited as Japanese
Government bond yields fell to historic lows as Japan sank relentlessly into a
recession followed by a string of financial sector bankruptcies.
10
<PAGE>
<PAGE>
Strong gains were also recorded in Australian ten-year bonds and three-year
notes and in Italian and German bond positions.
In the metal sector, gold prices pursued a steep path downward and silver
prices reached an eight-year high on strong global demand leading to gains in
corresponding positions.
Offsetting gains were losses, focused mainly on light crude oil positions in
the energy sector. Energy contracts lost across the board as instability in the
Middle East, the world's largest energy producing region, caused increased
volatility making it difficult to identify any trends.
Interest income declined approximately $18,000 for the year ended December
31, 1997 compared to 1996. This decrease was due to fewer funds available for
investment in U.S. Treasury bills resulting from the liquidation of such
investments for the payment of redemptions, which outweighed the increase in
available funds from the Partnership's positive 1997 trading performance. Poor
trading performance during the first nine months of 1996, coupled with
redemptions, reduced the amount of funds available for investment in U.S.
Treasury bills during 1996. These factors, as well as a decrease in interest
rates in 1996 versus 1995, resulted in a decrease in interest income of
approximately $237,000 during 1996 compared to 1995.
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 $39,000 for the year ended December 31,
1997 as compared to 1996 due to lower monthly net asset values caused by
redemptions, offset, in part, by positive 1997 trading performance. In the year
ended December 31, 1996 as compared to 1995, commissions decreased by
approximately $308,000 due to the effect of poor trading performance during the
first nine months of 1996, as well as redemptions, on the monthly net asset
values.
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 $20,000 and $167,000
during the years ended December 31, 1997 and 1996 compared to the comparable
periods in the prior years for the same reasons commissions decreased as
discussed above.
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 Trading Manager. Trading performance resulted in
incentive fees of approximately $13,000 and $438,000 for the years ended
December 31, 1997 and 1995. No incentive fees were earned during 1996.
General and administrative expenses decreased by approximately $13,000 for
the year ended December 31, 1997 compared to 1996 and approximately $18,000 for
the year ended December 31, 1996 compared to 1995. 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. These
decreases were due to a reduction in overall costs associated with administering
the Partnership including continuing declines in printing and postage costs as
limited partners redeem their Units.
Inflation
Inflation has had no material impact on operations or on the financial
condition of the Partnership from inception through December 31, 1997.
11
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
I hereby affirm that, to the best of my knowledge and belief, the
information contained herein relating to Prudential-Bache Capital Return Futures
Fund L.P. is accurate and complete.
SEAPORT FUTURES
MANAGEMENT, INC.
(General Partner)
By: Barbara J. Brooks
Treasurer and Chief Financial Officer
- --------------------------------------------------------------------------------
12
<PAGE>
OTHER INFORMATION
The actual round-turn equivalent of brokerage commissions paid per contract
for the year ended December 31, 1997 was $178.
The Partnership's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available to limited partners without charge upon written
request to:
Prudential Securities Incorporated
P.O. Box 2016
Peck Slip Station
New York, New York 10272-2016
13
<PAGE>
Peck Slip Station
BULK RATE
P.O. Box 2016
U.S. POSTAGE
New York, NY 10272
PAID
Automatic Mail
9N17172-0
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Prudential-Bache Capital Return
Futures Fund and is qualified in its entirety
by reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000846176
<NAME> Prudential-Bache Capital Return Futures Fund
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Dec-31-1997
<PERIOD-TYPE> 12-Mos
<CASH> 3,259,537
<SECURITIES> 14,184,962
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,444,499
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,444,499
<CURRENT-LIABILITIES> 433,314
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,011,185
<TOTAL-LIABILITY-AND-EQUITY> 17,444,499
<SALES> 0
<TOTAL-REVENUES> 3,513,055
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,234,470
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,278,585
<EPS-PRIMARY> 10.34
<EPS-DILUTED> 10.34
</TABLE>
