PRUDENTIAL BACHE CAPITAL RETURN FUTURES FUND L P, 10-K, 2000-03-30

PRUDENTIAL BACHE CAPITAL RETURN FUTURES FUND L P
10-K, 2000-03-30
COMMODITY CONTRACTS BROKERS & DEALERS

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<PAGE>
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, 1999

/ / 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 of (I.R.S. Employer Identification No.)
incorporation or organization)

One New York Plaza, 13th Floor, New York, New York 10292
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 778-7866

Securities registered pursuant to Section 12(b) of the Act:
None
- -------------------------------------------------------------------------------

Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
- -------------------------------------------------------------------------------
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes CK No __

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [CK]

DOCUMENTS INCORPORATED BY REFERENCE

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, 1999 is incorporated by reference into Parts II and IV of this Annual Report
on Form 10-K

Index to exhibits can be found on pages 8 and 9.

<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1 Business......................................................................... 3
Item 2 Properties....................................................................... 4
Item 3 Legal Proceedings................................................................ 4
Item 4 Submission of Matters to a Vote of Limited Partners.............................. 4

<CAPTION>
PART II
<S> <C> <C>
Item 5 Market for the Registrant's Units and Related Limited Partner Matters............ 4
Item 6 Selected Financial Data.......................................................... 4
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 4
Item 7A Quantitative and Qualitative Disclosures About Market Risk....................... 5
Item 8 Financial Statements and Supplementary Data...................................... 5
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 5

<CAPTION>
PART III
<S> <C> <C>
Item 10 Directors and Executive Officers of the Registrant............................... 5
Item 11 Executive Compensation........................................................... 6
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 7
Item 13 Certain Relationships and Related Transactions................................... 7

PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.................. 8
Financial Statements and Financial Statement Schedules........................... 8
Exhibits......................................................................... 8
Reports on Form 8-K.............................................................. 9
SIGNATURES ................................................................................. 10
</TABLE>

2
<PAGE>
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 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 having 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, the '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.

The Registrant is engaged solely in the business of commodity futures,
forward and options trading; therefore, presentation of industry segment
information is not applicable.

Termination of the Registrant

The Registrant will terminate on December 31, 2009 unless terminated sooner
under the provisions of the Amended and Restated Agreement of Limited
Partnership (the 'Partnership Agreement'). These provisions, as set forth in
Article XVII of the Partnership Agreement, include the dissolution of the
Registrant if the Registrant's net asset value declines to less than $10 million
as of the end of any business day. As of March 28, 2000, the Registrant's
estimated net asset value was approximately $10,432,000. Additionally, the
general partner has received first quarter 2000 redemption requests from limited
partners which, when recorded on March 31, 2000, at $121.15 per Unit (the
estimated net asset value per unit as of March 28, 2000), would cause the
Registrant's net asset value to fall below $10 million and would require the
General Partner to dissolve the Registrant and begin its orderly liquidation.
However, the net asset value as of March 31, 2000 is subject to the
Registrant's trading results of March 29 through March 31, 2000.

Trading Manager

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.

General Partner and its Affiliates

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 as further discussed

3
<PAGE>
in Notes A, C and D to the Registrant's annual report to limited partners for
the year ended December 31, 1999 ('Registrant's 1999 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

PART II

Item 5. Market for the Registrant's Units and Related Limited Partner Matters

Information with respect to the offering of Units is incorporated by
reference to Note A to the Registrant's 1999 Annual Report, which is filed as an
exhibit hereto.

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 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. Consequently, holders of
Units may not be able to liquidate their investments in the event of an
emergency or for any other reason.

There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Partnership Agreement. No distributions have been made since inception and no
distributions are anticipated in the future.

As of March 21, 2000, there were 1,074 holders of record owning 86,107 Units,
including 862 units of general partnership interest.

Item 6. Selected Financial Data

The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the financial statements of the
Registrant and the notes thereto on pages 2 through 10 of the Registrant's 1999
Annual Report which is filed as an exhibit hereto.

<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
Total revenues (including
interest) $ 321,395 $ 1,704,817 $ 3,513,055 $ 3,624,267 $ 8,187,598
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) $(1,450,139) $ (258,576) $ 1,278,585 $ 1,330,842 $ 4,963,090
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per weighted
average Unit $ (15.31) $ (2.39) $ 10.34 $ 9.23 $ 28.30
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total assets $11,641,092 $15,388,184 $17,444,499 $18,703,847 $20,648,992
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net asset value per Unit $ 129.99 $ 146.27 $ 147.88 $ 137.02 $ 126.19
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

This information is incorporated by reference to pages 12 through 14 of the
Registrant's 1999 Annual Report which is filed as an exhibit hereto.

<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Information regarding quantitative and qualitative disclosures about market
risk is not required pursuant to Item 305(e) of Regulation S-K.

Item 8. Financial Statements and Supplementary Data

The financial statements are incorporated by reference to pages 2 through 10
of the Registrant's 1999 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.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None

PART III

Item 10. Directors and Executive Officers of the Registrant

There are no directors or executive officers of the Registrant. The
Registrant is managed by the General Partner.

The General Partner's directors and executive officers and any persons
holding more than 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 and Ten Percent Owners 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
- ------------------------- -----------------------------------------
Eleanor L. Thomas President and Director
Joseph A. Filicetti Executive Vice President and Director
Barbara J. Brooks Chief Financial Officer
Steven Carlino Vice President and Treasurer
Alan J. Brody Director
A. Laurence Norton, Jr. Director
Guy S. Scarpaci Director
Tamara B. Wright Senior Vice President and Director

ELEANOR L. THOMAS, age 45, is the President and a Director of Seaport Futures
Management, Inc. and is the Executive Vice President and a Director of
Prudential Securities Futures Management Inc. She is primarily responsible for
origination, asset allocation, and due diligence for the managed futures
department within PSI. She is also a First Vice President of PSI. Prior to
joining PSI in March 1993, she was with MC Baldwin Financial Company from June
1990 through February 1993 and Arthur Andersen & Co. from 1986 through May 1990.
Ms. Thomas is a certified public accountant.

JOSEPH A. FILICETTI, age 37, is the Executive Vice President and a Director of
Seaport Futures Management, Inc. He had been a Vice President of Seaport Futures
Management, Inc. and Prudential Securities Futures Management Inc. from October
1998 to March 1999. In April 1999, Mr. Filicetti was named to his

5
<PAGE>
current positions at Seaport Futures Management, Inc. and became the President
and a Director of Prudential Securities Futures Management Inc. Mr. Filicetti is
also a Vice President of PSI and the Director of Sales and Marketing for its
managed futures department. Prior to joining PSI, Mr. Filicetti was with Rotella
Capital Management as Director of Sales and Marketing from September 1996
through September 1998, and was with Merrill Lynch as a market maker trading
bonds from July 1992 to August 1996.

BARBARA J. BROOKS, age 51, is the Chief Financial Officer of Seaport Futures
Management, Inc. She is a Senior Vice President of PSI. She is also the 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 36, is a Vice President and Treasurer of Seaport Futures
Management, Inc. He is a First Vice President of PSI. He is also a Vice
President and Treasurer 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.

ALAN J. BRODY, age 48, is a Director of Seaport Futures Management, Inc. and
Prudential Securities Futures Management Inc. Mr. Brody has been a Senior Vice
President and Director of International Sales and Marketing for PSI since 1996.
Based in London, Mr. Brody is currently responsible for the marketing and sales
of all PSI products and services to international clientele throughout the
firm's global branch system. Additionally, Mr. Brody has overall responsibility
for the managed futures department within PSI. Prior to joining PSI, Mr. Brody
was an Executive Director and Senior Vice President with Lehman Brothers'
Financial Services Division in London and President of Lehman Brothers Futures
Asset Management Corp. from 1990 to 1996. Prior to joining Lehman Brothers, Mr.
Brody served as President and Chief Executive Officer of Commodity Exchange,
Inc. from 1980 to 1989. Earlier in his career, Mr. Brody was associated with the
law firm of Baer Marks & Upham from 1977 to 1980.

A. LAURENCE NORTON, JR., age 61, is a Director of Seaport Futures Management,
Inc. He is an Executive Vice President of PSI and, since March 1994, has been
the director of the International and Futures Divisions of PSI. He is also a
Director of Prudential Securities Futures Management Inc. and is a member of
PSI's Operating Committee. From October 1991 to March 1994, he held the position
of Executive Director of Retail Development and Retail Strategies at PSI. Prior
to joining PSI in 1991, Mr. Norton was a Senior Vice President and Branch
Manager of Shearson Lehman Brothers.

GUY S. SCARPACI, age 53, 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.

TAMARA B. WRIGHT, age 41, is a Senior Vice President and Director of Seaport
Futures Management, Inc. She is a Senior Vice President and Chief Administrative
Officer for the International and Futures Divisions of PSI. She is also a Senior
Vice President and Director of Prudential Securities Futures Management Inc. and
serves in various capacities for other affiliated companies. Prior to joining
PSI in July 1988, she was a manager with Price Waterhouse.

Effective April 1999, i->Eleanor L. Thomas and Joseph A. Filicetti were
elected as Directors of both Seaport Futures Management, Inc. and Prudential
Securities Futures Management Inc. In addition, Ms. Thomas was elected as
President of Seaport Futures Management, Inc. replacing Thomas M. Lane, Jr. and
Mr. Filicetti was elected as the Executive Vice President of Seaport Futures
Management, Inc. Additionally, Alan J. Brody was elected as a Director of
Seaport Futures Management, Inc. and Prudential Securities Futures Management
Inc. during May 1999.

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

<PAGE>
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 21, 2000, 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 21, 2000, no director or officer of the General Partner owns
directly or beneficially any of the Units issued by the Registrant.

As of March 21, 2000, the following owner of limited partnership units
beneficially owns more than five percent (5%) of the limited partnership units
issued by the Registrant.

<TABLE>
<CAPTION>
Title Name and Address of Amount and Nature of Percent of
of Class Beneficial Owner Beneficial Ownership Class
- ------------------ --------------------------- ---------------------------- ----------
<S> <C> <C> <C>
units of Eugene Ramos 5,000 units of limited 6%
limited FBO Julia Ramos partnership interest
partnership 7035 Gleneagle Drive
interest Miami Lakes, FL 33014-6509
</TABLE>

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 1999 Annual Report which is filed as an exhibit hereto, which
identify the related parties and discuss the services provided by these parties
and the amounts paid or payable for their services.

7
<PAGE>
PART IV

<TABLE>
<CAPTION>
Page in
Annual Report
<C> <S> <C>
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 1999
Annual Report which is filed as an exhibit hereto

Report of Independent Accountants 2

Financial Statements:

Statements of Financial Condition--December 31, 1999 and 1998 3

Statements of Operations--Three years ended December 31, 1999 4

Statements of Changes in Partners' Capital--Three years ended
December 31, 1999 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)

10.4 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)

10.6 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)
</TABLE>

8
<PAGE>
<TABLE>
<C> <S> <C>
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)

10.9 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 Quarterly Report on Form 10-Q for the period ended
March 31, 1991)

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 10.18 of the Registrant's Quarterly Report on
Form 10-Q for the period ended March 31, 1996)

13.1 Registrant's 1999 Annual Report (with the exception of the
information and data incorporated by reference in Items 5, 7 and 8
of this Annual Report on Form 10-K, no other information or data
appearing in the Registrant's 1999 Annual Report is to be deemed
filed as part of this report) (filed herewith)

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
</TABLE>
9
<PAGE>
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, 2000
-------------------------------------------
Steven Carlino
Vice President and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partner) and on
the dates indicated.

By: Seaport Futures Management, Inc.
A Delaware corporation, General Partner

By: /s/ Eleanor L. Thomas Date: March 30, 2000
---------------------------------------------
Eleanor L. Thomas
President and Director

By: /s/ Joseph A. Filicetti Date: March 30, 2000
---------------------------------------------
Joseph A. Filicetti
Executive Vice President and Director
By: /s/ Barbara J. Brooks Date: March 30, 2000
---------------------------------------------
Barbara J. Brooks
Chief Financial Officer
By: /s/ Steven Carlino Date: March 30, 2000
---------------------------------------------
Steven Carlino
Vice President and Treasurer
By: /s/ Alan J. Brody Date: March 30, 2000
--------------------------------------------
Alan J. Brody
Director
By: Date:
--------------------------------------------
A. Laurence Norton, Jr.
Director
By: /s/ Guy S. Scarpaci Date: March 30, 2000
-------------------------------------------
Guy S. Scarpaci
Director
By: Date:
-------------------------------------------
Tamara B. Wright
Senior Vice President and Director

<PAGE>
LETTER TO LIMITED OWNERS FOR
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.

1
<PAGE>
PricewaterhouseCoopers (LOGO)

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Telephone (212) 596 8000
Facsimile (212) 596 8910

Report of Independent Accountants

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, 1999 and 1998, and the results
of its operations for each of the three years in the period ended December 31,
1999 in conformity with accounting principles generally accepted in the United
States. 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 auditing standards generally accepted in the United States 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/ PricewaterhouseCoopers LLP

January 28, 2000

<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
ASSETS
Cash $ 2,746,277 $ 3,166,467
U.S. Treasury bills, at amortized cost 8,532,471 11,092,586
Net unrealized gain on open futures contracts 287,516 1,129,131
Net unrealized gain on open forward contracts 74,828 --
----------- -----------
Total assets $11,641,092 $15,388,184
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable $ 301,577 $ 408,971
Net unrealized loss on open forward contracts -- 121,175
Management fees payable 38,444 50,656
Accrued expenses 62,651 57,613
Due to affiliates 45,198 12,481
----------- -----------
Total liabilities 447,870 650,896
----------- -----------
Commitments
Partners' capital
Limited partners (85,245 and 99,743 units outstanding) 11,081,169 14,589,844
General partner (862 and 1,008 units outstanding) 112,053 147,444
----------- -----------
Total partners' capital 11,193,222 14,737,288
----------- -----------
Total liabilities and partners' capital $11,641,092 $15,388,184
----------- -----------
----------- -----------

Net asset value per limited and general partnership unit ('Units') $ 129.99 $ 146.27
----------- -----------
----------- -----------
- --------------------------------------------------------------------------------------------------
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,
-----------------------------------------
1999 1998 1997
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
REVENUES
Net realized gain $ 496,859 $1,301,509 $1,602,156
Change in net unrealized gain/loss (645,612) (169,565) 1,234,209
Interest from U.S. Treasury bills 470,148 572,873 676,690
----------- ---------- ----------
321,395 1,704,817 3,513,055
----------- ---------- ----------
EXPENSES
Commissions 1,084,856 1,214,818 1,377,622
Management fees 539,392 608,574 695,451
Incentive fees -- -- 12,998
General and administrative 147,286 140,001 148,399
----------- ---------- ----------
1,771,534 1,963,393 2,234,470
----------- ---------- ----------
Net income (loss) $(1,450,139) $ (258,576) $1,278,585
----------- ---------- ----------
----------- ---------- ----------
ALLOCATION OF NET INCOME (LOSS)
Limited partners $(1,435,625) $ (255,983) $1,265,788
----------- ---------- ----------
----------- ---------- ----------
General partner $ (14,514) $ (2,593) $ 12,797
----------- ---------- ----------
----------- ---------- ----------
NET INCOME (LOSS) PER WEIGHTED AVERAGE LIMITED AND
GENERAL PARTNERSHIP UNIT
Net income (loss) per weighted average limited and
general partnership unit $ (15.31) $ (2.39) $ 10.34
----------- ---------- ----------
----------- ---------- ----------
Weighted average number of limited and general
partnership units outstanding 94,717 108,183 123,618
----------- ---------- ----------
----------- ---------- ----------
- ----------------------------------------------------------------------------------------------------
</TABLE>

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<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 -- 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
Net loss -- (255,983) (2,593) (258,576)
Redemptions (14,280) (1,995,145) (20,176) (2,015,321)
-------- ----------- --------- -----------
Partners' capital--December 31, 1998 100,751 14,589,844 147,444 14,737,288
Net loss -- (1,435,625) (14,514) (1,450,139)
Redemptions (14,644) (2,073,050) (20,877) (2,093,927)
-------- ----------- --------- -----------
Partners' capital--December 31, 1999 86,107 $11,081,169 $ 112,053 $11,193,222
-------- ----------- --------- -----------
-------- ----------- --------- -----------
- -----------------------------------------------------------------------------------------------------
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 to engage in the
speculative trading of commodity futures, forward and options contracts. On May
12, 1989, the Partnership completed its offering having 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 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, 1999, 100% of the Partnership's
assets were allocated for commodity trading purposes. The General Partner
generally maintains not less than 75% of the Partnership's net 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 net 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 manager. The General Partner retains the authority to
override trading instructions that violate the Partnership's trading policies.

Termination of the Partnership

The Partnership will terminate on December 31, 2009 unless terminated sooner
under the provisions of the Amended and Restated Agreement of Limited
Partnership (the 'Partnership Agreement'). These provisions, as set forth in
Article XVII of the Partnership Agreement, include the dissolution of the
Partnership if the Partnership's net asset value declines to less than $10
million as of the end of any business day. Consequently, given the Partnership's
net asset value at December 31, 1999, subsequent poor trading performance and/or
redemptions may cause the Partnership's net asset value to fall below $10
million as early as March 31, 2000 and, therefore, would result in the ultimate
liquidation and dissolution of the Partnership.

B. Summary of Significant Accounting Policies

Basis of accounting

The financial statements of the Partnership are prepared 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 net assets in U.S. Treasury bills, which are often used to fulfill 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 (loss) 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

<PAGE>
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.'

Certain balances from the prior year have been reclassified to conform with
the current financial statement presentation.

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.

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 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 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.

Accounting for Derivative Instruments

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ('SFAS') No. 133, Accounting for Derivative
Instruments and Hedging Activities, which the Partnership adopted effective
October 1, 1999. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities and requires that an entity
recognize all derivatives as assets or liabilities measured at fair value. SFAS
No. 133 supersedes SFAS No. 119, Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments and SFAS No. 105, Disclosure
of Information about Financial Instruments with Off-Balance Sheet Risk and
Financial Instruments with Concentrations of Credit Risk which required the
disclosure of average aggregate fair values and contract/notional values,
respectively, of derivative financial instruments for an entity like the
Partnership which carries its assets at fair value. The General Partner does not
believe the adoption of SFAS No. 133 has a material effect on the carrying value
of assets and liabilities within the financial statements.

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).

6
<PAGE>
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 and other administrative services.

The costs incurred for these services for the years ended December 31, 1999,
1998 and 1997 were:

<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
----------------------------------------
Commissions $1,084,856 $1,214,818 $1,377,622
General and administrative 72,450 65,400 91,077
---------- ---------- ----------
Total $1,157,306 $1,280,218 $1,468,699
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The Partnership's assets are maintained either in trading or cash accounts
with PSI, the Partnership's commodity broker, or for margin purposes, with the
various exchanges on which the Partnership is permitted to trade.

The Partnership, acting through its Trading 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.

E. Income Taxes

The following is a reconciliation of net income (loss) for financial
reporting purposes to net income (loss) for tax reporting purposes for the years
ended December 31, 1999, 1998 and 1997, respectively:

<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
----------------------------------------
Net income (loss) per financial statements $(1,450,139) $(258,576) $1,278,585
Change in unrealized gain/loss on nonregulated
commodity positions and foreign currencies 103,661 (51,990) (532,445)
----------- --------- ----------
Tax basis net income (loss) $(1,346,478) $(310,566) $ 746,140
----------- --------- ----------
----------- --------- ----------
</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

Futures, forward and options contracts involve varying degrees of off-balance
sheet risk; and changes in the level or 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 futures and forward 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

7
<PAGE>
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 and its 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. Additionally, the
Advisory Agreement among the Partnership, the General Partner and the Trading
Manager may be terminated if the net asset value allocated to the Trading
Manager as of the last day of the then current year declines by 40% from the
beginning of any year and will terminate automatically if the net asset value
declines by 33 1/3% since the initial allocation of assets to the Trading
Manager (September 1, 1990). Furthermore, the Agreement of Limited Partnership
provides that the Partnership will liquidate its positions, and eventually
dissolve, if the Partnership experiences a decline in the net asset value of 50%
since the commencement of trading activities. In each case, the decline in the
net asset value is after giving effect for distributions and redemptions. The
General Partner may impose additional restrictions (through modifications of
such trading limitations and policies) upon the trading activities of the
Trading 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, 1999 such segregated assets totalled $6,836,293. 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 $4,729,971 at December 31,
1999. There are no segregation requirements for assets related to forward
trading.

As of December 31, 1999, the Partnership's open forward contracts mature
within three months and open futures contracts mature within one year.

Gross contract amounts represent the Partnership's potential involvement in a
particular class of financial instrument (if it were to take or make delivery on
an underlying futures, forward or options contract). Gross contract amounts
significantly exceed 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.

<PAGE>
At December 31, 1998, gross contract amounts of open futures and forward
contracts were:

1998
-----------
Currency Forwards:
Commitments to purchase $ 546,406
Commitments to sell 1,960,358
Currency Futures:
Commitments to purchase 5,617,987
Commitments to sell 4,238,887
Interest Rate Futures:
Commitments to purchase 37,950,345
Commitments to sell 83,475,164
Stock Index Futures:
Commitments to purchase 1,243,504
Commodity Futures:
Commitments to purchase 1,139,330
Commitments to sell 3,588,609

At December 31, 1999 and 1998, the fair value of open futures and forward
contracts was:

<TABLE>
<CAPTION>
1999 1998
----------------------- -------------------------
<S> <C> <C> <C> <C>
Assets Liabilities Assets Liabilities
-------- ----------- ---------- -----------
Futures Contracts:
Domestic exchanges
Interest rates $101,013 $ -- $ 9,844 $ 106,650
Currencies 121,537 38,060 178,225 41,112
Commodities 104,468 59,741 114,222 42,294
Foreign exchanges
Interest rates 49,056 24,607 1,068,363 43,340
Stock indices 22,927 -- 12,270 45,620
Commodities 20,908 9,985 29,238 4,015
Forward Contracts:
Currencies 116,345 41,517 6,297 127,472
-------- ----------- ---------- -----------
$536,254 $ 173,910 $1,418,459 $ 410,503
-------- ----------- ---------- -----------
-------- ----------- ---------- -----------
</TABLE>

The following table presents the average fair value of futures and forward
contracts during the year ended December 31, 1998.

<TABLE>
<CAPTION>
1998
--------------------------
<S> <C> <C>
Assets Liabilities
---------- -----------
Futures Contracts:
Domestic exchanges
Interest rates $ 134,577 $ 26,687
Currencies 13,710 4,526
Commodities 222,938 59,529
Foreign exchanges
Interest rates 428,420 41,763
Stock indices 31,587 19,168
Commodities 22,255 9,947
Forward Contracts:
Currencies 563,410 481,174
---------- -----------
$1,416,897 $ 642,794
---------- -----------
---------- -----------
</TABLE>
9
<PAGE>
The following table presents the Partnership's trading revenues for the years
ended December 31, 1998 and 1997.

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Future Contracts:
Domestic exchanges
Interest rates $ 145,038 $ 210,426
Currencies 76,951 24,502
Commodities (457,560) (555,667)
Foreign exchanges
Interest rates 2,018,258 897,749
Stock indices (424,088) 230,698
Commodities 93,497 (109,842)
Forward Contracts:
Currencies (320,152) 2,131,390
Foreign Currencies: -- 7,109
---------- ----------
$1,131,944 $2,836,365
---------- ----------
---------- ----------
</TABLE>
10
<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
Chief Financial Officer
- --------------------------------------------------------------------------------

11
<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.

The Partnership Agreement provides that a 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. Redemptions by limited partners recorded for the years ended
December 31, 1999, 1998 and 1997 were $2,073,050, $1,995,145 and $2,141,221,
respectively. Redemptions by the General Partner for the years ended December
31, 1999, 1998 and 1997 were $20,877, $20,176 and $21,663, respectively.
Redemptions by limited partners and the General Partner from the commencement of
operations, May 12, 1989, through December 31, 1999 totalled $144,401,063 and
$1,639,801, respectively. Future redemptions will impact the amount of funds
available for investment in commodity contracts in subsequent periods.

As of March 28, 2000, the Partnership's estimated net asset value was
approximately $10,432,000. Additionally, the General Partner has received
first quarter 2000 redemption requests from limited partners, which when
recorded on March 31, 2000, at $121.15 per Unit (the estimated net asset value
per unit as of March 28, 2000), would cause the Partnership's net asset value
to fall below $10 million and, in accordance with the provisions of the
Partnership Agreement, would require the General Partner to dissolve the
Partnership and begin its orderly liquidation. However, the net asset value as
of March 31, 2000 is subject to the Partnership's trading results of March 29
through March 31, 2000.

At December 31, 1999, 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 74% of the net
asset value prior to redemptions payable) and cash, which are used as margin for
the Partnership's trading in commodities. Inasmuch as the sole business of the
Partnership is to trade in commodities, the Partnership continues to own such
liquid assets to be used as margin.

The percentage that U.S. Treasury bills bears to the net asset value varies
each day, and from month to month, as the market value of commodity interests
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 Partnership's exposure to market risk is
influenced by a number of factors including the volatility of interest rates and
foreign currency exchange rates, the liquidity of the markets in which the
contracts are traded and the relationship among the contracts held. The inherent
uncertainty of the Partnership's speculative trading as well as the development
of drastic market occurrences could result in monthly losses considerably beyond
the Partnership's experience to date and could ultimately lead to a loss of all
or substantially all of investors' capital. The General Partner attempts to
minimize these risks by requiring the Partnership and its Trading Manager to
abide by various trading limitations and policies which include limiting margin
amounts, trading only in liquid markets and utilizing stop loss provisions. See
Note F to the financial statements for a further discussion on the credit and
market risks associated with the Partnership's futures and forward contracts.

<PAGE>
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, 1999 was $129.99, a decrease
of 11.13% from the December 31, 1998 net asset value per Unit of $146.27, which
was an decrease of 1.09% from the December 31, 1997 net asset value per Unit of
$147.88. The MAR (Managed Account Reports) Fund/Pool Index, which tracked the
performance of 317 and 281 futures funds in 1999 and 1998, returned gains of
1.48% and 6.81%, respectively, outperforming the Partnership. Past performance
is not necessarily indicative of future results.

The Partnership's unfavorable performance in 1999 was attributed to losses
from positions in the metal, financial, soft and index sectors. The currency and
energy sectors incurred gains.

The Partnership incurred losses in the metal sector primarily due to gold and
silver positions. In the first quarter as the International Monetary Fund
threatened to sell gold, prices declined causing losses for the Partnership's
long positions. Further losses were incurred in September when the European
Central Bank decided to limit sales and lending of gold, thus triggering strong
market movement. Gold prices rose to 2-year highs over a 10-day period, causing
short positions to incur losses. Silver moved in conjunction with gold as prices
rallied towards the end of the third quarter and into the fourth quarter also
generating losses.

In the financial sector, the bear market trend in Japanese government bonds
reversed when the Ministry of Finance announced that the Bank of Japan would
continue supporting the bond market by purchasing sizable quantities of Japanese
government bonds (JGBs). As a result, the Partnership sustained sizable losses
from long JGB positions in the first quarter. JGBs added profits during the
second quarter when long-term Japanese interest rates rose on concerns that more
government bonds may be issued to finance the bailout of weaker Japanese banks.
Volatile market action during the third and fourth quarters caused the
Partnership's JGB positions to end the year at an overall net loss. In the third
quarter long-term interest rates rose early on from concerns that more
government bonds may be issued to finance the bailout of weaker Japanese banks.
In the fourth quarter, JGBs benefited from a strong yen through November, but
declined in price when a major rating agency was rumored to be considering a
downgrade.

Currency sector positions in the euro, Japanese yen and Swiss franc provided
substantial profits for the Partnership. In the first quarter, the Partnership
gained from the strength of the U.S. dollar as it benefited from the
considerable slowdown in European growth and market sentiment that the European
Central Bank would have to smooth the transition to the euro by cutting rates.
As a result, gains were derived from long U.S. dollar crossrate positions
against the Deutsche mark and Swiss franc. The euro's weakness continued into
the second quarter due to deteriorating confidence in that currency and Italy's
possible retraction from the European Economic Union. Consequently, the European
Central Bank was rumored to be considering an interest rate hike in June. With
the exception of the third quarter, short euro positions provided profits
throughout the year. Strong profits were earned from Swiss franc positions in
the first half of the year. Mid-year, the Swiss franc fell in value versus the
U.S. dollar when the U.S. Federal Reserve increased interest rates by 0.25%. In
Japan, the economy showed signs of a recovery during the second quarter, but
Japanese officials feared a premature strengthening of the yen might dampen
growth. The Bank of Japan intervened at various points throughout the year by
selling yen. During November, the Japanese yen surged to a 4-year high against
the U.S. dollar. Consequently, from the second through the fourth quarters, long
yen positions benefited the Partnership.

Long positions in the energy sector, specifically crude oil and derivative
products, provided gains as prices rose throughout 1999. In the first quarter,
energy markets surged as OPEC announced substantial cuts in crude oil exports.
Crude oil prices continued to rally into the second quarter as extremely hot
U.S. weather drove increased utility demand during June and following statements
by Saudi Arabian and Mexican oil ministers reporting a high degree of compliance
with OPEC production cuts. These production cuts continued to prove beneficial
for oil markets throughout the third and fourth quarters.

Interest income is earned on the Partnership's investment in U.S. Treasury
bills and, therefore, varies monthly based on interest rates as well as the
effect of trading performance and redemptions on the level of funds available
for investment in U.S. Treasury bills. Interest income from U.S. Treasury bills
declined approximately $103,000 and $104,000 for the years ended December 31,
1999 and 1998 compared to the prior years. These decreases are due to
redemptions and poor trading performance as well as declining interest rates
during 1999 and 1998.

<PAGE>
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 approximately $130,000 and $163,000 for the years ended
December 31, 1999 and 1998 compared to the prior years primarily due to the
effect of redemptions and poor trading performance 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 $69,000 and $87,000
during the years ended December 31, 1999 and 1998 compared to 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 among the Partnership, the
General Partner and the Trading Manager. Trading performance resulted in
incentive fees of approximately $13,000 for the year ended December 31, 1997. No
incentive fees were earned during 1999 and 1998.

General and administrative expenses increased by approximately $7,000 for the
year ended December 31, 1999 compared to 1998 but decreased approximately $8,000
for the year ended December 31, 1998 compared to 1997. 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.

Accounting for Derivative Instruments

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ('SFAS') No. 133, Accounting for Derivative
Instruments and Hedging Activities, which the Partnership adopted effective
October 1, 1999. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities and requires that an entity
recognize all derivatives as assets or liabilities measured at fair value. SFAS
No. 133 supersedes SFAS No. 119, Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments and SFAS No. 105, Disclosure
of Information about Financial Instruments with Off-Balance Sheet Risk and
Financial Instruments with Concentrations of Credit Risk which required the
disclosure of average aggregate fair values and contract/notional values,
respectively, of derivative financial instruments for an entity like the
Partnership which carries its assets at fair value. The adoption of SFAS No. 133
has not had a material effect on the carrying value of assets and liabilities
within the financial statements.

Year 2000 Risk

The arrival of year 2000 was much anticipated and raised serious concerns
about whether or not computer systems around the world would continue to
function properly and the degree of 'Year 2000 Problems' that would have to be
resolved.

The Partnership engages third parties to perform primarily all of the
services it needs and also relies on other third parties such as governments,
exchanges, clearinghouses, vendors and banks. The Partnership has not
experienced any material adverse impact on operations related to Year 2000
Problems. While the Partnership believes that it has mitigated its Year 2000
risk, the Partnership cannot guarantee that an as yet unknown Year 2000 failure
will not have a material adverse effect on the Partnership's operations.

Inflation

Inflation has had no material impact on operations or on the financial
condition of the Partnership from inception through December 31, 1999.

14
<PAGE>
OTHER INFORMATION

The actual round-turn equivalent of brokerage commissions paid per contract
for the year ended December 31, 1999 was $125.

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

15
<PAGE>
1999
- --------------------------------------------------------------------------------
Prudential-Bache Annual
Capital Return Futures Report
Fund L.P.

<PAGE>
Peck Slip Station BULK RATE
P.O. Box 2016 U.S. POSTAGE
New York, NY 1027 PAID
Automatic Mail

9N17172-0

<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>

<CIK> 0000846176
<NAME> Prudential-Bache Capital Return Futures Fund
<MULTIPLIER> 1

<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Dec-31-1999

<PERIOD-TYPE> 12-Mos

<CASH> 2,746,277

<SECURITIES> 8,894,815

<RECEIVABLES> 0

<ALLOWANCES> 0

<INVENTORY> 0

<CURRENT-ASSETS> 11,641,092

<PP&E> 0

<DEPRECIATION> 0

<TOTAL-ASSETS> 11,641,092

<CURRENT-LIABILITIES> 447,870

<BONDS> 0

<COMMON> 0

<OTHER-SE> 11,193,222

<TOTAL-LIABILITY-AND-EQUITY> 11,641,092

<SALES> 0

<TOTAL-REVENUES> 321,395

<CGS> 0

<TOTAL-COSTS> 0

<OTHER-EXPENSES> 1,771,534

<LOSS-PROVISION> 0

<INTEREST-EXPENSE> 0

<INCOME-PRETAX> 0

<INCOME-TAX> 0

<INCOME-CONTINUING> 0

<DISCONTINUED> 0

<EXTRAORDINARY> 0

<CHANGES> 0

<NET-INCOME> (1,450,139)

<EPS-BASIC> (15.31)

<EPS-DILUTED> 0

</TABLE>