<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-18418
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3533120
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One New York Plaza, 13th Floor New York, New York 10292
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 778-7866
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes CK No __
<PAGE>
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
ASSETS
Equity in commodity trading accounts:
Cash $ 6,563,447 $16,630,972
U.S. Treasury bills, at amortized cost 22,289,551 15,519,076
Net unrealized gain on open commodity positions 936,424 872,394
------------- ------------
Total assets $29,789,422 $33,022,442
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable $ 533,475 $ 1,143,534
Management fees payable 87,519 97,931
Accrued expenses 55,556 45,374
Due to affiliates 52,491 63,134
Incentive fees payable 14,719 --
Options, at market -- 3,000
------------- ------------
Total liabilities 743,760 1,352,973
------------- ------------
Commitments
Partners' capital
Limited partners (145,591 and 151,718 units outstanding) 28,755,130 29,692,794
General partner (1,471 and 10,100 units outstanding) 290,532 1,976,675
------------- ------------
Total partners' capital 29,045,662 31,669,469
------------- ------------
Total liabilities and partners' capital $29,789,422 $33,022,442
------------- ------------
------------- ------------
Net asset value per limited and general partnership unit
(``Units'')
$ 197.51 $ 195.71
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
2
<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
-------------------------- -------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
REVENUES
Net realized gain on commodity
transactions $1,642,326 $11,289,584 $1,369,240 $8,273,693
Change in net unrealized gain on open
commodity positions 55,792 (1,550,138) (301,569) (5,592,033)
Interest from U.S. Treasury bills 543,940 712,937 271,454 393,827
---------- ----------- ---------- ----------
2,242,058 10,452,383 1,339,125 3,075,487
---------- ----------- ---------- ----------
EXPENSES
Commissions 1,308,385 1,403,068 622,160 752,814
Management fees 549,180 614,833 261,342 326,787
Incentive fees 47,687 365,789 14,719 178,977
General and administrative 80,030 78,176 20,018 36,381
---------- ----------- ---------- ----------
1,985,282 2,461,866 918,239 1,294,959
---------- ----------- ---------- ----------
Net income $ 256,776 $ 7,990,517 $ 420,886 $1,780,528
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
ALLOCATION OF NET INCOME (LOSS)
Limited partners $ 262,777 $ 7,574,304 $ 416,676 $1,682,792
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
General partner $ (6,001) $ 416,213 $ 4,210 $ 97,736
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
NET INCOME PER WEIGHTED AVERAGE LIMITED
AND GENERAL PARTNERSHIP UNIT
Net income per weighted average limited
and general partnership unit $ 1.65 $ 41.95 $ 2.81 $ 9.68
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
Weighted average number of limited and
general partnership units outstanding 155,791 190,470 149,763 183,999
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
- -----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
UNITS PARTNERS PARTNER TOTAL
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Partners' capital--December 31, 1995 161,818 $29,692,794 $ 1,976,675 $31,669,469
Net income (loss) -- 262,777 (6,001) 256,776
Redemptions (14,756) (1,200,441) (1,680,142) (2,880,583)
-------- ----------- ----------- -----------
Partners' capital--June 30, 1996 147,062 $28,755,130 $ 290,532 $29,045,662
-------- ----------- ----------- -----------
-------- ----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the financial
position of Prudential-Bache Capital Return Futures Fund 2, L.P. (the
``Partnership'') as of June 30, 1996 and the results of its operations for the
six and three months ended June 30, 1996 and 1995. However, the operating
results for the interim periods may not be indicative of the results expected
for a full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1995 (the ``Annual
Report'').
Certain balances from the prior period have been reclassified to conform with
the current financial statement presentation.
B. Related Parties
Prudential Securities Futures Management Inc. (the ``General Partner'') and
its affiliates perform services for the Partnership which include, but are not
limited to: brokerage services, accounting and financial management, registrar,
transfer and assignment functions, investor communications, printing and other
administrative services.
The costs incurred for these services for the six months ended June 30, 1996
and 1995 were:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
- ---------------------------------------------------------------------------
Commissions $1,308,385 $1,403,068
General and administrative 34,302 43,780
---------- ----------
$1,342,687 $1,446,848
---------- ----------
---------- ----------
</TABLE>
The costs incurred for these services for the three months ended June 30,
1996 and 1995 were:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
- ---------------------------------------------------------------------------
Commissions $ 622,160 $ 752,814
General and administrative 5,902 20,085
---------- ----------
$ 628,062 $ 772,899
---------- ----------
---------- ----------
</TABLE>
The General Partner is a wholly-owned subsidiary of Prudential Securities
Incorporated (``PSI''). The Partnership maintains its trading and cash accounts
at PSI, the Partnership's commodity broker. Approximately 75% of the net asset
value is invested in interest-bearing U.S. Government obligations (primarily
U.S. Treasury bills), a significant portion of which is utilized for margin
purposes for the Partnership's commodity trading activities. As described in the
Annual Report, all commissions for brokerage services are paid to PSI.
When the Partnership engages in forward foreign currency transactions, it
trades with PSI who simultaneously engages in back-to-back transactions with an
affiliate who, pursuant to the Partnership's prospectus, is obligated to charge
a competitive price.
4
<PAGE>
<PAGE>
C. Credit and Market Risk
Since the Partnership's business is to trade futures, forward and options
contracts, its capital is at risk due to changes in the value of these contracts
(market risk) or the inability of counterparties to perform under the terms of
the contracts (credit risk).
Futures, forward and options contracts involve varying degrees of off-balance
sheet risk; and changes in the level of volatility of interest rates, foreign
currency exchange rates or the market values of the contracts (or commodities
underlying the contracts) frequently result in changes in the Partnership's
unrealized gain (loss) on open commodity positions reflected on the statements
of financial condition. The Partnership's exposure to market risk is influenced
by a number of factors including the relationships among the contracts held by
the Partnership as well as the liquidity of the markets in which the contracts
are traded.
Futures and options contracts are traded on organized exchanges and are thus
distinguished from forward contracts which are entered into privately by the
parties. The credit risks associated with futures and options contracts are
typically perceived to be less than those associated with forward contracts,
because exchanges typically provide clearinghouse arrangements in which the
collective credit (subject to certain limitations) of the members of the
exchanges is pledged to support the financial integrity of the exchange. On the
other hand, the Partnership must rely solely on the credit of its broker (PSI)
with respect to forward transactions. The Partnership presents unrealized gains
and losses on open forward positions as a net amount in the statements of
financial condition because it has a master netting agreement with PSI.
The General Partner attempts to minimize both credit and market risks by
requiring the Partnership's trading managers to abide by various trading
limitations and policies. The General Partner monitors compliance with these
trading limitations and policies which include, but are not limited to,
executing and clearing all trades with creditworthy counterparties (currently
PSI is the sole counterparty or broker); limiting the amount of margin or
premium required for any one commodity or all commodities combined; and
generally limiting transactions to contracts which are traded in sufficient
volume to permit the taking and liquidating of positions. The General Partner
may impose additional restrictions (through modifications of such trading
limitations and policies) upon the trading activities of the trading managers as
it, in good faith, deems to be in the best interest of the Partnership.
PSI, when acting as the Partnership's futures commission merchant in
accepting orders for the purchase or sale of domestic futures and options
contracts, is required by Commodity Futures Trading Commission (``CFTC'')
regulations to separately account for and segregate as belonging to the
Partnership all assets of the Partnership relating to domestic futures and
options trading and is not to commingle such assets with other assets of PSI. At
June 30, 1996 and December 31, 1995, such segregated assets totalled $22,350,062
and $26,171,977, respectively. Part 30.7 of the CFTC regulations also requires
PSI to secure assets of the Partnership related to foreign futures and options
trading which totalled $7,021,602 and $7,008,411 at June 30, 1996 and December
31, 1995, respectively. There are no segregation requirements for assets related
to forward trading.
As of June 30, 1996 and December 31, 1995, the Partnership's open forward and
options contracts mature within three months, but open futures contracts mature
within nine months and one year, respectively.
5
<PAGE>
At June 30, 1996 and December 31, 1995, gross contract amounts of open
futures, forward and options contracts are:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Financial Futures Contracts:
Commitments to purchase $104,363,236 $359,544,988
Commitments to sell $ 24,869,599 $25,500,889
Currency Forward Contracts:
Commitments to purchase $ 22,815,528 $ 372,619
Commitments to sell $ 37,905,133 $17,163,772
Currency Futures and Options
Contracts:
Commitments to purchase $ 6,003,800 $14,350,975
Commitments to sell $ 22,421,847 $28,217,838
Other Futures Contracts:
Commitments to purchase $ 280,356 --
Commitments to sell $ 16,921,955 $ 3,593,525
</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, forward or options contract). The gross
contract amounts significantly exceed the future cash requirements as the
Partnership intends to close out open positions prior to settlement and thus is
generally subject only to the risk of loss arising from the change in the value
of the contracts. As such, the Partnership considers the ``fair value'' of its
futures, forward and options contracts to be the net unrealized gain or loss on
the contracts (plus premiums on options). Thus, the amount at risk associated
with counterparty nonperformance of all contracts is the net unrealized gain
included in the statements of financial condition. The market risk associated
with the Partnership's commitments to purchase commodities is limited to the
gross contract amounts involved, while the market risk associated with its
commitments to sell is unlimited since the Partnership's potential involvement
is to make delivery of an underlying commodity at the contract price; therefore,
it must repurchase the contract at prevailing market prices.
At June 30, 1996 and December 31, 1995, the fair values of futures, forward
and options contracts were:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
-------------------------- --------------------------
Fair Value Fair Value
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ -- $ 126,000 $ 461,831 $ --
Currencies 51,841 132,955 133,670 338,563
Other 495,735 960 795 100
Foreign exchanges
Financial 253,708 24,497 785,691 9,984
Other 1,794 -- -- --
Forward Contracts:
Currencies 457,317 39,559 211,673 372,619
Options Contracts:
Domestic exchanges
Currencies -- -- -- 3,000
---------- ----------- ---------- -----------
$1,260,395 $ 323,971 $1,593,660 $ 724,266
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
6
<PAGE>
The following table presents the average fair values of futures, forward and
options contracts during the six months ended June 30, 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1996 June 30, 1995
-------------------------- --------------------------
Average Fair Value Average Fair Value
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 467,057 $ 20,927 $ 554,431 $ 53,981
Currencies 343,855 211,024 115,450 82,616
Other 85,594 47,975 174,773 61,495
Foreign exchanges
Financial 502,418 57,497 915,869 27,262
Other 319 6,087 15,193 --
Forward Contracts:
Currencies 794,756 337,127 2,603,762 767,438
Options Contracts:
Domestic exchanges
Currencies 10,752 4,582 105,775 96,365
---------- ----------- ---------- -----------
$2,204,751 $ 685,219 $4,485,253 $ 1,089,157
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
The following table presents the average fair values of futures, forward
and options contracts during the three months ended June 30, 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 1996 June 30, 1995
-------------------------- --------------------------
Average Fair Value Average Fair Value
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 472,228 $ 36,622 $ 393,827 $ 15,788
Currencies 296,054 136,585 143,396 136,843
Other 145,461 16,119 37,248 103,196
Foreign exchanges
Financial 199,238 55,429 799,212 29,123
Other 558 10,653 26,587 --
Forward Contracts:
Currencies 877,606 320,994 4,147,697 428,914
Options Contracts:
Domestic exchanges
Currencies 11,472 4,534 170,954 72,297
---------- ----------- ---------- -----------
$2,002,617 $ 580,936 $5,718,921 $ 786,161
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
7
<PAGE>
<PAGE>
The following table presents the net realized gains (losses) and the
change in net unrealized
gains/losses of futures, forward and options contracts during the six months
ended June 30, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Six months ended June 30, 1996 Six months ended June 30, 1995
----------------------------------------------- -----------------------------------------------
Change in Change in
Net Realized Net Unrealized Net Realized Net Unrealized
Gains (Losses) Gains/Losses Total Gains (Losses) Gains/Losses Total
-------------- -------------- ----------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 1,358,838 $ (587,831) $ 771,007 $ 2,489,210 $ (500,987) $ 1,988,223
Currencies 679,828 123,779 803,607 962,468 189,558 1,152,026
Other (137,394) 494,080 356,686 100,850 (481,885) (381,035)
Foreign exchanges
Financial (1,100,681) (546,496) (1,647,177) 4,014,219 (896,515) 3,117,704
Other (24,496) 1,794 (22,702) 122,154 -- 122,154
Forward Contracts:
Currencies 792,064 578,704 1,370,768 4,671,630 199,279 4,870,909
Options Contracts:
Domestic exchanges
Currencies 74,167 (8,238) 65,929 (1,070,947) (59,588) (1,130,535)
-------------- -------------- ----------- -------------- -------------- -----------
$ 1,642,326 $ 55,792 $ 1,698,118 $ 11,289,584 $ (1,550,138) $ 9,739,446
-------------- -------------- ----------- -------------- -------------- -----------
-------------- -------------- ----------- -------------- -------------- -----------
</TABLE>
The following table presents the net realized gains (losses) and the
change in net unrealized gains/losses of futures, forward and options contracts
during the three months ended June 30, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Three months ended June 30, 1996 Three months ended June 30, 1995
----------------------------------------------- ----------------------------------------------
Change in Change in
Net Realized Net Unrealized Net Realized Net Unrealized
Gains (Losses) Gains/Losses Total Gains (Losses) Gains/Losses Total
-------------- -------------- ----------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 955,388 $ (752,000) $ 203,388 $1,639,516 $ (78,124) $1,561,392
Currencies 520,148 (208,919) 311,229 48,492 133,431 181,923
Other 234,676 506,865 741,541 (391,676) 70,940 (320,736)
Foreign exchanges
Financial (1,006,083) (61,038) (1,067,121) 2,459,329 (611,414) 1,847,915
Other (24,496) 1,794 (22,702) 70,552 (58,456) 12,096
Forward Contracts:
Currencies 686,357 243,467 929,824 4,743,082 (5,154,856) (411,774)
Options Contracts:
Domestic exchanges
Currencies 3,250 (31,738) (28,488) (295,602) 106,446 (189,156)
-------------- -------------- ----------- -------------- -------------- ----------
$ 1,369,240 $ (301,569) $ 1,067,671 $8,273,693 $ (5,592,033) $2,681,660
-------------- -------------- ----------- -------------- -------------- ----------
-------------- -------------- ----------- -------------- -------------- ----------
</TABLE>
8
<PAGE>
PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P.
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership commenced operations on October 6, 1989 with gross proceeds
of $101,010,000. After accounting for organizational and offering costs, the
Partnership's net proceeds were $99,010,000. At the inception of the
Partnership, sixty percent of the net proceeds was allocated to trading activity
and forty percent was placed in reserve and invested in investment grade
interest-bearing obligations (``Reserve Assets''). On January 3, 1995, the
Reserve Assets matured and the resulting proceeds were allocated to commodities
trading.
As of June 30, 1996, 100% of the Partnership's assets were allocated to
commodities trading. A significant portion of the net asset value was held in
U.S. Treasury bills (which represented approximately 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 bears to the net asset value varies
each day, and from month to month, as the market value of commodity interests
change. The balance of the net asset value is held in cash. All interest earned
on the Partnership's interest-bearing funds is paid to the Partnership.
The commodities contracts are subject to periods of illiquidity because of
market conditions, regulatory considerations and other reasons. For example,
commodity exchanges limit fluctuations in commodity futures contract prices
during a single day by regulations referred to as ``daily limits.'' During a
single day no trades may be executed at prices beyond the daily limit. Once the
price of a futures contract for a particular commodity has increased or
decreased by an amount equal to the daily limit, positions in the commodity can
neither be taken nor liquidated unless traders are willing to effect trades at
or within the limit. Commodity futures prices have occasionally moved the daily
limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating its commodity
futures positions.
Since the Partnership's business is to trade futures, forward and options
contracts, its capital is at risk due to changes in the value of these contracts
(market risk) or the inability of counterparties to perform under the terms of
the contracts (credit risk). The General Partner attempts to minimize these
risks by requiring the Partnership's trading managers to abide by various
trading limitations and policies. See Note C to the financial statements for a
further discussion on the credit and market risks associated with the
Partnership's futures, forward and options contracts.
Redemptions by limited partners recorded for the six and three months ended
June 30, 1996 were $1,200,441 and $528,142, respectively. Redemptions by the
General Partner recorded for the six and three months ended June 30, 1996 were
$1,680,142 and $5,333, respectively. Redemptions by limited partners and the
General Partner from commencement of operations, October 6, 1989, through June
30, 1996 totalled $112,281,034 and $1,680,142, 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 June 30, 1996 was $197.51, an increase of
.92% from the December 31, 1995 net asset value per Unit of $195.71.
The Partnership's performance was positive in the month of April. Profits
were earned in the currencies, stock indices, grains, metals and energies
sectors. Losses were incurred in the financials and softs sectors. Relatively
high U.S. bond yields in April attracted investors to the U.S. dollar,
strengthening the dollar against the German mark and Swiss franc. Positions in
the mark and franc resulted in gains while positions in the Japanese yen
resulted in losses. Positions in the Nikkei were profitable as the stock indices
sector received support from institutional buyers lured into the equities market
by deregulation. A run-up in commodity prices occurred in April which generated
profits in corn positions and profits were taken by
9
<PAGE>
<PAGE>
expectations of a poor wheat crop. Profits were generated in gold and silver
although metals markets in general remained trendless. Profits were reaped in
light crude oil as prices soared and refiners rushed to meet the summertime
demand for gasoline. Except for the U.S. sector, positions in interest rates
were unprofitable as global markets responded to the threat of U.S. inflation.
The Partnership's performance was negative in the month of May. Profits
earned in the currencies, grains and meats sectors were offset by losses in the
stock indices, financials, metals, energies and softs sectors. Among the factors
affecting foreign exchange markets in May were the continued strength of the
U.S. dollar against most major currencies and a comparatively vigorous U.S.
economy. Gains were made in Swiss Franc and Japanese yen positions. In the
grains sector, export demand was strong and worries about the weather conditions
for spring planting replaced earlier concerns about devastated winter crops.
Profits were reaped in corn and wheat positions. In the financials sector, bond
markets remained volatile as investors struggled to interpret conflicting U.S.
economic reports out of Washington. Losses were taken in French, British and
Australian bond positions. The energy markets felt political pressure to keep
oil prices down and Iraq reached an agreement with the U.N. on the sale of crude
oil to raise money for humanitarian purposes, which compounded the effect on
prices. Positions in crude and heating oil were unprofitable. In the metals
sector, profits in gold positions were offset by losses in silver and nickel
positions.
The Partnership's performance was positive in the month of June. Profits were
earned in the metals, currencies and energies sectors. Losses were incurred in
the financials, stock indices and softs sectors. Moderate gains were achieved as
metal and currency profits offset losses in the highly volatile stock index and
global interest rate markets. Positions in gold and silver were profitable as
world supplies improved, presumably the result of selling by central banks. Gold
hit a seven-month low early in June, breaking a trading range of $390 to $400 an
ounce that had lasted several months. In the currency markets, the U.S. dollar
reached a 28-month high against the Japanese yen early in June, ending down
somewhat at month's end, as investors turned to higher yielding European
currencies such as the British pound. Positions in the Japanese yen and British
pound were profitable. In the bond markets, gains in the Japanese government
bond, Italian bond and British short sterling failed to offset losses in other
sectors. Losses were sustained in global equity indices.
Interest income from U.S. Treasury bills for the six and three months ended
June 30, 1996 decreased by approximately $169,000 and $122,000 as compared to
the same periods in 1995 due to the effect of redemptions on the funds available
for investment in U.S. Treasury bills as well as a decrease in interest rates in
1996.
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 $95,000 and $131,000 for the six and
three months ended June 30, 1996 as compared to the same periods in 1995
primarily due to the effect of redemptions on the monthly net asset values.
All trading decisions are currently being made by John W. Henry & Co., Inc.,
Welton Investment System Corp. and Analytic/TSA Investors Inc. (formerly called
TSA Capital Management) (the ``Trading Managers''). Management fees are
calculated on the net asset value allocated to each Trading Manager as of the
end of each month and, therefore, are affected by trading performance and
redemptions. Management fees decreased by approximately $66,000 and $65,000 for
the six and three months ended June 30, 1996 as compared to the same periods in
1995 primarily due to the effect of redemptions on the monthly net asset values.
Incentive fees are based on the New High Net Trading Profits generated by
each Trading Manager, as defined in the Advisory Agreements between the
Partnership, the General Partner and each Trading Manager. Trading performance
resulted in incentive fees of approximately $48,000 and $15,000 for the six and
three months ended June 30, 1996 and approximately $366,000 and $179,000 for the
six and three months ended June 30, 1995, respectively.
General and administrative expenses increased by approximately $2,000 for the
six months ended June 30, 1996 but decreased by approximately $16,000 for the
three months ended June 30, 1996 as compared to the same periods in 1995. These
expenses include reimbursement of costs incurred by the General Partner on
behalf of the Partnership, in addition to accounting, audit, tax and legal fees
as well as printing and postage costs related to reports sent to limited
partners. These variances were primarily due to a reduction in overall costs
associated with administrating the Partnership.
10
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--There are no material legal proceedings pending by or
against the Registrant or the General Partner.
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
4.1 Agreement of Limited Partnership of the Registrant, dated as
of June 8, 1989 as amended and restated as of July 21, 1989
(incorporated by reference to Exhibits 3.1 and 4.1 to the
Registrant's Annual Report on Form 10-K for the period ended
December 31, 1989)
4.2 Subscription Agreement (incorporated by reference to
Exhibit 4.2 to the Registrant's Registration Statement
on Form S-1, File No. 33-29039)
4.3 Request for Redemption (incorporated by
reference to Exhibit 4.3 to the Registrant's
Registration Statement on Form S-1, File No.
33-29039)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K--
Registrant's Current Report on Form 8-K dated May 14, 1996, as filed
with the Securities and Exchange Commission on May 16, 1996, relating
to Item 4 regarding the change in the Registrant's certifying
accountant from Deloitte & Touche LLP to Price Waterhouse LLP.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Prudential-Bache Capital Return Futures Fund 2, L.P.
By: Prudential Securities Futures Management
Inc.A Delaware corporation, General Partner
By: /s/ Steven Carlino Date: August 14, 1996
----------------------------------------
Steven Carlino
Vice President
Chief Accounting Officer for the
Registrant
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for P-B Capital Return Futures Fund 2, L.P.
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000851786
<NAME> P-B Capital Return Futures Fund 2, L.P.
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Jun-30-1996
<PERIOD-TYPE> 6-Mos
<CASH> 6,563,447
<SECURITIES> 23,225,975
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,789,422
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,789,422
<CURRENT-LIABILITIES> 743,760
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,045,662
<TOTAL-LIABILITY-AND-EQUITY> 29,789,422
<SALES> 0
<TOTAL-REVENUES> 2,242,058
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,985,282
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 256,776
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 0
</TABLE>
