<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, 2002

                                       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 0-13518

                    PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

Texas                                           75-1933081
--------------------------------------------------------------------------------
(State or other jurisdiction of                 (I.R.S. Employer
incorporation or organization)                  Identification No.)

One Seaport Plaza, New York, N.Y.               10292-0128
--------------------------------------------------------------------------------
(Address of principal executive offices)        (Zip Code)

Registrant's telephone number, including area code (212) 214-3500

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]

   Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes _  No CK

                      DOCUMENTS INCORPORATED BY REFERENCE

   Registrant's Annual Report to Limited Partners for the year ended December
31, 2002 is incorporated by reference into Parts II and IV of this Annual Report
on Form 10-K.

   Amended and Restated Certificate and Agreement of Limited Partnership,
included as part of the Registration Statement on Form S-11 (File No. 2-88785)
filed with the Securities and Exchange Commission pursuant to Rule 424(b) of the
Securities Act of 1933, as amended, is incorporated by reference into Part IV of
this Annual Report on Form 10-K.

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

<Page>
                    PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
                            (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


PART II
Item  5    Market for the Registrant's Units and Related Limited Partner Matters.............    5
Item  6    Selected Financial Data...........................................................    5
Item  7    Management's Discussion and Analysis of Financial Condition and Results of
             Operations......................................................................    5
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

PART III
Item 10    Directors and Executive Officers of the Registrant................................    5
Item 11    Executive Compensation............................................................    7
Item 12    Security Ownership of Certain Beneficial Owners and Management....................    7
Item 13    Certain Relationships and Related Transactions....................................    7
Item 14    Controls and Procedures...........................................................    7

PART IV
Item 15    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...................................................................................   14
CERTIFICATIONS...............................................................................   15
</Table>
                                       2

<Page>
                                     PART I

Item 1. Business

General

   Prudential-Bache/Watson & Taylor, Ltd.-2 (the 'Registrant'), a Texas limited
partnership, was formed on November 14, 1983 and will terminate in accordance
with a vote of the limited partners as described below. The Registrant was
formed for the purpose of acquiring, developing, owning and operating
mini-storage and office/warehouse facilities with proceeds raised from the
initial sale of units of limited partnership interests ('Units'). The
Registrant's fiscal year for book and tax purposes ends on December 31.

   In accordance with a consent statement dated September 17, 1996, the limited
partners approved, during October 1996, the proposed sale of all eight
miniwarehouse facilities owned by the Registrant to Public Storage, Inc.
('Public') and the liquidation and dissolution of the Registrant.

   Seven of the eight properties were sold to Public during December 1996. The
Registrant continues to own the Hampton Park property located in Capitol
Heights, Maryland as it was not sold to Public after Phase I and Phase II
Environmental Site Assessments performed during 1996 by MACTEC Engineering and
Consulting, Inc. ('MACTEC'), which was formerly known as Law Engineering and
Environmental Services, Inc. or LAW, identified detectable levels of
tetrachloroethene ('PCE') in the soil and ground water samples collected at the
site. MACTEC, at the Registrant's request, reported the PCE release to the
Maryland Department of the Environment ('MDE').

   On November 21, 2000, MDE reached a determination that it was appropriate to
undertake an active remedial measure at the site. MACTEC, at the request of the
Registrant, submitted an application to enter the site into MDE's Voluntary
Cleanup Program ('VCP') during March 2001. During a meeting on May 16, 2001
between the Registrant, MACTEC and MDE, to discuss MDE's comments on the
Registrant's application, it was determined that the Registrant would perform a
non-invasive Phase I Environmental Site Assessment Update ('Phase I Activities')
and would subsequently, upon review and agreement with MDE, move to perform
certain Phase II invasive sampling and analytical procedures ('Phase II
Activities') with the anticipation of entering the site into the VCP. During the
first quarter of 2002, MDE notified the Registrant that its responses to all
previous comments on Phase I Activities have been resolved. Additionally, MACTEC
completed the fieldwork for Phase II activities (under a work plan that MDE
reviewed) during 2002. The procedures and findings were documented in a Phase II
Site Characterization and Risk Assessment Report (the 'Report') that was sent to
MDE on February 13, 2003. It is anticipated that MDE will take approximately 60
days to review the Report. Once the site is formally entered into the VCP, MDE
will provide direction regarding future monitoring, assessment or remediation
activities at the site that may be required of the Registrant or a prospective
buyer. As a result of the Registrant's experience in working with MDE on the
environmental issue, the Registrant changed the estimated date of liquidation to
December 31, 2003. As of December 31, 2002, the Statement of Net Assets included
in the Registrant's annual report to the limited partners for the year ended
December 31, 2002 ('Registrant's Annual Report') reflects an accrued liability
of $500,000 which represents the Registrant's best estimate of the obligation
regarding the environmental issues mentioned above. The amount includes costs
associated with an active remediation program over a five-year period. It is
reasonably possible that the loss exposure will be in excess of the amount
accrued and will be material to the Registrant and may possibly change in the
near future. However, it is uncertain at this time what will ultimately be
required to resolve the environmental issue at the property.

   The general partners of the Registrant intend to offer the Hampton Park
property to a select group of potential buyers, which specialize in the purchase
of contaminated properties, and others, albeit at a discount. It is the
intention of the Registrant to obtain from any potential buyer as complete an
indemnification as possible for any liability in connection with remediation of
the contamination of the property. Due to the environmental problem and MDE
oversight, it is uncertain when any such sale could be consummated. The
Registrant's liquidation and dissolution will proceed upon the sale of the
Hampton Park property.

   Watson & Taylor Management, Inc., an affiliate of the individual general
partners, is responsible for the day-to-day operation of the property, including
the supervision of the on-site managers and the establishment of rental policies
and rates for new rentals and renewals and directs the marketing activity for
the property.
                                       3

<Page>
General Partners and Affiliates

   The general partners of the Registrant are Prudential-Bache Properties, Inc.
('PBP'), George S. Watson and A. Starke Taylor, III (collectively, the 'General
Partners'). PBP is the Managing General Partner and is responsible for the
day-to-day operations of the Registrant and its investments. For further
information, see Notes A and E of the financial statements in the Registrant's
Annual Report which is filed as an exhibit hereto.

   In February 2003, Prudential Financial, Inc. ('Prudential') and Wachovia
Corp. ('Wachovia') announced an agreement to combine each company's respective
retail securities brokerage and clearing operations within a new firm, which
will be headquartered in Richmond, Virginia. Under the agreement, Prudential
will have a 38% ownership interest in the new firm and Wachovia will own 62%.
The transaction, which includes the securities brokerage, securities clearing,
and debt capital markets operations of PSI, but does not include the equity
sales, trading and research operations or commodity brokerage and derivative
operations of PSI, is anticipated to close in the third quarter of 2003. PBP
will continue to be an indirect wholly owned subsidiary of Prudential.

Employees

   The Registrant has no employees. Management and administrative services for
the Registrant are performed by the General Partners and their affiliates
pursuant to the Partnership Agreement. For further information, see Note E of
the financial statements in the Registrant's Annual Report which is filed as an
exhibit hereto.

Item 2. Properties

   As of December 31, 2002, the Registrant owns the following property:

<Table>
<Caption>
                                               Average                                          Monthly
                                           Occupancy Rates                                    Rental Rates
                                         for the year ended                                     Per Unit
                                            December 31,           Land       Rentable     as of December 31,
          Property Location                    2002(1)          (in acres)     Units              2002
--------------------------------------   -------------------    ----------    --------    --------------------
<S>                                      <C>                    <C>           <C>         <C>
Hampton Park (Capitol Heights,
  Maryland)
     Mini-warehouse                             97.40%             5.87          130           $42 - $285
     Commercial                                 96.22%                            54         $350 - $1,350
                                                                              --------
                                                                                 184
                                                                              --------
                                                                              --------
</Table>

(1) Average occupancy rates are calculated by averaging the monthly occupancies
    determined by dividing occupied square footage by available square footage
    as of each month-end.

   The General Partners believe the Registrant's remaining property is
adequately insured.

   During the three years ended December 31, 2002, 2001 and 2000, the Hampton
Park property rental revenues represented 94%, 90% and 89% of the Registrant's
total revenue, respectively.

Item 3. Legal Proceedings

   None

Item 4. Submission of Matters to a Vote of Limited Partners

   None
                                       4


<Page>
                                    PART II

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

   As of March 7, 2003, there were 3,392 holders of record owning 51,818 Units,
inclusive of 258, 130 and 130 equivalent limited partnership units held by PBP
and Messrs. Watson and Taylor, respectively. 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 Section 17.3 of the
Amended and Restated Certificate and Agreement of Limited Partnership limiting
the ability of a limited partner to transfer Units. Consequently, holders of
Units may not be able to liquidate their investments in the event of an
emergency or for any other reason.

   There were no cash distributions paid to limited partners during 2002, 2001
and 2000.

   A distribution of $300 per limited partnership unit was made on December 19,
1996 representing the net proceeds from the sale of seven of the Registrant's
properties, reduced by a contingency reserve and funds required to meet the
anticipated current and future operating costs until the liquidation of the
Registrant. The Registrant intends to liquidate, subject to the Hampton Park
property first being sold (refer to Item 1 for further discussion), and will
distribute any remaining funds at such time.

Item 6. Selected Financial Data

   As of October 1, 1996, the Registrant adopted the liquidation basis of
accounting in accordance with generally accepted accounting principles and,
therefore, there is no reporting of results of operations. Total assets at
December 31, 1998, 1999, 2000, 2001 and 2002 were $2,594,664, $3,332,496,
$3,583,953, $3,833,466 and $4,061,081, respectively. Additionally, no
distributions were made during the five years ended December 31, 2002. This data
should be read in conjunction with the financial statements of the Registrant
and the notes thereto on pages 2 through 7 of the Registrant's Annual Report
which is filed as an exhibit hereto.

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

   This information is incorporated by reference to pages 8 and 9 of the
Registrant's Annual Report which is filed as an exhibit hereto.

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 7
of the Registrant's Annual Report which is filed as an exhibit hereto. Quarterly
financial data pursuant to Item 302 of Regulation S-K is not provided as the
Registrant follows the liquidation basis of accounting and has not reported
results of operations subsequent to 1996 in accordance with generally accepted
accounting principles.

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 Managing General Partner.

Section 16(a) Beneficial Ownership Reporting Compliance

   The Registrant, the Registrant's General Partners, PBP's directors and
executive officers and any persons holding more than 10% of the Registrant's
Units 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
                                       5

<Page>
3, 4 and 5. Such General Partners, executive officers, directors and other
persons who own greater than 10% of the Registrant's Units are required by
Securities and Exchange Commission regulations to furnish the Registrant with
copies of all Forms 3, 4 or 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 Partners, PBP's
directors and executive officers and other persons who own greater than 10% of
the Registrant's Units or copies of the reports they have filed with the
Securities and Exchange Commission during and with respect to its most recent
fiscal year.

Prudential-Bache Properties, Inc., Managing General Partner

   The directors and executive officers of PBP and their positions with regard
to managing the Registrant are as follows:

Name                       Position
Brian J. Martin            Chairman of the Board of Directors
Chester A. Piskorowski     President, Chief Executive Officer and Director
Steven Weinreb             Chief Financial Officer, Vice President and Director

   BRIAN J. MARTIN, age 52, is the Chairman of the Board of Directors of PBP. He
is a Senior Vice President of Prudential Securities Incorporated ('PSI'), an
affiliate of PBP. In his current position, Mr. Martin has responsibility for
developing various alternative investment products for the firm's high net worth
clients. Mr. Martin also serves in various capacities for certain other
affiliated companies. Mr. Martin joined PSI in 1980. Mr. Martin is a member of
the Pennsylvania Bar.

   CHESTER A. PISKOROWSKI, age 59, is the President, Chief Executive Officer and
a Director of PBP. He is a Senior Vice President of PSI and is head of its
Specialty Finance Department. Mr. Piskorowski also serves in various capacities
for certain other affiliated companies. Mr. Piskorowski has held several
positions within PSI since April 1972. Mr. Piskorowski is a member of the New
York and Federal Bars.

   STEVEN WEINREB, age 40, is the Chief Financial Officer, Vice President and a
Director of PBP. He is a Senior Vice President and Controller of PSI. Mr.
Weinreb also serves in various capacities for other affiliated companies. Prior
to joining PSI in May 1991, he was with the public accounting firms Deloitte &
Touche from 1986 to 1991 and from 1984 to 1986 with Laventhol & Horwath. Mr.
Weinreb graduated in 1984 from the State University of New York at Albany with a
B.S. in Accounting. Mr. Weinreb is a Certified Public Accountant.

   Effective June 2002, Steven Weinreb was elected by the Board of Directors of
PBP as Chief Financial Officer and Vice President replacing Barbara Brooks.

   There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and executive officers have
indefinite terms.

Individual General Partners

   GEORGE S. WATSON, age 62, is a financial specialist and a certified public
accountant. He has been instrumental in the success of The Community Minority
Business Advancement Program sponsored by the University of Texas at Austin
College and Graduate Schools of Business. Mr. Watson is a member of the Advisory
Council of the University of Texas at Austin Business School and a member of its
Chancellor's Council. Mr. Watson attended the University of Texas at Austin,
graduating summa cum laude in 1963 with a BBA in accounting and finance. He
received his MBA in accounting and finance from the University of Texas in 1965,
graduating first in his class and summa cum laude. He also has received various
awards and scholarships and is a member of many fraternal organizations
including Phi Kappa Phi, the honorary scholastic society. Mr. Watson has over 25
years of experience in real estate and financial investments.

   A. STARKE TAYLOR, III, age 59, holds a bachelor of business administration
degree from Southern Methodist University which was awarded in 1966. He is past
president of the North Dallas Chamber of Commerce. Mr. Taylor is a member of the
boards of the Dallas Theological Seminary and the Northeast

                                       6

<Page>
Texas Regional Board of Young Life. Mr. Taylor has over 25 years of experience
in real estate, insurance and financial investments.

   The two individual General Partners are not related.

Item 11. Executive Compensation

   The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to either individual General Partner or to directors and officers
of the Managing General Partner for their services. Certain officers and
directors of the Managing General Partner receive compensation from affiliates
of the Managing General Partner, not from the Registrant, for services performed
for various affiliated entities, which may include services performed for the
Registrant; however, the Managing 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
reimbursement to the General Partners for services provided to the Registrant.

Item 12. Security Ownership of Certain Beneficial Owners and Management

   As of March 7, 2003, no individual General Partner or director or officer of
the Managing General Partner owns directly or beneficially any interest in the
voting securities of the Managing General Partner.

   As of March 7, 2003, no individual General Partner or director or officer of
the Managing General Partner owns directly or beneficially any of the Units
issued by the Registrant.

   The General Partners have contributed to the Registrant and, based on such
contribution, they received 'equivalent units' entitling them to participate in
the distributions to the limited partners and in the Registrant's profits and
losses in the same proportion that the General Partners' capital contribution
bears to the total capital contributions of the limited partners. The Managing
General Partner has retained its right to receive funds from the Registrant,
such as General Partner distributions and reimbursement of expenses, but has
waived its right to share in any limited partner cash distributions and
allocations of Registrant's profits and losses based upon such equivalent units.

   As of March 7, 2003, no limited partner beneficially owns more than 5% of the
outstanding Units issued by the Registrant.

Item 13. Certain Relationships and Related Transactions

   The Registrant has and will continue to have certain relationships with the
General Partners and their affiliates. However, there have been no direct
financial transactions between the Registrant and the individual General
Partners or the directors or officers of the Managing General Partner during
2002.

   Reference is made to Notes A and E of the financial statements in the
Registrant's 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.

Item 14. Controls and Procedures

   Within the 90 days prior to the date of this report, the Managing General
Partner carried out an evaluation, under the supervision and with the
participation of the officers of the Managing General Partner, including the
Managing General Partner's Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Partnership's disclosure
controls and procedures. Based upon that evaluation, the Managing General
Partner's Chief Executive Officer and Chief Financial Officer concluded that the
Partnership's disclosure controls and procedures are effective. There were no
significant changes in the Partnership's internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation.
                                       7

<Page>
                                    PART IV

<Table>
<Caption>
                                                                                           Page
                                                                                         Number in
                                                                                       Annual Report
<S>    <C>        <C>                                                                 <C>
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)            1. Financial Statements and Report of Independent
                  Auditors--incorporated by reference to the Registrant's Annual
                  Report which is filed as an exhibit hereto

                  Report of Independent Auditors                                             2
                  Financial Statements:
                  Statements of Net Assets--December 31, 2002 and 2001                       3
                  Statements of Changes in Net Assets--Years ended December 31,
                  2002, 2001 and 2000                                                        3
                  Notes to Financial Statements                                              4

               2. Financial Statement Schedules and Consent of Independent Auditors
                  Consent of Independent Auditors
                  Schedules:
                  II-- Valuation and Qualifying Accounts and Reserves--Three years
                  ended December 31, 2002
                  III--Real Estate and Accumulated Depreciation at December 31,
                  2002
                  Notes to Schedule III--Real Estate and Accumulated Depreciation
                  All other schedules have been omitted because they are not
                  applicable or the required information is included in the
                  financial statements and the notes thereto.

               3. Exhibits
                  Description:
                  2.01 Consent Statement dated September 17, 1996 (1)
                  3.01 Amended and Restated Certificate and Agreement of Limited
                  Partnership (2)
                  3.02 Amendment Number 8 to Amended and Restated Certificate and
                       Agreement of Limited Partnership (3)
                  4.01 Revised Form of Certificate of Limited Partnership Interest
                  (4)
                  10.01 Management Agreement (2)
                  10.02 Property Management Agreement dated as of November 1, 1988
                        by and between the Registrant and Public Storage Commercial
                        Properties Group, Inc. (4)
                  10.03 Property Management Agreement dated as of November 1, 1988
                        by and between the Registrant and Public Storage
                        Management, Inc. (4)
                  10.04 Agreement Relating to General Partner Interests (2)
                  10.05 Management Agreement dated March 1, 1998 by and between the
                        Registrant and Watson & Taylor Management, Inc., a Texas
                        corporation (5)
</Table>
                                       8

<Page>
<Table>
<S>    <C>        <C>                                                                 <C>
                  13.01 Registrant's Annual Report to Limited Partners for the year
                  ended December 31, 2002 (with the exception of the information
                        and data incorporated by reference in Items 7 and 8 of this
                        Annual Report on Form 10-K, no other information or data
                        appearing in the Registrant's Annual Report is to be deemed
                        filed as part of this report)
                  99.1  Certificate pursuant to 18 U.S.C. Section 1350 as adopted
                  pursuant to Section 906 of the SARBANES-OXLEY Act of 2002 (filed
                        herewith)
(b)               Reports on Form 8-K--None
</Table>
------------------
(1)  Filed on the Registrant's Proxy Statement on Schedule 14A and incorporated
     herein by reference.

(2)  Filed as an exhibit to Registration Statement on Form S-11 (No. 2-88785)
     and incorporated herein by reference.

(3)  Filed as an exhibit to Registrant's Form 10-Q for the quarter ended March
     31, 1990 and incorporated herein by reference.

(4)  Filed as an exhibit to Registrant's Form 10-K for the year ended December
     31, 1988 and incorporated herein by reference.

(5)  Filed as an exhibit to Registrant's Form 10-K for the year ended December
     31, 1997 and incorporated herein by reference.

                                       9

<Page>
                        CONSENT OF INDEPENDENT AUDITORS

To the Partners
Prudential-Bache/Watson & Taylor, Ltd.-2

We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Prudential-Bache/Watson & Taylor, Ltd.-2 of our report dated February 24,
2003, included in the 2002 Annual Report to Partners of Prudential-Bache/Watson
& Taylor, Ltd.-2.

Our audits also included the financial statement schedules of
Prudential-Bache/Watson & Taylor, Ltd.-2 listed in Item 15(a). These schedules
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial statement
schedules referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.

/s/ Ernst & Young LLP
New York, New York
February 24, 2003
                                       10

<Page>
                    PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
                            (a limited partnership)

          SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                               December 31, 2002
---------------------------------------------------------------------------
Allowance for Loss on Impairment of Assets

<Table>
<Caption>
                                                                  Deductions - Amounts
 Year Ended         Balance at          Additions - Amounts        Written-off During       Balance at
December 31,     Beginning of Year      Reserved During Year              Year              End of Year
------------     -----------------      --------------------      --------------------      -----------
<S>              <C>                    <C>                       <C>                       <C>
    2000            $ 1,418,000               --                        --                  $ 1,418,000(1)
    2001            $ 1,418,000               --                        --                  $ 1,418,000(1)
    2002            $ 1,418,000               --                        --                  $ 1,418,000(1)
-------------------------------------------------------------------------------------------------------
(1) Shown as a direct deduction of carrying value of property held for sale.
</Table>
                                       11

<Page>
                    PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
                            (a limited partnership)
             SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
                               December 31, 2002
<Table>
<Caption>
                                                                                              Amount at which carried at
                                                                                                     close of year
                                                                                    -----------------------------------------------
                                        Initial cost to                                                                Valuation
                                          Registrant                  Costs                                          allowance on
                                           (Note B)                capitalized                                      impaired assets
                                 -----------------------------      subsequent                                      and accumulated
         Description                            Buildings and           to                       Buildings and       depreciation
          (Note A)                  Land         Improvements      acquisition        Land        Improvements       (Notes C & D)
-----------------------------    ----------     --------------     ------------     --------     --------------     ---------------
<S>                              <C>            <C>                <C>              <C>          <C>                <C>
Hampton Park
(Capitol Heights, Maryland)      $  925,595       $       --       $ 3,774,366      $926,441       $3,773,520         $ 2,681,440
                                 ----------     --------------     ------------     --------     --------------     ---------------
                                 ----------     --------------     ------------     --------     --------------     ---------------
-----------------------------------------------------------------------------------------------------------------------------------

<Caption>

         Description             Total          Dates of          Date
          (Note A)              (Note C)      construction      acquired
-----------------------------  ----------     -------------     --------
<S>                              <C>          <C>               <C>
Hampton Park
(Capitol Heights, Maryland)    $2,018,521         1985/86         1984
                               ----------
                               ----------
---------------------------------------------------------------------------------
</Table>
                        See notes on the following page.

                                       12

<Page>
                    PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-2
                            (a limited partnership)
                             NOTES TO SCHEDULE III
                               December 31, 2002

NOTE A--There are no mortgages, deeds of trust or similar encumbrances against
        the remaining property.
NOTE B--Initial cost represents the initial purchase price of the property
        including acquisition fees.
NOTE C--RECONCILIATION SUMMARY OF TRANSACTIONS--REAL ESTATE

<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                              --------------------------------------
                                                                 2002          2001          2000
                                                              ----------    ----------    ----------
<S>                                                           <C>           <C>          <C>
Balance at beginning of year...............................   $2,018,521    $2,018,521    $2,018,521
Additions during the year--capitalization of environmental
  costs                                                               --            --            --
                                                              ----------    ----------    ----------
Balance at close of year...................................   $2,018,521    $2,018,521    $2,018,521
                                                              ----------    ----------    ----------
                                                              ----------    ----------    ----------
</Table>

   The aggregate cost of land, buildings and improvements, and furniture and
fixtures, net of depreciation, for Federal income tax purposes as of December
31, 2002 was $2,091,611.

    NOTE D--RECONCILIATION SUMMARY OF TRANSACTIONS--ACCUMULATED DEPRECIATION

   The Partnership ceased depreciating the properties for financial reporting
purposes when the properties were reclassified as held for sale as of December
31, 1995.
                                       13

<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/Watson & Taylor, Ltd.-2

By: Prudential-Bache Properties, Inc.,
    A Delaware corporation,
    Managing General Partner

     By: /s/ Steven Weinreb                       Date: March 18, 2003
     ----------------------------------------
     Steven Weinreb
     Chief Financial Officer,
     Vice President and Director

   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: Prudential-Bache Properties, Inc.,
    A Delaware corporation,
    Managing General Partner

    By: /s/ Brian J. Martin                       Date: March 18, 2003
    -----------------------------------------
    Brian J. Martin
    Chairman of the Board of Directors

    By: /s/ Chester A. Piskorowski                Date: March 18, 2003
    -----------------------------------------
    Chester A. Piskorowski
    President, Chief Executive Officer
    and Director

    By: /s/ Steven Weinreb                        Date: March 18, 2003
    -----------------------------------------
    Steven Weinreb
    Chief Financial Officer, Vice President
    and Director (chief accounting officer)

                                       14

<Page>

                                 CERTIFICATIONS

I, Chester A. Piskorowski, certify that:
   1.  I have reviewed this annual report on Form 10-K of
       Prudential-Bache/Watson & Taylor, LTD.-2 (the 'Partnership');
   2.  Based on my knowledge, this annual report does not contain any untrue
       statement of a material fact or omit to state a material fact necessary
       to make the statements made, in light of the circumstances under which
       such statements were made, not misleading with respect to the period
       covered by this annual report;
   3.  Based on my knowledge, the financial statements, and other financial
       information included in this annual report, fairly present in all
       material respects the financial condition, results of operations and cash
       flows of the Partnership as of, and for, the periods presented in this
       annual report;
   4.  The Partnership's other certifying officers and I are responsible for
       establishing and maintaining disclosure controls and procedures (as
       defined in Exchange Act Rules 13a-14 and 15d-14) for the Partnership and
       we have:
        a)  designed such disclosure controls and procedures to ensure
            that material information relating to the Partnership,
            including its consolidated subsidiaries, is made known to us
            by others within those entities, particularly during the
            period in which this annual report is being prepared;
        b)  evaluated the effectiveness of the Partnership's disclosure
            controls and procedures as of a date within 90 days prior to
            the filing date of this annual report (the 'Evaluation
            Date'); and
        c)  presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based
            on our evaluation as of the Evaluation Date;
   5.  The Partnership's other certifying officers and I have disclosed, based
       on our most recent evaluation, to the Partnership's auditors and the
       board of directors of the managing general partner of the Partnership:
        a)  all significant deficiencies in the design or operation of
            internal controls which could adversely affect the
            Partnership's ability to record, process, summarize and
            report financial data and have identified for the
            Partnership's auditors any material weaknesses in internal
            controls; and
        b)  any fraud, whether or not material, that involves management
            or other employees who have a significant role in the
            Partnership's internal controls; and
   6.  The Partnership's other certifying officers and I have indicated in this
       annual report whether or not there were significant changes in internal
       controls or in other factors that could significantly affect internal
       controls subsequent to the date of our most recent evaluation, including
       any corrective actions with regard to significant deficiencies and
       material weaknesses.

Date:  March 18, 2003                /s/ Chester A. Piskorowski
                                     -------------------------------------
                                         Chester A. Piskorowski
                                         President and Chief Executive Officer
                                         of the managing general partner of
                                         the Partnership

                                       15

<Page>
I, Steven Weinreb, certify that:
   1.  I have reviewed this annual report on Form 10-K of
       Prudential-Bache/Watson & Taylor, LTD.-2 (the 'Partnership');
   2.  Based on my knowledge, this annual report does not contain any untrue
       statement of a material fact or omit to state a material fact necessary
       to make the statements made, in light of the circumstances under which
       such statements were made, not misleading with respect to the period
       covered by this annual report;
   3.  Based on my knowledge, the financial statements, and other financial
       information included in this annual report, fairly present in all
       material respects the financial condition, results of operations and
       cash flows of the Partnership as of, and for, the periods presented in
       this annual report;
   4.  The Partnership's other certifying officers and I are responsible for
       establishing and maintaining disclosure controls and procedures (as
       defined in Exchange Act Rules 13a-14 and 15d-14) for the Partnership and
       we have:
        a)  designed such disclosure controls and procedures to ensure
            that material information relating to the Partnership,
            including its consolidated subsidiaries, is made known to us
            by others within those entities, particularly during the
            period in which this annual report is being prepared;
        b)  evaluated the effectiveness of the Partnership's disclosure
            controls and procedures as of a date within 90 days prior to
            the filing date of this annual report (the 'Evaluation
            Date'); and
        c)  presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based
            on our evaluation as of the Evaluation Date;
   5.  The Partnership's other certifying officers and I have disclosed, based
       on our most recent evaluation, to the Partnership's auditors and the
       board of directors of the managing general partner of the Partnership:
        a)  all significant deficiencies in the design or operation of
            internal controls which could adversely affect the
            Partnership's ability to record, process, summarize and
            report financial data and have identified for the
            Partnership's auditors any material weaknesses in internal
            controls; and
        b)  any fraud, whether or not material, that involves management
            or other employees who have a significant role in the
            Partnership's internal controls; and
   6.  The Partnership's other certifying officers and I have indicated in this
       annual report whether or not there were significant changes in internal
       controls or in other factors that could significantly affect internal
       controls subsequent to the date of our most recent evaluation, including
       any corrective actions with regard to significant deficiencies and
       material weaknesses.

Date:  March 18, 2003                   /s/ Steven Weinreb
                                        -------------------------------------
                                             Steven Weinreb
                                             Chief Financial Officer
                                              and Vice President of the
                                              managing general partner of the
                                              Partnership
                                       16