<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 quarter ended September 30, 1996
/ / 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: 0-17592
PRUDENTIAL-BACHE DIVERSIFIED FUTURES FUND L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3464456
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
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 DIVERSIFIED FUTURES FUND L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Equity in commodity trading accounts:
Cash $ 2,677,056 $ 3,783,451
U.S. Treasury bills, at amortized cost 12,619,731 14,622,390
Net unrealized gain on open commodity positions 2,108,135 1,061,597
------------- ------------
Total assets $17,404,922 $19,467,438
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable $ 358,866 $ 425,077
Management fees payable 57,840 64,703
Accrued expenses 53,021 56,340
------------- ------------
Total liabilities 469,727 546,120
------------- ------------
Commitments
Partners' capital
Limited partners (50,362 and 54,356 units outstanding) 16,765,748 17,745,997
General partner (509 and 3,600 units outstanding) 169,447 1,175,321
------------- ------------
Total partners' capital 16,935,195 18,921,318
------------- ------------
Total liabilities and partners' capital $17,404,922 $19,467,438
------------- ------------
------------- ------------
Net asset value per limited and general partnership unit
(``Units'') $ 332.90 $ 326.48
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements
2
<PAGE>
<PAGE>
PRUDENTIAL-BACHE DIVERSIFIED FUTURES FUND L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
-------------------------- ------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Net realized gain (loss) on commodity
transactions $ 529,613 $ 7,772,781 $ (592,346) $ (23,349)
Change in net unrealized gain/loss on open
commodity positions 1,046,538 (1,865,362) 1,232,566 (540,838)
Interest from U.S Treasury bills 525,530 631,477 166,813 222,489
---------- ----------- ---------- ---------
2,101,681 6,538,896 807,033 (341,698)
---------- ----------- ---------- ---------
EXPENSES
Commissions 1,197,871 1,249,757 377,411 435,410
Management fees 535,529 574,019 169,068 190,848
Incentive fees -- 268,499 -- --
General and administrative 53,990 61,182 30,685 22,792
---------- ----------- ---------- ---------
1,787,390 2,153,457 577,164 649,050
---------- ----------- ---------- ---------
Net income (loss) $ 314,291 $ 4,385,439 $ 229,869 $(990,748)
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
ALLOCATION OF NET INCOME (LOSS)
Limited partners $ 324,494 $ 4,142,172 $ 227,544 $(931,413)
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
General partner $ (10,203) $ 243,267 $ 2,325 $ (59,335)
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
NET INCOME (LOSS) PER WEIGHTED AVERAGE
LIMITED AND GENERAL PARTNERSHIP UNIT
Net income (loss) per weighted average
limited and general partnership unit $ 5.77 $ 70.73 $ 4.42 $ (16.48)
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
Weighted average number of limited and
general partnership units outstanding 54,454 62,000 51,949 60,111
---------- ----------- ---------- ---------
---------- ----------- ---------- ---------
- ------------------------------------------------------------------------------------------------------
</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 57,956 $17,745,997 $1,175,321 $18,921,318
Net income (loss) 324,494 (10,203) 314,291
Redemptions (7,085) (1,304,743) (995,671) (2,300,414)
------ ----------- ---------- -----------
Partners' capital--September 30, 1996 50,871 $16,765,748 $ 169,447 $16,935,195
------ ----------- ---------- -----------
------ ----------- ---------- -----------
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE>
<PAGE>
PRUDENTIAL-BACHE DIVERSIFIED FUTURES FUND L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
September 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 Diversified Futures Fund L.P. (the ``Partnership'')
as of September 30, 1996 and the results of its operations for the nine and
three months ended September 30, 1996 and 1995. However, the operating results
for the interim periods may not be indicative of the results expected for the
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 for prior periods have been reclassified to conform with
current financial statement presentation.
B. Related Parties
Seaport Futures Management, Inc. (the ``General Partner'') and its affiliates
perform services for the Partnership which include, but are not limited to:
brokerage services, accounting and financial management, registrar, transfer and
assignment functions, investor communications, printing and other administrative
services. A portion of the general and administrative expenses of the
Partnership for the nine and three months ended September 30, 1996 and 1995 was
borne by Prudential Securities Incorporated (``PSI'') and its affiliates.
Costs and expenses charged to the Partnership for these services for the nine
and three months ended September 30, 1996 and 1995 were:
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
------------------------- ---------------------
1996 1995 1996 1995
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Commissions $1,197,871 $1,249,757 $377,411 $435,410
Printing services 10,410 8,940 4,915 4,800
---------- ---------- -------- --------
$1,208,281 $1,258,697 $382,326 $440,210
---------- ---------- -------- --------
---------- ---------- -------- --------
</TABLE>
Expenses payable to the General Partner and its affiliates (which are
included in accrued expenses) as of September 30, 1996 and December 31, 1995
were $13,150 and $9,300, respectively.
The Partnership maintains its trading and cash accounts at PSI, the
Partnership's commodity broker and an affiliate of the General Partner.
Approximately 75% of the Partnership's net assets 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 in the statements
of financial condition. The Partnership's exposure to market risk is influenced
by a number of factors including the relationships among the contracts held by
the Partnership as well as the liquidity of the markets in which the contracts
are traded.
Futures and options contracts are traded on organized exchanges and are thus
distinguished from forward contracts which are entered into privately by the
parties. The credit risks associated with futures and options contracts are
typically perceived to be less than those associated with forward contracts,
because exchanges typically provide clearinghouse arrangements in which the
collective credit (subject to certain limitations) of the members of the
exchanges is pledged to support the financial integrity of the exchange. On the
other hand, the Partnership must rely solely on the credit of its broker (PSI)
with respect to forward transactions. The Partnership presents unrealized gains
and losses on open forward positions as a net amount in the statements of
financial condition because it has a master netting agreement with PSI.
The General Partner attempts to minimize both credit and market risks by
requiring the Partnership's trading manager to abide by various trading
limitations and policies. The General Partner monitors compliance with these
trading limitations and policies which include, but are not limited to,
executing and clearing all trades with creditworthy counterparties (currently
PSI is the sole counterparty or broker); limiting the amount of margin or
premium required for any one commodity or all commodities combined; and
generally limiting transactions to contracts which are traded in sufficient
volume to permit the taking and liquidating of positions. The General Partner
may impose additional restrictions (through modifications of such trading
limitations and policies) upon the trading activities of the trading manager as
it, in good faith, deems to be in the best interests of the Partnership.
PSI, when acting as the Partnership's futures commission merchant in
accepting orders for the purchase or sale of domestic futures and options
contracts, is required by Commodity Futures Trading Commission (``CFTC'')
regulations to separately account for and segregate as belonging to the
Partnership all assets of the Partnership relating to domestic futures and
options trading and is not to commingle such assets with other assets of PSI. At
September 30, 1996 and December 31, 1995, such segregated assets totalled
$10,691,886 and $10,874,252, 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 $6,508,347 and $8,704,525 at September 30,
1996 and December 31, 1995, respectively. There are no segregation requirements
for assets related to forward trading.
As of September 30, 1996 and December 31, 1995, all open forward contracts
mature within three months, but open futures contracts mature within one year.
5
<PAGE>
<PAGE>
At September 30, 1996 and December 31, 1995, gross contract amounts of open
futures and forward contracts are:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
Futures Currency Contracts:
Commitments to purchase $ 1,928,633 $ 3,101,098
Commitments to sell $ 2,819,438 $ 3,918,450
Forward Currency Contracts:
Commitments to purchase $ 25,017,679 $ 275,262
Commitments to sell $ 30,529,896 $ 14,967,152
Financial Futures Contracts:
Commitments to purchase $208,854,799 $ 198,771,784
Commitments to sell $ 7,151,563 $ 9,245,157
Other Futures Contracts:
Commitments to purchase $ 1,954,313 $ 3,128,616
Commitments to sell $ 21,150,610 $ 4,522,406
</TABLE>
The gross contract amounts represent the Partnership's potential involvement
in a particular class of financial instrument (if it were to take or make
delivery on an underlying futures or forward contract). The gross contract
amounts significantly exceed the future cash requirements as the Partnership
intends to close out open positions prior to settlement and thus is generally
subject only to the risk of loss arising from the change in the value of the
contracts. As such, the Partnership considers the ``fair value'' of its futures
and forward contracts to be the net unrealized gain or loss on the contracts
(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 September 30, 1996 and December 31, 1995, the fair values of futures and
forward contracts were:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
-------------------------- --------------------------
Fair Value Fair Value
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 7,200 $ 160,344 $ 361,913 $ --
Currencies 67,620 -- 10,305 7,450
Other 523,570 24,348 304,613 2,955
Foreign exchanges
Financial 1,530,091 51,547 507,205 6,565
Other 11,830 626 7,120 1,250
Forward Contracts:
Currencies 330,462 125,773 171,400 282,739
---------- ----------- ---------- -----------
$2,470,773 $ 362,638 $1,362,556 $ 300,959
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
6
<PAGE>
<PAGE>
The following table presents the average fair value of futures and forward
contracts during the nine months ended September 30, 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1996 September 30, 1995
-------------------------- --------------------------
Average Fair Value Average Fair Value
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $263,912 $58,175 $225,371 $21,761
Currencies 48,253 4,437 172,145 35,259
Other 219,340 54,824 306,279 51,665
Foreign exchanges
Financial 574,394 55,438 419,575 39,134
Other 8,437 3,968 3,622 4,008
Forward Contracts:
Currencies 683,817 413,749 1,484,358 675,237
---------- ----------- ---------- -----------
$1,798,153 $590,591 $2,611,350 $827,064
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
The following table presents the average fair value of futures and forward
contracts during the three months ended September 30, 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1996 September 30, 1995
-------------------------- --------------------------
Average Fair Value Average Fair Value
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $16,527 $129,180 $75,310 $42,341
Currencies 39,639 5,550 144,490 27,481
Other 324,018 34,861 144,814 45,714
Foreign exchanges
Financial 1,119,437 31,462 140,084 67,794
Other 9,756 588 5,432 6,752
Forward Contracts:
Currencies 318,205 231,807 239,426 309,360
---------- ----------- ---------- -----------
$1,827,582 $433,448 $749,556 $499,442
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
7
<PAGE>
<PAGE>
The following table presents the net realized gains (losses) and the change
in net unrealized gains/losses of futures and forward contracts during the nine
months ended September 30, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Nine months ended September 30, 1996 Nine months ended September 30, 1995
-------------------------------------------- ---------------------------------------------
Change in Change in
Net Realized Net Net Realized Net
Gains Unrealized Gains Unrealized
(Losses) Gains/Losses Total (Losses) Gains/Losses Total
------------ ------------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 497,906 $ (515,057) $ (17,151) $1,493,175 $ (463,550 ) $ 1,029,625
Currencies 86,623 64,765 151,388 1,549,129 (57,552 ) 1,491,577
Other 138,463 197,564 336,027 (18,355) (604,625 ) (622,980)
Foreign exchanges
Financial (232,024) 977,904 745,880 1,973,027 (507,506 ) 1,465,521
Other (3,005) 5,334 2,329 (21,247) (3,162 ) (24,409)
Forward Contracts:
Currencies 41,650 316,028 357,678 2,797,052 (228,967 ) 2,568,085
------------ ------------ ---------- ------------ ------------ -----------
$ 529,613 $1,046,538 $1,576,151 $7,772,781 $(1,865,362 ) $ 5,907,419
------------ ------------ ---------- ------------ ------------ -----------
------------ ------------ ---------- ------------ ------------ -----------
</TABLE>
The following table presents the net realized gains (losses) and the change
in net unrealized gains/losses of futures and forward contracts during the three
months ended September 30, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Three months ended September 30, 1996 Three months ended September 30, 1995
-------------------------------------------- ---------------------------------------------
Change in Change in
Net Realized Net Net Realized Net
Gains Unrealized Gains Unrealized
(Losses) Gains/Losses Total (Losses) Gains/Losses Total
------------ ------------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ (618,782) $ (49,937) $ (668,719) $ (304,606) $ (183,257) $ (487,863)
Currencies (54,802) 27,017 (27,785) 1,054,494 (89,970) 964,524
Other 192,186 65,513 257,699 (358,489) (53,332) (411,821)
Foreign exchanges
Financial 529,709 1,312,838 1,842,547 (401,862) 102,892 (298,970)
Other 4,550 2,437 6,987 (12,886) (4,437) (17,323)
Forward Contracts:
Currencies (645,207) (125,302) (770,509) -- (312,734) (312,734)
------------ ------------ ---------- ------------ ------------ -----------
$ (592,346) $1,232,566 $ 640,220 $ (23,349) $ (540,838) $ (564,187)
------------ ------------ ---------- ------------ ------------ -----------
------------ ------------ ---------- ------------ ------------ -----------
</TABLE>
8
<PAGE>
<PAGE>
PRUDENTIAL-BACHE DIVERSIFIED FUTURES FUND L.P.
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership commenced operations on October 19, 1988 with gross proceeds
of $30,107,800. After accounting for organizational and offering expenses, the
Partnership's net proceeds were $29,387,470.
At September 30, 1996, 100% of the Partnership's total net assets were
allocated to commodities trading. A significant portion of net assets was held
in U.S. Treasury bills (which represented approximately 73% of net assets at
September 30, 1996 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 the U.S. Treasury bills bear to the net assets varies
each day, and from month to month, as the market values of commodity interests
change. The balance of the net assets 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 certain commodity futures contract
prices during a single day by regulations referred to as ``daily limits.''
During a single day, no trades may be executed at prices beyond the daily limit.
Once the price of a futures contract for a particular commodity has increased or
decreased by an amount equal to the daily limit, positions in the commodity can
neither be taken nor liquidated unless traders are willing to effect trades at
or within the limit. Commodity futures prices have occasionally moved the daily
limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating its commodity
futures positions.
Since the Partnership's business is to trade futures, forward and options
contracts, its capital is at risk due to changes in the value of these contracts
(market risk) or the inability of counterparties to perform under the terms of
the contracts (credit risk). The General Partner attempts to minimize these
risks by requiring the Partnership's trading manager to abide by various trading
limitations and policies. See Note C to the financial statements for a further
discussion on the credit and market risks associated with the Partnership's
futures, forward and options contracts.
The Partnership does not have, nor does it expect to have, any capital
assets.
Redemptions by limited partners recorded for the nine and three months ended
September 30, 1996 were $1,304,743 and $355,204, respectively. Redemptions by
the general partner recorded for the corresponding periods were $995,671 and
$3,662, respectively. Redemptions by limited partners and the general partner
from commencement of operations (October 19, 1988) through September 30, 1996
totalled $38,674,530 and $995,681, respectively. Future redemptions will impact
the amount of funds available for investment in commodity contracts in
subsequent periods.
Results of Operations
The net asset value per Unit as of September 30, 1996 was $332.90, an
increase of 1.97% from the December 31, 1995 net asset value per Unit of
$326.48.
The Partnership's performance was negative in the month of July. Profits
reaped in the financials, softs and energies sectors were offset by losses in
the metals, currencies, stock indices and grains sectors. In the financials
sector, profits were reaped in long positions in Australian, German, British and
French bonds. Whipsawed by a volatile U.S. stock market, global bond markets
recovered somewhat by month's end as reports indicated a slowing U.S. economy.
In the softs sector, gains in coffee, soybean oil and sugar were offset by
losses in corn as rainy weather improved the outlook for this largely Midwestern
crop, thereby lowering prices. In the energies sector, reports that the U.S. was
about to endorse procedures for the implementation of the Iraqi/U.N. oil sales
agreement pushed crude oil prices down, but prices firmed by month's end proving
profitable for long positions in heating and light crude oil. In the metals
sector, short positions in gold, silver, copper and aluminum proved
unprofitable. In foreign exchange markets, the U.S. dollar lost ground against
the German mark and the Japanese yen as the prospect for a hike in U.S. interest
9
<PAGE>
<PAGE>
rates seemed more unlikely. The Partnership profited from German mark positions
but incurred losses in the Japanese yen and Swiss franc positions. The weakness
in the U.S. stock market negatively impacted both European and Asian stock
markets and trading in stock indices was unprofitable.
The Partnership's performance was slightly negative in the month of August.
Profits reaped in the financials, energies and stock indices sectors were offset
by losses in the currencies, metals, softs and grains sectors. Trading was thin
in both the financial and commodity markets as summer holidays lowered
participation. In the financial markets, investors were reluctant to take
positions prior to key month-end economic reports and central bank policy
decision meetings. Positions in Japanese, Australian and German bonds were
profitable. In the energies sector, profits in heating and light crude oil were
reaped on an uptrend. Crude oil prices reached $23.26 per barrel amid continued
supply concerns and increasing demands from developing nations. In the
currencies sector, the U.S. dollar, German mark and Japanese yen fluctuated as
investors responded to various economic reports and policy decisions on interest
rates. Positions in the Australian dollar, British pound and Swiss franc were
unprofitable. Losses were also incurred in the agricultural markets, where
prices of corn, cotton, and coffee were buffeted by shifting weather patterns
and concerns over late development of crops. The Partnership's positions in
gold, silver, coffee, cotton, corn and soybean oil were unprofitable.
The Partnership's performance was positive in the month of September. Profits
reaped in the financials, metals, energies and grain sectors offset losses in
the stock indices, currencies and softs sectors. In the financials sector,
positions in German, Italian, French and Japanese bonds were profitable. Bond
markets remained unsettled for much of the month, prior to the U.S. Federal
Reserve Board's policy committee meeting on interest rates. The decision to
leave short-term interest rates at current levels coupled with the increasing
pressure in Europe and Japan to keep rates low influenced central banks to move
assets into the higher yielding U.S. bond market. In the metals sector,
positions in silver, aluminum, and gold were profitable. Lower demand for gold
fabrication and the prospects for gold sales by central banks and the
International Monetary Fund (IMF) pushed gold prices down. In the energies
sector, the price of heating oil reached its highest level in five years amid
worries that Middle East hostilities could threaten supplies just as winter
approaches in the U.S. with stockpiles at historically low levels. In the
currencies sector, profits in Japanese yen positions were offset by losses in
Australian dollar, German mark and Swiss franc positions. Given the expressed
support of G-7 heads of state and finance ministers, the U.S. dollar dominated
world markets.
Interest income from U.S. Treasury bills decreased by approximately $106,000
and and $56,000 for the nine and three months ended September 30, 1996 as
compared to the corresponding periods in 1995 primarily due to a decrease in
funds available for investment in U.S. Treasury bills as a result of redemptions
and a decline in interest rates in 1996.
Commissions are calculated on the Partnership's net asset value on the first
day of each month and, therefore, vary monthly according to trading performance
and redemptions. Accordingly, they must be compared to the fluctuations in the
monthly net asset values. Commissions decreased by approximately $52,000 and
$58,000 for the nine and three months ended September 30, 1996 as compared to
the corresponding periods in 1995 primarily due to redemptions.
All trading decisions for the Partnership are made by John W. Henry & Co.,
Inc. (the ``Trading Manager''). Management fees are calculated on the
Partnership's net asset value at the end of the month and, therefore, are
affected by trading performance and redemptions. Management fees decreased by
approximately $38,000 and $22,000 for the nine and three months ended September
30, 1996 as compared to the corresponding periods in 1995 primarily due to
redemptions.
Incentive fees are based on the New High Net Trading Profits as defined in
the Advisory Agreement, as amended, between the Partnership, the General Partner
and the Trading Manager. No incentive fees were earned for the nine months ended
September 30, 1996. Incentive fees earned for the nine months ended September
30, 1995 were approximately $269,000. No incentive fees were earned for the
three months ended September 30, 1995.
General and administrative expenses include audit, tax and legal fees as well
as printing and postage costs. General and administrative expenses decreased by
approximately $7,000 but increased by approximately $8,000 for the nine and
three months ended September 30, 1996 as compared to the corresponding periods
in 1995 primarily due to the timing of certain expense accruals recorded in the
respective periods.
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. (a) Exhibits
4.1 Agreement of Limited Partnership of the Registrant, dated
as of May 25, 1988 as amended and restated as of July 12,
1988 (incorporated by reference to Exhibit 3.1 and 4.1 of
Registrant's Annual Report on Form 10-K for the period
ended December 31, 1988)
4.2 Subscription Agreement (incorporated by reference to
Exhibit 4.2 to the Registrant's Registration Statement
on Form S-1, File No. 33-22100)
4.3 Request for Redemption (incorporated by reference to
Exhibit 4.3 to the Registrant's Registration Statement
on Form S-1, File No. 33-22100)
27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K--None
11
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRUDENTIAL-BACHE DIVERSIFIED FUTURES FUND L.P.
By: Seaport Futures Management, Inc.
A Delaware corporation, General Partner
By: /s/ Steven Carlino Date: November 14, 1996
----------------------------------------
Steven Carlino
Vice President
Chief Accounting Officer for the
Registrant
12
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information
extracted from the financial statements for
Prudential-Bache Diversified Futures Fund L.P.
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000833225
<NAME> Prudential-Bache Diversified Futures Fund L.P.
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Sep-30-1996
<PERIOD-TYPE> 9-MOS
<CASH> 2,677,056
<SECURITIES> 14,727,866
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,404,922
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,404,922
<CURRENT-LIABILITIES> 469,727
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 16,935,195
<TOTAL-LIABILITY-AND-EQUITY> 17,404,922
<SALES> 0
<TOTAL-REVENUES> 2,101,681
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,787,390
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 314,291
<EPS-PRIMARY> 5.77
<EPS-DILUTED> 0
</TABLE>
