<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, 1998
/ / 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 Identification No.)
incorporation or organization)
One New York Plaza, 13th Floor, New York, New York 10292
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 778-7866
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>
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,
1998 1997
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
ASSETS
Equity in commodity trading accounts:
Cash $ 1,833,636 $ 3,663,968
U.S. Treasury bills, at amortized cost 13,806,810 14,948,662
Net unrealized gain on open commodity positions 3,590,508 1,431,940
------------- ------------
Total assets $19,230,954 $20,044,570
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable $ 735,212 $ 227,022
Management fees payable 63,964 66,634
Incentive fees payable 61,366 160,551
Accrued expenses 41,530 54,239
------------- ------------
Total liabilities 902,072 508,446
------------- ------------
Commitments
Partners' capital
Limited partners (39,193 and 43,534 units outstanding) 18,145,541 19,340,647
General partner (396 and 440 units outstanding) 183,341 195,477
------------- ------------
Total partners' capital 18,328,882 19,536,124
------------- ------------
Total liabilities and partners' capital $19,230,954 $20,044,570
------------- ------------
------------- ------------
Net asset value per limited and general partnership unit ('Units') $ 462.98 $ 444.27
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
2
<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,
------------------------- -------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
REVENUES
Net realized gain (loss) on commodity
transactions $ (215,080) $ 785,468 $ (365,719) $1,257,948
Change in net unrealized gain/loss on open
commodity positions 2,158,568 659,859 4,096,390 557,973
Interest from U.S Treasury bills 498,253 561,921 156,173 193,988
---------- ---------- ---------- ----------
2,441,741 2,007,248 3,886,844 2,009,909
---------- ---------- ---------- ----------
EXPENSES
Commissions 1,145,891 1,275,482 334,092 410,976
Incentive fees 61,366 -- 61,366 --
Management fees 525,414 569,851 172,257 188,127
General and administrative 58,522 59,496 21,783 17,382
---------- ---------- ---------- ----------
1,791,193 1,904,829 589,498 616,485
---------- ---------- ---------- ----------
Net income $ 650,548 $ 102,419 $3,297,346 $1,393,424
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ALLOCATION OF NET INCOME
Limited partners $ 644,034 $ 101,393 $3,264,354 $1,379,473
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
General partner $ 6,514 $ 1,026 $ 32,992 $ 13,951
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET INCOME PER WEIGHTED AVERAGE
LIMITED AND GENERAL PARTNERSHIP UNIT
Net income per weighted average
limited and general partnership unit $ 15.30 $ 2.19 $ 80.08 $ 30.80
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
limited and general partnership units
outstanding 42,514 46,689 41,177 45,246
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
- -----------------------------------------------------------------------------------------------------
</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, 1997 43,974 $19,340,647 $195,477 $19,536,124
Net income 644,034 6,514 650,548
Redemptions (4,385) (1,839,140) (18,650) (1,857,790)
------ ----------- -------- -----------
Partners' capital--September 30, 1998 39,589 $18,145,541 $183,341 $18,328,882
------ ----------- -------- -----------
------ ----------- -------- -----------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
PRUDENTIAL-BACHE DIVERSIFIED FUTURES FUND L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(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, 1998 and the results of its operations for the nine and
three months ended September 30, 1998 and 1997. 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, 1997.
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 months ended September 30, 1998 and 1997 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, 1998 and 1997 were:
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
------------------------- ---------------------
1998 1997 1998 1997
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Commissions $1,145,891 $1,275,482 $334,092 $410,976
General and Administrative 8,130 9,900 2,377 1,050
---------- ---------- -------- --------
$1,154,021 $1,285,382 $336,469 $412,026
---------- ---------- -------- --------
---------- ---------- -------- --------
</TABLE>
Expenses payable to the General Partner and its affiliates (which are
included in accrued expenses) as of September 30, 1998 and December 31, 1997
were $5,502 and $5,780, respectively.
The Partnership maintains its trading and cash accounts at PSI, the
Partnership's commodity broker and an affiliate of the General Partner. Except
for the portion of assets that is deposited as margin to maintain forward
currency contract positions as further discussed below, the Partnership's assets
are maintained either with PSI or, for margin purposes, with the various
exchanges on which the Partnership is permitted to trade.
The Partnership, acting through its trading manager, executes
over-the-counter, spot, forward and/or option foreign exchange transactions with
PSI. PSI then engages in back-to-back trading with an affiliate,
Prudential-Bache Global Markets Inc. ('PBGM'). PBGM attempts to earn a profit on
such transactions. PBGM keeps its prices on foreign currency competitive with
other interbank trading desks. All over-the-
counter currency transactions are conducted between PSI and the Partnership
pursuant to a line of credit. PSI may require that collateral be posted against
the marked-to-market position of the Partnership.
4
<PAGE>
C. Credit and Market Risk
Since the Partnership's business is to trade futures, forward (including
foreign exchange transactions) 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, 1998 and December 31, 1997, such segregated assets totalled
$12,875,959 and $15,454,142, 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 $5,730,360 and $4,551,236 at September 30,
1998 and December 31, 1997, respectively. There are no segregation requirements
for assets related to forward trading.
As of September 30, 1998, all open futures and forward contracts mature
within one year.
5
<PAGE>
At September 30, 1998 and December 31, 1997, gross contract amounts of open
futures and forward contracts are:
<TABLE>
<CAPTION>
1998 1997
-------------- -----------------
<S> <C> <C>
Futures Currency Contracts:
Commitments to purchase $ 4,394,250 $ 3,390,000
Commitments to sell 698,200 6,473,978
Forward Currency Contracts:
Commitments to purchase 26,014,468 1,407,251
Commitments to sell 1,322,456 17,951,973
Financial Futures Contracts:
Commitments to purchase 343,443,752 94,581,750
Commitments to sell 4,145,827 57,703,723
Other Futures Contracts:
Commitments to purchase 1,383,932 3,567,655
Commitments to sell 2,806,689 9,032,727
</TABLE>
The gross contract amounts represent the Partnership's potential involvement
in a particular class of financial instrument (if it were to take or make
delivery on an underlying futures or forward contract). The gross contract
amounts significantly exceed the future cash requirements as the Partnership
intends to close out open positions prior to settlement and thus is generally
subject only to the risk of loss arising from the change in the value of the
contracts. As such, the Partnership considers the 'fair value' of its futures
and forward contracts to be the net unrealized gain or loss on the contracts.
Thus, the amount at risk associated with counterparty nonperformance of all
contracts is the net unrealized gain included in the statements of financial
condition. The market risk associated with the Partnership's commitments to
purchase commodities is limited to the gross contract amounts involved, while
the market risk associated with its commitments to sell is unlimited since the
Partnership's potential involvement is to make delivery of an underlying
commodity at the contract price; therefore, it must repurchase the contract at
prevailing market prices.
At September 30, 1998 and December 31, 1997, the fair values of open futures
and forward contracts were:
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 881,213 $ 24,975 $ 139,389 $ --
Currencies 133,450 8,213 170,950 --
Other 79,195 67,805 872,883 33,653
Foreign exchanges
Financial 1,971,828 -- 369,178 132,611
Other 10,698 9,518 7,642 1,030
Forward Contracts:
Currencies 853,989 229,354 280,315 241,123
---------- ----------- ---------- -----------
$3,930,373 $ 339,865 $1,840,357 $ 408,417
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
6
<PAGE>
The following table presents the average fair value of futures and forward
contracts during the nine months ended September 30, 1998 and 1997,
respectively.
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 252,685 $ 31,819 $ 156,350 $ 17,608
Currencies 129,835 31,873 91,729 18,010
Other 298,047 65,876 273,732 47,647
Foreign exchanges
Financial 674,464 98,256 478,159 89,059
Other 10,739 6,215 4,747 2,195
Forward Contracts:
Currencies 252,043 462,832 428,646 438,809
---------- ----------- ---------- -----------
$1,617,813 $ 696,871 $1,433,363 $ 613,328
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
The following table presents the average fair value of futures and forward
contracts during the three months ended September 30, 1998 and 1997,
respectively.
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 420,507 $ 39,163 $ 331,403 $ 12,219
Currencies 71,968 41,997 153,447 28,188
Other 220,712 79,002 299,303 87,942
Foreign exchanges
Financial 1,068,096 118,818 825,113 29,189
Other 12,558 8,979 5,966 4,459
Forward Contracts:
Currencies 239,985 702,375 323,960 430,515
---------- ----------- ---------- -----------
$2,033,826 $ 990,334 $1,939,192 $ 592,512
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
7
<PAGE>
The following tables present trading revenues from futures and forward
contracts during the nine and three months ended September 30, 1998 and 1997,
respectively.
<TABLE>
<CAPTION>
For the nine months ended For the three months ended
September 30, September 30,
-------------------------- --------------------------------
1998 1997 1998 1997
---------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $1,230,549 $ 19,345 $1,570,846 $ 173,489
Currencies (203,500) (99,228) (102,726) (138,114)
Other (863,996) 188,597 (388,617) 2,412
Foreign exchanges
Financial 2,312,625 1,718,810 2,723,555 1,784,428
Other 15,599 (39,784) (8,936) (57,573)
Forward Contracts:
Currencies (547,789) (342,413) (63,451) 51,279
---------- ----------- ---------------- -----------
$1,943,488 $ 1,445,327 $3,730,671 $ 1,815,921
---------- ----------- ---------------- -----------
---------- ----------- ---------------- -----------
</TABLE>
8
<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, 1998, 100% of the Partnership's total net assets (the 'Net
Asset Value') was allocated to commodities trading. A significant portion of the
Net Asset Value was held in U.S. Treasury bills (which represented approximately
72% 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 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.
Redemptions recorded for the nine and three months ended September 30, 1998
were $1,839,140 and $727,805 for the limited partners and $18,650 and $7,407 for
the General Partner, respectively. Redemptions by limited partners and the
general partner from commencement of operations (October 19, 1988) through
September 30, 1998 totalled $43,277,091 and $1,042,244, 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.
Effective August 1, 1998, the General Partner reduced the annual rate of
commissions charged to the Partnership from 9% to 8% of Net Asset Value.
Year 2000 Risk
Investment funds, like financial and business organizations and individuals
around the world, depend on the smooth functioning of computer systems. The year
2000, however, holds the potential for a significant disruption in the operation
of these systems. Many computer systems in use today cannot distinguish the year
2000 from the year 1900 because of the way in which dates are encoded. This is
commonly known as the 'Year 2000 Problem.' The Partnership could be adversely
affected if computer systems used by it or any third party with whom it has a
material relationship do not properly perform date comparisons and calculations
concerning dates on or after January 1, 2000, which in turn could have a
negative impact on the handling or determination of trades and prices and the
services provided to the Partnership.
The Partnership has engaged third parties to perform primarily all of the
services it needs. Accordingly, the Partnership's Year 2000 problems, if any,
are not its own but those that center on the ability of the General Partner,
Prudential Securities Incorporated, its trading manager and any other third
party with
9
<PAGE>
whom the Partnership has a material relationship (individually, a 'Service
Provider,' and collectively, the 'Service Providers') to address and correct
problems that may cause their systems not to function as intended as a result of
the Year 2000 Problem.
The Partnership has received assurances from its General Partner and from
Prudential Securities Incorporated that they anticipate being able to continue
their operations without any material adverse impact from the Year 2000 Problem.
Although other Service Providers, such as the Partnership's trading manager,
have not made similar representations to the Partnership, the Partnership has no
reason to believe that these Service Providers will not take steps necessary to
avoid any material adverse impact on the Partnership, though there can be no
assurance that this will be the case. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Problem by the Service Providers, or by
governments, exchanges, clearing houses, regulators, banks and other third
parties, are unknown to the Partnership at this time, but could have a material
adverse impact on the operations of the Partnership. The General Partner will
promptly notify the Partnership's limited partners in the event it determines
that the Year 2000 Problem will have a material adverse impact on the
Partnership's operations.
The Partnership has considered various alternatives as a contingency plan. If
the Year 2000 Problems are systemic, for example, the federal government, the
banking system, exchanges or utilities are affected materially, there may be no
adequate contingency plan for the Partnership to follow other than to suspend
operations. If the Year 2000 Problems are related to one or more of the other
Service Providers selected by the Partnership, the Partnership believes that
each such Service Provider is prepared to address any Year 2000 Problems which
arise that could have a material adverse impact on the Partnership's operations.
Results of Operations
The Net Asset Value per Unit as of September 30, 1998 was $462.98, an
increase of 4.21% from the December 31, 1997 Net Asset Value per Unit of
$444.27. Additionally, the Net Asset Value per Unit increased 20.91% during the
quarter ended September 30, 1998.
Third quarter trading resulted in gains. Profitable sectors included the
financial, grain, index and meat sectors. Partially offsetting gains, losses
were experienced in the metal, currency, soft and energy sectors. Residual
effects from June's Japanese yen intervention resulted in a rough start for the
Partnership's third quarter performance. However, markets subsequently began to
shift in directions favoring the Partnership's positions. The financial sector
began the quarter with considerable volatility. As the quarter progressed, this
sector began to draw attention as an alternative to the falling stock market.
This 'flight-to-quality' resulted in significant profits for the Partnership's
positions, particularly in German ten-year, Japanese, U.S. ten-year, U.S.
Treasury and Eurodollar bonds. In the grain sector, favorable weather for crops
early on in the quarter caused prices of corn and wheat to plunge, profiting the
Partnership's short exposure. Short positions in the index sector performed well
as the British FTSE 100 fell along with other world indices in August and
September. Losses were experienced primarily in the metal sector. Silver
positions lost the greatest amount as indications of declining warehouse
inventories caused prices to rise. Copper trading was unprofitable for the
Partnership as well. Currency sector exposure led to losses in Japanese yen,
British pound, Australian dollar and German mark positions as market uncertainty
led to increased volatility.
Interest income from U.S. Treasury bills for the nine and three months ended
September 30, 1998 decreased by approximately $64,000 and $38,000, respectively,
as compared to the same periods in 1997. These declines in interest income were
the result of fewer funds being invested in U.S. Treasury bills principally due
to weak trading performance during the first half of 1998 and redemptions, as
well as the result of a decline in interest rates during 1998.
Commissions paid to PSI 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 $130,000 and $77,000 for the nine and three months ended September
30, 1998 as compared to the corresponding periods in 1997 principally due to the
effect of weak trading performance during the first half of 1998 and redemptions
on the monthly Net Asset Values as well as a reduction in the commission rate
from 9% to 8% as discussed in Liquidity and Capital Resources above.
Management fees are calculated on the Partnership's Net Asset Value at the
end of each month and, therefore, are affected by trading performance and
redemptions. Management fees decreased by
approxi-
10
<PAGE>
mately $44,000 and $16,000 for the nine and three months ended September 30,
1998 as compared to the corresponding periods in 1997 due to fluctuations in
monthly Net Asset Values as described above.
Incentive fees are based on the New High Net Trading Profits as defined in
the Advisory Agreement, as amended, among the Partnership, the General Partner
and the trading manager. Incentive fees earned by the trading manager, as a
result of a strong trading performance during the third quarter of 1998, were
approximately $61,000 for the nine and three months ended September 30, 1998. No
incentive fee was earned by the trading manager during the corresponding periods
in 1997.
General and administrative expenses include audit, tax and legal fees as well
as printing and postage costs. General and administrative expenses for the nine
months ended September 30, 1998 decreased by approximately $1,000 as compared to
the corresponding period in 1997 but increased by approximately $4,000 for the
three months ended September 30, 1998 as compared to the corresponding period in
1997.
11
<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
12
<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 13, 1998
----------------------------------------
Steven Carlino
Vice President
Chief Accounting Officer for the Registrant
13
<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-31-1998
<PERIOD-START> Jan-1-1998
<PERIOD-END> Sep-30-1998
<PERIOD-TYPE> 9-MOS
<CASH> 1,833,636
<SECURITIES> 17,397,318
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,230,954
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,230,954
<CURRENT-LIABILITIES> 902,072
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 18,328,882
<TOTAL-LIABILITY-AND-EQUITY> 19,230,954
<SALES> 0
<TOTAL-REVENUES> 2,441,741
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,791,193
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 650,548
<EPS-PRIMARY> 15.30
<EPS-DILUTED> 0
</TABLE>
