<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1996
Commission File Number 33-75056
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3729162
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Smith Barney Futures Management Inc.
390 Greenwich St. - 1st Fl.
New York, New York 10013
(Address and Zip Code of principal executive offices)
(212) 723-5424
(Registrant's telephone number, including area code)
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 X No
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SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at
March 31, 1996 and December 31,
1995. 3
Statements of Income and Expenses and
Partners' Capital for the three months
ended March 31, 1996 and 1995. 4
Notes to Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7 - 8
PART II - Other Information 9
</TABLE>
2
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PART I
Item 1. Financial Statements
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Equity in commodity futures trading account:
Cash and cash equivalents $168,885,828 $181,687,559
Net unrealized appreciation on open futures contracts 10,119,701 18,951,551
Commodity options owned, at market
value (cost $5,360) 5,520
------------ ------------
179,005,529 200,644,630
Interest receivable 592,142 675,035
------------ ------------
$179,597,671 $201,319,665
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses:
Commissions $ 836,650 $ 940,399
Management fees 401,629 447,124
Other 131,279 107,357
Redemptions payable 5,833,732 5,631,797
Commodity options written, at market
value (premiums received $2,400) 2,560
------------ ------------
7,203,290 7,129,237
------------ ------------
Partners' Capital
General Partner, 2,048.9308 Unit
equivalents outstanding
in 1996 and 1995 2,096,548 2,236,736
Limited Partners, 166,430.4618 and
175,835.9644 Units of Limited Partnership
Interest outstanding in 1996 and 1995,
respectively 170,297,833 191,953,692
------------ ------------
172,394,381 194,190,428
------------ ------------
$179,597,671 $201,319,665
============ ============
</TABLE>
See Notes to Financial Statements.
3
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SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
STATEMENTS OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE - MONTHS THREE - MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1996 1995
------------ ------------
<S> <C> <C>
Income:
Net gains (losses) on trading of commodity futures:
Realized gains (losses) on closed positions $ (842,886) $ 17,910,950
Change in unrealized gains/losses on open positions (8,831,850) 1,536,489
------------ ------------
(9,674,736) 19,447,439
Less, brokerage commissions and clearing fees
($122,902 and $122,320, respectively) (2,897,381) (2,862,837)
------------ ------------
Net realized and unrealized gains (losses) (12,572,117) 16,584,602
Interest income 1,753,386 1,808,529
------------ ------------
(10,818,731) 18,393,131
------------ ------------
Expenses:
Management fees 1,217,311 1,292,969
Other expense 88,619 56,977
Incentive fees 1,429,958
------------ ------------
1,305,930 2,779,904
------------ ------------
Net income (loss) (12,124,661) 15,613,227
Sale of Additional Limited Partnership Interest 2,035,483 6,541,995
Redemption of Limited Partnership Interest (11,706,869) (17,386,211)
Redemption of General Partner's Interest (60,045)
------------ ------------
Net increase (decrease) in Partners' capital (21,796,047) 4,708,966
Partners' capital, beginning of period 194,190,428 179,260,521
------------ ------------
Partners' capital, end of period $172,394,381 $183,969,487
============ ============
Net asset value per Unit
( 168,479.3926 and 174,555.9245 Units outstanding
at March 31, 1996 and 1995, respectively) $ 1,023.24 $ 1,053.93
============ ============
Net income (loss) per Unit of Limited Partnership
Interest and General Partnership Unit equivalent $ (68.42) $ 86.87
============ ============
</TABLE>
See Notes to Financial Statements.
4
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SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
General
Smith Barney Diversified Futures Fund L.P. (the "Partnership") is a
limited partnership organized under the laws of the State of New York, on August
13, 1993 to engage in the speculative trading of a diversified portfolio of
commodity interests including futures contracts, options and forward contracts.
The commodity interests that are traded by the Partnership are volatile and
involve a high degree of market risk. The Partnership commenced trading
operations on January 12, 1994.
Smith Barney Futures Management Inc. acts as the general
partner (the "General Partner") of the Partnership. Smith Barney
Inc. ("SB"), an affiliate of the General Partner, acts as commodity
broker for the Partnership. All trading decisions are made for the
Partnership by Campbell & Company, Inc., John W. Henry & Co., Hyman
Beck & Company Inc., Chesapeake Capital Corp., Abraham Trading
Company and Rabar Market Research (collectively, the "Advisors").
The accompanying financial statements are unaudited but, in the opinion
of management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Partnership's financial
condition at March 31, 1996 and the results of its operations for the three
months ended March 31, 1996 and 1995. These financial statements present the
results of interim periods and do not include all disclosures normally provided
in annual financial statements. It is suggested that these financial statements
be read in conjunction with the financial statements and notes included in the
Partnership's annual report on Form 10-K filed with Securities and Exchange
Commission for the year ended December 31, 1995.
Due to the nature of commodity trading, the results of operations for the
interim periods presented should not be considered indicative of the results
that may be expected for the entire year.
5
<PAGE> 6
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS
(continued)
Net Asset Value Per Unit
Changes in net asset value per Unit for the three months ended March 31,
1996 and 1995 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Net realized and unrealized
gains (losses) $ (70.97) $ 92.22
Interest income 9.94 9.76
Expenses (7.39) (15.11)
--------- ---------
Increase (decrease) for period (68.42) 86.87
Net Asset Value per Unit,
beginning of period 1,091.66 967.06
--------- ---------
Net Asset Value per Unit,
end of period $1,023.24 $1,053.93
========= =========
</TABLE>
6
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
The Partnership does not engage in the sale of goods or services. Its
only assets are its equity in its commodity futures trading account, consisting
of cash and cash equivalents, net unrealized appreciation (depreciation) on open
futures contracts and interest receivable. Because of the low margin deposits
normally required in commodity futures trading, relatively small price movements
may result in substantial losses to the Partnership. While substantial losses
could lead to a decrease in liquidity, no such losses occurred during the first
quarter of 1996.
The Partnership is party to financial instruments with offbalance sheet
risk, including derivative financial instruments and derivative commodity
instruments, in the normal course of its business. These financial instruments
include forwards, futures and options, whose value is based upon an underlying
asset, index, or reference rate, and generally represent future commitments to
exchange currencies or cash flows, or to purchase or sell other financial
instruments at specified terms at specified future dates. Each of these
instruments is subject to various risks similar to those relating to the
underlying financial instruments including market and credit risk. The General
Partner monitors and controls the Partnership's risk exposure on a daily basis
through financial, credit and risk management monitoring systems and,
accordingly believes that it has effective procedures for evaluating and
limiting the credit and market risks to which the Partnership is subject.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by gains or losses on commodity futures
trading, expenses, interest income, additions and redemptions of Units and
distributions of profits, if any.
For the three months ended March 31, 1996 Partnership capital decreased
11.2% from $194,190,428 to $172,394,381. This decrease was attributable to net
loss from operations of $12,124,661 and net redemptions of 11,310.7826 units
totaling $11,706,869 which was partially offset by additional sales of
1,905.2800 units totaling $2,035,483.
Results of Operations
During the Partnership's first quarter of 1996, the net asset
value per Unit decreased 6.3% from $1,091.66 to $1,023.24 as
compared to an increase of 9.0% in the first quarter of 1995. The
7
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Partnership experienced a net trading loss before commissions and expenses in
the first quarter of 1996 of $9,674,736. Losses were recognized in the trading
of commodity futures in precious metals, stock indices, agricultural products
and energy products. These losses were partially offset by gains recognized in
the trading of currencies and interest rates. The Partnership experienced a net
trading gain before commissions and expenses in the first quarter of 1995 of
$19,447,439. These gains were primarily attributable to the trading of commodity
futures in precious metals, foreign currencies, stock indices and agricultural
products and were partially offset by losses realized in energy products.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisors to
identify correctly those price trends. These price trends are influenced by,
among other things, changing supply and demand relationships, weather,
governmental, agricultural, commercial and trade programs and policies, national
and international political and economic events and changes in interest rates.
To the extent that market trends exist and the Advisors are able to identify
them, the Partnership expects to increase capital through operations.
Interest income on 80% of the Partnership's daily equity maintained in
cash was earned on the monthly average 30-day U.S. Treasury Bill Yield. Interest
income for the three months ended March 31, 1996 decreased by $55,143 as
compared to the corresponding period in 1995. The decrease in interest income is
primarily due to a decrease in interest rates during the three months ended
March 31, 1996 as compared to the corresponding period in 1995.
Brokerage commissions are calculated on the Partnership's net asset
value as of the last day of each month and, therefore, vary according to trading
performance, subscriptions and redemptions. Commissions for the three months
ended March 31, 1996 increased by $34,544 as compared to the corresponding
period in 1995.
Management fees are calculated on the portion of the Partnership's net
asset value allocated to each Advisor at the end of the month and, therefore,
are affected by trading performance, subscriptions and redemptions. Management
fees for the three months ended March 31, 1996 decreased by $75,658 as compared
to the corresponding period in 1995.
Incentive fees are based on the new appreciation generated by each
Advisor at the end of the quarter, as defined in the advisory agreements between
the Partnership, the General Partner and each Advisor. No incentive fees were
earned for the three months ended March 31, 1996. Trading performance for the
three months ended March 31, 1995 resulted in incentive fees of $1,429,958.
8
<PAGE> 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
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 - None
(b) Reports on Form 8-K - None
9
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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.
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
By: Smith Barney Futures Management Inc.
----------------------------------------------
(General Partner)
By: /s/ David J. Vogel, President
----------------------------------------------
David J. Vogel, President
Date: 5/10/96
------------------------
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 and on the dates indicated.
By: Smith Barney Futures Management Inc.
----------------------------------------------
(General Partner)
By: /s/ David J. Vogel, President
----------------------------------------------
David J. Vogel, President
Date: 5/10/96
------------------------
By /s/ Daniel A. Dantuono
----------------------------------------------
Daniel A. Dantuono
Chief Financial Officer and
Treasurer
Date: 5/10/96
------------------------
10
<PAGE> 11
EXHIBIT INDEX
-------------
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000911503
<NAME> SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 168,885,828
<SECURITIES> 10,119,701
<RECEIVABLES> 592,142
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 179,597,671
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 179,597,671
<CURRENT-LIABILITIES> 7,203,290
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 172,394,381
<TOTAL-LIABILITY-AND-EQUITY> 179,597,671
<SALES> 0
<TOTAL-REVENUES> (10,818,731)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,305,930
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (12,124,661)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,124,661)
<EPS-PRIMARY> (68.42)
<EPS-DILUTED> 0
</TABLE>
