<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
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: 0-26004
DIVERSIFIED FUTURES TRUST I
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3780260
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One New York Plaza, 14th 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 I. FINANCIAL STATEMENTS
DIVERSIFIED FUTURES TRUST I
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
ASSETS
Equity in commodity trading accounts:
Cash $64,174,647 $79,506,881
Net unrealized gain on open commodity positions 1,794,229 1,513,343
----------- ------------
Net equity 65,968,876 81,020,224
Other receivable 32,072 20,607
----------- ------------
Total assets $66,000,948 $81,040,831
----------- ------------
----------- ------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Redemptions payable $ 3,383,745 $ 7,223,685
Management fee payable 220,003 270,136
Incentive fee payable -- 2,055,497
----------- ------------
Total liabilities 3,603,748 9,549,318
----------- ------------
Commitments
Trust capital
Limited interests (368,157.559 and 401,784.703 interests
outstanding) 61,773,190 70,776,499
General interests (3,719 and 4,059 interests outstanding) 624,010 715,014
----------- ------------
Total trust capital 62,397,200 71,491,513
----------- ------------
Total liabilities and trust capital $66,000,948 $81,040,831
----------- ------------
----------- ------------
Net asset value per limited and general interests ('Interests') $ 167.79 $ 176.16
----------- ------------
----------- ------------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
2
<PAGE>
DIVERSIFIED FUTURES TRUST I
(a Delaware Business Trust)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
--------------------------- ---------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Net realized gain (loss) on commodity
transactions $(1,198,863 ) $2,598,999 $(3,976,971 ) $2,123,380
Change in net unrealized gain on
commodity positions 280,886 (39,003) 437,919 52,137
Interest income 1,901,374 1,386,491 955,534 737,338
------------ ---------- ------------ ----------
983,397 3,946,487 (2,583,518 ) 2,912,855
------------ ---------- ------------ ----------
EXPENSES
Commissions 2,737,520 2,152,199 1,325,645 1,125,268
Management fees 1,408,937 1,117,955 671,172 586,742
Incentive fees 70,715 -- -- --
------------ ---------- ------------ ----------
4,217,172 3,270,154 1,996,817 1,712,010
------------ ---------- ------------ ----------
Net income (loss) $(3,233,775 ) $ 676,333 $(4,580,335 ) $1,200,845
------------ ---------- ------------ ----------
------------ ---------- ------------ ----------
ALLOCATION OF NET INCOME (LOSS)
Limited interests $(3,201,432 ) $ 667,825 $(4,534,525 ) $1,188,374
------------ ---------- ------------ ----------
------------ ---------- ------------ ----------
General interests $ (32,343 ) $ 8,508 $ (45,810 ) $ 12,471
------------ ---------- ------------ ----------
------------ ---------- ------------ ----------
NET INCOME (LOSS) PER WEIGHTED AVERAGE
LIMITED AND GENERAL INTEREST
Net income (loss) per weighted average
limited and general interest $ (8.11 ) $ 1.74 $ (11.68 ) $ 2.94
------------ ---------- ------------ ----------
------------ ---------- ------------ ----------
Weighted average number of limited and
general interests outstanding 398,943 388,037 392,043 408,852
------------ ---------- ------------ ----------
------------ ---------- ------------ ----------
- -------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN TRUST CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
INTERESTS INTERESTS INTERESTS TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust capital--December 31, 1996 405,843.703 $70,776,499 $715,014 $71,491,513
Net loss -- (3,201,432) (32,343 ) (3,233,775)
Redemptions (33,967.144) (5,801,877) (58,661 ) (5,860,538)
------------ ----------- --------- -----------
Trust capital--June 30, 1997 371,876.559 $61,773,190 $624,010 62,397,200
------------ ----------- --------- -----------
------------ ----------- --------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
DIVERSIFIED FUTURES TRUST I
(a Delaware Business Trust)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(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 Diversified Futures Trust I (the 'Trust') as of June 30, 1997 and
the results of its operations for the six and three months ended June 30, 1997
and 1996. 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 Trust's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1996 (the 'Annual Report').
B. Related Parties
Prudential Securities Futures Management Inc., a wholly-owned subsidiary of
Prudential Securities Incorporated ('PSI'), is the managing owner of the Trust
(the 'Managing Owner'). The Managing Owner and its affiliates perform services
for the Trust 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.
Except for costs related to brokerage services, PSI or its affiliates pay the
costs of these services in addition to costs of organizing the Trust and
offering its interests as well as its routine operational, administrative, legal
and auditing fees.
The Trust maintains its trading and cash accounts at PSI, the Trust's
commodity broker. A significant portion of the Trust's cash is utilized for
margin purposes for the Trust's commodity trading activities. PSI credits the
Trust monthly with 100% of the interest it earns on the equity in these
accounts. As described in the Annual Report, all commissions for brokerage
services are paid to PSI.
In connection with the Trust's interbank transactions, PSI engages in foreign
currency forward transactions with the Trust and an affiliate of PSI who, as
principal, attempts to earn a profit on the bid-ask spreads (which must be
competitive) on any foreign currency forward transactions entered into between
the Trust and PSI, on the one hand, and PSI and such affiliate on the other. In
connection with its trading of foreign currencies in the interbank market, PSI
may arrange bank lines of credit at major international banks. To the extent
such lines of credit are arranged, PSI does not charge the Trust for maintaining
such lines of credit, but requires margin deposits with respect to forward
contract transactions.
As of June 30, 1997, a non-U.S. affiliate of the Managing Owner owns 4,681
limited interests of the Trust.
C. Credit and Market Risk
Since the Trust'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 Trust's unrealized
gain (loss) on open commodity positions reflected in the statements of financial
condition. The Trust's exposure to market risk is influenced by a number of
factors including the relationships among the contracts held by the Trust 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.
4
<PAGE>
On the other hand, the Trust must rely solely on the credit of its broker (PSI)
with respect to forward transactions. The Trust 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 Managing Owner attempts to minimize both credit and market risks by
requiring the Trust's trading manager to abide by various trading limitations
and policies. The Managing Owner 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 Managing Owner 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 Trust.
PSI, when acting as the Trust'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 Trust all assets of the
Trust relating to domestic futures and options trading and is not to commingle
such assets with other assets of PSI. At June 30, 1997 and December 31, 1996,
such segregated assets totalled $38,981,747 and $53,711,518, respectively. Part
30.7 of the CFTC regulations also requires PSI to secure assets of the Trust
related to foreign futures and options trading which totalled $27,182,666 and
$26,551,088 at June 30, 1997 and December 31, 1996, respectively. There are no
segregation requirements for assets related to forward trading.
As of June 30, 1997 and December 31, 1996, the Trust's open futures and
forward contracts mature within one year.
At June 30, 1997 and December 31, 1996, gross contract amounts of open
futures and forward contracts are:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Financial Futures Contracts:
Commitments to purchase $840,323,593 $246,536,386
Commitments to sell 127,692,209 85,149,239
Currency Forward Contracts:
Commitments to purchase 111,789,484 55,393,671
Commitments to sell 50,313,613 61,497,457
Other Futures Contracts:
Commitments to purchase 7,862,281 6,735,960
Commitments to sell 38,801,338 25,980,949
</TABLE>
The gross contract amounts represent the Trust'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 Trust 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
Trust considers the 'fair value' of its futures, forward and options contracts
to be the net unrealized gain or loss on the contracts (plus premiums on
options). Thus, the amount at risk associated with counterparty nonperformance
of all contracts is the net unrealized gain included in the statements of
financial condition. The market risk associated with the Trust'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
Trust'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.
5
<PAGE>
At June 30, 1997 and December 31, 1996, the fair value of futures and forward
contracts were:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------------------------- --------------------------
Fair Value Fair Value
-------------------------- --------------------------
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Financial $ 783,081 $ -- $ 66,450 $ 175,344
Other 1,025,410 320,263 1,219,801 58,011
Foreign exchanges
Financial 887,095 427,734 542,415 847,344
Other 42,177 -- 7,758 --
Forward Contracts:
Currencies 1,329,464 1,525,001 1,592,852 835,234
---------- ----------- ---------- -----------
$4,067,227 $ 2,272,998 $3,429,276 $ 1,915,933
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
The following table presents the average fair value of futures and forward
contracts during the six months ended June 30, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1997 June 30, 1996
-------------------------------- --------------------------
<S> <C> <C> <C> <C>
Average Fair Value Average Fair Value
-------------------------------- --------------------------
Assets Liabilities Assets Liabilities
-------------- -------------- ---------- ------------
Futures Contracts:
Domestic exchanges
Financial $ 287,915 $ 45,725 $ 956,931 $ 54,501
Other 1,067,648 112,232 874,898 179,950
Foreign exchanges
Financial 782,605 467,104 830,928 227,336
Other 18,094 -- 11,995 5,713
Forward Contracts:
Currencies 1,907,397 1,538,348 1,929,021 558,824
-------------- -------------- ---------- ------------
$4,063,659 $2,163,409 $4,603,773 $1,026,324
-------------- -------------- ---------- ------------
-------------- -------------- ---------- ------------
</TABLE>
The following table presents the average fair value of futures and forward
contracts during the three months ended June 30, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 1997 June 30, 1996
-------------------------------- --------------------------
<S> <C> <C> <C> <C>
Average Fair Value Average Fair Value
-------------------------------- --------------------------
Assets Liabilities Assets Liabilities
-------------- -------------- ---------- ------------
Futures Contracts:
Domestic exchanges
Financial $ 470,831 $ 11,438 $1,083,991 $ 88,795
Other 953,652 142,559 1,028,900 142,648
Foreign exchanges
Financial 809,869 557,681 522,036 345,412
Other 29,363 -- 18,641 9,461
Forward Contracts:
Currencies 947,158 1,779,007 2,010,448 642,923
-------------- -------------- ---------- ------------
$3,210,873 $2,490,685 $4,664,016 $1,229,239
-------------- -------------- ---------- ------------
-------------- -------------- ---------- ------------
</TABLE>
6
<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 six
months ended June 30, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Six months ended June 30, 1997 Six months ended June 30, 1996
--------------------------------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Change in Change in
Net Realized Net Unrealized Net Realized Net Unrealized
Gains (Losses) Gains/Losses Total Gains (Losses) Gains/Losses Total
-------------- -------------------- ----------- -------------- -------------------- -----------
Futures Contracts:
Domestic exchanges
Financial $ (1,278,888) $ 891,975 $ (386,913) $ 2,683,403 $ (1,134,342) $ 1,549,061
Other 161,051 (456,643) (295,592) 238,030 651,133 889,163
Foreign exchanges
Financial (781,682) 764,290 (17,392) (3,707,780) (715,012) (4,422,792)
Other 52,363 34,419 86,782 (45,572) 8,038 (37,534)
Forward Contracts:
Currencies 648,293 (953,155) (304,862) 3,430,918 1,151,180 4,582,098
-------------- -------------------- ----------- -------------- -------------------- -----------
$ (1,198,863) $ 280,886 $ (917,977) $ 2,598,999 $ (39,003) $ 2,559,996
-------------- -------------------- ----------- -------------- -------------------- -----------
-------------- -------------------- ----------- -------------- -------------------- -----------
</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 June 30, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Three months ended June 30, 1997 Three months ended June 30, 1996
--------------------------------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Change in Change in
Net Realized Net Unrealized Net Realized Net Unrealized
Gains (Losses) Gains/Losses Total Gains (Losses) Gains/Losses Total
-------------- -------------------- ----------- -------------- -------------------- -----------
Futures Contracts:
Domestic exchanges
Financial $ (136,239) $ (36,519) $ (172,758) $ 2,225,022 $ (1,820,767) $ 404,255
Other (177,057) (207,253) (384,310) 1,079,244 1,368,131 2,447,375
Foreign exchanges
Financial (658,231) 285,453 (372,778) (3,282,531) (398,274) (3,680,805)
Other 46,408 18,750 65,158 (45,572) 48,588 3,016
Forward Contracts:
Currencies (3,051,852) 377,488 (2,674,364) 2,147,217 854,459 3,001,676
-------------- -------------------- ----------- -------------- -------------------- -----------
$ (3,976,971) $ 437,919 $(3,539,052) $ 2,123,380 $ 52,137 $ 2,175,517
-------------- -------------------- ----------- -------------- -------------------- -----------
-------------- -------------------- ----------- -------------- -------------------- -----------
</TABLE>
7
<PAGE>
DIVERSIFIED FUTURES TRUST I
(a Delaware Business Trust)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Trust commenced operations on January 5, 1995 with gross proceeds of
$25,262,800 allocated to commodities trading. The Trust continued to offer
interests on a monthly basis until the continuous offering period ended pursuant
to the terms of the offering on August 31, 1996, resulting in additional gross
proceeds to the Trust of $41,129,100.
At June 30, 1997, 100% of the Trust's net assets were allocated to commodity
trading. A significant portion of the net assets was held in cash which is used
as margin for the Trust's trading in commodities. Inasmuch as the sole business
of the Trust is to trade in commodities, the Trust continues to own such liquid
assets to be used as margin. PSI credits the Trust monthly with 100% of the
interest it earns on the equity in these accounts.
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 Trust from promptly liquidating its commodity
futures positions.
Since the Trust's business is to trade futures, forward and options
contracts, its capital is at risk due to change in the value of these contracts
(market risk) or the inability of counterparties to perform under the terms of
the contract (credit risk). The Managing Owner attempts to minimize these risks
by requiring the Trust'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 Trust's futures, forward and
options contracts.
The Trust does not have, nor does it expect to have, any capital assets.
Redemptions of limited interests for the six and three months ended June 30,
1997 were $5,801,877 and $3,349,851, respectively. Redemptions of general
interests for the six and three months ended June 30, 1997 were $58,661 and
$33,894, respectively. Redemptions of limited and general interests from the
commencement of operations, January 5, 1995, to June 30, 1997 totalled
$28,146,993 and $154,441, respectively. Future redemptions will impact the
amount of funds available for investment in commodity contracts in subsequent
periods.
John W. Henry & Co., Inc. (the 'Trading Manager') has determined that its Yen
Financial Portfolio no longer meets its original investment objectives and
therefore, terminated its Yen Financial Portfolio effective March 31, 1997.
Accordingly, as of April 1, 1997, the Managing Owner reallocated assets
previously traded pursuant to the Yen Financial Portfolio to the Trading
Manager's G-7 Currency Portfolio, increasing the percentage of the Trust's
assets allocated to that program by 3%.
Results of Operations
The net asset value per Interest as of June 30, 1997 was $167.79, a decrease
of 4.75% from the December 31, 1996 net asset value per Interest of $176.16.
The Trust's negative performance in April resulted from losses incurred in
the financial and grain sectors. Profits were posted in the currency, soft,
metal, stock index and energy sectors. Global equity markets tracked the
downward movement of U.S. bond and stock prices as economic reports seemed to
strengthen the argument for another short-term rate increase by the U.S. Federal
Reserve Bank during the first two weeks of the month. However, bearish sentiment
gave way to exuberance in the second half as new data, strong corporate earnings
and a budget deal in Washington restored investor confidence. This sharp shift
in the interest rate markets incurred losses for the Trust, as U.S., Australian,
Japanese, Canadian, British, German and French bond positions were unprofitable.
In the currency sector, the Trust benefited from
8
<PAGE>
continuing trends. There was little to shift the U.S. dollar from its position
of strength in world markets. Talk of central bank intervention to stem the
dollar's rise against the Japanese yen ruffled the markets throughout the month.
However, the dollar continued to rise in the weeks leading up to the meeting of
G-7 finance ministers on April 27, 1997 reaching new highs against both the yen
and German mark. In the final week of trading, new economic data dampened
expectations for a second U.S. rate hike and the dollar sagged against its major
counterparts. Positions in Japanese yen, German mark, Canadian dollar and Swiss
franc posted gains. In the soft sector, supply concerns continued to push coffee
prices upward. Long coffee positions were profitable.
May's negative performance resulted from losses in the currency, energy,
financial and metal sectors offsetting profits earned in the grain, index and
soft sectors. In the currency sector, the Trust suffered losses in the Japanese
yen, British pound, and Deutsche mark. Upset elections in France and Great
Britain, verbal intervention by Japanese officials, another U.S. Federal Reserve
meeting on interest rate policy, and extraordinary public bickering between the
German government and central bank contributed to a general state of confusion
in the foreign exchange markets. In Japan, official warnings of intervention to
cap the U.S. dollar's rise against the Japanese yen and a report that the Bank
of Japan might raise a key interest rate pushed the dollar to a 4 1/2 month low
against the yen. Towards month end, the dollar reversed itself as Japanese
officials warned of intervention and said interest rates would not be increased.
In the financial sector, bond markets were equally unsettled reflecting U.S.
interest rate concerns and renewed doubts about monetary union in Europe.
Japanese and European bond positions were unprofitable. In the energy sector,
gains in natural gas positions failed to offset losses in crude oil. In the
index sector, small gains were realized in the Nikkei and Australian All
Ordinaries, which logged its fifth record high for the month on May 29th.
June's flat performance resulted from gains in the metal, financial, index,
grain and currency sectors, which were slightly offset by losses in the energy
and soft sectors. In the financial sector, the Trust profited from numerous bond
positions including U.S., Australian, Italian and German bonds. This was due, in
part, to continued uncertainty surrounding the European Monetary Union (EMU)
which benefited positions held in bonds from countries outside and from within
the Union. Italian bonds, for example, strengthened on improved prospects for
Italy's entry into the EMU. Profits were also achieved in the metal sector,
specifically in gold and silver. In the index sector, the Trust saw gains in
both the Nikkei Dow and the Australian index. In the soft sector, the Trust had
losses in coffee as a result of improved supplies. The availability of 2.5
million bags of coffee promised by the Colombian Coffee Federation, Brazilian
exports at record rates to take advantage of high prices, and good weather
prognostications in Brazil helped to drive coffee prices down. In the energy
sector, light crude oil positions were unprofitable as OPEC pressure caused
prices to rise.
Interest income is earned on the net equity held at PSI and, therefore,
varies monthly according to interest rates, trading performance, contributions
and redemptions. Interest income increased approximately $515,000 and $218,000
for the six and three months ended June 30, 1997 compared to the corresponding
periods in 1996 primarily due to a higher net equity in the Trust as a result of
additional contributions and strong trading performance from September 1996
through January 1997 and, to a lesser extent, an increase in interest rates.
Commissions are calculated on the Trust's net asset value at the beginning of
the month and, therefore, vary according to trading performance, contributions
and redemptions. Commissions for the six and three months ended June 30, 1997
increased approximately $585,000 and $200,000 compared to the corresponding
periods in 1996. These increases were primarily due to a higher monthly net
asset values as a result of additional contributions and strong trading
performance from September 1996 through January 1997.
All trading decisions for the Trust are made by John W. Henry & Co., Inc.
Management fees are calculated on the Trust's net asset value at the end of each
month and, therefore, are affected by trading performance, contributions and
redemptions. Management fees for the six and three months ended June 30, 1997
increased approximately $291,000 and $84,000 as compared to the corresponding
periods in 1996 for the same reasons commissions increased as discussed above.
Incentive fees are based on the New High Net Trading Profits generated by the
Trading Manager, as defined in the Advisory Agreement between the Trust, the
Managing Owner and the Trading Manager. Incentive fees of approximately $71,000
generated during the six months ended June 30, 1997 were the result of favorable
trading performance during January. No incentive fees were generated during the
six months ended June 30, 1996.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--There are no material legal proceedings pending by or
against the Registrant or the Managing Owner.
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--
3.1
and
4.1-- Amended and Restated Declaration of Trust and Trust Agreement of
the Registrant dated as of August 25, 1994, as amended and
restated as of September 14, 1994 (incorporated by reference to
Exhibits 3.1 and 4.1 of the Registrant's Form 10-Q for the period
ended September 30, 1994)
4.2-- Subscription Agreement (incorporated by reference to
Exhibit C to the Registrant's Registration Statement on
Form S-1, File No. 33-81534, dated as of September 13,
1994)
4.3-- Request for Redemption (incorporated by reference to
Exhibit D to the Registrant's Registration Statement
on Form S-1, File No. 33-81534, dated as of September
13, 1994)
27.1--Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K--None
10
<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.
Diversified Futures Trust I
By: Prudential Securities Futures Management Inc.
A Delaware corporation, Managing Owner
By: /s/ Steven Carlino Date: August 14, 1997
----------------------------------------
Steven Carlino
Vice President
Chief Accounting Officer for the
Registrant
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Diversified Futures Trust I
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000926805
<NAME> Diversified Futures Trust I
<MULTIPLIER> 1
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0
0
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</TABLE>
