DIVERSIFIED FUTURES TRUST I, 10-K, 2000-03-30

DIVERSIFIED FUTURES TRUST I
10-K, 2000-03-30
COMMODITY CONTRACTS BROKERS & DEALERS

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<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the fiscal year ended December 31, 1999

/ / 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 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

Securities registered pursuant to Section 12(b) of the Act:
None
- --------------------------------------------------------------------------------

Securities registered pursuant to Section 12(g) of the Act:
Limited Interests
- --------------------------------------------------------------------------------
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes CK No __

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [CK]

DOCUMENTS INCORPORATED BY REFERENCE

Amended and Restated Declaration of Trust and Trust Agreement of the
Registrant dated as of August 25, 1994, included as part of the Registration
Statement on Form S-1 (File No. 33-81534) filed with the Securities and Exchange
Commission on September 13, 1994, pursuant to Rule 424(b) of the Securities Act
of 1933, is incorporated by reference into Part IV of this Annual Report on Form
10-K

Registrant's Annual Report to Interest holders for the year ended December
31, 1999 is incorporated by reference into Parts II and IV of this Annual Report
on Form 10-K

Index to exhibits can be found on pages 11 and 12.

<PAGE>
DIVERSIFIED FUTURES TRUST I
(a Delaware Business Trust)

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1 Business......................................................................... 3
Item 2 Properties....................................................................... 3
Item 3 Legal Proceedings................................................................ 3
Item 4 Submission of Matters to a Vote of Interest Holders.............................. 4

<CAPTION>
PART II
<S> <C> <C>
Item 5 Market for the Registrant's Interests and Related Interest Holder Matters........ 4
Item 6 Selected Financial Data.......................................................... 4
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 4
Item 7A Quantitative and Qualitative Disclosures About Market Risk....................... 4
Item 8 Financial Statements and Supplementary Data...................................... 8
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 8

<CAPTION>
PART III
<S> <C> <C>
Item 10 Directors and Executive Officers of the Registrant............................... 8
Item 11 Executive Compensation........................................................... 10
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 10
Item 13 Certain Relationships and Related Transactions................................... 10

<CAPTION>
PART IV
<S> <C> <C>
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.................. 11
Financial Statements and Financial Statement Schedules........................... 11
Exhibits......................................................................... 11
Reports on Form 8-K.............................................................. 12

SIGNATURES.................................................................................. 13
</TABLE>
2
<PAGE>
PART I

Item 1. Business

General

Diversified Futures Trust I (the 'Registrant'), a Delaware Business Trust,
was organized under the Delaware Business Trust Act on May 18, 1994 and will
terminate on December 31, 2014 unless terminated sooner under the provisions of
the Amended and Restated Declaration of Trust and Trust Agreement (the 'Trust
Agreement'). The Registrant's trustee is Wilmington Trust Company. The
Registrant was formed to engage in the speculative trading of commodity futures
and forward contracts. The Registrant's fiscal year for book and tax purposes
ends on December 31.

On January 5, 1995, the Registrant completed its initial offering having
raised $25,262,800 from the sale of 249,628 limited interests ('Limited
Interests') and 3,000 general interests ('General Interests') (collectively, the
'Interests') and commenced operations. Following the close of the initial
offering period, additional Interests were offered and sold monthly at their
month-end net asset value ('NAV') per Interest during a continuous offering
period ('Continuous Offering Period') which expired on August 31, 1996.
Additional contributions raised during the Continuous Offering Period resulted
in additional proceeds to the Registrant of $41,129,100 from the sale of 299,640
Limited Interests and 1,628 General Interests.

All trading decisions for the Registrant are made by John W. Henry & Company,
Inc. (the 'Trading Manager'), an independent commodity trading manager which
manages the Registrant's assets pursuant to four trading programs developed by
the Trading Manager. The managing owner retains the authority to override
trading instructions that violate the Registrant's trading policies.

The Registrant is engaged solely in the business of commodity futures and
forward trading; therefore, presentation of industry segment information is not
applicable.

Managing Owner and its Affiliates

The managing owner of the Registrant is Prudential Securities Futures
Management Inc. (the 'Managing Owner'), a wholly owned subsidiary of Prudential
Securities Incorporated ('PSI'), the Registrant's commodity broker and principal
underwriter and selling agent of its Interests. PSI is a wholly owned subsidiary
of Prudential Securities Group Inc. The Managing Owner is required to maintain
at least a 1% interest in the Registrant as long as it is acting as the
Registrant's Managing Owner.

Competition

The Managing Owner and its affiliates have formed, and may continue to form,
various entities to engage in the speculative trading of futures and forward
contracts which have certain of the same investment policies as the Registrant.

The Registrant is a closed-end Trust which does not currently, and does not
intend in the future to, solicit the sale of additional Interests. As such, the
Registrant does not compete with other entities to attract new participants.
However, to the extent that the Trading Manager recommends similar or identical
trades to the Registrant and other accounts which it manages, the Registrant may
compete with those accounts for the execution of the same or similar trades.

Employees

The Registrant has no employees. Management and administrative services for
the Registrant are performed by the Managing Owner and its affiliates pursuant
to the Trust Agreement as further discussed in Notes A, C and D to the
Registrant's annual report to limited partners for the year ended December 31,
1999 ('Registrant's 1999 Annual Report') which is filed as an exhibit hereto.

Item 2. Properties

The Registrant does not own or lease any property.

Item 3. Legal Proceedings

There are no material legal proceedings pending by or against the Registrant
or the Managing Owner.

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<PAGE>
Item 4. Submission of Matters to a Vote of Interest Holders

None

PART II

Item 5. Market for the Registrant's Interests and Related Interest Holder
Matters

Information with respect to the offering of Interests is incorporated by
reference to Note A to the Registrant's 1999 Annual Report, which is filed as an
exhibit hereto.

A significant secondary market for the Interests has not developed, and it is
not expected that one will develop in the future. There are also certain
restrictions set forth in the Trust Agreement limiting the ability of an
Interest holder to transfer Interests. However, Interests may be redeemed as of
the last business day of any full calendar quarter at the then current NAV per
Interest. Consequently, holders of Interests may not be able to liquidate their
investments in the event of an emergency or for any other reason.

There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the Trust
Agreement. No distributions have been made since inception and no distributions
are anticipated in the future.

As of March 21, 2000, there were 1,903 holders of record owning 233,362.868
Interests which include 2,334 General Interests.

Item 6. Selected Financial Data

The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the financial statements of the
Registrant and the notes thereto on pages 2 through 9 of the Registrant's 1999
Annual Report which is filed as an exhibit hereto.

<TABLE>
<CAPTION>
Period from
January 5, 1995
(commencement of
Year Ended December 31, operations) to
----------------------------------------------------------- December 31,
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Total revenues (including
interest) $ (419,704) $ 9,529,178 $13,955,119 $24,485,692 $19,003,618
----------- ----------- ----------- ----------- -----------------
----------- ----------- ----------- ----------- -----------------
Net income (loss) $(6,995,874) $ 2,340,736 $ 5,527,892 $15,110,020 $12,430,489
----------- ----------- ----------- ----------- -----------------
----------- ----------- ----------- ----------- -----------------
Net income (loss) per
weighted average Interest $ (25.53) $ 7.09 $ 14.43 $ 36.56 $ 40.56
----------- ----------- ----------- ----------- -----------------
----------- ----------- ----------- ----------- -----------------
Total assets $44,792,832 $61,889,081 $70,024,756 $81,040,831 $49,542,775
----------- ----------- ----------- ----------- -----------------
----------- ----------- ----------- ----------- -----------------
Net asset value per
Interest $ 173.82 $ 200.91 $ 191.70 $ 176.16 $ 142.65
----------- ----------- ----------- ----------- -----------------
----------- ----------- ----------- ----------- -----------------
</TABLE>

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

This information is incorporated by reference to pages 11 through 13 of the
Registrant's 1999 Annual Report which is filed as an exhibit hereto.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Introduction

Past Results Not Necessarily Indicative of Future Performance
The Registrant is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and
substantially all of the Registrant's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Registrant's main line of business.

Market movements result in frequent changes in the fair market value of the
Registrant's open positions and, consequently, in its earnings and cash flow.
The Registrant's market risk is influenced by a wide variety of factors,
including the level and volatility of interest rates, exchange rates, equity
price levels, the market

4
<PAGE>
value of financial instruments and contracts, the diversification effects among
the Registrant's open positions and the liquidity of the markets in which it
trades.

The Registrant rapidly acquires and liquidates both long and short positions
in a wide range of different markets. Consequently, it is not possible to
predict how a particular futures market scenario will affect performance, and
the Registrant's past performance is not necessarily indicative of its future
results.

Value at Risk is a measure of the maximum amount which the Registrant could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Registrant's speculative trading and the recurrence in the
markets traded by the Registrant of market movements far exceeding expectations
could result in actual trading or non-trading losses far beyond the indicated
Value at Risk or the Registrant's experience to date (i.e., 'risk of ruin'). In
light of the foregoing, as well as the risks and uncertainties intrinsic to all
future projections, the inclusion of the quantification included in this section
should not be considered to constitute any assurance or representation that the
Registrant's losses in any market sector will be limited to Value at Risk or by
the Registrant's attempts to manage its market risk.

Standard of Materiality
Materiality as used in this section, 'Quantitative and Qualitative
Disclosures About Market Risk,' is based on an assessment of reasonably possible
market movements and the potential losses caused by such movements, taking into
account the leverage, optionality and multiplier features of the Registrant's
market sensitive instruments.

Quantifying The Registrant's Trading Value at Risk

Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Registrant's market risk
exposures contain 'forward-looking statements' within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).

The Registrant's risk exposure in the various market sectors traded by the
Trading Manager is quantified below in terms of Value at Risk. Due to the
Registrant's mark-to-market accounting, any loss in the fair value of the
Registrant's open positions is directly reflected in the Registrant's earnings
(realized or unrealized) and cash flow (at least in the case of exchange-traded
contracts in which profits and losses on open positions are settled daily
through variation margin).

Exchange maintenance margin requirements have been used by the Registrant as
the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
interval. The maintenance margin levels are established by dealers and exchanges
using historical price studies as well as an assessment of current market
volatility (including the implied volatility of the options on a given futures
contract) and economic fundamentals to provide a probabilistic estimate of the
maximum expected near-term one-day price fluctuation. Maintenance margin has
been used rather than the more generally available initial margin, because
initial margin includes a credit risk component which is not relevant to Value
at Risk.

In the case of market sensitive instruments which are not exchange-traded
(almost exclusively currencies in the case of the Registrant), the margin
requirements for the equivalent futures positions have been used as Value at
Risk. In those rare cases in which a futures-equivalent margin is not available,
dealers' margins have been used.

In quantifying the Registrant's Value at Risk, 100% positive correlation in
the different positions held in each market risk category has been assumed.
Consequently, the margin requirements applicable to the open contracts have
simply been aggregated to determine each trading category's aggregate Value at
Risk. The diversification effects resulting from the fact that the Registrant's
positions are rarely, if ever, 100% positively correlated have not been
reflected.

5
<PAGE>
The Registrant's Trading Value at Risk in Different Market Sectors

The following tables indicate the trading Value at Risk associated with the
Registrant's open positions by market sector at December 31, 1999 and 1998. All
open position trading risk exposures of the Registrant have been included in
calculating the figures set forth below. At December 31, 1999 and 1998, the
Registrant's total capitalization was approximately $40.6 million and $58.9
million, respectively.

<TABLE>
<CAPTION>
1999 1998
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Value at % of Total Value at % of Total
Market Sector Risk Capitalization Risk Capitalization
- -------------------------------------- ---------- -------------- ---------- --------------
Currencies $2,264,720 5.58% $1,261,024 2.14%
Interest Rates 2,097,653 5.17 3,844,921 6.53
Commodities 1,819,839 4.49 974,096 1.65
Stock indices 654,390 1.61 389,788 .66
---------- ------- ---------- -------
Total $6,836,602 16.85% $6,469,829 10.98%
---------- ------- ---------- -------
---------- ------- ---------- -------
</TABLE>

The following table presents the average trading Value at Risk of the
Registrant's open positions by market sector for the year ended December 31,
1999. During the year ended December 31, 1999, the Registrant's total average
capitalization was approximately $52.9 million.

<TABLE>
<CAPTION>
Value at % of Total
Market Sector Risk Capitalization
----------------------- ---------- --------------
<S> <C> <C>
Interest Rates $2,763,806 5.22%
Currencies 2,059,888 3.89
Commodities 1,394,211 2.63
Stock Indices 561,860 1.06
---------- -------
Total $6,779,765 12.80%
---------- -------
---------- -------
</TABLE>

Material Limitations on Value at Risk as an Assessment of Market Risk

The face value of the market sector instruments held by the Registrant is
typically many times the applicable maintenance margin requirement (maintenance
margin requirements generally range between approximately 1% and 10% of the face
value) as well as many times the total capitalization of the Registrant. The
magnitude of the Registrant's open positions creates a 'risk of ruin' not
typically found in most other investment vehicles. Because of the size of its
positions, certain market conditions, although unusual, but historically
recurring from time to time, could cause the Registrant to incur severe losses
over a short period of time. The foregoing Value at Risk table, as well as the
past performance of the Registrant, give no indication of this 'risk of ruin.'

Non-Trading Risk

The Registrant has non-trading market risk on its foreign cash balances not
needed for margin. However, these balances (as well as any market risk they
represent) are immaterial.

Qualitative Disclosures Regarding Primary Trading Risk Exposures

The following qualitative disclosures regarding the Registrant's market risk
exposures--except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Registrant manages its primary market
risk exposures--constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Registrant's primary market risk exposures as well as
the strategies used and to be used by the Managing Owner and the Trading Manager
for managing such exposures are subject to numerous uncertainties, contingencies
and risks, any one of which could cause the actual results of the Registrant's
risk controls to differ materially from the objectives of such strategies.
Government interventions, defaults and expropriations, illiquid markets, the
emergence of dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market participants, increased
regulation and many other factors could result in material losses

6
<PAGE>
as well as in material changes to the risk exposures and the risk management
strategies of the Registrant. There can be no assurance that the Registrant's
current market exposure and/or risk management strategies will not change
materially or that any such strategies will be effective in either the short- or
long-term. Investors must be prepared to lose all or substantially all of their
investment in the Registrant.

The primary trading risk exposures of the Registrant at December 31, 1999,
and during the year then ended, by market sector were:

Interest Rates. Interest rate risk represented the principal market exposure
of the Registrant at December 31, 1998 and the majority of 1999. Interest rate
movements directly affect the price of sovereign bond positions held by the
Registrant and indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country as well as relative interest
rate movements between countries may materially impact the Registrant's
profitability. The Registrant's primary interest rate exposure is to interest
rate fluctuations in the U.S. and other G-7 countries. To a lesser extent, the
Registrant also takes positions in the government debt of smaller nations--e.g.,
Australia. The Managing Owner anticipates that G-7 interest rates will remain a
primary market exposure of the Registrant in the foreseeable future. The changes
in interest rates which have the most effect on the Registrant are changes in
long-term, as opposed to short-term, rates. Most of the speculative positions
held by the Registrant are in medium- to long-term instruments. Consequently,
even a material change in short-term rates would have little effect on the
Registrant were the medium- to long-term rates to remain steady.

Currencies. Currency risk represented the principal market exposure of the
Registrant at December 31, 1999. The Registrant's currency exposure is due to
exchange rate fluctuations, primarily fluctuations which disrupt the historical
pricing relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Registrant's major exposure has typically
resulted from positions in the local currencies of G-7 countries. These include
outright, as well as, cross-rate positions--i.e., positions between two
currencies other than the U.S. dollar. While it is difficult at this point to
evaluate the effect that the introduction of the euro has had on the Registrant,
the Managing Owner does not believe that the risk profile of the Registrant's
currency sector has significantly changed, although the ultimate effect of the
euro's full introduction is yet unknown. The currency trading Value at Risk
figure includes foreign margin amounts converted into U.S. dollars with an
incremental adjustment to reflect the exchange rate risk inherent to the
dollar-based Registrant in expressing Value at Risk in a functional currency
other than U.S. dollars.

Commodities. The Registrant's primary commodities exposure lies in the energy
market and results from gas and oil price movements, often resulting from
political developments in the Middle East. The Registrant's major energy
exposure has typically resulted from positions in light crude, crude oil, and
natural gas. Additional exposure is supplied by positions in precious metals,
particularly gold and silver. In the agricultural sector, the Registrant's
market risk exposure is primarily due to price movements resulting from severe
or unexpected weather conditions. The Trading Manager trades in various
agricultural commodities including coffee, sugar, wheat, and corn.

Stock Indices. The Registrant's primary equity exposure is due to equity
price risk in the Nikkei Dow (Japan) and Australian All Ordinaries Index. The
stock index futures traded by the Registrant are by law limited to futures on
broadly based indices.

Qualitative Disclosures Regarding Means of Managing Risk Exposure

The means by which the Managing Owner and the Trading Manager, severally,
attempt to manage the risk of the Registrant's open positions is essentially the
same in all market categories traded.

The Trading Manager attempts to minimize market risk exposure by applying its
own risk management trading policies which include the diversification of
trading assets into various market sectors. Additionally, the Trading Manager
has an oversight committee broadly responsible for evaluating and overseeing the
Trading Manager's trading policies. The oversight committee meets periodically
to discuss and analyze issues such as liquidity, position size, capacity,
performance cycles, and new product and market strategies.

7
<PAGE>
The Managing Owner attempts to minimize market risk exposure by requiring the
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, 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. Additionally, the Managing Owner
may terminate the Trading Manager if the net asset value of the Registrant
declines by 33 1/3% during any year or since the commencement of trading
activities. Furthermore, the Trust Agreement provides that the Registrant will
liquidate its positions, and eventually dissolve, if the Registrant experiences
a decline in the net asset value of 50% in any year or since the commencement of
trading activities. In each case, the decline in the net asset value is after
giving effect for distributions, contributions and redemptions. 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 Registrant.

Qualitative Disclosures Regarding Non-Trading Risk Exposure

At December 31, 1999, the Registrant's primary exposure to non-trading market
risk resulted from foreign currency balances held in Canadian dollars. As
discussed above, these balances, as well as any risk they represent, are
immaterial.

Item 8. Financial Statements and Supplementary Data

The financial statements are incorporated by reference to pages 2 through 9
of the Registrant's 1999 Annual Report which is filed as an exhibit hereto.

Supplementary data specified by Item 302 of Regulation S-K (selected
quarterly financial data) is not applicable.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None

PART III

Item 10. Directors and Executive Officers of the Registrant

There are no directors or executive officers of the Registrant. The
Registrant is managed by the Managing Owner.

The Managing Owner's directors and executive officers and any person holding
more than ten percent of the Registrant's Interests ('Ten Percent Owners') are
required to report their initial ownership of such Interests and any subsequent
changes in that ownership to the Securities and Exchange Commission on Forms 3,
4 or 5. Such executive officers, directors and Ten Percent Owners are required
by Securities and Exchange Commission regulations to furnish the Registrant with
copies of all Forms 3, 4 or 5 they file. All of these filing requirements were
satisfied on a timely basis. In making these disclosures, the Registrant has
relied solely on written representations of the Managing Owner's directors and
executive officers and Ten Percent Owners or copies of the reports that they
have filed with the Securities and Exchange Commission during and with respect
to its most recent fiscal year.

The directors and executive officers of Prudential Securities Futures
Management Inc. and their positions with respect to the Registrant are as
follows:

Name Position
Joseph A. Filicetti President and Director
Eleanor L. Thomas Executive Vice President and Director
Barbara J. Brooks Chief Financial Officer
Steven Carlino Vice President and Treasurer
Alan J. Brody Director
A. Laurence Norton, Jr. Director
Guy S. Scarpaci Director
Tamara B. Wright Senior Vice President and Director

8
<PAGE>
JOSEPH A. FILICETTI, age 37, is the President and a Director of Prudential
Securities Futures Management Inc. He had been a Vice President of Prudential
Securities Futures Management Inc. and Seaport Futures Management, Inc. from
October 1998 to March 1999. In April 1999, Mr. Filicetti was named to his
current positions at Prudential Securities Futures Management Inc. and became
the Executive Vice President and a Director of Seaport Futures Management, Inc.
Mr. Filicetti is also a Vice President of PSI and the Director of Sales and
Marketing for its managed futures department. Prior to joining PSI, Mr.
Filicetti was with Rotella Capital Management as Director of Sales and Marketing
from September 1996 through September 1998, and was with Merrill Lynch as a
market maker trading bonds from July 1992 to August 1996.

ELEANOR L. THOMAS, age 45, is the Executive Vice President and a Director of
Prudential Securities Futures Management Inc. and is the President and a
Director of Seaport Futures Management, Inc. She is primarily responsible for
origination, asset allocation, and due diligence for the managed futures
department within PSI. She is also a First Vice President of PSI. Prior to
joining PSI in March 1993, she was with MC Baldwin Financial Company from June
1990 through February 1993 and Arthur Andersen & Co. from 1986 through May 1990.
Ms. Thomas is a certified public accountant.

BARBARA J. BROOKS, age 51, is the Chief Financial Officer of Prudential
Securities Futures Management Inc. She is a Senior Vice President of PSI. She is
also the Chief Financial Officer of Seaport Futures Management, Inc. and serves
in various capacities for other affiliated companies. She has held several
positions within PSI since April 1983. Ms. Brooks is a certified public
accountant.

STEVEN CARLINO, age 36, is a Vice President and Treasurer of Prudential
Securities Futures Management Inc. He is a First Vice President of PSI. He is
also a Vice President and Treasurer of Seaport Futures Management, Inc. and
serves in various capacities for other affiliated companies. Prior to joining
PSI in October 1992, he was with Ernst & Young for six years. Mr. Carlino is a
certified public accountant.

ALAN J. BRODY, age 48, is a Director of Prudential Securities Futures
Management Inc. and Seaport Futures Management, Inc. Mr. Brody has been a Senior
Vice President and Director of International Sales and Marketing for PSI since
1996. Based in London, Mr. Brody is currently responsible for the marketing and
sales of all PSI products and services to international clientele throughout the
firm's global branch system. Additionally, Mr. Brody has overall responsibility
for the managed futures department within PSI. Prior to joining PSI, Mr. Brody
was an Executive Director and Senior Vice President with Lehman Brothers'
Financial Services Division in London and President of Lehman Brothers Futures
Asset Management Corp. from 1990 to 1996. Prior to joining Lehman Brothers, Mr.
Brody served as President and Chief Executive Officer of Commodity Exchange,
Inc. from 1980 to 1989. Earlier in his career, Mr. Brody was associated with the
law firm of Baer Marks & Upham from 1977 to 1980.

A. LAURENCE NORTON, JR., age 61, is a Director of Prudential Securities
Futures Management Inc. He is an Executive Vice President of PSI and, since
March 1994, has been the director of the International and Futures Divisions of
PSI. He is also a Director of Seaport Futures Management, Inc. and is a member
of PSI's Operating Committee. From October 1991 to March 1994, he held the
position of Executive Director of Retail Development and Retail Strategies at
PSI. Prior to joining PSI in 1991, Mr. Norton was a Senior Vice President and
Branch Manager of Shearson Lehman Brothers.

GUY S. SCARPACI, age 53, is a Director of Prudential Securities Futures
Management Inc. He is a First Vice President of the Futures Division of PSI. He
is also a Director of Seaport Futures Management, Inc. Mr. Scarpaci has been
employed by PSI in positions of increasing responsibility since August 1974.

TAMARA B. WRIGHT, age 41, is a Senior Vice President and Director of
Prudential Securities Futures Management Inc. She is a Senior Vice President and
Chief Administrative Officer for the International and Futures Divisions of PSI.
She is also a Senior Vice President and Director of Seaport Futures Management,
Inc. and serves in various capacities for other affiliated companies. Prior to
joining PSI in July 1988, she was a manager with Price Waterhouse.

Effective April 1999, Eleanor L. Thomas and Joseph A. Filicetti were elected
as Directors of both Prudential Securities Futures Management Inc. and Seaport
Futures Management, Inc. In addition, Mr. Filicetti was elected as President of
Prudential Securities Futures Management Inc. replacing Thomas M. Lane, Jr. and
Ms. Thomas was elected as the Executive Vice President of Prudential Securities
Futures

9
<PAGE>
Management Inc. Additionally, Alan J. Brody was elected as a Director of
Prudential Securities Futures Management Inc. and Seaport Futures Management,
Inc. during May 1999.

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

Item 11. Executive Compensation

The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the Managing Owner for their services.
Certain directors and officers of the Managing Owner receive compensation from
affiliates of the Managing Owner, not from the Registrant, for services
performed for various affiliated entities, which may include services performed
for the Registrant; however, the Managing Owner believes that any compensation
attributable to services performed for the Registrant is immaterial. (See also
Item 13, Certain Relationships and Related Transactions, for information
regarding compensation to the Managing Owner.)

Item 12. Security Ownership of Certain Beneficial Owners and Management

As of March 21, 2000, no director or executive officer of the Managing Owner
owns directly or beneficially any interest in the voting securities of the
Managing Owner.

As of March 21, 2000, no director or executive officer of the Managing Owner
owns directly or beneficially any of the Interests issued by the Registrant.

As of March 21, 2000, no owners of Limited Interests beneficially own more
than five percent (5%) of the Limited Interests issued by the Registrant.

Item 13. Certain Relationships and Related Transactions

The Registrant has and will continue to have certain relationships with the
Managing Owner and its affiliates. However, there have been no direct financial
transactions between the Registrant and the directors or officers of the
Managing Owner.

Reference is made to Notes A, C and D to the financial statements in the
Registrant's 1999 Annual Report which is filed as an exhibit hereto, which
identify the related parties and discuss the services provided by these parties
and the amounts paid or payable for their services.

10
<PAGE>
PART IV

<TABLE>
<CAPTION>
Page
Number
------------

<C> <C> <C>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1. Financial Statements and Report of Independent Accountants--incorporated
by reference to the Registrant's 1999 Annual Report which is filed as an
exhibit hereto

Report of Independent Accountants 2

Financial Statements:

Statements of Financial Condition--December 31, 1999 and 1998 3

Statements of Operations--Three years ended December 31, 1999 4

Statements of Changes in Trust Capital--Three years ended December 31,
1999 4

Notes to Financial Statements 5

2. Financial Statement Schedules

All schedules have been omitted because they are not applicable or the
required information is included in the financial statements or notes
thereto.

3. Exhibits

Description:

3.1 Amended and Restated Declaration of Trust and Trust Agreement of the
and Registrant dated as of August 25, 1994, (incorporated by reference to
4.1 Exhibits 3.1 and 4.1 of Registrant's Quarterly Report on 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)

10.1 Escrow Agreement, dated as of September 13, 1994, among the Registrant,
Prudential Securities Futures Management Inc., Prudential Securities
Incorporated and The Bank of New York (incorporated by reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the
period ended September 30, 1994)

10.2 Brokerage Agreement, dated as of January 4, 1995, between the Registrant
and Prudential Securities Incorporated (incorporated by reference to
Exhibit 10.2 of the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994)

10.3 Advisory Agreement, dated as of September 13, 1994, among the Registrant,
Prudential Securities Futures Management Inc., and John W. Henry & Co.,
Inc. (incorporated by reference to Exhibit 10.3 of the Registrant's
Quarterly Report on Form 10-Q for the period ended September 30, 1994)
</TABLE>
11
<PAGE>
<TABLE>
<C> <C> <C>
10.4 Representation Agreement Concerning the Registration Statement and the
Prospectus, dated as of September 13, 1994, among the Registrant,
Prudential Securities Futures Management Inc., Prudential Securities
Incorporated, Wilmington Trust Company and John W. Henry & Co., Inc.
(incorporated by reference to Exhibit 10.4 of the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1994)

10.5 Net Worth Agreement, dated as of September 13, 1994, between Prudential
Securities Futures Management Inc. and Prudential Securities Incorporated
(incorporated by reference to Exhibit 10.5 of the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1994)

10.6 Secured Demand Note, dated as of January 4, 1995, between Prudential
Securities Group Inc. and Prudential Securities Futures Management Inc.
(incorporated by reference to Exhibit 10.6 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994)

10.7 Secured Demand Note Collateral Agreement, dated as of January 4, 1995,
between Prudential Securities Futures Management Inc. and Prudential
Securities Group Inc. (incorporated by reference to Exhibit 10.7 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994)

10.8 Form of Foreign Currency Addendum to Brokerage Agreement between the
Registrant and Prudential Securities Incorporated (incorporated by
reference to Exhibit 10.8 of the Registrant's Quarterly Report on Form
10-Q for the period ended March 31, 1996)

13.1 Registrant's 1999 Annual Report (with the exception of the information
and data incorporated by reference in Items 5, 7 and 8 of this Annual
Report on Form 10-K, no other information or data appearing in the
Registrant's 1999 Annual Report is to be deemed filed as part of this
report) (filed herewith)

27.1 Financial Data Schedule (filed herewith)

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
</TABLE>
12
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Diversified Futures Trust I

By: Prudential Securities Futures Management Inc.
A Delaware corporation, Managing Owner

By: /s/ Steven Carlino Date: March 30, 2000
----------------------------------------
Steven Carlino
Vice President and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the Managing Owner) and on the
dates indicated.

By: Prudential Securities Futures Management Inc.
A Delaware corporation, Managing Owner

By: /s/ Joseph A. Filicetti Date: March 30, 2000
-----------------------------------------
Joseph A. Filicetti
President and Director

By: /s/ Eleanor L. Thomas Date: March 30, 2000
-----------------------------------------
Eleanor L. Thomas
Executive Vice President and Director

By: /s/ Barbara J. Brooks Date: March 30, 2000
-----------------------------------------
Barbara J. Brooks
Chief Financial Officer

By: /s/ Steven Carlino Date: March 30, 2000
-----------------------------------------
Steven Carlino
Vice President and Treasurer

By: /s/ Alan J. Brody Date: March 30, 2000
-----------------------------------------
Alan J. Brody
Director

By: Date:
-----------------------------------------
A. Laurence Norton, Jr.
Director

By: /s/ Guy S. Scarpaci Date: March 30, 2000
-----------------------------------------
Guy S. Scarpaci
Director

By: Date:
-----------------------------------------
Tamara B. Wright
Senior Vice President and Director

<PAGE>

1999
- --------------------------------------------------------------------------------
Diversified Futures Trust I Annual
Report

<PAGE>
LETTER TO LIMITED OWNERS FOR
DIVERSIFIED FUTURES TRUST I

1
<PAGE>
PricewaterhouseCoopers (LOGO)
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Telephone (212) 596 8000
Facsimile (212) 596 8910

Report of Independent Accountants

To the Managing Owner and
Limited Owners of
Diversified Futures Trust I

In our opinion, the accompanying statements of financial condition and the
related statements of operations and changes in trust capital present fairly, in
all material respects, the financial position of Diversified Futures Trust I at
December 31, 1999 and 1998, and the results of its operations for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Managing Owner; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by the Managing
Owner, and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

January 28, 2000

2
<PAGE>
DIVERSIFIED FUTURES TRUST I
(a Delaware Business Trust)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
ASSETS
Cash $43,317,270 $ 55,481,234
Net unrealized gain on open futures contracts 1,417,732 6,398,973
Net unrealized gain on open forward contracts 49,621 --
------------- -------------
Net equity 44,784,623 61,880,207
Other receivable 8,209 8,874
------------- -------------
Total assets $44,792,832 $ 61,889,081
------------- -------------
------------- -------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Redemptions payable $ 4,079,581 $ 2,543,697
Management fees payable 149,309 205,624
Net unrealized loss on open forward contracts -- 201,761
------------- -------------
Total liabilities 4,228,890 2,951,082
------------- -------------
Commitments

Trust capital
Limited interests (231,028.868 and 290,423.624 interests
outstanding) 40,158,237 58,348,534
General interests (2,334 and 2,934 interests outstanding) 405,705 589,465
------------- -------------
Total trust capital 40,563,942 58,937,999
------------- -------------
Total liabilities and trust capital $44,792,832 $ 61,889,081
------------- -------------
------------- -------------

Net asset value per limited and general interests ('Interests') $ 173.82 $ 200.91
------------- -------------
------------- -------------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
DIVERSIFIED FUTURES TRUST I
(a Delaware Business Trust)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1999 1998 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
REVENUES
Net realized gain on commodity transactions $ 1,647,081 $4,475,810 $ 7,279,598
Change in net unrealized gain/loss on open commodity
positions (4,729,859) 1,750,186 2,933,683
Interest income 2,663,074 3,303,182 3,741,838
----------- ---------- -----------
(419,704) 9,529,178 13,955,119
----------- ---------- -----------
EXPENSES
Commissions 4,181,083 4,666,065 5,289,700
Management fees 2,142,642 2,424,509 2,761,108
Incentive fees 252,445 97,868 376,419
----------- ---------- -----------
6,576,170 7,188,442 8,427,227
----------- ---------- -----------
Net income (loss) $(6,995,874) $2,340,736 $ 5,527,892
----------- ---------- -----------
----------- ---------- -----------
ALLOCATION OF NET INCOME (LOSS)
Limited interests $(6,925,889) $2,317,331 $ 5,472,611
----------- ---------- -----------
----------- ---------- -----------
General interests $ (69,985) $ 23,405 $ 55,281
----------- ---------- -----------
----------- ---------- -----------
NET INCOME (LOSS) PER WEIGHTED AVERAGE LIMITED AND
GENERAL INTEREST
Net income (loss) per weighted average limited and
general interest $ (25.53) $ 7.09 $ 14.43
----------- ---------- -----------
----------- ---------- -----------
Weighted average number of limited and general interests
outstanding 274,040 330,196 383,058
----------- ---------- -----------
----------- ---------- -----------
- ---------------------------------------------------------------------------------------------------
</TABLE>

STATEMENTS OF CHANGES IN TRUST CAPITAL
<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 income -- 5,472,611 55,281 5,527,892
Redemptions (53,669.486) (9,412,151) (95,125 ) (9,507,276)
----------- ----------- --------- -----------
Trust capital--December 31, 1997 352,174.217 66,836,959 675,170 67,512,129
Net income -- 2,317,331 23,405 2,340,736
Redemptions (58,816.593) (10,805,756) (109,110 ) (10,914,866)
----------- ----------- --------- -----------
Trust capital--December 31, 1998 293,357.624 58,348,534 589,465 58,937,999
Net loss -- (6,925,889) (69,985 ) (6,995,874)
Redemptions (59,994.756) (11,264,408) (113,775 ) (11,378,183)
----------- ----------- --------- -----------
Trust capital--December 31, 1999 233,362.868 $40,158,237 $405,705 $40,563,942
----------- ----------- --------- -----------
----------- ----------- --------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
DIVERSIFIED FUTURES TRUST I
(a Delaware Business Trust)
NOTES TO FINANCIAL STATEMENTS

A. General

Diversified Futures Trust I (the 'Trust') was organized under the Delaware
Business Trust Act on May 18, 1994 and will continue until December 31, 2014
unless terminated sooner under the provisions of the Amended and Restated
Declaration of Trust and Trust Agreement (the 'Trust Agreement'). The Trust was
formed to engage in the speculative trading of commodity futures and forward
contracts. The Trust's trustee is Wilmington Trust Company. The managing owner
of the Trust is Prudential Securities Futures Management Inc. (the 'Managing
Owner'), a wholly owned subsidiary of Prudential Securities Incorporated
('PSI'), which, in turn, is a wholly owned subsidiary of Prudential Securities
Group Inc. ('PSGI'). PSI was the principal underwriter of the Interests and is
the commodity broker of the Trust. The Managing Owner is required to maintain at
least a 1% interest in the Trust so long as it is acting as the Managing Owner.

On January 5, 1995, the Trust completed its initial offering having raised
$25,262,800 from the sale of 249,628 limited interests ('Limited Interests') and
3,000 general interests ('General Interests') (collectively, the 'Interests').
Additional Interests were offered and sold monthly at the then current net asset
value ('NAV') per Interest until the continuous offering period expired on
August 31, 1996. Additional contributions raised during the continuous offering
period resulted in additional proceeds to the Trust of $41,129,100 from the sale
of 299,640 Limited Interests and 1,628 General Interests.

All trading decisions are made for the Trust by John W. Henry & Company, Inc.
(the 'Trading Manager'), an independent commodity trading manager. The Trading
Manager trades the Trust's assets pursuant to four of its trading programs: the
Financial and Metals Portfolio; the Global Financial Portfolio; the Original
Investment Program; and the G-7 Currency Portfolio. The Managing Owner retains
the authority to override trading instructions that violate the Trust's trading
policies.

B. Summary of Significant Accounting Policies

Basis of accounting

The financial statements of the Trust are prepared in accordance with
generally accepted accounting principles.

Commodity futures and forward transactions are reflected in the accompanying
statements of financial condition on trade date. The difference between the
original contract amount and market value is reflected as net unrealized gain or
loss. The market value of each contract is based upon the closing quotation on
the exchange, clearing firm or bank on, or through, which the contract is
traded.

The weighted average number of limited and general interests outstanding was
computed for purposes of disclosing net income (loss) per weighted average
limited and general interest. The weighted average limited and general interests
are equal to the number of Interests outstanding at year end, adjusted
proportionately for Interests subscribed and redeemed based on their respective
time outstanding during such year.

The Trust has elected not to provide a Statement of Cash Flows as permitted
by Statement of Financial Accounting Standards No. 102, 'Statement of Cash
Flows--Exemption of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale.'

Certain balances from the prior year have been reclassified to conform with
the current financial statement presentation.

Income taxes

The Trust is treated as a partnership for Federal income tax purposes. As
such, the Trust is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the individual Interest holders. The Trust may be subject to other
state and local taxes in jurisdictions in which it operates.

<PAGE>
Profit and loss allocation, distributions and redemptions

Net realized profits or losses for tax purposes are allocated first to
Interest holders who redeem Interests to the extent the amounts received on
redemption are greater than or are less than the amounts paid for the redeemed
Interests by the Interest holders. Net realized profits or losses remaining
after these allocations are allocated to each Interest holder in proportion to
such Interest holder's capital account at month-end. Net income or loss for
financial reporting purposes is allocated monthly to all Interest holders on a
pro rata basis based on each Interest holder's number of Interests outstanding
during the month.

Distributions (other than redemptions of Interests) are made at the sole
discretion of the Managing Owner on a pro rata basis in accordance with the
respective capital accounts of the Interest holders. No distributions have been
made since inception.

The Trust Agreement provides that an Interest holder may redeem its Interests
as of the last business day of any full calendar quarter at the then current NAV
per Interest.

Accounting for Derivative Instruments

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ('SFAS') No. 133, Accounting for Derivative
Instruments and Hedging Activities, which the Trust adopted effective October 1,
1999. SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities and requires that an entity recognize all
derivatives as assets or liabilities measured at fair value. SFAS No. 133
supersedes SFAS No. 119, Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments and SFAS No. 105, Disclosure of Information
about Financial Instruments with Off-Balance Sheet Risk and Financial
Instruments with Concentrations of Credit Risk which required the disclosure of
average aggregate fair values and contract/notional values, respectively, of
derivative financial instruments for an entity like the Trust which carries its
assets at fair value. The adoption of SFAS No. 133 has not had a material effect
on the carrying value of assets and liabilities within the financial statements.

C. Fees

Organizational and general and administrative costs

PSI or its affiliates paid the costs of organizing the Trust and offering its
Interests and pay the routine operational, administrative, legal and auditing
expenses.

Management and incentive fees

The Trust pays the Trading Manager a monthly management fee equal to 1/3 of
1% (a 4% annual rate) of the Trust's NAV as of the end of each month.

In addition, the Trust pays the Trading Manager a quarterly incentive fee
equal to 15% of the New High Net Trading Profits (as defined in the Advisory
Agreement among the Trust, the Managing Owner and the Trading Manager).

Commissions

The Managing Owner, on behalf of the Trust, entered into an agreement with
PSI as commodity broker whereby the Trust pays a fixed monthly fee for brokerage
services rendered. The monthly fee equals .64583 of 1% (7.75% per annum) of the
Trust's NAV as of the first day of each month. From this fee, PSI pays all of
the Trust's execution (including floor brokerage expenses and NFA, clearing and
exchange fees) and account maintenance costs.

D. Related Parties

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 as well as the Trust's routine operational, administrative, legal and
auditing costs.

The costs charged to the Trust for brokerage services for the years ended
December 31, 1999, 1998 and 1997 were $4,181,083, $4,666,065 and $5,289,700,
respectively.

<PAGE>
The Trust's assets are maintained either in trading or cash accounts at PSI,
the Trust's commodity broker, or for margin purposes, with the various exchanges
on which the Trust is permitted to trade. PSI credits the Trust monthly with
100% of the interest it earns on the average net assets in the Trust's accounts.

The Trust, 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
currency trading desks. All over-the-counter currency transactions are conducted
between PSI and the Trust pursuant to a line of credit. PSI may require that
collateral be posted against the marked-to-market position of the Trust.

As of December 31, 1999, a non-U.S. affiliate of the Managing Owner owns
2,117.885 Limited Interests of the Trust.

E. Income Taxes

There have been no differences between the tax basis and book basis of
Interest holders' capital since inception of the Trust.

F. Credit and Market Risk

Since the Trust's business is to trade futures and forward (including foreign
exchange transactions) 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 and forward contracts involve varying degrees of off-balance sheet
risk; and changes in the level or 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 futures and forward 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 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 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 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, if any, 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 and its 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. Additionally, the
Managing Owner may terminate the Trading Manager if the net asset value
allocated to the Trading Manager declines by 33 1/3% during any year or since
the commencement of trading activities. Furthermore, the Trust Agreement
provides that the Trust will liquidate its positions, and eventually dissolve,
if the Trust experiences a decline in the net asset value of 50% in any year or
since the commencement of trading activities. In each case, the decline in the
net asset value is after giving effect for distributions and redemptions. 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 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 trading and is not to commingle such assets with other assets
of PSI. At December 31, 1999, such segregated assets totalled $35,546,741. Part
30.7 of the CFTC regulations also requires PSI to secure

<PAGE>
assets of the Trust related to foreign futures trading which totalled $9,188,261
at December 31, 1999. There are no segregation requirements for assets related
to forward trading.

As of December 31, 1999, the Trust's open futures and forward contracts
mature within one year.

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). Gross contract amounts significantly
exceed 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 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 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.

At December 31, 1998, the gross contract amounts of open futures and forward
contracts were:

Interest Rate Futures:
Commitments to purchase $236,487,631
Commitments to sell 450,175,973
Stock Index Futures:
Commitments to purchase 5,225,670
Currency Futures:
Commitments to purchase 29,926,525
Commitments to sell 22,716,988
Commodity Futures:
Commitments to purchase 2,666,083
Commitments to sell 15,300,056
Currency Forwards:
Commitments to purchase 464,787
Commitments to sell 7,297,275

At December 31, 1999 and 1998, the fair value of open futures and forward
contracts was:

<TABLE>
<CAPTION>
1999 1998
------------------------------------- -------------------------------------
Assets Liabilities Assets Liabilities
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Futures Contracts:
Domestic exchanges
Interest rates $ 565,484 $ -- $ 59,531 $ 607,294
Currencies 664,038 212,790 969,688 187,500
Commodities 376,057 277,867 589,283 134,120
Foreign exchanges
Interest rates 254,975 151,117 5,928,953 229,907
Stock indices 112,677 -- 62,201 155,107
Commodities 111,455 25,180 114,259 11,014
Forward Contracts:
Currencies 157,101 107,480 5,365 207,126
----------------- ----------------- ----------------- -----------------
$ 2,241,787 $ 774,434 $ 7,729,280 $ 1,532,068
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>

8
<PAGE>
The following table presents the average fair value of futures and forward
contracts during the year ended December 31, 1998.

<TABLE>
<CAPTION>
1998
--------------------------
Assets Liabilities
---------- -----------
<S> <C> <C>
Futures Contracts:
Domestic exchanges
Interest rates $ 744,665 $ 152,149
Currencies 74,591 21,197
Commodities 832,436 231,205
Foreign exchanges
Interest rates 2,388,319 226,462
Stock indices 168,995 93,409
Commodities 74,156 26,229
Forward Contracts:
Currencies 1,813,641 1,709,484
---------- -----------
$6,096,803 $ 2,460,135
---------- -----------
---------- -----------
</TABLE>

The following table presents the trading revenues from futures and forward
contracts during the years ended December 31, 1998 and 1997, respectively.

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Futures Contracts:
Domestic exchanges
Interest rates $ 748,929 $ 1,108,889
Currencies 435,938 --
Commodities (2,713,903) (1,144,183)
Foreign exchanges
Interest rates 11,096,089 4,448,084
Stock indices (2,002,588) 1,043,697
Commodities 405,655 (297,738)
Forward Contracts:
Currencies (1,744,124) 5,054,532
----------- -----------
$ 6,225,996 $10,213,281
----------- -----------
----------- -----------
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------

I hereby affirm that, to the best of my knowledge and belief, the information
contained herein relating to Diversified Futures Trust I is accurate and
complete.

PRUDENTIAL SECURITIES
FUTURES MANAGEMENT INC.
(Managing Owner)

By: Barbara J. Brooks
Chief Financial Officer
- --------------------------------------------------------------------------------

10
<PAGE>
DIVERSIFIED FUTURES TRUST I
(a Delaware Business Trust)
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 on
August 31, 1996, resulting in additional gross proceeds to the Trust of
$41,129,100.

The Trust Agreement provides that an Interest holder may redeem its Interests
as of the last business day of any full calendar quarter at the then current NAV
per Interest. Redemptions of Limited Interests for the years ended December 31,
1999, 1998 and 1997 were $11,264,408, $10,805,756 and $9,412,151, respectively.
Redemptions of General Interests for the years ended December 31, 1999, 1998 and
1997 were $113,775, $109,110 and $95,125, respectively. Redemptions of Limited
and General Interests from the commencement of operations, January 5, 1995, to
December 31, 1999 totalled $53,827,431 and $413,790, respectively. Future
redemptions will impact the amount of funds available for investment in
commodity contracts in subsequent periods.

At December 31, 1999, 100% of the Trust's net assets were allocated to
commodities 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 average net assets 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 and forward 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 Trust's exposure to market risk is influenced by a number of
factors including the volatility of interest rates and foreign currency exchange
rates, the liquidity of the markets in which the contracts are traded and the
relationships among the contracts held. The inherent uncertainty of the Trust's
speculative trading as well as the development of drastic market occurrences
could result in monthly losses considerably beyond the Trust's experience to
date and could ultimately lead to a loss of all or substantially all of
investors' capital. The Managing Owner attempts to minimize these risks by
requiring the Trust and its Trading Manager to abide by various trading
limitations and policies which include limiting margin amounts, trading only in
liquid markets and utilizing stop loss provisions. See Note F to the financial
statements for a further discussion on the credit and market risks associated
with the Trust's futures and forward contracts.

The Trust does not have, nor does it expect to have, any capital assets.

Results of Operations

The net asset value per Interest as of December 31, 1999 was $173.82, a
decrease of 13.48% from the December 31, 1998 net asset value per Interest of
$200.91, which was an increase of 4.80% from the December 31, 1997 net asset
value per Interest of $191.70. The MAR (Managed Account Reports) Fund/Pool
Index, which tracked the performance of 317 and 281 futures funds in 1999 and
1998, returned gains of 1.48% and 6.81%, respectively, outperforming the Trust.
Past performance is not necessarily indicative of future results.

The Trust's unfavorable performance in 1999 resulted from losses recorded in
the financial, metal, index, soft, grain, and meat sectors. Gains were
accumulated in the currency and energy sectors.

<PAGE>
Losses accumulated in the financial sector throughout 1999 specifically from
Japanese bond positions. In the first quarter, the bear market trend in Japanese
government bonds reversed when the Ministry of Finance announced that the Bank
of Japan would continue supporting the bond market by purchasing sizable
quantities of Japanese government bonds (JGBs). As a result, the Trust sustained
sizable losses in short JGB positions. In the second quarter, a strengthening
Japanese economy triggered a bond market rally profiting long Japanese bond
positions. JGBs benefited from a strong yen in October and November, but
declined in price when a major rating agency was rumored to be considering a
downgrade causing losses in the Trust's long positions.

In the metal sector, gold and silver positions incurred losses for the Trust.
During the first quarter, the sector rallied until events in Kosovo led to NATO
military attacks on Yugoslavia resulting in losses for the Trust. In September,
the European Central Bank's (ECB) decision to limit both gold sales and lending
triggered strong movement in the gold market. Gold prices rose to two-year highs
over a ten-day period, causing short positions to incur losses. Silver moved in
conjunction with gold as prices rallied towards the end of the third quarter and
into the fourth quarter also generating losses.

Positions in the SFE Index (Australia) recorded losses for the Trust in the
third and fourth quarters. Australian markets were trendless as strong economic
activity was counteracted by statements from the Reserve Bank of Australia (RBA)
suggesting that the RBA did not need to follow the U.S. and raise interest
rates. In October, Australian markets rallied at month end following RBA
comments that a long-anticipated tightening in monetary policy would happen
gradually. Short positions incurred losses.

Significant gains were achieved in the currency sector due to Swiss franc,
euro, and Japanese yen positions. In the second quarter, the Swiss franc fell,
profiting the Fund, as it lost its safe haven attraction as the war ended in
Kosovo and lost value versus the U.S. dollar when the Federal Reserve increased
U.S. interest rates by 0.25%. Weakness in the euro continued due to
deteriorating confidence in that currency and Italy's possible retraction from
the European Economic Union. Consequently, the ECB was rumored to be considering
an interest rate increase. Short euro positions provided profits in the first
and fourth quarters. In Japan, the economy showed signs of a recovery during the
second quarter, but Japanese officials feared a premature strengthening of the
yen might dampen growth. The Bank of Japan intervened at various points
throughout the year by selling yen. During November, the Japanese yen surged to
a 4-year high against the U.S. dollar. Consequently, from the second through the
fourth quarters, long yen positions were profitable.

Interest income is earned on the average net assets held at PSI and,
therefore, varies monthly according to interest rates, trading performance, and
redemptions. Interest income decreased $640,000 for the year ended December 31,
1999 compared to 1998. This decrease was primarily due to lower interest rates
and lower net assets during 1999 as a result of redemptions and poor trading
performance during the year. Interest income decreased $439,000 for the year
ended December 31, 1998 compared to 1997, primarily due to lower net assets as a
result of redemptions and weak trading performance during the first six months
of 1998.

Commissions are calculated on the Trust's net asset value at the beginning of
each month and, therefore, vary according to trading performance and
redemptions. Commissions decreased $485,000 for the year ended December 31, 1999
compared to 1998 primarily due to lower monthly net asset values as a result of
redemptions and poor trading performance. Commissions decreased approximately
$624,000 for the year ended December 31, 1998 compared to 1997. This decrease
was primarily due to lower monthly net asset values as a result of redemptions
and weak trading performance during the first six months of 1998.

All trading decisions for the Trust are made by John W. Henry & Company, Inc.
(the 'Trading Manager'). Management fees are calculated on the Trust's net asset
value at the end of each month and, therefore, are affected by trading
performance and redemptions. Management fees decreased $282,000 and $337,000 for
the years ended December 31, 1999 and 1998 versus the prior years for the same
reasons commissions decreased 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 among the Trust, the
Managing Owner and the Trading Manager. Trading performance resulted in
incentive fees of $252,000, $98,000, and $376,000 for the years ended December
31, 1999, 1998 and 1997, respectively. Although the Trust ended 1999 with an
overall loss, incentive fees were generated by strong trading performance during
the second quarter. The payment of these fees is not

12
<PAGE>
contingent upon future trading performance and, therefore, is unaffected by the
Trust's poor trading performance during the remainder of the 1999 year.

Accounting for Derivative Instruments

Year 2000 Risk

The arrival of year 2000 was much anticipated and raised serious concerns
about whether or not computer systems around the world would continue to
function properly and the degree of 'Year 2000 Problems' that would have to be
resolved.

The Trust engages third parties to perform primarily all of the services it
needs and also relies on other third parties such as governments, exchanges,
clearinghouses, vendors and banks. The Trust has not experienced any material
adverse impact on operations related to Year 2000 Problems. While the Trust
believes it has mitigated its Year 2000 risk, the Trust cannot guarantee that an
as yet unknown Year 2000 failure will not have a material adverse effect on the
Trust's operations.

Inflation

Inflation has had no material impact on operations or on the financial
condition of the Trust from inception through December 31, 1999.

13
<PAGE>
OTHER INFORMATION

The actual round-turn equivalent of brokerage commissions paid per contract
for the year ended December 31, 1999 was $109.

The Trust's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available to limited owners without charge upon written
request to:

Diversified Futures Trust I
P.O. Box 2016
Peck Slip Station
New York, New York 10272-2016

14
<PAGE>

<PAGE>
Peck Slip Station BULK RATE
P.O. Box 2016 U.S. POSTAGE
New York, NY 10272 PAID
Automatic Mail
DFT1/17152

<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>

<CIK> 0000926805
<NAME> Diversified Futures Trust I
<MULTIPLIER> 1

<FISCAL-YEAR-END> Dec-31-1999

<PERIOD-START> Jan-1-1999

<PERIOD-END> Dec-31-1999

<PERIOD-TYPE> 12-Mos

<CASH> 43,317,270

<SECURITIES> 1,467,353

<RECEIVABLES> 8,209

<ALLOWANCES> 0

<INVENTORY> 0

<CURRENT-ASSETS> 44,792,832

<PP&E> 0

<DEPRECIATION> 0

<TOTAL-ASSETS> 44,792,832

<CURRENT-LIABILITIES> 4,228,890

<BONDS> 0

<COMMON> 0

<OTHER-SE> 40,563,942

<TOTAL-LIABILITY-AND-EQUITY> 44,792,832

<SALES> 0

<TOTAL-REVENUES> (419,704)

<CGS> 0

<TOTAL-COSTS> 0

<OTHER-EXPENSES> 6,576,170

<LOSS-PROVISION> 0

<INTEREST-EXPENSE> 0

<INCOME-PRETAX> 0

<INCOME-TAX> 0

<INCOME-CONTINUING> 0

<DISCONTINUED> 0

<EXTRAORDINARY> 0

<CHANGES> 0

<NET-INCOME> (6,995,874)

<EPS-BASIC> (25.53)

<EPS-DILUTED> 0

</TABLE>