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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
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 0-17592
PRUDENTIAL-BACHE DIVERSIFIED FUTURES FUND L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3464456
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(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
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(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
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Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(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
Agreement of Limited Partnership of the Registrant, dated May 25, 1988, as
amended and restated as of July 12, 1988, included as part of the Registration
Statement on Form S-1 (File No. 33-22100) filed with the Securities and Exchange
Commission on June 1, 1988 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.
Annual Report to Limited Partners 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 8 and 9.
PRUDENTIAL-BACHE DIVERSIFIED FUTURES FUND L.P.
(a limited partnership)
TABLE OF CONTENTS
PART I PAGE
Item 1 Business......................................................................... 3
Item 2 Properties....................................................................... 3
Item 3 Legal Proceedings................................................................ 3
Item 4 Submission of Matters to a Vote of Limited Partners.............................. 4
PART II
Item 5 Market for the Registrant's Units and Related Limited Partner 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...................................... 4
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 4
PART III
Item 10 Directors and Executive Officers of the Registrant............................... 5
Item 11 Executive Compensation........................................................... 6
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 6
Item 13 Certain Relationships and Related Transactions................................... 7
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K................. 8
Financial Statements and Financial Statement Schedules........................... 8
Exhibits......................................................................... 8
Reports on Form 8-K.............................................................. 9
SIGNATURES.................................................................................. 10
2
PART I
Item 1. Business
General
Prudential-Bache Diversified Futures Fund L.P. (the 'Registrant'), a Delaware
limited partnership, was formed on May 25, 1988 and will terminate on December
31, 2007 unless terminated sooner under the provisions of the Amended and
Restated Agreement of Limited Partnership (the 'Partnership Agreement'). The
Registrant was formed to engage primarily in the speculative trading of a
portfolio consisting primarily of commodity futures, forward and options
contracts. On October 19, 1988, the Registrant completed its offering and raised
$30,107,800 from the sale of 297,468 units of limited partnership interest and
3,610 units of general partnership interest (collectively, 'Units') which
resulted in net proceeds to the Registrant of $29,387,470. The Registrant's
fiscal year for book and tax purposes ends on December 31.
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 three trading programs developed by
the Trading Manager. The Trading Manager had been trading the Registrant's
assets pursuant to five of its trading programs since commencement of operations
until April 1, 1997 when the general partner of the Registrant reallocated the
Registrant's assets so that only three of the trading programs remained as
further discussed in Note A to the Registrant's annual report to the limited
partners for the year ended December 31, 1999 ('Registrant's 1999 Annual
Report') which is filed as an exhibit hereto. The general partner of the
Registrant 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,
forward and options trading; therefore, presentation of industry segment
information is not applicable.
General Partner and its Affiliates
The general partner of the Registrant is Seaport Futures Management, Inc.
(the 'General Partner'), which is an affiliate of Prudential Securities
Incorporated ('PSI'), the Registrant's commodity broker. Both the General
Partner and PSI are wholly owned subsidiaries of Prudential Securities Group
Inc. ('PSGI'). The General Partner is required to maintain at least a 1%
interest in the Registrant as long as it is acting as the Registrant's general
partner.
Competition
The General Partner and its affiliates have formed, and may continue to form,
various entities to engage in the speculative trading of futures, forward and
options contracts which, in part, have certain of the same investment policies
as the Registrant.
The Registrant is a closed-end fund which does not currently, and does not
intend in the future to, solicit the sale of additional Units. As such, the
Registrant does not compete with other entities to attract new fund
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 General Partner and its affiliates pursuant
to the Partnership Agreement as further discussed in Notes A, C and D to the
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 General Partner.
3
Item 4. Submission of Matters to a Vote of Limited Partners
None
PART II
Item 5. Market for the Registrant's Units and Related Limited Partner Matters
A significant secondary market for the Units has not developed, and it is not
expected that one will develop in the future. There are also certain
restrictions set forth in the Partnership Agreement limiting the ability of a
partner to transfer Units. The Partnership Agreement does, however, provide that
a limited partner may redeem its units as of the last business day of any full
calendar quarter at the then current net asset value per Unit. Consequently,
holders of Units 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
Partnership Agreement. No distributions have been made since inception and no
distributions are anticipated in the future.
As of March 21, 2000, there were 476 holders of record owning 31,978 Units
which include 322 units of general partnership interest.
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.
Year ended December 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
Total revenues (including
interest).................... $ (953,797) $ 2,595,752 $ 4,284,472 $ 7,090,392 $ 8,060,997
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss).............. $(2,933,491) $ 254,155 $ 1,599,123 $ 4,107,441 $ 5,284,484
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per weighted
average Unit................. $ (80.12) $ 6.08 $ 34.66 $ 76.69 $ 86.19
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total assets................... $13,002,258 $18,118,204 $20,044,570 $21,401,289 $19,578,777
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net asset value per Unit....... $ 369.26 $ 452.97 $ 444.27 $ 407.47 $ 326.48
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
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
Information regarding quantitative and qualitative disclosures about market
risk is not required pursuant to Item 305(e) of Regulation S-K.
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
4
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 General Partner.
The General Partner's directors and executive officers, and any persons
holding more than 10% of the Registrant's Units ('Ten Percent Owners') are
required to report their initial ownership of such Units 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 and 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 General Partner's directors and
executive officers 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 Seaport Futures Management, Inc. and
their positions with respect to the Registrant are as follows:
Name Position
Eleanor L. Thomas President and Director
Joseph A. Filicetti 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
ELEANOR L. THOMAS, age 45, is the President and a Director of Seaport Futures
Management, Inc. and is the Executive Vice President and a Director of
Prudential Securities 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.
JOSEPH A. FILICETTI, age 37, is the Executive Vice President and a Director
of Seaport Futures Management, Inc. He had been a Vice President of Seaport
Futures Management, Inc. and Prudential Securities Futures Management Inc. from
October 1998 to March 1999. In April 1999, Mr. Filicetti was named to his
current positions at Seaport Futures Management, Inc. and became the President
and a Director of Prudential Securities 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.
BARBARA J. BROOKS, age 51, is the Chief Financial Officer of Seaport Futures
Management, Inc. She is a Senior Vice President of PSI. She is also the Chief
Financial Officer of Prudential Securities 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 Seaport Futures
Management, Inc. He is a First Vice President of PSI. He is also a Vice
President and Treasurer of Prudential Securities 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.
5
ALAN J. BRODY, age 48, is a Director of Seaport Futures Management, Inc. and
Prudential Securities 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 Seaport 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 Prudential Securities 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 Seaport Futures Management, Inc. He
is a First Vice President of the Futures Division of PSI. He is also a Director
of Prudential Securities 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 Director and a Senior Vice President of
Seaport 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 Director and a Senior Vice President of Prudential Securities 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 Seaport Futures Management, Inc. and Prudential Securities
Futures Management Inc. In addition, Ms. Thomas was elected as President of
Seaport Futures Management, Inc. replacing Thomas M. Lane Jr. and Mr. Filicetti
was elected as the Executive Vice President of Seaport Futures Management, Inc.
Additionally, Alan J. Brody was elected as a Director of Seaport Futures
Management, Inc. and Prudential Securities 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 General Partner for their
services. Certain directors and officers of the General Partner receive
compensation from affiliates of the General Partner, not from the Registrant,
for services performed for various affiliated entities, which may include
services performed for the Registrant; however, the General Partner 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 General Partner.)
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 21, 2000, no director or officer of the General Partner owns
directly or beneficially any interest in the voting securities of the General
Partner.
As of March 21, 2000, no director or officer of the General Partner owns
directly or beneficially any of the Units issued by the Registrant.
As of March 21, 2000, no partner beneficially owns more than five percent
(5%) of the outstanding limited partnership units issued by the Registrant.
6
Item 13. Certain Relationships and Related Transactions
The Registrant has and will continue to have certain relationships with the
General Partner and its affiliates. However, there have been no direct financial
transactions between the Registrant and the directors or officers of the General
Partner.
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.
7
PART IV
Page in
Annual Report
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 Partners' 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 the
notes thereto.
3. Exhibits
Description:
3.1 Agreement of Limited Partnership of the Registrant, dated as of May 25,
and 1988 as amended and restated as of July 12, 1988 (incorporated by
4.1 reference to Exhibit 3.1 and 4.1 of Registrant's Annual Report on Form
10-K for the period ended December 31, 1988)
4.2 Subscription Agreement (incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-1, File No. 33-22100)
4.3 Request for Redemption (incorporated by reference to Exhibit 4.3 to the
Registrant's Registration Statement on Form S-1, File No. 33-22100)
10.1 Escrow Agreement, dated July 14, 1988 among the Registrant, Seaport
Futures Management, Inc., Prudential-Bache Securities Inc. and Bankers
Trust Company (incorporated by reference to Exhibit 10.1 of
Registrant's Annual Report on Form 10-K for the period ended December
31, 1988)
10.2 Brokerage Agreement dated October 18, 1988 between the Registrant and
Prudential-Bache Securities Inc. (incorporated by reference to Exhibit
10.2 of Registrant's Annual Report on Form 10-K for the period ended
December 31, 1988)
10.3 Advisory Agreement dated June 1, 1988 among the Registrant, Seaport
Futures Management, Inc., and John W. Henry & Company, Inc.
(incorporated by reference to Exhibit 10.3 of Registrant's Annual
Report on Form 10-K for the period ended December 31, 1988)
10.4 Addendum to Advisory Agreement dated as of July 13, 1988 among the
Registrant, Seaport Futures Management, Inc., and John W. Henry &
Company, Inc. (incorporated by reference to Exhibit 10.4 of
Registrant's Annual Report on Form 10-K for the period ended December
31, 1988)
8
10.5 Representation Agreement Concerning the Registration Statement and the
Prospectus, dated as of July 14, 1988 among the Registrant, Seaport
Futures Management, Inc., Prudential-Bache Securities Inc. and John W.
Henry & Company, Inc. (incorporated by reference to Exhibit 10.5 of
Registrant's Annual Report on Form 10-K for the period ended December
31, 1988)
10.6 Net Worth Agreement, dated as of July 14, 1988 between Seaport Futures
Management, Inc. and Prudential Securities Group Inc. (incorporated by
reference to Exhibit 10.6 of Registrant's Annual Report on Form 10-K
for the period ended December 31, 1988)
10.7 Secured Demand Note Collateral Agreement dated as of February 15, 1991
between Seaport Futures Management, Inc. and Prudential Securities
Group Inc. (incorporated by reference to Exhibit 10.7 of Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991)
10.8 Amendment to Advisory Agreement as of June 1, 1988 among the
Registrant, Seaport Futures Management, Inc., and John W. Henry &
Company, Inc. (incorporated by reference to Exhibit 10.8 of
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993)
10.9 Form of Foreign Currency Addendum to Brokerage Agreement between the
Registrant and Prudential Securities Incorporated (incorporated by
reference to Exhibit 10.9 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 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.
9
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.
Prudential-Bache Diversified Futures Fund L.P.
By: Seaport Futures Management, Inc.
A Delaware corporation, General Partner
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 General Partner) and on
the dates indicated.
By: Seaport Futures Management, Inc.
A Delaware corporation, General Partner
By: /s/ Eleanor L. Thomas Date: March 30, 2000
-------------------------------------------
Eleanor L. Thomas
President and Director
By: /s/ Joseph A. Filicetti Date: March 30, 2000
-------------------------------------------
Joseph A. Filicetti
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
10