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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, 2001
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
incorporation or organization) No.)
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
Annual Report to Limited Partners for the year ended December 31, 2001 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.............................. 3
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..................................................................... 5
PART III
Item 10 Directors and Executive Officers of the Registrant............................... 5
Item 11 Executive Compensation........................................................... 7
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 7
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 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 indirect wholly owned subsidiaries of Prudential Financial,
Inc. 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, as well as with other market participants.
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 financial statements included in its annual report to the limited
partners for the year ended December 31, 2001 ('Registrant's 2001 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.
Item 4. Submission of Matters to a Vote of Limited Partners
None
3
PART II
Item 5. Market for the Registrant's Units and Related Limited Partner Matters
On October 19, 1988, the Registrant completed its offering. 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 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, 2002, there were 333 holders of record owning 21,929 Units
which include 220 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 10 of the Registrant's 2001
Annual Report which is filed as an exhibit hereto.
Year ended December 31,
-----------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ----------- ----------- -----------
Total revenues (including
interest)...................... $ 79,245 $ 766,189 $ (953,797) $ 2,595,752 $ 4,284,472
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
Net income (loss)................ $ (830,796) $ (350,188) $(2,933,491) $ 254,155 $ 1,599,123
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
Net income (loss) per weighted
average Unit................... $ (35.46) $ (12.57) $ (80.12) $ 6.08 $ 34.66
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
Total assets..................... $7,577,152 $9,268,631 $13,002,258 $18,118,204 $20,044,570
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
Net asset value per Unit......... $ 331.94 $ 369.48 $ 369.26 $ 452.97 $ 444.27
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 12 through 14 of the
Registrant's 2001 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 10
of the Registrant's 2001 Annual Report which is filed as an exhibit hereto.
4
Selected unaudited quarterly financial data for the years ended December 31,
2001 and 2000 are summarized below:
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------- ----------- --------- ----------
2001:
Total revenues (including interest) $1,162,933 $(1,289,917) $ 565,888 $ (359,659)
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Total revenues (including interest) less
commissions $ 984,397 $(1,469,696) $ 408,215 $ (517,217)
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Net income (loss) $ 919,494 $(1,529,264) $ 351,044 $ (572,070)
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Net income (loss) per weighted average Unit $ 37.63 $ (65.03) $ 15.16 $ (25.29)
---------- ----------- --------- ----------
---------- ----------- --------- ----------
2000:
Total revenues (including interest) $ (441,805) $ (928,240) $(345,221) $2,481,455
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Total revenues (including interest) less
commissions $ (675,133) $(1,115,396) $(501,792) $2,331,586
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Net income (loss) $ (806,443) $(1,221,840) $(595,302) $2,273,397
---------- ----------- --------- ----------
---------- ----------- --------- ----------
Net income (loss) per weighted average Unit $ (25.22) $ (43.27) $ (22.62) $ 91.33
---------- ----------- --------- ----------
---------- ----------- --------- ----------
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 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 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.
Name Position
Alex H. Ladouceur Chairman of the Board of Directors and Director
Eleanor L. Thomas President and Director
Barbara J. Brooks Chief Financial Officer
Guy S. Scarpaci Director
Tamara B. Wright Senior Vice President and Director
Thomas T. Bales Vice President
David Buchalter Secretary
The directors and executive officers of Seaport Futures Management, Inc. and
their positions with respect to the Registrant are as follows:
ALEX H. LADOUCEUR, born 1960, has been Chairman of the Board of Directors and
a Director of the General Partner since November 2001 and also has held such
positions with Prudential Securities Futures Management Inc. ('PSFMI') an
affiliate of the General Partner, since such date. Mr. Ladouceur joined PSI in
August 2001 as Executive Vice President, Head of the Global Derivatives
division. He is responsible for all
5
operating activities of PSI's Global Derivatives division including sales and
trading, foreign exchange, base and precious metals, and the trading floors. In
addition, Mr. Ladouceur has responsibility for Alternative Investment
Strategies. Mr. Ladouceur joined PSI from Credit Lyonnais Rouse Ltd. ('CLR'),
where he served as president of their United States operations since 1992 and as
a main board director of CLR in London since 1994. In 1998, he was appointed
managing director of Global Cash Markets at CLR with responsibility for leading
global market-making and sales for OTC products, including structured derivative
products. Mr. Ladouceur earned his bachelor's degree in Economics from the
University of Calgary in Alberta, Canada, and his master's degree in European
Studies from the College of Europe in Bruges, Belgium.
ELEANOR L. THOMAS, born 1954, has been a Director and President of the
General Partner since September 2000 and was a Director and Executive Vice
President from April 1999 to September 2000. She was a First Vice President of
the General Partner and PSFMI from October 1998 to April 1999 and a Director and
the President of PSFMI since such date. Ms. Thomas is a Senior Vice President
and the Director of Alternative Investment Strategies at PSI. She is responsible
for origination, asset allocation, due diligence, marketing and sales for the
group's product offerings. 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. She graduated Summa Cum Laude from
Long Island University with a B.A. in English Literature, and graduated Baruch
College in 1986 with an M.B.A. in Accounting. Ms. Thomas is a certified public
accountant.
BARBARA J. BROOKS, born 1948, became the Treasurer and Chief Financial
Officer of the General Partner in May 1990, at which time she also became the
Treasurer and Chief Financial Officer of PSFMI. In 1998, she relinquished her
position as Treasurer of the General Partner and PSFMI. She is a Senior Vice
President of PSI and is the Vice President-Finance and the Chief Financial
Officer of various entities affiliated with PSI. She has been employed by PSI
since 1983. Ms. Brooks is a certified public accountant.
GUY S. SCARPACI, born 1947, has been a Director of the General Partner since
July 1987 and was Assistant Treasurer from May 1988 until December 1989. In
addition, Mr. Scarpaci has been a Director of PSFMI since May 1989. Mr. Scarpaci
was first affiliated with the General Partner in July 1987. Mr. Scarpaci has
been employed by PSI in positions of increasing responsibility since August
1974, and he is currently a Senior Vice President of the Global Derivatives
division.
TAMARA B. WRIGHT, born 1959, has been a Senior Vice President of the General
Partner and PSFMI since October 1998 and a Director of the General Partner since
December 1998. She is also a Senior Vice President and the Chief Administrative
Officer for the International Division at Prudential Securities. In this
capacity, her responsibilities include financial management, risk management,
systems implementation, employment matters and internal control policies and
procedures. Previously, Mrs. Wright served as Director of Consumer Markets Risk
Management, where she led the Domestic and International Branch efforts in
ensuring the timely resolution of audit, compliance and legal concerns. Prior to
joining the firm, Mrs. Wright was a manager with PricewaterhouseCoopers LLP in
its Management Consulting division in New York, New York.
THOMAS T. BALES, born 1959, is a Vice President of the General Partner. He is
also a Senior Vice President of Futures Administration in the Global Derivatives
division for PSI, and he serves in various capacities for other affiliated
companies. Prior to joining the Global Derivatives division, Mr. Bales served as
in-house counsel in the Law Department of PSI from October 1987 through May
1996. Mr. Bales joined PSI in November 1981 as an Analyst in the Credit Analysis
Department and later served as a Section Manager.
DAVID BUCHALTER, born 1958, has been the Secretary of both the General
Partner and PSFMI since October 1996. Mr. Buchalter is a Senior Vice President
and is Senior Counsel in the Law Department of PSI. Prior to joining PSI in
January 1992, Mr. Buchalter was associated with the law firm of Rosenman & Colin
LLP from April 1988 to January 1992. Prior to that, from May 1983 though March
1988, Mr. Buchalter served as in-house counsel for Shearson Lehman Hutton, Inc.
and its predecessor firm, E.F. Hutton & Co., Inc.
Effective March 2001, A. Laurence Norton, Jr. resigned as a Director of both
the General Partner and PSFMI. Additionally, Steven Carlino resigned as Vice
President and Treasurer for both the General Partner and PSFMI effective March
2002.
6
Effective November 2001, Alex H. Ladouceur was elected by the Board of
Directors of the General Partner as Chairman of the Board and he has served as
Chairman of the Board of PSFMI since November 2001.
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, 2002, 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, 2002, no director or officer of the General Partner owns
directly or beneficially any of the Units issued by the Registrant.
As of March 21, 2002, no partner beneficially owns more than five percent
(5%) of the outstanding limited partnership units issued by the Registrant.
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 2001 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 2001 Annual
Report which is filed as an exhibit hereto
Report of Independent Accountants 2
Financial Statements:
Statements of Financial Condition--December 31, 2001 and 2000 3
Condensed Schedule of Investments at December 31, 2001 4
Statements of Operations--Three years ended December 31, 2001 5
Statements of Changes in Partners' Capital--Three years ended December
31, 2001 5
Notes to Financial Statements 6
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)
10.10 Amendment to Advisory Agreement, dated October 1, 2000, among the
Registrant, Seaport Futures Management, Inc. and John W. Henry &
Company, Inc. (incorporated by reference to Exhibit 10.10 of the
Registrant's Quarterly Report on Form 10-Q for the period ended
September 30, 2000)
13.1 Registrant's 2000 Annual Report (with the exception of the information
and data incorporated by reference in Items 1, 7 and 8 of this Annual
Report on Form 10-K, no other information or data appearing in the
Registrant's 2000 Annual Report is to be deemed filed as part of this
report) (filed herewith)
(b) Reports on Form 8-K--None
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/ Barbara J. Brooks Date: March 28, 2002
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Barbara J. Brooks
Chief Financial Officer
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/ Alex H. Ladouceur Date: March 28, 2002
------------------------------------------------------------------
Alex H. Ladouceur
Chairman of the Board of Directors
By: /s/ Eleanor L. Thomas Date: March 28, 2002
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Eleanor L. Thomas
President and Director
By: /s/ Barbara J. Brooks Date: March 28, 2002
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Barbara J. Brooks
Chief Financial Officer (chief accounting officer)
By: /s/ Guy S. Scarpaci Date: March 28, 2002
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Guy S. Scarpaci
Director
By: Date:
------------------------------------------------------------------
Tamara B. Wright
Senior Vice President and Director
10