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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, 1996
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
One New York Plaza, 14th 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, 1996 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 7 and 8.
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 8 Financial Statements and Supplementary Data...................................... 5
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........................................................... 6
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 6
Item 13 Certain Relationships and Related Transactions................................... 6
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
Financial Statements and Financial Statement Schedules........................... 7
Exhibits......................................................................... 7
Reports on Form 8-K.............................................................. 8
SIGNATURES.................................................................................. 9
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, the ``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 & Co.,
Inc. (the ``Trading Manager''), an independent commodity trading manager which
manages the Registrant's assets pursuant to five trading programs developed by
the Trading Manager. The General Partner 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,
forwards and options trading; therefore, presentation of industry segment
information is not applicable.
General Partner
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. See Notes A, C and D to the Registrant's annual
report to limited partners for the year ended December 31, 1996 (``Registrant's
1996 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
As of March 3, there were 695 holders of record owning 47,972 Units which
include 480 units of general partnership interest. 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 only
redeem its units as of the last business day of any full calendar quarter at the
then current net asset value per Unit reduced by each Unit's pro rata portion of
unamortized organizational costs. 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.
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 1996
Annual Report which is filed as an exhibit hereto.
Year ended December 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ------------ -----------
Net realized gain on
commodity transactions...... $ 6,922,228 $ 7,694,647 $ 195,099 $ 6,760,365 $ 7,098,724
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Change in net unrealized gain
on open commodity
positions................... $ (546,204) $ (460,239) $ 215,941 $ 654,157 $(7,880,542)
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Commissions................... $ 1,629,113 $ 1,668,063 $ 1,641,756 $ 1,667,523 $ 1,543,216
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Management fees............... $ 745,450 $ 763,562 $ 727,169 $ 763,902 $ 681,835
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Incentive fees................ $ 532,138 $ 268,499 $ 226,735 $ 399,990 $ 121,252
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Net income (loss)............. $ 4,107,441 $ 5,284,484 $(1,739,097) $ 4,939,250 $(2,713,190)
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Allocation of net income
(loss):
Limited partners............ $ 4,079,689 $ 4,986,601 $(1,641,114) $ 4,709,119 $(2,632,558)
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
General partner............. $ 27,752 $ 297,883 $ (97,983) $ 230,131 $ (80,632)
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Net income (loss) per weighted
average Unit................ $ 76.69 $ 86.19 $ (25.65) $ 66.05 $ (29.78)
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Total assets.................. $21,401,289 $19,467,438 $16,120,278 $ 19,612,027 $17,200,931
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Redemptions................... $ 3,481,670 $ 2,047,033 $ 1,671,602 $ 2,027,435 $ 4,014,399
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Net asset value per Unit...... $ 407.47 $ 326.48 $ 243.73 $ 270.95 $ 206.07
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 10 and 11 of the
Registrant's 1996 Annual Report which is filed as an exhibit hereto.
4
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 9
of the Registrant's 1996 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
Reference is made to the Registrant's Current Report on Form 8-K dated May
14, 1996, as filed with the Securities and Exchange Commission on May 16, 1996
regarding the change in the Registrant's certifying accountant from Deloitte &
Touche LLP to Price Waterhouse LLP.
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 ten percent 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
James M. Kelso President and Director
Barbara J. Brooks Treasurer and Chief Financial Officer
Steven Carlino Vice President and Chief Accounting Officer
A. Laurence Norton, Jr. Director
Guy S. Scarpaci Director
JAMES M. KELSO, age 42, is the President and a Director of Seaport Futures
Management, Inc. He is a Senior Vice President of Futures Administration of PSI.
He is also the President and a Director of Prudential Securities Futures
Management Inc. and serves in various capacities for other affiliated companies.
He has held several positions within PSI since July 1981.
BARBARA J. BROOKS, age 48, is the Treasurer and Chief Financial Officer of
Seaport Futures Management, Inc. She is a Senior Vice President of PSI. She is
also the Treasurer and 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 33, is a Vice President of Seaport Futures Management,
Inc. He is a First Vice President of PSI. He is also a Vice President 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.
A. LAURENCE NORTON, JR., age 58, is a Director of Seaport Futures Management,
Inc. He is an Executive Vice President of PSI and head of its Futures Division.
He is also a Director of Prudential Securities
5
Futures Management Inc. Most recently, 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 50, 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.
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 3, 1997, 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 3, 1997, no director or officer of the General Partner owns
directly or beneficially any of the Units issued by the Registrant.
As of March 3, 1997, 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 1996 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.
6
PART IV
Page in
Annual Report
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements and Reports of Independent
Accountants--Incorporated by reference to the Registrant's 1996 Annual
Report which is filed as an exhibit hereto
Reports of Independent Accountants:
Report of Independent Accountants as of December 31, 1996 and for the
year then ended 2
Independent Auditors' Report as of December 31, 1995 and for the years
ended December 31, 1995 and 1994 2A
Financial Statements:
Statements of Financial Condition--December 31, 1996 and 1995 3
Statements of Operations--Three years ended December 31, 1996 4
Statements of Changes in Partners' Capital--Three years ended December
31, 1996 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 & Co., Inc. (incorporated
by reference to Exhibit 10.3 of Registrant's Annual Report on Form 10-K
for the period ended December 31, 1988)
7
10.4 Addendum to Advisory Agreement dated as of July 13, 1988 among the
Registrant, Seaport Futures Management, Inc., and John W. Henry & Co.,
Inc. (incorporated by reference to Exhibit 10.4 of Registrant's Annual
Report on Form 10-K for the period ended December 31, 1988)
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 & Co., 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 & Co.,
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 (incorported by
reference to Exhibit 10.9 of the Registrant's Quarterly Report on Form
10-Q for the period ended March 31, 1996)
13 Registrant's 1996 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 1996 Annual Report is to be deemed filed as part of this
report) (filed herewith)
16.1 Letter dated May 15, 1996 from Deloitte & Touche LLP to the Securities
and Exchange Commission regarding change in certifying accountant
(incorporated by reference to Exhibit 16.1 to the Registrant's Current
Report on Form 8-K dated May 14, 1996)
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.
8
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 27, 1997
-------------------------------------------
Steven Carlino
Vice President and Chief Accounting 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/ James M. Kelso Date: March 27, 1997
------------------------------------------
James M. Kelso
President and Director
By: /s/ Barbara J. Brooks Date: March 27, 1997
-------------------------------------------
Barbara J. Brooks
Treasurer and Chief Financial Officer
By: /s/ Steven Carlino Date: March 27, 1997
-------------------------------------------
Steven Carlino
Vice President
By: /s/ A. Laurence Norton, Jr. Date: March 27, 1997
-------------------------------------------
A. Laurence Norton, Jr.
Director
By: /s/ Guy S. Scarpaci Date: March 27, 1997
-------------------------------------------
Guy S. Scarpaci
Director
9