FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 2003
Commission File Number 333-102038
CITIGROUP DIVERSIFIED FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
New York 13-4015586
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Citigroup Managed Futures LLC
388 Greenwich St. - 7th Fl.
New York, New York 10013
(Address and Zip Code of principal executive offices)
(212) 723-5424
(Registrant's telephone number, including area code)
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 X No_____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act).
Yes _____ No X
CITIGROUP DIVERSIFIED FUTURES FUND L.P.
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statement of Financial Condition
at March 31, 2003. 3
Notes to Financial Statements. 4 - 5
Item 2. Management's Discussion and Analysis
of Financial Condition. 6
PART II - Other Information 7
2
PART 1
ITEM 1. - FINANCIAL STATEMENT
CITIGROUP DIVERSIFIED FUTURES FUND L.P.
Statement of Financial Condition
March 31, 2003
ASSETS
Cash $ 2,000
Deferred offering costs 287,908
----------
Total assets $ 289,908
=========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Due to CGM for organizational expenses $ 12,910
Due to CGM for offering costs 287,908
----------
Total Liabilities $ 300,818
========
Partners' Capital
Limited Partner $ (5,455)
General Partner (5,455)
----------
Total Partners' Capital $ (10,910)
========
Total Liabilities and Partners' Capital $ 289,908
========
See Accompanying Notes to Statement of Financial Condition
NOTES TO STATEMENT OF FINANCIAL CONDITION
General
Citigroup Diversified Futures Fund L.P. (the "Partnership") was formed
under the laws of the State of New York on December 3, 2002 and has not yet
commenced operations. Citigroup Managed Futures LLC (the "General Partner") has
agreed to make capital contributions so that its General Partnership interest
will be the greater of (i) 1% of the partners' contributions to the Partnership
or (ii) $25,000. The Limited Partnership Agreement, included in the
Partnership's registration statement on Form S-1 (file number 333-102038) (the
"Registration Statement"), provides that 25,000 units of limited partnership
interest ("Units") must be sold at $1,000 per Unit prior to commencement of
trading activities. Further, 25,000 Units must be subscribed for within 90 days
after the date of commencement of the public offering of the Units (March 27,
2003), subject to an extension of up to an additional 60 days by the General
Partner. All subscriptions plus interest earned thereon are to be refunded
should less than 25,000 Units be sold during the subscription period or
extension thereof. The minimum subscription is $5,000 except that subscriptions
for employee benefit plans can be made for a minimum of $2,000. The minimum
investment for subscribers who are already limited partners will be $1,000
(except in Maine, where the minimum additional subscription will be $5,000).
On April 7, 2003, Smith Barney Futures Management LLC changed its name to
Citigroup Managed Futures LLC. Citigroup Managed Futures LLC acts as the general
partner (the "General Partner") of the Partnership. The Partnership's commodity
broker is Citigroup Global Markets Inc. ("CGM"), formerly Salomon Smith Barney
Inc. CGM is an affiliate of the General Partner. The General Partner is wholly
owned by Citigroup Global Markets Holdings Inc. ("CGMHI"), formerly Salomon
Smith Barney Holdings Inc., which is the sole owner of CGM. CGMHI is a wholly
owned subsidiary of Citigroup Inc. All trading decisions will be made for the
Partnership by Drury Capital Inc., ("Drury"), Graham Capital Management,
("Graham"), John W. Henry & Company, ("JWH")and Willowbridge Associates, Inc.
("Willowbridge") (the "Advisors") upon commencement of operations. The Advisors
are not affiliated with the General Partner or CGM.
CGM will bear all of the Partnership's organizational and offering expenses
incurred in connection with the issuance and distribution during the Initial
Offering Period of the securities being registered. Interest payments to the
Partnership will be used to reimburse CGM for the offering and organizational
expenses of the initial offering period (estimated at $650,000), plus interest
quoted by JP Morgan Chase & Co. As of March 31, 2003 the Partnership incurred
$12,910 of organizational costs and $287,908 of offering costs. A statement of
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operations has not been included as the only operational activity pertains to
incurring the aforementioned organizational costs.
The accompanying statement of financial condition is unaudited but, in the
opinion of management, includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the Partnership's
financial condition at March 31, 2003. These financial statements presents the
results of an interim period and does not include all disclosures normally
provided in annual financial statements. You should read this financial
statement included in the Registration Statement.
Subsequent Event
The Partnership commenced trading operations on May 1, 2003 with total
capital of $36,942,000 which includes the General Partner contribution of
$364,000.
5
PART I
Item 2. Management's Discussion and Analysis of Financial Condition.
The Registration Statement covering 300,000 Units of Limited Partnership
Interest became effective on March 27, 2003, thus necessitating this filing
under Section 15(d) of the Securities Exchange Act of 1934, as amended.
As of March 31, 2003, the Partnership has accepted $1,000 of Limited
Partner subscription and $1,000 of General Partner contribution. Subscription
amounts are held in escrow until the termination of the Initial Offering Period.
6
PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
The following information supplements and amends our discussion set
forth under Part I, Item 3 "Legal Proceedings" in the Partnership's Annual
Report on Form 10-K for the fiscal year ended December 31, 2002.
Settlement Of Certain Regulatory Matters:
On April 28, 2003, Salomon Smith Barney Inc. (SSB), now named
Citigroup Global Markets Inc., announced final agreements with the
Securities and Exchange Commission, the National Association of Securities
Dealers, the New York Stock Exchange and the New York Attorney General (as
lead state among the 50 states, the District of Columbia and Puerto Rico)
to resolve on a civil basis all of their outstanding investigations into
its research and IPO allocation and distribution practices. As part of the
settlements, SSB has consented to the entry of (1) an injunction under the
federal securities laws to be entered in the United States District Court
for the Southern District of New York, barring SSB from violating
provisions of the federal securities laws and related NASD and NYSE rules
relating to research, certain IPO allocation practices, the safeguarding of
material nonpublic information and the maintenance of required books and
records, and requiring SSB to adopt and enforce new restrictions on the
operation of research; (2) an NASD Acceptance Waiver and Consent requiring
SSB to cease and desist from violations of corresponding NASD rules and
requiring SSB to adopt and enforce the same new restrictions; (3) an NYSE
Stipulation and Consent requiring SSB to cease and desist from violations
of corresponding NYSE rules and requiring SSB to adopt and enforce the same
new restrictions; and (4) an Assurance of Discontinuance with the New York
Attorney General containing substantially the same or similar restrictions.
As required by the settlements, SSB expects to enter into related
settlements with each of the other states, the District of Columbia and
Puerto Rico. Consistent with the settlement-in-principle announced in
December 2002, these settlements require SSB to pay $300 million for
retrospective relief, plus $25 million for investor education, and commit
to spend $75 million to provide independent third-party research to its
clients at no charge. SSB reached these final settlement agreements without
admitting or denying any wrongdoing or liability. The settlements do not
establish wrongdoing or liability for purposes of any other proceeding. The
$300 million was accrued during the fourth quarter of 2002.
7
Enron:
New Power Holdings Actions
On April 17, 2003, the motion to dismiss the complaints in the
putative class actions relating to the New Power Holdings common stock was
denied.
Additional Actions
On March 5, 2003, an action was brought on behalf of the
purchasers of the Yosemite Notes and Enron Credit Linked Notes,
alleging violations of federal securities laws.
On April 9, 2003, an action was brought by a group of related
mutual funds that purchased certain Yosemite Notes, alleging
violations of state securities law and common law claims.
Research:
In Re At&T Corporation Securities Litigation
By order dated March 27, 2003, the court denied plaintiffs' leave
to amend their complaint to add as defendants Citigroup, SSB, and
certain of their executive officers and current and former employees.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. The exhibits required to be filed by Item 601 of Regulation S-K are
incorporated herein by reference to the exhibit index of the
Partnership's Pre-effective Amended No.2 to Registration Statement on
Form S-1 (File No.333-102038).
a) Exhibits - 99.1 Certificate of Chief Executive Officer.
99.2 Certificate of Chief Financial Officer.
(b) Reports on Form 8-K - None
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.
CITIGROUP DIVERSIFIED FUTURES FUND L.P.
By: Citigroup Managed Futures LLC
(General Partner)
By: /s/ David J. Vogel
David J. Vogel
President and Director
Date: 5/14/03
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 and on the dates indicated.
By: Citigroup Managed Futures LLC
(General Partner)
By: /s/ David J. Vogel
David J. Vogel
President and Director
Date: 5/14/03
By /s/ Daniel R. McAuliffe, Jr.
Daniel R. McAuliffe, Jr.
Chief Financial Officer and
Director
Date: 5/14/03
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CERTIFICATION
I, David J. Vogel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Citigroup Diversified
Futures Fund L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
10
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003
/s/David J. Vogel
David J. Vogel
Citigroup Managed Futures
President and Director
11
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Citigroup Diversified Futures Fund,
L.P. (the "Partnership") on Form 10-Q for the period ending March 31, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, David J. Vogel, President and Director of Citigroup Managed
Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/ David J.Vogel
David J. Vogel
Citigroup Managed Futures LLC
President and Director
May 14, 2003
12
CERTIFICATION
I, Daniel R. McAuliffe, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Citigroup Diversified
Futures Fund L.P. ;
2 Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
13
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003
/s/ Daniel R. McAuliffe, Jr.
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures
Chief Financial Officer and Director
14
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Citigroup Diversified Futures Fund,
L.P. (the "Partnership") on Form 10-Q for the period ending March 31, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Daniel R. McAuliffe, Jr., Chief Financial Officer and Director of
Citigroup Managed Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Partnership.
/s/ Daniel R. McAuliffe , Jr.
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
May 14, 2003
15