Item 1. Business.
(a) General development of business. Smith Barney Diversified Futures Fund L.P. ("Partnership") is a limited partnership organized under the laws of the State of New York, on August 13, 1993 to engage in speculative trading of a diversified portfolio of commodity interests, including futures contracts, options and forwards. The commodity interests that are traded by the Partnership are volatile and involve a high degree of market risk. The Partnership commenced trading operations on January 12, 1994. A total of 150,000 Units of Limited Partnership Interest in the Partnership ("Units") were offered to the public. A Registration Statement on Form S-1 relating to the public offering became effective on October 29, 1993. Between October 29, 1993 and January 11, 1994, 75,615 Units were sold to the public at $1,000 per Unit. Proceeds of the offering were held in an escrow account and were transferred, along with the General Partner's contribution of $781,000 to the Partnership's trading account on January 12, 1994 when the Partnership commenced trading. An additional 150,000 Units were registered on a Registration Statement on Form S-1 effective February 17, 1994. Sales of additional Units and additional General Partner's contributions and redemptions of Units for the year ended December 31, 1996 are reported in the Statement of Partners' Capital on page under "Item 8. Financial Statements and Supplementary Data."
The General Partner has agreed to make capital contributions, if necessary, so that its general partnership interest will be equal to the greater of (i) an amount to entitle it to 1% of each material item of Partnership income, loss, deduction or credit and (ii) the greater of (a) 1% of the partners' contributions to the Partnership or (b) $25,000. The Partnership will be liquidated upon the first of the following to occur: December 31, 2013; the net asset value of a Unit decreases to less than $400 as of the close of any business day; or under certain circumstances as defined in the Limited Partnership Agreement of the Partnership (the "Limited Partnership Agreement"). The Partnership's trading of futures contracts on commodities is done on United States and foreign commodity exchanges. It engages in such trading through a commodity brokerage account maintained with its commodity broker, Smith Barney Inc. ("SB"). Smith Barney Futures Management Inc., acts as the general partner of the Partnership (the "General Partner"). SB is an affiliate of the General Partner. Under the Limited Partnership Agreement, the General Partner administers the business and affairs of the Partnership. As of December 31, 1996, all commodity trading decisions are made for the Partnership by Campbell & Company, Inc., John W. Henry & Company, Inc. ("JWH"), Chesapeake Capital Corporation, Abraham Trading Co., Rabar Market Research, Inc. and AIS Futures Management, Inc. (collectively, the "Advisors"). None of the Advisors is affiliated with one another, the General Partner or SB. The Advisors are not responsible for the organization or
operation of the Partnership. Pursuant to the terms of the Management Agreements (the "Management Agreement"), the Partnership is obligated to pay each Advisor: (i) a monthly management fee equal to 1/6 of 1% (2% per year) of month-end Net Assets (except that JWH will receive a monthly management fee equal to 1/3 of 1% (4% per year)) of the Partnership allocated to each Advisor as of the end of each month and (ii) an incentive fee payable quarterly, equal to 20% of the New Trading Profits (except JWH, which will receive an incentive fee of 15% of New Trading Profits) of the Partnership. The Partnership has entered into a Customer Agreement with SB (the "Customer Agreement") which provides that the Partnership will pay SB a monthly brokerage fee equal to 11/24 of 1% of month-end Net Assets allocated to the Advisors (5.5% per year) in lieu of brokerage commissions on a per trade basis. SB pays a portion of its brokerage fees to its financial consultants who have sold Units and who are registered as associated persons with the Commodity Futures Trading Commission (the "CFTC"). The Partnership pays for National Futures Association ("NFA") fees, exchange and clearing fees, give-up and user fees and floor brokerage fees. The Customer Agreement between the Partnership and SB gives the Partnership the legal right to net unrealized gains and losses. Brokerage fees will be paid for the life of the Partnership, although the rate at which such fees are paid may be changed. In addition, SB pays the Partnership interest on 80% of the average daily equity maintained in cash in its account during each
month at a 30-day U.S. Treasury bill rate determined weekly by SB based on the average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days from the date on which such weekly rate is determined. (b) Financial information about industry segments. The Partnership's business consists of only one segment, speculative trading of commodity interests. The Partnership does not engage in sales of goods or services. The Partnership's net income (loss) from operations for the year ended December 31, 1996, 1995 and for the period from January 12, 1994 (commencement of trading operations) to December 31, 1994 is set forth under "Item 6. Select Financial Data". The Partnership capital as of December 31, 1996 was $171,587,261. (c) Narrative description of business. See Paragraphs (a) and (b) above. (i) through (x) - Not applicable. (xi) through (xii) - Not applicable. (xiii) - The Partnership has no employees. (d) Financial Information About Foreign and Domestic Operations and Export Sales. The Partnership does not engage in sales of goods or services, and therefore this item is not applicable. Item 2.
Item 2. Properties. The Partnership does not own or lease any properties. The General Partner operates out of facilities provided by its affiliate, SB.
Item 3.
Item 3. Legal Proceedings. There are no pending legal proceedings to which the Partnership is a party or to which any of its assets is subject. No material legal proceedings affecting the Partnership were terminated during the fiscal year. Item 4.
Item 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted to the security holders for a vote during the last fiscal year covered by this report. PART II Item 5.
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters. (a) Market Information. The Partnership has issued no stock. There is no established public market for the Units of Limited Partnership Interest. (b) Holders. The number of holders of Units of Limited Partnership Interest as of December 31, 1996 was 7,706. (c) Distribution. The Partnership did not declare a distribution in 1996.
Item 6.
Item 6. Select Financial Data. The Partnership commenced trading operations on January 12, 1994. Realized and unrealized trading gains (losses), interest income, net income (loss) and increase (decrease) in net asset value per Unit for the years ended December 31, 1996, 1995 and for the period from January 12, 1994 (commencement of trading operations) to December 31, 1994 and total assets at December 31, 1996, 1995, 1994 and 1993 were as follows:
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. (a) Liquidity. The Partnership does not engage in sales of goods or services. Its only assets are its equity in its commodity futures trading account, consisting of cash and cash equivalents, net unrealized appreciation (depreciation) on open futures contracts and interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership. Such substantial losses could lead to a material decrease in liquidity. To minimize this risk, the Partnership will follow certain policies including: (1) Partnership funds are invested only in futures contracts which are traded in sufficient volume to permit, in the opinion of the Advisors, ease of taking and liquidating positions. (2) The Partnership diversifies its positions among various commodities. (3) No Advisor initiates additional positions in any commodity if such additional positions would result in aggregate positions for all commodities requiring as margin more than 66-2/3% of the Partnership's assets allocated to the Advisor. (4) The Partnership may occasionally accept delivery of a commodity. Unless such delivery is disposed of promptly by retendering the warehouse receipt representing the delivery to the appropriate clearing house, the physical commodity position will be fully hedged.
(5) The Partnership does not employ the trading technique commonly known as "pyramiding", in which the speculator uses unrealized profits on existing positions as margin for the purchase or sale of additional positions in the same or related commodities. (6) The Partnership does not utilize borrowings except short-term borrowings if the Partnership takes delivery of any cash commodities. (7) The Advisor may, from time to time, employ trading strategies such as spreads or straddles on behalf of the Partnership. The term "spread" or straddle" describes a commodity futures trading strategy involving the simultaneous buying and selling of futures contracts on the same commodity but involving different delivery dates or markets and in which the trader expects to earn a profit from a widening or narrowing of the difference between the prices of the two contracts. The Partnership is party to financial instruments with off- balance sheet risk, including derivative financial instruments and derivative commodity instruments, in the normal course of its business. These financial instruments include forwards, futures and options, whose value is based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash flows, or to purchase or sell other financial instruments at specified terms at specified future dates. Each of these instruments is subject to various risks similar to those relating to the underlying financial instruments including market and credit risk. The General Partner monitors and controls the Partnership's risk exposure on a daily basis through financial,
credit and risk management monitoring systems and, accordingly believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership is subject. (See also Item 8.
Item 8. Financial Statements and Supplementary Data.
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
Page Number
Report of Independent Accountants.
Financial Statements: Statement of Financial Condition at December 31, 1996 and 1995.
Statement of Income and Expenses for the years ended December 31, 1996 and 1995 and for the period January 12, 1994 (commencement of trading operations) to December 31, 1994.
Statement of Partner's Capital for the years ended December 31, 1996, 1995 and 1994.
Notes to Financial Statements. -
Report of Independent Accountants
To the Partners of Smith Barney Diversified Futures Fund L.P.:
We have audited the accompanying statement of financial condition of SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. (a New York Limited Partnership) as of December 31, 1996 and 1995, and the related statements of income and expenses for the years ended December 31, 1996 and 1995 and for the period from January 12, 1994 (commencement of trading operations) to December 31, 1994, and of partners' capital for the years ended December 31, 1996, 1995, and 1994. These financial statements are the responsibility of the management of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management of the General Partner, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SMITH BARNEY DIVERSIFIED FUTURES FUND L.P. as of December 31, 1996 and 1995, and the results of its operations for the years ended December 31, 1996, 1995 and 1994, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York February 28, 1997
Smith Barney Diversified Futures Fund L.P. Statement of Financial Condition December 31, 1996 and 1995
Assets: 1996 1995 Equity in commodity futures trading account: Cash and cash equivalents (Note 3c) $170,574,018 $181,687,559 Net unrealized appreciation on open futures contracts 6,887,203 18,951,551 Commodity options owned, at market value (cost $607,539 and $5,360, in 1996 and 1995, respectively) 442,696 5,520 ------------ ------------ 177,903,917 200,644,630 Interest receivable 558,298 675,035 ------------ ------------ $178,462,215 $201,319,665 ============ ============ Liabilities and Partners' Capital: Liabilities: Accrued expenses: Commissions $ 831,169 $ 940,399 Management fees 412,599 447,124 Incentive fees 3,476,717 Other 108,043 107,357 Redemptions payable (Note 5) 2,005,213 5,631,797 Commodity options written, at market value (premiums received $83,070 and $2,400, in 1996 and 1995, respectively) 41,213 2,560 ------------ ------------ 6,874,954 7,129,237 ------------ ------------ Partners' capital (Notes 1, 5, and 7): General Partner, 2,048.9308 Unit equivalents outstanding in 1996 and 1995 2,561,901 2,236,736 Limited Partners, 135,181.6379 and 175,835.9644 Units of Limited Partnership Interest outstanding in 1996 and 1995, respectively 169,025,360 191,953,692 ------------ ------------ 171,587,261 194,190,428 ------------ ------------ $178,462,215 $201,319,665 ============ ============
See notes to financial statements.
Smith Barney Diversified Futures Fund L.P. Statement of Income and Expenses for the years ended December 31, 1996 and 1995 and for the period from January 12, 1994 (commencement of trading operations) to December 31, 1994
1996 1995 1994 Income: Net gains (losses) on trading of commodity interests: Realized gains (losses) on closed positions $ 46,225,371 $ 39,663,772 $(12,300,678) Change in unrealized gains/ losses on open positions (12,187,334) (4,383,357) 23,334,908 ------------ ------------ ------------ 34,038,037 35,280,415 11,034,230 Less, Brokerage commissions and clearing fees ($393,877, $433,213 and $273,864, respectively) (Note 3c) (10,754,060) (11,751,508) (9,866,501) ------------ ------------ ------------ Net realized and unrealized gains 23,283,977 23,528,907 1,167,729 Interest income 6,631,110 8,077,695 5,227,466 ------------ ------------ ------------ 29,915,087 31,606,602 6,395,195 ------------ ------------ ------------ Expenses: Management fees (Note 3b) 4,682,124 4,940,353 4,285,947 Incentive fees (Note 3b) 3,923,488 4,073,071 3,023,294 Other 252,861 415,960 170,003 Organization expense (Note 6) 1,145,322 ------------ ------------ ------------ 8,858,473 9,429,384 8,624,566 ------------ ------------ ------------ Net income (loss) $ 21,056,614 $ 22,177,218 $ (2,229,371) ============ ============ ============ Net income (loss) per Unit of Limited Partnership Interest and General Partner Unit equivalent (Notes 1 and 7) $ 158.70 $ 124.60 $ (32.94) ============ ============ ============
See notes to financial statements.
Smith Barney Diversified Futures Fund L.P. Statement of Partners' Capital for the years ended December 31, 1996, 1995 and 1994
Limited General Partners Partner Total Partners' capital at December 31, 1993 $ 1,000 $ 1,000 $ 2,000 Proceeds from offering of 75,614 Units of Limited Partnership Interest and General Partner's contribution representing 780 Unit equivalents (Note 1) 75,614,000 780,000 76,394,000 ------------- ------------- ------------- Opening Partnership capital for operations 75,615,000 781,000 76,396,000 Net loss (2,202,957) (26,414) (2,229,371) Sale of 141,214.7500 Units of Limited Partnership Interest and General Partner's contribution representing 1,316.6838 Unit equivalents 136,109,323 1,274,000 137,383,323 Redemption of 33,561.8122 Units of Limited Partnership Interest (32,289,431) 0 (32,289,431) ------------- ------------- ------------- Partners' capital at December 31, 1994 177,231,935 2,028,586 179,260,521 Net income 21,909,023 268,195 22,177,218 Sale of 38,919.4389 Units of Limited Partnership Interest 40,580,354 0 40,580,354 Redemption of 46,351.4123 Units of Limited Partnership Interest and General Partner's redemption representing 48.7530 Unit equivalents (47,767,620) (60,045) (47,827,665) ------------- ------------- ------------- Partners' capital at December 31, 1995 191,953,692 2,236,736 194,190,428 Net income 20,731,449 325,165 21,056,614 Sale of 1,905.2800 Units of Limited Partnership Interest 2,035,483 0 2,035,483 Redemption of 42,559.6065 Units of Limited Partnership Interest (45,695,264) 0 (45,695,264) ------------- ------------- ------------- Partners' capital at December 31, 1996 $ 169,025,360 $ 2,561,901 $ 171,587,261 ============= ============= =============
See notes to financial statements.
Smith Barney Diversified Futures Fund L.P. Notes to Financial Statements
1. Partnership Organization:
Smith Barney Diversified Futures Fund L.P. (the "Partnership") is a limited partnership which was organized on August 13, 1993 under the partnership laws of the State of New York to engage in the speculative trading of a diversified portfolio of commodity interests including futures contracts, options and forward contracts. The commodity interests that are traded by the Partnership are volatile and involve a high degree of market risk.
Between October 29, 1993 and January 11, 1994, 75,615 Units of Limited Partnership Interest ("Units") were sold at $1,000.00 per Unit. The proceeds of the offering were held in an escrow account until January 12, 1994, at which time they were turned over to the Partnership for trading. The Partnership was authorized to sell 300,000 Units during its offering period.
Smith Barney Futures Management Inc. is the general partner (the "General Partner") of the Partnership. Smith Barney Inc. ("SB"), an affiliate of the General Partner, acts as commodity broker for the Partnership (see Note 3c). The General Partner and each limited partner share in the profits and losses of the Partnership in proportion to the amount of partnership interest owned by each except that no limited partner shall be liable for obligations of the Partnership in excess of his initial capital contribution and profits, if any, net of distributions.
The Partnership will be liquidated upon the first of the following to occur: December 31, 2013; the net asset value of a Unit decreases to less than $400 as of the close of any business day; or under certain circumstances as defined in the Limited Partnership Agreement.
2. Accounting Policies:
a.All commodity interests (including derivative financial instruments and derivative commodity instruments) are used for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded in the statement of financial condition at market value for those commodity interests for which market quotations are readily available or at fair value on the last business day of the year. Investments in commodity interests denominated in foreign currency are translated into U.S. dollars at the exchange rates prevailing on the last business day of the year. Realized gain (loss) and changes in unrealized values on commodity interests are recognized in the period in which the contract is closed or the changes occur and are included in net gains (losses) on trading of commodity interests.
Smith Barney Diversified Futures Fund L.P. Notes to Financial Statements
b.Income taxes have not been provided as each partner is individually liable for the taxes, if any, on his share of the Partnership's income and expenses.
c.The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
3. Agreements:
a.Limited Partnership Agreement:
The Limited Partnership Agreement provides that the General Partner shall manage the business of the Partnership and may make all trading decisions for the Partnership.
b.Management Agreements:
The General Partner has entered into Management Agreements with Campbell & Co., Inc., Chesapeake Capital Corporation, John W. Henry & Company, Inc. ("JWH"), AIS Futures Management, Inc., Abraham Trading Co. and Rabar Market Research Inc. (collectively, the "Advisors"), registered commodity trading advisors. The Advisors are not affiliated with one another and none is affiliated with the General Partner or SB and are not responsible for the organization or operation of the Partnership. The Partnership will pay each Advisor a monthly management fee equal to 1/6 of 1% (2% per year) of Net Assets allocated to the Advisor as of the end of each month (except JWH, which will receive a monthly management fee equal to 1/3 of 1% (4% per year) of month-end Net Assets). In addition, the Partnership is obligated to pay each Advisor 20% of the New Trading Profits earned by each Advisor for the Partnership in each calendar quarter (except JWH, which will receive an incentive fee of 15% of New Trading Profits). AIS Futures Management, Inc. was added as an Advisor to the Partnership effective October 1, 1996 and Hyman Beck & Co., Inc., was terminated on the same date.
Smith Barney Diversified Futures Fund L.P. Notes to Financial Statements
c.Customer Agreement
The Partnership has entered into a Customer Agreement which provides that the Partnership will pay SB a monthly brokerage fee equal up to 11/24 of 1% (5.5% per year) of month-end Net Assets in lieu of brokerage commissions on a per trade basis. Persons investing $1,000,000 or more will pay a reduced brokerage fee of 7/24 of 1% of month-end Net Assets (3.5% per year), receiving the differential between this reduced fee and 5.5% per year in the form of additional Units. SB will pay a portion of brokerage fees to its financial consultants who have sold Units in this offering. Brokerage fees will be paid for the life of the Partnership, although the rate at which such fees are paid may be changed. The Partnership will pay for National Futures Association ("NFA") fees, exchange, clearing, user, give-up and floor brokerage fees. All of the Partnership's assets are deposited in the Partnership's account at SB. The Partnership's cash is deposited by SB in segregated bank accounts as required by Commodity Futures Trading Commission regulations. At December 31, 1996 and 1995, the amount of cash held for margin requirements was $17,906,764 and $37,366,691, respectively. SB has agreed to pay the Partnership interest on 80% of the average daily equity maintained in cash in its account during each month at a 30-day Treasury bill rate determined weekly by SB based on the average non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days from the date on which such weekly rate is determined. The Customer Agreement between the Partnership and SB gives the Partnership the legal right to net unrealized gains and losses. The Customer Agreement may be terminated upon notice by either party.
Smith Barney Diversified Futures Fund L.P. Notes to Financial Statements
4. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The results of the Partnership's trading activities are shown in the statements of income and expenses.
All of the commodity interests owned by the Partnership are held for trading purposes. The fair value of these commodity interests, including options thereon, at December 31, 1996 and 1995 was $7,288,686 and $18,954,511, respectively and the average fair value during the years then ended, based on monthly calculation, was $14,427,778 and $12,694,190, respectively.
5. Distributions and Redemptions:
Distributions of profits, if any, will be made at the sole discretion of the General Partner and at such times as the General Partner may decide. Beginning on April 1, 1994, a limited partner may require the Partnership to redeem his Units at their Net Asset Value as of the last day of each month 10 days' notice to the General Partner. No fee will be charged for redemptions.
6. Organization and Offering Costs:
Offering and organization expenses of $1,145,322 relating to the issuance and marketing of units offered were initially paid by SB. The Partnership has reimbursed SB for all such expenses from interest paid to the Partnership and has recorded such reimbursement amounts as organization expense in 1994.
7. Net Asset Value Per Unit:
Changes in the net asset value per Unit for the years ended December 31, 1996, 1995 and 1994 were as follows:
1996 1995 1994 Net realized and unrealized gains/losses $ 175.18 $ 132.42 $ (11.88) Interest income 41.97 44.48 29.36 Expenses (58.45) (52.30) (50.42) --------- --------- --------- Increase(decrease) for period 158.70 124.60 (32.94) Net asset value per Unit, beginning of period 1,091.66 967.06 1,000.00 --------- --------- --------- Net asset value per Unit, end of period $1,250.36 $1,091.66 $ 967.06 ========= ========= =========
Smith Barney Diversified Futures Fund L.P. Notes to Financial Statements
8. Financial Instrument Risk:
The Partnership is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments, in the normal course of its business. These financial instruments include forwards, futures and options, whose value is based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash flows, to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash or with another financial instrument. These instruments may be traded on an exchange or over-the-counter ("OTC"). Exchange traded instruments are standardized and include futures and certain option contracts. OTC contracts are negotiated between contracting parties and include forwards and certain options. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange traded instruments because of the greater risk of default by the counterparty to an OTC contract.
Market risk is the potential for changes in the value of the financial instruments traded by the Partnership due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. Credit risk with respect to exchange traded instruments is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transactions. The Partnership's risk of loss in the event of counterparty default is typically limited to the amounts recognized in the statement of financial condition and not represented by the contract or notional amounts of the instruments. The Partnership has concentration risk because the sole counterparty or broker with respect to the Partnership's assets is SB.
Smith Barney Diversified Futures Fund L.P. Notes to Financial Statements
The General Partner monitors and controls the Partnership's risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership is subject. These monitoring systems allow the General Partner to statistically analyze actual trading results with risk adjusted performance indicators and correlation statistics. In addition, on-line monitoring systems provide account analysis of futures, forwards and options positions by sector, margin requirements, gain and loss transactions and collateral positions.
The notional or contractual amounts of these instruments, while not recorded in the financial statements, reflect the extent of the Partnership's involvement in these instruments. At December 31, 1996, the notional or contractual amounts of the Partnership's commitment to purchase and sell these instruments was $852,011,994 and $465,891,579, respectively. All of these instruments mature within one year of December 31, 1996. However, due to the nature of the Partnership's business, these instruments may not be held to maturity. At December 31, 1996, the fair value of the Partnership's derivatives, including options thereon, was $7,288,686, as detailed below.
Notional or Contractual Amount of Commitments To Purchase To Sell Fair Value Currencies -Exchange Traded Contracts $ 45,531,748 $ 99,346,984 $ 2,104,939 -OTC Contracts 81,321,969 94,859,240 893,020 Energy 39,406,151 0 2,582,805 Interest Rate U.S. 128,723,410 20,658,535 (57,409) Interest Rate Non-U.S. 494,435,015 117,300,683 (389,818) Grains 3,521,825 31,295,014 694,742 Metals 22,575,658 72,077,301 1,126,558 Indices 24,509,712 15,044,568 453,162 Softs 5,868,966 15,302,854 (141,817) Livestock 6,117,540 6,400 22,504 ------------- ------------- ------------- Total $ 852,011,994 $ 465,891,579 $ 7,288,686 ============= ============= =============
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. During the last two fiscal years and any subsequent interim period, no independent accountant who was engaged as the principal accountant to audit the Partnership's financial statements has resigned or was dismissed. PART III Item 10.
Item 10.Directors and Executive Officers of the Registrant. The Partnership has no officers or directors and its affairs are managed by its General Partner, Smith Barney Futures Management Inc. Investment decisions will be made by Campbell & Company, Inc., Chesapeake Capital Corporation, John W. Henry & Company, Inc., Abraham Trading Co., Rabar Market Research, Inc. and AIS Futures Management, Inc. (collectively the "Advisors"). Item 11.
Item 11.Executive Compensation. The Partnership has no directors or officers. Its affairs are managed by Smith Barney Futures Management Inc., its General Partner, which receives compensation for its services, as set forth under "Item 1. Business." SB, an affiliate of the General Partner, is the commodity broker for the Partnership and receives brokerage commissions for such services, as described under "Item 1. Business." Brokerage commissions and clearing fees of $10,754,060 were paid for the year ended December 31, 1996. Management fees and incentive fees of $4,682,124 and $3,923,488, respectively, were paid or payable to the Advisors for the year ended December 31, 1996.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management. (a). Security ownership of certain beneficial owners. The Partnership knows of no person who beneficially owns more than 5% of the Units outstanding. (b). Security ownership of management. Under the terms of the Limited Partnership Agreement, the Partnership's affairs are managed by the General Partner. The General Partner owns Units of general partnership interest equivalent to 2,048.9308 Units (1.5%) of Limited Partnership Interest as of December 31, 1996. (c). Changes in control. None. Item 13.
Item 13. Certain Relationship and Related Transactions. Smith Barney Inc. and Smith Barney Futures Management Inc. would be considered promoters for purposes of item 404 (d) of Regulation S-K. The nature and the amounts of compensation each promoter will receive from the Partnership are set forth under "Item 1. Business" and "Item 11. Executive Compensation."
PART IV Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) (1) Financial Statements: Statement of Financial Condition at December 31, 1996 and 1995. Statement of Income and Expenses for the years ended December 31, 1996, 1995 and for the period from January 12, 1994 (commencement of trading
operations) to December 31, 1994. Statement of Partner's Capital for the years ended December 31, 1996, 1995, and 1994. (2) Financial Statement Schedules: None. (3) Exhibits: 3.1 - Limited Partnership Agreement (filed as Exhibit 3.1 to the Registration Statement on Form S-1 (File No. 33-75056 and incorporated herein by reference). 3.2 - Certificate of Limited Partnership of the Partnership as filed in the office of the County Clerk of New York County on October 13, 1993 (filed as Exhibit 3.2 to the Registration Statement on Form S-1 (File No. 33-75056) and incorporated herein by reference). 10.1- Customer Agreement between the Partnership and Smith Barney (filed as Exhibit 10.1 to the Registration Statement on Form S-1 (File No. 33-75056) and incorporated herein by reference). 10.3- Escrow Instructions relating to escrow of subscription funds (filed as Exhibit 10.3 to the Registration Statement on Form S-1 (File No. 33- 75056) and incorporated herein by reference). 10.5- Management Agreement among the Partnership, the General Partner and Campbell & Company, Inc. (filed as Exhibit 10.5 to the Registration Statement on Form S-1 (File No. 33-75056) and incorporated herein
by reference). 10.6- Management Agreement among the Partnership, the General Partner and Colorado Commodity Management Corp. (filed as Exhibit 10.6 to the Registration Statement on Form S-1 (File No. 33-75056) and incorporated herein by reference). 10.7- Management Agreement among the Partnership, the General Partner and John W. Henry & Company, Inc. (filed as Exhibit 10.7 to the Registration Statement on Form S-1 (File No. 33-75056) and incorporated herein by reference). 10.8- Management Agreement among the Partnership, the General Partner and Hyman Beck & Company (filed as Exhibit 10.8 to the Registration Statement on Form S-1 (File No. 33-75056) and incorporated herein by reference). 10.9- Letter dated May 19, 1994 from the General Partner to Colorado Commodities Management Corp. terminating the Management Agreement (previously filed). 10.10- Management Agreement among the Partnership, the General Partner and Chesapeake Capital Corp. (previously filed). 10.11- Letters extending Management Agreements with John W. Henry & Company, Inc., Hyman Beck & Company, Campbell & Co., Inc. and Chesapeake Capital Corp. (previously filed).
10.12- Management Agreement among the Partnership, the General Partner and Abraham Trading Co. (previously filed). 10.13- Management Agreement among the Partnership, the General Partner and Rabar Market Research Inc. (previously filed). 10.14- Management Agreement among the Partnership, the General Partner and AIS Futures Management, Inc. (filed herein). 10.15- Letter dated October 1, 1996 from the General Partner to Hyman Beck & Company terminating the Management Agreement (filed herein). (b) Reports on 8-K: None Filed.
Supplemental Information To Be Furnished With Reports Filed Pursuant To Section 15(d) Of The Act by Registrants Which Have Not Registered Securities Pursuant To Section 12 Of the Act.
Annual Report to Limited Partners
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and State of New York on the 24th day of March 1997.
SMITH BARNEY DIVERSIFIED FUTURES FUND L.P.
By: Smith Barney Futures Management Inc. (General Partner)
By /s/ David J. Vogel David J. Vogel, President & Director
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
/s/ David J. Vogel /s/ Jack H. Lehman III David J. Vogel, Jack H. Lehman III Director, Principal Executive Chairman and Director Officer and President
/s/ Michael Schaefer /s/ Daniel A. Dantuono Michael Schaefer Daniel A. Dantuono Director Treasurer, Chief Financial Officer and Director
/s/ Philip M. Waterman, Jr. /s/ Daniel R. McAuliffe, Jr. Philip M. Waterman, Jr. Daniel R. McAuliffe, Jr. Director and Vice-Chairman Director
/s/ Steve J. Keltz /s/ Shelley Ullman Steve J. Keltz Shelley Ullman Secretary and Director Director