UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarter ended: September 30, 2008

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: 0-26004





DIVERSIFIED FUTURES TRUST I

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 13-3780260                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|900 King Street, Suite 100, Rye Brook, New York                |  | 10573                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(914) 307-7000

(Registrants telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)





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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of accelerated filer, large
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                              |  | 
|-------------------------- |  | ---------------------------- |  | 
|Large accelerated filer   ̈ |  | Accelerated filer   ̈         |  | 
|Non-accelerated filer  x   |  | Smaller Reporting Company   ̈ |  | 

Indicate by check mark whether Registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  x









---

DIVERSIFIED FUTURES TRUST I

INDEX TO QUARTERLY REPORT ON FORM 10-Q

SEPTEMBER 30, 2008



|                               |  |                                                                                                                       |  |     
|------------------------------ |  | --------------------------------------------------------------------------------------------------------------------- |  | ----
|                               |  |                                                                                                                       |  | Page
|PART I  FINANCIAL INFORMATION |  | 3                                                                                                                    
|                               |  |                                                                                                                      
|Item 1.                        |  | Financial Statements                                                                                                  |  | 3   
|                               |  |                                                                                                                      
|                               |  | Diversified Futures Trust I:                                                                                          |  |     
|                               |  |                                                                                                                      
|                               |  | Condensed Statements of Financial Condition as of September 30, 2008 (Unaudited) and December 31, 2007                |  | 5   
|                               |  |                                                                                                                      
|                               |  | Condensed Statements of Operations (Unaudited) for the Three Months and Nine Months Ended September 30, 2008 and 2007 |  | 6   
|                               |  |                                                                                                                      
|                               |  | Condensed Statements of Changes in Trust Capital (Unaudited) for the Nine Months Ended September 30, 2008 and 2007    |  | 7   
|                               |  |                                                                                                                      
|                               |  | Notes to Condensed Financial Statements (Unaudited)                                                                   |  | 8   
|                               |  |                                                                                                                      
|                               |  | WCM Pool LLC:                                                                                                         |  |     
|                               |  |                                                                                                                      
|                               |  | Condensed Statements of Financial Condition as of September 30, 2008 (Unaudited) and December 31, 2007                |  | 18  
|                               |  |                                                                                                                      
|                               |  | Condensed Schedules of Investments as of September 30, 2008 (Unaudited) and December 31, 2007                         |  | 19  
|                               |  |                                                                                                                      
|                               |  | Condensed Statements of Operations (Unaudited) for the Three Months and Nine Months Ended September 30, 2008 and 2007 |  | 20  
|                               |  |                                                                                                                      
|                               |  | Condensed Statements of Changes in Members Capital (Unaudited) for the Nine Months Ended September 30, 2008 and 2007 |  | 21  
|                               |  |                                                                                                                      
|                               |  | Notes to Condensed Financial Statements (Unaudited)                                                                   |  | 22  
|                               |  |                                                                                                                      
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                 |  | 33  
|                               |  |                                                                                                                      
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                            |  | 46  
|                               |  |                                                                                                                      
|Item 4.                        |  | Controls and Procedures                                                                                               |  | 46  
|                               | 
|PART II  OTHER INFORMATION    |  | 46                                                                                                                   
|                               |  |                                                                                                                      
|Item 1.                        |  | Legal Proceedings                                                                                                     |  | 46  
|                               |  |                                                                                                                      
|Item 1.A.                      |  | Risk Factors                                                                                                          |  | 46  
|                               |  |                                                                                                                      
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                           |  | 47  
|                               |  |                                                                                                                      
|Item 3.                        |  | Defaults Upon Senior Securities                                                                                       |  | 47  
|                               |  |                                                                                                                      
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                                   |  | 47  
|                               |  |                                                                                                                      
|Item 5.                        |  | Other Information                                                                                                     |  | 47  
|                               |  |                                                                                                                      
|Item 6.                        |  | Exhibits:                                                                                                             |  | 47  



2



---

PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK;

FINANCIAL STATEMENTS TO FOLLOW]



3



---

DIVERSIFIED FUTURES TRUST I

FINANCIAL STATEMENTS

September 30, 2008



4



---

DIVERSIFIED FUTURES TRUST I

CONDENSED STATEMENTS OF FINANCIAL CONDITION

September 30, 2008 (Unaudited) and December 31, 2007







|                                                                                                                              |  |                   |            |                  |   |           
|----------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ---------------- | - | ----------
|                                                                                                                              |  | September 30,2008 |            | December 31,2007
|ASSETS                                                                                                                        |  |                   |            |                  |   |           
|Cash                                                                                                                          |  | $                 | 25,631     |                  | $ | 5,805     
|Redemptions receivable from WCM Pool LLC                                                                                      |  |                   | 74,955     |                  |   | 304,479   
|Investment in WCM Pool LLC, at fair value (100.08% and 100.53% of net asset value, respectively)                              |  |                   | 10,771,164 |                  |   | 11,055,308
|Receivable from Managing Owner                                                                                                |  |                   | 1,569      |                  |   | 0         
|                                                                                                                              |  |                   |            |                  |   |           
|Total assets                                                                                                                  |  | $                 | 10,873,319 |                  | $ | 11,365,592
|                                                                                                                              |  |                   |            |                  |   |           
|LIABILITIES                                                                                                                   |  |                   |            |                  |   |           
|Redemptions payable                                                                                                           |  | $                 | 78,398     |                  | $ | 302,152   
|Commissions payable                                                                                                           |  |                   | 32,109     |                  |   | 66,250    
|                                                                                                                              |  |                   |            |                  |   |           
|Total liabilities                                                                                                             |  |                   | 110,507    |                  |   | 368,402   
|                                                                                                                              |  |                   |            |                  |   |           
|TRUST CAPITAL (Net Asset Value)                                                                                               |  |                   |            |                  |   |           
|Limited Interests (44,502.378 and 46,189.067 interests outstanding) at September 30, 2008 and December 31, 2007,
respectively |  |                   | 10,653,885 |                  |   | 10,883,382
|General Interests (455 and 483 interests outstanding) at September 30, 2008 and December 31, 2007, respectively               |  |                   | 108,927    |                  |   | 113,808   
|                                                                                                                              |  |                   |            |                  |   |           
|Total trust capital (Net Asset Value)                                                                                         |  |                   | 10,762,812 |                  |   | 10,997,190
|                                                                                                                              |  |                   |            |                  |   |           
|Total liabilities and trust capital                                                                                           |  | $                 | 10,873,319 |                  | $ | 11,365,592
|                                                                                                                              |  |                   |            |                  |   |           

Net Asset Value per Limited and General Interest



|                   |  |                  
|------------------ |  | -----------------
|September 30, 2008 |  | December 31, 2007
|$ 239.40           |  | $ 235.63         
|                   |  |                  

See accompanying notes.

-2-



5



---

DIVERSIFIED FUTURES TRUST I

CONDENSED STATEMENTS OF OPERATIONS

For
the Three Months and Nine Months Ended September 30, 2008 and 2007

(Unaudited)







|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|---------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | - | -------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                                                   |  | Three Months EndedSeptember 30, |            |   | Nine Months EndedSeptember 30, |  
|                                                                                   |  | 2008                            |            |   | 2007                           |   |          | 2008 |  |   | 2007      |  
|NET LOSS FROM TRUST OPERATIONS                                                     |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|REVENUES                                                                           |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Realized                                                                           |  | $                               | 0          |   |                                | $ | (3       | )    |  | $ | 0         |   |  | $ | 52,467    |  
|Change in unrealized                                                               |  |                                 | 0          |   |                                |   | 0        |      |  |   | 0         |   |  |   | (71,943   | )
|Interest income                                                                    |  |                                 | 56         |   |                                |   | 205      |      |  |   | 88        |   |  |   | 23,126    |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Total revenues                                                                     |  |                                 | 56         |   |                                |   | 202      |      |  |   | 88        |   |  |   | 3,650     |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|EXPENSES                                                                           |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Brokerage commissions                                                              |  |                                 | 215,518    |   |                                |   | 207,485  |      |  |   | 654,010   |   |  |   | 648,701   |  
|General and administrative                                                         |  |                                 | 963        |   |                                |   | 0        |      |  |   | 1,122     |   |  |   | 0         |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Total expenses                                                                     |  |                                 | 216,481    |   |                                |   | 207,485  |      |  |   | 655,132   |   |  |   | 648,701   |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|WCM Pool LLC administrative expenses borne by the ManagingOwner and its affiliates |  |                                 | (4,912     | ) |                                |   | 0        |      |  |   | (18,006   | ) |  |   | 0         |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Net expenses                                                                       |  |                                 | 211,569    |   |                                |   | 207,485  |      |  |   | 637,126   |   |  |   | 648,701   |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|NET LOSS FROM TRUST OPERATIONS                                                     |  |                                 | (211,513   | ) |                                |   | (207,283 | )    |  |   | (637,038  | ) |  |   | (645,051  | )
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|NET INCOME (LOSS) ALLOCATED FROM WCM POOL LLC:                                     |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|REVENUES                                                                           |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Realized                                                                           |  |                                 | (378,546   | ) |                                |   | (26,791  | )    |  |   | 1,605,780 |   |  |   | 166,016   |  
|Change in unrealized                                                               |  |                                 | (477,486   | ) |                                |   | 496,229  |      |  |   | (239,855  | ) |  |   | 835,437   |  
|Interest income                                                                    |  |                                 | 43,573     |   |                                |   | 117,524  |      |  |   | 136,853   |   |  |   | 371,663   |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Total revenues                                                                     |  |                                 | (812,459   | ) |                                |   | 586,962  |      |  |   | 1,502,778 |   |  |   | 1,373,116 |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|EXPENSES                                                                           |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Brokerage commissions                                                              |  |                                 | 4,469      |   |                                |   | 7,560    |      |  |   | 15,461    |   |  |   | 42,803    |  
|Management fees                                                                    |  |                                 | 56,404     |   |                                |   | 56,656   |      |  |   | 176,466   |   |  |   | 180,996   |  
|Incentive fees                                                                     |  |                                 | 0          |   |                                |   | 81,233   |      |  |   | 409,087   |   |  |   | 161,551   |  
|General and administrative                                                         |  |                                 | 12,885     |   |                                |   | 3,125    |      |  |   | 59,340    |   |  |   | 13,923    |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Total expenses                                                                     |  |                                 | 73,758     |   |                                |   | 148,574  |      |  |   | 660,354   |   |  |   | 399,273   |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|NET INCOME (LOSS) ALLOCATED FROM WCM POOL LLC                                      |  |                                 | (886,217   | ) |                                |   | 438,388  |      |  |   | 842,424   |   |  |   | 973,843   |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|NET INCOME (LOSS)                                                                  |  | $                               | (1,097,730 | ) |                                | $ | 231,105  |      |  | $ | 205,386   |   |  | $ | 328,792   |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|NET INCOME (LOSS) PER WEIGHTED AVERAGE LIMITED AND GENERAL INTEREST                |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Net income (loss) per weighted average Limited and General Interest                |  | $                               | (24.28     | ) |                                | $ | 4.66     |      |  | $ | 4.47      |   |  | $ | 6.10      |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  
|Weighted average number of Limited and General Interestsoutstanding                |  |                                 | 45,203     |   |                                |   | 49,615   |      |  |   | 45,921    |   |  |   | 53,896    |  
|                                                                                   |  |                                 |            |   |                                |   |          |      |  |   |           |   |  |   |           |  

See accompanying notes.

-3-



6



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DIVERSIFIED FUTURES TRUST I

CONDENSED STATEMENTS OF CHANGES IN TRUST CAPITAL

For the Nine Months Ended September 30, 2008 and 2007

(Unaudited)







|                                                        |  |             |   |  |                  |            |   |                  |   |         |       |  |   |            |  
|------------------------------------------------------- |  | ----------- | - |  | ---------------- | ---------- | - | ---------------- | - | ------- | ----- |  | - | ---------- | -
|                                                        |  | Interests   |   |  | LimitedInterests |            |   | GeneralInterests |   |         | Total | 
|Nine months ended September 30, 2008                    |  |             |   |  |                  |            |   |                  |   |         |       |  |   |            |  
|Trust capital at December 31, 2007                      |  | 46,672.067  |   |  | $                | 10,883,382 |   |                  | $ | 113,808 |       |  | $ | 10,997,190 |  
|Redemptions                                             |  | (1,714.689  | ) |  |                  | (432,833   | ) |                  |   | (6,931  | )     |  |   | (439,764   | )
|Net income for the nine months ended September 30, 2008 |  |             |   |  |                  | 203,336    |   |                  |   | 2,050   |       |  |   | 205,386    |  
|                                                        |  |             |   |  |                  |            |   |                  |   |         |       |  |   |            |  
|Trust capital at September 30, 2008                     |  | 44,957.378  |   |  | $                | 10,653,885 |   |                  | $ | 108,927 |       |  | $ | 10,762,812 |  
|                                                        |  |             |   |  |                  |            |   |                  |   |         |       |  |   |            |  
|Nine months ended September 30, 2007                    |  |             |   |  |                  |            |   |                  |   |         |       |  |   |            |  
|Trust capital at December 31, 2006                      |  | 58,278.560  |   |  | $                | 12,835,254 |   |                  | $ | 143,870 |       |  | $ | 12,979,124 |  
|Redemptions                                             |  | (10,419.662 | ) |  |                  | (2,257,174 | ) |                  |   | (29,989 | )     |  |   | (2,287,163 | )
|Net income for the nine months ended September 30, 2007 |  |             |   |  |                  | 325,692    |   |                  |   | 3,100   |       |  |   | 328,792    |  
|                                                        |  |             |   |  |                  |            |   |                  |   |         |       |  |   |            |  
|Trust capital at September 30, 2007                     |  | 47,858.898  |   |  | $                | 10,903,772 |   |                  | $ | 116,981 |       |  | $ | 11,020,753 |  
|                                                        |  |             |   |  |                  |            |   |                  |   |         |       |  |   |            |  

See accompanying notes.

-4-



7



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DIVERSIFIED FUTURES TRUST I

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)







|Note 1. | ORGANIZATION
|------- | ------------



| | A. | General Description of the Trust
| | -- | --------------------------------

Diversified Futures
Trust I (the Trust) was organized under the Delaware Statutory Trust Act on May 18, 1994 and will continue until December 31, 2020 unless terminated sooner under the provisions of the Second Amended and Restated
Declaration of Trust and Trust Agreement (the Trust Agreement). The Trust was formed to engage in the speculative trading of commodity futures and forward contracts. The Trusts trustee is Wilmington Trust Company.

Effective January 1, 2007, Preferred Investment Solutions Corp., the Managing Owner (Preferred or
Managing Owner), terminated the Trading Advisor Agreements with Aspect Capital Limited and Graham Capital Management, L.P., and the Trust contributed its net assets to WCM Pool LLC (the Company) and received a
Voting Membership Interest in the Company. The Company was formed to function as an aggregate trading vehicle. The sole members of the Company are the Trust, Diversified Futures Fund L.P. (DFF), Futures Strategic Trust
(FST) and Kenmar Global Trust (KGT). Preferred is the General Partner or Managing Owner of DFF, FST and KGT and has been delegated administrative authority over the operations of the Company. The Company engages
in the speculative trading of futures and forward contracts. The financial statements of the Company, including the condensed schedule of investments, are included in Section II of these financial statements and should be read in conjunction with
the Trusts financial statements.



| | B. | Regulation
| | -- | ----------

As a registrant with the Securities and
Exchange Commission, the Trust is subject to the regulatory requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934. As a commodity pool, the Trust is subject to the regulations of the Commodity Futures Trading
Commission (CFTC), an agency of the United States (U.S.) government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the
requirements of the various commodity exchanges where the Trust executed transactions. Additionally, the Trust is subject to the requirements of the futures commission merchants (brokers) and interbank market makers through which the Company trades.



| | C. | The Offering
| | -- | ------------

On January 5, 1995, the Trust
completed its initial offering from the sale of limited interests (Limited Interests) and general interests (General Interests) (collectively, the Interests). Additional Interests were offered
and sold monthly at the then current net asset value (NAV) per Interest until the continuous offering period expired on August 31, 1996. General Interests were sold exclusively to the Managing Owner.

The Managing Owner is required to maintain at least a 1% interest in the Trust so long as it is acting as the Managing Owner.

-5-



8



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DIVERSIFIED FUTURES TRUST I

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|------- | ------------------------------------------



| | A. | Basis of Accounting
| | -- | -------------------

The statement of financial condition
as of September 30, 2008, and the statements of operations for the three months and nine months ended September 30, 2008 and 2007 and the statements of changes in trust capital for the nine months ended September 30, 2008 and 2007,
are unaudited. In the opinion of Preferred, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the financial position of the Trust as of September 30, 2008 and the
results of its operations for the three months and nine months ended September 30, 2008 and 2007. The operating results for the interim periods may not be indicative of the results expected for the full year.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Trusts annual report on Form 10-K filed with the
Securities and Exchange Commission for the year ended December 31, 2007.

The financial statements of the Trust are prepared in
accordance with accounting principles generally accepted in the United States of America. Such principles require the Managing Owner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent 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 those estimates.

Commodity futures and forward transactions are reflected in the accompanying statements of financial condition on trade date. Net unrealized gain or loss
on open contracts (the difference between contract trade price and market price) is reflected in the statement of financial condition in accordance with Financial Accounting Standards Board (FASB) Interpretation No. 39 
Offsetting of Amounts Related to Certain Contracts. The market value of futures (exchange-traded) contracts is based upon the closing quotation on the various futures exchanges on which the contract is traded. The fair value of swap and
forward (non-exchange traded) contracts is extrapolated on a forward basis from the spot prices. Any change in net unrealized gain or loss during the current period is reported in the statements of operations. Realized gains and losses on commodity
transactions are recognized in the period in which the contracts are closed.

For the nine months ended September 30, 2008 and 2007,
the Trust indirectly earned income or loss through its investments in the Company (see Note 5).

The weighted average number of Limited and
General Interests outstanding was computed for purposes of disclosing net income (loss) per weighted average Limited and General Interest. The weighted average Limited and General Interests are equal to the number of interests outstanding at period
end, adjusted proportionately for interests redeemed based on their respective time outstanding during such year.

The Trust has elected
not to provide a Statement of Cash Flows as permitted by Statement of Financial Accounting Standards (SFAS) No. 102, Statement of Cash Flows  Exemption of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale.



-6-



9



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DIVERSIFIED FUTURES TRUST I

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|------- | ------------------------------------------------------

|
|



| | A. | Basis of Accounting (Continued)
| | -- | -------------------------------



Consistent with standard business practices in the normal course of business, the Trust has provided
general indemnifications to the Managing Owner, the Company and others when they act, in good faith, in the best interests of the Trust. The Trust is unable to develop an estimate of the maximum potential amount of future payments that could
potentially result from any hypothetical future claim, but expects the risk of having to make any payments under these general business indemnifications to be remote.

In July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109, which
clarifies the accounting for uncertainty in tax positions. FIN 48 requires that the Trust recognize in its financial statements, the impact of a tax position if that position is more likely than not of being sustained on audit, based on the
technical merits of the position. The provisions of FIN 48 were effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained
earnings. In connection with the adoption of FIN 48, the Trust has elected an accounting policy to classify interest and penalties related to unrecognized tax benefits as interest expense. Preferred as Managing Owner of the Trust evaluated the
impact of adopting FIN 48 on the Trusts financial statements. The adoption of FIN 48 had no material impact on the Trust, as the Trusts tax positions are based on established tax precedence for the tax treatment of investment
partnerships as flow through tax entities.

In September 2006, the FASB issued SFAS No. 157 (SFAS 157), Fair
Value Measurements. SFAS 157 requires use of a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels: quoted market prices in active markets for identical assets and liabilities
(Level 1), inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly (Level 2), and unobservable inputs for the asset or liability (Level 3). SFAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007.

The Trust adopted SFAS 157 in the first quarter of 2008. Based on an
analysis by Preferred, the effect of applying SFAS 157 to the investments included in these financial statements did not result in a change to the fair value of the Trusts investments. $0 or 0.00% of the Trusts investments at
September 30, 2008 are classified as Level 1 or Level 2 and $10,771,164 or 100.00% are classified as Level 3 using the fair value hierarchy of SFAS 157. $0 or 0.00% of the Trusts investments at December 31, 2007 are classified as
Level 1 or Level 2 and $11,055,308 or 100.00% are classified as Level 3 using the fair value hierarchy of SFAS 157.



-7-



10



---

DIVERSIFIED FUTURES TRUST I

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|------- | ------------------------------------------------------



| | A. | Basis of Accounting (Continued)
| | -- | -------------------------------



The following table summarizes the assets and liabilities measured at fair value using the fair
value hierarchy of SFAS 157:



|                                          |  |         |   |         |   |         |  |       |            |  |   |           
|----------------------------------------- |  | ------- | - | ------- | - | ------- |  | ----- | ---------- |  | - | ----------
|September 30, 2008                        |  | Level 1 |   | Level 2 |   | Level 3 |  | Total
|Assets:                                   |  |         |   |         |   |         |  |       |            |  |   |           
|Investment in WCM Pool LLC, at fair value |  | $       | 0 |         | $ | 0       |  | $     | 10,771,164 |  | $ | 10,771,164
|                                          |  |         |   |        
|December 31, 2007                         |  | Level 1 |   | Level 2 |   | Level 3 |  | Total
|Assets:                                   |  |         |   |         |   |         |  |       |            |  |   |           
|Investment in WCM Pool LLC, at fair value |  | $       | 0 |         | $ | 0       |  | $     | 11,055,308 |  | $ | 11,055,308

A table presenting the changes in the Level 3 fair value category for the nine months ended
September 30, 2008 and 2007 is provided in Note 5, of the Trusts financial statements. Of the $842,424 and $973,843 gains for the nine months ended September 30, 2008 and 2007, respectively, reported on Level 3 investments in Note 5,
$(239,855) and $835,437, respectively, represent a change in unrealized allocated from the Company on the Trusts condensed statements of operations.

In October 2008, the FASB issued FASB Staff Position FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (FSP 157-3).
FSP 157-3 clarified the application of SFAS 157. FSP 157-3 demonstrated how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP 157-3 was effective upon issuance, including
prior periods for which financial statements had not been issued. The implementation of this standard did not have an impact on the Trusts condensed financial statements.

In February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial
Liabilities, including an amendment of SFAS 115. This statement provides companies with an option to report selected financial assets and liabilities at fair value. This statement is effective for fiscal years beginning after November 15,
2007 with early adoption permitted.

The Trust adopted SFAS 159 during the first quarter of 2008, and it did not have a material effect on
the Trusts financial statements, as the Trust did not elect the fair value option for any eligible financial assets or liabilities.

Cash represents amounts deposited with a bank and clearing broker, a portion of which is restricted for purposes of meeting margin requirements, which typically range from 0% to 35% of the notional amounts of the derivatives traded. The
Trust receives interest at prevailing rates on all cash balances held by the bank and clearing broker, as well as its pro rata share of interest income from the Company.



-8-



11



---

DIVERSIFIED FUTURES TRUST I

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|------- | ------------------------------------------------------



| | B. | Income Taxes
| | -- | ------------

The Trust is treated as a partnership for
Federal income tax purposes. As such, the Trust is not required to provide for, or pay, any Federal or state income taxes. Income tax attributes that arise from its operations are passed directly to the individual Interest holders. The Trust may be
subject to other state and local taxes in jurisdictions in which it operates.



| | C. | Investment in WCM Pool LLC
| | -- | --------------------------

The investment in the Company
is reported in the Trusts statements of financial condition at the net asset value as reported by the Company. The Trust records its proportionate share of the Companys income or loss in the statement of operations. Through its
investment in the Company, the Trust pays its pro-rata share of the 2% annual management fee (accrued and paid monthly) and a 20% incentive fee on New High Net Trading Profits (accrued monthly and paid quarterly) as defined in the
Advisory Agreement. Valuation of futures and forward contracts by the Company is discussed in the notes to the Companys financial statements included in Section II of this report.



| | D. | Profit and Loss Allocation, Distributions and Redemptions
| | -- | ---------------------------------------------------------

Net income or loss for both financial and tax reporting purposes is allocated monthly to all interest holders on a pro rata basis on each interest holders number of interests outstanding during the month.

Distributions (other than redemptions of interests) are made at the sole discretion of the Managing Owner on a pro rata basis in accordance with the
respective capital accounts of the interest holders. The Managing Owner has not made and does not intend to make any distributions.

The
Trust Agreement provides that an Interest holder may redeem its Interests as of the last business day of any calendar quarter at the then current NAV per interest.



| | E. | Foreign Currency Transaction
| | -- | ----------------------------

The Trusts functional
currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of
the statement of financial condition. Income and expense items denominated in currencies other than U.S. dollars are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S.
dollars are reported in operations currently under the caption Realized in the statements of operations.



| | F. | Interest Income
| | -- | ---------------

Interest income is recorded on an
accrual basis.



-9-



12



---

DIVERSIFIED FUTURES TRUST I

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 3. | FEES
|------- | ----



| | A. | Organizational and General and Administrative Costs
| | -- | ---------------------------------------------------

Preferred pays all administrative costs for services it performs for the Trust. Administrative costs include, but are not limited to, those discussed in Note 4 below. The Trust pays for its pro-rata allocation of expenses incurred by the
Company except for the Spectrum Global Fund Administration administrative fee.



| | B. | Management and Incentive Fees
| | -- | -----------------------------

The Trust pays its
pro-rata share of management and incentive fees as disclosed in Note 2 through its investment in the Company.



| | C. | Commissions
| | -- | -----------

The Trust deducts the cost of its pro-rata
share of commissions allocated from the Company in calculation of the Managing Owners 7.75% per annum commission.



|Note 4. | RELATED PARTIES
|------- | ---------------

The Managing Owner or third
parties engaged by the Managing Owner perform services for the Trust which include, but are not limited to: brokerage services; accounting and financial management; registrar, transfer and assignment function; investor communications; printing and
other administrative services. Except for costs related to brokerage services, Preferred pays all the costs of these services as well as the Trusts routine operational, administrative, legal and auditing costs.

Costs and expenses charged to the Trust for the three months and nine months ended September 30, 2008 and 2007 were:



|                           |  |                                 |         |                                |   |         |  |      |         |  |   |        
|-------------------------- |  | ------------------------------- | ------- | ------------------------------ | - | ------- |  | ---- | ------- |  | - | -------
|                           |  | Three Months EndedSeptember 30, |         | Nine Months EndedSeptember 30,
|                           |  | 2008                            |         | 2007                           |   | 2008    |  | 2007
|Commissions                |  | $                               | 215,518 |                                | $ | 207,485 |  | $    | 654,010 |  | $ | 648,701
|General and administrative |  |                                 | 0       |                                |   | 0       |  |      | 0       |  |   | 0      
|                           |  |                                 |         |                                |   |         |  |      |         |  |   |        
|                           |  | $                               | 215,518 |                                | $ | 207,485 |  | $    | 654,010 |  | $ | 648,701
|                           |  |                                 |         |                                |   |         |  |      |         |  |   |        

Expenses payable to the Managing Owner and its affiliates (which are included in commissions
payable less any receivable from the Managing Owner on the statements of financial condition) as of September 30, 2008 and December 31, 2007 were $30,540 and $66,250, respectively.



-10-



13



---

DIVERSIFIED FUTURES TRUST I

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 5. | INVESTMENT IN WCM POOL LLC
|------- | --------------------------



Effective January 1, 2007, the Trust invested its assets in the Company. The Trusts
investment in the Company represents approximately 59.03% and 54.86% of the net asset value of the Company at September 30, 2008 and December 31, 2007, respectively. The investment in the Company is subject to the Organization Agreement of
the Company.

Summarized information for the Trusts investment in the Company is as follows:



|                        |  |                                  |            |             |   |            |  |             |         |  |                                   |            |   |  |   |           
|----------------------- |  | -------------------------------- | ---------- | ----------- | - | ---------- |  | ----------- | ------- |  | --------------------------------- | ---------- | - |  | - | ----------
|                        |  | Net Asset ValueDecember 31, 2007 |            | Investments |   | Gain*      |  | Redemptions |         |  | Net Asset ValueSeptember 30, 2008
|WCM Pool LLC            |  | $                                | 11,055,308 |             | $ | 0          |  | $           | 842,424 |  | $                                 | (1,126,568 | ) |  | $ | 10,771,164
|                        |  |                                  |            |             |   |            |  |             |         |  |                                   |            |   |  |   |           
|                        |  |                                  |            |             |  
|                        |  | Net Asset ValueDecember 31, 2006 |            | Investments |   | Gain*      |  | Redemptions |         |  | Net Asset ValueSeptember 30, 2007
|WCM Pool LLC            |  | $                                | 0          |             | $ | 12,966,087 |  | $           | 973,843 |  | $                                 | (2,858,505 | ) |  | $ | 11,081,425
|                        |  |                                  |            |             |   |            |  |             |         |  |                                   |            |   |  |   |           
|                       
|*  Included in earnings |  |                                  |            |             |   |            |  |             |         |  |                                   |            |   |  |   |           

The Trust may make additional contributions to, or redemptions from, the Company on a monthly
basis.

Certain expenses allocated to the Trust from the Company are reimbursed by the Managing Owner at the Trust level.



|Note 6. | DERIVATIVE INSTRUMENTS AND ASSOCIATED RISKS
|------- | -------------------------------------------

The
Trusts investment in the Company is subject to the market and credit risks of the futures contracts, options on futures contracts, forward currency contracts and other financial instruments held or sold short by the Company. The Trust bears
the risk of loss only to the extent of the market value of its investments and, in certain specific circumstances, distributions and redemptions received.

The Trust has cash on deposit with a financial institution. In the event of a financial institutions insolvency, recovery of cash on deposit may be limited to account insurance or other protection afforded such
deposits. The Managing Owner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The interestholders bear the risk of loss only to the
extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received.

The Trusts futures commission merchant in accepting orders for the purchase or sale of domestic futures contracts, is required by CFTC regulations to separately account for and segregate as belonging to the Trust all assets of the
Trust relating to domestic futures trading and is not to commingle such assets with its other assets. At September 30, 2008 and December 31, 2007, such segregated assets totaled $0 and $1,042, respectively. Part 30.7 of the CFTC
regulations also requires the Trusts futures commission merchant to secure assets of the Trust related to foreign futures trading which totaled $0 and $0 at September 30, 2008 and December 31, 2007, respectively. There are no
segregation requirements for assets related to forward trading.



-11-



14



---

DIVERSIFIED FUTURES TRUST I

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)





|Note 7. | FINANCIAL HIGHLIGHTS
|------- | --------------------



The following information presents per Interest performance data and other supplemental financial
data for the three months and nine months ended September 30, 2008 and 2007. This information has been derived from information presented in the financial statements.



|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|-------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | -- | ------------------------------ | - | ------ | ----------- |  | - | ----------- | -- |  | - | ------ | --
|                                                                                       |  | Three Months EndedSeptember 30, |        |    | Nine Months EndedSeptember 30, |  
|                                                                                       |  | 2008                            |        |    | 2007                           |   |        | 2008        |  |   | 2007        |   
|                                                                                       |  | (Unaudited)                     |        |    | (Unaudited)                    |   |        | (Unaudited) |  |   | (Unaudited) |   
|Per Interest Performance (for an Interest outstanding throughout the entireperiod)     |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net asset value, beginning of period                                                   |  | $                               | 263.64 |    |                                | $ | 225.67 |             |  | $ | 235.63      |    |  | $ | 222.71 |   
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net realized and change in net unrealized gain (loss) on commodity transactions(1),(5) |  |                                 | (18.90 | )  |                                |   | 9.42   |             |  |   | 29.04       |    |  |   | 19.68  |   
|Interest income(1),(5)                                                                 |  |                                 | 0.97   |    |                                |   | 2.37   |             |  |   | 2.98        |    |  |   | 7.33   |   
|Expenses(1),(5)                                                                        |  |                                 | (6.31  | )  |                                |   | (7.18  | )           |  |   | (28.25      | )  |  |   | (19.44 | ) 
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net increase (decrease) for the period                                                 |  |                                 | (24.24 | )  |                                |   | 4.61   |             |  |   | 3.77        |    |  |   | 7.57   |   
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net asset value, end of period                                                         |  | $                               | 239.40 |    |                                | $ | 230.28 |             |  | $ | 239.40      |    |  | $ | 230.28 |   
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Total Return(3)                                                                        |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Total return before incentive fees                                                     |  |                                 | (9.19  | )% |                                |   | 2.77   | %           |  |   | 5.18        | %  |  |   | 4.77   | % 
|Incentive fees                                                                         |  |                                 | 0.00   | %  |                                |   | (0.73  | )%          |  |   | (3.58       | )% |  |   | (1.37  | )%
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Total return after incentive fees                                                      |  |                                 | (9.19  | )% |                                |   | 2.04   | %           |  |   | 1.60        | %  |  |   | 3.40   | % 
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Supplemental Data                                                                      |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Ratios to average net asset value:(5)                                                  |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net investment loss before incentive fees(2),(4)                                       |  |                                 | (8.63  | )% |                                |   | (5.67  | )%          |  |   | (8.76       | )% |  |   | (5.55  | )%
|Incentive fees(3)                                                                      |  |                                 | 0.00   | %  |                                |   | (0.73  | )%          |  |   | (3.58       | )% |  |   | (1.37  | )%
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net investment loss after incentive fees                                               |  |                                 | (8.63  | )% |                                |   | (6.40  | )%          |  |   | (12.34      | )% |  |   | (6.92  | )%
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Interest income(4)                                                                     |  |                                 | 1.56   | %  |                                |   | 4.25   | %           |  |   | 1.60        | %  |  |   | 4.46   | % 
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Incentive fees(3)                                                                      |  |                                 | 0.00   | %  |                                |   | 0.73   | %           |  |   | 3.58        | %  |  |   | 1.37   | % 
|Other expenses(4)                                                                      |  |                                 | 10.19  | %  |                                |   | 9.92   | %           |  |   | 10.36       | %  |  |   | 10.01  | % 
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Total net expenses                                                                     |  |                                 | 10.19  | %  |                                |   | 10.65  | %           |  |   | 13.94       | %  |  |   | 11.38  | % 
|                                                                                       |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   

Total returns are calculated based on the change in value of an Interest during the period. An
individual Interestholders total returns and ratios may vary from the above total returns and ratios based on the timing of redemptions.



|(1) | Interest income per Interest and expenses per Interest are calculated by dividing interest income and expenses by the
weighted average number of Interests outstanding during the period. Net realized and change in net unrealized gain (loss) on commodity transactions is a balancing amount necessary to reconcile the change in net asset value per Interest with the
other per Interest information.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents interest income less total expenses (exclusive of incentive fees).
|--- | -----------------------------------------------------------------------------

|(3) | Not annualized.
|--- | ---------------

|(4) | Annualized.
|--- | -----------

|(5) | Includes the Trusts proportionate share of income and expenses of WCM Pool LLC for the three months and nine
months ended September 30, 2008 and 2007.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------



-12-



15



---



SECTION II







16



---

WCM POOL LLC

FINANCIAL STATEMENTS

September 30, 2008



17



---

WCM POOL LLC

CONDENSED STATEMENTS OF FINANCIAL CONDITION

September 30, 2008 (Unaudited)
and December 31, 2007







|                                        |  |                   |            |                  |   |           
|--------------------------------------- |  | ----------------- | ---------- | ---------------- | - | ----------
|                                        |  | September 30,2008 |            | December 31,2007
|ASSETS                                  |  |                   |            |                  |   |           
|Cash and cash equivalents               |  | $                 | 18,426,342 |                  | $ | 20,525,950
|Interest receivable                     |  |                   | 24,418     |                  |   | 47,642    
|Net unrealized gain on open contracts   |  |                   | 20,845     |                  |   | 434,983   
|                                        |  |                   |            |                  |   |           
|Total assets                            |  | $                 | 18,471,605 |                  | $ | 21,008,575
|                                        |  |                   |            |                  |   |           
|LIABILITIES                             |  |                   |            |                  |   |           
|Accrued expenses                        |  | $                 | 57,352     |                  | $ | 33,955    
|Management fees payable                 |  |                   | 31,564     |                  |   | 70,084    
|Incentive fees payable                  |  |                   | 0          |                  |   | 174,235   
|Redemptions payable                     |  |                   | 137,295    |                  |   | 580,258   
|                                        |  |                   |            |                  |   |           
|Total liabilities                       |  |                   | 226,211    |                  |   | 858,532   
|                                        |  |                   |            |                  |   |           
|MEMBERS CAPITAL (Net Asset Value)      |  |                   |            |                  |   |           
|Member DFF LP                           |  |                   | 2,931,683  |                  |   | 3,165,178 
|Member DFT I                            |  |                   | 10,771,164 |                  |   | 11,055,308
|Member KGT                              |  |                   | 890,473    |                  |   | 1,732,978 
|Member FST                              |  |                   | 3,652,074  |                  |   | 4,196,579 
|                                        |  |                   |            |                  |   |           
|Total members capital(Net Asset Value) |  |                   | 18,245,394 |                  |   | 20,150,043
|                                        |  |                   |            |                  |   |           
|Total liabilities and members capital  |  | $                 | 18,471,605 |                  | $ | 21,008,575
|                                        |  |                   |            |                  |   |           

See accompanying notes.

-2-



18



---

WCM POOL LLC

CONDENSED SCHEDULES OF INVESTMENTS

September 30, 2008 (Unaudited) and
December 31, 2007







|                                                         |  |                                                   |    |  |                          |          |   |                                                   |       |    |                          |   |         |  
|-------------------------------------------------------- |  | ------------------------------------------------- | -- |  | ------------------------ | -------- | - | ------------------------------------------------- | ----- | -- | ------------------------ | - | ------- | -
|                                                         |  | September 30, 2008                                |    |  | December 31, 2007        |         
|Open Futures Contracts                                   |  | NetUnrealizedGain (Loss)as a % ofMembers Capital |    |  | NetUnrealizedGain (Loss) |          |   | NetUnrealizedGain (Loss)as a % ofMembers Capital |       |    | NetUnrealizedGain (Loss) |  
|Futures contracts purchased:                             |  |                                                   |    |  |                          |          |   |                                                   |       |    |                          |   |         |  
|Commodities                                              |  | (0.53                                             | )% |  | $                        | (97,562  | ) |                                                   | 1.82  | %  |                          | $ | 367,154 |  
|Currencies                                               |  | (0.21                                             | )% |  |                          | (38,019  | ) |                                                   | (0.24 | )% |                          |   | (49,036 | )
|Interest rates                                           |  | 0.18                                              | %  |  |                          | 33,301   |   |                                                   | 0.57  | %  |                          |   | 115,021 |  
|Stock indicies                                           |  | 0.00                                              | %  |  |                          | 0        |   |                                                   | 0.09  | %  |                          |   | 17,163  |  
|                                                         |  |                                                   |    |  |                          |          |   |                                                   |       |    |                          |   |         |  
|Net unrealized gain (loss) on futurescontracts purchased |  | (0.56                                             | )% |  |                          | (102,280 | ) |                                                   | 2.24  | %  |                          |   | 450,302 |  
|                                                         |  |                                                   |    |  |                          |          |   |                                                   |       |    |                          |   |         |  
|Futures contracts sold:                                  |  |                                                   |    |  |                          |          |   |                                                   |       |    |                          |   |         |  
|Commodities                                              |  | 0.33                                              | %  |  |                          | 60,880   |   |                                                   | (0.01 | )% |                          |   | (1,873  | )
|Currencies                                               |  | (0.15                                             | )% |  |                          | (26,398  | ) |                                                   | (0.05 | )% |                          |   | (9,014  | )
|Interest rates                                           |  | (0.10                                             | )% |  |                          | (19,031  | ) |                                                   | (0.04 | )% |                          |   | (8,288  | )
|Stock indicies                                           |  | 0.59                                              | %  |  |                          | 107,674  |   |                                                   | 0.02  | %  |                          |   | 3,856   |  
|                                                         |  |                                                   |    |  |                          |          |   |                                                   |       |    |                          |   |         |  
|Net unrealized gain (loss) on futurescontracts sold      |  | 0.67                                              | %  |  |                          | 123,125  |   |                                                   | (0.08 | )% |                          |   | (15,319 | )
|                                                         |  |                                                   |    |  |                          |          |   |                                                   |       |    |                          |   |         |  
|Net unrealized gain on open contracts                    |  | 0.11                                              | %  |  | $                        | 20,845   |   |                                                   | 2.16  | %  |                          | $ | 434,983 |  
|                                                         |  |                                                   |    |  |                          |          |   |                                                   |       |    |                          |   |         |  

See accompanying notes.

-3-



19



---

WCM POOL LLC

CONDENSED STATEMENTS OF OPERATIONS

For the Three Months and Nine Months Ended
September 30, 2008 and 2007

(Unaudited)







|                      |  |                                 |            |   |                                |   |           |      |  |   |           |   |  |   |          
|--------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | - | --------- | ---- |  | - | --------- | - |  | - | ---------
|                      |  | Three Months EndedSeptember 30, |            |   | Nine Months EndedSeptember 30,
|                      |  | 2008                            |            |   | 2007                           |   |           | 2008 |  |   | 2007     
|REVENUES              |  |                                 |            |   |                                |   |           |      |  |   |           |   |  |   |          
|Realized              |  | $                               | (648,743   | ) |                                | $ | (53,446   | )    |  | $ | 2,904,255 |   |  | $ | 824,003  
|Change in unrealized  |  |                                 | (829,889   | ) |                                |   | 906,937   |      |  |   | (414,138  | ) |  |   | 1,446,298
|Interest income       |  |                                 | 74,715     |   |                                |   | 219,142   |      |  |   | 241,861   |   |  |   | 637,452  
|                      |  |                                 |            |   |                                |   |           |      |  |   |           |   |  |   |          
|Total revenues        |  |                                 | (1,403,917 | ) |                                |   | 1,072,633 |      |  |   | 2,731,978 |   |  |   | 2,907,753
|                      |  |                                 |            |   |                                |   |           |      |  |   |           |   |  |   |          
|EXPENSES              |  |                                 |            |   |                                |   |           |      |  |   |           |   |  |   |          
|Brokerage commissions |  |                                 | 7,649      |   |                                |   | 14,084    |      |  |   | 27,327    |   |  |   | 69,395   
|Management fees       |  |                                 | 96,729     |   |                                |   | 105,509   |      |  |   | 311,515   |   |  |   | 309,661  
|Incentive fees        |  |                                 | 0          |   |                                |   | 149,622   |      |  |   | 730,712   |   |  |   | 388,256  
|Operating expenses    |  |                                 | 22,287     |   |                                |   | 5,840     |      |  |   | 105,421   |   |  |   | 23,513   
|                      |  |                                 |            |   |                                |   |           |      |  |   |           |   |  |   |          
|Total expenses        |  |                                 | 126,665    |   |                                |   | 275,055   |      |  |   | 1,174,975 |   |  |   | 790,825  
|                      |  |                                 |            |   |                                |   |           |      |  |   |           |   |  |   |          
|NET INCOME (LOSS)     |  | $                               | (1,530,582 | ) |                                | $ | 797,578   |      |  | $ | 1,557,003 |   |  | $ | 2,116,928
|                      |  |                                 |            |   |                                |   |           |      |  |   |           |   |  |   |          

See accompanying notes.

-4-



20



---

WCM POOL LLC

CONDENSED STATEMENTS OF CHANGES IN MEMBERS CAPITAL (NET ASSET VALUE)

For
the Nine Months Ended September 30, 2008 and 2007

(Unaudited)







|                                                        |  |                  |           |   |             |   |            |           |  |   |           |   |  |       |            |   |  |   |            |  
|------------------------------------------------------- |  | ---------------- | --------- | - | ----------- | - | ---------- | --------- |  | - | --------- | - |  | ----- | ---------- | - |  | - | ---------- | -
|                                                        |  | Members Capital |          
|                                                        |  | MemberDFF LP     |           |   | MemberDFT I |   |            | MemberKGT |  |   | MemberFST |   |  | Total |           
|Nine months ended September 30, 2008                    |  |                  |           |   |             |   |            |           |  |   |           |   |  |       |            |   |  |   |            |  
|Balances at December 31, 2007                           |  | $                | 3,165,178 |   |             | $ | 11,055,308 |           |  | $ | 1,732,978 |   |  | $     | 4,196,579  |   |  | $ | 20,150,043 |  
|Redemptions                                             |  |                  | (478,931  | ) |             |   | (1,126,568 | )         |  |   | (980,755  | ) |  |       | (875,398   | ) |  |   | (3,461,652 | )
|Net income for the nine months ended September 30, 2008 |  |                  | 245,436   |   |             |   | 842,424    |           |  |   | 138,250   |   |  |       | 330,893    |   |  |   | 1,557,003  |  
|                                                        |  |                  |           |   |             |   |            |           |  |   |           |   |  |       |            |   |  |   |            |  
|Balances at September 30, 2008                          |  | $                | 2,931,683 |   |             | $ | 10,771,164 |           |  | $ | 890,473   |   |  | $     | 3,652,074  |   |  | $ | 18,245,394 |  
|                                                        |  |                  |           |   |             |   |            |           |  |   |           |   |  |       |            |   |  |   |            |  
|                                                        |  |                  |           |   |            
|Nine months ended September 30, 2007                    |  |                  |           |   |             |   |            |           |  |   |           |   |  |       |            |   |  |   |            |  
|Balances at December 31, 2006                           |  | $                | 0         |   |             | $ | 0          |           |  | $ | 0         |   |  | $     | 0          |   |  | $ | 0          |  
|Additions                                               |  |                  | 3,636,164 |   |             |   | 12,966,087 |           |  |   | 2,143,975 |   |  |       | 5,002,950  |   |  |   | 23,749,176 |  
|Redemptions                                             |  |                  | (641,178  | ) |             |   | (2,858,505 | )         |  |   | (414,690  | ) |  |       | (1,407,514 | ) |  |   | (5,321,887 | )
|Net income for the nine months ended September 30, 2007 |  |                  | 279,598   |   |             |   | 973,843    |           |  |   | 167,584   |   |  |       | 695,903    |   |  |   | 2,116,928  |  
|                                                        |  |                  |           |   |             |   |            |           |  |   |           |   |  |       |            |   |  |   |            |  
|Balances at September 30, 2007                          |  | $                | 3,274,584 |   |             | $ | 11,081,425 |           |  | $ | 1,896,869 |   |  | $     | 4,291,339  |   |  | $ | 20,544,217 |  
|                                                        |  |                  |           |   |             |   |            |           |  |   |           |   |  |       |            |   |  |   |            |  

See accompanying notes.

-5-



21



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WCM POOL LLC

NOTES TO CONDENSED CONDENSED FINANCIAL STATEMENTS

(Unaudited)







|Note 1. | ORGANIZATION
|------- | ------------



| | A. | General Description of the Company
| | -- | ----------------------------------

WCM Pool LLC (the
Company) is a limited liability company organized under the laws of Delaware on November 20, 2006 and commenced operations on January 1, 2007. The Company will terminate on December 31, 2056 unless terminated sooner
under the provisions of the Organization Agreement. The Company was formed to engage in the speculative trading of a diversified portfolio of futures contracts, options on futures contracts and forward currency contracts and may, from time to time,
engage in cash and spot transactions. Preferred Investment Solutions Corp. (Preferred or Managing Member) is the Managing Member of the Company. The Company currently consists of four members: Diversified
Futures Fund L.P. (Member DFF LP), Diversified Futures Trust I (Member DFT I), Futures Strategic Trust (Member FST) and Kenmar Global Trust (Member KGT) (collectively, the
Members). Member DFFLP, Member DFT I and Member KGT contributed their net assets to the Company effective January 1, 2007, while Member FST invested in the Company on April 1, 2007. Preferred is also the Managing Owner
or General Partner of each of the Members. Upon making the initial capital contribution, each Member received Voting Membership Interests.

The Company is a member managed limited liability company that is not registered in any capacity with, or subject directly to regulation by the Commodity Futures Trading Commission (CFTC) or the United States Securities
and Exchange Commission.



| | B. | The Trading Advisor
| | -- | -------------------

The Company entered into an advisory
agreement with Winton Capital Management Limited (the Trading Advisor) to make the trading decisions for the Company. The Trading Advisor manages approximately 100% of the assets of the Company pursuant to its Diversified Program
Portfolio.



|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|------- | ------------------------------------------



| | A. | Basis of Accounting
| | -- | -------------------

The statement of financial
condition, including the condensed schedule of investments, as of September 30, 2008, and the statements of operations for the three months and nine months ended September 30, 2008 and 2007 and the statements of changes in members
capital (net asset value) for the nine months ended September 30, 2008 and 2007, are unaudited. In the opinion of Preferred, such financial statements reflect all adjustments, which were of a normal and recurring nature, necessary for a fair
presentation of financial position as of September 30, 2008, and the results of operations for the three months and nine months ended September 30, 2008 and 2007. The operating results for these interim periods may not be indicative of the
results expected for a full year.

-6-



22



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WCM POOL LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|------- | ------------------------------------------------------



| | A. | Basis of Accounting (Continued)
| | -- | -------------------------------

Certain information and
footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in Members annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2007.

The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America, which
requires the Managing Member to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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.

Commodity futures and foreign
exchange transactions are reflected in the accompanying statements of financial condition on the trade date. Net unrealized gain or loss on open contracts (the difference between contract trade price and market price) is reflected in the financial
statements in accordance with Financial Accounting Standards Board (FASB) Interpretation No. 39  Offsetting of Amounts Related to Certain Contracts. The market value of futures (exchange-traded) contracts is
based upon the closing quotation on the various futures exchanges on which the contract is traded. The values which will be used by the Company for open forward positions will be provided by its administrator, who obtains market quotes from data
vendors and third parties. Any change in net unrealized gain or loss during the current period is reported in the statement of operations. Realized gains and losses on transactions are recognized in the period in which the contracts are closed.
Brokerage commissions include other trading fees and are charged to expense when incurred.

The Company has elected not to provide a
Statement of Cash Flows as permitted by Statement of Financial Accounting Standards (SFAS) No. 102, Statement of Cash Flows  Exemption of Certain Enterprises and Classification of Cash Flows from Certain
Securities Acquired for Resale.

Consistent with standard business practices in the normal course of business, the Company has
provided general indemnifications to its Trading Advisor and others when they act, in good faith, in the best interests of the Company. The Company is unable to develop an estimate of the maximum potential amount of future payments that could
potentially result from any hypothetical future claim, but expects the risk of having to make any payments under these general business indemnifications to be remote.

-7-



23



---

WCM POOL LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|------- | ------------------------------------------------------



| | A. | Basis of Accounting (Continued)
| | -- | -------------------------------

In July 2006, the FASB
issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. FIN
48 requires that the Company recognize in its financial statements, the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 were
effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. In connection with the adoption of FIN 48, the Company has
elected an accounting policy to classify interest and penalties related to unrecognized tax benefits as interest expense. Preferred as Managing Member of the Company evaluated the impact of adopting FIN 48 on the Companys financial statements.
The adoption of FIN 48 had no material impact on the Company, as the Companys tax positions are based on established tax precedence for the tax treatment of investment partnerships as flow through tax entities.

In September 2006, the FASB issued SFAS No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 requires use of a fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels: quoted market prices in active markets for identical assets and liabilities (Level 1), inputs other than quoted market prices that are
observable for the asset or liability, either directly or indirectly (Level 2), and unobservable inputs for the asset or liability (Level 3). SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15,
2007.

The Company adopted SFAS 157 in the first quarter of 2008. Based on an analysis by Preferred, the effect of applying SFAS 157 to the
investment portfolio included in these financial statements did not result in a change to the fair value of the Companys investments. Of its net unrealized gain, $20,845 or 100.00% of the Companys investments at September 30, 2008
are classified as Level 1 and $0 or 0.00% as Level 2 or Level 3 using the fair value hierarchy of SFAS 157. Of its net unrealized gain, $434,983 or 100.00% of the Companys investments at December 31, 2007 are classified as Level 1 and $0
or 0.00% as Level 2 or Level 3 using the fair value hierarchy of SFAS 157. The Company considers prices for exchange traded commodity futures and options contracts to be based on quoted prices in active markets for identical assets (Level 1). The
values of forwards, swaps, and certain option contracts for which market quotations are not readily available are priced by third party data providers such as Bloomberg, Reuters, and or Super Derivatives who derive fair values for those assets from
observable inputs (Level 2).

-8-



24



---

WCM POOL LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|------- | ------------------------------------------------------



| | A. | Basis of Accounting (Continued)
| | -- | -------------------------------

The following table
summarizes the assets and liabilities measured at fair value using the fair value hierarchy of SFAS 157:



|                                      |  |         |         |         |   |         |  |       |   |  |   |        
|------------------------------------- |  | ------- | ------- | ------- | - | ------- |  | ----- | - |  | - | -------
|September 30, 2008                    |  | Level 1 |         | Level 2 |   | Level 3 |  | Total
|Assets:                               |  |         |         |         |   |         |  |       |   |  |   |        
|Net unrealized gain on open contracts |  | $       | 20,845  |         | $ | 0       |  | $     | 0 |  | $ | 20,845 
|                                      |  |         |         |        
|December 31, 2007                     |  | Level 1 |         | Level 2 |   | Level 3 |  | Total
|Assets:                               |  |         |         |         |   |         |  |       |   |  |   |        
|Net unrealized gain on open contracts |  | $       | 434,983 |         | $ | 0       |  | $     | 0 |  | $ | 434,983

In October 2008, the FASB issued FASB Staff Position FAS 157-3, Determining the Fair
Value of a Financial Asset When the Market for That Asset Is Not Active (FSP 157-3). FSP 157-3 clarified the application of SFAS 157. FSP 157-3 demonstrated how the fair value of a financial asset is
determined when the market for that financial asset is inactive. FSP 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have an impact on
the Companys condensed financial statements.

In February 2007, the FASB issued SFAS No. 159 (SFAS 159),
The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of SFAS 115. This statement provides companies with an option to report selected financial assets and liabilities at fair value. This statement
is effective for fiscal years beginning after November 15, 2007 with early adoption permitted.

The Company adopted SFAS 159 during
the first quarter of 2008, and it did not have a material effect on the Companys financial statements, as the Company did not elect the fair value option for any eligible financial assets or liabilities.

-9-



25



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WCM POOL LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|------- | ------------------------------------------------------



| | A. | Basis of Accounting (Continued)
| | -- | -------------------------------

Cash represents amounts
deposited with a bank and clearing broker, a portion of which is restricted for purposes of meeting margin requirements, which typically range from 0% to 35% of the notional amounts of the derivatives traded. The Company receives interest at
prevailing interest rates on all cash balances held by the clearing broker and bank.



| | B. | Income Taxes
| | -- | ------------

The Company is treated as a partnership for
Federal income tax purposes. As such, the Company is not required to provide for, or pay, any Federal or state income taxes. Income tax attributes that arise from its operations are passed directly to the Members. The Company may be subject to other
state and local taxes in jurisdictions in which it operates.



| | C. | Capital Accounts
| | -- | ----------------

The Company accounts for subscriptions,
allocations and redemptions on a per member capital account basis.

The Company allocates profits and losses, prior to calculation of the
incentive fee, for both financial and tax reporting purposes to its Members monthly on a pro rata basis based on each Members pro rata capital in the Company during the month. Each Member is then charged with the applicable incentive fee.
Distributions (other than redemptions of capital) may be made at the sole discretion of the Members on a pro rata basis in accordance with the Members respective capital balances. The Company has not and does not presently intend to make any
distributions.



| | D. | Foreign Currency Transactions
| | -- | -----------------------------

The Companys
functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at
the date of the statements of financial condition. Income and expense items denominated in currencies other than U.S. dollars are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation
to U.S. dollars are reported in operations currently under the caption Realized in the statements of operations.



| | E. | Interest Income
| | -- | ---------------

Interest income is recorded on an
accrual basis.

-10-



26



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WCM POOL LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 3. | FEES
|------- | ----



| | A. | Operating Expenses
| | -- | ------------------

Operating expenses of the Company are
paid for by the Company.



| | B. | Management and Incentive Fees
| | -- | -----------------------------

The Company accrues and
pays the Trading Advisor a management fee at an annual rate of 2% of the Companys Net Assets determined as of the close of business each month. For purposes of determining the management fee, any distributions, redemptions or reallocation of
assets made as of the last day of the month shall be added back to the assets and there shall be no reduction for (i) the management fees calculated or (ii) any accrued but unpaid incentive fees due the Trading Advisor.

Additionally, the Company pays the Trading Advisor a quarterly incentive fee of 20% (the Incentive Fee) of New High Net Trading
Profits (as defined in the Advisory Agreement). For the nine months ended September 30, 2008 and 2007, the Trading Advisor earned incentive fees of $730,712 and $388,256, respectively, of which $0 remains payable at September 30,
2008.



|Note 4. | RELATED PARTIES
|------- | ---------------

The Company reimburses the
Managing Member for services it performs for the Company, which include, but are not limited to: management, accounting, printing, and other administrative services.

The expenses incurred by the Company for services performed by the Managing Member for the Company were:



|                           |  |                                 |       |                                |   |      |  |      |        |  |   |  
|-------------------------- |  | ------------------------------- | ----- | ------------------------------ | - | ---- |  | ---- | ------ |  | - | -
|                           |  | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                           |  | 2008                            |       | 2007                           |   | 2008 |  | 2007
|General and administrative |  |                                 | 6,605 |                                |   | 0    |  |      | 16,870 |  |   | 0
|                           |  |                                 |       |                                |   |      |  |      |        |  |   |  
|                           |  | $                               | 6,605 |                                | $ | 0    |  | $    | 16,870 |  | $ | 0
|                           |  |                                 |       |                                |   |      |  |      |        |  |   |  

Expenses payable to the Managing Member and its affiliates as of September 30, 2008 and
December 31, 2007 were $6,505, and $0, respectively which are included in accrued expenses on the condensed statement of financial condition.



|Note 5. | INCOME TAXES
|------- | ------------

There have been no differences
between the tax basis and book basis of assets, liabilities or members capital since inception of the Company.



|Note 6. | DEPOSITS WITH COMMODITY BROKER, PRIME BROKER AND BANK
|------- | -----------------------------------------------------

The Company deposits funds with a commodity broker subject to CFTC regulations and various exchange and commodity broker requirements. Margin requirements are satisfied by the deposit of cash with such commodity broker. The Company earns
interest income on assets deposited with the commodity broker. The Company deposits funds with a prime broker. Margin requirements are satisfied by the deposit of cash with such prime broker. The Company earns interest income on assets deposited
with its prime broker and funds deposited with JPMorgan Chase Bank, Nassau branch.

-11-



27



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WCM POOL LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 7. | SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS
|------- | --------------------------------------------

Investments in the Company are made subject to the terms of the Organization Agreement.

The Company is not required to make
distributions, but could do so at the discretion of the Members. A Member can request and receive redemption of capital, subject to the terms in the Organization Agreement.



|Note 8. | DERIVATIVE INSTRUMENTS AND ASSOCIATED RISKS
|------- | -------------------------------------------

The
Company has cash on deposit with financial institutions. In the event of a financial institutions insolvency, recovery of cash on deposit may be limited to account insurance or other protection afforded such deposits.

The Company is exposed to various types of risks associated with the derivative instruments and related markets in which it invests. These risks include,
but are not limited to, risk of loss from fluctuations in the value of derivative instruments held (market risk) and the inability of counterparties to perform under the terms of the Companys investment activities (credit risk).

Market Risk

Trading in futures and
forward contracts (including foreign exchange) involves entering into contractual commitments to purchase or sell a particular commodity at a specified date and price. The gross or face amount of the contracts, which is typically many times that of
the Companys net assets being traded, significantly exceeds the Companys future cash requirements since the Company intends to close out its open positions prior to settlement. As a result, the Company is generally subject only to the
risk of loss arising from the change in the value of the contracts. As such, the Company considers the fair value of its derivative instruments to be the net unrealized gain or loss on the contracts. The market risk associated with the
Companys commitments to purchase commodities is limited to the gross or face amount of the contract held. However, when the Company enters into a contractual commitment to sell commodities, it must make delivery of the underlying commodity at
the contract price and then repurchase the contract at prevailing market prices or settle in cash. Since the repurchase price to which a commodity can rise is unlimited, entering into commitments to sell commodities exposes the Company to unlimited
risk.

Market risk is influenced by a wide variety of factors, including government programs and policies, political and economic events,
the level and volatility of interest rates, foreign currency exchange rates, the diversification effect among the derivative instruments the Company holds and the liquidity and inherent volatility of the markets in which the Company trades.

-12-



28



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WCM POOL LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 8. | DERIVATIVE INSTRUMENTS AND ASSOCIATED RISKS (CONTINUED)
|------- | -------------------------------------------------------

Credit Risk

When entering into futures or forward contracts, the Company is exposed to credit risk that the counterparty to
the contract will not meet its obligations. The counterparty for futures contracts traded on United States and most foreign futures exchanges is the clearinghouse associated with the particular exchange. In general, a clearinghouse is backed by its
corporate members who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing
members (i.e., some foreign exchanges), it is normally backed by a consortium of banks or other financial institutions. On the other hand, there is concentration risk on forward transactions entered into by the Company, as the Companys forward
broker is the sole counterparty. The Company has entered into a master netting agreement with its forward broker and, as a result, when applicable, presents unrealized gains and losses on open forward positions as a net amount in the statements of
financial condition. The amount at risk associated with counterparty non-performance of all of the Companys contracts is the net unrealized gain included in the statement of financial condition; however, counterparty non-performance on only
certain of the Companys contracts may result in greater loss than non-performance on all of the Companys contracts. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its obligations to the
Company.

Preferred attempts to minimize both credit and market risks by requiring the Company and its Trading Advisor to abide by various
trading limitations and policies. Preferred monitors compliance with these trading limitations and policies, which include, but are not limited to, executing and clearing all trades with creditworthy counterparties; limiting the amount of margin or
premium required for any one commodity or all commodities combined; and generally limiting transactions to contracts which are traded in sufficient volume to permit the taking and liquidating of positions. Additionally, pursuant to the Advisory
Agreement among the Company, Preferred and the Trading Advisor, the Company shall automatically terminate the Trading Agreement, if the net asset value allocated to the Trading Advisor declines by 40% from the value at the beginning of any year or
since the effective date of the Advisory Agreement. The decline in net asset value is after giving effect for distributions, subscriptions and redemptions.

The Companys futures commission merchant, in accepting orders for the purchase or sale of domestic futures contracts, is required by CFTC regulations to separately account for and segregate as belonging to the
Company all assets of the Company relating to domestic futures trading and is not allowed to commingle such assets with its other assets. At September 30, 2008 and December 31, 2007, such segregated assets totaled $13,784,155 and
$17,941,562, respectively, which are included in cash and cash equivalents on the condensed statements of financial condition. Part 30.7 of the CFTC regulations also requires the Companys futures commission merchant to secure assets of the
Company related to foreign futures trading which totaled $135,557 and $48,961 at September 30, 2008 and December 31, 2007, respectively. There are no segregation requirements for assets related to forward trading.

As of September 30, 2008, all open futures contracts mature within eighteen months.



-13-



29



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WCM POOL LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 9. | FINANCIAL HIGHLIGHTS
|------- | --------------------

The following information
presents the financial highlights of the Company for the three months and nine months ended September 30, 2008 and 2007. This information has been derived from information presented in the financial statements.



|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |           |   
|---------------------------------- |  | ----------------------------------------------- | -- |  | ---------------------------------------------- | -- |  | --------- | -- |  | --------- | -- |  | ------------ | -- |  | ----------- | -- |  | --------- | -- |  | --------- | --
|                                   |  | Three Months EndedSeptember 30, 2008(Unaudited) |    |  | Nine Months EndedSeptember 30, 2008(Unaudited) |   
|                                   |  | MemberDFF LP                                    |    |  | MemberDFT I                                    |    |  | MemberKGT |    |  | MemberFST |    |  | MemberDFF LP |    |  | MemberDFT I |    |  | MemberKGT |    |  | MemberFST |   
|Total return(1),(4)                |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |           |   
|Total return beforeincentive fees  |  | (7.43                                           | )% |  | (7.43                                          | )% |  | (7.43     | )% |  | (7.43     | )% |  | 10.98        | %  |  | 10.98       | %  |  | 10.98     | %  |  | 10.98     | % 
|Incentive fees                     |  | 0.00                                            | %  |  | 0.00                                           | %  |  | 0.00      | %  |  | 0.00      | %  |  | (3.67        | )% |  | (3.67       | )% |  | (3.68     | )% |  | (3.67     | )%
|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |           |   
|Total return afterincentive fees   |  | (7.43                                           | )% |  | (7.43                                          | )% |  | (7.43     | )% |  | (7.43     | )% |  | 7.31         | %  |  | 7.31        | %  |  | 7.30      | %  |  | 7.31      | % 
|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |           |   
|Ratios to average netasset values: |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |           |   
|Expenses prior toincentive fees(2) |  | 2.64                                            | %  |  | 2.63                                           | %  |  | 2.81      | %  |  | 2.63      | %  |  | 2.93         | %  |  | 2.92        | %  |  | 3.06      | %  |  | 2.95      | % 
|Incentive fees(1)                  |  | 0.00                                            | %  |  | 0.00                                           | %  |  | 0.00      | %  |  | 0.00      | %  |  | 3.62         | %  |  | 3.57        | %  |  | 4.10      | %  |  | 3.63      | % 
|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |           |   
|Total expenses andincentive fees   |  | 2.64                                            | %  |  | 2.63                                           | %  |  | 2.81      | %  |  | 2.63      | %  |  | 6.55         | %  |  | 6.49        | %  |  | 7.16      | %  |  | 6.58      | % 
|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |           |   
|Net investment loss(2), (3)        |  | (1.08                                           | )% |  | (1.08                                          | )% |  | (1.19     | )% |  | (1.08     | )% |  | (1.34        | )% |  | (1.33       | )% |  | (1.39     | )% |  | (1.35     | )%
|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |           |   



-14-



30



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WCM POOL LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 9. | FINANCIAL HIGHLIGHTS (CONTINUED)
|------- | --------------------------------



|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |              |   
|---------------------------------- |  | ----------------------------------------------- | -- |  | ---------------------------------------------- | -- |  | --------- | -- |  | --------- | -- |  | ------------ | -- |  | ----------- | -- |  | --------- | -- |  | ------------ | --
|                                   |  | Three Months EndedSeptember 30, 2007(Unaudited) |    |  | Nine Months EndedSeptember 30, 2007(Unaudited) |   
|                                   |  | MemberDFF LP                                    |    |  | MemberDFT I                                    |    |  | MemberKGT |    |  | MemberFST |    |  | MemberDFF LP |    |  | MemberDFT I |    |  | MemberKGT |    |  | MemberFST(5) |   
|Total return(1),(4)                |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |              |   
|Total return beforeincentive fees  |  | 4.66                                            | %  |  | 4.66                                           | %  |  | 4.66      | %  |  | 4.66      | %  |  | 10.21        | %  |  | 10.21       | %  |  | 10.22     | %  |  | 19.99        | % 
|Incentive fees                     |  | (0.73                                           | )% |  | (0.73                                          | )% |  | (0.73     | )% |  | (0.73     | )% |  | (1.41        | )% |  | (1.40       | )% |  | (1.50     | )% |  | (3.72        | )%
|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |              |   
|Total return afterincentive fees   |  | 3.93                                            | %  |  | 3.93                                           | %  |  | 3.93      | %  |  | 3.93      | %  |  | 8.80         | %  |  | 8.81        | %  |  | 8.72      | %  |  | 16.27        | % 
|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |              |   
|Ratios to average netasset values: |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |              |   
|Expenses prior toincentive fees(2) |  | 2.41                                            | %  |  | 2.42                                           | %  |  | 2.43      | %  |  | 2.44      | %  |  | 2.65         | %  |  | 2.66        | %  |  | 2.66      | %  |  | 2.60         | % 
|Incentive fees(1)                  |  | 0.73                                            | %  |  | 0.73                                           | %  |  | 0.70      | %  |  | 0.71      | %  |  | 1.37         | %  |  | 1.36        | %  |  | 1.46      | %  |  | 3.38         | % 
|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |              |   
|Total expenses andincentive fees   |  | 3.14                                            | %  |  | 3.15                                           | %  |  | 3.13      | %  |  | 3.15      | %  |  | 4.02         | %  |  | 4.02        | %  |  | 4.12      | %  |  | 5.98         | % 
|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |              |   
|Net investment income(2), (3)      |  | 1.80                                            | %  |  | 1.80                                           | %  |  | 1.82      | %  |  | 1.83      | %  |  | 1.50         | %  |  | 1.50        | %  |  | 1.53      | %  |  | 1.80         | % 
|                                   |  |                                                 |    |  |                                                |    |  |           |    |  |           |    |  |              |    |  |             |    |  |           |    |  |              |   

Total returns are calculated based on the change in value of members capital during the
period. An individual members total returns and ratios may vary from the above total returns and ratios based on the timing of additions and redemptions.



|(1) | Not annualized.
|--- | ---------------

|(2) | Annualized.
|--- | -----------

|(3) | Represents interest income less total expenses (exclusive of incentive fees).
|--- | -----------------------------------------------------------------------------

|(4) | Includes realized and unrealized gains (losses) on securities transactions.
|--- | ---------------------------------------------------------------------------

|(5) | Member FST contributed its net assets to the Company effective April 1, 2007.
|--- | -----------------------------------------------------------------------------



-15-



31



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WCM POOL LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)







|Note 10. | SUBSEQUENT EVENT
|-------- | ----------------

Effective December 31, 2008,
Member DFF LP is terminating, and will withdraw 100% of its member interests representing 16.07% of members capital as of September 30, 2008.



-16-



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

This report on Form 10-Q (the Report) for the quarter ending September 30, 2008 (Third Quarter 2008) includes forward-looking statements that reflect the current expectations
of Preferred Investment Solutions Corp. (Preferred or the Managing Owner), the managing owner of Diversified Futures Trust I (Registrant), about the future results, performance, prospects and
opportunities of Registrant. The Managing Owner has tried to identify these forward-looking statements by using words such as may, will, expect, anticipate, believe, intend,
should, estimate or the negative of those terms or similar expressions. These forward-looking statements are based on information currently available to the Managing Owner and are subject to a number of risks, uncertainties
and other factors, both known, such as those described in this Report, and unknown, that could cause Registrants actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these
forward-looking statements.

You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities
laws, the Managing Owner undertakes no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Report, as a result of new information, future events or changed
circumstances or for any other reason after the date of this Report.

Introduction

General

Registrant, a Delaware business trust,
was organized under the Delaware Statutory Trust Act on May 18, 1994 and will terminate on December 31, 2020 unless terminated sooner under the provisions of the Second Amended and Restated Declaration of Trust and Trust Agreement (the
Trust Agreement). Registrants trustee is Wilmington Trust Company. Registrant was formed to engage in the speculative trading of commodity futures and forward contracts. Registrants fiscal year for book and tax
purposes ends on December 31.

Registrant is engaged solely in the business of commodity futures and forward trading; therefore, presentation of
industry segment information is not applicable.

Managing Owner and its Affiliates

Preferred has been the managing owner of Registrant since October 1, 2004. The term Managing Owner, as used herein, refers to Preferred.

The Managing Owner is required to maintain at least a 1% interest in Registrant so long as it is acting as Registrants Managing Owner.

The Trading Advisor and the Trading Vehicle

Effective January 1, 2007, Registrant became a member of and allocated all of its assets to WCM Pool LLC (the Trading Vehicle), a Delaware limited liability company, and received a voting membership interest in the
Trading Vehicle and became party to the Trading Vehicles Organization Agreement. The Trading Vehicle was formed to function as an aggregate trading vehicle for its members. Registrant, Futures Strategic Trust, Diversified Futures Fund, L.P.
and Kenmar Global Trust are the sole members of the Trading Vehicle. Preferred is the managing owner/general partner of each of these Trading Vehicle members and has been delegated administrative authority over the operations of the Trading Vehicle.
The Trading Vehicle engages in the speculative trading of futures and forwards contracts.

The Trading Vehicle has entered into an advisory agreement (the
Trading Vehicle Advisory Agreement) with Winton Capital Management Limited (Winton), whereby Winton makes the trading decisions for the Trading Vehicle and, in turn, Registrant, pursuant to Wintons
Diversified Program. The Advisory Agreement may be terminated for various reasons, including at the discretion of the Trading Vehicle. Registrant has allocated 100% of the proceeds from the initial and continuous offering of Registrant to the
Trading Vehicle. Registrant, through its investment in the Trading Vehicle, pays a monthly management fee equal to 0.16667% (2% annually) of the assets allocated to the Trading Advisor. Registrant, through its investment in the Trading Vehicle, pays
Winton an



33



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incentive fee of 20% of New High Net Trading Profits (as defined in the Advisory Agreement) generated by the Trading Vehicle. Incentive fees will
accrue monthly and be paid quarterly in arrears.

The term Trading Advisor, as used herein, refers to Winton. The term Trading
Advisory Agreement, as used herein, refers to the Trading Vehicle Advisory Agreement.

Competition

The Managing Owner and its affiliates have formed, and may continue to form, various entities to engage in the speculative trading of futures and forward contracts that
have certain of the same investment policies as Registrant.

Registrant does not currently, and does not intend in the future to, solicit the sale of
additional Interests. As such, Registrant does not compete with other entities to attract new fund participants. However, to the extent that a Trading Advisor recommends similar or identical trades to Registrant and other accounts that it manages,
Registrant may compete with those accounts, as well as with other market participants, for the execution of the same or similar trades.

Employees

Registrant has no employees. Management and administrative services for Registrant are performed by the Managing Owner or
third parties pursuant to the Trust Agreement, as further discussed in Notes 3 and 4 to Registrants financial statements included in its annual report for the year ended December 31, 2007 (Registrants 2007 Annual
Report), which was included in the Registrants Form 10-K for the fiscal year ended December 31, 2007.

Critical Accounting Policies

Preparation of the financial statements and related disclosures in compliance with accounting principles generally accepted in the United States of
America requires the application of appropriate accounting rules and guidance. Applying these policies requires the Managing Owner to make judgments, estimates and assumptions in connection with the preparation of Registrants financial
statements. Actual results may differ from the estimates used.

The Managing Owner has evaluated Registrants financial statements and related
disclosures and has determined that the policies discussed below are critical accounting policies because they involve estimates, judgments and assumptions that are particularly complex, subjective or uncertain. For a further discussion of
Registrants significant accounting policies, see Note 2 to Registrants financial statements for the year ended December 31, 2007, which was included in the Registrants annual report on Form 10-K for the fiscal year ended
December 31, 2007.

The valuation of Registrants investments that are not traded on a United States (US) or internationally
recognized futures exchange is a critical accounting policy. The market values of futures (exchange traded) contracts is verified by Registrants administrator, which obtains valuation data from third party data providers such as Bloomberg,
Reuters and or Super Derivatives and compares those prices with Registrants clearing broker. The market value of currency swap and forward (non-exchange traded) contracts is extrapolated on a forward basis from the spot prices quoted as of 4
PM on the last business day of the reporting period. All values assigned by the administrator and confirmed by the Managing Owner are final and conclusive as to all of Registrants Unitholders.

As such, if actual results vary from estimates used, they are not anticipated to have a material impact on the financial statements and related disclosures.

Registrant records all investments at fair value in its financial statements, with changes in fair value reported as a component of Trading Profits (Losses) in the
Statements of Operations. The Registrant considers prices for exchange traded commodity futures and options contracts to be based on quoted prices in active markets for identical assets (Level 1). The values of forwards, swaps, and certain option
contracts for which market quotations are not readily available are priced by by third party data providers such as Bloomberg, Reuters and or Super Derivatives who derive fair values for those assets from observable inputs (Level 2).



34



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In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. FIN 48 requires that Registrant recognize in
its financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 were effective for fiscal years beginning after
December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. In connection with the adoption of FIN 48, Registrant has elected an accounting policy to classify
interest and penalties related to unrecognized tax benefits as interest expense. The Managing Owner evaluated the impact of adopting FIN 48 on Registrants financial statements. In the Managing Owners opinion, the adoption of FIN 48 had
no material impact on Registrant, as Registrants tax positions are based on established tax precedence for the tax treatment of investment partnerships as flow through tax entities.

In September 2006, the FASB issued SFAS No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 requires use of a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels: quoted market prices in active markets for identical assets and liabilities (Level 1), inputs other than quoted market prices that are
observable for the asset or liability, either directly or indirectly (Level 2), and unobservable inputs for the asset or liability (Level 3). SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15,
2007.

Registrant adopted SFAS 157 in the first quarter of 2008. Based on an analysis by the Managing Owner, the effect of applying SFAS 157 to the
investments included in Registrants financial statements did not result in a change to the fair value of Registrants investments. $0 or 0.00% of the Registrants investments at September 30, 2008 are classified as Level 1 or
Level 2 and $10,771,164 or 100.00% are classified as Level 3 using the fair value hierarchy of SFAS 157. $0 or 0.00% of Registrants investments at December 31, 2007 are classified as Level 1 or Level 2 and $11,055,308 or 100.00% are
classified as Level 3 using the fair value hierarchy of SFAS 157. A table presenting the changes in the Level 3 fair value category for the nine months ended September 30, 2008 and 2007 is provided in Note 5 of the Registrants financial
statements, included in the Registrants quarterly report on Form 10-Q for the quarter-ended September 30, 2008. Of the $842,424 and $973,843 gains for the nine months ended September 30, 2008 and 2007, respectively, reported on Level
3 investments in Note 5, $(239,855) and $835,437, respectively, represent a change in unrealized allocated from the Trading Vehicle on the Registrants condensed statements of operations.

In October 2008, the FASB issued FASB Staff Position FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active (FSP 157-3). FSP 157-3 clarified the application of SFAS 157. FSP 157-3 demonstrated how the fair value of a financial asset is determined when the market for that financial asset is inactive.
FSP 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have an impact on the Registrants condensed financial statements.

In February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities,
including an amendment of SFAS 115. This statement provides companies with an option to report selected financial assets and liabilities at fair value. This statement is effective for fiscal years beginning after November 15, 2007 with early
adoption permitted. The Registrant adopted SFAS 159 during the first quarter of 2008, and it did not have a material effect on the Registrants financial statements, as the Registrant did not elect the fair value option for any eligible
financial assets or liabilities.

Liquidity and Capital Resources

Registrant commenced operations on January 5, 1995 with gross proceeds of $25,262,800 allocated to commodities trading. Additional contributions raised through the continuous offering of limited interests
(Limited Interests) and general interests (General Interests and, together with the Limited Interests, Interests) of beneficial ownership in Registrant through August 31, 1996 resulted in
additional gross proceeds to Registrant of $41,129,100. The continuous offering period ended on August 31, 1996.

For Third Quarter 2008, the period
January 1, 2008 to September 30, 2008 (Year-To-Date 2008), the period July 1, 2007 to September 30, 2007 (Third Quarter 2007) and the period January 1, 2007 to September 30, 2007
(Year-To-Date 2007) there were no subscriptions of Limited Interests or General Interests.

Interests in Registrant may be redeemed on a
quarterly basis. Redemptions of Limited Interests for Third Quarter 2008 and Year-To-Date 2008 were $75,047 and $432,833, respectively. Redemptions of Limited Interests for Third Quarter 2007 and Year-To-Date 2007 were $528,248 and $2,257,174,
respectively.



35



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Redemptions of General Interests for Third Quarter 2008 and Year-To-Date 2008 were $3,352 and $6,931, respectively.
Redemptions of General Interests for Third Quarter 2007 and Year-To-Date 2007 were $11,053 and $29,989, respectively.

Future redemptions will impact the
amount of funds available for investment in commodity contracts in subsequent periods.

At September 30, 2008, 100.08% of Registrants net assets
were allocated to commodities trading through its investment in the Trading Vehicle. A significant portion of Registrants net assets invested in the Trading Vehicle was held in cash, which was used as margin for trading in commodities. In as
much as the sole business of Registrant is to trade in commodities (through its investment in the Trading Vehicle), Registrant continues to own such liquid assets to be used as margin. The clearing broker and bank credit the Trading Vehicle (and, in
turn, Registrant, as a member of the Trading Vehicle) with interest income on 100% of its average daily equity maintained in its accounts with the clearing broker and bank during each month at competitive interest rates.

The commodities contracts may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. For example, commodity
exchanges limit fluctuations in certain commodity futures contract prices during a single day by regulations referred to as daily limits. During a single day, no trades may be executed at prices beyond the daily limit. Once the price of
a futures contract for a particular commodity has increased or decreased by an amount equal to the daily limit, positions in the commodity can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit.
Commodity futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent the Trading Vehicle (and, in turn, Registrant) from promptly liquidating its commodity
futures positions.

Since Registrants business is to trade futures and forward contracts (through its investment in the Trading Vehicle), its capital
is at risk due to changes in the value of these contracts (market risk) or the inability of counterparties to perform under the terms of the contracts (credit risk). Registrants exposure to market risk is influenced by a number of factors
including the volatility of interest rates and foreign currency exchange rates, the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of Registrants speculative
trading as well as the development of drastic market occurrences could result in losses considerably beyond Registrants experience to date and could ultimately lead to a loss of all or substantially all of investors capital. The Managing
Owner attempts to minimize these risks by requiring Registrant, the Trading Vehicle and the Trading Advisor to abide by various trading limitations and policies, which include limiting margin amounts, trading only in liquid markets and permitting
the use of stop loss provisions. For a further discussion of the credit and market risks associated with Registrants futures and forward contracts through its investment in the Trading Vehicle, see Note 7 to Registrants financial
statements for the year ended December 31, 2007, which was included in the Registrants annual report on Form 10-K for the fiscal year ended December 31, 2007.

Registrant does not have, nor does it expect to have, any capital assets.

Market Overview

Following is a market overview for Third Quarter 2008, Third Quarter 2007 and Third Quarter 2006:

Third Quarter 2008

Clearly, the financial
crisis gripping the nation is resonating throughout all corners of the economy and the effects will be felt for some time to come. Consumers have already cut back spending dramatically but more retrenchment can be expected in response to worsening
job and income prospects as well as the growing wealth destruction that has taken place in recent months. There is no longer any doubt that the economy is mired in a recession; the only question is how deep and long it will be. Economists are
crossing their fingers that the downturn will be no worse than the last two mild recessions in 1990-91 and 2001. However, many believe that conditions will be at least as bad as they were during the worst post-war recessions, which occurred in
1980-81 and 1973-74. The credit crisis got worse with each passing day, despite huge Federal Reserve liquidity additions, a $700 billion bailout package and numerous other measures. The broker dealer, as once known, basically ceased to
exist as Goldman Sachs, Merrill Lynch, Morgan Stanley and others changed structure to essentially become banks. The economic data flow in the US can only be described as feeble and promises to get even weaker. In the US, housing,
employment



36



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and manufacturing data were all anemic throughout the third quarter of 2008 with many indications of worse to come.

A strengthening US dollar throughout the quarter added to demand for US Treasuries as well as flight-to-safety support. After seeing their largest monthly yield declines
since February in the month of August, Treasury yields saw further erosion in September. The benchmark 10-Year Note saw its yield fall approximately 20 basis points during the quarter and the 2-Year yield dipped by roughly 70 basis points as the
yield curve experienced a severe steepening. Central banks kept rates unchanged throughout the third quarter but in early October they collaboratively cut key rates in response to the global credit crisis. During the quarter, the Federal Reserve,
Bank of England, European Central Bank and others injected huge amounts of liquidity into the markets.

Currencies:The Dollar Index, which measures
the US unit against a basket of other currencies, ended the quarter up overall and up 3.7% for the year. Among the majors, the euro and pound were particularly weak in September as the UK and the Eurozone experienced severe economic problems to go
along with a burgeoning credit crisis. The British pound slipped to a 2-year low against the US dollar as the UK suffered recessionary-like conditions, including a 12.4% year-to-date drop in housing prices. The euro scored an all-time high in July,
but from the peak it was all downhill as the euro slumped badly in August and September to close out the quarter near $1.41. The yen suffered far less fallout from the global credit crisis. It showed particular strength against both the euro and
pound while gaining modestly to the dollar. The Australian dollar was pressured versus the yen as carry trades were unwound. The New Zealand dollar experienced a similar fate.

Energies:Crude posted steep losses in September down more than 13% within the Dow Jones AIG Index and over 31% for the quarter. Crude was pummeled by intense selling, the ongoing feature throughout the period.
In addition, a firming US dollar, a significant slowing in global demand and above-quota OPEC output weighed on sentiment, which more than offset the geopolitical events surrounding Iran, Nigeria, Russia, Venezuela and the Middle East. Combined
gasoline, heating oil and jet fuel demand is down more than 7% compared to last September. Natural gas followed suit and ended the quarter much lower.

Agriculturals:With steady declines in both price and open interest during the month of September, as well as all of the third quarter, the agricultural futures markets were prime examples of the widespread deleveraging seen across
all markets. The deterioration in values came despite occasional weather concerns, which typically are the impetus for late summer rallies. For the quarter, corn, soybeans, wheat and cotton saw high-to-low declines in value from 37% to 30%. Corn and
wheat lost roughly $3.00 per bushel each and soybeans lost over $6.00. Cotton also dropped significantly. The longer-term implications of the recent price plunge will be played out first in farmers springtime planting decisions. In addition to
the normal, net profit calculations, banking considerations will play a major role in next seasons production potential. Understandably, the ongoing tight credit markets will cause bankers to shy away from lending money to farmers wishing to
grow high-input-cost crops, regardless of profit potential.

Indices:Global equities suffered from a total lack of confidence as related to the
credit crisis, which got worse instead of better throughout the quarter, despite herculean efforts from central banks and various government agencies. US stocks were hit with massive fund liquidations, partially due to margin needs but also due to
large redemption levels that picked up speed with each passing session. After managing very modest gains in August, despite a sharp month-end slide, all the major US indices were lower in September. The Dow Jones Industrial Average, S&P 500
and NASDAQ fell over 4%, 9% and 9% respectively for the quarter. Financial stocks, including banks, brokers and insurance companies were particularly weak, as were retail issues and energy stocks. The markets failed to react to the much-debated and
delayed $700 billion Treasury rescue plan. US stocks were clearly hurt by the credit crisis in Europe.

Europe saw similar performance as their
financial crisis was equally, if not more, dire than that in the US. The UK in particular has seen rigorous credit issues as the DJ Stoxx 600 lost approximately 12% during the third quarter due to staggering financial sector events. The German DAX,
the French CAC and Londons FTSE all ended the quarter with losses. The Russian stock market was particularly weak, forcing trading halts on numerous occasions.

Asia posted the weakest equity performance of the three major regions during the quarter and it has subsequently experienced massive liquidation from international funds despite the fact that Japan and the region
in general have less exposure to the global credit crisis. The Nikkei lost nearly 2,000 points and Koreas Kospi fell over 14% throughout the period. Hong Kong was extremely weak and Shanghai extended a yearlong slide. Australian equities could
not ward off the credit crisis and ended the quarter lower.



37



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Metals:After a brief run in mid-July and a sell-off through the second week in of September, late quarter gains
were not enough to offset losses as gold finished down over 5% for the period. Silver was down a hefty 29% for the third quarter. Base metals were sold heavily across the markets in September, to an even greater degree than in July and August, and
all metals within the GSCI Commodity Index finished down for the quarter. Increasing exchange warehouse inventories as well as slowing global demand patterns weighted on metals. A firmer US dollar did not help the cause, neither did the general
outflow of capital from commodities.

Softs and Livestock:Individual soft commodity fundamentals were similarly overwhelmed by capital outflows and
fund liquidation pressures in September. Cocoa had managed gains in August but this was not the case in September. Sugar extended its August losses into September. Supplies hold ample and Brazilian sugar exports have accelerated. Coffee lost nearly
17% for the quarter.

Live hogs fell almost 4.5% and cattle 4.9%. Hogs were again hurt by increased slaughter levels and sluggish demand. Both markets saw
slaughter increases related to higher feed costs and, like many agricultural commodities, were pressured by financing difficulties for farmers.

Third Quarter 2007

Throughout the third quarter of 2007, subprime/credit concerns dominated the global economy with some forecasting
a recession as a result. Former Fed Chairman Greenspan said the risk of inflation has increased, although he still put the odds of a recession below 50%. The crisis, or at least the paranoia surrounding it, seemed to worsen with each passing day
during most of the quarter. In reaction, the US Federal Reserve (the Fed) cut rates in August and September. In general, pundits and economists approved of the Feds stance but a few saw it as highly inflationary and some a
bailout of Wall Street.

On the economic data front, already dismal housing numbers only got worse during the quarter. Both housing starts and building
permits fell to their lowest levels since 1995. Both existing and new home sales plunged. Inventories remained burdensome.

On the inflation front, the
producer price index fell each month during the third quarter. Falling food and energy prices kept wholesale inflation in check. For the most part, producers still seem to be absorbing higher commodity costs without passing them to the consumer. The
more closely watched consumer price index, the measure of a basket of consumer goods, fell slightly overall.

The most troubling economic data number
released in the quarter was the August employment report that showed nonfarm payrolls contract for the first time since August of 2003. The unemployment rate held steady at 4.6%.

Volatile durable goods orders fell sharply in August after a larger gain in July. Retail sales were up during the past year, but consumer confidence numbers tended to weaken in September. However, the latest report on
consumer spending showed the largest gain in two years.

Outside of the US, at the start of the quarter, both the Bank of England and the European Central
Bank were forecast to raise rates. But by the end of September, the picture had changed dramatically. The Bank of England was forced to deal with the Northern Rock crisis. The European Central Bank had been seen as hawkish in their views, but the US
rate cuts and some evidence of a slowing economic landscape, particularly in Germany, has some market participants looking for the maintenance of current levels. In the UK, LIBOR rose at the close of the quarter as Northern Rock borrowed more from
the Bank of England and other banks were caught in something of a credit squeeze. The Bank of England engaged in unprecedented measures to add liquidity to the financial markets. LIBORs volatility continued into the fourth quarter.

Currencies: After mixed trading patterns, albeit with a downside bias, for much of July through mid-August, the dollar fell to record levels against the euro
and British pound sterling in September. Overall, the dollar declined against 13 of the 16 major currencies in September, sending the dollar index to all-time lows. The euros share of global foreign exchange reserves rose to a record high in
September. The euro also gained on the yen in September, after losing some ground in August. It was a rocky month for the pound to the euro, trading nearly at a 30-month low. The pound grew slightly on the dollar in September, but lower then the
25-year high set in July.

The yen ended the month lower then in previous months. A change in prime ministers as the disgraced Mr. Abe stood down had
virtually no impact. Carry trade has lessened, but forecasts of its demise have proven premature.



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Regarding rates, the Bank of Japan held rates steady during the quarter. China saw a record trade surplus in August. The Chinese yuan continued its decline,
albeit very gradual to the US dollar. High yield currencies such as the Canadian, Australian and New Zealand dollars had a strong third quarter. All of these currencies attracted fund and carry trade demand during the quarter.

Energies: Crude oil entertained the global markets with a superior quarter, especially in the latter part of September. Prices very briefly traded below $70 in
early August during the period of an overall commodity selling blitz, but it was essentially straight up from there. After touching an all time high in September, crude finished the quarter with a year to date gain of just over 17%. While political
tensions were quiet in the third quarter, there seemed to be an increasing undercurrent toward quarters end. Nigerian unrest reasserted itself after a period of comparative calm. OPEC raised production at its most recent meeting but this drew
limited reaction. Global demand, not surprisingly led by China, remains extremely buoyant. Weather/tropical storm factors had a minimal impact during the month.

Abundant supply and benign weather weighed on natural gas prices for much of the third quarter, but prices staged a solid rally in September and finished the quarter lessening its year-to-date loss to just over 16%. While there were no
storms, there were enough precautionary shutdowns in September to turn the market around and the surge in crude aided sentiment. The potential for a La Niña weather pattern this winter could prove supportive in the fourth quarter, as this
weather pattern typically leans to cold weather in the northeast. Despite being in the height of the hurricane season, there were no lasting supply interruptions to heating oil in the quarter. Reformulated gasoline prices ended the quarter lower. A
lag in price relative to crude is the key reason prices at the pump have not risen in the face of surging crude. Overall supplies have been sufficient to meet demand.

Grains: Trepidation that wheat shortages might lead to tight supplies led to continued expansion in the third quarter, with an astounding 48% increase in the price of wheat. Behind the exploding wheat prices
were the ongoing crop worries in Australia, the worlds largest exporter of wheat. Market participants worry that the high prices will have a spillover effect on the prices of other crops that can be planted on wheat acreage. Soybean prices
similarly increased in the third quarter, up more than 25%. In addition to the supply side support, born of reduced acreage this past season at the hands of the agri-energy darling corn, the demand side of the equation has been equally influential,
as overseas buying of beans, oil, and meal has been relentless. Global cotton consumption remains robust. Regarding the supply and demand equation, the financial allure to grow the crop may tempt farmers to plant additional acreage. Corn prices also
rose dramatically in the third quarter. Supply and demand fundamentals indicated that the price fears created by the ethanol-induced glut of corn acreage may have subsided. As the price of competing crops wheat and beans moved sharply higher on the
back of a demand-driven/supply-uncertain rally, corn prices rallied as it suddenly became a comparatively cheap substitute, especially as a feed grain.

Indices: It was a nervous and, at times, erratic trading quarter for US and global equities surrounding the credit crisis and subprime mortgage fallout. However, the US Feds aggressive move on September 18 was well
received and helped end the quarter on a positive note for equities, despite weakness in some areas led by financials. The Dow Jones Industrial Average, the tech-heavy NASDAQ and the S&P 500 indices all finished higher for the quarter. For the
most part, the third quarter had the major European bourses following the pattern of the US but with a slight trail and most finished lower on the quarter.

Equities soared in Asia, with the Hang Seng Index, Shanghai Composite, Kospi Index and Australian All Ordinaries setting record highs during the quarter. The Nikkei ended the quarter slightly below its second quarter close, due in large
part to rate concerns, carry trade issues and political shifts.

Interest Rates: September
proved an eventful month for US Treasuries as speculation abounded regarding what the Federal Reserve might, or might not, do. On September 18 the Fed voted to cut both the Fed Funds rate by 50 basis points to 4.75% and the discount rate by
another 50 basis points to 5.25%. After the Fed move the yield curve showed significant steepening. The European Central Bank (ECB) held steady at the September meeting. While ECB President Jean Claude Trichet exhibited a somewhat
hawkish rhetoric, the bank appears to many to be on hold through year-end, a change from a month ago when a rate increase appeared most probable. Market participants believe that the Bank of England (BOE), forced to
deal with the Northern Rock crisis, may now be set to cut rates. LIBOR saw higher yields during September as Northern Rock borrowed more from the BOE and other banks were caught in something of a quarter-ending credit squeeze. There was no change by
the Bank of Japan in September.



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Metals: Gold was a stellar performer during the quarter. After being subject to margin selling as related to sub
prime/credit concerns, Japanese carry trades and a general flight to quality, gold resumed its role as an alternative asset with vengeance. The plunge in the US dollar against other major currencies and a pattern of lower global interest rates
increased demand for the metal. Gold now appears to have returned to its traditional role as a monetary asset to go along with strong physical demand. Jewelry demand is also solid, despite high price points. Gold for December delivery finished
September up over 12% year to date within the Dow Jones AIG Index.

While gold achieved 27-year highs, silver remains below its high level from earlier
this year. Overall physical demand has been and continues to hold buoyant. After stumbling in August, platinum staged an impressive rally through the end of the quarter. Chinas appetite for platinum has been exceptionally strong, as evidenced
by the latest customs statistics. Platinum jewelry sales continue to be strong, including an over 50% increase in jewelry buying through August versus 2006 in China. Other Asian nations showed a net increase of over 15%. Labor tensions in South
Africa supported both palladium and platinum prices, but the former lacked the aggressive Chinese interest and also saw minimal jewelry off-take.

Among
base metals, the third quarter proved volatile for copper prices. The general commodity selling blitz in August took its toll on the red metal, but prices came back with a vengeance in September. Strong global demand, led by China, paved the way
along with a series of labor disputes in Chile, Mexico and Peru. Like copper, aluminum prices fell in August, but were not able to recover in September. Year to date, aluminum prices are down over 13%. Nickel also fell in August, but managed a small
reversal in September. Spot nickel demand has been buoyant, particularly from the Far East outside of Japan. Overall, global stainless steel demand has been decent. Zinc prices fell throughout the third quarter and are now down over 25% for the year
to date. Lead prices ended the quarter up sharply higher as buoyant global demand has resulted in a production deficit, the sixth consecutive annual deficit. Tin prices saw an eighteen-year high in July, but ended the third quarter slightly lower.

Softs: Sugar prices were volatile during the quarter, but ended slightly higher to reduce its year-to-date loss to just under 20%. Coffee had been
losing ground all year until it woke up in September and eased its year-to-date loss to just over 8%. Cocoa rallied late in the quarter. Declining US warehouse inventories have been supportive, along with reports of black pod disease in
West Africa. The lingering threat of political unrest in the Ivory Coast persists. Cattle prices fell during the quarter. Korea rejected a third shipment of US beef due to mad-cow disease concerns. Hog prices fell to seventeen-month lows in the
third quarter. The market remains dependent on strong Asian demand but China has proven to buy less than expected, making hogs a rare market in that regard.

Third Quarter 2006

The most prominent economic development during the third quarter of 2006 was the
suspension of the Federal Reserves (Fed) long running rate hike cycle, which ended at the August meeting and was followed by a further pause at the September meeting. The Federal Reserve Open Market Committee
(FOMC) statements from both meetings were very similar, with an expectation of slower economic growth and of a gradual moderation in inflationary pressures over time, partially as a reflection of lower energy
prices. The Fed also anticipates the cumulative effects of monetary tightening to restrain aggregate demand.

Pursuant to these events,
U.S. interest rates steadily declined throughout the quarter, particularly in September. U.S. Treasuries were aided by flight to quality, as market participants seemed nervous about geopolitical events and asset reallocation factors during the
quarter, some of which came from liquidation of commodity holdings. Treasury auctions met with solid success and featured strong foreign demand.

On
the economic data front, the housing market was the focus. After weak numbers in July and August, September housing starts fell 6% to 1.665 million units, the weakest since April 2003, and are now down 19.8% over the last 12 months. Housing
permits, which tends to be a more forward looking economic indicator, fell 2.3% to 1.722 million in August and are down 21.9% over the past year. The news on new home sales and existing home sales was similar. Median sales prices for existing
homes fell 1.7% to $225,000 in August, the first drop in 11 years. Home builders are not optimistic with the National Association of Home Builders reporting the lowest levels of builder sentiment in 15 years.

Domestic inflation was tame throughout most of the period, even with crude oil and other industrial commodities jumping to historically high levels. The fact that
commodity prices moderated, particularly oil and natural gas, at quarters end, adds to a fairly benign forward inflation outlook. The Fed continues to issue the required inflation concern statements, and the numbers remain above target on a
year-on-year basis. However, rampant inflation



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seems unlikely in the U.S. on both a Consumer Price Index (CPI) and Producer Price Index (PPI) basis, the two most
common measures of economic inflation.

Economic growth, as measured by Gross Domestic Product (GDP), was softer, as the second quarter
release was revised downwards from 2.9% to 2.6%. Corporate profits remained healthy but were also lower during this quarter. The Consumer Confidence Index continued to show solid performance, with a reading of 104.5 in September versus 100.2 in
August, as lower gasoline prices have helped consumers. While geopolitical and energy risks abound, the U.S. economy has consistently shown an ability to weather the worst of storms. The fact that the majority of the global economic community is
doing well adds to the supportive landscape for the U.S.

On the foreign front, the overall picture remained constructive in the third quarter and looks
reasonably strong across the board for Asia and Europe. China extended its ongoing growth with 11.3% GDP in the second quarter and some recent forecasts indicate that third and fourth quarter numbers might even be better. The Chinese
yuan maintained its slow process of gains as it reached a high of 7.8965 to the U.S. dollar in September, the best level since the revaluation process was initiated. It is widely expected that the People Bank of China will gradually expand
the trading band in coming months and at least gradually accelerate the revaluation process.

The Bank of Japan (BOJ) ended its
zero interest rate policy in July with a rate hike to 0.25%. However, the Japanese economy is still expanding slowly, so no additional hikes are expected soon. The current situation surrounding North Korea has added to potential
problems. Japanese equities saw a volatile quarter but in the end put in a strong performance, including a rise in the Nikkei to 16,127 at the end of the third quarter compared to 15,505 at the end of the second quarter. South Korea also saw
its stock market and economy do well in the third quarter. The Kospi rose to 1,371 from 1,352 in August and 1,298 in July and was holding well as the North Korean nuclear situation remained in flux. The overall outlook for Asia as a
whole appears quite positive. The coup in Thailand had virtually no impact on the Asian regions economy or its currencies.

Australia also seems to be thriving with higher equity prices and an apparent end of their rate hike cycle after raising rates 25 basis points at the Reserve Banks August 2 meeting. With Canada doing well on the economic
front, the Bank of Canada is similarly in pause mode. Meanwhile, the Bank of New Zealand indicated that they were finished raising rates in spite of risks to their currency.

In Europe, higher rates were noted as the European Central Bank (ECB) raised rates to the current 3.25%, and judging from the cautious language from ECB President Jean Claude Trichet, another
increase could be in order before year-end. Eurozone economic data is mixed. The 10-year German Bund was yielding around 3.69% at quarters end compared to 3.90% to conclude the second quarter. The biggest surprise was a 25 basis point hike
from the Bank of England (BOE) in August to 4.75% but that may well be the last for a while as U.K. economic numbers do not seem to justify additional moves in 2006. European equities put in a strong quarter with the DAX, CAC
and FTSE near 5-year highs as October began.

Currencies:Uncertainty over interest rate policy in the four main industrial blocks affected currency
moves in the third quarter, causing the U.S. dollar to trade unevenly against the euro, the Japanese yen and the British pound. The ECB did not alter rates in August or September but the language from ECB President Jean Claude Trichet continued to
exhibit a cautious tone. The U.S. dollar was pressured by a growing perception that the Fed has concluded the rate hike cycle after no action at the August and September FOMC meetings. The euro was also inhibited by ideas that the U.S. economy is
slowing. Meanwhile, European data has been mixed, leading to weaker than expected German business confidence readings. Talk of higher European Union interest rates and increased taxation were cited as reasons for the weakness. The British pound
showed some strength in the third quarter, after the BOE unexpectedly raised rates 25 basis points to 4.75% on August 3.

The Japanese yen weakened in
early September, then firmed at mid-month, only to weaken again at months end. The prospect of very slow rate increases in Japan is a negative to the currency. The Japanese yen was briefly pressured by the coup in Thailand but this was
short lived as the situation proved to be less unsettling than originally thought. After a brief halt, the Bank of Thailand told foreign currency dealers that they could resume normal trading of the Thai baht. Japan also saw a new Prime Minister in
September as Shinzo Abe took over leadership of the ruling Liberal Party. He is expected to take a conservative view through year-end.

At the end of
September, the Chinese yuan reached its highest level since last years revaluation. Australia raised rates by 25 points to 6.00% on August 2 but the accompanying statement indicated they were finished with increases for the year.
Meanwhile the Bank of New Zealand indicated they were finished raising rates and warned that the New Zealand dollar might suffer as a result. The Canadian dollar maintained a firm tone throughout the third quarter although the Bank of Canada has
indicated that it is finished raising rates for 2006.



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Energies:The third quarter started with energy prices on an upswing as geopolitical factors, weather fears,
concerns about the availability of reformulated gasoline and summer driving demand were all supportive. However, as the quarter developed, all of these concerned dissipated.

Geopolitical fears diminished, including the end of the Israel/Hezbollah crisis. Also, it became clear that there was not likely to be any interruption in Iranian supplies as Iran continues to stall negotiations on
nuclear enrichment. Further, it appears that Russia, China and France will not support meaningful sanctions against Iran, leaving the U.S. on its own. With elections approaching in the U.S., the Bush administration is not likely to make any
unilateral moves.

Underlying supply and demand fundamentals continue to lack any degree of physical tightness. OPEC maintained current production levels
at its September 11 meeting, and recent rumors of an emergency meeting to consider production cuts in the face of the price decline, have proven premature. Moreover, increases in non-OPEC supplies, about 1.5 million barrels per day over
last year, add to the bearish supply/demand scenario.

On the weather front, the hurricane season is nearly over, and preseason fears of numerous storms
proved incorrect, as the season was one of the quietest in recent years.

On a year-to-date basis, following the third quarter sell-off, crude is down
9.23% within the DJ/AIG Index, unleaded gasoline has fallen 23.14%, heating oil showed a decline of 15.62% and natural gas plunged 67.47%.

Grains:Corn priced fluctuated during the quarter, peaking in early July and then falling off by quarter-end to match early springtime lows. During July, August and the first half of September, improved meteorological conditions across the Central
United States erased problematic growing condition fears from the wheat market. As a result, values declined in the late summer to their lowest level since January 2005. Weather was an important factor for soybeans as well, and soybeans followed
wheats price pattern closely in the third quarter, with soybean prices reaching their lowest level since February 2005. China is the main driver on the demand side. The ongoing improvements in the Chinese economy have resulted in a continued
increase in the demand for poultry, beef and pork, by the rapidly expanding Chinese middle class. Similar to the pattern seen in the soybean market during the third quarter, the cotton market too, saw declining prices.

Indices:The third quarter proved to be a positive one for U.S. equities, as the Fed ended its string of 17 consecutive rate hikes and gave indications it was
finished for the year and perhaps beyond. A pull back in energy prices and healthy consumer confidence and spending also lent support, while a solid run of earnings data and strength in big cap stocks was featured. Stocks were also aided by
asset reallocation, including some out of commodities. In Europe, the third quarter proved even better than the U.S. The strength in U.S. equities was supportive along with some positive data, and the markets were able to shrug off rate hikes from
the ECB and the BOE. European equities showed gains in all three months of the quarter, particularly in August and September. Asian equities, particularly Japan, had a volatile third quarter before finishing with a positive tone. In the
end, solid economic data for much of the region along with money flow led to higher prices.

Interest Rates:The Fed followed the August pause that
ended a streak of 17 consecutive rate hikes to 5.25% by holding steady at the September meeting. The FOMC statement varied little from the August commentary, as the Fed said it expects lower economic growth to reduce inflationary pressures. Treasury
yields moved directionally lower during the quarter and bonds benefited from flight to quality and asset reallocation during the third quarter.

In foreign
markets, the BOJ, the BOE, the ECB and the Reserve Bank of Australia all raised rates by 25 basis points during the third quarter. The Bank of China raised its base lending rate to 6.12% from 5.85% on August 19, and could raise it again
before year-end. Chinas strong 11.3% second quarter GDP growth lends to this probability. Meanwhile, the Bank of Canada and the New Zealand Reserve Bank made no rate changes during the quarter and the minutes from both indicated no
additional moves this year.

Metals:Gold prices rallied in the early part of the quarter and then sold off before ending the third quarter on a
strong note. While gold is still up 10.9% for the year, the quarters softness came on the back of general commodity malaise, lower energy prices and the less hectic geopolitical landscape. Silver prices briefly decoupled from gold during the
early part of the quarter, but ended up following the same path eventually. The slide in gold prices impacted copper, but there was enough trade support to limit the sell-off. Labor news was also supportive throughout the quarter. However, copper is
headed for a production surplus due to high levels of Chilean output. Additionally, there are concerns on the demand side as Chinese consumption has declined in 2006 and the U.S.



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housing market is depressed, both of which are weighing on sentiment. Aluminum has also been hurt recently by excess production capacity and indications of
lessened Chinese consumption, but overall global demand is solid. As for zinc, the price rally that occurred in first half of 2006 ended in the third quarter. However, the sell-off was limited as zincs fundamentals, featuring a huge production
deficit, are strong. Nickel put in an exceptionally strong performance in the third quarter, gaining 127%. Demand remains strong in the face of tight inventories, and production and labor concerns.

Softs:Sugar rallied strongly in the first quarter of 2006, traded sideways for much of the second quarter of 2006 and tumbled almost 30% in the third quarter of
2006, leading to a year-to-date loss of 28.97%. The same general commodity weakness affecting many other markets, weighed on sugar as well. Additionally, a well-respected analyst predicted that Indias 2006-2007 sugar crop might reach
27 million tonnes, vastly ahead of 21 million tonnes this season. Since Brazil, Russia, China, Thailand and the Ukraine are also expecting abundant crops, the result will be significant global surplus, which will offset a decline in EU
output to 16.5 million tonnes from 21.9 million this year. As for ethanol-related demand, it has waned of late. After rebounding in August following three negative months, coffee showed a mild loss in September, taking the year-to-date
loss to 10.71%. Prospects for an excellent Brazilian crop and the above mentioned general commodity malaise still weigh on sentiment. Cocoa is faced with ample supplies and continued favorable crop prospects.

Sector Performance

Due to the nature of Registrants trading
activities, a period-to-period comparison of its trading results is not meaningful. However, a discussion of Registrants trading results for the major sectors in which Registrant traded for Third Quarter 2008, Third Quarter 2007 and Third
Quarter 2006 are presented below.

Third Quarter 2008

Currencies: (-)This sector experienced a majority of its losses in the euro, Swiss franc, Australian dollar and Japanese yen.

Energies: (-)This sector experienced losses in gasoline, heating oil, brent crude, crude oil, gas oil and natural gas.

Grains: (-)This sector experienced gains in cotton. The majority of losses were seen in corn, wheat, soybeans and soybean meal.

Indices: (+)This sector experienced a majority of its gains in the DJ Stoxx 50, S&P 500 and the Nikkei. Losses were made in the Russell 2000 and the Canadian S&P TSE 60 Index.

Interest Rates: (+)This sector experienced a majority of its gains in US Treasury Notes, Australian Bonds and the German Bund. The majority of losses were
incurred in Euribor, Short Sterling and Australian Bank Bills.

Meats: (-)This sector experienced gains in feeder cattle and live cattle. Losses
were incurred in live hogs.

Metals: (-)This sector experienced gains in nickel and zinc. Losses were incurred in gold, aluminum, copper and
platinum.

Softs: (-)This sector experienced losses in coffee, cocoa and sugar.

Third Quarter 2007

Currencies:
(+) The majority of gains were experienced in the U.S. dollar versus the euro, Canadian dollar and British pound. The majority of losses were experienced in the Japanese yen versus the euro and U.S dollar.

Energies: (+) Gains were experienced in crude oil, gas oil, heating oil and natural gas. Losses were experienced in gasoline.

Grains: (+) Gains were made in canola oil, soybean oil, soybeans and wheat. Losses were experienced in corn and cotton.

Indices: (-)The majority of losses were experienced in the DJ Stoxx 50, the Nikkei and the S&P 500 indices.



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Interest Rates: (+)The majority of gains were made in Eurodollar and U.S. 5-year and 10-year Treasury Notes.
The majority of losses were experienced in Euribor and Short Sterling.

Meats: (+) Gains were experienced in cattle and hogs.

Metals: (-) Losses were experienced in aluminum, copper, nickel and zinc. Gains were made in gold, lead and platinum.

Softs: (-) Losses were experienced in cocoa, coffee and sugar.

Third Quarter 2006

Currencies: (+)Short positions in the Japanese yen resulted in a gain for the
third quarter of 2006.

Energies: (-) Long positions in crude oil and unleaded gas were the primary contributors to losses for the quarter.

Grains: (+) The sector was up for the third quarter of 2006, with a majority of the gains from short positions in soybeans and soybean meal.

Indices: (+)Gains on long Dow Jones STOXX 50, IBEX and DAX positions contributed to gains for this sector in the third quarter of 2006.

Interest rates: (-)The interest rate sector was down for the third quarter of 2006. Short positions in the German Bund, the Eurodollar and the
Japanese Government Bond led to the sectors losses for the quarter.

Metals: (-)Long positions in gold, aluminum, and zinc generated net losses for
the third quarter of 2006 in this sector.

Softs: (-)The sector was down for the third quarter of 2006 primarily due to short positions in coffee
and long positions in cocoa.

Results of Operations

The net asset value (Net Asset Value) per Interest as of September 30, 2008 was $239.40, an increase of 1.60% from the December 31, 2007 Net Asset Value per Interest of $235.63 and a decrease of 9.19% from the
June 30, 2008 Net Asset Value per Interest of $263.64. The Net Asset Value per Interest as of September 30, 2007 was $230.28, an increase of 3.40% from the December 31, 2006 Net Asset Value per Interest of $222.71 and an increase of
2.04% from the June 30, 2007 Net Asset Value per Interest of $225.67. Past performance is not necessarily indicative of future results.

Registrants trading gains (losses) before commissions and related fees during Third Quarter 2008 and Year-To-Date 2008 were approximately $(856,000) and $1,366,000, respectively. Registrants trading gains before commissions and
related fees during Third Quarter 2007 and Year-To-Date 2007 were approximately $469,000 and $982,000, respectively.

The Registrants average net
asset level increased during the Third Quarter 2008 in comparison to Third Quarter 2007 primarily due to positive trading performance entering into the Third Quarter 2008 relative to Third Quarter 2007 which offset the effect of quarterly
redemptions in the Third Quarter 2008. The Registrants average net asset level decreased Year-To-Date 2008 in comparison to Year-To-Date 2007 primarily due to the effect of redemptions and a significant decline in trading performance in the
Third Quarter 2008. Registrants average net asset level decreased during Third Quarter 2007 and Year-To-Date 2007 in comparison to Third Quarter 2006 and Year-To-Date 2006 primarily due to the effect of redemptions.

Interest income is earned on the average daily equity maintained with the clearing broker or bank at competitive interest rates and, therefore, varies monthly according
to interest rates, trading performance and redemptions. Interest income during Third Quarter 2008 and Year-To-Date 2008 was approximately $44,000 and $137,000, respectively, a decrease of approximately $74,000 and $258,000, respectively, as compared
to Third Quarter 2007 and Year-To-Date 2007, primarily due to declining interest rates and the effects of redemptions discussed above.



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Interest income during Third Quarter 2007 and Year-To-Date 2007 was approximately $118,000 and $395,000, respectively, a decrease of approximately $70,000
and $167,000, respectively, as compared to Third Quarter 2006 and Year-To-Date 2006, primarily due to reduced average net asset levels discussed above.

Commissions are calculated on Registrants Net Asset Value at the beginning of each month and therefore, vary according to monthly trading performance and redemptions. Other transaction fees consist of National Futures Association,
exchange and clearing fees as well as floor brokerage costs and give-up charges, which are based on the number of trades the Trading Advisor executes, as well as which exchange, clearing firm or bank on, or through, which the contract is traded.
Commissions and other transaction fees during the Third Quarter 2008 and Year-To-Date 2008 were approximately $220,000 and $669,000, respectively, an increase of approximately $5,000 as compared to Third Quarter 2007, primarily due to an increase in
average net asset levels discussed above and a decrease of approximately $23,000 as compared to Year-To-Date 2007, primarily due to reduced average net asset levels discussed above. Commissions and other transaction fees during the Third Quarter
2007 and Year-To-Date 2007 were approximately $215,000 and $692,000, respectively, a decrease of approximately $69,000 and $224,000, respectively, as compared to Third Quarter 2006 and Year-To-Date 2006, primarily due to reduced average net asset
levels discussed above.

Management fees are calculated on the net asset value of Registrants investment in the Trading Vehicle at the end of each
month, and therefore, are affected by trading performance and redemptions. Management fees during the Third Quarter 2008 and Year-To-Date 2008 were approximately $56,000 and $176,000, respectively, a decrease of approximately $1,000 and $5,000,
respectively, as compared to Third Quarter 2007 and Year-To-Date 2007, primarily due to the effect of redemptions discussed above. Management fees during Third Quarter 2007 and Year-To-Date 2007 were approximately $57,000 and $181,000, respectively,
a decrease of approximately $16,000 and $54,000, respectively, as compared to Third Quarter 2006 and Year-To-Date 2006, primarily due to reduced average net asset levels discussed above.

Incentive fees, which are based on the New High Net Trading Profits (as defined in the Advisory Agreement) generated by the Trading Advisor, are accrued monthly and are ultimately determined as of the
close of business on the last business day of each calendar quarter. Incentive fees during Third Quarter 2008 and Year-To-Date 2008 were approximately $0 and $409,000, respectively. Incentive fees during Third Quarter 2007 and Year-To-Date 2007 were
approximately $81,000 and $162,000, respectively.

General and administrative expenses during Third Quarter 2008 and Year-To-Date 2008 were approximately
$9,000 and $42,000, respectively. General and administrative expenses during the Third Quarter 2007 and Year-To-Date 2007 were approximately $3,000 and $14,000, respectively. These expenses charged to Registrant through its investment in the Trading
Vehicle include accounting, audit, tax, and legal fees, as well as printing and postage costs related to reports sent to limited owners.

Inflation

Inflation has had no material impact on the operations or on the financial condition of Registrant from inception through September 30, 2008.

Off-Balance Sheet Arrangements and Contractual Obligations

As of September 30, 2008, Registrant had not utilized special purpose entities to facilitate off-balance sheet financing arrangements and has no loan guarantee arrangements or off-balance sheet arrangements of any kind other than
agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers, such as our accountants, undertake in performing services which are in the best interests of
Registrant. While Registrants exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on Registrants financial position.

Registrants contractual obligations are with the Managing Owner and the Trading Vehicle and, as a result of its investment in the Trading Vehicle, with the Trading
Advisor and the Trading Vehicles commodity broker. Management fees payable by Registrant to the Trading Advisor (through its investment in the Trading Vehicle) and the Managing Owner are calculated as a fixed percentage of the Trading Vehicle
and Registrants Net Asset Value, respectively. Incentive fees payable by the Registrant to the Trading Advisor (through its investment in the Trading Vehicle) are at a fixed rate, calculated as a percentage of the Trading Vehicles
New High Net Trading Profits. As



45



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such, the Managing Owner cannot anticipate the amounts to be paid for future periods as Net Asset Values and New High Net Trading Profits are not
known until a future date. Commissions payable to the Trading Vehicles commodity broker are based on a cost per executed trade and, as such, the Managing Owner cannot anticipate the amount that will be required under the brokerage agreement,
as the level of executed trades are not known until a future date. These agreements are effective for one-year terms, renewable automatically for additional one-year terms unless terminated. Additionally, these agreements may be terminated by either
party thereto for various reasons. For a further discussion of Registrants contractual obligations, see Notes 1, 3 and 4 to Registrants financial statements for the year ended December 31, 2007, which is filed as an exhibit to
Registrants annual report on Form 10-K for the fiscal year ended December 31, 2007.



|Item 3. | 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 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls
and Procedures

Registrants disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities and Exchange Act of 1934, as amended (the Exchange Act)) are designed to ensure that information required to be disclosed by Registrant in reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the SEC), and that such information is accumulated and communicated to Registrants management,
including the Managing Owners Co-Chief Executive Officers and Director of Fund Administration (who, in these capacities, function as the Co-Chief Executive Officers and Principal Financial/Accounting Officer, respectively, of Registrant), as
appropriate to allow for timely decisions regarding required disclosure.

In designing and evaluating Registrants disclosure controls and procedures,
the Managing Owner recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and
procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

The Managing Owners management, under the supervision and with the participation of certain officers of the Managing Owner (including the Managing Owners
Co-Chief Executive Officers and Director of Fund Administration), has evaluated the effectiveness of Registrants disclosure controls and procedures as of the end of the period covered by this report. Based upon such evaluation, the Managing
Owners Co-Chief Executive Officers and Director of Fund Administration have concluded that, as of the end of such period, Registrants disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There
have been no changes in Registrants internal controls over financial reporting (as defined in Rules 13a  15(f) and 15d  15(f) under the Exchange Act) during Third Quarter 2008 that have materially affected, or are reasonably likely
to materially affect, Registrants internal controls over financial reporting.

PART II  OTHER
INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

There are no legal proceedings pending by or
against Registrant or the Managing Owner, or to which Registrant or Managing Owner was a party during the period covered by this Report.



|Item 1.A. | Risk Factors
|--------- | ------------

There have been no changes from risk factors as
previously disclosed in Registrants Form 10-K for the fiscal year ended December 31, 2007.



46



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|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

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. | Exhibits:
|------- | ---------



|     |  |                                                                                                                                       
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 (filed herewith)                                                       
|     | 
|31.2 |  | Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 (filed herewith)                                                       
|     | 
|32.1 |  | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
|     | 
|32.2 |  | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY.]



47



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                            |  |                                                           |  |  |  |                         |  | 
|--------------------------- |  | --------------------------------------------------------- |  |  |  | ----------------------- |  | 
|DIVERSIFIED FUTURES TRUST I |  |                                                           |  | 
|                            |  |                                                           | 
|By:                         |  | Preferred Investment Solutions Corp.,its managing owner   |  |  |  |                        
|                            |  |                                                           | 
|By:                         |  | /s/ Kenneth A. Shewer                                     |  |  |  | Date: November 12, 2008
|Name:                       |  | Kenneth A. Shewer                                         |  |  |  |                         |  | 
|Title:                      |  | Co-Chief Executive Officer                                |  |  |  |                         |  | 
|                            |  | (Principal Executive Officer)                             |  |  |  |                         |  | 
|                            |  |                                                           | 
|By:                         |  | /s/ David K. Spohr                                        |  |  |  | Date: November 12, 2008
|Name:                       |  | David K. Spohr                                            |  |  |  |                         |  | 
|Title:                      |  | Senior Vice President and Director of Fund
Administration |  |  |  |                         |  | 
|                            |  | (Principal Financial/Accounting Officer)                  |  |  |  |                         |  |