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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

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



For the quarterly period ended September 30, 2005



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



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DIVERSIFIED FUTURES TRUST I

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 13-3780260                          
|(State or other Jurisdiction of Incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                                     |  |           
|-------------------------------------------------------------------- |  | ----------
|51 Weaver Street, Building 1 South, 2ndFloor,
Greenwich, Connecticut |  | 06831     
|(Address of principal executive offices)                             |  | (Zip Code)



Registrants
telephone number, including area code: (203) 861-1000



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Indicate by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.    Yes  x    No ̈



Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes ̈No  x



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



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PART I. FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



DIVERSIFIED FUTURES TRUST I



FINANCIAL STATEMENTS

(Unaudited)



September 30, 2005



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DIVERSIFIED FUTURES TRUST I

STATEMENTS OF FINANCIAL CONDITION

September 30, 2005 (Unaudited) and
December 31, 2004 (Audited)



|                                                                                                                |  |                   |            |                  |   |            |  
|--------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ---------------- | - | ---------- | -
|                                                                                                                |  | September 30,2005 |            | December 31,2004 |  
|ASSETS                                                                                                          |  |                   |            |                  |   |            |  
|Cash in commodity trading accounts                                                                              |  | $                 | 17,315,915 |                  | $ | 20,394,257 |  
|Net unrealized gain on open futures contracts                                                                   |  |                   | 346,136    |                  |   | 532,883    |  
|Net unrealized gain (loss) on open forward contracts                                                            |  |                   | 322,118    |                  |   | (93,777    | )
|                                                                                                                |  |                   |            |                  |   |            |  
|Total assets                                                                                                    |  | $                 | 17,984,169 |                  | $ | 20,833,363 |  
|                                                                                                                |  |                   |            |                  |   |            |  
|LIABILITIES                                                                                                     |  |                   |            |                  |   |            |  
|Redemptions payable                                                                                             |  | $                 | 577,286    |                  | $ | 513,955    |  
|Management fees payable                                                                                         |  |                   | 29,950     |                  |   | 41,888     |  
|Commissions payable                                                                                             |  |                   | 13,226     |                  |   | 114,332    |  
|                                                                                                                |  |                   |            |                  |   |            |  
|Total liabilities                                                                                               |  |                   | 620,462    |                  |   | 670,175    |  
|                                                                                                                |  |                   |            |                  |   |            |  
|Commitments                                                                                                     |  |                   |            |                  |   |            |  
|                                                                                                                |  |                  
|TRUST CAPITAL                                                                                                   |  |                   |            |                  |   |            |  
|Limited interests (75,181.907 and 83,974.684 interests outstanding) at September 30, 2005 and December 31, 2004 |  |                   | 17,182,018 |                  |   | 19,956,434 |  
|General interests (795 and 870 interests outstanding) at September 30, 2005 and December 31, 2004               |  |                   | 181,689    |                  |   | 206,754    |  
|                                                                                                                |  |                   |            |                  |   |            |  
|Total trust capital                                                                                             |  |                   | 17,363,707 |                  |   | 20,163,188 |  
|                                                                                                                |  |                   |            |                  |   |            |  
|Total liabilities and trust capital                                                                             |  | $                 | 17,984,169 |                  | $ | 20,833,363 |  
|                                                                                                                |  |                   |            |                  |   |            |  



See accompanying notes.



-2-



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DIVERSIFIED FUTURES TRUST I

CONDENSED SCHEDULES OF INVESTMENTS

September 30, 2005 (Unaudited) and
December 31, 2004 (Audited)



|                                                          |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|--------------------------------------------------------- |  | ---------------------------------------------- | -- |  | ------------------------ | -------- | - | ---------------------------------------------- | ----- | -- | ------------------------ | - | -------- | -
|                                                          |  | September 30, 2005                             |    |  | December 31, 2004        |         
|Futures and Forward Contracts                             |  | NetUnrealizedGain (Loss)as a % ofTrust Capital |    |  | NetUnrealizedGain (Loss) |          |   | NetUnrealizedGain (Loss)as a % ofTrust Capital |       |    | NetUnrealizedGain (Loss) |  
|Futures contracts purchased:                              |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Commodities                                               |  | 2.04                                           | %  |  | $                        | 353,822  |   |                                                | 1.12  | %  |                          | $ | 226,555  |  
|Currencies                                                |  | 0.00                                           | %  |  |                          | 0        |   |                                                | 0.03  | %  |                          |   | 6,225    |  
|Interest rates                                            |  | (1.17                                          | )% |  |                          | (202,889 | ) |                                                | 0.77  | %  |                          |   | 154,841  |  
|Stock indices                                             |  | 0.88                                           | %  |  |                          | 153,153  |   |                                                | 1.30  | %  |                          |   | 260,855  |  
|                                                          |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Net unrealized gain on futures contracts purchased        |  | 1.75                                           | %  |  |                          | 304,086  |   |                                                | 3.22  | %  |                          |   | 648,476  |  
|                                                          |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Futures contracts sold:                                   |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Commodities                                               |  | (0.23                                          | )% |  |                          | (39,282  | ) |                                                | (0.62 | )% |                          |   | (125,504 | )
|Interest rates                                            |  | 0.47                                           | %  |  |                          | 81,332   |   |                                                | 0.06  | %  |                          |   | 10,961   |  
|Stock indices                                             |  | 0.00                                           | %  |  |                          | 0        |   |                                                | (0.01 | )% |                          |   | (1,050   | )
|                                                          |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Net unrealized gain (loss) on futures contracts sold      |  | 0.24                                           | %  |  |                          | 42,050   |   |                                                | (0.57 | )% |                          |   | (115,593 | )
|                                                          |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Net unrealized gain on futures contracts                  |  | 1.99                                           | %  |  | $                        | 346,136  |   |                                                | 2.65  | %  |                          | $ | 532,883  |  
|                                                          |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Forward contracts purchased:                              |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Net unrealized gain (loss) on forward contracts purchased |  | 1.66                                           | %  |  | $                        | 288,131  |   |                                                | (0.18 | )% |                          | $ | (36,981  | )
|                                                          |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Forward contracts sold:                                   |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Net unrealized gain (loss) on forward contracts sold      |  | 0.20                                           | %  |  | $                        | 33,987   |   |                                                | (0.29 | )% |                          | $ | (56,796  | )
|                                                          |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  
|Net unrealized gain (loss) on forward contracts           |  | 1.86                                           | %  |  | $                        | 322,118  |   |                                                | (0.47 | )% |                          | $ | (93,777  | )
|                                                          |  |                                                |    |  |                          |          |   |                                                |       |    |                          |   |          |  



See accompanying notes.



-3-



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DIVERSIFIED FUTURES TRUST I

STATEMENTS OF OPERATIONS

For the Three Months and Nine Months Ended
September 30, 2005 and 2004

(Unaudited)



|                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  
|-------------------------------------------------------------------- |  | -------------------------------- | -------- | - | ------------------------------- | - | ---------- | ---- |  | - | --------- | - |  | - | ---------- | -
|                                                                     |  | Three Months Ended September 30, |          |   | Nine Months Ended September 30, |  
|                                                                     |  | 2005                             |          |   | 2004                            |   |            | 2005 |  |   | 2004      |  
|REVENUES                                                             |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  
|Realized                                                             |  | $                                | 753,762  |   |                                 | $ | (1,261,560 | )    |  | $ | (126,510  | ) |  | $ | (1,527,501 | )
|Change in unrealized                                                 |  |                                  | (110,692 | ) |                                 |   | 1,627,911  |      |  |   | 229,148   |   |  |   | (604,896   | )
|Interest income                                                      |  |                                  | 154,470  |   |                                 |   | 62,863     |      |  |   | 402,162   |   |  |   | 179,804    |  
|                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  
|Total revenues                                                       |  |                                  | 797,540  |   |                                 |   | 429,214    |      |  |   | 504,800   |   |  |   | (1,952,593 | )
|                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  
|EXPENSES                                                             |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  
|Brokerage commissions                                                |  |                                  | 337,879  |   |                                 |   | 359,423    |      |  |   | 1,045,509 |   |  |   | 1,267,014  |  
|Management fees                                                      |  |                                  | 87,960   |   |                                 |   | 92,871     |      |  |   | 268,907   |   |  |   | 322,385    |  
|Incentive fees                                                       |  |                                  | 0        |   |                                 |   | 0          |      |  |   | 0         |   |  |   | 237,102    |  
|                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  
|Total expenses                                                       |  |                                  | 425,839  |   |                                 |   | 452,294    |      |  |   | 1,314,416 |   |  |   | 1,826,501  |  
|                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  
|NET INCOME (LOSS)                                                    |  | $                                | 371,701  |   |                                 | $ | (23,080    | )    |  | $ | (809,616  | ) |  | $ | (3,779,094 | )
|                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  
|NET INCOME (LOSS) PER WEIGHTED AVERAGE LIMITED AND GENERAL INTEREST  |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  
|Net income (loss) per weighted average limited and general interest  |  | $                                | 4.73     |   |                                 | $ | (0.26      | )    |  | $ | (9.88     | ) |  | $ | (41.49     | )
|                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  
|Weighted average number of limited and general interests outstanding |  |                                  | 78,503   |   |                                 |   | 88,481     |      |  |   | 81,913    |   |  |   | 91,079     |  
|                                                                     |  |                                  |          |   |                                 |   |            |      |  |   |           |   |  |   |            |  



See accompanying notes.



-4-



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DIVERSIFIED FUTURES TRUST I

STATEMENTS OF CHANGES IN TRUST CAPITAL

For the Nine Months Ended
September 30, 2005 and 2004

(Unaudited)



|                                                        |  |                                                  |            |   |                  |   |            |                   |  |   |                  |   |  |   |            |  
|------------------------------------------------------- |  | ------------------------------------------------ | ---------- | - | ---------------- | - | ---------- | ----------------- |  | - | ---------------- | - |  | - | ---------- | -
|                                                        |  | Interests                                        |            |   | LimitedInterests |   |            | GeneralInterests  |  |   | Total            |  
|Nine Months ended September 30, 2005                    |  |                                                  |            |   |                  |   |            |                   |  |   |                  |   |  |   |            |  
|Trust capital at December 31, 2004                      |  |                                                  | 84,844.684 |   |                  | $ | 19,956,434 |                   |  | $ | 206,754          |   |  | $ | 20,163,188 |  
|Net (loss) for the nine months ended September 30, 2005 |  |                                                  |            |   |                  |   | (801,691   | )                 |  |   | (7,925           | ) |  |   | (809,616   | )
|Redemptions                                             |  |                                                  | (8,867.777 | ) |                  |   | (1,972,725 | )                 |  |   | (17,140          | ) |  |   | (1,989,865 | )
|                                                        |  |                                                  |            |   |                  |   |            |                   |  |   |                  |   |  |   |            |  
|Trust capital at September 30, 2005                     |  |                                                  | 75,976.907 |   |                  | $ | 17,182,018 |                   |  | $ | 181,689          |   |  | $ | 17,363,707 |  
|                                                        |  |                                                  |            |   |                  |   |            |                   |  |   |                  |   |  |   |            |  
|Nine Months ended September 30, 2004                    |  |                                                  |            |   |                  |   |            |                   |  |   |                  |   |  |   |            |  
|Trust capital at December 31, 2003                      |  |                                                  | 92,961.991 |   |                  | $ | 23,521,958 |                   |  | $ | 237,691          |   |  | $ | 23,759,649 |  
|Net (loss) for the nine months ended September 30, 2004 |  |                                                  |            |   |                  |   | (3,741,305 | )                 |  |   | (37,789          | ) |  |   | (3,779,094 | )
|Redemptions                                             |  |                                                  | (5,968.152 | ) |                  |   | (1,322,409 | )                 |  |   | (13,442          | ) |  |   | (1,335,851 | )
|                                                        |  |                                                  |            |   |                  |   |            |                   |  |   |                  |   |  |   |            |  
|Trust capital at September 30, 2004                     |  |                                                  | 86,993.839 |   |                  | $ | 18,458,244 |                   |  | $ | 186,460          |   |  | $ | 18,644,704 |  
|                                                        |  |                                                  |            |   |                  |   |            |                   |  |   |                  |   |  |   |            |  
|                                                        | 
|                                                        |  | Net Asset Value per Limited and General Interest |           
|                                                        |  | September 30,2005                                |            |   | December 31,2004 |   |            | September 30,2004 |  |   | December 31,2003 |  
|                                                        |  | $                                                | 228.54     |   |                  | $ | 237.65     |                   |  | $ | 214.32           |   |  | $ | 255.58     |  
|                                                        |  |                                                  |            |   |                  |   |            |                   |  |   |                  |   |  |   |            |  



See accompanying notes.



-5-



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DIVERSIFIED FUTURES TRUST I

NOTES TO FINANCIAL STATEMENTS

(Unaudited)



Note 1. ORGANIZATION



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



The statement of financial condition, including the condensed schedule of investments, as of September 30, 2005, the statements of operations for the
three months and nine months ended September 30, 2005 and 2004, and the statements of changes in trust capital for the nine months ended September 30, 2005 and 2004 are unaudited. In the opinion of the Managing Owner, the financial
statements contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the financial position of Diversified Futures Trust I (the Trust) as of September 30, 2005 and the results of its
operations for the three months and nine months ended September 30, 2005 and 2004. However, 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, 2004.



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.



On July 1, 2003, Prudential Financial, Inc. (Prudential) and Wachovia Corp. (Wachovia) combined their separate retail
securities brokerage and clearing businesses under a new holding company named Wachovia/Prudential Financial Advisors, LLC (WPFA), owned 62% by Wachovia and 38% by Prudential. As a result, the retail brokerage operations of Prudential
Securities Incorporated (PSI) were contributed to Wachovia Securities, LLC (Wachovia Securities). Wachovia Securities is wholly-owned by WPFA and is a registered broker-dealer and a member of the National Association of
Securities Dealers, Inc. (NASD) and all major securities exchanges. The Trust and its Managing Owner, Prudential Securities Futures Management Inc., which was a wholly owned subsidiary of PSI, entered into a service agreement with
Wachovia Securities, effective July 1, 2003. Pursuant to this agreement, Wachovia Securities agreed to provide certain enumerated services to accounts of the limited interest owners carried at Wachovia.



-6-



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DIVERSIFIED FUTURES TRUST I

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)



|Note | 1. ORGANIZATION (CONTINUED)
|---- | ---------------------------



| | A. | General Description of the Trust (Continued)
| | -- | --------------------------------------------



Effective July 1, 2003, PSI changed its name to Prudential Equity Group, Inc. (PEG). PEG remained an indirectly wholly-owned subsidiary
of Prudential. PEG was a registered broker-dealer and a member of the NASD and all major securities exchanges and conducted the equity research, domestic and international equity sales and trading operations, and commodity brokerage and derivative
operations it had previously conducted as PSI until December 31, 2003. As part of the process of reorganizing its business structure, Prudential Securities Group, Inc. (PSG), the direct parent of PEG and a wholly-owned subsidiary of
Prudential, transferred the commodity brokerage, commodity clearing and derivative operations previously performed by PEG to another PSG indirect wholly-owned subsidiary, Prudential Financial Derivatives, LLC (PFD) effective
January 1, 2004. Like PEG, PFD is registered as a futures commission merchant under the Commodity Exchange Act and is a member of the National Futures Association. On April 1, 2004, PEG transferred the ownership of the Managing Owner and
PFD Holdings, LLC, the direct parent of PFD to PSG.



On
June 30, 2004, PSG and Preferred Investment Solutions Corp., formerly Kenmar Advisory Corp. (Preferred), entered into a Stock Purchase Agreement, pursuant to which PSG would sell, and Preferred would buy, all of the capital stock of
Prudential Securities Futures Management Inc. (the then current Managing Owner of the Trust) and another commodity pool operator owned by PSG. In connection with the transaction, Prudential Securities Futures Management Inc. solicited proxies
seeking approval from the Trusts Interest holders for (i) the sale of the stock of Prudential Securities Futures Management Inc. to Preferred; (ii) the concomitant approval of Preferred as the new Managing Owner of the Trust; and
(iii) the approval of certain amendments to the Declaration of the Trust and Trust Agreement of the Trust. A report on Form 8-K describing the transaction was filed with the Securities Exchange Commission on July 1, 2004 and the definitive
proxies were filed with the Securities and Exchange Commission on July 20, 2004.



As of October 1, 2004, Preferred acquired from PSG all of the outstanding stock of Prudential Securities Futures Management Inc. Immediately after such acquisition, Prudential Securities Futures Management Inc.
was merged with and into Preferred. Accordingly, as of October 1, 2004 all of the board of directors and officers of Prudential Securities Futures Management Inc. resigned. Following Preferreds acquisition of Prudential Securities Futures
Management Inc. and its merger with and into Preferred, Preferred became the successor Managing Owner of the Trust.



The term Managing Owner, as used herein, refers either to Prudential Securities Futures Management Inc. or Preferred, depending upon the applicable period
discussed.



Note 2. 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, PEG or its affiliates paid all the costs of these services as well as the Trusts routine operational, administrative, legal and auditing costs through September 30, 2004. Effective October 1, 2004,
Preferred began performing such services for the Trust with the exception of brokerage services. Preferred pays all of the costs of such services.



-7-



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DIVERSIFIED FUTURES TRUST I

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)



Note 2. RELATED PARTIES (CONTINUED)



The costs charged to the Trust for brokerage services for the nine months
ended September 30, 2005 and 2004 were $1,045,509 and $1,267,014, respectively, and for the three months ended September 30, 2005 and 2004 were $337,879 and $359,423, respectively.



The Trusts assets are maintained either in trading or cash accounts at
PFD, the Trusts commodity broker, or for margin purposes, with the various exchanges on which the Trust is permitted to trade. PFD credits the Trust monthly with 100% of the interest it earns on the average net assets in the Trusts
accounts.



The Trust, acting through its trading managers,
executes over-the-counter, spot, forward and/or option foreign exchange transactions with its broker. The broker then engages in back-to-back trading with an affiliate, Prudential-Bache Global Markets, Inc. (PBGM). PBGM attempts to earn
a profit on such transactions. PBGM keeps its prices on foreign currency competitive with other interbank currency trading desks. All over-the-counter currency transactions are conducted between the Trust and its broker pursuant to a line of credit.
The broker may require that collateral be posted against the marked-to-market position of the Trust.



Note 3. DERIVATIVE INSTRUMENTS AND ASSOCIATED RISKS



The Trust 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 Trust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 Trusts net assets being traded, significantly exceeds the Trusts future cash requirements since the Trust
intends to close out its open positions prior to settlement. As a result, the Trust is generally subject only to the risk of loss arising from the change in the value of the contracts. As such, the Trust 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 Trusts commitments to purchase commodities is limited to the gross or face amount of the contracts held. However, when the Trust
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 Trust 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 effects among the derivative instruments the Trust holds and the liquidity and inherent volatility of the markets in which the Trust trades.



-8-



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DIVERSIFIED FUTURES TRUST I

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)



Note 3. DERIVATIVE INSTRUMENTS AND ASSOCIATED RISKS (CONTINUED)



Credit Risk



When entering into futures or forward contracts, the Trust 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, clearinghouses are backed by their 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 Trust as the Trusts commodity broker is the sole counterparty. The Trust has entered into a master netting agreement with its 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; however, counterparty non-performance on only certain of the Trusts contracts may result in greater loss than non-performance on all of the Trusts contracts. The amount at risk associated
with counterparty non-performance of all of the Trusts contracts is the net unrealized gain included in the statements of financial condition. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its
obligations to the Trust.



The Managing Owner attempts to
minimize both credit and market risks by requiring the Trust and its trading managers to abide by various trading limitations and policies. The Managing Owner 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 Trust, the Managing Owner has the right, among others, to terminate each trading manager if the net asset value
allocated to the trading manager declines by 33-1/3% from the value at the beginning of any year or since the commencement of trading activities. Furthermore, the Amended and Restated Declaration of Trust and Trust Agreement provides that the Trust
will liquidate its positions, and eventually dissolve, if the Trust experiences a decline in the net asset value of 50% from the value at the beginning of any year or since the commencement of trading activities. In each case, the decline in net
asset value is after giving effect for distributions and redemptions. The Managing Owner may impose additional restrictions (through modifications of trading limitations and policies) upon the trading activities of the trading manager as it, in good
faith, deems to be in the best interests of the Trust.



The
Trusts futures commission merchant in accepting orders for the purchase or sale of domestic futures contracts, is required by Commodity Futures Trading Commission (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, 2005 and December 31, 2004, such segregated assets totaled $9,799,458 and
$13,404,536, 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 $7,242,131 and $7,522,604 at September 30,
2005 and December 31, 2004, respectively. There are no segregation requirements for assets related to forward trading.



As of September 30, 2005, substantially all of the Trusts open futures and forward contracts mature within one year.



-9-



---

DIVERSIFIED FUTURES TRUST I

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)



Note 4. 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, 2005 and 2004. This information has been derived from information presented in the financial statements.



|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|----------------------------------------------------------------------------------- |  | ------------------------------- | ------ | -- | ------------------------------ | - | ------ | ----------- |  | - | ----------- | -- |  | - | ------ | --
|                                                                                    |  | Three months endedSeptember 30, |        |    | Nine months endedSeptember 30, |  
|                                                                                    |  | 2005                            |        |    | 2004                           |   |        | 2005        |  |   | 2004        |   
|                                                                                    |  | (Unaudited)                     |        |    | (Unaudited)                    |   |        | (Unaudited) |  |   | (Unaudited) |   
|Per Interest Performance (for an interest outstanding throughout the entire period) |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net asset value per interest at beginning of period                                 |  | $                               | 223.80 |    |                                | $ | 214.58 |             |  | $ | 237.65      |    |  | $ | 255.58 |   
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net realized and change in net unrealized gain (loss) on commodity transactions(1)  |  |                                 | 8.19   |    |                                |   | 4.14   |             |  |   | 2.03        |    |  |   | (23.27 | ) 
|Interest income(1)                                                                  |  |                                 | 1.97   |    |                                |   | 0.71   |             |  |   | 4.91        |    |  |   | 1.98   |   
|Expenses(1)                                                                         |  |                                 | (5.42  | )  |                                |   | (5.11  | )           |  |   | (16.05      | )  |  |   | (19.97 | ) 
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net increase (decrease) for the period                                              |  |                                 | 4.74   |    |                                |   | (0.26  | )           |  |   | (9.11       | )  |  |   | (41.26 | ) 
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net asset value per interest at end of period                                       |  | $                               | 228.54 |    |                                | $ | 214.32 |             |  | $ | 228.54      |    |  | $ | 214.32 |   
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Total Return(3)                                                                     |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Total return before incentive fees                                                  |  |                                 | 2.12   | %  |                                |   | (0.12  | )%          |  |   | (3.83       | )% |  |   | (15.04 | )%
|Incentive fees                                                                      |  |                                 | 0.00   | %  |                                |   | 0.00   | %           |  |   | 0.00        | %  |  |   | (1.10  | )%
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Total return after incentive fees                                                   |  |                                 | 2.12   | %  |                                |   | (0.12  | )%          |  |   | (3.83       | )% |  |   | (16.14 | )%
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Supplemental Data                                                                   |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Ratios to average net asset value:                                                  |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net investment loss before incentive fees(2), (4)                                   |  |                                 | (6.22  | )% |                                |   | (8.35  | )%          |  |   | (6.76       | )% |  |   | (8.74  | )%
|Incentive fees(3)                                                                   |  |                                 | 0.00   | %  |                                |   | 0.00   | %           |  |   | 0.00        | %  |  |   | (1.10  | )%
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Net investment loss after incentive fees                                            |  |                                 | (6.22  | )% |                                |   | (8.35  | )%          |  |   | (6.76       | )% |  |   | (9.84  | )%
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Interest income(4)                                                                  |  |                                 | 3.55   | %  |                                |   | 1.35   | %           |  |   | 2.98        | %  |  |   | 1.11   | % 
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Incentive fees(3)                                                                   |  |                                 | 0.00   | %  |                                |   | 0.00   | %           |  |   | 0.00        | %  |  |   | 1.10   | % 
|Other expenses(4)                                                                   |  |                                 | 9.77   | %  |                                |   | 9.70   | %           |  |   | 9.74        | %  |  |   | 9.85   | % 
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   
|Total net expenses                                                                  |  |                                 | 9.77   | %  |                                |   | 9.70   | %           |  |   | 9.74        | %  |  |   | 10.95  | % 
|                                                                                    |  |                                 |        |    |                                |   |        |             |  |   |             |    |  |   |        |   



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 gain (loss) 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.
|--- | -----------



-10-



---

DIVERSIFIED FUTURES TRUST I

(a Delaware Business Trust)



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERAITONS



Critical Accounting Policies



This Report includes forward-looking statements that reflect the Managing Owners current expectations about the future results, performance, prospects and
opportunities of the Trust. 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 the Trusts actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these
forward-looking statements.



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, as well as the use of estimates. The Trusts application of
these policies involves judgments and actual results may differ from the estimates used.



The Managing Owner has evaluated the nature and types of estimates that it makes in preparing the Trusts financial statements and related disclosures and has determined that the valuation of its investments
which are not traded on a United States or Internationally recognized futures exchange involves a critical accounting policy. The market values of futures (exchange traded) contracts is verified by the administrator who obtains valuation data from
third party data providers such as Bloomberg and Reuters and compares those prices with the Trusts 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 3 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 Interest holders.



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



Liquidity and Capital Resources



The Trust commenced
operations on January 5, 1995 with gross proceeds of $25,262,800 allocated to commodities trading. The Trust continued to offer interests on a monthly basis until the continuous offering period ended on August 31, 1996, resulting in
additional gross proceeds to the Trust of $41,129,100.



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. Redemptions of Limited Interests and General Interests for the nine months ended September 30,
2005 were $1,972,725 and $17,140, respectively, and for the three months ended September 30, 2005 were $560,146 and $17,140, respectively. Redemptions of Limited Interests and General Interests from the commencement of operations,
January 5, 1995, to September 30, 2005 totaled $82,732,790 and $697,941, respectively. Future redemptions will impact the amount of funds available for investment in commodity contracts in subsequent periods.



At September 30, 2005, 100% of the Trusts net assets were allocated to commodities
trading. A significant portion of the net assets were held in cash which was used as margin for the Trusts trading in commodities. Inasmuch as the sole business of the Trust is to trade in commodities, the Trust continues to own such liquid
assets to be used as margin. The broker credits the Trust monthly with 100% of the interest it earns on the average net assets in these accounts.



The commodities contracts are 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 Trust from promptly liquidating its commodity futures positions.



Since the Trusts business is to trade futures and forward contracts, 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). The Trust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 the Trusts speculative trading, as
well as the development of drastic market occurrences could result in monthly losses considerably beyond the Trusts experience to date and could ultimately lead to a loss of all or substantially all of investors capital. The Managing
Owner attempts to minimize these risks by requiring the Trust and its trading manager 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. See Note 3 to the financial statements for a further discussion of the credit and market risks associated with the Trusts futures and forward contracts.



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



---

Off-Balance Sheet Arrangements and Contractual Obligations



As of September 30, 2005, the Trust has 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 undertake in performing services which are in the best interests of the Trust. While the Trusts exposure under such indemnification provisions can not be estimated, these general business
indemnifications are not expected to have a material impact on the Trusts financial position.



The Trusts contractual obligations are with the Managing Owner, each Trading Manager and its commodity broker. Payments made under the Trusts agreement with each Trading Manager are at a fixed rate,
calculated as a percentage of the Trusts New High Net Trading Profits. Management fee payments made to the Trading Managers and fees paid to the Managing Owner are calculated as a fixed percentage of the Trusts Net Asset
Values (NAVs). As such, the Managing Owner cannot anticipate the amount of payments that will be required under these agreements for future periods as NAVs are not known until a future date. Commission payments to the commodity broker
are based on a cost per executed trade and, as such, the Managing Owner cannot anticipate the amount of payments that will be required under the brokerage agreement for future periods, 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 for various reasons. For a further discussion on these
payments, see Notes 1 & 3 of the Registrants 2004 Annual Report.



Results of Operations



The net asset value per interest as of
September 30, 2005 was $228.54, a decrease of 3.83% from the December 31, 2004 net asset value per interest of $237.65, and an increase of 2.12% from the June 30, 2005 net asset value per interest of $223.80. Past performance is not
necessarily indicative of future results.



The Trusts trading gains
(losses) before commissions were $643,000 and $103,000 during the three months and nine months ended September 30, 2005, respectively, compared to trading gain of $366,000 and trading loss of $2,132,000 for the corresponding periods in the
prior year. Due to the nature of the Trusts trading activities, a period to period comparison of its trading results is not meaningful. However, a detailed discussion of the Trusts current quarter trading results is presented below.



Past performance is not indicative of future results.

As a result, any recent increases in realized or unrealized trading gains

may have no bearing on any results that may be obtained in the future.



Quarterly Market Overview



The U.S. economy had a reasonably positive third quarter, despite higher petroleum and natural gas prices and two major hurricanes at quarters end that caused
significant damage in New Orleans and the Gulf Coast region. A strong U.S. dollar was an evident factor throughout the third quarter. The final report on the second quarter Gross Domestic Product (GDP), released at the end of September,
showed the U.S. economy growing at a 3.3% annual rate. Consumer spending and a large trade deficit were major contributors to the final second quarter number. For the third quarter, the forecasts are mostly running around an annual rate of 3.5%,
notwithstanding $3 per gallon gasoline and rising natural gas prices that are expected to cause higher home heating bills.



The Federal Reserve (Fed) increased its emphasis on inflation throughout the third quarter, as evidenced not only by the Federal Open Market Committee
(FOMC) minutes, but also by speeches from Chairman Greenspan and a number of Fed members. The FOMC continued to raise rates during the third quarter, ignoring pleas from politicians and economists to pause after the hurricanes. In
addition, the statement from the September 20meeting made it appear that the FOMC may continue raising rates.
Treasury yields have been slow to reflect this but the 10-year note ended the third quarter at 4.25%, up from 3.94% at June 30. The yield curve has been flattening almost all year and the spread between the 2 and 10-year notes was 14 to 15
points at the end of September, slightly above the 4 year low of 12 points.



Third quarter economic data included steady housing numbers and decent employment figures. However, consumer confidence was clearly shaken by gas prices and the hurricanes. In particular, the September University of Michigan Sentiment Index
disappointed economists with a decline to 76.9 from 89.1 in August and 96.7 in July. Among other reports, personal income and spending ended the quarter on a weak note and the nations savings rate fell to a record low of minus 0.7%.



The major European and Asian economies were reasonably strong this quarter,
despite high energy prices. In Europe, the European Central Bank (ECB) left rates unchanged during the quarter, extending the existing 2% rate. While there was periodic speculation that it was leaning toward higher rates, and ECB
President Claude Trichet stepped up his inflation rhetoric, the ECB continues to maintain the same rate that has existed since November 2003 with little prospect of any change this year. While the Bank of England lowered its base rate by 25 points
at its August 4meeting, that is considered a one-time event as recent U.K. data does not indicate any
additional moves in the near future.



---

A significant event in Europe during the third quarter was the German elections, which ended in a virtual tie between
Gerhard Schroeder and Angela Merkel. This created a great deal of uncertainty and lessened prospects of any imminent economic reform. At the end of September, the situation was still unresolved but appeared to be moving toward a coalition solution,
a result that may limit reform potential.



In the third quarter, the
Organization of Economic Cooperation and Development (OECD) increased its GDP forecasts for France and Italy but lowered them for Germany and the U.K. France was increased to 1.6% from 1.4% and Italy was increased to a positive 0.2% from
a negative 0.6%. Germany was downgraded to 1.0% from 1.2% and the U.K. was decreased to 1.9% from 2.4%. The August unemployment rate for Germany was unchanged at 11.6% while Frances unemployment rate edged below 10% for the first time in 2
years.



In Asia, the reelection of reform-minded Prime Minister Koizumi was
received favorably, leading to a rally in the Nikkei to 13,678, a level not seen since May 2001. Japans economic data also pointed to growth, including strong consumer sector numbers. Despite a period of increasing oil prices, August
industrial production grew at a 1.2% pace, extending the recent positive trend. The OECD raised its 2005 GDP projection for Japan to 1.8% from 1.5%. Meanwhile, China, Korea and India continue to see strong economic expansion while inflationary
pressures appear to be under reasonable control.



Currencies: The U.S.
dollar had a strong September and a solid third quarter against the euro, Japanese yen and British pound. In late September, the Peoples Republic of China central bank widened the yuans trading band against the Japanese yen, euro and
Hong Kong dollar to 3.0% from 1.5%. The U.S. dollar remained at 0.3%. China described the move as necessary to curb speculation that could be harmful to the yuan.



The Bank of Canada raised its overnight interest rate by 25 basis points to 2.75% on September 7th. The accompanying statement was unclear as to whether further rate hikes were likely. The Canadian dollar ended September at 86.03 cents to the U.S.
dollar compared to 83.66 cents to the U.S. dollar at the end of the second quarter. In other currencies, the Australian dollar ended the quarter at 76.27 cents to the U.S. dollar and the South African rand was at 6.37 rand to the U.S. dollar.



Energies: Natural gas prices hit record highs in September increasing
80% for the quarter. Hurricanes Katrina and Rita were the primary reasons for the increase. Repairing the vast damage to natural gas facilities in the Gulf (including rigs, pipelines and processing facilities) is taking far longer than expected. It
is expected that it will be weeks before facilities are near normal and months before they are fully operational.



As to the petroleum sector, the third quarter also saw higher prices, albeit less than natural gas. Crude rose 13%, heating oil increased 23% and unleaded petroleum rose
44% in the third quarter. At the end of the quarter, the U.S. Minerals Management Service estimated that 97.8% of daily oil production in the Gulf was still offline. As with natural gas, repairs are taking considerably longer than originally
anticipated. President Bush announced two releases from the strategic petroleum reserve and OPEC increased quotas by 500,000 barrels; however, given refinery capacity problems, these actions had minimal impact.



Grains: The corn market saw a continuation of the downward movement that began in July
and continued throughout the months of August and September as each months respective USDA Supply/Demand Report confirmed the existence of a strong U.S. crop. Also, Hurricanes Katrina and Rita and the accompanying 300-mile wide band of rain
proved more beneficial to the crop, in the form of irrigation, than the damage done by the 30 mile wide band of destructive winds. Soybeans followed much the same pattern as corn in the third quarter. The wheat market saw a commensurate pricing
pattern develop during the third quarter.



Indices: The Dow Jones
Industrial Average (DJIA), the NASDAQ and the S&P 500 indices each ended September higher, notwithstanding two major hurricanes and sharply higher gasoline and natural gas prices. For the DJIA, it was its first September gain in
seven years.



Foreign markets outperformed the U.S. in almost all cases. The
Nikkei ended the quarter at 13,678, a level not seen since May 2001, despite a period of higher oil prices. Stocks may have also benefited from a weaker yen, which encourages exports.



Other regional markets ended the quarter higher. Koreas Kospi, which is attracting global investor attention, rose to record levels.
Natural resource equities helped the Australian All Ordinary Index.



European
markets were strong throughout September in part because of a number of announced merger and acquisition deals, and the U.S. dollar rally. Technology, energy and mining issues were leading performers. European companies have been able to increase
profits despite lackluster, albeit slightly improved, economic growth, high oil prices and concerns surrounding the U.S. economy.



Interest Rates:In the third quarter, U.S. Treasuries turned in their weakest quarter since the second quarter of 2004. The pattern of a flattening yield curve,
prevalent for most of the quarter, was extended in September as the spread between the 10-year note and the 2-year narrowed to 14 points, just off the 4 year low of 12 basis points. Many fixed income experts view an inverted curve as inevitable. The
Fed continued to raise rates, and numerous speeches from various Fed governors made it clear that the FOMC was not finished.



---

In Europe, the ECB held rates at 2.0%, a level that has stayed constant since November 2003. After cutting rates 25 basis
points at its August 4 meeting, the Bank of England took no action in September, and recent economic data seems to indicate no further change this year. While the Bank of Canada followed the U.S. by raising rates 25 basis points, the Reserve
Bank of Australia made no move. U.S. securities continue to benefit from a distinct yield advantage over most of their major competitors, including 115 basis points over the German Bund, the highest in 5 years. Foreign demand for U.S. Treasuries
remains strong among central banks and private investors in Europe, Asia and the Middle East.



Metals: The third quarter, but especially September, was strong for precious metals, particularly gold. The gold rally occurred during a period of significant U.S. dollar strength. Increasing oil prices aroused
inflation concerns and gold prices indicate growing underlying inflation pressures, similar to concerns expressed by the FOMC. The September hurricanes and their potential inflationary implications and ongoing concerns regarding the Middle East
added to golds performance.



Copper turned in a strong third quarter as
well and is now up 33.6% year-to-date thru September 30 within the Dow Jones AIG Index. Aluminum followed the lead of copper at times, albeit in a far less buoyant pattern, although it weakened somewhat toward the end of the quarter. Nickel saw
rising warehouse stocks as it lost 9.1% in September and 6.02% for the third quarter. Zinc was 13.46% higher in the third quarter.



Softs: The third quarter was difficult for the cocoa market. The situation in the Ivory Coast is relatively unchanged from what it was earlier in the year. Ivorian
President Gbagbo confirmed that elections would not be held on October 30 as previously scheduled. The situation is likely to remain in chaos for weeks and there is potential for renewed violence. Given that the peak harvest season is
approaching, uncertainty remains.



The coffee market experienced high
volatility following Hurricane Katrina. There was a growing concern for coffee beans stored in New Orleans, which amounted to approximately 25% of total stocks in the U.S. The level of damage remains unknown but a clearer picture will develop by mid
October. Brazils output has proven disappointing and thus a sharp decline also seems improbable.



Sugar prices increased in the third quarter, bringing its 2005 gain to 24%. Sugar is benefiting from strong overall demand, including that related to ethanol production. The latest figures from India, the worlds
number one consumer, indicate domestic demand exceeding production for the third consecutive year as that nations standard of living improves. Brazil is exporting less sugar, instead diverting it to ethanol production. On the negative side,
the European Union has been unloading large tonnage in recent weeks which might serve to temper the market.



The month of September saw a reversal for cotton prices in the third quarter. Sellers backed away from the market as a result of the fears of, and actual damage to the crop, at the hands of hurricanes Katrina and
Rita.



Quarterly Trust Performance



The following is a summary of performance for the major
sectors in which the Trust traded:



Currencies (-): Escalating energy prices,
strong demand for U.S. securities and concerns over a general slowing of the global economy affected the currency markets during the quarter. The Trust experienced net losses due to negative performance in August where the largest losses were in
short Japanese yen, euro and New Zealand dollar positions.



Energies (+):
Concerns over refining capacity as well as the lack of supply for increasing global demand were elevated to new heights in the wake of Hurricane Katrina. Record highs were experienced in both crude oil and natural gas during the quarter, and gains
were achieved on long positions in both.



Grains (-): The possibility of a
drought and limited supply turned into an abundant crop after the rains associated with the hurricanes Katrina and Rita provided ample irrigation. Long positions in soybean meal and short positions in wheat were losers.



Indices (+): The major equity indices in Western Europe, Japan and Australia were strong
throughout the quarter. The Trusts largest gains were achieved through long positions in the Nikkei, the TOPIX and the Dow Jones STOXX 50.



Interest Rates (-): Short-term volatility increased as global bond markets reacted to news on economic growth and central bank monetary policy activity. The Trusts
losses were attributable to long positions in the Japanese Government Bond, and the U.S. Treasury Note and Bond.



Metals (+): Concerns over inflation and a possible slowing global economy drove gold prices to a new 17 year high in September. Gains were made on long positions in gold
and copper.



Softs (+): The sector experienced a positive return for the
quarter. Long positions in sugar and short positions in coffee were responsible for the positive return.



---

SAFE HARBOR STATEMENT. The discussion above contains certain forward-looking statements (as such term is defined
in the rules promulgated under the Securities Exchange Act of 1934, as amended) that are based on the beliefs of the Trust, as well as assumptions made by, and information currently available to, the Trust. A number of important factors should cause
the Trusts actual results, performance or achievements for 2005 and beyond to differ materially from the results, performance or achievements expressed in, or implied by, such forward-looking statements. These factors include, without
limitation, the factors described above.



Interest income is earned on the cash
balances held at the broker and, therefore, varies monthly according to interest rates, as well as the effect of trading performance, and redemptions on the level of interest-bearing funds. Interest income increased by $92,000 and $222,000 for the
three months and nine months ended September 30, 2005 as compared to the corresponding periods in 2004, respectively, primarily due to higher interest rates during 2005 versus 2004.



Commissions are calculated on the Trusts net asset value at the beginning of each month and, therefore, vary monthly according to
trading performance and redemptions. Commissions decreased by $22,000 and $222,000 for the three months and nine months ended September 30, 2005 as compared to the corresponding periods in 2004. These decreases were primarily due to decrease in
average net asset levels during 2005, as a result of redemptions and net losses.



Management fees are calculated on the Trusts net asset value at the end of each month and, therefore, are affected by trading performance and redemptions. Management fees for the three months and nine months ended September 30,
2005 decreased $5,000 and $53,000, respectively, compared to the corresponding periods in 2004 primarily due to decrease in average net asset levels during 2005, as a result of redemptions and net losses.



Incentive fees are based on the New High Net Trading Profits generated by the Trading
Managers, as defined in the Advisory Agreements among the Trust, the Managing Owner and the Trading Managers. Incentive fees for the nine months ended September 30, 2004 were $237,000. No incentive fees were incurred during the three months
ended September 30, 2005 and 2004 and the nine months ended September 30, 2005.



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



As of the end of the period covered by this report, the Managing Owner carried out an
evaluation, under the supervision and with the participation of the officers of the Managing Owner, including the Managing Owners co-chief executive officer, chief financial officer and the director of fund administration, of the effectiveness
of the design and operation of the Trusts disclosure controls and procedures. Based upon that evaluation, the Managing Owners co-chief executive officer, chief financial officer and the director of fund administration concluded that the
Trusts disclosure controls and procedures are effective.



In designing
and evaluating the Trusts disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act), the Managing Owner recognized that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurances of achieving the desired control objectives, as ours are designed to do, and the Managing Owner necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures. We believe that our disclosure controls and procedures provide such reasonable assurance.



There have not been any changes in our internal controls over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) during the fiscal quarter to which
this report relates that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



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PART II. OTHER INFORMATION



|        |  |                                                                                                                                                                                                                         
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 1. |  | Legal Proceedings  There are no material legal proceedings pending by or against the Registrant or the Managing Owner or to which the Registrant or Managing Owner was a party during the
period covered by this report
|        | 
|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:                                                                                                                                                                                                               



|            |  |                                                                                                                                                                                                                                           
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 and 4.1 |  | Second Amended and Restated Agreement of Limited Partnership of the Registrant, dated as of October 1, 2004 (incorporated by reference to Exhibit 4.1 to the Registrants Annual
Report on Form 10-K for the year ended December 31, 2004)
|            | 
|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)                                                                                                                                                           
|            | 
|31.3        |  | 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 (furnished 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 (furnished herewith)                                                                                                
|            | 
|32.3        |  | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)                                                                                                



---



SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                            |  |                                      |  |                                                    |  |                        
|--------------------------- |  | ------------------------------------ |  | -------------------------------------------------- |  | -----------------------
|DIVERSIFIED FUTURES TRUST I |  |                                     
|                            |  |                                     
|By:                         |  | Preferred Investment Solutions Corp. |  |                                                   
|                            |  | Managing Owner                       |  |                                                   
|                            |  |                                      | 
|                            |  | By:                                  |  | /s/ Kenneth A. Shewer                              |  | Date: November 14, 2005
|                            |  |                                      |  | Kenneth A. Shewer                                  |  |                        
|                            |  |                                      |  | Co-Chief Executive Officer                         |  |                        
|                            |  |                                      | 
|                            |  | By:                                  |  | /s/ Maureen D. Howley                              |  | Date: November 14, 2005
|                            |  |                                      |  | Maureen D. Howley                                  |  |                        
|                            |  |                                      |  | Senior Vice President and Chief Financial Officer  |  |                        
|                            |  |                                      | 
|                            |  | By:                                  |  | /s/ David K. Spohr                                 |  | Date: November 14, 2005
|                            |  |                                      |  | David K. Spohr                                     |  |                        
|                            |  |                                      |  | Vice President and Director of Fund Administration |  |