<PAGE>

                                                         2000
------------------------------------------------------------------------------
Diversified Futures Trust I                              Annual
                                                         Report
 
<PAGE>
<PAGE>

                          DIVERSIFIED FUTURES TRUST I

 Letter to Limited Owners

                                       1

<PAGE>

PricewaterhouseCoopers (LOGO)

                                              PricewaterhouseCoopers LLP
                                              1177 Avenue of the Americas
                                              New York, NY 10036
                                              Telephone (212) 596 8000
                                              Facsimile (212) 596 8910

                       Report of Independent Accountants

To the Managing Owner and
Limited Owners of
Diversified Futures Trust I

In our opinion, the accompanying statements of financial condition and the
related statements of operations and changes in trust capital present fairly, in
all material respects, the financial position of Diversified Futures Trust I at
December 31, 2000 and 1999, and the results of its operations for each of the
three years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Managing Owner; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by the Managing Owner, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion.

/s/ PricewaterhouseCoopers LLP

January 26, 2001

                                       2

<PAGE>

                          DIVERSIFIED FUTURES TRUST I
                          (a Delaware Business Trust)
                       STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                                               December 31,
                                                                      -------------------------------
                                                                          2000              1999
<S>                                                                   <C>               <C>
-----------------------------------------------------------------------------------------------------
ASSETS
Cash                                                                   $26,730,111      $  43,317,270
Net unrealized gain on open futures contracts                            4,674,695          1,417,732
Net unrealized gain on open forward contracts                              870,491             49,621
                                                                      -------------     -------------
Net equity                                                              32,275,297         44,784,623
Other receivable                                                             7,523              8,209
                                                                      -------------     -------------
Total assets                                                           $32,282,820      $  44,792,832
                                                                      -------------     -------------
                                                                      -------------     -------------
LIABILITIES AND TRUST CAPITAL
Liabilities
Redemptions payable                                                    $ 2,980,451      $   4,079,581
Management fees payable                                                     53,805            149,309
                                                                      -------------     -------------
Total liabilities                                                        3,034,256          4,228,890
                                                                      -------------     -------------
Commitments

Trust capital
Limited interests (151,627.034 and 231,028.868 interests
outstanding)                                                            28,956,000         40,158,237
General interests (1,532 and 2,334 interests outstanding)                  292,564            405,705
                                                                      -------------     -------------
Total trust capital                                                     29,248,564         40,563,942
                                                                      -------------     -------------
Total liabilities and trust capital                                    $32,282,820      $  44,792,832
                                                                      -------------     -------------
                                                                      -------------     -------------

Net asset value per limited and general interests ('Interests')        $    190.97      $      173.82
                                                                      -------------     -------------
                                                                      -------------     -------------
-----------------------------------------------------------------------------------------------------
<CAPTION>
                  The accompanying notes are an integral part of these statements.
</TABLE>

                                       3

<PAGE>

                          DIVERSIFIED FUTURES TRUST I
                          (a Delaware Business Trust)
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                           ----------------------------------------
                                                              2000           1999           1998
---------------------------------------------------------------------------------------------------
<S>                                                        <C>            <C>            <C>
REVENUES
Net realized gain (loss) on commodity transactions         $(1,013,488)   $ 1,647,081    $4,475,810
Change in net unrealized gain/loss on open commodity
  positions                                                  4,077,833     (4,729,859)    1,750,186
Interest income                                              1,954,128      2,663,074     3,303,182
                                                           -----------    -----------    ----------
                                                             5,018,473       (419,704)    9,529,178
                                                           -----------    -----------    ----------
EXPENSES
Commissions                                                  2,440,604      4,181,083     4,666,065
Management fees                                              1,128,866      2,142,642     2,424,509
Incentive fees                                                 --             252,445        97,868
                                                           -----------    -----------    ----------
                                                             3,569,470      6,576,170     7,188,442
                                                           -----------    -----------    ----------
Net income (loss)                                          $ 1,449,003    $(6,995,874)   $2,340,736
                                                           -----------    -----------    ----------
                                                           -----------    -----------    ----------
ALLOCATION OF NET INCOME (LOSS)
Limited interests                                          $ 1,434,508    $(6,925,889)   $2,317,331
                                                           -----------    -----------    ----------
                                                           -----------    -----------    ----------
General interests                                          $    14,495    $   (69,985)   $   23,405
                                                           -----------    -----------    ----------
                                                           -----------    -----------    ----------
NET INCOME (LOSS) PER WEIGHTED AVERAGE LIMITED AND
GENERAL INTEREST
Net income (loss) per weighted average limited and
  general interest                                         $      7.27    $    (25.53)   $     7.09
                                                           -----------    -----------    ----------
                                                           -----------    -----------    ----------
Weighted average number of limited and general interests
  outstanding                                                  199,216        274,040       330,196
                                                           -----------    -----------    ----------
                                                           -----------    -----------    ----------

<CAPTION>
---------------------------------------------------------------------------------------------------
</TABLE>

                     STATEMENTS OF CHANGES IN TRUST CAPITAL
<TABLE>
<CAPTION>
                                                              LIMITED        GENERAL
                                             INTERESTS       INTERESTS      INTERESTS        TOTAL
-----------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>             <C>           <C>
Trust capital--December 31, 1997            352,174.217     $66,836,959     $675,170      $67,512,129
Net income                                                    2,317,331       23,405        2,340,736
Redemptions                                 (58,816.593)    (10,805,756)    (109,110 )    (10,914,866)
                                            -----------     -----------     ---------     -----------
Trust capital--December 31, 1998            293,357.624      58,348,534      589,465       58,937,999
Net loss                                                     (6,925,889)     (69,985 )     (6,995,874)
Redemptions                                 (59,994.756)    (11,264,408)    (113,775 )    (11,378,183)
                                            -----------     -----------     ---------     -----------
Trust capital--December 31, 1999            233,362.868      40,158,237      405,705       40,563,942
Net income                                                    1,434,508       14,495        1,449,003
Redemptions                                 (80,203.834)    (12,636,745)    (127,636 )    (12,764,381)
                                            -----------     -----------     ---------     -----------
Trust capital--December 31, 2000            153,159.034     $28,956,000     $292,564      $29,248,564
                                            -----------     -----------     ---------     -----------
                                            -----------     -----------     ---------     -----------
<CAPTION>
-----------------------------------------------------------------------------------------------------
                  The accompanying notes are an integral part of these statements.
</TABLE>

                                       4

<PAGE>
                          DIVERSIFIED FUTURES TRUST I
                          (a Delaware Business Trust)
                         NOTES TO FINANCIAL STATEMENTS

A. General

   Diversified Futures Trust I (the 'Trust') was organized under the Delaware
Business Trust Act on May 18, 1994 and will continue until December 31, 2014
unless terminated sooner under the provisions of the 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. The managing owner
of the Trust is Prudential Securities Futures Management Inc. (the 'Managing
Owner'), a wholly owned subsidiary of Prudential Securities Incorporated
('PSI'), which, in turn, is a wholly owned subsidiary of Prudential Securities
Group Inc. ('PSGI'). PSI was the principal underwriter for the Trust and is its
commodity broker. 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.

   On January 5, 1995, the Trust completed its initial offering having raised
$25,262,800 from the sale of 249,628 limited interests ('Limited Interests') and
3,000 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. Additional contributions raised during the continuous offering
period resulted in additional proceeds to the Trust of $41,129,100 from the sale
of 299,640 Limited Interests and 1,628 General Interests. General Interests were
sold exclusively to the managing owner.

   All trading decisions are made for the Trust by John W. Henry & Company, Inc.
(the 'Trading Manager'), an independent commodity trading manager. The Trading
Manager trades the Trust's assets pursuant to four of its trading programs: the
Financial and Metals Portfolio; the Global Financial Portfolio; the Original
Investment Program; and the G-7 Currency Portfolio. The Managing Owner retains
the authority to override trading instructions that violate the Trust's trading
policies.

B. Summary of Significant Accounting Policies

Basis of accounting

   The financial statements of the Trust are prepared in accordance with
accounting principles generally accepted in the United States of America.

   Commodity futures and forward transactions are reflected in the accompanying
statements of financial condition on trade date. The difference between the
original contract amount and market value is reflected as net unrealized gain or
loss. The market value of each contract is based upon the closing quotation on
the exchange, clearing firm or bank on, or through, which the contract is
traded.

   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 year 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 No. 102, 'Statement of Cash
Flows--Exemption of Certain Enterprises and Classification of Cash Flows from
Certain Securities Acquired for Resale.'

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.

                                       5

<PAGE>

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 based 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. No distributions have been
made since inception.

   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.

New Accounting Guidance

   In June 2000, the Financial Accounting Standards Board ('FASB') issued
Statement No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities--an amendment of FASB Statement No. 133 ('SFAS 138'), which
became effective for the Trust on July 1, 2000. SFAS 138 amends the accounting
and reporting standards of FASB Statement No. 133 for certain derivative
instruments and certain hedging activities. SFAS 138 has not had a material
effect on the carrying value of assets and liabilities within the financial
statements.

C. Fees

Organizational and general and administrative costs

   PSI or its affiliates paid the costs of organizing the Trust and offering its
Interests and pay the routine operational, administrative, legal and auditing
expenses of the Trust.

Management and incentive fees

   The Trust pays the Trading Manager a monthly management fee and quarterly
incentive fee. Effective on October 1, 2000, the Advisory Agreement among the
Trust, the Managing Owner and the Trading Manager was amended (the 'Amended
Advisory Agreement'). The Amended Advisory Agreement reduced the monthly
management fee paid to the Trading Manager from 1/3 of 1% (a 4% annual rate) of
the Trust's NAV as of the end of each month to 1/6 of 1% (a 2% annual rate).
Additionally, if the Trading Manager achieves 'New High Net Trading Profits' (as
defined in the Amended Advisory Agreement), the Trading Manager will earn a 20%
incentive fee as compared to a 15% incentive fee previously paid.

Commissions

   The Managing Owner, on behalf of the Trust, entered into an agreement with
PSI as commodity broker whereby the Trust pays a fixed monthly fee for brokerage
services rendered. The monthly fee equals .64583 of 1% (7.75% per annum) of the
Trust's NAV as of the first day of each month. From this fee, PSI pays all of
the Trust's execution (including floor brokerage expenses and NFA, clearing and
exchange fees) and account maintenance costs.

D. Related Parties

   The Managing Owner and its affiliates perform services for the Trust which
include, but are not limited to: brokerage services; accounting and financial
management; registrar, transfer and assignment functions; investor
communications; printing and other administrative services. Except for costs
related to brokerage services, PSI or its affiliates pay the costs of these
services as well as the Trust's routine operational, administrative, legal and
auditing costs.

   The costs charged to the Trust for brokerage services for the years ended
December 31, 2000, 1999 and 1998 were $2,440,604, $4,181,083 and $4,666,065,
respectively.

   The Trust's assets are maintained either in trading or cash accounts at PSI,
the Trust's commodity broker, or for margin purposes, with the various exchanges
on which the Trust is permitted to trade. PSI 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 Manager, executes over-the-counter,
spot, forward and/or option foreign exchange transactions with PSI. PSI 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

                                       6

<PAGE>

keeps its prices on foreign currency competitive with other interbank currency
trading desks. All over-the-counter currency transactions are conducted between
PSI and the Trust pursuant to a line of credit. PSI may require that collateral
be posted against the marked-to-market positions of the Trust.

   As of December 31, 2000, a non-U.S. affiliate of the Managing Owner owns
578.511 Limited Interests of the Trust.

E. Income Taxes

   There have been no differences between the tax basis and book basis of
Interest holders' capital since inception of the Trust.

F. 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 (including foreign exchange transactions)
contracts 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. 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.

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 in the United States and on most
foreign futures exchanges is the clearinghouse associated with such exchanges.
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, the sole counterparty to the Trust's
forward transactions is PSI, the Trust's commodity broker. The Trust has entered
into a master netting agreement with PSI and, as a result, 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 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 Manager 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 Amended Advisory Agreement among the Trust, the
Managing Owner and the Trading Manager, the Trust

                                       7

<PAGE>

shall automatically terminate the Trading Manager if the NAV 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 NAV of 50% from the value at the beginning of any year or since
the commencement of trading activities. In each case, the decline in NAV 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.

   PSI, when acting as 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 other assets
of PSI. At December 31, 2000, such segregated assets totalled $23,255,703. Part
30.7 of the CFTC regulations also requires PSI to secure assets of the Trust
related to foreign futures trading which totalled $8,149,103 at December 31,
2000. There are no segregation requirements for assets related to forward
trading.

   As of December 31, 2000, the Trust's open futures and forward contracts
mature within one year.

   At December 31, 2000 and 1999, the fair value of open futures and forward
contracts was:

<TABLE>
<CAPTION>
                                            2000                                    1999
                            -------------------------------------   -------------------------------------
                                 Assets            Liabilities           Assets            Liabilities
                            -----------------   -----------------   -----------------   -----------------
<S>                         <C>                 <C>                 <C>                 <C>
Futures Contracts:
  Domestic exchanges
     Interest rates            $ 1,022,561          $      --          $   565,484         $        --
     Stock indices                 221,700                 --                   --                  --
     Currencies                  1,479,050            111,600              664,038             212,790
     Commodities                   881,010            131,336              376,057             277,867
  Foreign exchanges
     Interest rates                870,562                 --              254,975             151,117
     Stock indices                 388,967             27,913              112,677                  --
     Commodities                   127,439             45,745              111,455              25,180
Forward Contracts:
  Currencies                       882,242             11,751              157,101             107,480
                            -----------------   -----------------   -----------------   -----------------
                               $ 5,873,531          $ 328,345          $ 2,241,787         $   774,434
                            -----------------   -----------------   -----------------   -----------------
                            -----------------   -----------------   -----------------   -----------------
</TABLE>

                                       8

<PAGE>

--------------------------------------------------------------------------------
   I hereby affirm that, to the best of my knowledge and belief, the information
contained herein relating to Diversified Futures Trust I is accurate and
complete.

     PRUDENTIAL SECURITIES
     FUTURES MANAGEMENT INC.
     (Managing Owner)

     By: Barbara J. Brooks
     Chief Financial Officer
--------------------------------------------------------------------------------

                                       9

<PAGE>

                          DIVERSIFIED FUTURES TRUST I
                          (a Delaware Business Trust)
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

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 for the years ended December 31,
2000, 1999 and 1998 were $12,636,745, $11,264,408 and $10,805,756, respectively.
Redemptions of General Interests for the years ended December 31, 2000, 1999 and
1998 were $127,636, $113,775 and $109,110, respectively. Redemptions of Limited
and General Interests from the commencement of operations, January 5, 1995, to
December 31, 2000 totalled $66,464,176 and $541,426, respectively. Future
redemptions will impact the amount of funds available for investment in
commodity contracts in subsequent periods.

   At December 31, 2000, 100% of the Trust's net assets were allocated to
commodities trading. A significant portion of the net assets was held in cash
which is 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. PSI 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
investors' 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 F to the
financial statements for a further discussion on 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.

Results of Operations

   The net asset value per Interest as of December 31, 2000 was $190.97, an
increase of 9.87% from the December 31, 1999 net asset value per Interest of
$173.82, which was a decrease of 13.48% from the December 31, 1998 net asset
value per Interest of $200.91. The MAR (Managed Account Reports) Fund/Pool
Index, which tracks the performance of approximately 300 futures funds, returned
9.41% and 1.48% for the years ended December 31, 2000 and 1999, respectively.
Past performance is not necessarily indicative of future results.

                                       10

<PAGE>

   The Trust's favorable performance in 2000 was attributed to gains in the
energy, currency and stock index sectors. Losses were incurred in the metal and
interest rate sectors.

   Energy prices climbed throughout January and February and into the first week
of March. Prices of crude oil futures rose above $33 a barrel, the highest level
for a front-month (the most liquid) contract since the Gulf War in 1991. The
energy sector reached a high early in March just prior to OPEC's agreement to
increase production sufficiently to stabilize prices. Political pressure by the
United States, along with a desire among OPEC members to maintain crude oil
prices in the range of $22-$28 per barrel, prompted the cartel to announce a
production increase and crude oil prices reversed downward. Increased demand and
low supplies caused oil prices to surge once again during the second quarter,
resulting in gains for long energy positions. Energy markets ended a year long
uptrend with natural gas surging to an all time high in December as low supplies
were strained by unusually cold temperatures in the U.S. Long positions in
natural gas resulted in gains.

   The euro began 2000 lower versus the U.S. dollar, Japanese yen and British
pound before rallying slightly in June as a result of solid European economic
data and sentiment that the currency was undervalued. Short euro positions
resulted in gains. Despite a brief rally after intervention by the European
Central Bank and other G-7 central banks to boost the failing euro in September,
the euro settled back down more than $0.02 below its intervention peaks. The
euro reversed its downtrend during the fourth quarter as it rose against the
U.S. dollar and Japanese yen. The Japanese yen rallied sharply, gaining on the
U.S. dollar and most other currencies in the final months of Japan's fiscal year
(which ended March 31st). This was attributed to positive sentiment regarding
Japan's economy. In May, the yen rose slightly against the U.S. dollar supported
by expectations of a possible change in the Bank of Japan's (BOJ) zero-interest
rate policy and continued to rise when the BOJ increased short-term interest
rates in August incurring losses for short positions. Political and economic
uncertainty in Japan during the fourth quarter caused the yen to fall against
the U.S. dollar and short Japanese yen positions resulting in gains.

   Extreme volatility in world financial markets during the first half of 2000
led to lack of trending opportunities and resulted in losses for equity index
positions. During the second half of the year, equity markets experienced
continued volatility, but markets trended downward as global economies began to
show signs of slowing down. Most major indexes ended the year lower resulting in
gains for short positions.

   Short metal positions provided negative performance for the Trust throughout
most of the year as strong demand and fears of inflation drove prices higher. In
addition, the high cost of energy, which is used in the production of base
metals, caused a decrease in metal supply driving prices higher and incurring
losses for short positions.

   Global bond markets began 2000 on a strong note. The U.S. Federal Reserve,
European Central Bank, Bank of England, Reserve Bank of Australia, and Bank of
Canada increased interest rates in early February. These rate increases shared
motivation of strong economic growth and concerns about inflation. Despite rate
hikes and news of robust worldwide economic growth, global bond markets
continued to rally partially due to investors seeking refuge from volatile
equity markets. U.S., Japanese and euro bond positions resulted in losses during
the first three quarters of the year. Negative equity performance throughout the
fourth quarter and mounting fears of a global economic slowdown contributed to a
bond market rally towards year end as investors continued their flight to
quality from the stock market. Prices of long- and short-term interest rate
instruments rose, but gains from long U.S., Australian and euro bond positions
during the last quarter were not sufficient to offset losses incurred earlier in
the year.

   Interest income is earned on the average net assets held at PSI and,
therefore, varies monthly according to interest rates, trading performance, and
redemptions. Interest income decreased $709,000 for the year ended December 31,
2000 compared to 1999. This decrease was primarily due to lower net assets
during 2000 as a result of redemptions and weak trading performance during the
second half of 1999 and during 2000 through the third quarter offset, in part,
by higher interest rates in 2000 and strong trading performance in the fourth
quarter. Interest income decreased $640,000 for the year ended December 31, 1999
compared to 1998, primarily due to lower interest rates and lower net assets as
a result of redemptions and poor trading performance during 1999.

   Commissions are calculated on the Trust's net asset value at the beginning of
each month and, therefore, vary according to trading performance and
redemptions. Commissions decreased $1,740,000 for the year ended December 31,
2000 compared to 1999 primarily due to lower monthly net asset values as a
result of

                                       11

<PAGE>

redemptions and weak trading performance during the second half of 1999 and
during 2000 through the third quarter. Commissions decreased approximately
$485,000 for the year ended December 31, 1999 compared to 1998. This decrease
was primarily due to lower monthly net asset values as a result of redemptions
and poor trading performance during 1999.

   All trading decisions for the Trust are made by John W. Henry & Company, Inc.
(the 'Trading Manager'). 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. Additionally, effective on October 1, 2000, The
advisory agreement among the Trust, the Managing Owner and the Trading Manager
was amended. The Amended Advisory Agreement reduced the monthly management fee
paid to the Trading Manager from 1/3 of 1% (a 4% annual rate) of the Trust's net
asset value to 1/6 of 1% (a 2% annual rate). Additionally, if the Trading
Manager recoups its cumulative trading losses to date and achieves a new trading
high, the Trading Manager will earn a 20% incentive fee as compared to a 15%
incentive fee previously paid. Management fees decreased $1,014,000 and $282,000
for the years ended December 31, 2000 and 1999 compared to the corresponding
periods in the prior years for the same reasons commissions decreased as
discussed above in addition to the reduced monthly management fee paid to the
Trading Manager effective October 1, 2000.

   Incentive fees are based on the New High Net Trading Profits generated by the
Trading Manager, as defined in the Advisory Agreement among the Trust, the
Managing Owner and the Trading Manager. No incentive fees were generated during
the year ended December 31, 2000. Incentive fees of $252,000 were generated
during the six months ended June 30, 1999 due to strong trading performance
during the second quarter of 1999.

New Accounting Guidance

   In June 2000, the Financial Accounting Standards Board ('FASB') issued
Statement No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities--an amendment of FASB Statement No. 133 ('SFAS 138'), which
became effective for the Trust on July 1, 2000. SFAS 138 amends the accounting
and reporting standards of FASB Statement No. 133 for certain derivative
instruments and certain hedging activities. SFAS 138 has not had a material
effect on the carrying value of assets and liabilities within the financial
statements.

Inflation

   Inflation has had no material impact on operations or on the financial
condition of the Trust from inception through December 31, 2000.

                                       12

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                               OTHER INFORMATION

   The actual round-turn equivalent of brokerage commissions paid per contract
for the year ended December 31, 2000 was $89.

   The Trust's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available to limited owners without charge upon written
request to:

        Diversified Futures Trust I
        P.O. Box 2016
        Peck Slip Station
        New York, New York 10272-2016

                                       13

<PAGE>

Peck Slip Station
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