UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Period ended March 31, 1996 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 No. 33-24662
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3490286
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
c/o Demeter Management Corp.
Two World Trade Center, New York, NY 62 Fl. 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 1996
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition March 31, 1996
(Unaudited) and December 31, 1995.....................2
Statements of Operations for the Quarters Ended
March 31, 1996 and 1995 (Unaudited)...................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 1996 and 1995
(Unaudited)...........................................4
Statements of Cash Flows for the Quarters Ended
March 31, 1996 and 1995 (Unaudited)...................5
Notes to Financial Statements (Unaudited)........... ........6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..10-13
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................. 14
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
1996 1995
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 12,017,764 14,643,529
Net unrealized gain on open contracts 818,802 852,419
Total Trading Equity 12,836,566 15,495,948
Interest receivable (DWR) 42,181 54,267
Total Assets 12,878,747 15,550,215
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 296,797 781,248
Accrued brokerage commissions (DWR) 96,578 116,587
Accrued management fee (DWFCM) 32,193 38,862
Accrued transaction fees and costs 1,664 5,241
Accrued incentive fee (DWFCM) - 3,299
Total Liabilities 427,232 945,237
Partners' Capital
Limited Partners (5,523.610 and
5,657.751 Units, respectively) 12,221,407 14,341,357
General Partner (104 Units) 230,108 263,621
Total Partners' Capital 12,451,515 14,604,978
Total Liabilities and Partners' Capital 12,878,747 15,550,215
NET ASSET VALUE PER UNIT 2,212.58 2,534.82
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1996 1995
$ $
<S> <C> <C>
REVENUES
Trading profit (loss):
Realized (1,523,712) 519,220
Net change in unrealized (33,617) 1,372,758
Total Trading Results (1,557,329) 1,891,978
Interest Income (DWR) 133,457 186,648
Total Revenues (1,423,872) 2,078,626
EXPENSES
Brokerage fees (DWR) 303,808 383,923
Management fees (DWFCM) 101,269 127,974
Transaction fees and costs 30,307 37,881
Incentive fees (DWFCM) (2,590) 207,886
Total Expenses 432,794 757,664
NET INCOME (LOSS) (1,856,666) 1,320,962
NET INCOME (LOSS) ALLOCATION
Limited Partners (1,823,153) 1,299,801
General Partner (33,513) 21,161
NET INCOME (LOSS) PER UNIT
Limited Partners (322.24) 203.47
General Partner (322.24) 203.47
<FN>
The accompanying footnotes are an integral part
of these financial statements.
<PAGE>
</TABLE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Quarters Ended March 31, 1996 and 1995
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital
December 31, 1994 6,492.295 $16,676,005 $271,481 $16,947,486
Net Income - 1,299,801 21,161 1,320,962
Redemptions (166.015) (467,144) - (467,144)
Partners' Capital
March 31, 1995 6,326.280 $17,508,662 $292,642 $17,801,304
Partners' Capital
December 31, 1995 5,761.751 $14,341,357 $263,621 $14,604,978
Net Loss - (1,823,153) (33,513) (1,856,666)
Redemptions (134.141) (296,797) - (296,797)
Partners' Capital
March 31, 1996 5,627.610 $12,221,407 $230,108 $12,451,515
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) (1,856,666) 1,320,962
Noncash item included in net income (loss):
Net change in unrealized 33,617 (1,372,758)
Decrease in operating assets:
Interest receivable (DWR) 12,086 3,183
Increase (decrease) in operating liabilities:
Accrued brokerage commissions (DWR) (20,009) 8,752
Accrued management fee (DWFCM) (6,669) 2,917
Accrued transaction fees and costs (3,577) 2,612
Accrued incentive fee (DWFCM) (3,299) 203,295
Net cash provided by (used for) operating activities (1,844,517) 168,963
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable (484,451) 98,202
Redemptions of units (296,797) (467,144)
Net cash used for financing activities (781,248) (368,942)
Net decrease in cash (2,625,765) (199,979)
Balance at beginning of period 14,643,529 15,466,376
Balance at end of period 12,017,764 15,266,397
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements include, in the opinion of management, all
adjustments necessary for a fair presentation of the results of
operations and financial condition. The financial statements and
condensed notes herein should be read in conjunction with the
Partnership's December 31, 1995 Annual Report on Form 10-K.
1. Organization
Dean Witter Diversified Futures Fund II L.P. (the "Partnership")
was organized to engage in the speculative trading of commodity
futures and futures-related contracts, including forward contracts
on foreign currencies.
The General Partner for the Partnership is Demeter Management
Corporation (the "General Partner"). The commodity broker is Dean
Witter Reynolds Inc. ("DWR"). The trading manager who makes all
trading decisions for the Partnership is Dean Witter Futures and
Currency Management, Inc. ("DWFCM"), an affiliate of DWR. The
General Partner, DWR, and DWFCM are all wholly owned subsidiaries
of Dean Witter, Discover & Co.
2. Related Party Transactions
The Partnership's cash is on deposit with DWR in commodity trading
accounts to meet margin requirements as needed. DWR pays interest
on these funds based on current 13-week U.S. Treasury Bill rates.
Brokerage expenses incurred by the Partnership are paid to DWR.
Management and incentive fees incurred by the Partnership are paid
to DWFCM.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. Financial Instruments
The Partnership trades futures and forward contracts in interest
rates, stock indices, commodities, currencies, petroleum and
precious metals. Futures and forwards represent contracts for
delayed delivery of an instrument at a specified date and price.
Risk arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms of
the contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest
rate volatility. At March 31, 1996, open contracts were:
Contract or
Notional Amount
$
Exchange Traded Contracts
Financial Futures:
Commitments to Purchase 271,740
Commitments to Sell 25,720,000
Commodity Futures:
Commitments to Purchase 8,568,000
Commitments to Sell 272,000
Foreign Futures:
Commitments to Purchase 957,000
Commitments to Sell 11,947,000
Off-Exchange Traded Forward
Currency Contracts
Commitments to Purchase 24,046,000
Commitments to Sell 17,956,000
A portion of the amounts indicated as off-balance sheet risk in
forward foreign currency contracts is due to offsetting forward
commitments to purchase and to sell the same currency on the same
date in the future. These commitments are economically offsetting,
but are not offset in the forward market until the settlement date.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unrealized gain on open contracts is reported as a component of
"Equity in Commodity Futures Trading Accounts" on the Statement of
Financial Condition and totaled $818,802 at March 31, 1996. Of
this amount, $709,547 related to exchange-traded futures contracts
and $109,255 related to off-exchange-traded forward currency
contracts.
Exchange-traded futures contracts held by the Partnership at March
31, 1996 mature through September 1996. Off-exchange traded
forward currency contracts held by the Partnership at March 31,
1996 mature through May 1996. The contract amounts in the above
table represent the Partnership's extent of involvement in the
particular class of financial instrument, but not the credit risk
associated with counterparty nonperformance. The credit risk
associated with these instruments is limited to the amounts
reflected in the Partnership's Statements of Financial Condition.
The Partnership also has credit risk because the sole counterparty,
with respect to most of the Partnership's assets is DWR. Exchange-
traded futures contracts are marked to market on a daily basis,
with variations in value credited or charged to the Fund's account
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
on a daily basis. DWR, as the futures commission merchant for all
of the Partnership's exchange-traded futures contracts, is required
pursuant to regulations of the Commodity Futures Trading Commission
to segregate from its own assets and for the sole benefit of its
commodity customers all funds held by DWR with respect to exchange-
traded futures contracts including an amount equal to the net
unrealized gain on all open futures contracts, which funds totalled
$12,727,311 at March 31, 1996. With respect to the Partnership's
off-exchange-traded forward currency contracts, there are no daily
settlements of variations in value nor is there any requirement
that an amount equal to the net unrealized gain on open forward
contracts be segregated. With respect to those off-exchange-traded
forward currency contracts, the Partnerships are at risk to the
ability of DWR, the counterparty on all of such contracts, to
perform.
For the quarter ended March 31, 1996 the average fair value of
financial instruments held for trading purposes was as follows:
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 31,276,000 17,809,000
Commodity Futures 16,173,000 3,003,000
Foreign Futures 24,172,000 8,159,000
Off-Exchange-Traded Foreign
Currency Contracts 40,259,000 51,701,000
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity - The Partnership's assets are on deposit in separate
commodity interest trading accounts with DWR, and are used by the
Partnership as margin to engage in commodity futures, forward
contracts and other commodity interest trading. DWR holds such
assets in either designated depositories or in securities approved
by the Commodity Futures Trading Commission for investment of
customer funds. The Partnership's assets held by DWR may be used
as margin solely for the Partnership's trading. Since the
Partnership's sole purpose is to trade in commodity futures
contracts, forward contracts on foreign currencies and other
commodity interests, it is expected that the Partnership will
continue to own such liquid assets for margin purposes.
The Partnership's investment in commodity futures and forward
contracts and other commodity interests may be illiquid. If the
price for the 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 Partnership from promptly
liquidating its commodity futures positions.
<PAGE>
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to
substantial losses. Either of these market conditions could result
in restrictions on redemptions.
Capital Resources. The Partnership does not have, nor does it
expect to have, any capital assets. Redemptions of additional
Units in the future will impact the amount of funds available for
investments in commodity futures, forward contracts on foreign
currencies and other commodity interests. As redemptions are at
the discretion of Limited Partners, it is not possible to estimate
the amount and therefore, the impact of future redemptions.
Results of Operations
For the Quarter Ended March 31, 1996
For the quarter ended March 31, 1996 the Partnership's total
trading losses net of interest income were $1,423,872. During the
first quarter, the Partnership posted a loss in Net Asset Value per
Unit. The most significant trading losses during the quarter were
recorded in the currency and energy markets during February. In
the currency markets, a sudden and sharp trend reversal in the
downward move in the value of the Japanese yen and most major
European currencies, which had posted gains during January,
resulted in losses from short positions in the Japanese yen, German
<PAGE>
mark, Swiss franc and British pound. Trading gains recorded during
March from transactions involving the Australian dollar and
Japanese yen offset a portion of the overall losses experienced in
the currency markets during February. Additional losses were
experienced in the energy markets due primarily to short-term
volatile movement in gas and oil prices during February. A portion
of these losses was offset by gains in crude oil during March. In
the financial futures markets, losses were recorded in most global
interest rate and stock index futures as these prices moved in a
short-term volatile pattern during the quarter. Trading gains in
British long gilt, French bond and U.S. Treasury note futures
offset a portion of these losses. Smaller losses were recorded in
the agricultural markets from trading soybean futures and in the
soft commodities markets from trading cotton and coffee futures.
Total expenses for the period were $432,794, resulting in a net
loss of $1,856,666. The value of an individual Unit in the
Partnership decreased from $2,534.82 at December 31, 1995 to
$2,212.58 at March 31, 1996.
For the Quarter Ended March 31, 1995
For the quarter ended March 31, 1995, the Partnership's total
trading revenues including interest income were $2,078,626. During
the first quarter, the Partnership posted a gain in Net Asset Value
per Unit. The most significant trading gains were recorded during
February and March in the currency markets as a result of a
decrease in value of the U.S. dollar versus the Japanese yen and
major European currencies such as the Swiss franc, German mark and
French franc. Additional gains were recorded in the financial
<PAGE>
futures markets as a result of trading Japanese and U.S. interest
rate futures and global stock index futures. Smaller trading
losses in the agricultural, metals, energy and international
markets offset a portion of overall gains for the quarter. Total
expenses for the period were $757,664, generating net income of
$1,320,962. The value of an individual Unit in the Partnership
increased from $2,610.40 at December 31, 1994 to $2,813.87 at March
31, 1995.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits.
None.
B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
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.
Dean Witter Diversified Futures
Fund II L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
May 7, 1996 By: /s/ Patti L. Behnke
Patti L. Behnke
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean Witter
Diversified Futures Fund II L.P. and is qualified in its entirety by references
to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 12,017,764
<SECURITIES> 0
<RECEIVABLES> 42,181
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,878,747<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,878,747<F2>
<SALES> 0
<TOTAL-REVENUES> (1,423,872)<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 432,794
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,856,666)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,856,666)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,856,666)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $818,802.
<F2>Liabilities include redemptions payable of $296,797, accrued brokerage
commissions of $96,578, accrued management fees of $32,193 and accrued
transaction fees and costs of $1,664.
<F3>Total revenues includes realized trading revenue of $(1,523,712), net
change in unrealized of $(33,617) and interest income of $133,457.
</FN>
</TABLE>
