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 September 30, 1997 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
September 30, 1997
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition September 30, 1997
(Unaudited) and December 31, 1996.....................2
Statements of Operations for the Quarters Ended
September 30, 1997 and 1996 (Unaudited)...............3
Statements of Operations for the Nine Months Ended
September 30, 1997 and 1996 (Unaudited)...............4
Statements of Changes in Partners' Capital for the
Nine Months ended September 30, 1997 and 1996
(Unaudited)...........................................5
Statements of Cash Flows for the Nine Months Ended
September 30, 1997 and 1996 (Unaudited)...............6
Notes to Financial Statements (Unaudited)........ 7-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..13-19
Part II. OTHER INFORMATION
Item 1. Legal Proceedings..............................20-21
Item 5. Other Information.................................21
Item 6. Exhibits and Reports on Form 8-K..................22
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
September 30, December 31,
1997 1996
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 10,915,331 12,415,430
Net unrealized gain on open contracts 689,490 160,193
Total Trading Equity 11,604,821 12,575,623
Interest receivable (DWR) 36,919 42,043
Total Assets 11,641,740 12,617,666
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 530,225 297,904
Accrued management fee (DWFCM) 29,099 31,538
Accrued brokerage commissions (DWR) 26,234 15,137
Accrued transaction fees and costs 2,067 2,330
Total Liabilities 587,625 346,909
Partners' Capital
Limited Partners ( 4,281.169 and
4,982.521 Units, respectively) 10,791,952 12,019,867
General Partner (104 Units) 262,163 250,890
Total Partners' Capital 11,054,115 12,270,757
Total Liabilities and Partners' Capital 11,641,740 12,617,666
NET ASSET VALUE PER UNIT 2,520.80 2,412.41
<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 September 30,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit:
Realized 183,098 144,140
Net change in unrealized 525,415 813,840
Total Trading Results 708,513 957,980
Interest Income (DWR) 117,079 119,649
Total Revenues 825,592 1,077,629
EXPENSES
Brokerage fees (DWR) 194,316 246,062
Management fees (DWFCM) 87,118 90,036
Transaction fees and costs 15,593 16,507
Total Expenses 297,027 352,605
NET INCOME 528,565 725,024
NET INCOME ALLOCATION
Limited Partners 516,603 710,956
General Partner 11,962 14,068
NET INCOME PER UNIT
Limited Partners 115.02 135.27
General Partner 115.02 135.27
<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 Nine Months Ended September 30,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 599,472 (884,671)
Net change in unrealized 529,297 161,586
Total Trading Results 1,128,769 (723,085)
Interest Income (DWR) 368,287 381,512
Total Revenues 1,497,056 (341,573)
EXPENSES
Brokerage fees (DWR) 640,232 832,679
Management fees (DWFCM) 276,598 285,575
Transaction fees and costs 50,693 68,492
Incentive fees (DWFCM) - (2,590)
Total Expenses 967,523 1,184,156
NET INCOME (LOSS) 529,533 (1,525,729)
NET INCOME (LOSS) ALLOCATION
Limited Partners 518,260 (1,499,001)
General Partner 11,273 (26,728)
NET INCOME (LOSS) PER UNIT
Limited Partners 108.39 (257.00)
General Partner 108.39 (257.00)
<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 CHANGES IN PARTNERS' CAPITAL
For the Nine Months Ended September 30, 1997and 1996
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C>
<C>
Partners' Capital
December 31, 1995 5,761.751 $14,341,357 $263,621 $14,604,978
Net Loss - (1,499,001) (26,728) (1,525,729)
Redemptions (551.742) (1,211,800) - (1,211,800)
Partners' Capital
September 30, 1996 5,210.009 $11,630,556 $236,893 $11,867,449
Partners' Capital
December 31, 1996 5,086.521 $12,019,867 $250,890 $12,270,757
Net Income - 518,260 11,273 529,533
Redemptions (701.352) (1,746,175) - (1,746,175)
Partners' Capital
September 30, 1997 4,385.169 $10,791,952 $262,163 $11,054,115
<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 Nine Months Ended September 30,
1997 1996
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss): 529,533 (1,525,729)
Noncash item included in net income (loss):
Net change in unrealized (529,297) (161,586)
Decrease in operating assets:
Interest receivable (DWR) 5,124 15,257
Increase (decrease) in operating liabilities:
Accrued management fee (DWFCM) (2,439) (8,221)
Accrued brokerage commissions (DWR) 11,097 (99,790)
Accrued transaction fees and costs (263) (3,089)
Accrued incentive fee (DWFCM) - (3,299)
Net cash provided by (used for) operating activities 13,755 (1,786,457)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable 232,321 (439,892)
Redemptions of units (1,746,175) (1,211,800)
Net cash used for financing activities (1,513,854) (1,651,692)
Net decrease in cash (1,500,099) (3,438,149)
Balance at beginning of period 12,415,430 14,643,529
Balance at end of period 10,915,331 11,205,380
<FN>
The accompanying footnotes are an integral part
</TABLE> of these financial statements.
<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, 1996 Annual Report on Form 10-K.
1. Organization
Dean Witter Diversified Futures Fund II L.P. (the "Partnership")
is a limited partnership organized to engage in the speculative
trading of commodity futures and futures-related contracts,
including forward contracts on foreign currencies (collectively,
"futures interests"). The general partner for the Partnership is
Demeter Management Corporation ("Demeter"). The commodity broker
for most of the Partnership's transactions is Dean Witter
Reynolds Inc. ("DWR"). The trading manager who makes all trading
decisions for the Partnership is Dean Witter Futures & Currency
Management, Inc. ("DWFCM"), an affiliate of DWR. Demeter, DWR
and DWFCM are all wholly owned subsidiaries of Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD").
On July 31, 1997, DWR closed the sale of its institutional
futures business and foreign currency trading operations to Carr
Futures Inc. ("Carr"), a subsidiary of Credit Agricole Indosuez.
Following the sale, Carr became the counterparty on the
Partnership's foreign currency trades. However, during a
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
transition period of about four months, DWR will continue to
perform certain services relating to the Partnership's futures
trading including clearance. After such transaction period, DWR
will continue to serve as a non-clearing commodity broker for the
Partnership with Carr providing all clearing services for
Partnership transactions.
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr 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.
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
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
significantly influence the market value of these contracts,
including interest rate volatility. At September 30, 1997 and
December 31, 1996, open contracts were:
Contract or Notional Amount
September 30, 1997 December 31,
1996 $ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 376,000 -
Commodity Futures:
Commitments to Purchase 6,457,000 2,026,000
Commitments to Sell 4,598,000 6,083,000
Foreign Futures:
Commitments to Purchase 17,239,000 6,629,000
Commitments to Sell 4,858,000 11,748,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 22,109,000 33,150,000
Commitments to Sell 21,680,000 42,844,000
A portion of the amounts indicated as off-balance-sheet risk in
forward 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.
The net unrealized gains on open contracts are reported as a
component of "Equity in Commodity futures trading accounts" on
the Statements of Financial Condition and totaled $689,490 and
$160,193 at September 30, 1997 and December 31, 1996,
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
respectively. Of the $689,490 net unrealized gain on open
contracts at September 30, 1997, $466,020, related to exchange-
traded futures contracts and $223,470 related to off-exchange-
traded forward currency contracts. Of the $160,193 net
unrealized gain on open contracts at December 31, 1996, $423,229
related to exchange-traded futures contracts and $(263,036)
related to off-exchange-traded forward currency contracts.
Exchange-traded futures contracts held by the Partnership at
September 30, 1997 and December 31, 1996 mature through March
1998 and June 1997, respectively. Off-exchange-traded forward
currency contracts held by the Partnership at September 30, 1997
and December 31, 1996 mature through December 1997 and February
1997, respectively. 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 either DWR or Carr
acts as the futures commission merchant or the counterparty, with
respect to most of the Partnership's assets. Exchange-traded
futures contracts are marked to market on a daily basis, with
variations in value settled on a daily basis. DWR, as the
futures
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
commission merchant for all of the Partnership's exchange-traded
futures contracts, is required pursuant to regulations of the
Commodity Futures Trading Commission ("CFTC") 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 totaled
$11,285,326 and $12,838,659 at September 30, 1997 and December
31, 1996, respectively. 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 Partnership is at risk to
the ability of Carr, the sole counterparty on all such contracts,
to perform. Carr's parent, Credit Agricole Indosuez, has
guaranteed Carr's obligations to the Partnership.
For the nine months ended September 30, 1997 and for the year
ended December 31, 1996, the average fair value of financial
instruments held for trading purposes was as follows:
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
September 30, 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 3,755,000 14,954,000
Commodity Futures 4,416,000 5,484,000
Foreign Futures 13,695,000 8,500,000
Off-Exchange-Traded Forward
Currency Contracts 21,060,000 30,505,000
December 31, 1996
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 15,923,000 8,572,000
Commodity Futures 7,188,000 5,152,000
Foreign Futures 22,067,000 8,118,000
Off-Exchange-Traded Forward
Currency Contracts 37,689,000 41,562,000
<PAGE>
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership's assets are on deposit in futures
interest trading accounts with DWR and Carr, and are used by the
Partnership as margin to engage in futures interest trading. DWR
and Carr hold such assets in either designated depositories or
in securities approved by the CFTC for investment of customer
funds. The Partnership's assets held by DWR and Carr may be used
as margin solely for the Partnership's trading. Since the
Partnership's sole purpose is to trade in futures interests, it
is expected that the Partnership will continue to own such liquid
assets for margin purposes.
The Partnership's investment in futures interests may, from time
to time, be illiquid. Most United States futures exchanges limit
fluctuations in certain futures interest prices during a single
day by regulations referred to as "daily price fluctuations
limits" or "daily limits". Pursuant to such regulations, during
a single trading day no trades may be executed at prices beyond
the daily limit. If the price of a particular futures interest
has increased or decreased by an amount equal to the "daily
limit", positions in such futures interest can neither be taken
nor liquidated unless traders are willing to effect trades at or
within the limit. Futures interest 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 futures interests and result in
<PAGE>
restrictions on redemptions. However, since the commencement of
trading by the Partnership, there has never been a time when
illiquidity has affected a material portion of the Partnership's
assets.
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 of Limited Partnership Interest in the future
will affect the amount of funds available for investments in
futures interests in subsequent periods. As redemptions are at
the discretion of the Limited Partners, it is not possible to
estimate the amount and therefore the impact of future
redemptions.
Results of Operations
For the Quarter and Nine Months Ended September 30, 1997
For the quarter ended September 30, 1997 the Partnership's total
trading revenues including interest income were $825,592. During
<PAGE>
the third quarter, the Partnership posted a gain in Net Asset
Value per Unit. The most significant gains were recorded in
financial futures due primarily to an upward trend in global
interest rate futures prices during July and September. Smaller
profits were recorded in global stock index futures from short
Nikkei Index futures during the quarter. In the currency
markets, gains were recorded during July from short German mark
positions as the value of the U.S. dollar increased versus the
German mark. During August, the value of the German mark
increased versus the U.S. dollar, resulting in losses for the
Partnership. This upward price move resulted in new long German
mark positions, which profited during September. Additional
currency gains were recorded from transactions involving the
Malaysian ringgit, Australian dollar and Swedish krona. A
portion of these currency gains was offset by losses experienced
from transactions involving the British pound and Japanese yen.
In the energy markets, gains were recorded from long natural gas
positions as prices increased during August and September. In
metals, gains were recorded from long zinc futures during July
and long silver futures positions during September. Gains were
also recorded from short copper futures positions during August
and September. Trading losses in aluminum futures during August
offset a portion of these gains. In soft commodities and
agricultural markets, losses were recorded as a result of short-
term volatile price movement in a majority of the markets traded,
particularly, cocoa, cotton and corn futures. Total expenses for
the period were $297,027, resulting in net income of $528,565.
<PAGE>
The value of an individual Unit in the Partnership increased from
$2,405.78 at at June 30, 1997 to $2,520.80 at September 30, 1997.
For the nine months ended September 30, 1997 the Partnership's
total revenues including interest income were $1,497,056. During
the first three-quarters of year, the Partnership posted a gain
in Net Asset Value per Unit. The most significant trading gains
were recorded in the currency markets as a result of a
strengthening in the value of the U.S. dollar relative to most
major currencies during the period January through April.
Additional currency gains were recorded during the third quarter
from transactions involving the German mark, Malaysian ringgit,
Swedish knona and Australian dollar. A portion of these gains
was offset by losses from transactions involving the British
pound and Canadian dollar during February, March and May. In
metals, gains experienced from short gold futures positions in
January and July from long zinc futures positions in July and
long silver futures positions in September more than offset
losses recorded from base metals futures during the second
quarter. A portion of the Partnership's overall gains for the
first nine months of the year was offset by losses from trading
energy futures as oil and gas prices moved without consistent
direction for a majority of the year. One exception in the
energy complex was natural gas futures prices, which increased
during the third quarter, thus resulting in gains from long
positions. In soft commodities, losses recorded from trading
cocoa, cotton and sugar futures during the third quarter offset
<PAGE>
profits recorded during the first half of the year from long
coffee futures positions. In agricultural markets, losses were
recorded from trading corn futures during the third quarter and
soybean oil during the first half of the year. In financial
futures, trading gains recorded from short Nikkei Index and long
global interest rate futures during the third quarter more than
offset the losses experienced in global interest rate futures as
a result of short-term price volatility during the first four
months of the year. Total expenses for the period were $967,523,
resulting in net income of $529,533. The value of an individual
Unit in the Partnership increased from $2,412.41 at December 31,
1996 to $2,520.80 at September 30, 1997.
For the Quarter and Nine Months Ended September 30, 1996
For the quarter ended September 30, 1996, the Partnership's total
trading revenues including interest income were $1,077,629.
During the third quarter, the Partnership posted an increase in
Net Asset Value per Unit. The most significant trading gains
were recorded in the financial futures markets from long
Australian, European and Japanese bond futures positions as
global interest rate futures prices moved steadily higher between
July and September. Additional gains were recorded in the energy
markets from long positions in crude, heating and gas oil futures
as prices in these markets trended higher throughout the quarter.
Gains were also recorded in metals as a downward move in aluminum
futures prices during September resulted in gains from previously
established short positions. A portion of the overall gains for
<PAGE>
the quarter was offset by losses experienced in the agricultural,
currency and soft commodities markets. In agricultural markets,
losses were recorded as soybean and corn futures prices moved in
an inconsistent pattern during most of the quarter. Additional
losses were recorded in the currency markets during August from
short Australian dollar positions as its value reversed higher
relative to the U.S. dollar and other world currencies and from
short Japanese yen positions as its value increased sharply
during late August. In soft commodities, losses were recorded as
a result of trendless movement in cotton and coffee prices
throughout most of the quarter. Total expenses for the quarter
were $352,605, resulting in net income of $725,024. The value of
an individual Unit in the Partnership increased from $2,142.55 at
June 30, 1996 to $2,277.82 at September 30, 1996.
For the nine months ended September 30, 1996, the Partnership's
total trading losses net of interest income were $341,573.
During the first three quarters of the year, the Partnership
posted a decrease in Net Asset Value per Unit. The most
significant losses were recorded in soft commodities as a result
of choppy price movement in coffee, cotton and cocoa futures
during a majority of the first nine months of the year.
Additional losses were recorded in the agricultural markets as a
result of trendless price movement in soybean products during the
first and third quarters of the year. Gains from long corn and
wheat futures positions during the second quarter offset a
portion of these losses. In financial futures trading, losses
were recorded as a
<PAGE>
result of short-term volatile movement in global stock index
futures prices during the first nine months of the year. In
interest rate futures, gains experienced during the third quarter
from long Australian and European bond futures positions more
than offset losses recorded during the first half of the year in
U.S. and Japanese interest rate futures. In the currency
markets, losses were recorded during February as a result of a
sharp and sudden trend reversal in the previous downward move in
the value of the Japanese yen and most European currencies, which
had resulted in gains during January. Smaller currency losses
were recorded from transactions involving the Canadian dollar.
Trading gains experienced from transactions involving the German
mark relative to the U.S. dollar and other world currencies
during April and July helped to mitigate currency losses. A
portion of overall losses during the first nine months of the
year was offset by gains from short aluminum futures positions as
prices declined sharply during September. These gains, coupled
with smaller profits from trading gold, more than offset losses
experienced in silver and other base metals during the first half
of the year. Gains experienced during the third quarter in the
energy markets from a strong upward move in heating, gas and
crude oil futures prices more than offset losses experienced from
trading unleaded gas futures earlier in the year. Total expenses
for the quarter were $1,184,156, resulting in a net loss of
$1,525,729. The value of an individual Unit in the Partnership
decreased from $2,534.82 at December 31, 1995 to $2,277.82 at
September 30, 1996.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar
purported class actions were filed in the Superior Court of the
State of California, County of Los Angeles, on behalf of all
purchasers of interests in limited partnership commodity pools
sold by DWR. Named defendants include DWR, Demeter, DWFCM, MSDWD
(all such parties referred to hereafter as the "Dean Witter
Parties"), the Partnership, certain other limited partnership
commodity pools of which Demeter is the general partner, and
certain trading advisors to those pools. On June 16, 1997, the
plaintiffs in the above actions filed a consolidated amended
complaint. Similar purported class actions were also filed on
September 18 and 20, 1996 in the Supreme Court of the State of
New York, New York County, and on November 14, 1996 in the
Superior Court of the State of Delaware, New Castle County,
against the Dean Witter Parties and certain trading advisors on
behalf of all purchasers of interests in various limited
partnership commodity pools including the Partnership, sold by
DWR. Generally, these complaints allege, among other things,
that the defendants committed fraud, deceit, misrepresentation,
breach of fiduciary duty, fraudulent and unfair business
practices, unjust enrichment, and conversion in connection with
the sale and operation of the various limited partnership
commodity pools. The complaints seek unspecified amounts of
compensatory and punitive damages and other relief. It is
possible that additional similar actions may be filed and that,
in the course of these actions, other parties
<PAGE>
could be added as defendants. The Dean Witter Parties believe
that they and the Partnership have strong defenses to, and they
will vigorously contest, the actions. Although the ultimate
outcome of legal proceedings cannot be predicted with certainty,
it is the opinion of management of the Dean Witter Parties that
the resolution of the actions will not have a material adverse
effect on the financial condition or the results of operations of
any of the Dean Witter Parties or the Partnership.
Item 5. OTHER INFORMATION
On July 21, 1997, MSDWD, the sole shareholder of Demeter,
appointed a new Board of Directors consisting of Richard M.
DeMartini, Mark J. Hawley, Lawrence Volpe, Joseph G. Siniscalchi,
Edward C. Oelsner III, and Robert E. Murray.
<PAGE>
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)
November 10, 1997 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.
<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 reference to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,915,331
<SECURITIES> 0
<RECEIVABLES> 36,919<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,641,740<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,641,740<F3>
<SALES> 0
<TOTAL-REVENUES> 1,497,056<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 967,523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 529,533
<INCOME-TAX> 0
<INCOME-CONTINUING> 529,533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 529,533
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $36,919 and due from DWR
of $0.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $689,490.
<F3>Liabilities include redemptions payable of $530,225, accrued brokerage
commissions of $26,234, accrued management fees of $29,099 and accrued
transaction fees and costs of $2,067.
<F4>Total revenue includes realized trading revenue of $599,472, net change
in unrealized of $529,297, and interest income of $368,287.
</FN>
</TABLE>
