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, 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. 33-34989
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3577501
(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 III L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 1996
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
September 30, 1996 (Unaudited) and December 31, 1995..2
Statements of Operations for the Quarters Ended
September 30, 1996 and 1995 (Unaudited)............... 3
Statements of Operations for the Nine Months
Ended September 30, 1996 and 1995 (Unaudited).........4
Statements of Changes in Partners' Capital for the
Nine Months ended September 30, 1996 and 1995
(Unaudited)...........................................5
Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995 (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 6. Exhibits and Reports on Form 8-K................ 20
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
September 30, December 31,
1996 1995
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in commodity futures trading accounts:
Cash 74,391,369 95,976,883
Net unrealized gain on open contracts 6,868,790 5,917,996
Total Trading Equity 81,260,159 101,894,879
Interest receivable (DWR) 260,524 357,564
Receivable from DWR 42,735 160,019
Total Assets 81,563,418 102,412,462
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 1,841,490 1,377,212
Accrued management fees (DWFCM) 205,041 257,680
Accrued brokerage commissions (DWR) 138,232 361,211
Accrued administrative expenses 94,001 167,603
Accrued transaction fees and costs 14,154 35,174
Total Liabilities 2,292,918 2,198,880
Partners' Capital
Limited Partners (54,369.035 and
62,353.870 Units, respectively) 77,835,885 98,628,520
General Partner (1,002.091 Units) 1,434,615 1,585,062
Total Partners' Capital 79,270,500 100,213,582
Total Liabilities and Partners' Capital 81,563,418 102,412,462
NET ASSET VALUE PER UNIT 1,431.62 1,581.75
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended September 30,
1996 1995
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 1,248,808 470,822
Net change in unrealized 5,426,107 (11,821,903)
Total Trading Results 6,674,915 (11,351,081)
Interest Income (DWR) 799,371 1,221,039
Total Revenues 7,474,286 (10,130,042)
EXPENSES
Brokerage commissions (DWR) 1,468,501 2,399,604
Management fees (DWFCM) 609,128 843,955
Transaction fees and costs 104,149 217,252
Administrative expenses 23,000 -
Incentive fees (DWFCM) - 3,474
Total Expenses 2,204,778 3,464,285
NET INCOME (LOSS) 5,269,508 (13,594,327)
NET INCOME (LOSS) ALLOCATION
Limited Partners 5,177,525 (13,387,620)
General Partner 91,983 (206,707)
NET INCOME (LOSS) PER UNIT
Limited Partners 91.79 (206.28)
General Partner 91.79 (206.28)
<FN>
The accompanying footnotes are an integral part
of these financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Nine Months Ended September 30,
1996 1995
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized (5,676,192) 25,133,656
Net change in unrealized 950,794 (20,872,434)
Total Trading Results (4,725,398) 4,261,222
Interest Income (DWR) 2,539,427 3,839,023
Total Revenues (2,185,971) 8,100,245
EXPENSES
Brokerage commissions (DWR) 5,121,669 7,473,426
Management fees (DWFCM) 1,931,023 2,652,568
Transaction fees and costs 418,695 729,632
Administrative expenses 63,000 20,000
Incentive fees (DWFCM) - 724,383
Total Expenses 7,534,387 11,600,009
NET LOSS (9,720,358) (3,499,764)
NET LOSS ALLOCATION
Limited Partners (9,569,911) (3,439,201)
General Partner (150,447) (60,563)
NET LOSS PER UNIT
Limited Partners (150.13) (60.44)
General Partner (150.13) (60.44)
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital
December 31, 1994 71,363.599 $115,956,558 $1,651,457 $117,608,015
Net Loss - (3,439,201) (60,563) (3,499,764)
Redemptions (6,120.469) (10,529,950) - (10,529,950)
Partners' Capital
September 30, 1995 65,243.130 $101,987,407 $1,590,894 $103,578,301
Partners' Capital
December 31, 1995 63,355.961 $98,628,520 $1,585,062 $100,213,582
Net Loss - (9,569,911) (150,447) (9,720,358)
Redemptions (7,984.835) (11,222,724) - (11,222,724)
Partners' Capital
September 30, 1996 55,371.126 $77,835,885 $1,434,615 $79,270,500
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Nine Months Ended September 30,
1996 1995
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss (9,720,358) (3,499,764)
Noncash item included in net loss:
Net change in unrealized (950,794) 20,872,434
(Increase) decrease in operating assets:
Interest receivable (DWR) 97,040 83,863
Receivable from DWR 117,284 (61,136)
Increase (decrease) in operating liabilities:
Accrued management fees (DWFCM) (52,639) (38,669)
Accrued brokerage commissions (DWR) (222,979) (158,284)
Accrued administrative expenses (73,602) (17,237)
Accrued transaction fees and costs (21,020) 9,572
Net cash provided by (used for) operating activities (10,827,068) 17,190,779
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable 464,278 (1,024,350)
Redemptions of units (11,222,724) (10,529,950)
Net cash used for financing activities (10,758,446) (11,554,300)
Net increase (decrease) in cash (21,585,514) 5,636,479
Balance at beginning of period 95,976,883 104,333,630
Balance at end of period 74,391,369 109,970,109
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III 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 III L.P. (the "Partnership")
is the limited partnership 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 & Currency Management Inc. ("DWFCM"). The General Partner,
DWFCM and DWR are wholly owned subsidiaries of Dean Witter, Discover & Co.
2. Summary of Significant Accounting Policies
Effective September 1, 1996, maximum total brokerage commissions
and transaction fees chargeable to the Partnership are capped at
.65% per month of adjusted Net Assets as defined in the Limited
Partnership Agreement.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. 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.
4. 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 September 30, 1996, open contracts were:
Contract or
Notional Amount
$
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 6,568,000
Commodity Futures:
Commitments to Purchase 19,668,000
Commitments to Sell 45,523,000
Foreign Futures:
Commitments to Purchase 186,033,000
Commitments to Sell 9,652,000
Off-Exchange-Traded Forward
Currency Contracts
Commitments to Purchase 187,120,000
Commitments to Sell 288,614,000
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 gain on open contracts is reported as a
component of "Equity in Commodity futures trading accounts" on the
Statement of Financial Condition and totaled $6,868,790 at
September 30, 1996. Of this amount, $6,553,317 related to
exchange-traded futures contracts and $315,473 related to off-
exchange-traded forward currency contracts.
Exchange-traded futures contracts held by the Partnership at
September 30, 1996 mature through June 1997. Off-exchange-traded
forward currency contracts held by the Partnership at September 30,
1996 mature through November 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 DWR acts as the
futures commission merchant or the sole counterparty, with respect
to most of the Partnership's assets. Exchange-traded futures
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
contracts are marked to market on a daily basis with variations in
value settled 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 totaled $80,944,686 at September 30, 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 Partnership is at risk to the ability of DWR, the counterparty
on all such contracts, to perform.
For the nine months ended September 30, 1996, the average fair
value of financial instruments held for trading purposes was as
follows:
Assets Liabilities
$ $
Exchange-Traded Contracts
Financial Futures 94,758,000 74,020,000
Commodity Futures 60,885,000 28,348,000
Foreign Futures 156,447,000 48,425,000
Off-Exchange-Traded Forward
Currency Contracts 264,414,000 292,429,000
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
5. Legal Matters
On September 6, 10, and 20, 1996, 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, the General Partner, DWFCM, Dean Witter, Discover & Co. (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. Also, on September 18 and 20, 1996
similar purported class actions were filed in the Supreme Court of
the State of New York, New York County, against the Dean Witter
Parties and certain trading advisors on behalf of all purchasers of
interests in various limited partnership commodity pools 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 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
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
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.
<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 and forward contracts 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 and Nine Months Ended September 30, 1996
For the quarter ended September 30, 1996, the Partnership's total
trading revenues including interest income were $7,474,286. 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
<PAGE>
during September resulted in gains from previously established
short positions. A portion of the overall gains for the quarter
was offset by losses experienced in the agricultural, currency and
soft commodiites markets. In the 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 $2,204,778,
resulting in net income of $5,269,508. The value of an individual
Unit in the Partnership increased from $1,339.83 at June 30, 1996
to $1,431.62 at September 30, 1996.
For the nine months ended September 30, 1996, the Partnership's
total trading losses net of interest income were $2,185,971. During
the first nine months 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 result of short-term
<PAGE>
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 period were $7,534,387, resulting in a net
loss of $9,720,358. The value of an individual Unit in the
Partnership decreased from $1,581.75 at December 31, 1995 to
$1,431.62 at September 30, 1996.
<PAGE>
For the Quarter and Nine Months Ended September 30, 1995
For the quarter ended September 30, 1995, the Partnership's total
trading losses net of interest income were $10,130,042. During the
third quarter, the Partnership posted a decrease in Net Asset Value
per Unit. Trading gains during the first nine months were offset
by brokerage commissions resulting in net trading losses. The most
significant trading losses were recorded in financial futures as
global interest rate futures prices experienced choppiness
throughout the quarter. As a result of this price volatility,
losses were experienced in U.S. Treasury bond, Treasury note and
eurodollar futures, as well as in Japanese, Australian and French
government bond futures trading. In global stock index futures, a
sharp reversal in the downward trend in the Japanese Nikkei Index
during July resulted in losses for the Partnership's previously
established short Nikkei positions. Additional losses in this
complex were recorded in Australian All Ordinaries Index futures as
Australian stock prices remained in a short-term volatile range.
In agricultural futures trading, net losses were recorded from
trading soybean products and corn as prices remained trendless
throughout the quarter. Smaller losses were recorded in each of
the energy, metals and soft commodities complexes as prices moved
in a trendless pattern for most of the quarter. Trading gains from
transactions involving the Japanese yen were recorded during all
three months of the quarter as a downward trend in the value of the
yen relative to the U.S. dollar was evident until late September.
Smaller Partnership gains were recorded in August from transactions
involving the British pound as its value declined relative to the
U.S. dollar. These gains offset losses experienced due to a sharp
reversal in European currency values during late September. Total
<PAGE>
expenses for the period were $3,464,285, resulting in a net loss of
$13,594,327. The value of an individual Unit in the Partnership
decreased from $1,793.85 at June 30, 1995 to $1,587.57 at September
30, 1995.
For the nine months ended September 30, 1995, the Partnership's
total revenues including interest income were $8,100,245. During
the first three quarters of the year, the Partnership posted a
decrease in Net Asset Value per Unit. Trading gains during the
first nine months were offset by brokerage commissions resulting in
net trading losses. The most significant losses were recorded in
agricultural futures, primarily due to a trendless environment in
soybean and corn prices. In other markets, trading losses were
experienced in metals futures as precious and base metals prices
traded within a short-term volatile pattern for most of the year.
Losses were also recorded in soft commodities and energy futures
trading due to a similar price volatility. Trading gains were
recorded in financial futures between February and May as global
bond prices trended higher. As a result, gains were recorded in
Japanese, U.S., Australian and European interest rate futures.
Additional gains within this complex were recorded from long
positions in S&P 500 Index futures as domestic stock prices reached
record highs throughout the first nine months of the year.
Currency trading also helped in offsetting a portion of the
Partnership's losses as an upward trend in the Japanese yen and
major European currencies versus the U.S. dollar occurred between
February and April. This upward trend in these foreign currencies
lost momentum during May and June. However, a declining trend in
the Japanese yen relative to the U.S. dollar occurred between July
<PAGE>
and September resulting in net gains for the Partnership's short
yen positions during this period. Total expenses for the period
were $11,600,009, resulting in net loss of $3,499,764. The value
of an individual Unit in the Partnership decreased from $1,648.01
at December 31, 1994 to $1,587.57 at September 30, 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 III L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
November 8, 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 III L.P. and is qualified in its
entirety by references to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 74,391,369
<SECURITIES> 0
<RECEIVABLES> 303,259<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 81,563,418<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 81,563,418<F3>
<SALES> 0
<TOTAL-REVENUES> (2,185,971)<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,534,387
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,720,358)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,720,358)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,720,358)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $260,524 and receivable from
DWR of $42,735.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $6,868,790.
<F3>Liabilities include redemptions payable of $1,841,490, accrued brokerage
commissions of $138,232, accrued management fees of $205,041, accrued
administrative expenses of $94,001 and accrued transaction fees and
costs of $14,154.
<F4>Total revenues include realized trading revenue of $(5,676,192), net
change in unrealized of $950,794 and interest income of $2,539,427.
</FN>
</TABLE>
