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. 33-34989
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
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).......... 6-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..11-14
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................. 15
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND III 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 79,903,565 95,976,883
Net unrealized gain on open contracts 5,667,005 5,917,996
Total Trading Equity 85,570,570 101,894,879
Interest receivable (DWR) 280,506 357,564
Receivable from DWR 81,597 160,019
Total Assets 85,938,673 102,412,462
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 1,174,890 1,377,212
Accrued management fee (DWFCM) 216,637 257,680
Accrued brokerage commissions (DWR) 110,397 361,211
Accrued administrative expenses 88,029 167,603
Accrued transaction fees and costs 11,434 35,174
Total Liabilities 1,601,387 2,198,880
Partners' Capital
Limited Partners (60,245.680 and
62,353.870 Units, respectively) 82,957,421 98,628,520
General Partner (1,002.091 Units) 1,379,865 1,585,062
Total Partners' Capital 84,337,286 100,213,582
Total Liabilities and Partners' Capital 85,938,673 102,412,462
NET ASSET VALUE PER UNIT 1,376.99 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 March 31,
1996 1995
$ $
<S> <C> <C>
REVENUES
Trading profit (loss):
Realized (10,505,927) 4,552,102
Net change in unrealized (250,991) 8,846,534
Total Trading Results (10,756,918) 13,398,636
Interest Income (DWR) 885,634 1,262,859
Total Revenues (9,871,284) 14,661,495
EXPENSES
Brokerage commissions (DWR) 2,068,908 2,616,760
Management fee (DWFCM) 689,636 873,745
Transaction fees and costs 178,600 254,537
Administrative expenses 19,000 12,000
Incentive fee (DWFCM) - 720,909
Total Expenses 2,956,144 4,477,951
NET INCOME (LOSS) (12,827,428) 10,183,544
NET INCOME (LOSS) ALLOCATION
Limited Partners (12,622,231) 10,035,510
General Partner (205,197) 148,034
NET INCOME (LOSS) PER UNIT
Limited Partners (204.76) 147.73
General Partner (204.76) 147.73
<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 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 71,363.599 $115,956,558 $1,651,457 $117,608,015
Net Income - 10,035,510 148,034 10,183,544
Redemptions (2,965.626) (4,966,884) - (4,966,884)
Partners' Capital
March 31, 1995 68,397.973 $121,025,184 $1,799,491 $122,824,675
Partners' Capital
December 31, 1995 63,355.961 $98,628,520 $1,585,062 $100,213,582
Net Loss - (12,622,231) (205,197) (12,827,428)
Redemptions (2,108.190) (3,048,868) - (3,048,868)
Partners' Capital
March 31, 1996 61,247.771 $82,957,421 $1,379,865 $84,337,286
<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 Quarters Ended March 31,
1996 1995
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) (12,827,428) 10,183,544
Noncash item included in net income (loss):
Net change in unrealized 250,991 (8,846,534)
(Increase) decrease in operating assets:
Interest receivable (DWR) 77,058 25,987
Receivable from DWR 72,422 (174,172)
Increase (decrease) in operating liabilities:
Accrued management fee (DWFCM) (41,043) 17,510
Accrued brokerage commissions (DWR) (250,814) 22,498
Accrued administrative expenses (79,574) (25,237)
Accrued transaction fees and costs (23,740) 17,683
Accrued incentive fee (DWFCM) - 720,909
Net cash provided by (used for) operating activities (12,822,128) 1,942,188
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable (202,322) 1,159,256
Redemptions of units (3,048,868) (4,966,884)
Net cash used for financing activities (3,251,190) (3,807,628)
Net decrease in cash (16,073,318) (1,865,440)
Balance at beginning of period 95,976,883 104,333,630
Balance at end of period 79,903,565 102,468,190
<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")
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"). 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.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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 1,902,000
Commitments to Sell 171,904,000
Commodity Futures:
Commitments to Purchase 57,591,000
Commitments to Sell 1,890,000
Foreign Futures:
Commitments to Purchase 6,714,000
Commitments to Sell 81,814,000
Off Exchange Traded Contracts
Forward Currency Contracts:
Commitments to Purchase 163,664,000
Commitments to Sell 122,554,000
<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 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 $5,667,005 at March 31, 1996. Of
this amount, $4,921,754 was related to exchange-traded futures
contracts and $745,251 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 non-performance. The credit risk
associated with these instruments is limited to the amounts
reflected in the Partnership's Statements of Financial Condition.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 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 gains on all open futures contracts which funds
totaled $84,825,319 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 Partnership is at
risk to the ability of DWR, the counterparty on all of such
contracts, to perform.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 207,336,000 121,254,000
Commodity Futures 108,839,000 20,433,000
Foreign Futures 165,820,000 56,178,000
Off-Exchange-Traded Foreign
Currency Contracts 271,393,000 349,335,000
<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 on foreign currencies 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 Ended March 31, 1996
For the quarter ended March 31, 1996, the Partnership's total
trading losses net of interest income were $9,871,284. 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 $2,956,144, resulting in a net
loss of $12,827,428. The value of an individual Unit in the
Partnership decreased from $1,581.75 at December 31, 1995 to
$1,376.99 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 $14,661,495.
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
<PAGE>
recorded in the financial 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 $4,477,951,
generating net income of $10,183,544. The value of an individual
Unit in the Partnership increased from $1,648.01 at December 31,
1994 to $1,795.74 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 III 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 III 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> 79,903,565
<SECURITIES> 0
<RECEIVABLES> 362,103<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 85,938,673<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 30,201,040<F3>
<SALES> 0
<TOTAL-REVENUES> 8,554,233<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,683,013
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,871,220
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,871,220
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,871,220
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $280,506 and receivable from
DWR of $81,597.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $5,667,005.
<F3>Liabilities include redemptions payable of $1,174,890, accrued brokerage
commissions of $110,397, accrued management fees of $216,637, accrued
administrative expenses of $88,029 and accrued transaction fees and costs
of $11,434.
<F4>Total revenues includes realized trading revenue of $(10,505,927), net
change in unrealized of $(250,991) and interest income of $885,634.
</FN>
</TABLE>
