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. 33-34989
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, 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 III 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 67,312,346 79,927,495
Net unrealized gain on open contracts 4,656,190 1,118,317
Total Trading Equity 71,968,536 81,045,812
Interest receivable (DWR) 231,813 274,540
Total Assets 72,200,349 81,320,352
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 947,702 938,829
Accrued management fees (DWFCM) 181,465 204,690
Accrued brokerage commissions (DWR) 164,463 100,576
Administrative expenses payable 128,212 97,983
Accrued transaction fees and costs 13,069 15,691
Total Liabilities 1,434,911 1,357,769
Partners' Capital
Limited Partners (43,581.980 and
52,062.498 Units, respectively) 69,174,883 78,452,540
General Partner (1,002.091 Units) 1,590,555 1,510,043
Total Partners' Capital 70,765,438 79,962,583
Total Liabilities and Partners' Capital 72,200,349 81,320,352
NET ASSET VALUE PER UNIT 1,587.24 1,506.89
<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,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit:
Realized 1,345,880 1,248,808
Net change in unrealized 3,610,429 5,426,107
Total Trading Results 4,956,309 6,674,915
Interest Income (DWR) 740,867 799,371
Total Revenues 5,697,176 7,474,286
EXPENSES
Brokerage commissions (DWR) 1,264,802 1,468,501
Management fees (DWFCM) 555,911 609,128
Transaction fees and costs 101,714 104,149
Administrative expenses 32,000 23,000
Total Expenses 1,954,427 2,204,778
NET INCOME 3,742,749 5,269,508
NET INCOME ALLOCATION
Limited Partners 3,664,124 5,177,525
General Partner 78,625 91,983
NET INCOME PER UNIT
Limited Partners 78.46 91.79
General Partner 78.46 91.79
<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,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 4,684,660 (5,676,192)
Net change in unrealized 3,537,873 950,794
Total Trading Results 8,222,533 (4,725,398)
Interest Income (DWR) 2,352,808 2,539,427
Total Revenues 10,575,341 (2,185,971)
EXPENSES
Brokerage commissions (DWR) 4,163,833 5,121,669
Management fees (DWFCM) 1,779,100 1,931,023
Transaction fees and costs 326,702 418,695
Administrative expenses 87,000 63,000
Total Expenses 6,356,635 7,534,387
NET INCOME (LOSS) 4,218,706 (9,720,358)
NET INCOME (LOSS) ALLOCATION
Limited Partners 4,138,194 (9,569,911)
General Partner 80,512 (150,447)
NET INCOME (LOSS) PER UNIT
Limited Partners 80.35 (150.13)
General Partner 80.35 (150.13)
<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, 1997 and 1996
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
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
Partners' Capital
December 31, 1996 53,064.589 $78,452,540 $1,510,043 $79,962,583
Net Income - 4,138,194 80,512 4,218,706
Redemptions (8,480.518) (13,415,851) - (13,415,851)
Partners' Capital
September 30, 1997 44,584.071 $69,174,883 $1,590,555 $70,765,438
<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,
1997 1996
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) 4,218,706 (9,720,358)
Noncash item included in net income (loss):
Net change in unrealized (3,537,873) (950,794)
Decrease in operating assets:
Interest receivable (DWR) 42,727 97,040
Due from DWR - 117,284
Increase (decrease) in operating liabilities:
Accrued management fees (DWFCM) (23,225) (52,639)
Accrued brokerage commissions (DWR) 63,887 (222,979)
Administrative expenses payable 30,229 (73,602)
Accrued transaction fees and costs (2,622) (21,020)
Net cash provided by (used for) operating activities 791,829 (10,827,068)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in redemptions payable 8,873 464,278
Redemptions of units (13,415,851) (11,222,724)
Net cash used for financing activities (13,406,978) <10,758,446)
Net decrease in cash (12,615,149) (21,585,514)
Balance at beginning of period 79,927,495 95,976,883
Balance at end of period 67,312,346 74,391,369
<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, 1996 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 (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"). 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
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Indosuez. Following the sale, Carr became the counterparty on
the Partnership's foreign currency trades. However, during a
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.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 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 2,568,000 -
Commodity Futures:
Commitments to Purchase 40,495,000 13,206,000
Commitments to Sell 27,838,000 40,027,000
Foreign Futures:
Commitments to Purchase 109,378,000 43,199,000
Commitments to Sell 31,316,000 80,268,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 143,813,000 220,399,000
Commitments to Sell 141,807,000 284,187,000
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.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 $4,656,190 and
$1,118,317 at September 30, 1997 and December 31, 1996
respectively. Of the $4,656,190 net unrealized gain on open
contracts at September 30, 1997, $3,180,549 related to exchange-
traded futures contracts and $1,475,641 related to off-exchange
traded forward currency contracts. Of the $1,118,317 net
unrealized gain on open contracts at December 31, 1996,
$2,867,245 related to exchange-traded futures contracts and
$(1,748,928) 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
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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
$70,463,175 and $82,794,740 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
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Carr, the sole counterparty on all of 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 the year ended
December 31, 1996, the average fair value of financial
instruments held for trading purposes was as follows:
September 30, 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 24,722,000 95,178,000
Commodity Futures 28,403,000 33,638,000
Foreign Futures 90,389,000 56,029,000
Off-Exchange-Traded Forward
Currency Contracts 138,998,000 200,478,000
December 31, 1996
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 105,297,000 55,515,000
Commodity Futures 48,290,000 34,261,000
Foreign Futures 150,041,000 54,933,000
Off-Exchange-Traded Forward
Currency Contracts 254,647,000 280,645,000
<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 Carr, and are
used by the Partnership as margin to engage in futures interest
trading. DWR and Carr hold such assets in either designated
depositoriesor in securities approved by 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 prices of a particular futures interest
futures 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
<PAGE>
prevent the Partnership from promptly liquidating its futures
interests and result in 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.
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 futures 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, 1997
For the quarter ended September 30, 1997, the Partnership's total
trading revenues including interest income were $5,697,176.
During 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
<PAGE>
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 quarter were $1,954,427, resulting in net income of
$3,742,749. The value of an individual Unit in the Partnership
increased from $1,508.78 at June 30, 1997, 1997 to $1,587.24 at
September 30, 1997.
For the nine months ended September 30, 1997, the Partnership's
total trading revenues including interest income were
$10,575,341. During the first three-quarters of year, the
Partnership posted a
<PAGE>
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 krona 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
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
<PAGE>
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
$6,356,635, resulting in net income of $4,218,706. The value of
an individual Unit in the Partnership increased from $1,506.89 at
December 31, 1996 to $1,587.24 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 $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 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 commodities markets. In the agricultural
markets, losses were recorded as soybean and corn futures prices
moved in an inconsistent pattern during most of the quarter.
<PAGE>
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 volatile movement in global stock index
futures prices during the first nine months of the year. In
<PAGE>
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>
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
<PAGE>
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 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.
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 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 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-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 67,312,346
<SECURITIES> 0
<RECEIVABLES> 231,813<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 72,200,349<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 72,200,349<F3>
<SALES> 0
<TOTAL-REVENUES> 10,575,341<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,356,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,218,706
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,218,706
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,218,706
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $231,813 and receivables
from DWR of $0.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $4,656,190.
<F3>Liabilities include redemptions payable of $947,702, accrued brokerage
commissions of $164,463, accrued management fees of $181,465, accrued
administrative expenses of $128,212 and accrued transaction fees and
costs of $13,069.
<F4>Total revenues include realized trading revenue of $4,684,660, net
change in unrealized of $3,537,873 and interest income of $2,352,808.
</FN>
</TABLE>
