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 June 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 Corporation
Two World Trade Center, 62 Fl., New York, NY 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
June 30, 1997
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
June 30, 1997 (Unaudited) and December 31, 1996.......2
Statements of Operations for the Quarters Ended
June 30, 1997 and 1996 (Unaudited)....................3
Statements of Operations for the Six Months
Ended June 30, 1997 and 1996 (Unaudited)..............4
Statements of Changes in Partners' Capital for the
Six Months ended June 30, 1997 and 1996 (Unaudited)...5
Statements of Cash Flows for the Six Months Ended
June 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>
June 30, December 31,
1997 1996
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 73,534,541 79,927,495
Net unrealized gain on open contracts 1,045,762 1,118,317
Total Trading Equity 74,580,303 81,045,812
Interest receivable (DWR) 242,281 274,540
Receivable from DWR 58,423 -
Total Assets 74,881,007 81,320,352
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 2,504,668 938,829
Accrued brokerage commissions (DWR) 245,809 100,576
Accrued management fee (DWFCM) 187,873 204,690
Administrative expenses payable 103,912 97,983
Accrued transaction fees and costs 15,179
15,691
Total Liabilities 3,057,441 1,357,769
Partners' Capital
Limited Partners (46,601.787 and
52,062.498 Units, respectively)70,311,636 78,452,540
General Partner (1,002.091 Units) 1,511,930 1,510,043
Total Partners' Capital 71,823,566 79,962,583
Total Liabilities and Partners' Capital74,881,007 81,320,352
NET ASSET VALUE PER UNIT 1,508.78 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 June 30,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized (2,552,161) 3,580,927
Net change in unrealized (1,489,076) (4,224,322)
Total Trading Results (4,041,237) (643,395)
Interest Income (DWR) 783,263 854,423
Total Revenues (3,257,974) 211,028
EXPENSES
Brokerage commissions (DWR) 1,390,726 1,584,261
Management fee (DWFCM) 576,906 632,258
Transaction fees and costs 109,235 135,947
Administrative expenses 28,000 21,000
Total Expenses 2,104,867 2,373,466
NET LOSS (5,362,841) (2,162,438)
NET LOSS ALLOCATION
Limited Partners (5,255,805) (2,125,205)
General Partner (107,036) (37,233)
NET LOSS PER UNIT
Limited Partners (106.81) (37.16)
General Partner (106.81) (37.16)
<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 Six Months Ended June 30,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 3,338,781 (6,925,000)
Net change in unrealized (72,555) (4,475,314)
Total Trading Results 3,266,226 (11,400,314)
Interest Income (DWR) 1,611,941 1,740,058
Total Revenues 4,878,167 (9,660,256)
EXPENSES
Brokerage commissions (DWR) 2,899,031 3,653,168
Management fee (DWFCM) 1,223,188 1,321,894
Transaction fees and costs 224,991 314,548
Administrative expenses 55,000 40,000
Total Expenses 4,402,210 5,329,610
NET INCOME (LOSS) 475,957 (14,989,866)
NET INCOME (LOSS) ALLOCATION
Limited Partners 474,070 (14,747,436)
General Partner 1,887 (242,430)
NET INCOME (LOSS) PER UNIT
Limited Partners 1.89 (241.92)
General Partner 1.89 (241.92)
<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 Six Months Ended June 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 - (14,747,436)
(242,430) (14,989,866)
Redemptions (4,981.551) (7,011,873)
- - (7,011,873)
Partners' Capital,
June 30, 1996 58,374.410 $76,869,211
$1,342,632 $78,211,843
Partners' Capital,
December 31, 1996 53,064.589 $78,452,540 $1,510,043 $79,962,583
Net Income - 474,070 1,887 475,957
Redemptions (5,460.711) (8,614,974) - (8,614,974)
Partners' Capital,
June 30, 1997 47,603.878$70,311,636 $1,511,930 $71,823,566
<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 Six Months Ended June 30,
1997 1996
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) 475,957
(14,989,866)
Noncash item included in net income (loss):
Net change in unrealized 72,555
4,475,314
(Increase) decrease in operating assets:
Interest receivable (DWR) 32,259 80,697
Due from DWR (58,423) 160,019
Increase (decrease) in operating liabilities:
Accrued brokerage commissions (DWR)145,233
(277,025)
Accrued management fees (DWFCM)(16,817)
(56,423)
Administrative expenses payable 5,929 (75,309)
Accrued transaction fees and costs (512)
(8,250)
Net cash provided by (used for) operating activities 656,181
(10,690,843)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable1,565,839
(76,994)
Redemptions of units (8,614,974)
<7,011,873)
Net cash used for financing activities (7,049,135)
<7,088,867)
Net decrease in cash (6,392,954)
<17,779,710)
Balance at beginning of period 79,927,495
95,976,883
Balance at end of period 73,534,541
78,197,173
<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 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").
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 June 30, 1997 and
December 31, 1996, open contracts were:
Contract or Notional Amount
June 30, 1997 December 31, 1996
$ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 104,880,000 -
Commodity Futures:
Commitments to Purchase 21,129,000 13,206,000
Commitments to Sell 72,622,000 40,027,000
Foreign Futures:
Commitments to Purchase 158,739,000 43,199,000
Commitments to Sell 72,939,000 80,268,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 156,434,000 220,399,000
Commitments to Sell 168,228,000 284,187,000
<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 gains on open contracts are reported as a
component of "Equity in Commodity futures trading accounts" on
the Statements of Financial Condition and totaled $1,045,762 and
$1,118,317 at June 30, 1997 and December 31, 1996 respectively.
Of the $1,045,762 net unrealized gain on open contracts at June
30, 1997, $2,011,010 related to exchange-traded futures contracts
and $(965,248) 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 June
30, 1997 and December 31, 1996 mature through December 1997 and
June 1997, respectively. Off-exchange-traded forward currency
contracts held by the Partnership at June 30, 1997 and December
31, 1996 mature through August 1997 and February 1997,
respectively.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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
$75,545,551 and $82,794,740 at June 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
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
respect to those off-exchange-traded forward currency contracts,
the Partnership is at risk to the ability of DWR, the sole
counterparty on all of such contracts, to perform.
For the six months ended June 30, 1997 and the year ended
December 31, 1996, the average fair value of financial
instruments held for trading purposes was as follows:
June 30, 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 18,989,000 135,968,000
Commodity Futures 28,290,000 35,370,000
Foreign Futures 91,309,000 61,614,000
Off-Exchange-Traded Forward
Currency Contracts 135,549,000 189,798,000
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
4. Subsequent Event
On July 31, 1997, DWR closed the sale of its institutional
futures
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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
transition period of about three months, DWR will continue to
perform certain services relating to the Partnership's futures
trading including clearance. After such transition period, DWR
will continue to serve as a futures broker for the Partnership
with Carr providing execution and clearing services for the
Partnership's account.
<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 are used by the
Partnership as margin to engage in futures interest trading. DWR
holds 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 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
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 prevent
<PAGE>
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.
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 and sales 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 Six Months Ended June 30, 1997
For the quarter ended June 30, 1997, the Partnership's total
<PAGE>
trading losses net of interest income were $3,257,974. During
the second quarter, the Partnership posted a decrease in Net
Asset Value per Unit. Losses were recorded in the financial
futures markets during April from short positions in U.S.
interest rate futures as prices moved higher late in the month.
This upward price move resulted in the Partnership establishing
new long positions, which recorded additional losses in May as
prices finished the month lower. Smaller losses were recorded as
a result of similar choppy price movement in European interest
rate futures during April and May. A portion of these losses was
offset in June from long global interest rate and stock index
futures positions as prices in these markets moved higher.
Trading losses were also recorded in the energy and metals
markets as oil and gas prices, as well as base metals prices,
moved in a choppy pattern throughout a majority of the quarter.
Smaller losses were recorded in the currency markets as gains
experienced from a strengthening in the value of the U.S. dollar
versus the Japanese yen during April were more than offset by
losses recorded from transactions involving the Swiss franc
during June and from transactions involving the Canadian dollar
and British pound during May. A portion of the Partnership's
overall losses for the quarter was offset by gains experienced
from long coffee futures positions as coffee prices trended
higher during April and May. Gains recorded from short soybean
and corn futures positions, as prices in these markets moved
lower during June, also helped to mitigate losses during the
quarter. Total expenses for the
<PAGE>
quarter were $2,104,867, resulting in a net loss of $5,362,841.
The value of an individual Unit in the Partnership decreased from
$1,615.59 at March 31, 1997 to $1,508.78 at June 30, 1997.
For the six months ended June 30, 1997, the Partnership's total
trading revenues including interest income were $4,878,167.
During the first six months, the Partnership posted an increase
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 during the period
January through April. A portion of these gains was offset by
losses from transactions involving the British pound and Canadian
dollar during February, March and May. Gains were also recorded
in soft commodities from long coffee futures positions as coffee
prices trended steadily higher during January and February and
again during April and May. Trading gains were also recorded in
the agricultural markets from trading soybean and corn futures.
A majority of the Partnership's overall gains for the first half
of the year were offset by losses in global interest rate futures
as prices in these markets moved in a short-term volatile range
during the period January to April. Losses were also recorded
fromt trading energy futures during the second quarter as oil and
gas prices moved without consistent direction. Smaller losses
were recorded in metals as gains recorded from short gold futures
positions during January were more than offset by losses in base
metals futures trading during the second quarter. Total expenses
<PAGE>
for the period were $4,402,210, resulting in net income of
$475,957. The value of an individual Unit in the Partnership
increased from $1,506.89 at December 31, 1996 to $1,508.78 at
June 30, 1997.
For the Quarter and Six Months Ended June 30, 1996
For the quarter ended June 30, 1996, the partnership's total
trading revenues including interest income were $211,028. During
the second quarter, the Partnership posted a decrease in Net
Asset Value per Unit. The most significant trading losses during
the quarter were recorded in the financial futures markets as
trendless price movement was experienced in non-U.S. interest
rate futures, particularly in Australian, Japanese and European
interest rate futures. Trading gains recorded during April and
May from short U.S. interest rate futures positions, as prices in
these markets moved lower, offset a portion of these losses.
Additional losses for the Partnership were recorded in global
stock index futures as prices moved without consistent direction
throughout the quarter. In soft commodities, losses experienced
from short-term volatile movement in sugar and coffee futures
prices during April and May, as well as from losses in coffee and
cocoa futures during June, more than offset gains recorded in
June from short cotton positions as prices moved lower and from
long sugar positions as prices moved higher. In currency
trading, gains were recorded during April from short German mark
and Swiss franc positions as the value of the German mark and
Swiss franc
<PAGE>
moved lower relative to the U.S. dollar and other world
currencies. Smaller trading gains were recorded by the
Partnership during May from long Australian dollar positions as
the value of the Australian dollar moved higher relative to other
world currencies. Additional gains were recorded in metals
trading from short copper, gold and silver futures positions as
prices moved lower during June. In the agricultural markets,
gains recorded from long corn and wheat futures positions as
prices moved higher during April, offset losses in corn and
soybean products in June. Smaller gains were recorded in the
energy markets as gains in natural gas futures more than offset
losses in other gas and oil products. Total expenses for the
quarter were $2,373,466, resulting in a net loss of $2,162,438.
The value of an individual Unit in the Partnership decreased from
$1,376.99 at March 31, 1996 to $1,339.83 at June 30, 1996.
For the six months ended June 30, 1996, the Partnership's total
trading losses net of interest income were $9,660,256. During
the first half of the year, the Partnership posted a decrease in
Net Asset Value per Unit primarily as a result of a sudden and
sharp trend reversal during February in the downward move in the
value of the Japanese yen and most major European currencies,
which had resulted in gains during January. 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.
Additionally, trendless
<PAGE>
price movement in global interest rate futures trading during the
second quarter, resulted in losses for the Partnership. In
energy trading, gains in natural gas futures during June, as well
as from gains in natural gas futures during June, offset a
portion of overall losses for the first half of the year. In
agricultural trading, long positions in corn and wheat futures
profited from increasing prices early in the second quarter.
These gains helped to mitigate losses experienced from trading
soybean futures during the first quarter. Short-term volatile
price movement in soft commodities futures resulted in losses for
the Partnership during a majority of the first half of the year.
Total expenses for the period were $5,329,610, resulting in a net
loss of $14,989,866. The value of an individual Unit in the
Partnership decreased from $1,581.75 at December 31, 1995 to
$1,339.83 at June 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.
<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)
August 8, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 73,534,541
<SECURITIES> 0
<RECEIVABLES> 300,704<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 74,881,007<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 74,881,007<F3>
<SALES> 0
<TOTAL-REVENUES> 4,878,167<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,402,210
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 475,957
<INCOME-TAX> 0
<INCOME-CONTINUING> 475,957
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 475,957
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $242,281 and receivables
from DWR of $58,423.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $1,045,762.
<F3>Liabilities include redemptions payable of $2,504,668, accrued brokerage
commissions of $245,809, accrued management fees of $187,873, accrued
administrative expenses of $103,912 and accrued transaction fees and
costs of $15,179.
<F4>Total revenues include realized trading revenue of $3,338,781, net
change in unrealized of $(72,555) and interest income of $1,611,941.
</FN>
</TABLE>
