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, 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. 33-90360
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 13-3461507
(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 LIMITED PARTNERSHIP
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 1996
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition June 30, 1996
(Unaudited) and December 31, 1995.....................2
Statements of Operations for the Quarters Ended
June 30, 1996 and 1995 (Unaudited)....................3
Statements of Operations for the Six Months Ended
June 30, 1996 and 1995 (Unaudited)....................4
Statements of Changes in Partners' Capital for the
Six Months ended June 30, 1996 and 1995
(Unaudited)...........................................5
Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 (Unaudited)....................6
Notes to Financial Statements (Unaudited)........... ........ 7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..12-17
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................. 18
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
June 30, December 31,
1996 1995
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 160,669,539 186,577,817
Net unrealized gain on open contracts 798,700 7,961,783
Total Trading Equity 161,468,239 194,539,600
Interest receivable (DWR) 560,820 694,646
Due from DWR - 257,457
Total Assets 162,029,059 195,491,703
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 4,048,388 76,096
Accrued management fee (DWFCM) 410,454 464,750
Accrued brokerage commissions (DWR) 182,285 628,375
Administrative expenses payable 91,565 97,122
Accrued transaction fees and costs 54,359 61,596
Total Liabilities 4,787,051 1,327,939
Partners' Capital
Limited Partners (192,556.362 and
205,070.252 Units, respectively) 155,402,512 192,029,423
General Partner (2,279.285 Units) 1,839,496 2,134,341
Total Partners' Capital 157,242,008 194,163,764
Total Liabilities and Partners' Capital 162,029,059 195,491,703
NET ASSET VALUE PER UNIT 807.05 936.41
<FN>
The accompanying footnotes are an integral part
of these financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended June 30,
1996 1995
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 7,916,841 475,036
Net change in unrealized (8,103,617) (442,581)
Total Trading Results (186,776) 32,455
Interest Income (DWR) 1,713,740 35,387
Total Revenues 1,526,964 67,842
EXPENSES
Brokerage fees (DWR) 3,157,625 67,027
Management fees (DWFCM) 1,263,640 22,431
Transaction fees and costs 250,913 6,031
Administrative expenses 9,000 -
Total Expenses 4,681,178 95,489
NET LOSS (3,154,214) (27,647)
NET LOSS ALLOCATION
Limited Partners (3,117,734) (26,793)
General Partner (36,480) (854)
NET LOSS PER UNIT
Limited Partners (16.00) (10.78)
General Partner (16.00) (10.78)
<FN>
The accompanying footnotes are an integral part
of these financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Six Months Ended June 30,
1996 1995
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized (12,355,946) 607,208
Net change in unrealized (7,163,083) (272,262)
Total Trading Results (19,519,029) 334,946
Interest Income (DWR) 3,518,521 68,291
Total Revenues (16,000,508) 403,237
EXPENSES
Brokerage fees (DWR) 7,355,683 140,710
Management fees (DWFCM) 2,656,468 43,863
Transaction fees and costs 579,114 11,613
Administrative fees 40,000 4,000
Incentive fees (DWFCM) - 27,484
Total Expenses 10,631,265 227,670
NET INCOME (LOSS) (26,631,773) 175,567
NET INCOME (LOSS) ALLOCATION
Limited Partners (26,336,928) 170,996
General Partner (294,845) 4,571
NET INCOME (LOSS) PER UNIT
Limited Partners (129.36) 57.65
General Partner (129.36) 57.65
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 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 2,969.768 $2,836,167 $77,795 $2,913,962
Net Income - 170,996 4,571 175,567
Redemptions (178.390) (189,671) - (189,671)
Partners' Capital
June 30, 1995 2,791.378 $2,817,492 $82,366 $2,899,858
Partners' Capital
December 31, 1995 207,349.537 $192,029,423 $2,134,341 $194,163,764
Net Loss - (26,336,928) (294,845) (26,631,773)
Redemptions (12,513.890) (10,289,983) - (10,289,983)
Partners' Capital
June 30, 1996 194,835.647 $155,402,512 $1,839,496 $157,242,008
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Six Months Ended June 30,
1996 1995
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) (26,631,773) 175,567
Noncash item included in net income (loss):
Net change in unrealized 7,163,083 272,262
Increase in operating assets:
Interest receivable (DWR) 133,826 5,552
Due from DWR 257,457 1,986
Increase (decrease) in operating liabilities:
Accrued management fee (DWFCM) (54,296) (35)
Accrued brokerage commissions (DWR) (446,090) (2,951)
Accrued administrative expenses (5,557) (14,307)
Accrued transaction fees and costs (7,237) 239
Net cash provided by (used for) operating activities (19,590,587) 438,313
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in redemptions payable 3,972,292 -
Redemptions of units (10,289,983) (189,671)
Net cash used for financing activities (6,317,691) (189,671)
Net increase (decrease) in cash (25,908,278) 248,642
Balance at beginning of period 186,577,817 2,521,366
Balance at end of period 160,669,539 2,770,008
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
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 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 & 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.
Brokerage expenses incurred by the Partnership are paid to DWR.
Management and incentive fees incurred by the Partnership are paid
to DWFCM.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. Offering of Units
The Partnership initially commenced operation in April 1988 as a
private placement. The General Partner registered additional units
of Limited Partnership interest with the Securities and Exchange
Commission for a public offering held in August 1995. Units were
offered at $1,000 per Unit for issuance at the First Closing which
was held on September 1, 1995 and resulted in an additional
$205,135,863 investment to the Partnership.
At the close of business on August 31, 1995, the General Partner
issued to each existing Partner additional Units in such amounts as
necessary so that the Net Asset Value of all outstanding Units on
the date of the First Closing was equal to $1,000.00 per Unit.
Unit amounts for periods prior to August 31, 1995 have been
adjusted to reflect this change.
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
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
influence the market value of these contracts, including interest
rate volatility. At June 30, 1996, open contracts were:
Contract or
Notional Amount
$
Exchange-Traded Contracts
Financial Futures
Commitments to Purchase 3,290,000
Commitments to Sell 56,696,000
Commodity Futures:
Commitments to Purchase 25,472,000
Commitments to Sell 56,721,000
Foreign Futures:
Commitments to Purchase 164,689,000
Commitments to Sell 241,602,000
Off-Exchange-Traded Forward
Currency Contracts
Commitments to Purchase 515,570,000
Commitments to Sell 537,785,000
A portion of the amounts indicated as off-balance-sheet risk in
forward currency contracts is due to offsetting forward commitments
to purchase and to sell the same currency on the same date in the
future. These commitments are economically offsetting, but are not
offset in the forward market until the settlement date.
The 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 $798,700 at June 30, 1996. Of this
amount, $3,014,469 related to exchange-traded futures contracts and
($2,215,769) related to off-exchange-traded forward currency
contracts.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Exchange-traded futures contracts held by the Partnership at June
30, 1996 mature through March 1997. Off-exchange-traded forward
currency contracts held by the Partnership at June 30, 1996 mature
through August 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
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 $163,684,008 at June 30, 1996. With
respect to the Partnership's off-exchange-traded forward currency
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 quarter ended June 30, 1996, the average fair value of
financial instruments held for trading purposes was as follows:
Assets Liabilities
$ $
Exchange-Traded Contracts
Financial Futures 245,953,000 228,993,000
Commodity Futures 151,575,000 41,720,000
Foreign Futures 234,982,000 126,184,000
Off-Exchange-Traded Forward
Currency Contracts 483,306,000 608,201,000
5. Subsequent Event
Effective September 1, 1996, maximum total brokerage commissions
and transaction fees chargeable to the Partnership will be capped
at .65% per month of adjusted Net Assets as defined in the Limited
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, 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, forward contracts on foreign
currencies and other commodity interests. 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, 1996
For the quarter ended June 30, 1996, the Partnership's total
trading revenues including interest income were $1,526,964. 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
<PAGE>
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 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 $4,681,179,
resulting in a net loss of $3,154,215. The value of an individual
Unit in the Partnership decreased from $823.05 at March 31, 1996 to
$807.05 at June 30, 1996.
<PAGE>
For the six months ended June 30, 1996, the Partnership's total
trading losses net of interest income were $16,000,508. 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
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, as well as from gains in
crude oil futures during March, 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
$10,631,265, resulting in a net loss of $26,631,773. The value of
an individual Unit in the Partnership decreased from $936.41 at
December 31, 1995 to $807.05 at June 30, 1996. Partnership results
of operations for quarter and six months ended June 30, 1996 are
not comparable to the same periods in 1995 due to the significant
<PAGE>
additional investments made on September 1, 1995 as discussed in
Note 3 to the financial statements.
For the Quarter and Six Months Ended June 30, 1995
For the quarter ended June 30, 1995 the Partnership's total
revenues including interest income were $67,842. During the second
quarter, the Partnership posted a loss in Net Asset Value per Unit.
The most significant trading losses during the quarter were
recorded from transactions involving most European currencies
versus the U.S. dollar during May and June. Additional losses were
recorded in the agricultural markets as a result of losses in
soybean products and livestock futures. Trading losses were also
experienced in the metals markets as base metals prices moved in a
trendless pattern throughout the quarter. In soft commodities
trading, losses in cotton, cocoa and orange juice more than offset
smaller gains in coffee trading. Trading losses experienced in the
energy markets were the result of losses in heating oil, natural
gas and gas oil during April and June. Trading gains in the
financial futures markets during April and May offset a portion of
overall losses recorded by the Partnership during the second
quarter. The majority of these gains were recorded from trading
both global interest rate and stock index futures. Total expenses
for the period were $95,489, resulting in a net loss of $27,647.
The value of an individual Unit in the Partnership decreased from
$1,049.64 at March 31, 1995 to $1,038.86 at June 30, 1995.
<PAGE>
For the six months ended June 30, 1995 the Partnership's total
revenues including interest income were $463,237. During the first
six months, 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 recorded in the financial
futures markets as a result of trading Japanese and U.S. interest
rate futures and global stock index futures during the first half
of the year. A portion of the Partnership's gains recorded during
the first half of the year were offset due to losses recorded in
the agricultural markets from trading soybean products and in soft
commodities as a result of trading losses in sugar, cotton, coffee
and cocoa. Additional losses were recorded in the energy and
metals markets during the first half of 1995. Total expenses for
the period were $227,670, resulting in net income of $175,567. The
value of an individual Unit in the Partnership increased from
$981.21 at December 31, 1994 to $1,038.86 at June 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 L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
August 9, 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 Limited Partnership and is qualified in
its entirety by reference to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 160,669,539
<SECURITIES> 0
<RECEIVABLES> 560,820
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 162,029,059<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 162,029,059<F2>
<SALES> 0
<TOTAL-REVENUES> (16,000,508)<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,631,265
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (26,631,773)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,631,773)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,631,773)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $798,700.
<F2>Liabilities include redemptions payable of $4,048,388, accrued brokerage
commissions of $182,285, accrued management fees of $410,454 and
administrative expenses payable of $91,565 and accrued transaction fees
and costs of $54,359.
<F3>Total revenues includes realized trading revenue of $(12,355,946), net
change in unrealized of $(7,163,083) and interest income of $3,518,521.
</FN>
</TABLE>
