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, 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. 33-90360
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
March 31, 1997
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition March 31, 1997
(Unaudited) and December 31, 1996.....................2
Statements of Operations for the Quarters Ended
March 31, 1997 and 1996 (Unaudited)...................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 1997 and 1996
(Unaudited)...........................................4
Statements of Cash Flows for the Quarters Ended
March 31, 1997 and 1996 (Unaudited)...................5
Notes to Financial Statements (Unaudited)......... 6-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..........12-16
Part II. OTHER INFORMATION
Item 1. Legal Proceedings..............................17-18
Item 6. Exhibits and Reports on Form 8-K..................19
</TABLE>
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<TABLE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
1997 1996
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 164,943,807 166,737,088
Net unrealized gain (loss) on open contracts 3,471,430 (10,164)
Total Trading Equity 168,415,237 166,726,924
Interest receivable (DWR) 589,440 574,678
Due from DWR 279,461 -
Total Assets 169,284,138 167,301,602
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 2,276,877 2,811,995
Accrued brokerage commissions (DWR) 469,732 208,243
Accrued management fee (DWFCM) 441,631 455,428
Administrative expenses payable 131,768 106,568
Accrued transaction fees and costs 34,695 32,213
Total Liabilities 3,354,703 3,614,447
Partners' Capital
Limited Partners (167,368.481 and
177,301.806 Units, respectively) 163,700,107 161,609,600
General Partner (2,279.285 Units) 2,229,328 2,077,555
Total Partners' Capital 165,929,435 163,687,155
Total Liabilities and Partners' Capital 169,284,138 167,301,602
NET ASSET VALUE PER UNIT 978.08 911.49
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 March 31,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 11,502,267 (20,272,787)
Net change in unrealized 3,481,594 940,534
Total Trading Results 14,983,861 (19,332,253)
Interest Income (DWR) 1,724,246 1,804,781
Total Revenues 16,708,107 (17,527,472)
EXPENSES
Brokerage commissions (DWR) 3,050,337 4,198,057
Management fee (DWFCM) 1,276,057 1,392,828
Transaction fees and costs 248,792 328,202
Administrative expenses 43,000 31,000
Total Expenses 4,618,186 5,950,087
NET INCOME (LOSS) 12,089,921 (23,477,559)
NET INCOME (LOSS) ALLOCATION
Limited Partners 11,938,148 (23,219,194)
General Partner 151,773 (258,365)
NET INCOME (LOSS) PER UNIT
Limited Partners 66.59 (113.36)
General Partner 66.59 (113.36)
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 Quarters Ended March 31, 1997 and 1996
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C>
<C> <C>
Partners' Capital
December 31, 1995 207,349.537 $192,029,423 $2,134,341 $194,163,764
Net Loss - (23,219,194) (258,365) (23,477,559)
Redemptions (3,966.270) (3,290,660) - (3,290,660)
Partners' Capital
March 31, 1996 203,383.267 $165,519,569 $1,875,976 $167,395,545
Partners' Capital
December 31, 1996 179,581.091 $161,609,600 $2,077,555 $163,687,155
Net Income - 11,938,148 151,773 12,089,921
Redemptions (9,933.325) (9,847,641) - (9,847,641)
Partners' Capital
March 31, 1997 169,647.766 $163,700,107 $2,229,328 $165,929,435
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 Quarters Ended March 31,
1997 1996
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) 12,089,921 (23,477,559)
Noncash item included in net income (loss):
Net change in unrealized (3,481,594) (940,534)
(Increase) decrease in operating assets:
Interest receivable (DWR) (14,762) 143,693
Due from DWR (279,461) 78,019
Increase (decrease) in operating liabilities:
Accrued brokerage commissions (DWR) 261,489 (408,860)
Accrued management fee (DWFCM) (13,797) (42,053)
Administrative expenses payable 25,200 (14,557)
Accrued transaction fees and costs 2,482 (38,997)
Net cash provided by (used for) operating activities 8,589,478 (24,700,848)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable (535,118) 1,618,950
Redemptions of units (9,847,641) (3,290,660)
Net cash used for financing activities (10,382,759) (1,671,710)
Net decrease in cash (1,793,281) (26,372,558)
Balance at beginning of period 166,737,088 186,577,817
Balance at end of period 164,943,807 160,205,259
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, 1996 Annual Report on Form 10-K.
1. Organization
Dean Witter Diversified Futures Fund Limited Partnership (the
"Partnership") is a limited partnership organized to engage in
the speculative trading of commodity futures and futures related
contracts, including forward contracts on foreign currencies.
The general partner for the Partnership is Demeter Management
Corporation ("Demeter"). The commodity broker is Dean Witter
Reynolds Inc. ("DWR"). The trading manager is Dean Witter
Futures & Currency Management, Inc. ("DWFCM"). Demeter, DWR, and
DWFCM are all wholly owned subsidiaries of Dean Witter, Discover
& Co. ("DWD").
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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, 1997 and
December 31, 1996, open contracts were:
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Contract or Notional Amount
March 31, 1997 December 31, 1996
$ $
Exchange-Traded Contracts
Financial Futures
Commitments to Sell 746,483,000 -
Commodity Futures:
Commitments to Purchase 120,462,000 28,117,000
Commitments to Sell 48,278,000 84,112,000
Foreign Futures:
Commitments to Purchase 47,778,000 86,391,000
Commitments to Sell 348,801,000 163,838,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 229,326,000 442,642,000
Commitments to Sell 399,405,000 573,157,000
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 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unrealized gain (loss) on open contracts is reported as a
component of "Equity in Commodity futures trading accounts" on
the Statement of Financial Condition and totaled $3,471,430 and
$(10,164) at March 31, 1997 and December 31, 1996, respectively.
Of the $3,471,430 net unrealized gain on open contracts at March
31, 1997, $7,398,891 related to exchange-traded futures contracts
and $(3,927,461) related to off-exchange-traded forward currency
contracts. Of the $(10,164) net unrealized loss on open
contracts at December 31, 1996, $3,667,477 related to exchange-
traded futures contracts and $(3,677,641) related to off-exchange-
traded forward currency contracts.
Exchange-traded futures contracts held by the Partnership at
March 31, 1997 and December 31, 1996 mature through December 1997
and June 1997, respectively. Off-exchange traded forward
currency contracts held at March 31, 1997 and December 31, 1996
mature through May 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 counterparty
non-performance.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 gains
on all open futures contracts, which funds totaled $172,342,698
and $170,404,565 at March 31, 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 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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.
For the quarter ended March 31, 1997 and the year ended December
31, 1996 the average fair value of financial instruments held for
trading purposes was as follows:
March 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 12,032,000 326,655,000
Commodity Futures 73,347,000 57,737,000
Foreign Futures 213,384,000 134,899,000
Off-Exchange-Traded Forward
Currency Contracts 261,202,000 431,310,000
December 1996
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 198,372,000 116,558,000
Commodity Futures 92,560,000 69,758,000
Foreign Futures 282,199,000 109,444,000
Off-Exchange-Traded Forward
Currency Contracts 489,931,000 540,039,000
<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 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 contracts 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
<PAGE>
no trading. Such market conditions could prevent the Partnership
from promptly liquidating its commodity futures positions.
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 Limited Partners, it is not possible to
estimate the amount and therefore, the impact of future
redemptions.
<PAGE>
Results of Operations
For the Quarter Ended March 31, 1997
For the quarter ended March 31, 1997, the Partnership's total
trading revenues including interest income were $16,708,107.
During the first quarter, 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 versus the Japanese
yen and most major European currencies during January and
February. A portion of these gains was offset by losses from
transactions involving the British pound, as well as the Canadian
and Australian dollars, during February and March. Gains were
also recorded in soft commodities from long coffee futures
positions as prices in this market trended steadily higher during
January and February, before reversing lower during March.
Additional trading gains were recorded in the metals markets from
short gold futures positions as gold prices, which began trending
lower during late 1996, continued to trend lower in January.
Gains were also recorded from long base metals futures positions
as copper and zinc futures prices increased from late January to
early March. Smaller gains were recorded in the agricultural
markets from long corn, soybean meal and soybean futures
<PAGE>
positions. A portion of the Partnership's overall gains was
offset by short-term volatile price movement in global interest
rate futures. Smaller losses were recorded in the energy markets
during January and March. Total expenses for the period were
$4,618,186, generating net income of $12,089,921. The value of
an individual Unit in the Partnership increased from $911.49 at
December 31, 1996 to $978.08 at March 31, 1997.
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 $17,527,472. During
the first quarter, the Partnership posted a decrease 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 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
<PAGE>
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
quarter were $5,950,087 resulting in a net loss of $23,477,559.
The value of an individual Unit in the Partnership decreased from
$936.41 at December 31, 1995 to $823.05 at March 31, 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, DWD
(all such parties referred to hereafter as the "Dean Witter
Parties"), the Partnership, certain limited partnership commodity
pools of which Demeter is the general partner, and certain
trading advisors to those pools. 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.
<PAGE>
The complaints seek unspecified amounts of compensatory and
punitive damages and other relief. It is possible that
additional similar actions may be filed and that, in the course
of these actions, other parties could be added as defendants.
The Dean Witter Parties believe that they have strong defenses
to, and they and the Partnership 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.
<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 L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
May 9, 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 Limited Partnership and is qualified in
its entirety by reference to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 164,943,807
<SECURITIES> 0
<RECEIVABLES> 868,901<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 169,284,138<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 169,284,138<F3>
<SALES> 0
<TOTAL-REVENUES> 16,708,107<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,618,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,089,921
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,089,921
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,089,921
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $589,440 and due from DWR
of $279,461.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $3,471,430.
<F3>Liabilities include redemptions payable of $2,276,877, accrued brokerage
commissions of $469,732, accrued management fees of $441,631,
administrative expenses payable of $131,768 and accrued transaction fees
and costs of $34,695.
<F4>Total revenues include realized trading revenue of $11,502,267, net
change in unrealized of $3,481,594 and interest income of $1,724,246.
</FN>
</TABLE>
