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 quarterly period ended September 30, 1998 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. 0-23577
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 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 LIMITED PARTNERSHIP
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 1998
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition September 30, 1998
(Unaudited) and December 31, 1997.....................2
Statements of Operations for the Quarters Ended
September 30, 1998 and 1997 (Unaudited)...............3
Statements of Operations for the Nine Months Ended
September 30, 1998 and 1997 (Unaudited)...............4
Statements of Changes in Partners' Capital for the
Nine Months ended September 30, 1998 and 1997
(Unaudited)...........................................5
Statements of Cash Flows for the Nine Months Ended
September 30, 1998 and 1997 (Unaudited)...............6
Notes to Financial Statements (Unaudited)..........7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..12-21
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.................................22
Item 6. Exhibits and Reports on Form 8-K..................22
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
September 30, December 31,
1998 1997
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 122,164,738 127,701,224
Net unrealized gain on open contracts 14,494,666 20,68
4,288
Total Trading Equity 136,659,404 148,385,512
Interest receivable (DWR) 432,303 497,966
Due from DWR - 89,180
Total Assets 137,091,707 148,972,658
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 1,734,131 2,976,998
Accrued management fee (DWFCM) 332,224 352,057
Administrative expenses payable 134,429 91,980
Total Liabilities 2,200,784 3,421,035
Partners' Capital
Limited Partners (119,170.919 and
140,342.310 Units, respectively) 132,359,393 143,225,512
General Partner (2,279.285 Units) 2,531,530 2,326,111
Total Partners' Capital 134,890,923 145,551,623
Total Liabilities and Partners' Capital 137,091,707 148,9
72,658
NET ASSET VALUE PER UNIT 1,110.67 1,020.54
<FN>
The accompanying notes 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 September 30,
1998 1997
$ $
REVENUES
<S> <C> <C>
Trading profit:
Realized 13,754,762 2,501,495
Net change in unrealized 4,251,523 7,003,329
Total Trading Results 18,006,285 9,504,824
Interest Income (DWR) 1,252,583 1,572,409
Total Revenues 19,258,868 11,077,233
EXPENSES
Brokerage commissions (DWR) 1,924,648 2,477,991
Management fees (DWFCM) 937,142 1,098,735
Transaction fees and costs 153,042 208,337
Administrative expenses 41,000 51,000
Total Expenses 3,055,832 3,836,063
NET INCOME 16,203,036 7,241,170
NET INCOME ALLOCATION
Limited Partners 15,904,803 7,137,732
General Partner 298,233 103,438
NET INCOME PER UNIT
Limited Partners
130.85 45.38
General Partner
130.85 45.38
<FN>
The accompanying notes 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 Nine Months Ended September 30,
1998 1997
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 22,181,034 9,092,269
Net change in unrealized (6,189,622) 7,286,059
Total Trading Results 15,991,412 16,378,328
Interest Income (DWR) 3,987,696 4,975,667
Total Revenues 19,979,108 21,353,995
EXPENSES
Brokerage commissions (DWR) 6,198,178 8,391,865
Management fees (DWFCM) 2,952,220 3,559,022
Transaction fees and costs 500,286 684,099
Administrative expenses 111,000 144,000
Total Expenses 9,761,684 12,778,986
NET INCOME 10,217,424 8,575,009
NET INCOME ALLOCATION
Limited Partners 10,012,005 8,464,990
General Partner 205,419 110,019
NET INCOME PER UNIT
Limited Partners 90.13 48.27
General Partner 90.13 48.27
<FN>
The accompanying notes 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 Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C>
<C> <C>
Partners' Capital
December 31, 1996 179,581.091 $161,609,600 $2,077,555
$163,687,155
Net Income - 8,464,990 110,019 8,575,009
Redemptions (29,651.298) (28,365,038) -
(28,365,038)
Partners' Capital
September 30, 1997 149,929.793 $141,709,552 $2,187,574
$143,897,126
Partners' Capital
December 31, 1997 142,621.595 $143,225,512 $2,326,111
$145,551,623
Net Income - 10,012,005 205,419
10,217,424
Redemptions (21,171.391) (20,878,124) -
(20,878,124)
Partners' Capital
September 30, 1998 121,450.204 $132,359,393 $2,531,530
$134,890,923
<FN>
The accompanying notes 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 Nine Months Ended September 30,
1998 1997
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income 10,217,424 8
,575,009
Noncash item included in net income:
Net change in unrealized 6,189,622 (
7,286,059)
(Increase) decrease in operating assets:
Interest receivable (DWR) 65,663 65,474
Due from DWR 89,180 (49,418)
Increase (decrease) in operating liabilities:
Accrued management fee (DWFCM) (19,833)
(99,655)
Administrative expenses payable 42,449 48,949
Accrued brokerage commissions (DWR)- 134,695
Accrued transaction fees and costs -
(4,890)
Net cash provided by operating activities 16,584,505 1
,384,105
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in redemptions payable (1,242,867) (
206,383)
Redemptions of units (20,878,124) (
28,365,038)
Net cash used for financing activities (22,120,991) (
28,571,421)
Net decrease in cash (5,536,486) (
27,187,316)
Balance at beginning of period 127,701,224 1
66,737,088
Balance at end of period 122,164,738 1
39,549,772
<FN>
The accompanying notes 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 of Dean Witter Diversified
Futures Fund L.P. (the "Partnership"). The financial statements
and condensed notes herein should be read in conjunction with the
Partnership's December 31, 1997 Annual Report on Form 10-K.
1. Organization
Dean Witter Diversified Futures Fund Limited Partnership is a
limited partnership organized to engage in the speculative
trading of commodity futures contracts and futures related
contracts, including forward contracts on foreign currencies
(collectively, "futures interests"). The general partner is
Demeter Management Corporation ("Demeter"). The non-clearing
commodity broker is Dean Witter Reynolds Inc. ("DWR"), an
affiliate of Demeter. The clearing commodity broker is Carr
Futures Inc. ("Carr"), providing clearing and execution services.
The trading manager who makes all trading decisions for the
Partnership is Dean Witter Futures & Currency Management, Inc.
("DWFCM", or "Trading Manager"), also an affiliate of Demeter.
Demeter, DWR and DWFCM are wholly-owned subsidiaries of Morgan
Stanley Dean Witter & Co. ("MSDW").
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interest trading accounts to meet margin requirements as needed.
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 (when
applicable) incurred by the Partnership are paid to DWFCM.
3. Financial Instruments
The Partnership trades futures and forward contracts in interest
rates, stock indices, commodities and currencies. 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 September 30, 1998 and December 31, 1997,
open contracts were:
Contract or Notional Amount
September 30, 1998 December 31, 1997
$ $
Exchange-Traded-Contracts
Financial Futures:
Commitments to Purchase 306,945,000 44,959,000
Commitments to Sell 8,987,000 -
Commodity Futures:
Commitments to Purchase 17,904,000 6,287,000
Commitments to Sell 16,471,000 94,480,000
Foreign Futures:
Commitments to Purchase 843,606,000 305,847,000
Commitments to Sell 56,661,000 68,688,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 605,394,000 282,748,000
Commitments to Sell 397,755,000 546,818,000
A portion of the amounts indicated as off-balance-sheet risk in
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 $14,494,666 and
$20,684,288 at September 30, 1998 and December 31, 1997,
respectively.
Of the $14,494,666 net unrealized gain on open contracts at
September 30, 1998, $16,071,635 related to exchange-traded
futures contracts and $(1,576,969) related to off-exchange-traded
forward currency contracts.
Of the $20,684,288 net unrealized gain on open contracts at
December 31, 1997, $7,311,878 related to exchange-traded futures
contracts and $13,372,410 related to off-exchange-traded forward
currency contracts.
Exchange-traded futures contracts held by the Partnership at
September 30, 1998 and December 31, 1997 mature through March
1999 and June 1998, respectively. Off-exchange-traded forward
currency
<PAGE>
DEAN WITTER DIVERSIFIED FUTURES FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
contracts held by the Partnership at September 30, 1998 and
December 31, 1997 mature through December 1998 and April 1998,
respectively.
The contract amounts in the above table represent the
Partnership's extent of involvement in a particular class of
financial instrument, but not the credit risk associated with
counterparty non-performance. The credit risk associated with
these instruments is limited to the amounts reflected in the
Partnership's Statements of Financial Condition.
The Partnership also has credit risk because DWR and Carr act as
the futures commission merchants or the counterparties, 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. Each of DWR and
Carr, as a futures commission merchant for the Partnership's
exchange-traded-futures contracts, are required, pursuant to
regulations of the Commodity Futures Trading Commission ("CFTC"),
to segregate from their own assets, and for the sole benefit of
their commodity customers, all funds held by them with respect to
exchange-traded futures contracts, including an amount equal to
the net unrealized gain on all open futures contracts, which
funds, in the aggregate, totaled $138,236,373 and $135,013,102 at
September 30, 1998 and December 31, 1997, respectively. 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 Carr, the sole
counterparty on all such contracts, to perform. Carr's parent,
Credit Agricole Indosuez, has guaranteed to the Partnership
payment of the net liquidating value of the transactions in the
Partnership's account with Carr (including foreign currency
contracts).
For the nine months ended September 30, 1998 and the year ended
December 31, 1997, the average fair value of financial
instruments held for trading purposes was as follows:
September 30, 1998
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 121,427,000 42,799,000
Commodity Futures 6,950,000 57,618,000
Foreign Futures 374,950,000 145,602,000
Off-Exchange-Traded Forward
Currency Contracts 586,496,000 641,597,000
December 31, 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 45,777,000 157,169,000
Commodity Futures 62,602,000 74,762,000
Foreign Futures 185,126,000 107,251,000
Off-Exchange-Traded Forward
Currency Contracts 320,498,000 431,962,000
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - Assets of the Partnership are deposited with DWR as
non-clearing broker and Carr as clearing broker in separate
futures interest trading accounts established for the Trading
Manager and are used by the Partnership as margin to engage in
futures interest trading. Such assets are held in either non-
interest bearing bank accounts or in securities approved by the
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 price of a particular futures interest
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 interests prices have occasionally
moved the daily limit for several consecutive days with little or
no trading. Such market conditions could prevent the Partnership
<PAGE>
from promptly liquidating its futures interests and result in
restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. 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. Future redemptions and
exchanges of Units of Limited Partnership Interest will affect
the amount of funds available for investment in futures interests
in subsequent periods. Since they are at the discretion of the
Limited Partners, it is not possible to estimate the amount, and
therefore, the impact of future redemptions and exchanges.
Results of Operations
For the Quarter and Nine Months Ended September 30, 1998
For the quarter ended September 30, 1998, the Partnership
recorded total trading revenues including interest income of
$19,258,868 and posted an increase in Net Asset Value per Unit.
The most significant gains were recorded in the financial futures
markets during August and September as investors sought the
<PAGE>
safety of fixed income investments in response to anticipated
interest rate cuts by the U. S. Federal Reserve and significant
volatility in the global financial markets. As a result, gains
were recorded from long global interest rate futures positions,
particularly U.S., Japanese and European bond futures. Smaller
gains were recorded from long positions in Australian interest
rate futures as prices in these markets also trended higher.
Additional gains were recorded during July and August in the
agricultural markets from short positions in corn and wheat
futures as grain prices continued their downward trend as
supplies remained abundant. These gains were partially offset by
losses recorded in the currency markets from long British pound
positions as its value moved lower in response to uncertainty
about economic developments and interest rate policy in that
country. These losses, coupled with additional currency losses
recorded from transactions involving the Australian dollar and
Swedish krona during September, more than offset gains from long
German mark positions. Additional losses were recorded during
July and September in the metals markets from short aluminum and
copper futures positions as base metals prices reversed higher
early in the quarter. Total expenses for the three months ended
September 30, 1998 were $3,055,832, resulting in net income of
$16,203,036. The value of an individual Unit in the Partnership
increased from $979.82 at June 30, 1998 to $1,110.67 at September
30, 1998.
<PAGE>
For the nine months ended September 30, 1998, the Partnership
recorded total trading revenues including interest income of
$19,979,108 and posted an increase in Net Asset Value per Unit.
The most significant gains were recorded in the financial futures
markets during the first and third quarters from long European
interest rate futures positions. Additional profits were
recorded from long positions in U.S. and Japanese bond futures as
prices in these markets also trended higher during the third
quarter. Smaller gains were recorded in soft commodities from
short sugar futures positions as prices trended lower during
January, February and September. A portion of these gains was
offset by losses in the metals and currency markets. In metals,
losses were recorded during the first quarter from long silver
futures positions as silver prices reversed lower in late
February after rallying higher during January. In September,
additional losses were recorded from short silver futures
positions as precious metals prices moved higher due to
uncertainty in global stock markets and in the wake of reported
difficulties with several major hedge funds. During July,
smaller losses were recorded from short aluminum and copper
futures positions as base metals prices reversed higher. In
currency trading, losses were recorded from transactions
involving the British pound as its value moved without consistent
direction during the first nine months of the year. Additional
currency losses were recorded during the first quarter due
primarily to short-term volatility caused by the economic
<PAGE>
instability in the Far East. During January, the upward trend in
the value of the U.S. dollar reversed lower in response to the
Japanese government's proposed economic stimulus package, thus
resulting in losses for previously established short Japanese yen
positions. Additional currency losses were recorded in February
as the value of the yen moved without consistent direction.
Total expenses for the nine months ended September 30, 1998 were
$9,761,684, resulting in net income of $10,217,424. The value of
an individual Unit in the Partnership increased from $1,020.54 at
December 31, 1997 to $1,110.67 at September 30, 1998.
For the Quarter and Nine Months Ended September 30, 1997
For the quarter ended September 30, 1997, the Partnership
recorded total trading revenues including interest income of
$11,077,233 and posted an increase 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 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
<PAGE>
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 three months ended
September 30, 1997 were $3,836,063, resulting in net income of
$7,241,170. The value of an individual Unit in the Partnership
increased from $914.38 at June 30, 1997 to $959.76 at September
30, 1997.
For the nine months ended September 30, 1997, the Partnership
recorded total trading revenues including interest income of
$21,353,995 and 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 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
<PAGE>
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
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 nine months ended
September 30, 1997 were $12,778,986, resulting in net income of
$8,575,009. The value of an individual Unit in the Partnership
increased from $911.49 at December 31, 1996 to $959.76 at
September 30, 1997.
<PAGE>
Year 2000 Problem - Commodity pools, like financial and business
organizations and individuals around the world, depend on the
smooth functioning of computer systems. Many computer systems in
use today cannot recognize the computer code for the year 2000,
but revert to 1900 or some other date. This is commonly known as
the "Year 2000 Problem". The Partnership could be adversely
affected if computer systems used by it or any third party with
whom it has a material relationship do not properly process and
calculate date-related information and data concerning dates on
or after January 1, 2000. Such a failure could have a negative
impact on the handling or determination of futures trades and
prices and the services provided the Partnership.
MSDW began its planning in response to the Year 2000 Problem in
1995 and currently has several hundred employees working on such
response. It has developed its own Year 2000 compliance plan to
deal with the problem and had the plan approved by the company's
executive management, Board of Directors and Information
Technology Department. Demeter is coordinating with MSDW in
taking steps that both believe are reasonably designed to address
the Year 2000 Problem with respect to Demeter's computer systems
that relate to the Partnership. This includes hardware and
software upgrades, systems consulting and computer maintenance.
Beyond the challenge facing internal computer systems, the
systems failure of any of the third parties with whom the
Partnership has a material relationship - the futures exchanges
and clearing organizations through which it trades, Carr, or the
<PAGE>
Trading Manager - could result in a material financial risk to
the Partnership. Regarding the futures exchanges, all U.S.
futures exchanges will be subject to the monitoring of the CFTC
for their Year 2000 preparedness and the major foreign futures
exchanges are also expected to be subject to market-wide testing
of their Year 2000 compliance during 1999. With respect to Carr
and the Trading Manager, Demeter intends to monitor their
progress throughout 1999 in their Year 2000 compliance and, where
applicable, to test its external interface with Carr and the
Trading Manager.
Finally, MSDW has begun developing various "contingency plans" in
the event that the systems of such third parties fail, and
Demeter intends to consult closely with MSDW in implementing
those plans. MSDW has also recently reported that its
development of such contingency plans is proceeding on schedule.
Despite the best efforts of both Demeter and MSDW, however, there
can be no assurance that the above steps will be sufficient to
avoid any adverse impact to the Partnership, whether from
failures in their own computer systems or those of Carr, the
Trading Manager or any other third party.
Risks Associated with the Euro - On January 1, 1999, eleven
countries in the European Union intend to establish fixed
conversion rates on their existing sovereign currencies and
convert to a common single currency (the "euro"). During a three-
year transition period, the existing sovereign currencies will
continue to exist but only as a fixed denomination of the
<PAGE>
euro. Conversion to the euro will prevent the Trading Manager
from trading in certain currencies and thereby limit its ability
to take advantage of potential market opportunities that might
otherwise have existed had separate currencies been available to
trade, and could result in losses with respect to those
positions.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Previously reported. See Form 10-Q for the quarter ended
March 31, 1998.
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K. - No reports have been filed for the quarter
ended September 30, 1998.
<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 Limited Partnership (Registrant)
By: Demeter Management Corporation
(General Partner)
November 11, 1998 By: /s/ Lewis A. Raibley, III
Lewis A. Raibley, III
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 statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 122,164,738
<SECURITIES> 0
<RECEIVABLES> 432,303<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 137,091,707<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 137,091,707<F3>
<SALES> 0
<TOTAL-REVENUES> 19,979,108<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,761,684
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,217,424
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,217,424
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,217,424
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $432,303.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $14,494,666.
<F3>Liabilities include redemptions payable of $1,734,131, accrued
management fee of $332,224, and administrative expenses payable
of $134,429.
<F4>Total revenues include realized trading revenue of $22,181,034, net
change in unrealized of $(6,189,622) and interest income of $3,987,696.
</FN>
</TABLE>
