-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QaDcXg25gMarfyph4XlAZkc4Wqa8GsqFtkNFmezHylocNkfDcbT0jI2H3UaOEBpn onMD7Cf9VZIwEEOeC+k8TQ== 0000839945-97-000004.txt : 19970529 0000839945-97-000004.hdr.sgml : 19970529 ACCESSION NUMBER: 0000839945-97-000004 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970528 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WITTER DEAN DIVERSIFIED FUTURES FUND II L P CENTRAL INDEX KEY: 0000839945 STANDARD INDUSTRIAL CLASSIFICATION: [6221] IRS NUMBER: 133490286 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-17446 FILM NUMBER: 97614836 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER 62ND FLR STREET 2: C/O DEMETER MANAGEMENT CORP CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123925454 MAIL ADDRESS: STREET 1: C/O DEMETER MANAGEMENT CORP STREET 2: TWO WORLD TRADE CENTER 62ND FL CITY: NEW YORK STATE: NY ZIP: 10048 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A AMENDMENT [X] Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended December 31, 1996 or [ ] Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from ___________to_______________ Commission File Number 33-24662 DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. (Exact name of registrant as specified in its Limited Partnership Agreement) DELAWARE 13-3490286 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) c/o Demeter Management Corporation Two World Trade Center, New York, N.Y.-62nd Fl. 10048 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 392-5454 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered None None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest (Title of Class) (Title of Class) 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10K. [ X ] State the aggregate market value of the Units of Limited Partnership Interest held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which units were sold, or the average bid and asked prices of such units, as of a specified date within 60 days prior to the date of filing: $12,773,240.66 at January 31, 1997. DOCUMENTS INCORPORATED BY REFERENCE (See Page 1) DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. INDEX TO ANNUAL REPORT ON FORM 10-K DECEMBER 31, 1996
Page No. DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . 1 Part I . Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . 2-3 Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . 4 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . 4-5 Item 4. Submission of Matters to a Vote of Security Holders . . .5 Part II. Item 5. Market for the Registrant's Partnership Units and Related Security Holder Matters . . . . . . . . . . . . 6 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . 8-12 Item 8. Financial Statements and Supplementary Data. . . . . . 12 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . 12 Part III. Item 10. Directors, Executive Officers, Promoters and Control Persons of the Registrant . . . . . . . . . 13-16 Item 11. Executive Compensation . . . . . . . . . . . . . . . 16 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . 16 Item 13. Certain Relationships and Related Transactions . . .16-17 Part IV. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . 18
DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference as follows:
Documents Incorporated Part of Form 10-K Partnership's Registration Statement I and IV on Form S-1, File No. 33-24662 December 31, 1996 Annual Report II and IV for the Dean Witter Diversified Futures Fund II L.P.
PART I Item 1. BUSINESS (a) General Development of Business. Dean Witter Diversified Futures Fund II L.P. (the "Partnership") is a Delaware limited partnership formed to engage in the speculative trading of commodity futures contracts and other commodity interests, including, but not limited to, forward contracts on foreign currencies and options on futures contracts and physical commodities. Units of limited partnership interest in the Partnership were registered pursuant to a Registration Statement on Form S-1 (File No. 33- 24662) which became effective on October 28, 1988. The offering of units was underwritten on a "best efforts" basis by Dean Witter Reynolds Inc. ("DWR"), a commodity broker and an affiliated corporation of the Partnership's general partner, Demeter Management Corporation ("Demeter"). The Partnership commenced operations on January 18, 1989. The Partnership's net asset value per unit, as of December 31, 1996, was $2,412.41 representing a decrease of 4.8 percent from the net asset value per unit of $2,534.82 at December 31, 1995. For a more detailed description of the Partnership's business see subparagraph (c). (b) Financial Information about Industry Segments. The Partnership's business comprises only one segment for financial reporting purposes, speculative trading of commodity futures contracts and other commodity interests. The relevant financial information is presented in Items 6 and 8. (c) Narrative Description of Business. The Partnership is in the business of speculative trading in commodity futures contracts and other commodity interests, pursuant to trading instructions provided by Dean Witter Futures & Currency Management Inc. ("DWFCM"), a wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWD") and an affiliate of DWR, and Demeter. For a detailed description of the different facets of the Partnership's business, see those portions of the Partnership's Prospectus, dated October 28, 1988, filed as part of the Registration Statement on Form S-1 (see "Documents Incorporated by Reference" Page 1), set forth below: Facets of Business 1. Summary 1. "Summary of the Prospectus" (Pages 2-7). 2. Commodity Markets 2. "The Commodities Markets" (Pages 57-67). 3. Partnership's Commodity 3. "Trading Policies" (Pages Trading Arrangements and 28-29) "The Trading Policies Manager" (Pages 29-38). 4. Management of the Part- 4. "The Management Agreement" nership (Pages 39-41). "The General Partner" (Pages 41-56) and "The Commodity Broker"(Pages 56-57). "The Limited Part- nership Agreement" (Pages 68-73). 5. Taxation of the Partner- 5. "Federal Income Tax ship's Limited Partners Aspects" and "State and Local Income Tax Aspects" (Pages 75-83). (d) Financial Information About Foreign and Domestic Operations and Export Sales. The Partnership has not engaged in any operations in foreign countries; however, the Partnership (through the commodity broker) enters into forward contract transactions where foreign banks are the contracting party and futures contracts on foreign exchanges. Item 2. PROPERTIES The executive and administrative offices are located within the offices of DWR. The DWR offices utilized by the Partnership are located at Two World Trade Center, 62nd Floor, New York, NY 10048. Item 3. LEGAL PROCEEDINGS On September 6, 10, and 20, 1996, 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 interest 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 other 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. 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 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II Item 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED SECURITY HOLDER MATTERS There is no established public trading market for the Units of Limited Partnership Interest in the Partnership. The number of holders of Units at December 31, 1996 was approximately 762. No distributions have been made by the Partnership since it commenced operations on January 18, 1989. Demeter has sole discretion to decide what distributions, if any, shall be made to investors in the Partnership. No determination has yet been made as to future distributions. Item 6. SELECTED FINANCIAL DATA (in dollars)
For the Years Ended December 31, 1996 1995 1994 1993 1992 Total Revenues (including interest) 643,498 1,556,726 3,037,932 3,868,460 5,240,665 Net Income (Loss) (824,517) (410,574) 853,441 1,263,735 2,627,638 Net Income (Loss) Per Unit (Limited & General Partners) (122.41) (75.58) 133.96 169.48 351.78 Total Assets 12,617,666 15,550,215 17,710,240 18,055,627 18,580,721 Total Limited Partners' Capital 12,019,867 14,341,357 16,676,005 17,109,409 16,853,690 Net Asset Value Per Unit of Limited Partnership Interest 2,412.41 2,534.82 2,610.40 2,476.44 2,306.96
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity. The Partnership's assets are deposited in separate commodity interest trading accounts with DWR, the commodity broker, and are used by the Partnership as margin to engage in commodity futures contract trading. DWR holds such assets in either designated depositories or in securities approved by the Commodity Futures Trading Commission ("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 commodity futures contracts 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 other commodity interests may be illiquid. If the price for a 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. 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. Market Risk. The Partnership trades futures, options and forward contracts in interest rates, stock indices, commodities and currencies. In entering into these contracts there exists a risk to the Partnership (market risk) that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interest positions held by the Partnership at the same time, and if the Trading Advisor were unable to offset futures interest positions of the Partnership, the Partnership could lose all of its assets and the Limited Partners would realize a 100% loss. The Partnership has established Trading Policies, which include standards for liquidity and leverage which help control market risk. Both the Trading Advisor and Demeter monitor the Partnership's trading activities on a daily basis to ensure compliance with the Trading Policies. Demeter may (under terms of the Management Agreement) override the trading instructions of the Trading Advisor to the extent necessary to comply with the Partnership's Trading Policies. Credit Risk. In addition to market risk, the Partnership is subject to credit risk in that a counterparty may not be able to meet its obligations to the Partnership. The counterparty of the Partnership for futures contracts traded in the United States and most foreign exchanges on which the Partnership trades is the clearinghouse associated with such exchange. In general, a clearinghouse is backed by the membership of the exchange and will act in the event of non-performance by one of its members or one of its member's customers, and as such, should significantly reduce this credit risk. In cases where the Partnership trades on exchanges where the clearinghouse is not funded or guaranteed by the membership, or where the exchange is a "principals' market" in which performance is the responsibility of the exchange member and not the exchange or a clearinghouse, or when the Partnership enters into off- exchange contracts with a counterparty, the sole recourse of the Partnership will be the clearinghouse, the exchange member or the off- exchange contract counterparty, as the case may be. With respect to futures contracts, DWR, in its business as an international commodity broker, constantly monitors the creditworthiness of the exchanges and clearing members of the foreign exchanges with which it does business for clients, including the Partnership. DWR employees also from time to time serve on supervisory or management committees of such exchanges. If DWR believed that there was a problem with the creditworthiness of an exchange on which the Partnership deals, it would so advise Demeter. With respect to exchanges of which DWR is not a member, DWR acts only through clearing brokers it has determined to be creditworthy. If DWR believed that a clearing broker with which it deals on behalf of clients were not creditworthy, it would terminate its relationship with such broker. While DWR monitors the creditworthiness and risks involved in dealing on the various exchanges (and their clearinghouses) and with other exchange members, there can be no assurance that an exchange (or its clearinghouse) or other exchange member will be able to meet its obligations to the Partnership. DWR has not undertaken to indemnify the Partnership against any loss. Further, the law is unclear, particularly with respect to trading in various non-U.S. jurisdictions, as to whether DWR has any obligation to protect the Partnership from any liability in the event that an exchange or its clearinghouse or another exchange member defaults on its obligations on trades effected for the Partnership. Although DWR monitors the creditworthiness of the foreign exchanges and clearing brokers with which it does business for clients, DWR does not have the capability to precisely quantify the Partnership's exposure to risks inherent in its trading activities on foreign exchanges, and, as a result, the risk is not monitored by DWR on an individual client basis (including the Partnership). In this regard, DWR must clear its customer trades through one or more other clearing brokers on each exchange where DWR is not a clearing member. Such other clearing brokers calculate the net margin requirements of DWR in respect of the aggregate of all of DWR's customer positions carried in DWR's omnibus account with that clearing broker. Similarly, DWR calculates a net margin requirement for the exchange-traded futures positions of each of its customers, including the Partnership. Neither DWR nor DWR's respective clearing brokers on each foreign futures exchange calculates the margin requirements of an individual customer, such as the Partnership, in respect of the customer's aggregate contract positions on any particular exchange. With respect to forward contract trading, the Partnership trades with only those counterparties which Demeter, together with DWR, have determined to be creditworthy. As set forth in the Partnership's Trading Policies, in determining creditworthiness, Demeter and DWR consult with the Corporate Credit Department of DWR. Currently, the Partnership deals solely with DWR as its counterparty on forward contracts. While DWR and Demeter monitor creditworthiness and risk involved in dealing on the various exchanges and with counterparties, there can be no assurance that an exchange or counterparty will be able to meet its obligations to the Partnership. See "Financial Instruments", under Notes to Financial Statements - to the Partnership's Financial Statements in its 1996 Annual Report to Partners, incorporated by reference in this Form 10-K. Capital Resources. The Partnership does not have, nor does it expect to have, any capital assets. Redemptions of 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 in subsequent periods. As redemptions are at the discretion of Limited Partners, it is not possible to estimate the amount and therefore, the impact of future redemptions. Results of Operations. As of December 31, 1996, the Partnership's total capital was $12,270,757, a decrease of $2,334,221 from the Partner- ship's total capital of $14,604,978 at December 31, 1995. For the year ended December 31, 1996, the Partnership incurred a net loss of $824,517 and total redemptions aggregated $1,509,704. For the year ended December 31, 1996, the Partnership's total trading revenues including interest income were $643,498. The Partnership's total expenses for the year were $1,468,015, resulting in a net loss of $824,517. The value of an individual unit in the Partnership decreased from $2,534.82 at December 31, 1995 to $2,412.41 at December 31, 1996. As of December 31, 1995, the Partnership's total capital was $14,604,978, a decrease of $2,342,508 from the Partnership's total capital of $16,947,486 at December 31, 1994. For the year ended December 31, 1995, the Partnership incurred a net loss of $410,574 and total redemptions aggregated $1,931,934. For the year ended December 31, 1995, the Partnership's total trading revenues including interest income were $1,556,726. The Partnership's total expenses for the year were $1,967,300, resulting in a net loss of $410,574. The value of an individual unit in the Partnership decreased from $2,610.40 at December 31, 1994 to $2,534.82 at December 31, 1995. As of December 31, 1994, the Partnership's total capital was $16,947,486, a decrease of $508,624 from the Partnership's total capital of $17,456,110 at December 31, 1993. For the year ended December 31, 1994, the Partnership generated net income of $853,441 and total redemptions aggregated $1,362,065. For the year ended December 31, 1994, the Partnership's total trading revenues including interest income were $3,037,932. The Partnership's total expenses for the year were $2,184,491, resulting in net income of $853,441. The value of an individual unit in the Partnership increased from $2,476.44 at December 31, 1993 to $2,610.40 at December 31, 1994. The Partnership's overall performance record represents varied results of trading in different commodity markets. For a further description of trading results, refer to the letter to the Limited Partners in the accompanying 1996 Annual Report to Partners, incorporated by reference in this Form 10-K. The Partnership's gains and losses are allocated among its Limited Partners for income tax purposes. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item appears in the attached 1996 Annual Report to Partners and is incorporated by reference in this Annual Report on Form 10-K. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE REGISTRANT General Partner Demeter, a Delaware corporation, was formed on August 18, 1977 to act as a commodity pool operator and is registered with the CFTC as a commodity pool operator and currently is a member of the National Futures Association ("NFA") in such capacity. Demeter is wholly-owned by DWD and is an affiliate of DWR. DWD, DWR and Demeter may each be deemed to be "promoters" and/or a "parent" of the Partnership within the meaning of the federal securities laws. Dean Witter Reynolds Inc. DWR is a financial services company which provides to its individual, corporate and institutional clients services as a broker in securities and commodity interest contracts, a dealer in corporate, municipal and government securities, an investment banker, an investment adviser and an agent in the sale of life insurance and various other products and services. DWR is a member firm of the New York Stock Exchange, the American Stock Exchange, the Chicago Board Options Exchange, and other major securities exchanges, and is a clearing member of the Chicago Board of Trade, the Chicago Mercantile Exchange, the Commodity Exchange Inc., and other major commodities exchanges. DWR is registered with the CFTC as a futures commission merchant and is a member of the NFA in such capacity. DWR is currently servicing its clients through a network of over 371 branch offices with approximately 9,080 account executives servicing individual and institutional client accounts. Directors and Officers of the General Partner The directors and officers of Demeter as of December 31, 1996 are as follows: Richard M. DeMartini, age 44, is the Chairman of the Board and a Director of Demeter. Mr. DeMartini is also the Chairman of the Board and a Director of DWFCM, a registered commodity trading advisor. Mr. DeMartini has served as President and Chief Operating Officer of Dean Witter Capital, a division of DWR since January 1989. From January 1988 until January 1989, Mr. DeMartini served as President and Chief Operating Officer of the Consumer Banking Division of DWD, and from May 1985 until January 1988 was President and Chief Executive Officer of the Consumer Markets Division of DWD. Mr. DeMartini currently serves as a Director of DWD and DWR, and has served as an officer of DWR for the past five years. Mr. DeMartini has been with DWD and its affiliates for 22 years. Mark J. Hawley, age 53, is President and a Director of Demeter. Mr. Hawley joined DWR in February 1989 and currently serves as Executive Vice President and Director of DWR's Managed Futures and Precious Metals Department. Mr. Hawley also serves as President of DWFCM. From 1978 to 1989, Mr. Hawley was a member of the senior management team at Heinold Asset Management, Inc., a commodity pool operator, and was responsible for a variety of projects in public futures funds. From 1972 to 1978, Mr. Hawley was a Vice President in charge of institutional block trading for the Mid-West at Kuhn Loeb & Co. Lawrence Volpe, age 49, is a Director of Demeter and DWFCM. Mr. Volpe joined DWR as a Senior Vice President and Controller in September 1983, and currently holds those positions. From July 1979 to September 1983, he was associated with E.F. Hutton & Company Inc. and prior to his departure, held the positions of First Vice President and Assistant Controller. From 1970 to July 1979, he was associated with Arthur Anderson & Co. and prior to his departure he served as audit manager in the financial services division. Joseph G. Siniscalchi, age 51, is a Director of Demeter. Mr. Siniscalchi joined DWR in July 1984 as a First Vice President, Director of General Accounting. He is currently Senior Vice President and Controller of the Dean Witter Financial Division of DWR. From February 1980 to July 1984, Mr. Siniscalchi was Director of Internal Audit at Lehman Brothers Kuhn Loeb, Inc. Laurence E. Mollner, age 55, is a Director of Demeter. Mr. Mollner joined DWR in May 1979 as Vice President and Director of Commercial Sales. He is currently Executive Vice President and Deputy Director of the Futures Markets Division of DWR. Edward C. Oelsner III, age 54, is a Director of Demeter. Mr. Oelsner joined DWR in March 1981 as a Managing Director in the Corporate Finance Department. He currently manages DWR's Retail Products Group within the Corporate Finance Department. While Mr. Oelsner has extensive experience in the securities industry, he has no experience in commodity interests trading. Robert E. Murray, age 36, is a Director of Demeter. Mr. Murray is currently a Senior Vice President of the DWR Managed Futures Division and is a Director and the Senior Administrative Officer of DWFCM. Mr. Murray graduated from Geneseo State University in May 1983 with a B.A. degree in Finance. Mr. Murray began at DWR in 1984 and is currently the Director of Product Development for the Managed Futures Division and is responsible for the development and maintenance of the proprietary Fund Management System utilized by Demeter and DWFCM for organizing information and producing reports for monitoring investors' accounts. Patti L. Behnke, age 36, is Vice President and Chief Financial Officer of Demeter. Ms. Behnke joined DWR in 1991 as Assistant Vice President of Financial Reporting and is currently First Vice President and Director of Financial Reporting and Managed Futures Accounting in the Capital Markets division of DWR. From August 1988 to September 1990, Ms. Behnke was Assistant Controller of L.F. Rothschild & Co. and from September 1986 to August 1988, she was associated with Carteret Savings Bank as Assistant Vice President - Financial Analysis. From April 1982 to September 1986, Ms. Behnke was an auditor at Arthur Andersen & Co. Item 11. EXECUTIVE COMPENSATION The Partnership has no directors and executive officers. As a limited partnership, the business of the Partnership is managed by Demeter which is responsible for the administration of the business affairs of the Partnership but receives no compensation for such services. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Security Ownership of Certain Beneficial Owners - As of December 31, 1996 there were no persons as beneficial owners of more than 5 percent of the Units of Limited Partnership Interest in the Partnership. (b) Security Ownership of Management - At December 31, 1996, Demeter owned 104 Units of General Partnership Interest representing a 2.04 percent interest in the Partnership. (c) Changes in Control - None Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Refer to Note 2 - "Related Party Transactions" of "Notes to Financial Statements", in the accompanying 1996 Annual Report to Partners, incorporated by reference in this Form 10-K. In its capacity as the Partnership's retail commodity broker, DWR received commodity brokerage fees (paid and accrued by the Partnership) of $1,004,389 for the year ended December 31, 1996. In its capacity as the Partnership's trading manager, DWFCM received management fee of $383,830 for the year ended December 31, 1996. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Listing of Financial Statements The following financial statements and report of independent public accountants, all appearing in the accompanying 1996 Annual Report to Partners, are incorporated by reference in this Form 10-K: - Report of Deloitte & Touche LLP, independent auditors, for the years ended December 31, 1996, 1995 and 1994. - Statements of Financial Condition as of December 31, 1996 and 1995. - Statements of Operations, Changes in Partners' Capital, and Cash Flows for the years ended December 31, 1996, 1995 and 1994. - Notes to Financial Statements. With exception of the aforementioned information and the information incorporated in Items 7, 8, and 13, the 1996 Annual Report to Partners is not deemed to be filed with this report. 2. Listing of Financial Statement Schedules No financial statement schedules are required to be filed with this report. (b) Reports on Form 8-K No reports on Form 8-K have been filed by the Partnership during the last quarter of the period covered by this report. (c) Exhibits Refer to Exhibit Index on Page E-1. SIGNATURES Pursuant to the requirement of Sections 13 or 15(d) 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 II L.P. (Registrant) BY: Demeter Management Corporation, General Partner March 24, 1997 BY: /s/ Mark J. Hawley Mark J. Hawley, Director and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantand in the capacities and on the dates indicated. Demeter Management Corporation. BY: /s/ Mark J. Hawley March 25, 1997 Mark J. Hawley, Director and President /s/ Richard M. DeMartini March 25, 1997 Richard M. DeMartini, Director and Chairman of the Board /s/ Lawrence Volpe March 25, 1997 Lawrence Volpe, Director /s/ Laurence E. Mollner March 25, 1997 Laurence E. Mollner, Director /s/ Joseph G. Siniscalchi March 25, 1997 Joseph G. Siniscalchi, Director /s/ Edward C. Oelsner III March 25, 1997 Edward C. Oelsner III, Director /s/ Robert E. Murray March 25, 1997 Robert E. Murray, Director /s/ Patti L. Behnke March 25, 1997 Patti L. Behnke, Chief Financial Officer and Principal Accounting Officer EXHIBIT INDEX ITEM METHOD OF FILING -3. Limited Partnership Agreement of the Partnership, dated as of October 28, 1988. (1) - -10. Management Agreement among the Partnership, Demeter Management Corporation and Dean Witter Futures (2) & Currency Management Inc. dated as of October 28, 1988. - -10. Customer Agreement Between the Partnership and Dean Witter Reynolds, Inc., dated as of (3) October 28, 1988. - -99. December 31, 1996 Annual Report to Limited Partners. (4) (1) Incorporated by reference to Exhibit 3.01 and Exhibit 3.02 of the Partnership's Registration Statement on Form S-1. (2) Incorporated by reference to Exhibit 10.02 of the Partnership's Registration Statement on Form S-1. (3) Incorporated by reference to Exhibit 10.01 of the Partnership's Registration Statement on Form S-1. (4) Filed herewith. EX-27 2
5 The schedule contains summary financial information extracted from Dean Witter Diversified Futures Fund II L.P. and is qualified in its entirety by references to such financial instruments. 12-MOS DEC-31-1996 DEC-31-1996 12,415,430 0 42,043 0 0 0 0 0 12,617,666 0 0 0 0 0 0 12,617,666 0 643,498 0 0 1,468,015 0 0 (824,517) 0 (824,517) 0 0 0 (824,517) 0 0 In addition to cash and receivables, total assets include net unrealized gain on open contracts of $160,193. Liabilities include redemptions payable of $297,904 and accrued management fees of $31,538. Total revenues include realized trading revenue of $832,912, net change in unrealized of ($692,226) and interest income of $502,812.
EX-99 3 ANNUAL REPORT Diversified Futures Fund II December 31, 1996 Annual Report [LOGO] DEAN WITTER DEAN WITTER Two World Trade Center 62nd Floor New York, NY 10048 Telephone (212) 392-8899 DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. ANNUAL REPORT 1996 Dear Limited Partner: This marks the eighth annual report for the Dean Witter Diversified Futures Fund II L.P. (the "Fund"). The Fund began the year at a Net Asset Value per Unit of $2,534.82 and finished 1996 at $2,412.41, reflecting a loss of 4.8%. The Fund has increased by 141.2% since it began trading in 1989 (a compound annualized return of 11.6%). Modest gains were recorded during January as short Japanese yen, German mark and Swiss franc positions profited from a downward move. A majority of these losses were offset by long positions in energy futures as gas and oil prices reversed lower after an upward move late in 1995. Significant losses were recorded in February as a result of a series of sharp trend reversals in the value of the Japanese yen and major European currencies. Additional losses were recorded in the energy markets, as a result of inconsistent price movement, and in global interest rate futures as a result of a sharp reversal in the previous upward move. Small gains were recorded in March from newly established long positions in the energy markets as oil and gas futures prices finished the month higher. Additional gains were recorded in the currency markets. Trading gains posted during April were recorded from short positions in the German mark and Swiss franc as the value of these currencies moved lower relative to the U.S. dollar. Smaller gains were recorded from trading in the agricultural and energy futures markets. Sharp trend reversals in a majority of the markets traded resulted in losses during May. The most significant losses were recorded in metals from long copper futures positions as prices moved dramatically lower on May 17 and 20. During June, global interest rate and stock index futures prices moved in a choppy pattern, resulting in losses for the Fund. Smaller losses were recorded in the agricultural markets. A portion of these losses was offset by gains from short copper futures positions as prices moved dramatically lower on news of significant losses in copper by Sumitomo Corporation. During July, long German mark and Swiss franc positions profited from an upward move in the value of these currencies relative to the U.S. dollar. Additional gains were recorded during July from long global interest rate futures positions. Trend reversals and choppy movement in the currency markets resulted in losses for the Fund during August. Smaller losses were recorded from trading in agricultural commodities and metals. Gains from long energy futures positions offset a portion of these losses. A strong upward move in global interest rate futures prices during September resulted in gains for the Fund's long positions. Additional gains were recorded in the energy markets as oil and gas prices continued to trend higher. Gains were recorded during October and November from long British pound positions as the value of the pound surged higher relative to the U.S. dollar. Additional gains were recorded as long global interest rate futures positions profited from a continued upward price trend. A small portion of these gains was offset by losses experienced during October in the energy markets, and during November as a result of choppy movement in agricultural futures prices. Losses were recorded during December as a result of sudden and dramatic reversal in global interest rate futures prices early in the month. Additional losses were recorded as the value of the British pound decreased sharply during the first week of December. The intermediate to long-term trend following trading methodology of the Fund's sole trading advisor, Dean Witter Futures & Currency Management Inc. ("DWFCM"), was hurt by price volatility in energies and agricultural commodities during much of 1996. This factor coupled with sharp trend reversals in currencies and global bond futures in February and December when positions in these areas were significant, resulted in overall losses for the year despite a better than 20% increase during the three month period September-November. While such results are frustrating, we remain confident in DWFCM's time tested methodology and in its ability to rebound as it has over previous long-term periods. Should you have any questions concerning this report, please feel free to contact Demeter Management Corporation at Two World Trade Center, 62nd Floor, New York, NY 10048, or your Dean Witter Account Executive. I hereby affirm, that to the best of my knowledge and belief, the information contained in this report is accurate and complete. Past performance is not a guarantee of future results. Sincerely, /s/ Mark J. Hawley Mark J. Hawley President Demeter Management Corporation General Partner DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. INDEPENDENT AUDITORS' REPORT The Limited Partners and the General Partner: We have audited the accompanying statements of financial condition of Dean Witter Diversified Futures Fund II L.P. (the "Partnership") as of December 31, 1996 and 1995 and the related statements of operations, changes in partners' capital, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Dean Witter Diversified Futures Fund II L.P. as of December 31, 1996 and 1995 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP February 17, 1997 New York, New York DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, --------------------- 1996 1995 ---------- ---------- $ $ ASSETS Equity in Commodity futures trading accounts: Cash 12,415,430 14,643,529 Net unrealized gain on open contracts 160,193 852,419 ---------- ---------- Total Trading Equity 12,575,623 15,495,948 Interest receivable (DWR) 42,043 54,267 ---------- ---------- Total Assets 12,617,666 15,550,215 ========== ========== LIABILITIES AND PARTNERS' CAPITAL LIABILITIES Redemptions payable 297,904 781,248 Accrued management fee (DWFCM) 31,538 38,862 Accrued brokerage fees (DWR) 15,137 116,587 Accrued transaction fees and costs 2,330 5,241 Accrued incentive fee (DWFCM) -- 3,299 ---------- ---------- Total Liabilities 346,909 945,237 ---------- ---------- PARTNERS' CAPITAL Limited Partners (4,982.521 and 5,657.751 Units, respectively) 12,019,867 14,341,357 General Partner (104 Units) 250,890 263,621 ---------- ---------- Total Partners' Capital 12,270,757 14,604,978 ---------- ---------- Total Liabilities and Partners' Capital 12,617,666 15,550,215 ========== ========== NET ASSET VALUE PER UNIT 2,412.41 2,534.82 ========== ==========
The accompanying notes are an integral part of these financial statements. DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, -------------------------------- 1996 1995 1994 --------- ---------- --------- $ $ $ REVENUES Trading Profit (Loss): Realized 832,912 2,142,749 1,613,912 Net change in unrealized (692,226) (1,324,261) 861,395 --------- ---------- --------- Total Trading Results 140,686 818,488 2,475,307 Interest income (DWR) 502,812 738,238 562,625 --------- ---------- --------- Total Revenues 643,498 1,556,726 3,037,932 --------- ---------- --------- EXPENSES Brokerage fees (DWR) 1,004,389 1,522,301 1,502,699 Management fee (DWFCM) 383,830 507,434 500,900 Transaction fees and costs 82,386 132,583 129,572 Incentive fee (DWFCM) (2,590) (195,018) 51,320 --------- ---------- --------- Total Expenses 1,468,015 1,967,300 2,184,491 --------- ---------- --------- NET INCOME (LOSS) (824,517) (410,574) 853,441 ========= ========== ========= NET INCOME (LOSS) ALLOCATION: Limited Partners (811,786) (402,714) 839,933 General Partner (12,731) (7,860) 13,508 NET INCOME (LOSS) PER UNIT: Limited Partners (122.41) (75.58) 133.96 General Partner (122.41) (75.58) 133.96
STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
UNITS OF PARTNERSHIP LIMITED GENERAL INTEREST PARTNERS PARTNER TOTAL ----------- ---------- ------- ---------- $ $ $ Partners' Capital, December 31, 1993 7,048.887 17,109,409 346,701 17,456,110 Net Income -- 839,933 13,508 853,441 Redemptions (556.592) (1,273,337) (88,728) (1,362,065) --------- ---------- ------- ---------- Partners' Capital, December 31, 1994 6,492.295 16,676,005 271,481 16,947,486 Net Loss -- (402,714) (7,860) (410,574) Redemptions (730.544) (1,931,934) -- (1,931,934) --------- ---------- ------- ---------- Partners' Capital, December 31, 1995 5,761.751 14,341,357 263,621 14,604,978 Net Loss -- (811,786) (12,731) (824,517) Redemptions (675.230) (1,509,704) -- (1,509,704) --------- ---------- ------- ---------- Partners' Capital, December 31, 1996 5,086.521 12,019,867 250,890 12,270,757 ========= ========== ======= ==========
The accompanying notes are an integral part of these financial statements. DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- $ $ $ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) (824,517) (410,574) 853,441 Noncash item included in net income (loss): Net change in unrealized 692,226 1,324,261 (861,395) (Increase) decrease in operating assets: Interest receivable (DWR) 12,224 12,917 (30,869) Increase (decrease) in operating liabilities: Accrued management fee (DWFCM) (7,324) (5,406) (862) Accrued brokerage fees (DWR) (101,450) (16,216) (2,587) Accrued transaction fees and costs (2,911) 2,068 (426) Accrued incentive fee (DWFCM) (3,299) (210,269) (4,382) ---------- ---------- ---------- Net cash provided by (used for) operating activities (235,051) 696,781 (47,080) ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in redemptions payable (483,344) 412,306 171,494 Redemptions of units (1,509,704) (1,931,934) (1,362,065) ---------- ---------- ---------- Net cash used for financing activities (1,993,048) (1,519,628) (1,190,571) ---------- ---------- ---------- Net decrease in cash (2,228,099) (822,847) (1,237,651) Balance at beginning of period 14,643,529 15,466,376 16,704,027 ---------- ---------- ---------- Balance at end of period 12,415,430 14,643,529 15,466,376 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION--Dean Witter Diversified Futures Fund II L.P. (the "Partnership") was organized to engage in the speculative trading of commodity futures contracts and futures related contracts including forward contracts on foreign currencies. The general partner 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"). DWR, DWFCM and Demeter are wholly-owned subsidiaries of Dean Witter, Discover & Co. ("DWD"). Demeter is required to maintain a 1% minimum interest in the equity of the Partnership and income (losses) are shared by the General and Limited Partners based upon their proportional ownership interests. BASIS OF ACCOUNTING--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements. REVENUE RECOGNITION--Commodity futures contracts and other commodity interests are open commitments until settlement date. They are valued at market and the resulting unrealized gains and losses are reflected in income. Monthly, DWR pays the Partnership interest income based upon 80% of the average daily Net Assets for the month at a rate equal to the average yield on 13-Week U.S. Treasury Bills issued during such month. For purposes of such interest payments, Net Assets do not include monies due the Partnership on forward contracts and other commodity interests, but not actually received. NET INCOME (LOSS) PER UNIT--Net income (loss) per Unit is computed using the weighted average number of units outstanding during the period. EQUITY IN COMMODITY FUTURES TRADING ACCOUNTS--The Partnership's asset "Equity in Commodity futures trading accounts" consists of cash on deposit at DWR to be used as margin for trading and the net asset or liability related to unrealized gains or losses on open contracts. The asset or liability related to the unrealized gains or losses on forward contracts is presented as a net amount because the Partnership has a master netting agreement with DWR. BROKERAGE FEES AND RELATED TRANSACTION FEES AND COSTS--Prior to September 1, 1996, the monthly brokerage fee was equal to 4/5 of 1% per month of the Partnership's adjusted month-end Net Assets, as defined in the Limited Partnership Agreement. DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Effective September 1, 1996, brokerage commissions are accrued on a half-turn basis at 80% of DWR's published non-member rates, to a maximum of 13/20 of 1% per month inclusive of transaction fees and costs of the Partnership's month- end Net Assets (as defined in the Limited Partnership Agreement). Transaction fees and costs are accrued on a half-turn basis. OPERATING EXPENSES--The Partnership incurs a monthly management fee and may incur an incentive fee. Demeter and/or DWR bear all other operating expenses. INCOME TAXES--No provision for income taxes has been made in the accompanying financial statements, as partners are individually responsible for reporting income or loss based upon their respective share of the Partnership's revenues and expenses for income tax purposes. DISTRIBUTIONS--Distributions, other than on redemptions of Units, are made on a pro-rata basis at the sole discretion of Demeter. No distributions have been made to date. REDEMPTIONS--Limited Partners may redeem some or all of their Units at 100% of the Net Asset Value per Unit effective as of the last day of any calendar quarter upon five business days advance notice by redemption form to Demeter. DISSOLUTION OF THE PARTNERSHIP--The Partnership will terminate on December 31, 2025 or at an earlier date if certain conditions set forth in the Limited Partnership Agreement occur. 2. RELATED PARTY TRANSACTIONS Under its Customer Agreement with DWR, the Partnership pays a monthly brokerage fee to DWR as described in Note 1. 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 as described in Note 1. Demeter, on behalf of the Partnership and itself, has entered into a Management Agreement with DWFCM to make all trading decisions for the Partnership. Compensation to DWFCM by the Partnership consists of a management fee and an incentive fee as follows: MANAGEMENT FEE--The management fee is accrued daily at the rate of 1/4 of 1% per month of adjusted Net Assets, as defined in the Management Agreement, at each month-end. DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) INCENTIVE FEE--The Partnership will pay an annual incentive fee to DWFCM equal to 15% of the "Trading Profits", as defined in the Management Agreement, earned by the Partnership as of the end of each annual incentive period ending January 31. Such incentive fee is accrued in each month in which "Trading Profits" occur. In those months in which "Trading Profits" are negative, previous accruals, if any, during the incentive period will be reduced. 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 December 31, 1996 and 1995, open contracts were:
CONTRACT OR NOTIONAL AMOUNT --------------------------- 1996 1995 ------------- ------------- $ $ EXCHANGE-TRADED CONTRACTS Financial Futures: Commitments to Purchase -- 68,504,000 Commitments to Sell -- -- Commodity Futures: Commitments to Purchase 2,026,000 32,009,000 Commitments to Sell 6,083,000 4,857,000 Foreign Futures: Commitments to Purchase 6,629,000 50,355,000 Commitments to Sell 11,748,000 3,536,000 OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS Commitments to Purchase 33,150,000 49,215,000 Commitments to Sell 42,844,000 55,478,000
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 gains on open contracts are reported as a component of "Equity in Commodity futures trading accounts" on the Statements of Financial Condition and totaled $160,193 and $852,419 at December 31, 1996 and 1995, respectively. Of the $160,193 net unrealized gain on open contracts at December 31, 1996, $423,229 related to exchange-traded futures contracts and $(263,036) related to off- DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) exchange-traded forward currency contracts. Of the $852,419 net unrealized gain on open contracts at December 31, 1995, $1,413,016 related to exchange-traded futures contracts and $(560,597) related to off-exchange-traded forward currency contracts. Exchange-traded futures contracts held by the Partnership at December 31, 1996 and 1995 mature through June 1997 and September 1996, respectively. Off- exchange-traded forward currency contracts held by the Partnership at December 31, 1996 and 1995 mature through February 1997 and February 1996, 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 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 $12,838,659 and $16,056,545 at December 31, 1996 and 1995, respectively. With respect to the Partnership's off-exchange-traded forward currency contracts, there are no daily settlements of variations in value nor is there any requirement that an amount equal to the net unrealized gain on open forward contracts be segregated. With respect to those off-exchange-traded forward currency contracts, the Partnership is at risk to the ability of DWR, the counterparty on all of such contracts, to perform. For the years ended December 31, 1996 and 1995, the average fair value of financial instruments held for trading purposes was as follows:
1996 ---------------------- ASSETS LIABILITIES ---------- ----------- $ $ EXCHANGE-TRADED CONTRACTS: Financial Futures 15,923,000 8,572,000 Commodity Futures 7,188,000 5,152,000 Foreign Futures 22,067,000 8,118,000 OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 37,689,000 41,562,000
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
1995 ---------------------- ASSETS LIABILITIES ---------- ----------- $ $ EXCHANGE-TRADED CONTRACTS: Financial Futures 25,157,000 13,498,000 Commodity Futures 13,763,000 6,544,000 Foreign Futures 28,482,000 9,500,000 OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 38,007,000 47,623,000
4. LEGAL MATTERS On September 6, 10, and 20, 1996, 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 other 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, Newcastle 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 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. DEAN WITTER REYNOLDS INC. Two World Trade Center 62nd Floor New York, NY 10048 FIRST-CLASS MAIL ZIP + 4 PRESORT U.S. POSTAGE PAID BROOKLYN, NY PERMIT NO. 148 -----END PRIVACY-ENHANCED MESSAGE-----