-----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, MqlQYjtlJa08ZjOkn1yWJvHrj4uohgLl4BFXm8tFXAdhtUjnmhk63iynPia261Vf kzPxNTEe388jSUzAbx7OaQ== 0000839945-98-000004.txt : 19981116 0000839945-98-000004.hdr.sgml : 19981116 ACCESSION NUMBER: 0000839945-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 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-Q SEC ACT: SEC FILE NUMBER: 000-17446 FILM NUMBER: 98747007 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-Q 1 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. 0-17446 DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. (Exact name of registrant as specified in its charter) Delaware 13-3490286 (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 DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. INDEX TO QUARTERLY REPORT ON FORM 10-Q September 30, 1998
PART I. FINANCIAL INFORMATION 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
PART I. FINANCIAL INFORMATION Item 1. Financial Statements DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. STATEMENTS OF FINANCIAL CONDITION
September 30, December 31, 1998 1997 $ $ (Unaudited) ASSETS Equity in Commodity futures trading accounts: Cash 10,332,845 10,015,151 Net unrealized gain on open contracts 1,337,236 1,749,349 Total Trading Equity 11,670,081 11,764,500 Interest receivable (DWR) 34,463 36,672 Total Assets 11,704,544 11,801,172 LIABILITIES AND PARTNERS' CAPITAL Liabilities Redemptions payable 516,842 283,443 Incentive fees payable (DWFCM) 71,138 - Accrued management fees (DWFCM) 29,261 29,503 Total Liabilities 617,241 312,946 Partners' Capital Limited Partners (3,724.949 and 4,175.580 Units, respectively) 10,786,155 11,209,045 General Partner (104 Units) 301,148 279,181 Total Partners' Capital 11,087,303 11,488,226 Total Liabilities and Partners' Capital 11,704,544 11,801,172 NET ASSET VALUE PER UNIT 2,895.65 2,684.43 The accompanying notes are an integral part of these financial statements.
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. STATEMENTS OF OPERATIONS (Unaudited)
For the Quarters Ended September 30, 1998 1997 $ $ REVENUES Trading profit: Realized 1,163,134 183,098 Net change in unrealized 306,818 525,415 Total Trading Results 1,469,952 708,513 Interest Income (DWR) 102,973 117,079 Total Revenues 1,572,925 825,592 EXPENSES Brokerage commissions (DWR) 165,147 194,316 Management fees (DWFCM) 82,403 87,118 Incentive fees (DWFCM) 71,138 - Transaction fees and costs 12,423 15,593 Total Expenses 331,111 297,027 NET INCOME 1,241,814 528,565 NET INCOME ALLOCATION Limited Partners 1,209,586 516,603 General Partner 32,228 11,962 NET INCOME PER UNIT Limited Partners 309.88 115.02 General Partner 309.88 115.02 The accompanying notes are an integral part of these financial statements.
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. STATEMENTS OF OPERATIONS (Unaudited)
For the Nine Months Ended September 30, 1998 1997 $ $ REVENUES Trading profit (loss): Realized 1,771,997 599,472 Net change in unrealized (412,113) 529,297 Total Trading Results 1,359,884 1,128,769 Interest Income (DWR) 316,651 368,287 Total Revenues 1,676,535 1,497,056 EXPENSES Brokerage commissions (DWR) 504,745 640,232 Management fees (DWFCM) 245,663 276,598 Incentive fees (DWFCM) 71,138 - Transaction fees and costs 39,267 50,693 Total Expenses 860,813 967,523 NET INCOME 815,722 529,533 NET INCOME ALLOCATION Limited Partners 793,755 518,260 General Partner 21,967 11,273 NET INCOME PER UNIT Limited Partners 211.22 108.39 General Partner 211.22 108.39 The accompanying notes are an integral part of these financial statements.
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. STATEMENTS OF CHANGES IN PARTNERS' CAPITAL For the Nine Months Ended September 30, 1998 and 1997 (Unaudited)
Units of Partnership Limited General Interest Partners Partner Total Partners' Capital December 31, 1996 5,086.521 $12,019,867 $250,890 $12,270,757 Net Income - 518,260 11,273 529,533 Redemptions (701.352) (1,746,175) - (1,746,175) Partners' Capital September 30, 1997 4,385.169 $10,791,952 $262,163 $11,054,115 Partners' Capital December 31, 1997 4,279.580 $11,209,045 $279,181 $11,488,226 Net Income - 793,755 21,967 815,722 Redemptions (450.631) (1,216,645) - (1,216,645) Partners' Capital September 30, 1998 3,828.949 $10,786,155 $301,148 $11,087,303 The accompanying notes are an integral part of these financial statements.
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 30, 1998 1997 $ $ CASH FLOWS FROM OPERATING ACTIVITIES Net income 815,722 529,533 Noncash item included in net income: Net change in unrealized 412,113 ( 529,297) Decrease in operating assets: Interest receivable (DWR) 2,209 5,124 Increase (decrease) in operating liabilities: Incentive fee payable (DWFCM) 71,138 - Accrued management fee (DWFCM) (242) (2,439) Accrued brokerage commissions (DWR) - 11,097 Accrued transaction fees and costs - (263) Net cash provided by operating activities1,300,940 13,755 CASH FLOWS FROM FINANCING ACTIVITIES Increase in redemptions payable 233,399 232,321 Redemptions of units (1,216,645) ( 1,746,175) Net cash used for financing activities (983,246) ( 1,513,854) Net increase (decrease) in cash 317,694 ( 1,500,099) Balance at beginning of period 10,015,151 1 2,415,430 Balance at end of period 10,332,845 1 0,915,331 The accompanying notes are an integral part of these financial statements.
DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) The financial statements include, in the opinion of management, all adjustments necessary for a fair presentation of the results of operations and financial condition of Dean Witter Diversified Futures Fund II L.P. (the "Partnership"). The financial state- ments 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 II L.P. 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 the "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 DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) interest 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 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 25,236,000 3,419,000 Commitments to Sell 737,000 - Commodity Futures: Commitments to Purchase 1,502,000 449,000 Commitments to Sell 1,341,000 7,245,000 Foreign Futures: Commitments to Purchase 69,342,000 22,719,000 Commitments to Sell 4,678,000 5,110,000 Off-Exchange-Traded Forward Currency Contracts Commitments to Purchase 51,064,000 22,401,000 Commitments to Sell 33,565,000 43,183,000 DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) A portion of the amounts indicated as off-balance-sheet risk in forward currency contracts is due to offsetting forward commitments to purchase and to sell the same currency on the same date in the future. These commitments are economically offsetting, but are not offset in the forward market until the settlement date. The net unrealized gains on open contracts are reported as a component of "Equity in Commodity futures trading accounts" on the Statements of Financial Condition and totaled $1,337,236 and $1,749,349 at September 30, 1998 and December 31, 1997, respectively. Of the $1,337,236 net unrealized gain on open contracts at September 30, 1998, $1,476,226, related to exchange-traded futures contracts and $(138,990), related to off-exchange-traded forward currency contracts. Of the $1,749,349 net unrealized gain on open contracts at December 31, 1997, $703,453, related to exchange-traded futures contracts and $1,045,896, 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 DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. 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 $11,809,071 and $10,718,604 at September 30, 1998 and December 31, 1997, respectively. With respect to the Partnership's off-exchange-traded forward currency DEAN WITTER DIVERSIFIED FUTURES FUND II L.P. 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 for 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 8,810,000 4,580,000 Commodity Futures 758,000 4,051,000 Foreign Futures 26,680,000 10,285,000 Off-Exchange-Traded Forward Currency Contracts 43,385,000 47,406,000 December 31, 1997 Assets Liabilities $ $ Exchange-Traded Contracts: Financial Futures 3,335,000 11,531,000 Commodity Futures 4,614,000 5,619,000 Foreign Futures 13,703,000 7,965,000 Off-Exchange-Traded Forward Currency Contracts 25,073,000 33,538,000 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 for 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 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 $1,572,925 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 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 $331,111, resulting in net income of $1,241,814. The value of an individual Unit in the Partnership increased from $2,585.77 at June 30, 1998 to $2,895.65 at September 30, 1998. For the nine months ended September 30, 1998, the Partnership recorded total trading revenues including interest income of $1,676,535 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 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 $860,813, resulting in net income of $815,722. The value of an individual Unit in the Partnership increased from $2,684.43 at December 31, 1997 to $2,895.65 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 $825,592 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 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 $297,027, resulting in net income of $528,565. The value of an individual Unit in the Partnership increased from $2,405.78 at June 30, 1997 to $2,520.80 at September 30, 1997. For the nine months ended September 30, 1997, the Partnership recorded total revenues including interest income of $1,497,056 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 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, 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 prior 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 $967,523, resulting in net income of $529,533. The value of an individual Unit in the Partnership increased from $2,412.41 at December 31, 1996 to $2,520.80 at September 30, 1997. 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 its 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 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. 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. 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 II L.P. (Registrant) By: Demeter Management Corporation (General Partner) November 13, 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. 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 reference to such financial statements. 9-MOS DEC-31-1998 SEP-30-1998 10,332,845 0 34,463 0 0 0 0 0 11,704,544 0 0 0 0 0 0 11,704,544 0 1,676,535 0 0 860,813 0 0 815,722 0 815,722 0 0 0 815,722 0 0 Receivables include interest receivable of $34,463. In addition to cash and receivables, total assets include net unrealized gain on open contracts of $1,337,236. Liabilities include redemptions payable of $516,842, accrued management fees of $29,261 and incentive fees payable of $71,138. Total revenues include realized trading revenue of $1,771,997, net change in unrealized of $(412,113), and interest income of $316,651.
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