UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X] Annual  report  pursuant  to  Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the year ended December 31, 1998 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 0-19116

                  DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
--------------------------------------------------------------------------------
  (Exact name of registrant as specified in its Limited Partnership Agreement)

            DELAWARE                                             13-3577501
--------------------------------------------------------------------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

c/o Demeter Management Corporation
Two World Trade Center, - 62nd Flr., New York, N.Y.                  10048
--------------------------------------------------------------------------------
(Address of principal executive offices)                           (Zip Code)

                                 (212) 392-5454
--------------------------------------------------------------------------------
               Registrant's telephone number, including area code

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)

         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 10-K. [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,  as of a specified
date within 60 days prior to the date of filing:  $60,421,065.94  at January 31,
1999.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                  (See Page 1)

<PAGE>

                  DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
                       INDEX TO ANNUAL REPORT ON FORM 10-K
                                DECEMBER 31, 1998

                                                                        Page No.
                                                                        --------
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . . . .     1

Part I.

     Item      1.  Business. . . . . . . . . . . . . . . . . . . . . . . .   2-4

     Item      2.  Properties. . . . . . . . . . . . . . . . . . . . . . .     4

     Item      3.  Legal Proceedings . . . . . . . . . . . . . . . . . . .   4-6

     Item      4.  Submission of Matters to a Vote of Security Holders . .     6

Part II.

     Item      5.  Market for the Registrant's Partnership Units and
                   Related Security Holder Matters . . . . . . . . . . . .     7

     Item      6.  Selected Financial Data . . . . . . . . . . . . . . . .     8

     Item      7.  Management's Discussion and Analysis of Financial
                   Condition and Results of Operations . . . . . . . . . .  9-18

     Item     7A.  Quantitative and Qualitative Disclosures About
                   Market Risk . . . . . . . . . . . . . . . . . . . . . . 18-31

     Item      8.  Financial Statements and Supplementary Data . . . . . .    31

     Item      9.  Changes in and Disagreements with Accountants on
                   Accounting and Financial Disclosure . . . . . . . . . .    31
Part III.

     Item     10.  Directors and Executive Officers of the Registrant. . . 32-36

     Item     11.  Executive Compensation. . . . . . . . . . . . . . . . .    36

     Item     12.  Security Ownership of Certain Beneficial Owners
                   and Management. . . . . . . . . . . . . . . . . . . . .    37

     Item     13.  Certain Relationships and Related Transactions. . . . .    37

Part IV.

     Item     14.  Exhibits, Financial Statement Schedules, and
                   Reports on Form 8-K . . . . . . . . . . . . . . . . . .    38


                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference as follows:

             Documents Incorporated                       Part of Form 10-K
             ----------------------                       -----------------

     Partnership's Prospectus dated 
     June 30, 1992.                                               I

     Annual Report to Dean Witter

     Diversified Futures Fund III L.P.
     Limited Partners for the year
     ended December 31, 1998                                II, III and IV


                                      -1-
<PAGE>

                                     PART I

Item 1.  BUSINESS

         (a) General  Development of Business.  Dean Witter Diversified  Futures
Fund III L.P. (the "Partnership") is a Delaware limited partnership organized to
engage in the  speculative  trading of commodity  futures  contracts and forward
contracts on foreign currencies (collectively, "futures interests"). The general
partner for the Partnership is Demeter Management Corporation  ("Demeter").  The
non-clearing  commodity  broker is Dean Witter  Reynolds  Inc.  ("DWR"),  and an
unaffiliated  clearing commodity broker,  Carr Futures Inc.  ("Carr"),  provides
clearing and execution  services.  The trading  manager is Dean Witter Futures &
Currency  Management Inc. ("DWFCM" or the "Trading Manager").  Demeter,  DWR and
DWFCM  are  wholly-owned  subsidiaries  of  Morgan  Stanley  Dean  Witter  & Co.
("MSDW").

         The  Partnership's  Net Asset Value per Unit,  as of December 31, 1998,
was $1,783.35, representing an increase of 5.39 percent from the Net Asset Value
per Unit of $1,692.08 at December 31, 1997.  For a more detailed  description of
the Partnership's business see subparagraph (c).

         (b)  Financial  Information  about  Industry  Segments.  For  financial
information reporting purposes, the Partnership is deemed to engage

                                      -2-

<PAGE>

in one industry  segment,  the  speculative  trading of futures  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 of  futures  interests,  pursuant  to trading
instructions  provided by the Trading Manager. For a detailed description of the
different  facets  of the  Partnership's  business,  see those  portions  of the
Partnership's prospectus, dated June 30, 1992, (the "Prospectus"),  incorporated
by reference in this Form 10-K, set forth below:

Facets of Business
------------------

      1. Summary                         1.  "Summary of the Prospectus"
                                              (Pages 1-8).

      2. Commodity Markets               2.  "The Commodities Markets"
                                              (Pages 52-59).

      3. Partnership's Trading           3.  "Trading Policies" (Pages
         Arrangements and                     48-49). "The Trading
         Policies                             Manager" (Pages 37-47).

      4. Management of the Part-         4.   "The Management Agreement"
         nership                              (Pages 50-52). "The
                                              General Partner" (Pages
                                              33-35) and "The Commodity
                                              Broker" (Pages 49-50).
                                              "The Limited Partner-
                                              ship Agreement" (Pages
                                              61-65).

      5. Taxation of the Partner-        5.   "Federal Income Tax
         ship's Limited Partners              Aspects" and "State and
                                              Local Income Tax Aspects"
                                              (Pages 70-77).

                                      -3-

<PAGE>


    (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  brokers) enters into forward
contract  transactions  where foreign banks are the contracting party and trades
in futures interests 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,  and on March 13,  1997,  similar
purported  class  actions  were  filed in the  Superior  Court  of the  State of
California,  County of Los Angeles,  on behalf of all purchasers of interests in
limited  partnership  commodity pools sold by DWR. Named defendants include DWR,
Demeter, DWFCM, MSDW (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.  On  June  16,  1997,  the  plaintiffs  in  the  above  actions  filed  a
consolidated  amended  complaint,   alleging,   among  other  things,  that  the
defendants  committed  fraud,  deceit,  negligent   misrepresentation,   various
violations of the

                                      -4-
<PAGE>

California  Corporations  Code,  intentional  and negligent  breach of fiduciary
duty,  fraudulent  and  unfair  business  practices,   unjust  enrichment,   and
conversion  in the  sale  and  operation  of  the  various  limited  partnership
commodity 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. A  consolidated  and  amended
complaint  in the action  pending in the Supreme  Court of the State of New York
was filed on August 13, 1997,  alleging  that the  defendants  committed  fraud,
breach  of  fiduciary  duty,  and  negligent  misrepresentation  in the sale and
operation of the various limited  partnership  commodity  pools. On December 16,
1997, upon motion of the plaintiffs, the action pending in the Superior Court of
the State of Delaware was voluntarily dismissed without prejudice.  The New York
Supreme  Court  dismissed  the New York  action in  November  1998,  but granted
plaintiffs leave to file an amended complaint,  which they did in early December
1998. The defendants  have filed a motion to dismiss the amended  complaint with
prejudice on February 1, 1999. The complaints

                                      -5-
<PAGE>

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.


                                      -6-
<PAGE>

                                     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  ("Units")  in the  Partnership.  The number of holders of
Units at December 31, 1998 was approximately  5,114. No distributions  have been
made by the  Partnership  since it commenced  trading  operations on November 1,
1990. 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.


                                       -7-
<PAGE>


Item 6.  SELECTED FINANCIAL DATA (in dollars)

<TABLE>
<CAPTION>
                                             For the Years Ended December 31,              
                        -------------------------------------------------------------------------
                            1998           1997           1996            1995            1994   
                        -----------    -----------    -----------     -----------     -----------
<S>                      <C>           <C>            <C>             <C>             <C>        
Total Revenues
(including interest)      9,448,680     16,870,923      4,036,681      10,909,439      19,353,083

Net Income (Loss)         3,166,040      8,729,367     (5,408,768)     (3,937,613)      5,193,417

Net Income (Loss)
Per Unit (Limited
& General Partners)           91.27         185.19         (74.86)         (66.26)          91.72

Total Assets             65,687,386     73,774,146     81,320,352     102,412,462     120,022,299

Total Limited
Partners' Capital        64,144,919     70,564,013     78,452,540      98,628,520     115,956,558

Net Asset Value Per
Unit of Limited
Partnership Interest       1,783.35       1,692.08       1,506.89        1,581.75        1,648.01
</TABLE>

                                       -8-
<PAGE>

Item 7.  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.  Such  assets are held in either  non-interest  bearing  bank
accounts or in securities  approved by the Commodity Futures Trading  Commission
("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  future  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.

                                      -9-
<PAGE>

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  from  promptly  liquidating   unfavorable
positions,   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 of Units will affect the amount of
funds available for investment in futures interests in subsequent periods. Since
they 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, 1998, the Partnership's total
capital was $64,888,738,  a decrease of $7,370,890 from the Partnership's  total
capital of  $72,259,628  at December 31, 1997.  For the year ended  December 31,
1998, the partnership generated net income of $3,166,040,  and total redemptions
aggregated $10,536,930.

                                      -10-
<PAGE>

         For the year ended December 31, 1998, the  Partnership's  total trading
revenues,  including interest income,  were $9,448,680.  The Partnership's total
expenses for the year were  $6,282,640,  resulting in net income of  $3,166,040.
The value of an individual unit in the  Partnership  increased from $1,692.08 at
December 31, 1997 to $1,783.35 at December 31, 1998.

         As  of  December  31,  1997,  the   Partnership's   total  capital  was
$72,259,628,  a decrease of $7,702,955 from the  Partnership's  total capital of
$79,962,583  at December 31,  1996.  For the year ended  December 31, 1997,  the
Partnership generated net income of $8,729,367 and total redemptions  aggregated
$16,432,322.

         For the year ended December 31, 1997, the  Partnership's  total trading
revenues  including  interest income were $16,870,923.  The Partnership's  total
expenses for the year were  $8,141,556,  resulting in net income of  $8,729,367.
The value of an individual unit in the  Partnership  increased from $1,506.89 at
December 31, 1996 to $1,692.08 at December 31, 1997.

         As  of  December  31,  1996,  the   Partnership's   total  capital  was
$79,962,583,  a decrease of $20,250,999 from the Partnership's  total capital of
$100,213,582 at December 31, 1995. For the year ended


                                      -11-
<PAGE>

December 31, 1996, the  Partnership  incurred a net loss of $5,408,768 and total
redemptions aggregated $14,842,231.

         For the year ended December 31, 1996, the  Partnership's  total trading
revenues  including  interest income were $4,036,681.  The  Partnership's  total
expenses for the year were  $9,445,449,  resulting in a net loss of  $5,408,768.
The value of an individual unit in the  Partnership  decreased from $1,581.75 at
December 31, 1995 to $1,506.89 at December 31, 1996.

         The Partnership's  overall performance record represents varied results
of trading in different futures interests markets.  For a further description of
1998  trading  results,  refer to the  letter  to the  Limited  Partners  in the
accompanying  Annual Report to Limited  Partners for the year ended December 31,
1998,  incorporated by reference in this Form 10-K. The Partnership's  gains and
losses are allocated among its partners for income tax purposes.

         Credit Risk. In entering into futures and forward contracts, there is a
credit risk to the Partnership  that the  counterparty on a contract will not be
able to meet its obligations to the  Partnership.  The ultimate  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

                                          -12-
<PAGE>

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.  For
example,  a  clearinghouse  may cover a default by (i) drawing upon a defaulting
member's mandatory contributions and/or non-defaulting members' contributions to
a  clearinghouse  guarantee  fund,  established  lines or letters of credit with
banks, and/or the clearinghouse's  surplus capital and other available assets of
the exchange and clearinghouse, or (ii) assessing its members.

         In cases where the Partnership  trades on a foreign  exchange 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-traded  contracts with a counterparty,  the
sole recourse of the Partnership will be the clearinghouse,  the exchange member
or the off-exchange-traded contract counterparty,  as the case may be. There can
be no assurance that a  clearinghouse,  exchange or other  exchange  member will
meet its obligations to the Partnership,  and the Partnership is not indemnified
against a default by such parties from Demeter, MSDW or DWR.

         Further,  the law is unclear as to whether a  commodity  broker has any
obligation to protect its customers from loss in the event of an

                                          -13-
<PAGE>

exchange,  clearinghouse or other exchange member default on trades effected for
the broker's  customers.  Any such  obligation on the part of the broker appears
even less clear where the default occurs in a non-US jurisdiction.

         Demeter deals with the credit risks of all the  partnerships  for which
it  serves  as  general  partner  in  several  ways.   First,  it  monitors  the
Partnership's credit exposure to each exchange on a daily basis, calculating not
only the amount of margin  required for it but also the amount of its unrealized
gains at each exchange, if any. The commodity brokers inform the Partnership, as
with all its customers, of its net margin requirements for all its existing open
positions, but do not break that net figure down, exchange by exchange. Demeter,
however,  has installed a system which  permits it to monitor the  Partnership's
potential  margin  liability,  exchange  by  exchange.  Demeter  is then able to
monitor the  Partnership's  potential  net credit  exposure to each  exchange by
adding  the  unrealized  trading  gains  on  that  exchange,   if  any,  to  the
Partnership's margin liability thereon.

         Second, the Partnership's  trading policies limit the amount of its net
assets that can be committed at any given time to futures contracts and require,
in addition,  a certain minimum amount of  diversification  in the Partnership's
trading,  usually  over  several  different  products.  One of the  aims of such
trading policies has been to reduce the credit

                                      -14-


<PAGE>

exposure  of  the  Partnership  to a  single  exchange  and,  historically,  the
Partnership's  exposure has typically amounted to only a small percentage of its
total net assets. On those relatively few occasions where a Partnership's credit
exposure may climb above that level,  Demeter deals with the situation on a case
by case basis, carefully weighing whether the increased level of credit exposure
remains appropriate.

         Third, Demeter has secured, with respect to Carr acting as the clearing
broker for the  Partnership,  a guarantee by Credit  Agricole  Indosuez,  Carr's
parent,  of the  payment  of the "net  liquidating  value"  of the  transactions
(futures and forward contracts) in the Partnership's account.

         With respect to forward contract trading,  the Partnership  trades with
only those counterparties  which Demeter,  together with DWR, have determined to
be  creditworthy.  At the date of this filing,  the Partnership  deals only with
Carr as its counterparty on forward  contracts.  The guarantee by Carr's parent,
discussed above, covers these forward contracts.

         See "Financial  Instruments" under Notes to Financial Statements in the
Partnership's  Annual Report to Limited Partners for the year ended December 31,
1998, incorporated by reference in this Form 10-K.

                                      -15-
<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 adversely  affect the handling or  determination of futures trades
and prices and other services.

         MSDW  began  its  planning  for the Year  2000  Problem  in  1995,  and
currently has several hundred  employees working on the matter. 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 to address
the Year 2000 Problem with respect to Demeter's computer systems that affect 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

                                      -16-
<PAGE>

material relationship - the futures exchanges and clearing organizations through
which it  trades,  Carr,  or the  Trading  Manager - could  result in a material
financial risk to the  Partnership.  All U.S.  futures  exchanges are subject to
monitoring  by the CFTC of 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.  Demeter intends to monitor the progress
of Carr and the Trading  Manager  throughout  1999 in their Year 2000 compliance
and, where applicable,  to test its external interface with Carr and the Trading
Manager.

         A worst case  scenario  would be one in which  trading of  contracts on
behalf  of the  Partnership  becomes  impossible  as a result  of the Year  2000
Problem  encountered by any third parties.  A less  catastrophic but more likely
scenario  would be one in which  trading  opportunities  diminish as a result of
technical  problems  resulting in illiquidity  and fewer  opportunities  to make
profitable trades. MSDW has begun developing various  "contingency plans" in the
event that the systems of such third  parties fail.  Demeter  intends to consult
closely with MSDW in implementing those plans.  Despite the best efforts of both
Demeter  and  MSDW,  however,  it is  possible  that  these  steps  will  not be
sufficient to avoid any adverse impact to the Partnership.

                                          -17-
<PAGE>

         Risks Associated With the Euro. On January 1, 1999, eleven countries in
the  European  Union  established  fixed  conversion  rates  on  their  existing
sovereign  currencies  and converted to a common  single  currency (the "euro").
During a three-year transition period, the sovereign currencies will continue to
exist  but only as a fixed  denomination  of the  euro.  Conversion  to the euro
prevents  the Trading  Manager from  trading in certain  currencies  and thereby
limits its ability to take  advantage of  potential  market  opportunities  that
might  otherwise have existed had separate  currencies  been available to trade.
This could adversely affect the performance results of the partnership.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Introduction

         The   Partnership  is  a  commodity  pool  engaged   primarily  in  the
speculative trading of futures interests.  The market sensitive instruments held
by the Partnership are acquired solely for speculative  trading purposes and, as
a result,  all or substantially all of the  Partnership's  assets are subject to
the risk of  trading  loss.  Unlike  an  operating  company,  the risk of market
sensitive instruments is integral, not incidental,  to the Partnership's primary
business activities.

         The futures interests traded by the Partnership involve varying degrees
of related market risk. Such market risk is often dependent upon

                                      -18-
<PAGE>

changes in the level or volatility of interest  rates,  exchange  rates,  and/or
market values of financial instruments and commodities.  Fluctuations in related
market risk based upon the aforementioned  factors result in frequent changes in
the fair value of the Partnership's open positions,  and,  consequently,  in its
earnings and cash flow.

         The Partnership's  total market risk is influenced by a wide variety of
factors,  including the diversification effects among the Partnership's existing
open positions, the volatility present within the market(s) and the liquidity of
the market(s).  At varying times, each of these factors may act to exacerbate or
mute the market risk associated with the Partnership.

         The Partnership's past performance is not necessarily indicative of its
future results. Any attempt at quantifying the Partnership's market risk must be
qualified by the inherent  uncertainty  of its  speculative  trading,  which may
cause future losses and  volatility  (i.e.  "risk of ruin") far in excess of the
Partnership's experience to date and/or any reasonable expectation premised upon
historical changes in the fair value of its market sensitive instruments.

                                      -19-
<PAGE>

Quantifying the Partnership's Trading Value at Risk 

         The following  quantitative  disclosures  regarding  the  Partnership's
market risk exposures contain "forward-looking statements" within the meaning of
the safe harbor from civil liability provided for such statements by the Private
Securities  Litigation  Reform  Act of 1995  (set  forth in  Section  27A of the
Securities Act of 1933 and Section 21E of the Securities  Exchange Act of 1934).
All  quantitative  disclosures in this section are deemed to be  forward-looking
statements for purposes of the safe harbor,  except for statements of historical
fact.

         The   Partnership   accounts  for  open   positions  on  the  basis  of
mark-to-market accounting principles. As such, any loss in the fair value of the
Partnership's   open  positions  is  directly  reflected  in  the  Partnership's
earnings,  whether realized or unrealized,  and the Partnership's  cash flow, as
profits and losses on open positions of exchange  traded  futures  interests are
settled daily through variation margin.

         The Partnership's risk exposure in the various market sectors traded by
the Trading  Manager is estimated  below in terms of Value at Risk ("VaR").  The
VaR model employed by the Partnership incorporates numerous variables that could
impact the fair value of the Partnership's trading

                                      -20-
<PAGE>

portfolio.  The  Partnership  estimates  VaR using a model  based on  historical
simulation  with a  confidence  level  of 99%.  Historical  simulation  involves
constructing a distribution of hypothetical  daily changes in trading  portfolio
value.  The VaR model generally takes into account linear exposures to price and
interest rate risk.  Market risks that are incorporated in the VaR model include
equity and commodity prices,  interest rates, foreign exchange rates, as well as
correlation  that exists  among these  variables.  The  hypothetical  changes in
portfolio  value are based on daily  observed  percentage  changes in key market
indices or other market  factors  ("market risk factors") to which the portfolio
is sensitive.  In the case of the Partnership's VaR, the historical  observation
period  is  approximately   four  years.  The  Partnership's   one-day  99%  VaR
corresponds to the negative  change in portfolio  value that,  based on observed
market risk factor moves, would have been exceeded once in 100 trading days.

         VaR  models  such as the  Partnership's  are  continually  evolving  as
trading  portfolios  become more  diverse and  modeling  techniques  and systems
capabilities  improve.  It must  also be  noted  that  the VaR  model is used to
quantify market risk for historic reporting purposes only and is not utilized by
either Demeter or the Trading Manager in its daily risk management activities.

                                      -21-

<PAGE>

The Partnership's Value at Risk in Different Market Sectors

         The following table indicates the VaR associated with the Partnership's
open  positions  as a  percentage  of total net assets by market  category as of
December  31,  1998.  As  of  December  31,  1998,   the   Partnership's   total
capitalization was approximately $65 million.

         Primary Market                         December 31, 1998
         Risk Category                            Value at Risk
         -------------                            -------------

         Interest Rate                               (.54)%
         Currency                                    (.95)
         Equity                                      (.22)
         Commodity                                  (1.04)
         Aggregate Value at Risk                    (1.37)%

         Aggregate   value  at  risk   represents   the  aggregate  VaR  of  the
Partnership's  open  positions  and not  the  sum of the  VaR of the  individual
categories  listed  above.  Aggregate VaR will be lower as it takes into account
correlation among different positions and categories.

         The table above represents the VaR of the Partnership's  open positions
at December 31, 1998 only and is not  necessarily  representative  of either the
historic or future risk of an investment in the Partnership.

                                      -22-
<PAGE>

         As the  Partnership's  sole  business  is the  speculative  trading  of
primarily futures interests,  the composition of its portfolio of open positions
can  change  significantly  over any given time  period or even  within a single
trading day. Such changes in open positions could materially  impact market risk
as measured by VaR either positively or negatively.

         The  table  below  supplements  the  year  end  VaR by  presenting  the
Partnership's  high, low and average VaR as a percentage of total net assets for
the four quarterly  reporting  periods from January 1, 1998 through December 31,
1998.

Primary Market Risk Category        High        Low         Average
----------------------------        ----        ---         -------
Interest Rate                      (1.76)%      (.54)%      (1.17)%
Currency                           (2.40)       (.95)       (1.75)
Equity                              (.57)       (.22)        (.36)
Commodity                          (1.07)       (.64)        (.88)
Aggregate Value at Risk            (3.32)%     (1.37)%      (2.38)%

                                      -23-

<PAGE>

Limitations on Value at Risk as an Assessment of Market Risk

         The face value of the market sector instruments held by the Partnership
is  typically  many times the  applicable  margin  requirements,  as such margin
requirements  generally  range  between  2% and  15%  of  contract  face  value.
Additionally,  due to the use of leverage,  the face value of the market  sector
instruments   held  by  the  Partnership  is  typically  many  times  the  total
capitalization of the Partnership.  The financial magnitude of the Partnership's
open  positions  thus  creates  a "risk of ruin"  not  typically  found in other
investment  vehicles.  Due to the relative size of the positions  held,  certain
market conditions may cause the Partnership to incur losses greatly in excess of
VaR within a short period of time. The foregoing VaR tables, as well as the past
performance of the Partnership, gives no indication of such "risk of ruin".

         In addition,  VaR risk measures  should be  interpreted in light of the
methodology's  limitations,  which include the following: past changes in market
risk factors will not always yield accurate predictions of the distributions and
correlations of future market movements;  changes in portfolio value in response
to market  movements  may differ  from the  responses  implicit  in a VaR model;
published VaR results reflect past

                                      -24-
<PAGE>

trading  positions  while future risk depends on future  positions;  VaR using a
one-day time horizon  does not fully  capture the market risk of positions  that
cannot be liquidated or hedged  within one day; and the  historical  market risk
factor data used for VaR estimation may provide only limited insight into losses
that could be incurred under certain unusual market movements.

         The foregoing VaR tables present the results of the  Partnership's  VaR
for each of the Partnership's market risk exposures and on an aggregate basis at
December 31, 1998 and for the end of quarter periods during calendar 1998. Since
VaR is based on historical  data,  VaR should not be viewed as predictive of the
Partnership's future financial  performance or its ability to manage and monitor
risk and there can be no assurance  that the  Partnership's  actual  losses on a
particular  day will not exceed  the VaR  amounts  indicated  below or that such
losses will not occur more than 1 in 100 trading days.

Non-Trading Risk

         The  Partnership  has  non-trading  market  risk  on its  foreign  cash
balances not needed for margin.  However,  such balances,  as well as any market
risk they may  represent,  are  immaterial.  The  Partnership  also  maintains a
substantial portion (approximately 89%) of its available assets in

                                      -25-
<PAGE>

cash at DWR. A decline in short-term  interest rates will result in a decline in
the Partnership's cash management income.  This cash flow risk is not considered
material.  Materiality,  as  used  throughout  this  section,  is  based  on  an
assessment  of reasonably  possible  market  movements and the potential  losses
caused by such  movements,  taking into account the  leverage,  optionality  and
multiplier features of the Partnership's market sensitive instruments.

Qualitative Disclosures Regarding Primary Trading Risk Exposures

         The  following  qualitative  disclosures  regarding  the  Partnership's
market risk exposures - except for (i) those  disclosures that are statements of
historical fact and (ii) the  descriptions  of how the  Partnership  manages its
primary market risk exposures - constitute forward-looking statements within the
meaning of Section 27A of the  Securities  Act and Section 21E of the Securities
Exchange Act. The  Partnership's  primary  market risk  exposures as well as the
strategies  used and to be used by Demeter and the Trading  Manager for managing
such exposures are subject to numerous  uncertainties,  contingencies and risks,
any one of which  could  cause the  actual  results  of the  Partnership's  risk
controls to differ materially from the objectives of such strategies. Government

                                      -26-
<PAGE>

interventions,  defaults and expropriations,  illiquid markets, the emergence of
dominant fundamental factors,  political upheavals,  changes in historical price
relationships,  an influx of new market  participants,  increased regulation and
many  other  factors  could  result in  material  losses as well as in  material
changes  to the  risk  exposures  and  the  risk  management  strategies  of the
Partnership.  Investors  must be  prepared to lose all or  substantially  all of
their investment in the Partnership.

         The  following   were  the  primary   trading  risk  exposures  of  the
Partnership  as of December 31, 1998, by market  sector.  It may be  anticipated
however, that these market exposures will vary materially over time.

         Currency.  The primary  exposure in the  Partnership is in the currency
complex.  The Partnership's  currency exposure is to exchange rate fluctuations,
primarily fluctuations that disrupt the historical pricing relationships between
different  currencies  and  currency  pairs.  Interest  rate  changes as well as
political and general  economic  conditions  influence these  fluctuations.  The
Partnership trades in a large number of currencies,  including cross-rates i.e.,
positions  between  two  currencies  other than the U.S.  dollar.  However,  the
Partnership's  major exposures have typically been in the dollar/Swedish  krone,
dollar/yen, and dollar/Swiss franc positions. Demeter does not

                                      -27-
<PAGE>

anticipate  that the risk  profile of the  Partnership's  currency  sector  will
change  significantly  in the future,  although it is difficult at this point to
predict  the effect of the  introduction  of the Euro on the  Trading  Manager's
currency trading strategies.  The currency trading Value at Risk figure includes
foreign  margin  amounts   converted  into  U.S.  dollars  with  an  incremental
adjustment  to reflect  the  exchange  rate risk  inherent  to the  dollar-based
Partnership  in  expressing  Value at Risk in a functional  currency  other than
dollars.

         Interest  Rate.  The second  largest  exposure is in the interest  rate
sector.  Interest rate movements directly affect the price of the sovereign bond
futures  positions held by the Partnership and indirectly the value of its stock
index and currency positions.  Interest rate movements in one country as well as
relative  interest  rate  movements  between  countries  materially  impact  the
Partnership's profitability. The Partnership's primary interest rate exposure on
its' futures is to interest rate  fluctuations  in the United States,  Australia
and the  other  G-7  countries.  Demeter  anticipates  that  G-7 and  Australian
interest rates will remain the primary market  exposure of the  Partnership  for
the  foreseeable  future.  The  changes in interest  rates,  which have the most
effect on the Partnership are changes in long-term and medium-term  instruments.
Consequently,  even a material  change in  short-term  rates  would have  little
effect on the Partnership's futures positions were

                                      -28-
<PAGE>

the medium to long term rates to remain steady.

         Equity.  The Partnership's  equity exposure is limited to price risk in
the S&P 500 and the  Nikkei  (Japan).  The  stock  index  futures  traded by the
Partnership  are by law  limited  to futures on  broadly  based  indices.  As of
December 31, 1998, the  Partnership's  only equity  exposure was in the S&P 500.
Demeter  anticipates  little,  if any,  trading in non-G-7  stock  indices.  The
Partnership  is primarily  exposed to the risk of adverse price trends or static
markets in the major U.S. and Japanese indices.  (Static markets would not cause
major market  changes but would make it difficult for the  Partnership  to avoid
being "whipsawed" into numerous small losses).

     Commodity.

         Metals.  While the Partnership's  primary metals market exposure was to
fluctuations  in base  metals,  exposure in the  precious  metals  impacted  the
portfolio as well. The fund aims to equally weight market exposure in the metals
as much as possible,  however base metals,  during  period of  volatility,  will
affect  performance  more  dramatically  than gold and silver  markets.  Demeter
anticipates  that base metals will remain the primary metals market  exposure of
the Partnership.

         Energy.  On December 31, 1998 the Partnership's energy exposure

                                      -29-
<PAGE>

was  shared by futures  contracts  in the oil and  natural  gas  markets.  Price
movements in these  markets  result from  political  developments  in the Middle
East, weather patterns,  and other economic  fundamentals.  While oil prices are
currently  depressed  and have shown little  volatility  as they have  decreased
substantially in 1998, they can be volatile. Significant profits and losses have
been and are expected to continue to be experienced in this market. Natural gas,
also a primary energy market  exposure,  has exhibited more  volatility than the
oil markets on an intra day and daily  basis.  It is  expected to continue  this
choppy pattern.

         Soft  Commodities.  In 1998 the Partnership had a reasonable  amount of
exposure in the markets that comprise these sectors. Within these complexes most
of the  exposure  was in the cocoa and cotton  markets.  Overall,  however,  the
Partnership's exposure in these complexes is generally less than the exposure in
the currency and interest  rate  sectors.  Price  movements in these markets are
affected by supply demand inequalities,  severe weather disruptions,  and market
expectations.

Qualitative Disclosures Regarding Non-Trading Risk Exposure

         The following was the only non-trading risk exposure of the Partnership
as of December 31, 1998:

                                          -30-
<PAGE>

         Foreign Currency Balances.  The Partnership's  primary foreign currency
balances are in Japanese yen,  British  pounds,  Deutsche  marks and  Australian
dollars.  The  Partnership  controls the  non-trading  risk of these balances by
regularly  converting  these balances back into dollars upon  liquidation of the
respective position.

Qualitative Disclosures Regarding Means of Managing Risk Exposure

         The means by which the Partnership and the Trading Manager,  severally,
attempt to manage the risk of the  Partnership's  open positions are essentially
the same in all  market  categories  traded.  Demeter  attempts  to  manage  the
Partnership's market exposure by (i) diversifying the Partnership's assets among
different  market  sectors  and trading  approaches,  and (ii),  monitoring  the
performance of the Trading  Manager on a daily basis.  In addition,  the Trading
Manager  establishes  diversification  guidelines,  often  set in  terms  of the
maximum  margin to be committed to positions in any one market  sector or market
sensitive instrument.

         Demeter monitors and controls the risk of the Partnership's non-trading
instruments, cash, which is the only Partnership investment directed by Demeter,
rather than the Trading Manager.

                                      -31-
<PAGE>


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The  information  required by this Item appears in the Annual Report to
Limited  Partners for the year ended  December 31, 1998 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.


                                      -32-
<PAGE>


                                    PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         There are no directors or executive  officers of the  Partnership.  The
Partnership is managed by Demeter.

Directors and Officers of the General Partner

         The directors and officers of Demeter are as follows:

         Mark J.  Hawley,  age 55, is  Chairman  of the Board and a Director  of
Demeter.  Mr. Hawley is also Chairman of the Board and a Director of DWFCM.  Mr.
Hawley  previously  served as President of Demeter  throughout  1998. Mr. Hawley
joined DWR in  February  1989 as Senior  Vice  President  and is  currently  the
Executive Vice President and Director of DWR's Product Management for Individual
Asset Management.  In this capacity, Mr. Hawley is responsible for directing the
activities of the firm's Managed Futures,  Insurance,  and Unit Investment Trust
Business.  From 1978 to 1989,  Mr. Hawley was a member of the senior  management
team at Heinold Asset Management, Inc., a CPO, 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
& Company.


                                      -33-
<PAGE>

         Joseph  G.  Siniscalchi,   age  53,  is  a  Director  of  Demeter.  Mr.
Siniscalchi  joined  DWR in July 1984 as a First  Vice  President,  Director  of
General  Accounting  and served as a Senior Vice  President and  Controller  for
DWR's Securities Division through 1997. He is currently Executive Vice President
and Director of the Operations Division of DWR. From February 1980 to July 1984,
Mr.  Siniscalchi  was Director of Internal  Audit at Lehman  Brothers Kuhn Loeb,
Inc.

         Edward  C.  Oelsner,  III,  age  56,  is a  Director  of  Demeter.  Mr.
Oelsner  is  currently  an  Executive  Vice  President  and head of the  Product
Development  Group at Dean Witter  InterCapital  Inc.,  an affiliate of DWR. Mr.
Oelsner joined DWR in 1981 as a Managing  Director in DWR's  Investment  Banking
Department  specializing in coverage of regulated industries and,  subsequently,
served as head of the DWR  Retail  Products  Group.  Prior to joining  DWR,  Mr.
Oelsner  held  positions  at The  First  Boston  Corporation  as a member of the
Research and  Investment  Banking  Departments  from 1967 to 1981.  Mr.  Oelsner
received his M.B.A. in Finance from the Columbia  University  Graduate School of
Business in 1966 and an A.B. in Politics from Princeton University in 1964.

         Robert E.  Murray,  age 38, is  President  and a Director  of  Demeter.
Mr.  Murray is also  President  and a  Director  of DWFCM.  Effective  as of the
close of  business  December  31,  1998,  Mr.  Murray  replaced  Mr.  Hawley  as
President of Demeter.  Mr. Murray is also a Senior Vice President of

                                      -34-
<PAGE>

DWR's Managed  Futures  Department and is the Senior  Administrative  Officer of
DWFCM.  Mr.  Murray  began  his  career  at DWR in  1984  and is  currently  the
Director of the Managed  Futures  Department.  In this  capacity,  Mr. Murray is
responsible   for  overseeing   all  aspects  of  the  firm's  Managed   Futures
Department.  Mr.  Murray  currently  serves as a Director of the  Managed  Funds
Association,  an industry  association for investment  professionals in futures,
hedge  funds  and other  alternative  investments.  Mr.  Murray  graduated  from
Geneseo State University in May 1983 with a B.A. degree in Finance.

         Lewis A.  Raibley,  III,  age 36, is Vice  President,  Chief  Financial
Officer  and a Director  of  Demeter.  Effective  as of the close of business on
December 31, 1998, Mr. Raibley was elected to Demeter's Board of Directors.  Mr.
Raibley is currently  Senior Vice  President and  Controller  in the  Individual
Asset  Management  Group of MSDW. From July 1997 to May 1998, Mr. Raibley served
as Senior Vice  President and Director in the Internal  Reporting  Department of
MSDW and prior to that,  from 1992 to 1997,  he served as Senior Vice  President
and  Director  in the  Financial  Reporting  and Policy  Division of Dean Witter
Discover & Co. He has been with MSDW and its affiliates since June 1986.

         Mitchell  M. Merin,  age 45,  became a Director of Demeter on March 17,
1999.  Mr. Merin was appointed the Chief Operating Officer of Asset

                                      -35-
<PAGE>

Management  for MSDW in  December  1998 and the  President  and Chief  Executive
Officer of Morgan Stanley Dean Witter  Advisors in February 1998. He has been an
Executive  Vice  President  of DWR since  1990,  during  which  time he has been
director of DWR's Taxable Fixed Income and Futures divisions,  managing director
in Corporate Finance and corporate treasurer.  Mr. Merin received his Bachelor's
degree from Trinity College in Connecticut and his M.B.A.  degree in finance and
accounting  from the  Kellogg  Graduate  School of  Management  of  Northwestern
University in 1977.

         Richard A.  Beech,  age 47,  became a Director  of Demeter on March 17,
1999. Mr. Beech has been associated with the futures industry for over 23 years.
He has been at DWR since August 1984 where he is presently Senior Vice President
and head of Branch Futures. Mr. Beech began his career at the Chicago Mercantile
Exchange,  where  he  became  the  Chief  Agricultural  Economist  doing  market
analysis,  marketing  and  compliance.  Prior to joining DWR, Mr. Beech also had
worked at two investment banking firms in Operations,  Research, Managed Futures
and Sales Management.

         Ray Harris,  age 42,  became a Director  of Demeter on March 17,  1999.
Mr. Harris is currently Senior Vice President,  Planning and  Administration for
Morgan Stanley Dean Witter Asset Management and has

                                      -36-
<PAGE>

worked at DWR or its affiliates  since July 1982,  serving in both financial and
administrative  capacities.  From August 1994 to January  1999, he worked in two
separate  DWR  affiliates,  Discover  Financial  Services  and  Novus  Financial
Corp.,  culminating  as Senior Vice  President.  Mr.  Harris  received  his B.A.
degree from Boston  College and his M.B.A.  in finance  from the  University  of
Chicago.

         Richard M. DeMartini,  age 46, previously served as the Chairman of the
Board and as a Director of Demeter throughout 1998. Effective as of the close of
business on December 31,  1998,  Mr.  DeMartini  resigned as the Chairman of the
Board and as a Director of Demeter due to changes in his responsibilities within
MSDW.

         Lawrence  Volpe,  age 51,  served as a Director  to Demeter  throughout
1998.  Effective  as of the close of business on December  31,  1998,  Mr. Volpe
resigned as a Director of Demeter.

         Patti L. Behnke,  age 38, served as Vice President and Chief  Financial
Officer of Demeter through May 1998. Effective June 1, 1998, Ms. Behnke resigned
as Vice President and Chief Financial Officer of Demeter in order to take on new
responsibilities as Operations Officer - Controllers  Division for MSDW, and was
replaced by Mr. Raibley.


                                      -37-
<PAGE>


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,  1998  there were no persons  known to be  beneficial  owners of more than 5
percent of the Units.

         (b) Security  Ownership of  Management - At December 31, 1998,  Demeter
owned 417.091 Units of General Partnership Interest  representing a 1.15 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 Annual Report to Limited Partners, for the year
ended  December 31, 1998,  incorporated  by reference in this Form 10-K.  In its
capacity as the Partnership's retail commodity

                                      -38-
<PAGE>

broker,  DWR received commodity  brokerage  commissions (paid and accrued by the
Partnership) of $3,886,833 for the year ended December 31, 1998. In its capacity
as  the  Partnership's  Trading  Manager,  DWFCM  received  management  fees  of
$2,006,537 for the year ended December 31, 1998.



                                      -39-

<PAGE>

                                     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  auditors,  all
appearing in the accompanying  Annual Report to Limited  Partners,  for the year
ended December 31, 1998 are incorporated by reference in this Form 10-K:

         -        Report of Deloitte & Touche LLP, independent auditors, for the
                  years ended December 31, 1998, 1997 and 1996.
         -        Statements  of  Financial  Condition  as of  December
                  31, 1998 and 1997.
         -        Statements of Operations,  Changes in Partners'  Capital,  and
                  Cash Flows for the years ended  December  31,  1998,  1997 and
                  1996.
         -        Notes to Financial Statements.

With  the  exception  of the  aforementioned  information  and  the  information
incorporated in Items 7, 8 and 13, the Annual Report to Limited Partners for the
year ended December 31, 1998 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.

                                      -40-
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements 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 III L.P.
                                                     (Registrant)

                                   BY:  Demeter Management Corporation,
                                        General Partner

March 29, 1999                     BY:  /s/ Robert E. Murray
                                        ----------------------------------------
                                        Robert E. Murray, 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
registrant and in the capacities and on the dates indicated.

Demeter Management Corporation.

BY: /s/  Mark J. Hawley                                       March 29, 1999
    -------------------------------------------
         Mark J. Hawley, Director
            and Chairman of the Board

    /s/  Robert E. Murray                                     March 29, 1999
    -------------------------------------------
         Robert E. Murray, Director and
              President

    /s/  Joseph G. Siniscalchi                                March 29, 1999
    -------------------------------------------
         Joseph G. Siniscalchi, Director

    /s/  Edward C. Oelsner III                                March 29, 1999
    -------------------------------------------
         Edward C. Oelsner III, Director

    /s/  Mitchell M. Merin                                    March 29, 1999
    -------------------------------------------
         Mitchell M. Merin, Director

    /s/  Richard A. Beech                                     March 29, 1999
    -------------------------------------------
         Richard A. Beech, Director

    /s/  Ray Harris                                           March 29, 1999 
    -------------------------------------------
         Ray Harris, Director

    /s/  Lewis A. Raibley, III                                March 29, 1999
    -------------------------------------------
         Lewis A. Raibley, III, Director, Chief
              Financial Officer and Principal
              Accounting Officer

                                      -41-
<PAGE>

                                  EXHIBIT INDEX

  ITEM                                                         METHOD OF FILING
  ----                                                         ----------------

 -3.01    Limited Partnership Agreement of
          the Partnership, dated as of
          July 12, 1990.                                              (1)

 -3.01    Form of Amendment No. 1 to the
          Limited Partnership Agreement
          of the Partnership.                                         (2)

-10.01    Management Agreement among the
          Partnership, Demeter Management
          Corporation and Dean Witter Futures                         (3)
          & Currency Management Inc. dated
          as of July 12, 1990.

-10.02    Form of Amendment No. 1 to the
          Management Agreement.                                       (4)

-10.03    Amended and Restated Customer Agreement
          dated as of December 1, 1997, between the
          Partnership and Dean Witter Reynolds Inc.                   (5)

-10.04    Customer Agreement, dated as of December 1,
          1997, among the Partnership, Carr Futures,
          Inc., and Dean Witter Reynolds Inc.                         (5)

-10.05    International Foreign Exchange Master Agreement,
          dated as of August 1, 1997, between the
          Partnership and Carr Futures, Inc.                          (5)

-13.      Annual Report to Limited Partners for the year ended
          December 31, 1998.                                          (5)

(1)       Incorporated  by  reference  to Exhibit  3.01 and Exhibit  3.02 of the
          Partnership's  Registration  Statement on Form S-1, File No. 33-34989,
          filed on May 21, 1990.

(2)       Incorporated  by  reference  to Exhibit  3.01(a) of the  Partnership's
          Registration  Statement on Form S-1, File No.  33-47797,  filed on May
          11, 1992.

(3)       Incorporated  by  reference  to  Exhibit  10.02  of the  Partnership's
          Registration  Statement on Form S-1, File No.  33-34989,  filed on May
          21, 1990.

(4)       Incorporated  by  reference to Exhibit  10.02(a) of the  Partnership's
          Registration  Statement on Form S-1, File No.  33-47797,  filed on May
          11, 1992.

(5)       Filed herewith.


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