THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the period ended June 30, 1995 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 number 0-13298
DEAN WITTER CORNERSTONE FUND II
(Exact name of registrant as specified in its charter)
New York 13-3212871
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
c/o Demeter Management Corp.
Two World Trade Center, New York, NY 62 Fl. 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
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<TABLE>
DEAN WITTER CORNERSTONE FUND II
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 1995
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Statements of Financial Condition
June 30, 1995 (Unaudited) and December 31, 1994..........2
Statements of Operations for the Quarters Ended
June 30, 1995 and 1994 (Unaudited).......................3
Statements of Operations for the Six Months Ended
June 30, 1995 and 1994 (Unaudited).......................4
Statements of Cash Flows for the Six Months Ended
June 30, 1995 and 1994 (Unaudited).......................5
Statements of Changes in Partners' Capital for
the Six Months Ended June 30, 1995 and 1994
(Unaudited)..............................................6
Notes to Financial Statements (Unaudited).............7-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................11-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................... 16
/TABLE
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<TABLE>
DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited)
ASSETS
<S> <C> <C>
Equity in commodity futures trading accounts:
Cash $ 32,888,016 $ 27,570,984
Net unrealized gain on open contracts 1,730,704 4,316,080
Total Trading Equity 34,618,720 31,887,064
Interest receivable (DWR) 129,202 124,668
Receivable from DWR 52,031 50,385
Total Assets $ 34,799,953 $ 32,062,117
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable $ 621,102 $ 386,099
Accrued incentive fees 486,794 -
Accrued management fees 115,113 105,860
Common administrative expenses payable 91,132 111,168
Accrued brokerage commissions (DWR) 55,429 81,268
Accrued transaction fees and costs 4,407 5,720
Total Liabilities 1,373,977 690,115
Partners' Capital
Limited Partners (11,564.296 and
13,802.050 Units, respectively) 32,809,189 30,885,515
General Partner (217.400 Units) 616,787 486,487
Total Partners' Capital 33,425,976 31,372,002
Total Liabilities and Partners' Capital $ 34,799,953 $ 32,062,117
NET ASSET VALUE PER UNIT $ 2,837.11 $ 2,237.75
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended June 30,
1995 1994
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized $ 6,400,530 $ 1,570,527
Net change in unrealized (4,650,918) 790,215
Total Trading Results 1,749,612 2,360,742
Interest Income (DWR) 414,608 274,561
Total Revenues 2,164,220 2,635,303
EXPENSES
Brokerage commissions (DWR) 457,469 663,922
Management fees 351,270 352,347
Incentive fees 135,682 184,450
Transaction fees and costs 36,327 64,584
Administrative expenses - 12,275
Total Expenses 980,748 1,277,578
NET INCOME $ 1,183,472 $ 1,357,725
Limited Partners 1,162,687 1,335,288
General Partner 20,785 22,437
Net income per unit $ 95.61 $ 90.32
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Six Months Ended June 30,
1995 1994
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized $ 12,177,479 $ 3,673,626
Net change in unrealized (2,585,376) (559,355)
Total Trading Results 9,592,103 3,114,271
Interest Income (DWR) 797,905 483,214
Total Revenues 10,390,008 3,597,485
EXPENSES
Brokerage commissions (DWR) 1,012,805 1,207,427
Management fees 689,946 678,299
Incentive fees 533,049 184,450
Transaction fees and costs 78,951 107,112
Administrative expenses 8,184 24,550
Total Expenses 2,322,935 2,201,838
NET INCOME $ 8,067,073 $ 1,395,647
Limited Partners 7,936,773 1,373,148
General Partner 130,300 22,499
Net income per unit $ 599.36 $ 90.57
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Six Months Ended June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 8,067,073 $ 1,395,647
Noncash item included in net income:
Net change in unrealized 2,585,376 559,355
(Increase) decrease in operating assets:
Interest receivable (DWR) (4,534) (35,739)
Receivable from DWR (1,646) 2,961
Increase (decrease) in operating liabilities:
Accrued incentive fees 486,794 169,114
Accrued management fees 9,253 16,227
Common administrative expenses payable (20,036) 24,550
Accrued brokerage commissions (DWR) (25,839) (23,424)
Accrued transaction fees and costs (1,313) (1,477)
Net cash provided by operating activities 11,095,128 2,107,214
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 132,223 5,084,802
Increase in redemptions payable 235,003 140,209
Redemptions of units (6,145,322) (1,921,719)
Net cash provided by (used for) financing activities (5,778,096) 3,303,292
Net increase in cash 5,317,032 5,410,506
Balance at beginning of period 27,570,984 28,680,335
Balance at end of period $32,888,016 $34,090,841
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 30, 1995 and 1994
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital
December 31, 1993 12,998.995 $31,331,000 $610,373 $31,941,373
Continuous Offering 2,111.349 5,084,802 - 5,084,802
Net Income - 1,373,148 22,499 1,395,647
Redemptions (784.189) (1,842,738) (78,981) (1,921,719)
Partners' Capital
June 30, 1994 14,326.155 $35,946,212 $553,891 $36,500,103
Partners' Capital
December 31, 1994 14,019.450 $30,885,515 $486,487 $31,372,002
Continous Offering 52.964 132,223 - 132,223
Net Income - 7,936,773 130,300 8,067,073
Redemptions (2,290.718) (6,145,322) - (6,145,322)
Partners' Capital
June 30, 1995 11,781.696 $32,809,189 $616,787 $33,425,976
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The financial statements include, in the opinion of management, all
adjustments necessary for a fair presentation of the results of
operations and financial condition. The financial statements and
condensed notes herein should be read in conjunction with the
Partnership's December 31, 1994 Annual Report on Form 10-K.
1. Organization
Dean Witter Cornerstone Fund II (the "Partnership") is a limited
partnership organized to engage in the speculative trading of
commodity futures contracts and forward contracts on foreign
currencies. The Partnership is one of the Dean Witter Cornerstone
Funds, comprised of Dean Witter Cornerstone Fund II, Dean Witter
Cornerstone Fund III, and Dean Witter Cornerstone Fund IV.
2. Summary of Significant Accounting Policies
Net Income (Loss) per Unit - Net income (loss) per unit was
computed using the weighted average number of units outstanding
during the period.
Equity in Commodity Futures Trading Accounts - The Partnership's
asset "Equity in Commodity Futures Trading Accounts" consists of
cash on deposit at Dean Witter Reynolds Inc. ("DWR") to be used as
margin for trading and the net asset or liability related to
unrealized gains on open contracts.
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The asset or liability related to the unrealized gains or losses on
forward contracts is presented as a net amount because the
Partnership has a master netting agreement with DWR.
3. Trading Managers
The trading managers who make all trading decisions for the
Partnership are as follows:
Abacus Asset Management Corporation
John W. Henry & Co., Inc.
4. Related Party Transactions
Both Demeter Management Corporation (the "General Partner") and the
commodity broker DWR are wholly owned subsidiaries of Dean Witter,
Discover & Co. The Partnership's cash is on deposit with DWR in
commodity trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on current 13-week U.S.
Treasury Bill rates. Brokerage expenses incurred by the
Partnership are paid to DWR.
5. Off-Balance Sheet Risk
The Partnership trades futures and forward contracts in interest
rates, stock indices, commodities, currencies, petroleum and
precious metals. Futures and forwards represent contracts for
delayed delivery of an instrument at a specified date and price.
Risk arises from changes in the value of these contracts and the
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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 June 30, 1995, open contracts were:
Contract or
Notional Amount
Exchange Traded Contracts:
Financial Futures:
Commitments to Purchase $28,866,000
Commitments to Sell $12,321,000
Commodity Futures:
Commitments to Purchase $ 6,517,000
Commitments to Sell $15,637,000
Foreign Futures:
Commitments to Purchase $ 4,781,000
Commitments to Sell $ 7,318,000
Off Exchange Traded Contracts:
Forward Currency Contracts:
Commitments to Purchase $27,942,000
Commitments to Sell $22,248,000
A portion of the amounts indicated as off-balance sheet risk in
forward currency contracts is due to offsetting forward commitments
to purchase and to sell the same currency on the same date in the
future. These commitments are economically offsetting, but are not
offset in the forward market until the settlement date.
The unrealized gains and losses on open contracts is reported as a
component of "Equity in Commodity Futures Trading Accounts" on the
Statement of Financial Condition and totaled $1,730,704 at June 30,
1995. Of the $1,730,704 net unrealized gain on open contracts as
of June 30, 1995, $1,664,321 related to exchange traded futures
contracts and $66,383 related to off-exchange traded forward
currency contracts.
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
Exchange Traded Futures Contracts held by the Partnership at June
30, 1995 mature through June 1996. Off Exchange Traded Forward
Currency Contracts held by the Partnership at June 30, 1995 matured
through July 1995.
The contract amounts in the above table represent the Partnership's
extent of involvement in the particular class of financial
instrument, but not the credit risk associated with counterparty
nonperformance. The credit risk associated with these instruments
is limited to the amounts reflected in the Partnership's Statements
of Financial Condition.
The Partnership also has credit risk because the sole counterparty,
with respect to most of the Partnership's assets, is DWR. Exchange
traded futures contracts are marked to market on a daily basis,
with variations in value credited or charged to the Fund's account
on a daily basis. DWR, as the futures commission merchant for all
of the Partnership's exchange traded futures contracts, is required
pursuant to regulations of the Commodity Futures Trading Commission
to segregate from its own assets and for the sole benefit of its
commodity customers all funds held by DWR with respect to exchange
traded futures contracts including an amount equal to the net
unrealized gain on all open futures contracts. With respect to the
Partnership's off-exchange traded foreign currency forward
contracts, there are no daily settlements of variations in value.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity. The Partnership's assets are deposited in separate
commodity trading accounts with DWR, and are used by the
Partnership as margin to engage in trading commodity futures
contracts and forward contracts on foreign currency. DWR holds
such assets in either bank accounts or in securities approved by
the Commodity Futures Trading Commission for investment of customer
funds. The Partnership's assets held by DWR may be used as margin
solely for the Partnership's trading. Since the Partnership's sole
purpose is to trade in commodity futures contracts and forward
contracts on foreign currency, it is expected that the Partnership
will continue to own such liquid assets for margin purposes.
The Partnership's investment in commodity futures contracts and
other commodity interests may be illiquid. If the price for a
futures contract for a particular commodity has increased or
decreased by an amount equal to the "daily limit," positions in the
commodity can neither be taken nor liquidated unless traders are
willing to effect trades at or within the limit. Commodity futures
prices have occasionally moved the daily limit for several
consecutive days with little or no trading. Such market conditions
could prevent the Partnership from promptly liquidating its
commodity futures positions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in profitable markets or
prevent the Partnership from promptly liquidating unfavorable
positions in such markets and subjecting it to substantial losses.
Either of these market conditions could result in restrictions on
redemptions.
Capital Resources The Partnership does not have, nor does it
expect to have, any capital assets. Redemptions, exchanges and
sales of additional Units in the future will impact the amount of
funds available for investments in commodity futures contracts and
other commodity interests.
Results of Operations
For the Quarter and Six Months Ended June 30, 1995
For the quarter ended June 30, 1995, the Partnership's total
trading gains including interest income were $2,164,220. During
the second quarter, the Partnership posted a gain in Net Asset
Value per Unit. The most significant trading gains were recorded
in financial futures during April and May as global interest rate
futures continued to trend higher. Trading gains were recorded in
U.S. Treasury bond and Treasury note, Japanese bond and European
bond futures. Gains were also recorded in Nikkei stock index
futures, as Japanese stock prices trended lower, and S&P 500 Index
futures, as domestic stock prices moved higher. In May, gains were
recorded as a result of trading in the energy markets. In June,
gains were recorded in the energy markets, as well as in the soft
commodities markets. Losses in the agricultural markets were
experienced in all three months of the quarter. Losses were also
recorded in the metals markets in May and in the currency markets
in May and June. These losses offset a portion of the
Partnership's overall gains for the quarter. The total expenses for
the period were $980,748, resulting in a net gain of $1,183,472.
The value of an individual Unit in the Partnership increased from
$2,741.50 at March 31, 1995 to $2,837.11 at June 30, 1995.
For the six months ended June 30, 1995, the Partnership's total
trading gains including interest income were $10,390,008. During
the first six months of the year, the Partnership posted a gain in
Net Asset Value per Unit. The most significant trading gains were
recorded in currency and financial futures trading. Currency
trading contributed to the overall gains as an upward trend in the
Japanese yen and a majority of the European currencies versus the
U.S. dollar occurred through February, March and April. Gains were
also recorded in both interest rate and stock index futures during
the first half of the year. The trading gains from interest rate
futures were the result of an upward trend in global bond prices
between February and May. Stock index futures also contributed to
the overall gains for the Partnership, as U.S. stocks trended
higher, while Japanese stocks declined during the quarter. Smaller
gains in crude oil experienced in February and June also added to
the overall gains. Trading losses were recorded in agricultural
futures, predominantly in the soybean products, as well as in the
metals and soft commodities markets, throughout the majority of the
months. These losses offset a portion of the Partnership's gains
experienced during the first half of the year. The total expenses
for the period were $2,322,935, resulting in a net income of
$8,067,073. The value of an individual Unit in the Partnership
increased from $2,237.75 at December 31, 1994 to $2,837.11 at June
30, 1995.
For the Quarter and Six Months Ended June 30, 1994
For the quarter ended June 30, 1994, the Partnership's total
trading revenues including interest income were $2,635,303.
During the second quarter, the Partnership posted a gain in Net
Asset Value per Unit. The most significant gains were the result
of an upward trend in coffee prices during the quarter. The
majority of these gains resulted from long coffee positions
throughout the quarter. Additional gains were recorded by the
Partnership from trading crude oil in the early portion of the
quarter. Smaller profits were also recorded from transactions
involving U.S. and European interest rate futures. Trading losses
in the agricultural and metals markets offset a portion of overall
Fund gains for the Partnership during the second fiscal quarter.
The total expenses for the period were $1,277,578, resulting in net
income of $1,357,725. The value of an individual Unit in the
Partnership increased from $2,457.47 at March 31, 1994 to $2,547.79
at June 30, 1994.
For the six months ended June 30, 1994, the Partnership's total
trading revenues including interest income were $3,597,485.
During the first six months, the Partnership posted a gain in Net
Asset Value per Unit. The most significant gains resulted from
trading coffee in the second quarter and from a download movement
in U.S. interest rate futures prices during March. Additional
gains were recorded in the energy markets, specifically crude oil
in April. The Partnership posted losses in the first half of the
year from trading in the agricultural, metals and currency markets
as prices within each of these complexes moved in a relatively
tight range. The total expenses for the period were $2,201,838,
resulting in net income of $1,395,647. The value of an individual
Unit in the Partnership increased from $2,457.22 at December 31,
1993 to $2,547.79 at June 30, 1994.
<PAGE>
PART II. OTHER INFORMATION
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - None.
(B) Reports on Form 8-K - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dean Witter Cornerstone Fund II
(Registrant)
By: Demeter Management Corporation
(General Partner)
August 11, 1995 By:/s/ Patti L. Behnke
Patti L. Behnke
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> The schedule contains summary financial information
extracted from Dean Witter Cornerstone II and is qualified in its
entirety
by reference to such financial instruments.
<CIK> 0000736999
<NAME> DEAN WITTER CORNERSTONE FUND II
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 32,888,016
<SECURITIES> 0
<RECEIVABLES> 181,233
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,799,953<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 34,799,953<F2>
<SALES> 0
<TOTAL-REVENUES> 10,390,008<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,322,935
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,067,073
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,067,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,067,073
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $1,730.704.
<F2>Liabilities include redemptions payable of $621,102, accrued
incentive fees of $486,794, accrued management fees of $115,113,
and common administrative expenses payable of $91,132.
<F3>Total revenue includes realized trading revenue of $12,177,479,
net change in unrealized of ($2,585,376) and interest income of
$797,905.
</FN>
</TABLE>
