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 September 30, 1997 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
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND II
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 1997
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
September 30, 1997 (Unaudited) and December 31, 1996.........2
Statements of Operations for the Quarters Ended
September 30, 1997 and 1996 (Unaudited)......................3
Statements of Operations for the Nine Months Ended
September 30, 1997 and 1996 (Unaudited)......................4
Statements of Changes in Partners' Capital for the
Nine Months Ended September 30, 1997 and 1996
(Unaudited)..................................................5
Statements of Cash Flows for the Nine Months Ended
September 30, 1997 and 1996 (Unaudited)......................6
Notes to Financial Statements (Unaudited).................7-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................13-19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................20-21
Item 2. Changes in Securities and Use of Proceeds..........21-23
Item 5. Other Information.....................................23
Item 6. Exhibits and Reports on Form 8-K......................24
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
September 30, December 31,
1997 1996
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 27,294,246 28,509,266
Net unrealized gain on open contracts 1,569,418 1,316,434
Total Trading Equity 28,863,664 29,825,700
Interest receivable (DWR) 96,278 97,815
Due from DWR 56,068 123,327
Total Assets 29,016,010 30,046,842
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 348,725 442,706
Accrued incentive fees 193,948 316,750
Accrued management fees 96,012 99,352
Accrued brokerage commissions (DWR) 62,222 83,967
Common administrative expenses payable 49,388 52,339
Accrued transaction fees and costs 4,864 5,558
Total Liabilities 755,159 1,000,672
Partners' Capital
Limited Partners (8,111.424 and
8,987.942 Units, respectively) 27,523,183 28,360,195
General Partner (217.400 Units) 737,668 685,975
Total Partners' Capital 28,260,851 29,046,170
Total Liabilities and Partners' Capital 29,016,010 30,046,842
NET ASSET VALUE PER UNIT 3,393.14 3,155.36
<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 September 30,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 974,132 (1,594,618)
Net change in unrealized 586,612 1,388,762
Total Trading Results 1,560,744 (205,856)
Interest Income (DWR) 296,118 283,795
Total Revenues 1,856,862 77,939
EXPENSES
Brokerage commissions (DWR) 367,088 426,613
Management fees 292,225 271,747
Incentive fees 127,873 -
Transaction fees and costs 37,341 48,154
Administrative expenses 11,599 6,410
Total Expenses 836,126 752,924
NET INCOME (LOSS) 1,020,736 (674,985)
NET INCOME (LOSS) ALLOCATION
Limited Partners 994,782 (661,360)
General Partner 25,954 (13,625)
NET INCOME (LOSS) PER UNIT
Limited Partners 119.38 (62.67)
General Partner 119.38 (62.67)
<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 Nine Months Ended September 30,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit:
Realized 3,237,515 592,737
Net change in unrealized 252,984 83,116
Total Trading Results 3,490,499 675,853
Interest Income (DWR) 924,295 884,585
Total Revenues 4,414,794 1,560,438
EXPENSES
Brokerage commissions (DWR) 1,029,202 1,341,836
Management fees 858,673 864,842
Incentive fees 220,502 -
Transaction fees and costs 99,189 126,554
Administrative expenses 33,422 11,909
Total Expenses 2,240,988 2,345,141
NET INCOME (LOSS) 2,173,806 (784,703)
NET INCOME (LOSS) ALLOCATION
Limited Partners 2,122,113 (769,432)
General Partner 51,693 (15,271)
NET INCOME (LOSS) PER UNIT
Limited Partners 237.78 (70.24)
General Partner 237.78 (70.24)
<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 Nine Months Ended September 30, 1997 and 1996
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital
December 31, 1995 10,891.098 $30,213,505 $615,383 $30,828,888
Offering of Units 45.006 124,554 - 124,554
Net Loss - (769,432) (15,271) (784,703)
Redemptions (1,206.991) (3,312,440) - (3,312,440)
Partners' Capital
September 30, 1996 9,729.113 $26,256,187 $600,112 $26,856,299
Partners' Capital
December 31, 1996 9,205.342 $28,360,195 $685,975 $29,046,170
Offering of Units 94.328 314,933 - 314,933
Net Income - 2,122,113 51,693 2,173,806
Redemptions (970.846) (3,274,058) - (3,274,058)
Partners' Capital
September 30, 1997 8,328.824 $27,523,183 $737,668 $28,260,851
<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 Nine Months Ended September 30,
1997 1996
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) 2,173,806 (784,703)
Noncash item included in net income (loss):
Net change in unrealized (252,984) (83,116)
(Increase) decrease in operating assets:
Interest receivable (DWR) 1,537 16,128
Receivable from DWR 67,259 (114,030)
Increase (decrease) in operating liabilities:
Accrued incentive fees (122,802) (307,567)
Accrued management fees (3,340) (13,722)
Accrued brokerage commissions (DWR) (21,745) 22,272
Common administrative expenses payable (2,951) (31,677)
Accrued transaction fees and costs (694) 1,838
Net cash provided by operating activities 1,838,086 (1,294,577)
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 314,933 124,554
Increase (decrease) in redemptions payable (93,981) 366,386
Redemptions of units (3,274,058) (3,312,440)
Net cash used for financing activities (3,053,106) (2,821,500)
Net decrease in cash (1,215,020) (4,116,077)
Balance at beginning of period 28,509,266 28,057,189
Balance at end of period 27,294,246 23,941,112
<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, 1996 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 (collectively, "futures interests") . 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. The general partner for the
Partnership is Demeter Management Corporation ("Demeter"). The
commodity broker for most of the Partnership's transactions
is Dean Witter Reynolds Inc. ("DWR"). The trading advisors
who make all trading decisions for the Partnership are
Northfield Trading L.P. ("Northfield") and John W. Henry & Company,
Inc. ("JWH"). Prior to March 1, 1997, Abacus Asset Management Corporation
("Abacus") was a trading advisor to the Partnership. Effective April 16,
1997, Northfield became a trading advisor to the Partnership and was
allocated assets previously managed by Abacus. Both Demeter and DWR are
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
wholly owned subsidiaries of Morgan Stanley, Dean Witter, Discover
& Co. ("MSDWD").
On July 31, 1997, DWR closed the sale of its institutional
futures business and foreign currency trading operations to Carr
Futures Inc. ("Carr"), a subsidiary of Credit Agricole Indosuez.
Following the sale, Carr became the counterparty on the
Partnership's foreign currency trades. However, during a
transition period of about four months, DWR will continue to
perform certain services relating to the Partnership's futures
trading including clearance. After such transition period, DWR
will continue to serve as a non-clearing commodity broker for the
Partnership with Carr providing all clearing services for
Partnership transactions.
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr 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.
3. Financial Instruments
The Partnership trades futures and forward contracts in interest
rates, stock indices, commodities, currencies, petroleum and
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
precious metals. Futures and forwards represent contracts for
delayed delivery of an instrument at a specific 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, 1997 and
December 31, 1996, open contracts were:
Contract or Notional Amount
September 30, 1997 December 31, 1996
$ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 38,046,000 18,287,000
Commitments to Sell 11,069,000 70,723,000
Commodity Futures:
Commitments to Purchase 17,316,000 6,346,000
Commitments to Sell 7,711,000 14,596,000
Foreign Futures:
Commitments to Purchase 31,699,000 57,075,000
Commitments to Sell 446,000 8,798,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 29,635,000 26,688,000
Commitments to Sell 40,671,000 18,334,000
A portion of the amounts indicated as off-balance-sheet risk in
forward currency contracts is due to offsetting forward
commitments to purchase and sell the same currency on the same
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 $1,569,418 and
$1,316,434 at September 30, 1997 and December 31, 1996,
respectively. Of the $1,569,418 net unrealized gain on open
contracts at September 30, 1997, $1,003,849 related to exchange-
traded futures contracts and $565,569 related to off-exchange-
traded forward currency contracts. Of the $1,316,434 net
unrealized gain on open contracts at December 31, 1996,
$1,342,050 related to exchange-traded futures contracts and
$(25,616) related to off-exchange-traded forward currency
contracts.
Exchange-traded-futures contracts held by the Partnership at
September 30, 1997 and December 31, 1996 mature through September
1998 and June 1998, respectively. Off-exchange-traded forward
currency contracts held by the Partnership at September 30, 1997
and December 31, 1996 mature through December 1997 and March
1997, respectively. The contract amounts in the above table
represent
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 either DWR or Carr
acts as the futures commission merchant or the sole counterparty,
with respect to most of the Partnership's assets. Exchange-
traded futures contracts are marked to market on a daily basis,
with variations in value settled on a daily basis. DWR, as the
futures commission merchant for all of the Partnership's exchange-
traded futures contracts, is required pursuant to regulations of
the Commodity Futures Trading Commission ("CFTC") to segregate
from its own assets and for the sole benefit of its commodity
customers all funds held by DWR with respect to exchange-traded
futures contracts including an amount equal to the net unrealized
gain on all open futures contracts, which funds totaled
$27,970,043 and $29,851,316 at September 30, 1997 and December
31, 1996, respectively. With respect to the Partnership's off-
exchange-traded forward currency contracts, there are no daily
settlements of variations in value nor is there any requirement
that an amount
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 of such contracts, to perform.
Carr's parent, Credit Agricole Indosuez, has guaranteed Carr's
obligations to the Partnership.
For the nine months ended September 30, 1997 and the year ended
December 31, 1996, the average fair value of financial
instruments held for trading purposes was as follows:
September 30, 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 28,656,000 30,019,000
Commodity Futures 14,432,000 12,904,000
Foreign Futures 27,636,000 8,865,000
Off-Exchange-Traded Forward
Currency Contracts 35,561,000 44,443,000
December 31, 1996
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 48,469,000 47,433,000
Commodity Futures 24,459,000 22,228,000
Foreign Futures 43,821,000 14,875,000
Off-Exchange-Traded Forward
Currency Contracts 38,522,000 44,536,000
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity. The Partnership's assets are deposited in futures
interest trading accounts with DWR and Carr, and are used by the
Partnership as margin to engage in futures interest trading. DWR
and Carr hold such assets in either designated depositories 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 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 interest prices have occasionally moved the daily
limit for several consecutive days with little or no trading.
Such market conditions could prevent the Partnership
<PAGE>
from promptly liquidating its futures interests and result in
restrictions on redemptions. However, since the commencement of
trading by the Partnership, there has never been a time when
illiquidity has affected a material portion of the Partnership's
assets.
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 and exchanges of
additional Units of Limited Partnership Interest in the future will
affect the amount of funds available for investments in futures
interests in subsequent periods. As redemptions are at the
discretion of Limited Partners, it is not possible to estimate
the amount and therefore the impact of future redemptions.
Results of Operations
For the Quarter and Nine Months Ended September 30, 1997
For the quarter ended September 30, 1997, the Partnership's total
<PAGE>
trading revenues including interest income were $1,856,862.
During the third quarter, the Partnership posted an increase in
Net Asset Value per Unit. The most significant gains were
recorded in the currency markets as the value of the U.S. dollar
increased relative to the Malaysian ringgit and Singapore dollar
throughout the quarter, thus resulting in profits for the
Partnership's short positions. Smaller currency gains were
recorded during July from short positions in the German mark as
its value also decreased versus the U.S. dollar. Additional
profits were experienced in the financial futures markets,
particularly in Japanese, Australian and European bond futures,
due to an upward trend in global interest rate futures prices
during July and September. In metals, smaller gains were
recorded from long silver futures positions, as silver prices
moved higher during September, and from short gold futures
positions, as gold prices decreased in July. A portion of the
Partnership's overall gains for the quarter was offset by losses
experienced from trading coffee and cocoa futures during July and
September as prices in these markets moved in a short-term
volatile pattern. In energies, choppy movement in oil prices
resulted in smaller losses from trading crude oil futures
throughout the quarter. Total expenses for the quarter were
$836,126, resulting in net income of $1,020,736. The value of an
individual Unit in the Partnership increased from $3,273.76 at
June 30, 1997 to $3,393.14 at September 30, 1997.
<PAGE>
For the nine months ended September 30, 1997, the Partnership's
total trading revenues including interest income were $4,414,794.
During the first nine months of the year, the Partnership posted
an increase in Net Asset Value per Unit. The most significant
gains were recorded from a strong upward trend in the value of
the U.S. dollar versus most major world currencies during
January, February and July. Additional gains were recorded in
the financial futures markets as profits experienced during the
third quarter from an increase in global interest rate futures
prices more than offset losses experienced from trendless price
movement earlier in the year. In metals, profits were recorded
from short gold futures positions as gold prices moved sharply
lower during January, June and July. Smaller gains in metals
were recorded from long silver futures positions as silver prices
increased during September. A portion of the Partnership's
overall gains was offset by losses recorded from trading crude
oil futures as oil prices moved without consistent direction
during the first nine months of the year. Smaller losses were
recorded in the agricultural markets as gains experienced earlier
in the year from trading corn futures were more than offset by
losses recorded in this market during the third quarter. In soft
commodities, gains recorded from long coffee futures positions,
as coffee prices trended higher during the first half of the
year, were offset by losses from trendless price movement in
sugar and cocoa futures. The total expenses for the period were
<PAGE>
$2,240,988, resulting in net income of $2,173,806. The value of
an individual Unit in the Partnership increased from $3,155.36 at
December 31, 1996 to $3,393.14 at September 30, 1997.
For the Quarter and Nine Months Ended September 30, 1996
For the quarter ended September 30, 1996, the Partnership's total
trading revenues including interest income were $77,939. During
the third quarter, the Partnership posted a decrease in Net Asset
Value per Unit. The most significant trading losses were
recorded in the currency markets during July from previously
established short positions in the Swiss franc as its value moved
sharply higher versus the U.S. dollar. Additional currency
losses were recorded during August from previously established
short positions in the Australian dollar, as its value reversed
higher versus other major world currencies, and from long German
mark positions, as its value moved lower relative to the U.S.
dollar early in the month. In soft commodities, losses were
experienced due to short-term volatility in coffee and cotton
prices during August and September. Smaller losses were recorded
in agricultural futures trading due to trendless price movement
in soybean products throughout the quarter. A portion of these
losses was offset by gains recorded in the energy markets from
long crude oil futures positions as prices trended higher between
July and September. Additional gains recorded from long
international bond futures positions also helped to mitigate
Partnership losses during the quarter. Total expenses for the
quarter were $752,924, resulting
<PAGE>
in a net loss of $674,985. The value of an individual Unit in
the Partnership decreased from $2,823.08 at June 30, 1996 to
$2,760.41 at September 30, 1996.
For the nine months ended September 30, 1996, the Partnership's
total trading revenues including interest income were $1,560,438.
During the first nine months, the Partnership posted a decrease
in Net Asset Value per Unit. Trading gains during the first nine
months were offset by brokerage commissions resulting in net
trading losses. The most significant trading losses were
recorded in the financial futures markets, particularly in U.S.
interest rate and global stock index futures, as prices moved
without consistent direction for a majority of the year. Smaller
losses recorded from trendless price movement in Japanese bond
futures during the first two quarters were partially offset by
gains recorded during the third quarter as prices trended higher.
In soft commodities, losses were experienced due to choppiness in
coffee and cotton prices throughout a majority of the year.
Smaller losses were recorded in agricultural futures as gains
recorded during April from long corn futures positions were
offset by losses experienced in soybean products during the third
quarter. A majority of the Partnership's overall losses was
offset by gains recorded in the currency markets from short
positions in the Japanese yen as the value of the yen moved lower
versus the U.S. dollar. Smaller currency gains were recorded
from short Swiss franc positions as its value also declined
versus the
<PAGE>
U.S. dollar between January and June. Additional gains recorded
from long crude oil futures positions, as prices trended higher,
also offset a portion of the Partnership's losses during the
first nine months of the year. Total expenses for the period were
$2,345,141, resulting in a net loss of $784,703. The value of an
individual Unit in the Partnership decreased from $2,830.65 at
December 31, 1995 to $2,760.41 at September 30, 1996.
<PAGE>
PART II. OTHER INFORMATION
Item 1. 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, Dean Witter
Futures & Currency Management, Inc., MSDWD (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 (including JWH) to those pools. On June 16, 1997, the
plaintiffs in the above actions filed a consolidated amended
complaint. 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
(including JWH) on behalf of all purchasers of interests in
various limited partnership commodity pools, including the
Partnership, sold by DWR. Generally, these complaints allege,
among other things, that the defendants committed fraud, deceit,
misrepresentation, breach of fiduciary duty, fraudulent and
unfair business practices, unjust enrichment, and conversion in
connection with the sale and operation of the various limited
partnership commodity pools. The
<PAGE>
complaints seek unspecified amounts of compensatory and punitive
damages and other relief. It is possible that additional similar
actions may be filed and that, in the course of these actions,
other parties could be added as defendants. The Dean Witter
Parties believe that they and the Partnership have strong
defenses to, and they will vigorously contest, the actions.
Although the ultimate outcome of legal proceedings cannot be
predicted with certainty, it is the opinion of management of the
Dean Witter Parties that the resolution of the actions will not
have a material adverse effect on the financial condition or the
results of operations of any of the Dean Witter Parties or the
Partnership.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Dean Witter Cornerstone Fund I ("Cornerstone I"); Dean Witter
Cornerstone Fund II ("Cornerstone II"), and Dean Witter
Cornerstone III ("Cornerstone III") collectively registered
250,000 Units of Limited Partnership Interest ("Units") pursuant
to a Registration Statement on Form S-1, which became effective
on May 31, 1984 (the "Registration Statement") (SEC File Numbers
2-88587; 88587-01; 88587-02). As contemplated in the
Registration Statement, an additional fund, Dean Witter
Cornerstone Fund IV ("Cornerstone IV" and, collectively with
Cornerstone I, Cornerstone II and Cornerstone III, the
"Partnerships") was
<PAGE>
registered pursuant to Post-Effective Amendment No. 5 to the
Registration Statement, which became effective on February 6,
1987. The managing underwriter for the Partnerships is DWR.
The offering for Cornerstone I originally commenced on May 31,
1984, and 18,679.643 Units of Cornerstone I were sold prior to
its dissolution on December 31, 1991. The offering for
Cornerstone II and Cornerstone III also originally commenced on
May 31, 1984 and currently continues, with 41,693.538 and
74,400.002 Units of Cornerstone II and Cornerstone III,
respectively, sold through September 30, 1997. The offering for
Cornerstone IV originally commenced on February 6, 1987 and
currently continues, with 100,550.782 Units sold through
September 30, 1997. Through September 30, 1997, an aggregate of
235,323.965 Units of the Partnership have been sold, leaving
14,676.035 Units remaining available for sale as of October 1,
1997.
The aggregate offering amount registered was $262,496,000, based
upon the initial offering price of $1,050 per Unit ($1,000
initial Net Asset Value per Unit, plus a $50 per Unit sales
charge on all but 80 Units sold to the Partnerships' initial
trading managers) during the Initial Offering Periods of May 31,
1984 through November 30, 1984 with respect to Cornerstone I,
Cornerstone II and Cornerstone III, and February 6, 1987 through
May 6, 1987 with respect to Cornerstone IV.
<PAGE>
After the respective Initial Offering Periods, Units in the
Partnerships were sold at 107.625% of Net Asset Value per Unit,
including a charge for offering expenses of 2.5% of Net Asset
Value per Unit, and a sales charge of 5% of the sum of the Net
Asset Value per Unit and the charge for offering expenses, during
the "Continuing Offering".
The aggregate price of Units sold through September 30, 1997 with
respect to Cornerstone II is $65,604,519.
Effective September 30, 1994, Cornerstone II, Cornerstone III and
Cornerstone IV were closed to new investors; Units have been sold
since then solely in "Exchanges" with existing investors, at 100%
of Net Asset Value per Unit. DWR has been paying all expenses in
connection with the offering of Units since September 30, 1994,
without reimbursement.
Item 5. OTHER INFORMATION
On July 21, 1997, MSDWD, the sole shareholder of Demeter,
appointed a new Board of Directors consisting of Richard M.
DeMartini, Mark J. Hawley, Lawrence Volpe, Joseph G. Siniscalchi,
Edward C. Oelsner III, and Robert E. Murray.
<PAGE>
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)
November 12, 1997 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean
Witter Cornerstone Fund II and is qualified in its entirety by reference
to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 27,294,246
<SECURITIES> 0
<RECEIVABLES> 152,346<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,016,010<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 29,016,010<F3>
<SALES> 0
<TOTAL-REVENUES> 4,414,794<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,240,988
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,173,806
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,173,806
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,173,806
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $96,278 and receivable from
DWR of $56,068.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $1,569,418.
<F3>Liabilities include redemptions payable of $348,725, accrued brokerage
commissions of $62,222, accrued management fees of $96,012, common
administrative expenses payable of $49,388, accrued transaction fees
and costs of $4,864 and accrued incentive fees of $193,948.
<F4>Total revenue includes realized trading revenue of $3,237,515, net change
in unrealized of $252,984 and interest income of $924,295.
</FN>
</TABLE>
