UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________________to_____________.
Commission file 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 Corporation
Two World Trade Center, 62 Fl., New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND II
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 1998
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
September 30, 1998 (Unaudited) and December 31, 1997......2
Statements of Operations for the Quarters Ended
September 30, 1998 and 1997 (Unaudited)...................3
Statements of Operations for the Nine Months Ended
September 30, 1998 and 1997 (Unaudited)...................4
Statements of Changes in Partners' Capital for
the Nine Months Ended September 30, 1998 and 1997
(Unaudited)...............................................5
Statements of Cash Flows for the Nine Months Ended
September 30, 1998 and 1997 (Unaudited)...................6
Notes to Financial Statements (Unaudited)..............7-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............12-20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................21
Item 2. Changes in Securities and Use of Proceeds..........21
Item 6. Exhibits and Reports on Form 8-K...................
22
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF FINANCIAL CONDITION
<CAPTION> September 30,
December 31,
1998
1997
$
$
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 29,312,937 29,293,294
Net unrealized gain on open contracts 3,319,142 2,003,679
Total Trading Equity 32,632,079 31,296,973
Interest receivable (DWR) 100,814 106,167
Due from DWR 47,426 27,883
Total Assets 32,780,319 31,431,023
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued incentive fees 401,530 618,270
Redemptions payable 247,547 199,022
Accrued management fees 108,738 104,350
Accrued administrative expenses 50,026 21,640
Total Liabilities 807,841 943,282
Partners' Capital
Limited Partners (7,512.250 and
7,967.401 Units, respectively) 31,073,237 29,677,943
General Partner (217.400 Units) 899,241 809,798
Total Partners' Capital 31,972,478 30,487,741
Total Liabilities and Partners' Capital 32,780,319 31,431,023
NET ASSET VALUE PER UNIT 4,136.34 3,724.92
<FN>
The accompanying notes 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,
1998 1997
$ $
REVENUES
<S> <C> <C>
Trading profit:
Realized 1,339,601 974,132
Net change in unrealized 1,555,758 586,612
Total Trading Results 2,895,359 1,560,744
Interest Income (DWR) 305,458 296,118
Total Revenues 3,200,817 1,856,862
EXPENSES
Brokerage commissions (DWR) 356,729 367,088
Incentive fees 325,774 127,873
Management fees 317,521 292,225
Transaction fees and costs 36,736 37,341
Administrative expenses 12,550 11,599
Total Expenses 1,049,310 836,126
NET INCOME 2,151,507 1,020,736
NET INCOME ALLOCATION
Limited Partners 2,091,679 994,782
General Partner 59,828 25,954
NET INCOME PER UNIT
Limited Partners 275.19 119.38
General Partner 275.19 119.38
<FN>
The accompanying notes 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,
1998 1997
$ $
REVENUES
<S> <C> <C>
Trading profit:
Realized 3,479,157 3,237,515
Net change in unrealized 1,315,463 252,984
Total Trading Results 4,794,620 3,490,499
Interest Income (DWR) 903,734 924,295
Total Revenues 5,698,354 4,414,794
EXPENSES
Brokerage commissions (DWR) 1,063,212 1,029,202
Management fees 904,976 858,673
Incentive fees 403,912 220,502
Transaction fees and costs 101,880 99,189
Administrative expenses 31,806 33,422
Total Expenses 2,505,786 2,240,988
NET INCOME 3,192,568 2,173,806
NET INCOME ALLOCATION
Limited Partners 3,103,125 2,122,113
General Partner 89,443 51,693
NET INCOME PER UNIT
Limited Partners 411.42 237.78
General Partner 411.42 237.78
<FN>
The accompanying notes 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, 1998 and 1997
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C>
<C>
Partners' Capital
December 31, 1996 9,205.342 $28,360,195 $685,975 $29,046,1
70
Offering of Units 94.328 314,933 - 314,933
Net Income - 2,122,113 51,6932,173,806
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
Partners' Capital
December 31, 1997 8,184.801 $29,677,943 $809,798$30,487,741
Offering of Units 8.044 29,966 - 29,966
Net Income - 3,103,125 89,4433,192,568
Redemptions (463.195) (1,737,797) -
(1,737,797)
Partners' Capital
September 30, 1998 7,729.650 $31,073,237 $899,241$31,972,478
<FN>
The accompanying notes 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,
1998 1997
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income 3,192,568 2,173,806
Noncash item included in net income:
Net change in unrealized (1,315,463) (252,984)
(Increase) decrease in operating assets:
Interest receivable (DWR) 5,353 1,537
Due from DWR (19,543) 67,259
Increase (decrease) in operating liabilities:
Accrued incentive fees (216,740) (122,802)
Accrued management fees 4,388 (3,340)
Accrued administrative expenses 28,386 (2,951)
Accrued brokerage commissions (DWR)- (21,745)
Accrued transaction fees and costs -
(694)
Net cash provided by operating activities 1,678,949
1,838,086
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 29,966 314,933
Increase (decrease) in redemptions payable 48,525 (93,981)
Redemptions of units (1,737,797)(3,274,058)
Net cash used for financing activities (1,659,306)(3,053,106)
Net increase (decrease) in cash 19,643 (1,215,020)
Balance at beginning of period 29,293,294 28,509,266
Balance at end of period 29,312,937 27,294,246
<FN>
The accompanying notes 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 of Dean Witter Cornerstone
Fund II (the "Partnership"). The financial statements and
condensed notes herein should be read in conjunction with the
Partnership's December 31, 1997 Annual Report on Form 10-K.
1. Organization
Dean Witter Cornerstone Fund II 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 the Partnership,
Dean Witter Cornerstone Fund III, and Dean Witter Cornerstone
Fund IV. The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter
Reynolds Inc. ("DWR"), an affiliate of Demeter. The clearing
commodity broker is Carr Futures Inc. ("Carr"), providing
clearing and execution services. Both Demeter and DWR are wholly-
owned subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW").
The trading advisors who make all trading decisions for the
Partnership are John W. Henry & Company, Inc. ("JWH") and
Northfield Trading L.P. (the "Trading Advisors").
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interest trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on current 13-week U.S.
Treasury bill rates. Brokerage expenses incurred by the
Partnership are paid to DWR.
3. Financial Instruments
The Partnership trades futures and forward contracts in interest
rates, stock indices, commodities, and currencies. Futures and
forwards represent contracts for delayed delivery of an
instrument at a 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, 1998 and December 31, 1997,
open contracts were:
Contract or Notional Amount
September 30, 1998 December 31,
1997 $ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 50,131,000 30,057,000
Commitments to Sell - 13,539,000
Commodity Futures:
Commitments to Purchase 4,944,000 6,148,000
Commitments to Sell 6,997,000 15,082,000
Foreign Futures:
Commitments to Purchase 104,750,000 25,543,000
Commitments to Sell 6,049,000 20,799,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 66,275,000 17,705,000
Commitments to Sell 26,499,000 46,518,000
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A portion of the amounts indicated as off-balance-sheet risk in
forward currency contracts is due to offsetting forward
commitments to purchase and to sell the same currency on the same
date in the future. These commitments are economically
offsetting, but are not offset in the forward market until the
settlement date.
The net unrealized gains on open contracts are reported as a
component of "Equity in Commodity futures trading accounts" on
the Statements of Financial Condition and totaled $3,319,142 and
$2,003,679 at September 30, 1998 and December 31, 1997,
respectively.
Of the $3,319,142 net unrealized gain on open contracts at
September 30, 1998, $2,915,602 related to exchange-traded futures
contracts and $403,540 related to off-exchange-traded forward
currency contracts.
Of the $2,003,679 net unrealized gain on open contracts at
December 31, 1997, $1,675,343 related to exchange-traded futures
contracts and $328,336 related to off-exchange-traded forward
currency contracts.
Exchange-traded futures contracts held by the Partnership at
September 30, 1998 and December 31, 1997 mature through September
1999 and December 1998, respectively. Off-exchange-traded
forward currency contracts held by the Partnership at September
30, 1998
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
and December 31, 1997 mature through December 1998 and March
1998, respectively.
The contract amounts in the above table represent the
Partnership's extent of involvement in a particular class of
financial instrument, but not the credit risk associated with
counterparty non-performance. The credit risk associated with
these instruments is limited to the amounts reflected in the
Partnership's Statements of Financial Condition.
The Partnership also has credit risk because DWR and Carr act as
the futures commission merchants or the counterparties, with
respect to most of the Partnership's assets. Exchange-traded
futures contracts are marked to market on a daily basis, with
variations in value settled on a daily basis. Each of DWR and
Carr, as a futures commission merchant for the Partnership's
exchange-traded futures contracts, is required, pursuant to
regulations of the Commodity Futures Trading Commission ("CFTC"),
to segregate from their own assets, and for the sole benefit of
their commodity customers, all funds held by them with respect to
exchange-traded futures contracts, including an amount equal to
the net unrealized gain on all open futures contracts, which
funds, in the aggregate, totaled $32,228,539 and $30,968,637 at
September 30, 1998 and December 31, 1997, respectively. With
respect to the Partnership's off-exchange-traded forward currency
<PAGE>
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
contracts, there are no daily settlements of variations in value
nor is there any requirement that an amount equal to the net
unrealized gain on open forward contracts be segregated. With
respect to those off-exchange-traded forward currency contracts,
the Partnership is at risk to the ability of Carr, the sole
counterparty on all such contracts, to perform. Carr's parent,
Credit Agricole Indosuez, has guaranteed to the Partnership
payment of the net liquidating value of the transactions in the
Partnership's account with Carr (including foreign currency
contracts).
For the nine months ended September 30, 1998 and the year ended
December 31, 1997, the average fair value of financial
instruments held for trading purposes was as follows:
September 30, 1998
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 30,372,000 13,313,000
Commodity Futures 3,505,000 12,613,000
Foreign Futures 44,241,000 21,235,000
Off-Exchange-Traded Forward
Currency Contracts 52,863,000 70,346,000
December 31, 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 32,004,000 25,556,000
Commodity Futures 14,417,000 12,696,000
Foreign Futures 26,042,000 10,396,000
Off-Exchange-Traded Forward
Currency Contracts 36,907,000 46,749,000
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - Assets of the Partnership are deposited with DWR as
non-clearing broker and Carr as clearing broker in separate
futures interest trading accounts established for each of the
Trading Advisors and are used by the Partnership as margin to
engage in futures interest trading. Such assets are held in
either non-interest bearing bank accounts or in securities
approved by the CFTC for investment of customer funds. The
Partnership's assets held by DWR and Carr may be used as margin
solely for the Partnership's trading. Since the Partnership's
sole purpose is to trade in futures interests, it is expected
that the Partnership will continue to own such liquid assets for
margin purposes.
The Partnership's investment in futures interests may, from time
to time, be illiquid. Most United States futures exchanges limit
fluctuations in certain futures interest prices during a single
day by regulations referred to as "daily price fluctuations
limits" or "daily limits". Pursuant to such regulations, during
a single trading day no trades may be executed at prices beyond
the daily limit. If the price for a particular futures interest
has increased or decreased by an amount equal to the daily limit,
positions in such futures interest can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Futures interests prices have occasionally
moved the daily limit for several consecutive days with little or
<PAGE>
no trading. Such market conditions could prevent the Partnership
from promptly liquidating its futures interests and result in
restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
Capital Resources. The Partnership does not have, nor does it
expect to have, any capital assets. Future redemptions and
exchanges of Units of Limited Partnership Interest will affect
the amount of funds available for investment in futures interests
in subsequent periods. Since they are at the discretion of
Limited Partners, it is not possible to estimate the amount and
therefore, the impact of future redemptions and exchanges.
Results of Operations
For the Quarter and Nine Months Ended September 30, 1998
For the quarter ended September 30, 1998, the Partnership recorded
total trading revenues including interest income of $3,200,817 and
posted an increase in Net Asset Value per Unit. The most
significant gains were recorded in the financial futures markets
from long positions in German, U.S. and Japanese interest rate
<PAGE>
futures as prices in these perceived "safe havens" rallied higher
during August and September due to a "flight-to-quality" by
investors seeking refuge from economic uncertainty. Smaller gains
were recorded from long positions in British, Italian and French
bond futures as prices in these markets also trended higher. In
the agricultural markets, profits were recorded from short corn
futures positions as grain prices moved lower during July and
August on reports of strong crops and decreasing demand from
overseas. These gains were partially offset by losses incurred in
the currency markets from transactions involving the British pound
as its value failed to move with consistent direction relative to
the U.S. dollar throughout most of the quarter. Losses were also
recorded in metals during September from short silver futures
positions as precious metals prices were boosted higher by the
weakness of the U.S. dollar and volatility in several of the
world's economies. Smaller losses were experienced during July
from short coffee futures positions as prices spiked higher and
during September from short crude oil futures positions as oil
prices jumped above $16 a barrel amid shrinking supplies. Total
expenses for the three months ended September 30, 1998 were
$1,049,310, resulting in net income of $2,151,507. The value of an
individual Unit in the Partnership increased from $3,861.15 at June
30, 1998 to $4,136.34 at September 30, 1998.
For the nine months ended September 30, 1998, the Partnership
recorded total trading revenues including interest income of
$5,698,354 and posted an increase in Net Asset Value per Unit.
The most significant gains were recorded during August and
<PAGE>
September in the financial futures markets from long positions in
European, U.S. and Japanese bond futures due to a strong upward
price trend in these perceived "safe havens". Most global bond
prices rallied higher during August and September as a result of
a "flight-to-quality" by investors seeking security from the
volatility plaguing many of the world's economies. Additional
gains were recorded in the energy markets from short positions in
crude oil futures as oil prices moved lower during the first half
of the year, as well as during July and early August, as supplies
remained in surplus. In the currency markets, profits were
recorded from short positions in the South African rand as its
value declined significantly relative to the U.S. dollar during
May and June despite an effort by the South African government to
support its declining currency. Smaller profits were recorded
during July and August in the agricultural markets from short
corn futures positions as grain prices trended lower on reports
of strong crops and decreasing demand from overseas. These gains
were partially offset by losses incurred in metals during January
from short gold futures positions as gold prices reversed higher
after trending lower in previous months. Losses were also
recorded in this complex during May from long gold futures
positions as precious metals prices moved lower and during
September from short silver futures positions as precious metals
prices increased in lieu of the U.S. dollar's weakness. Smaller
losses were recorded in soft commodities from trading cotton
futures during the first and third quarters, as prices moved in a
trendless pattern, and from short coffee futures positions during
<PAGE>
July as prices reversed higher after trending lower earlier in
the year. Total expenses for the nine months ended September 30,
1998 were $2,505,786, resulting in net income of $3,192,568. The
value of an individual Unit in the Partnership increased from
$3,724.92 at December 31, 1997 to $4,136.34 at September 30,
1998.
For the Quarter and Nine Months Ended September 30, 1997
For the quarter ended September 30, 1997, the Partnership
recorded total trading revenues including interest income of
$1,856,862 and 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,
<PAGE>
choppy movement in oil prices resulted in smaller losses from
trading crude oil futures throughout the quarter. Total expenses
for the three months ended September 30, 1997 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.
For the nine months ended September 30, 1997, the Partnership
recorded total trading revenues including interest income of
$4,414,794 and 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
<PAGE>
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. Total expenses for
the nine months ended September 30, 1997 were $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.
Year 2000 Problem - Commodity pools, like financial and business
organizations and individuals around the world, depend on the
smooth functioning of computer systems. Many computer systems in
use today cannot recognize the computer code for the year 2000,
but revert to 1900 or some other date. This is commonly known as
the "Year 2000 Problem". The Partnership could be adversely
affected if computer systems used by it or any third party with
whom it has a material relationship do not properly process and
calculate date-related information and data concerning dates on
or after January 1, 2000. Such a failure could have a negative
impact on the handling or determination of futures trades and
prices and the services provided to the Partnership.
MSDW began its planning in response to the Year 2000 Problem in
1995 and currently has several hundred employees working on such
response. It has developed its own Year 2000 compliance plan to
deal with the problem and had the plan approved by the company's
executive management, Board of Directors and Information
Technology Department. Demeter is coordinating with MSDW in
taking steps that both believe are reasonably designed to address
<PAGE>
the Year 2000 Problem with respect to Demeter's computer systems
that relate to the Partnership. This includes hardware and
software upgrades, systems consulting and computer maintenance.
Beyond the challenge facing internal computer systems, the
systems failure of any of the third parties with whom the
Partnership has a material relationship - the futures exchanges
and clearing organizations through which it trades, Carr, or the
Trading Advisors - could result in a material financial risk to
the Partnership. Regarding the futures exchanges, all U.S.
futures exchanges will be subject to the monitoring of the CFTC
for their Year 2000 preparedness and the major foreign futures
exchanges are also expected to be subject to market-wide testing
of their Year 2000 compliance during 1999. With respect to Carr
and the Trading Advisors, Demeter intends to monitor their
progress throughout 1999 in their Year 2000 compliance and, where
applicable, to test its external interface with Carr and the
Trading Advisors.
Finally, MSDW has begun developing various "contingency plans" in
the event that the systems of such third parties fail, and
Demeter intends to consult closely with MSDW in implementing
those plans. MSDW has also recently reported that its
development of such contingency plans is proceeding on schedule.
Despite the best efforts of both Demeter and MSDW, however, there
can be no assurance that the above steps will be sufficient to
avoid any adverse impact to the Partnership, whether from
<PAGE>
failures in their own computer systems or those of Carr, the
Trading Advisors or any other third party.
Risks Associated with the Euro - On January 1, 1999, eleven
countries in the European Union intend to establish fixed
conversion rates on their existing sovereign currencies and
convert to a common single currency (the "euro"). During a three-
year transition period, the existing sovereign currencies will
continue to exist but only as a fixed denomination of the euro.
Conversion to the euro will prevent the Trading Advisors from
trading in certain currencies and thereby limit its ability to
take advantage of potential market opportunities that might
otherwise have existed had separate currencies been available to
trade, and could result in losses with respect to those
positions.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Previously filed. See Form 10-Q for the quarter ended March 31,
1998.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Dean Witter Cornerstone Fund I ("Cornerstone I"), the Partnership,
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, the
Partnership and Cornerstone III, the "Cornerstone Funds") was
registered pursuant to Post-Effective Amendment No. 5 to the
Registration Statement, which became effective on February 6, 1987.
The managing underwriter for the Cornerstone Funds is DWR.
The offering for the Partnership originally commenced on May 31,
1984 and currently continues, with 41,701.582 Units sold through
September 30, 1998. The Cornerstone Funds have sold an aggregate
of 235,414.617 Units, leaving 14,585.383 Units remaining available
for sale as of October 1, 1998.
The aggregate price of Units sold through September 30, 1998 with
respect to the Partnership is $65,634,485.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K. - No reports have been filed for the quarter
ended September 30, 1998.
<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 13, 1998 By:
Lewis A. Raibley, III
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<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 statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 29,312,937
<SECURITIES> 0
<RECEIVABLES> 148,240<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,780,319<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 32,780,319<F3>
<SALES> 0
<TOTAL-REVENUES> 5,698,354<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,505,786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,192,568
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,192,568
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,192,568
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include due from DWR of $47,426 and interest receivable
of $100,814.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $3,319,142.
<F3>Liabilities include redemptions payable of $247,547, accrued
management fees of $108,738, accrued incentive fees of $401,530 and
accrued administrative expenses of $50,026.
<F4>Total revenues include realized trading revenue of $3,479,157, net
change in unrealized of $1,315,463 and interest income of $903,734.
</FN>
</TABLE>
