WITTER DEAN CORNERSTONE FUND II, 424B3, 1999-06-03

WITTER DEAN CORNERSTONE FUND II
424B3, 1999-06-03
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>

14,575.469 UNITS OF

DEAN WITTER CORNERSTONE FUND II
DEAN WITTER CORNERSTONE FUND III
DEAN WITTER CORNERSTONE FUND IV
------------------------
SUPPLEMENT
TO PROSPECTUS
DATED AUGUST 28, 1996

YOU SHOULD READ THIS SUPPLEMENT TOGETHER WITH THE PROSPECTUS DATED AUGUST 28,
1996. ALL CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED IN THIS SUPPLEMENT
HAVE THE SAME MEANINGS AS USED IN THE PROSPECTUS. ALL PAGE AND SECTION
REFERENCES IN THIS SUPPLEMENT RELATE TO THE PROSPECTUS, EXCEPT REFERENCES TO
PAGES PRECEDED BY "S-," WHICH RELATE TO THIS SUPPLEMENT.

EXCHANGE PRIVILEGE

You may redeem Units in any Cornerstone Fund and with the proceeds from the
redemption you may purchase Units of one or more of the other Cornerstone Funds.
The price you pay will equal 100% of the Net Asset Value per Unit on the date of
purchase. You may only effect an Exchange as of the last day of a calendar month
upon at least 15 days prior written notice to the General Partner.

THE RISKS

THESE ARE SPECULATIVE SECURITIES. YOU COULD LOSE ALL OR SUBSTANTIALLY ALL OF
YOUR INVESTMENT IN THE PARTNERSHIPS. READ THE PROSPECTUS AND THIS SUPPLEMENT
BEFORE YOU DECIDE TO EFFECT AN EXHANGE. SEE "RISK FACTORS" BEGINNING ON PAGE 9
OF THE PROSPECTUS.

* The performance of each Partnership has been volatile and the Net Asset
Value per Unit for each Partnership may fluctuate significantly.

* There is no secondary market for Units and you may only redeem your Units
on the last day of any calendar month upon at least 15 days prior written
notice to the General Partner.

* In order for each Partnership to cover its expenses, each Partnership
must earn annual net Trading Profits (after taking into account estimated
interest income, based on current rates of 4.25%) of the following
percentages of average annual Net Assets:

<TABLE>
<S> <C>
Cornerstone II.................... 6.90%
Cornerstone III................... 7.60%
Cornerstone IV.................... 4.03%
</TABLE>

------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN ANY ONE OF THESE POOLS NOR HAS THE COMMISSION PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
------------------------

MORGAN STANLEY DEAN WITTER

DEAN WITTER REYNOLDS INC.
THE DATE OF THIS SUPPLEMENT IS MAY 14, 1999.

<PAGE>
TABLE OF CONTENTS

PAGE

<TABLE>
<S> <C>
Risk Factors............................................................... S-1
Potential Inability to Trade or Report Results Because of Year 2000
Problems............................................................... S-1
Euro Conversion Limits a Trading Manager's Ability to Trade Certain
Individual Currencies and Could Result in Trading Losses............... S-1
The Cornerstone Funds...................................................... S-2
Selected Financial Data.................................................... S-5
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... S-7
Quantitative and Qualitative Disclosures About Market Risk................. S-11
Description of Charges to Each Partnership................................. S-18
Capitalization............................................................. S-20
The Trading Managers....................................................... S-20
The General Partner........................................................ S-32
The Commodity Brokers...................................................... S-34
Certain Litigation......................................................... S-36
Plan of Distribution and Exchange Procedure................................ S-37
Material Federal Income Tax Considerations................................. S-37
Experts.................................................................... S-38
Independent Auditors' Report to the Limited Partners and
the General Partner.................................................... S-39
Statements of Financial Condition and Statements of Operations........... S-40
Statements of Changes in Partners' Capital............................... S-43
Statements of Cash Flows................................................. S-44
Notes to Financial Statements............................................ S-46
Independent Auditors' Report to the Board of Directors of Demeter.......... S-53
Statements of Financial Condition........................................ S-54
Notes to Statements of Financial Condition............................... S-55
Amended Annex A-Request for Exchange....................................... A-1
</TABLE>
<PAGE>
YOU SHOULD REVIEW THE FOLLOWING INFORMATION WITH THE PROSPECTUS BECAUSE THE
INFORMATION CONTAINED IN THIS SUPPLEMENT UPDATES AND REPLACES PORTIONS OF THE
PROSPECTUS.

RISK FACTORS

THE FOLLOWING INFORMATION UPDATES AND SUPPLEMENTS THE INFORMATION UNDER
"RISK FACTORS--RISKS RELATING TO THE PARTNERSHIPS" ON PAGES 12-13.

POTENTIAL INABILITY TO TRADE OR REPORT RESULTS BECAUSE OF YEAR 2000
PROBLEMS. 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 Partnerships could be adversely affected if
computer systems used by them or any third party with whom they have 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.

Morgan Stanley Dean Witter & Co. ("MSDW"), the parent of the General
Partner, 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. The General Partner is co-ordinating with MSDW to address the Year
2000 Problem with respect to the General Partner's computer systems. 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 Partnerships have a material
relationship--the futures exchanges and clearing organizations through which
they trade, Carr Futures, Inc. ("CFI"), the Partnerships' clearing commodity
broker (see "The Commodity Brokers" in this Supplement), and their respective
Trading Managers--could result in a material financial risk to the Partnerships.
All US 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. The
General Partner intends to monitor the progress of CFI and each Trading Manager
throughout 1999 in their Year 2000 compliance and, where applicable, to test its
external interface with CFI and the Trading Managers.

A worst case scenario would be one in which trading of contracts on behalf
of the Partnerships 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. The General Partner intends to consult
closely with MSDW in implementing those plans. Despite the best efforts of both
the General Partner and MSDW, however, it is possible that those steps will not
be sufficient to avoid any adverse impact to the Partnerships.

THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION UNDER "RISK
FACTORS--RISKS RELATING TO THE TRADING MANAGERS" ON PAGES 13-15.

EURO CONVERSION LIMITS A TRADING MANAGER'S ABILITY TO TRADE CERTAIN
INDIVIDUAL CURRENCIES AND COULD RESULT IN TRADING LOSSES. 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 each Trading Manager from trading in certain currencies and
thereby limits their ability to take advantage of potential market opportunities
that previously existed when separate

S-1
<PAGE>
currencies were available to trade. This could adversely affect the performance
results of the Partnerships.

THE CORNERSTONE FUNDS

THE FOLLOWING INFORMATION UPDATES AND REPLACES THE FIRST THROUGH FIFTH
PARAGRAPHS UNDER "THE CORNERSTONE FUNDS--THE OFFERING OF UNITS" ON PAGE 19.

In January 1985, Cornerstone II and III commenced their Continuing Offering
of unsold Units and in May 1987, Cornerstone IV joined that Continuing Offering.
Capital contributions from the sale of Units have been accepted by the
Partnerships at the 172 Monthly Closings held through May 1, 1999.

Units in each Cornerstone Fund are only available pursuant to an Exchange
as of the last day of each month. As of May 1, 1999, there were 14,575.469 Units
remaining available for Exchange. Following is a summary of certain information
relating to the Exchange of Units in each Partnership since its commencement of
operations through May 1, 1999:

<TABLE>
<CAPTION>
CORNERSTONE II CORNERSTONE III CORNERSTONE IV
-------------- --------------- --------------
<S> <C> <C> <C>
Units sold/exchanged..................... 41,706.006 74,405.186 100,633.696
Net proceeds received.................... $ 65,653,270 $137,132,762 $168,060,778
Net Assets............................... $ 31,175,172 $ 38,035,480 $114,033,289
Net Asset Value per Unit................. $ 4,282.86 $ 3,193.09 $ 4,823.92
General Partner contributions............ $ 685,975 $ 1,037,606 $ 2,047,422
Units of General Partnership Interest.... 117.400 142.103 268.889
Number of Limited Partners............... 2,638 4,525 7,757
</TABLE>

THE FOLLOWING INFORMATION UPDATES AND REPLACES THE PERFORMANCE INFORMATION
CONTAINED ON PAGES 20-23. THE FOOTNOTES ON PAGE 24 ARE AN INTEGRAL PART OF THE
FOLLOWING TABLES.

PERFORMANCE RECORDS

Performance of Cornerstone II

Capsule I sets forth the actual performance record of Cornerstone II from
January 1, 1994 through April 30, 1999. As of the date of this Supplement, all
funds received at Monthly Closings are being allocated approximately two-thirds
to John W. Henry & Company, Inc. and approximately one-third to Northfield
Trading L.P., and the funds allocated to JWH are allocated to its Original
Investment Program, Global Diversified Portfolio, and International Foreign
Exchange Program. In the future, allocations and/or reallocations may be made
among such systems and/or additional systems. See "The Trading Managers--Dean
Witter Cornerstone Fund II."

Performance of Cornerstone III

Capsule II sets forth the actual performance record of Cornerstone III from
January 1, 1994 through April 30, 1999. As of the date of this Supplement, all
funds received at Monthly Closings are being allocated approximately one-half to
Sunrise Capital Management, Inc., and approximately one-quarter each to Welton
Investment Corporation and Abraham Trading Company. See "The Trading
Managers--Dean Witter Cornerstone Fund III."

Performance of Cornerstone IV

Capsule III sets forth the actual performance record of Cornerstone IV from
January 1, 1994 through April 30, 1999. Since the commencement of trading on May
1, 1987, Cornerstone IV's trading has been directed by its two initial Trading
Managers, JWH and Sunrise. As of the date of this Supplement, all funds received
by Cornerstone IV at Monthly Closings are being allocated

S-2
<PAGE>

equally between its Trading Managers. See "The Trading Managers--Dean Witter
Cornerstone Fund IV."

------------------

Investors are cautioned that the information set forth in each capsule
performance summary is not indicative of, and has no bearing on, any trading
results which may be attained by the Partnerships in the future, since past
results are not a guarantee of future results. The Partnerships cannot assure
investors that profits will be made or that they will be able to avoid incurring
substantial losses. Investors should also note that interest income may
constitute a significant portion of a commodity pool's total income and, in
certain instances, may generate profits where there have been realized or
unrealized losses from commodity trading.

CAPSULE I
PERFORMANCE OF CORNERSTONE II

<TABLE>
<S> <C>
Type of Pool: Publicly-Offered Pool
Inception of Trading: January 1985
Aggregate Subscriptions: $65,653,270
Current Capitalization: $31,164,558
Current Net Asset Value per Unit: $4,282.86
Worst Monthly Percent Drawdown: (11.74)% (9/89)
Worst Month-end Peak-to-Valley: (32.70)% (16 months, 7/88-10/89)
Cumulative Return Since Inception: 339.27%
</TABLE>

<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
--------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
% % % % % %
January.......................... (4.14) (1.75) 3.58 1.98 (2.85) (3.17)
February......................... 2.03 (0.93) 2.67 (6.13) 10.88 0.12
March............................ (0.25) (1.49) 1.51 0.07 13.73 3.16
April............................ 4.72 (2.92) (0.53) 4.76 4.18 (2.59)
May.............................. 4.49 (0.95) (3.14) (0.37) 3.84
June............................. 6.57 (2.46) 2.60 (0.29) 2.50
July............................. (0.64) 4.83 (4.06) (3.82) (3.86)
August........................... 6.79 0.00 (3.28) (0.46) (4.70)
September........................ 0.96 (1.13) 5.37 (2.52) 0.77
October.......................... 1.47 2.47 10.42 (0.40) (5.31)
November......................... (4.85) 1.71 5.53 3.20 3.35
December......................... 4.97 5.33 (1.90) 4.00 (2.80)
Compound Annual/Period Rate of
Return......................... 2.17 12.54 18.05 11.47 26.50 (8.93)
</TABLE>

S-3

<PAGE>

<TABLE>
<C> <S>
Aggregate Subscriptions: $137,132,762
Current Capitalization: $38,035,480
Current Net Asset Value per Unit: $3,193.09
Worst Monthly Percent Drawdown: (18.28)% (2/89)
Worst Month-end Peak-to-Valley: (32.35)% (9 months, 2/89-10/89)
Cumulative Return Since Inception: 227.50%
</TABLE>

<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
--------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
% % % % % %
January.......................... (4.26) (0.95) 3.12 2.09 (7.31) (10.58)
February......................... 2.31 4.08 6.63 (15.04) 1.88 (3.06)
March............................ (3.83) 2.70 (1.31) (0.93) 12.40 4.47
April............................ 3.76 (2.63) (1.60) 9.35 2.44 (3.23)
May.............................. 1.40 1.81 (5.33) 4.24 3.78
June............................. 0.75 1.11 1.95 0.10 5.60
July............................. (1.31) 7.33 (3.95) (4.17) (3.86)
August........................... 9.93 (6.45) (1.06) 1.89 (6.49)
September........................ 1.44 0.64 4.17 0.63 3.82
October.......................... (5.74) (4.50) 13.53 (1.66) 4.08
November......................... (1.59) 1.52 5.14 6.35 0.09
December......................... 1.51 2.37 1.01 9.37 (3.68)
Compound Annual/Period Rate of
Return......................... (2.26) 9.13 10.24 8.24 27.50 (10.04)

<C> <S>
Aggregate Subscriptions: $168,060,778
Current Capitalization: $114,033,289
Current Net Asset Value per Unit: $4,823.92
Worst Monthly Percent Drawdown: (21.04)% (9/89)
Worst Month-end Peak-to-Valley: (45.21)% (3 months, 7/89-9/89)
Cumulative Return Since Inception: 394.76%
</TABLE>

<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
--------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
% % % % % %
January.......................... (2.37) (1.58) 5.34 3.19 (7.65) (1.12)
February......................... 0.84 (3.16) 6.55 (5.78) 6.27 (2.75)
March............................ 2.23 2.51 1.45 2.80 27.02 0.29
April............................ 1.19 (3.44) 1.23 2.97 2.39 (3.19)
May.............................. 4.89 (5.54) 1.19 (4.83) (3.65)
June............................. 11.31 1.36 (0.23) (0.62) 6.72
July............................. 0.37 8.45 (3.51) (1.06) (4.21)
August........................... 0.78 2.68 (2.69) 5.49 (3.57)
September........................ (3.11) 0.45 0.32 (0.06) 1.66
October.......................... 4.86 3.12 8.80 0.74 4.93
November......................... (4.24) 4.15 4.25 (2.57) (6.82)
December......................... (1.49) 4.38 1.76 (0.52) (2.73)
Compound Annual/Period Rate of
Return......................... 1.84 6.80 38.41 12.97 22.96 (14.27)
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
DEAN WITTER CORNERSTONE FUND II
-------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
$ $ $ $ $
REVENUES
<S> <C> <C> <C> <C> <C>
Realized 5,592,885 6,363,803 7,321,679 11,081,716 (878,688)
Net change in unrealized 52,473 687,245 (2,051,673) (947,973) 556,567
----------- ----------- ----------- ----------- -----------
Total Trading Results 5,645,358 7,051,048 5,270,006 10,133,743 (322,121)
Interest income (DWR) 1,180,971 1,228,298 1,179,784 1,471,022 1,153,003
----------- ----------- ----------- ----------- -----------
Total Revenues 6,826,329 8,279,346 6,449,790 11,604,765 830,882
----------- ----------- ----------- ----------- -----------
EXPENSES
Brokerage commissions (DWR) 1,401,238 1,383,112 1,719,932 1,864,093 2,336,047
Management fees 1,224,365 1,159,248 1,167,223 1,307,872 1,346,905
Incentive fees 426,277 650,800 329,590 381,720 --
Transaction fees and costs 133,569 128,692 170,971 160,238 194,384
Common administrative expenses 44,337 41,330 14,612 8,183 49,101
----------- ----------- ----------- ----------- -----------
Total Expenses 3,229,786 3,363,182 3,402,328 3,722,106 3,926,437
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) 3,596,543 4,916,164 3,047,462 7,882,659 (3,095,555)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) PER UNIT
FOR PERIOD
Limited Partners 467.12 569.56 324.71 592.90 (219.47)
General Partner 467.12 569.56 324.71 592.90 (219.47)
TOTAL ASSETS AT END OF
PERIOD 32,113,096 31,431,023 30,046,842 31,558,306 32,062,117
TOTAL NET ASSETS AT END OF
PERIOD 31,396,729 30,487,741 29,046,170 30,828,888 31,372,002
NET ASSET VALUE PER UNIT AT
END OF PERIOD
Limited Partners 4,192.04 3,724.92 3,155.36 2,830.65 2,237.75
General Partner 4,192.04 3,724.92 3,155.36 2,830.65 2,237.75
</TABLE>

S-5
<PAGE>
SELECTED FINANCIAL DATA (CONTINUED)

<TABLE>
<CAPTION>
DEAN WITTER CORNERSTONE FUND III
-------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (loss):
Realized 5,912,923 7,439,669 8,925,181 14,260,042 913,869
Net change in unrealized 164,515 (642,508) (2,997,491) 561,437 (1,350,056)
----------- ----------- ----------- ----------- -----------
Total Trading Results 6,077,438 6,797,161 5,927,690 14,821,479 (436,187)
Interest income (DWR) 1,640,345 1,786,271 1,657,400 2,061,461 1,744,148
----------- ----------- ----------- ----------- -----------
Total Revenues 7,717,783 8,583,432 7,585,090 16,882,940 1,307,961
----------- ----------- ----------- ----------- -----------
EXPENSES
Brokerage commissions (DWR) 2,088,096 2,294,914 2,772,496 3,499,743 4,417,718
Management fees 1,682,394 1,728,062 1,629,715 1,828,013 2,014,028
Transaction fees and costs 212,795 229,570 379,973 502,332 434,287
Common administrative expenses 76,892 69,344 24,702 21,158 122,423
----------- ----------- ----------- ----------- -----------
Total Expenses 4,060,177 4,321,890 4,806,886 5,851,246 6,988,456
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) 3,657,606 4,261,542 2,778,204 11,031,694 (5,680,495)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) PER UNIT FOR
PERIOD
Limited Partners 273.45 278.01 206.83 541.04 (219.67)
General Partner 273.45 278.01 206.83 541.04 (219.67)
TOTAL ASSETS AT END OF PERIOD 40,759,850 41,782,326 43,137,470 48,156,795 48,308,274
TOTAL NET ASSETS AT END OF PERIOD 40,299,819 41,114,374 42,035,358 46,949,674 47,002,453
NET ASSET VALUE PER UNIT AT END
OF PERIOD
Limited Partners 3,266.97 2,993.52 2,715.51 2,508.68 1,967.64
General Partner 3,266.97 2,993.52 2,715.51 2,508.68 1,967.64
</TABLE>

<TABLE>
<CAPTION>
DEAN WITTER CORNERSTONE FUND IV
-------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (loss):
Realized 15,855,401 42,691,318 10,304,825 27,041,974 (10,447,878)
Net change in unrealized (4,642,364) (3,515,408) 5,260,377 (198,148) (1,726,877)
----------- ----------- ----------- ----------- -----------
Total Trading Results 11,213,037 39,175,910 15,565,202 26,843,826 (12,174,755)
Interest income (DWR) 4,462,904 4,200,571 3,924,420 4,912,698 4,129,344
----------- ----------- ----------- ----------- -----------
Total Revenues 15,675,941 43,376,481 19,489,622 31,756,524 (8,045,411)
----------- ----------- ----------- ----------- -----------
EXPENSES
Management fees 4,817,623 4,287,974 3,904,737 4,575,372 4,952,206
Brokerage commissions (DWR) 2,170,551 2,656,715 3,781,486 2,776,225 5,336,659
Common administrative expenses 147,731 134,041 47,685 39,890 228,633
Transaction fees and costs 114,925 171,578 222,993 168,718 339,083
Incentive fees 594,331 1,594,371 -- -- 7,659
----------- ----------- ----------- ----------- -----------
Total Expenses 7,845,161 8,844,679 7,956,901 7,560,205 10,864,240
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) 7,830,780 34,531,802 11,532,721 24,196,319 (18,909,651)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) PER UNIT FOR
PERIOD
Limited Partners 301.39 1,230.81 367.93 529.66 (383.89)
General Partner 301.39 1,230.81 367.93 529.66 (383.89)
TOTAL ASSETS AT END OF PERIOD 117,323,711 121,378,550 97,292,310 105,362,851 112,210,624
TOTAL NET ASSETS AT END OF PERIOD 115,241,099 118,409,744 95,496,244 103,667,011 109,892,266
NET ASSET VALUE PER UNIT AT END
OF PERIOD
Limited Partners 4,736.86 4,435.47 3,204.66 2,836.73 2,307.07
General Partner 4,736.86 4,435.47 3,204.66 2,836.73 2,307.07
</TABLE>

S-6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

THE FOLLOWING INFORMATION REPLACES THE FIRST PARAGRAPH UNDER "LIQUIDITY" ON
PAGE 26.

Liquidity. The assets of each Partnership are deposited with DWR as
non-clearing broker and with CFI as clearing broker (see "The Commodity Brokers"
beginning on page S-35) in separate futures interest trading accounts
established for each Trading Manager and are used by each Partnership as margin
to engage in trading. The assets will either be invested together with other
customer segregated and secured funds or will be held in non-interest bearing
bank accounts. See "Investment Program, Use of Proceeds and Trading Policies."
Each Partnership's assets held by DWR and CFI may be used as margin solely for
such Partnership's trading. Since each Partnership's sole purpose is to trade in
commodity interests, it is expected that each Partnership will continue to own
liquid assets for margin purposes.

THE FOLLOWING INFORMATION UPDATES AND SUPPLEMENTS THE INFORMATION UNDER THE
SUBCAPTION "RESULTS OF OPERATIONS" ON PAGES 26-34.

CORNERSTONE II

Results of Operations for 1996. Cornerstone II posted gains for the year
primarily by taking advantage of price trends in the financial futures, currency
and energy markets during the months of September through November. Additional
gains were recorded in the currency markets during the second quarter. These
profits contributed to the Partnership's overall gains in 1996, and more than
offset certain losses incurred as a result of trend reversals and choppy price
movement earlier in the year.

For the year ended December 31, 1996, the Partnership's total trading
revenues, including interest income, were $6,449,790. The Partnership's total
expenses for the year were $3,402,328, resulting in net income of $3,047,462.
The Net Asset Value of a Unit increased from $2,830.65 at December 31, 1995 to
$3,155.36 at December 31, 1996.

Results of Operations for 1997. Cornerstone II experienced a profitable
year in 1997, as the Partnership recorded gains resulting from strong price
trends in the currency markets. The strengthening in the value of the U.S.
dollar relative to the Japanese yen and German mark early in the year, as well
as versus the Japanese yen and most Pacific Rim currencies during the fourth
quarter, largely contributed to the Partnership's overall success. Additional
profits were recorded during July from long global interest rate futures
positions as prices in these markets made a strong upward move.

For the year ended December 31, 1997, the Partnership's total trading
revenues, including interest income, were $8,279,346. The Partnership's total
expenses for the year were $3,363,182, resulting in net income of $4,916,164.
The Net Asset Value of a Unit increased from $3,155.36 at December 31, 1996 to
$3,724.92 at December 31, 1997.

Results of Operations for 1998. Cornerstone II recorded its fourth
consecutive year of double-digit returns, with the most significant gains being
recorded from long global bond futures positions. Profits were recorded from a
"flight-to-quality" during the third quarter as stock prices plunged and
uncertainty plagued the global economic community. The Partnership also profited
in the interest rate futures markets during December from short positions in
Japanese government bond futures as prices declined sharply following a spike
higher in Japanese interest rates. Additional profits were recorded during July
from short futures positions in crude oil as prices fell on speculation that
further production cuts would not occur. Trading in currencies was also
profitable for the Partnership, as gains were recorded from short positions in
the South African rand during June due to a devaluation in that nation's
currency versus the U.S. dollar and from long Japanese yen positions during
October as the yen's value strengthened amid optimism for economic reform in
Japan.

S-7
<PAGE>
For the year ended December 31, 1998, the Partnership's total trading
revenues, including interest income, were $6,826,329. Total expenses for the
period were $3,229,786, resulting in net income of $3,596,543. The Net Asset
Value of a Unit increased from $3,724.92 at December 31, 1997 to $4,192.04 at
December 31, 1998.

To enhance the foregoing comparison of results of operations from year to
year, prospective investors can examine, line by line, the Partnership's
Statement of Operations and Statements of Financial Condition.

Interest income to the Partnership is derived from 80% of its average daily
Net Assets earning interest at a rate equal to the average yield on 13-week U.S.
Treasury bills. The size of the assets and the fluctuation of interest rates
affect the resulting interest income totals for each year. During 1998, a
decrease in the rates on U.S. Treasury bills resulted in a decrease in interest
income to the Partnership.

In regard to expenses of the Partnership, brokerage commissions and
transaction fees and costs charged fluctuate based on the volume of trading by
the Partnership's Trading Managers. These expenses increased in the aggregate in
1998 as a result of the presence of fewer long-term price trends in futures
markets in which the Partnerships' Trading Managers concentrate their
participation.

Management fees are charged at a 4% annual rate of Net Assets and fluctuate
based only on the size of the Partnership's Net Assets. These fees increased in
1998 as a result of an increase in the average Net Assets of the Partnership.
Incentive fees are only paid on an annual basis or on any redeemed Units on a
monthly basis if the Partnership is profitable on a cumulative basis since the
last annual period for which incentive fees were paid. Incentive fees were paid
in 1998.

Common administrative expenses are primarily legal, accounting, auditing,
printing, and distribution costs. These expenses increased during 1998 as a
result of increased audit and tax fees and increased printing expenses.

CORNERSTONE III

Results of Operations for 1996. Cornerstone III recorded net profits during
1996, due primarily to the strong trends experienced in the currency, energy and
financial futures markets during the months of September through November. The
Partnership recorded additional gains in commodities and currencies during the
second quarter, which helped mitigate the losses experienced in the beginning of
the year from trend reversals and choppy price movements.

For the year ended December 31, 1996, the Partnership's total trading
revenues, including interest income, were $7,585,090. The Partnership's total
expenses for the year were $4,806,886, resulting in net income of $2,778,204.
The Net Asset Value of a Unit increased from $2,508.68 at December 31, 1995 to
$2,715.51 at December 31, 1996.

Result of Operations for 1997. Cornerstone III experienced a profitable
year in 1997, due primarily to participation in strong price trends in the
currency and agricultural markets during January and February, and in the
financial futures markets during July. These gains, coupled with smaller profits
from short gold futures positions as gold prices declined late in the year,
helped to mitigate the losses experienced from trend reversals and choppy price
movements in global interest rate futures and currencies during August and
October.

For the year ended December 31, 1997, the Partnership's total trading
revenues, including interest income, were $8,583,432. The Partnership's total
expenses for the year were $4,321,890, resulting in net income of $4,261,542.
The Net Asset Value of a Unit increased from $2,715.51 at December 31, 1996 to
$2,993.52 at December 31, 1997.

Results of Operations for 1998. Cornerstone III experienced a profitable
year in 1998, with the majority of the gains being recorded in the global
financial futures markets. In global interest rate futures, profits were
recorded early in the year from long positions in Japanese government

S-8
<PAGE>
bonds as prices moved steadily higher in reaction to declining interest rates in
Japan. Later in the year, profits were recorded in this same market from short
positions as prices moved lower following a sharp spike higher in Japanese bond
yields during December. Additional gains were recorded from long positions in
European and U.S. bond futures as prices were pushed higher in a
"flight-to-quality" during the third quarter. Gains were also recorded from long
positions in U.S. and European stock index futures as equity prices reached
record levels during the first half of 1998.

For the year ended December 31, 1998, the Partnership's total trading
revenues, including interest income, were $7,717,783. Total expenses for the
period were $4,060,177, resulting in net income of $3,657,606. The Net Asset
Value of a Unit increased from $2,993.52 at December 31, 1997 to $3,266.97 at
December 31, 1998.

Interest income to the Partnership is derived from 80% of its average daily
Net Assets earning interest at a rate equal to the average yield on 13-week U.S.
Treasury bills. The size of the assets and the fluctuation of interest rates
affect the resulting interest income totals for each year. During 1998, a
decrease in the rates on U.S. Treasury bills and in Net Assets resulted in a
decrease in interest income to the Partnership.

In regard to expenses of the Partnership, brokerage commissions and
transaction fees and costs charged fluctuate based on the volume of trading by
the Partnership's Trading Managers. These expenses declined in the aggregate in
1998 as a result of the presence of more long-term price trends in futures
markets in which the Partnership's Trading Managers concentrate their
participation.

Management fees are charged at a 4% annual rate of Net Assets and fluctuate
based only on the size of the Partnership's Net Assets. Management fees
decreased in 1998 as a result of a decrease in the average Net Assets of the
Partnership. Incentive fees are only paid on an annual basis or on any redeemed
Units on a monthly basis if the Partnership is profitable on a cumulative basis
since the last annual period for which incentive fees were paid. Incentive fees
were not paid in 1998.

Common administrative expenses are primarily legal, accounting, auditing,
printing, and distribution costs. These expenses increased in 1998 as a result
of increased audit and tax fees and increased printing expenses.

CORNERSTONE IV

Results of Operations for 1996. Cornerstone IV experienced a profitable
year in 1996, due primarily to gains recorded during the fourth quarter. The
Partnership profited from a sustained upward trend in the value of the British
pound during the months of October through November and a steady decline in the
value of both the Japanese yen and the Swiss Franc relative to the U.S. dollar
during the fourth quarter. These gains more than offset losses recorded from
sharp trend reversals and choppy price movement during the first nine months of
the year.

For the year ended December 31, 1996, the Partnership's total trading
revenues, including interest income, were $19,489,622. The Partnership's total
expenses for the year were $7,956,901, resulting in net income of $11,532,721.
The Net Asset Value of a Unit increased from $2,836.73 at December 31, 1995 to
$3,204.66 at December 31, 1996.

Results of Operations for 1997. Cornerstone IV recorded strong profits
during 1997, due primarily to a strengthening in the value of the U.S. dollar
relative to most major world currencies throughout the year. The most
significant gains were recorded from short positions in the Japanese yen during
January and February. Additional profits were recorded during July as

S-9
<PAGE>
the value of the U.S. dollar increased versus most European and Pacific Rim
currencies. November and December also proved to be profitable months for the
Partnership as short positions in the Japanese yen and other Pacific Rim
currencies experienced gains in the wake of the Asian currency crisis.

For the year ended December 31, 1997, the Partnership's total trading
revenues, including interest income, were $43,376,481. The Partnership's total
expenses for the year were $8,844,679, resulting in net income of $34,531,802.
The Net Asset Value of a Unit increased from $3,204.66 at December 31, 1996 to
$4,435.47 at December 31, 1997.

Results of Operations for 1998. Cornerstone IV profited during 1998 due
primarily to significant gains in the second quarter from short South African
rand positions as the rand was devalued versus the U.S. dollar on concerns
regarding the South African economy. Additional gains were recorded from short
positions in the rand during August as the concerns regarding the economies of
emerging countries continued due to the collapse of the Russian ruble. Smaller
profits were recorded during the fourth quarter from long Japanese yen positions
as the yen's value strengthened versus the U.S. dollar amid optimism regarding
the financial crisis in Japan.

For the year ended December 31, 1998, the Partnership's total trading
revenues, including interest income, were $15,675,941. Total expenses for the
period were $7,845,161, resulting in net income of $7,830,780. The Net Asset
Value of a Unit increased from $4,435.47 at December 31, 1997 to $4,736.86 at
December 31, 1998.

To enhance the foregoing comparisons of results of operations from year to
year, prospective investors can examine, line by line, the Partnership's
Statements of Operations and Statements of Financial Condition.

In regard to expenses of the Partnership, brokerage commissions and
transaction fees and costs charged fluctuate based on the volume of trading by
the Partnership's Trading Managers. These expenses declined in the aggregate in
1998 as a result of the presence of more long-term price trends in futures
markets in which the Partnership's Trading Managers concentrate their
participation.

Management fees are charged at a 4% annual rate of Net Assets and fluctuate
based only on the size of the Partnership's Net Assets. Management fees
increased in 1998 as a result of an increase in the average Net Assets of the
Partnership. Incentive fees are only paid on an annual basis or on any redeemed
Units on a monthly basis if the Partnership is profitable on a cumulative basis
since the last annual period for which incentive fees were paid. Incentive fees
were paid in 1998.

Since the inception of trading in 1985 through April 30, 1999, the Net
Asset Values per Unit of Cornerstone II and III have increased by 339.27% (a
compound annualized return of 10.88%) and 227.50% (a compound annualized return
of 8.63%), respectively. Since it began trading in 1987 through April 30, 1999,
the Net Asset Value per Unit of Cornerstone IV has increased by 394.76% (a
compound annualized return of 14.25%).

THE FOLLOWING INFORMATION REPLACES THE FIRST FOUR PARAGRAPHS ON PAGE 35
UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--FINANCIAL INSTRUMENTS."

S-10
<PAGE>
There can be no assurance that a clearinghouse, exchange or other exchange
member will meet its obligations to the Partnerships, and the Partnerships are
not indemnified against a default by such parties from the General Partner 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 exchange,
clearinghouse or other exchange member default on trades effected for the
broker's customers; any such obligation on the part of the broker is even less
clear when the default occurs in a non-US jurisdiction.

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

Second, each Partnership's trading policies limit the amount of Partnership
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 the trading policies has been to reduce the credit exposure of any
Partnership to any single exchange and, historically, such Partnership 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, the General Partner deals with the situation on a case by case
basis, carefully weighing whether the increased level of credit exposure remains
appropriate.

Third, the General Partner has secured, with respect to CFI acting as the
clearing broker for the Partnerships, a guarantee by Credit Agricole Indosuez,
CFI's parent, of the payment of the "net liquidating value" of the transactions
(futures, options and forward contracts) in each Partnership's account. As of
December 31, 1997, Credit Agricole Indosuez' total equity was $6.28 billion, and
its senior unsecured debt is currently rated Aa2 by Moody's.

See "Selected Financial Data" and "Independent Auditors' Report."

Inflation has not been, and is not expected to be, a major factor in the
Partnerships' operations.

THE FOLLOWING SECTION IS TO BE INSERTED BEFORE "DESCRIPTION OF CHANGES TO
EACH PARTNERSHIP" ON PAGE 37.

QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
INTRODUCTION

Each Partnership is a commodity pool engaged primarily in the speculative
trading of commodity interests. The market sensitive instruments held by each
Partnership are acquired solely for speculative trading purposes and, as a
result, all or substantially all of each 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 each Partnership's primary business
activities.

The commodity interests traded by each Partnership involve varying degrees
of related market risk. Such market risk is often dependent upon changes in the
level or volatility of interest rates, exchange rates, and/or market values of
financial instruments and commodities.

S-11
<PAGE>
Fluctuations in related market risk based upon the aforementioned factors result
in frequent changes in the fair value of each Partnership's open positions, and,
consequently, in its earnings and cash flow.

Each 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 each Partnership.

Each Partnership's past performance is not necessarily indicative of its
future results. Any attempt at quantifying a 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 such
Partnership's experience to date and/or any reasonable expectation premised upon
historical changes in the fair value of its market sensitive instruments.

QUANTIFYING THE PARTNERSHIP'S TRADING VALUE AT RISK

The following quantitative disclosures regarding each 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.

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

Each Partnership's risk exposure in the various market sectors traded by
the Trading Managers is estimated below in terms of Value at Risk ("VaR"). The
VaR model employed by each Partnership incorporates numerous variables that
could impact the fair value of such Partnership's trading portfolio. Each
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 each Partnership's VaR, the historical observation period is
approximately four years. Each 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 each 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 the
General Partner or the Trading Managers in their daily risk management
activities.

EACH PARTNERSHIP'S VALUE AT RISK IN DIFFERENT MARKET SECTORS

The following tables indicate the VaR associated with each Partnership's
open positions as a percentage of total net assets by market risk category as of
December 31, 1998.

S-12
<PAGE>
CORNERSTONE II:

As of December 31, 1998, the Partnership's total capitalization was
approximately $31 million.

<TABLE>
<CAPTION>
MARKET CATEGORY VAR
--------------- ---
<S> <C>
Interest Rate............................................... (0.87)%
Currency.................................................... (0.85)
Equity...................................................... (0.22)
Commodity................................................... (0.61)
Aggregate Value at Risk..................................... (1.34)%
</TABLE>

CORNERSTONE III:

As of December 31, 1998, the Partnership's total capitalization was
approximately $40 million.

<TABLE>
<CAPTION>
MARKET CATEGORY VAR
--------------- ---
<S> <C>
Interest Rate............................................... (1.32)%
Currency.................................................... (0.72)
Equity...................................................... (0.91)
Commodity................................................... (0.73)
Aggregate Value at Risk..................................... (1.61)%
</TABLE>

CORNERSTONE IV:

As of December 31, 1998, the Partnership's total capitalization was
approximately $115 million.

<TABLE>
<CAPTION>
MARKET CATEGORY VAR
--------------- ---
<S> <C>
Currency.................................................... (0.79)%
Aggregate Value at Risk..................................... (0.79)%
</TABLE>

Aggregate value at risk represents the aggregate VaR of each 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 tables above represent the VaR of each Partnership's open positions at
December 31, 1998 only and are not necessarily representative of either the
historic or future risk of an investment in such Partnerships. As each
Partnership's sole business is the speculative trading of primarily commodity
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 tables below supplement the year end VaR by presenting each
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.

CORNERSTONE II

<TABLE>
<CAPTION>
PRIMARY MARKET RISK CATEGORY HIGH LOW AVERAGE
---------------------------- ---- --- -------
<S> <C> <C> <C>
Interest Rate........................... (1.21)% (0.59)% (0.96)%
Currency................................ (1.84) (0.85) (1.46)
Equity.................................. (0.41) (0.22) (0.29)
Commodity............................... (0.80) (0.58) (0.68)
Aggregate Value at Risk................. (2.39)% (1.34)% (1.83)%
</TABLE>

S-13
<PAGE>
CORNERSTONE III

<TABLE>
<CAPTION>
PRIMARY MARKET RISK CATEGORY HIGH LOW AVERAGE
---------------------------- ---- --- -------
<S> <C> <C> <C>
Interest Rate........................... (1.74)% (0.63)% (1.20)%
Currency................................ (1.75) (0.72) (1.09)
Equity.................................. (0.94) (0.08) (0.64)
Commodity............................... (0.93) (0.66) (0.75)
Aggregate Value at Risk................. (2.24)% (1.61)% (1.95)%
</TABLE>

CORNERSTONE IV

<TABLE>
<CAPTION>
PRIMARY MARKET RISK CATEGORY HIGH LOW AVERAGE
---------------------------- ---- --- -------
<S> <C> <C> <C>
Currency................................ (2.04)% (0.79)% (1.58)%
Aggregate Value at Risk................. (2.04)% (0.79)% (1.58)%
</TABLE>

LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK

The face value of the market sector instruments held by each 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 each Partnership is typically many times the total
capitalization of each such Partnership. The financial magnitude of a
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 a 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 each Partnership, give 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 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 each Partnership's VaR for
each such 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 a
Partnership's future financial performance or its ability to manage and monitor
risk and there can be no assurance that a Partnership's actual losses on a
particular day will not exceed the VaR amounts indicated or that such losses
will not occur more than once in 100 trading days.

NON-TRADING RISK

Each 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. Each Partnership also maintains a substantial
portion (approximately 87-98%) of its available assets in cash at DWR. A decline
in short-term interest rates will result in a decline in a 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 a Partnership's market sensitive instruments.

S-14
<PAGE>
QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES

The following qualitative disclosures regarding each Partnership's market
risk exposures -- except for (i) those disclosures that are statements of
historical fact and (ii) the descriptions of how a 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. Each Partnership's primary market risk exposures as
well as the strategies used and to be used by the General Partner and the
Trading Managers for managing such exposures are subject to numerous
uncertainties, contingencies and risks, any one of which could cause the actual
results of each Partnership's risk controls to differ materially from the
objectives of such strategies. Government 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 each Partnership. Investors must be prepared to
lose all or substantially all of their investment in a Partnership.

CORNERSTONE II

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.

Interest Rate. Interest rate risk is the principal market exposure of the
Partnership. 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 is
to interest rate fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes futures positions in the government debt of
smaller nations -- e.g. Australia. The General Partner anticipates that G-7
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, as opposed to short-term, rates.
Most of the speculative futures positions held by the Partnership are in
medium-to-long term instruments. Consequently, even a material change in
short-term rates would have little effect on the Partnership were the
medium-to-long term rates to remain steady.

Currency. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes, as well as political and
general economic conditions. 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/Swiss franc, dollar/Japanese yen, dollar/German
mark and dollar/British pound positions. The General Partner does not 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 Managers' currency
trading strategies.

Equity. The Partnership's primary equity exposure is to equity price risk
in the G-7 countries. 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 primary exposures were in the S&P 500, All Ordinaries (Australia),
and Nikkei (Japan) stock indices. The Partnership is primarily exposed to the
risk of adverse price trends or static markets in the major U.S., European 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).

S-15
<PAGE>
Commodity.

Metals. The Partnership's primary metals market exposure is to fluctuations
in the price of gold and silver. Although certain of the Trading Managers will
from time to time trade base metals such as aluminum and copper, the principal
market exposures of the Partnership have consistently been in the precious
metals, gold and silver. The Trading Managers' gold trading has been
increasingly limited due to the long-lasting and mainly non-volatile decline in
the price of gold over the last 10-15 years. However, silver prices have
remained volatile over this period, and the Trading Managers have from time to
time taken substantial positions as they have perceived market opportunities to
develop. The General Partner anticipates that gold and silver will remain the
primary metals market exposure for the Partnership.

Soft Commodities. The Partnership's primary commodities exposure is to
fluctuations in the price of soft commodities which are often directly affected
by severe or unexpected weather conditions. Grains, coffee, and cotton accounted
for the substantial bulk of the Partnership's commodities exposure as of
December 31, 1998. In the past, the Partnership has had material market exposure
to live cattle and hogs/bellies and may do so again in the future. However, the
General Partner anticipates that the Trading Managers will maintain an emphasis
on grains, coffee, and cotton, in which the Partnership has historically taken
its largest positions.

Energy. The Partnership's primary energy market exposure is to gas and oil
price movements, often resulting from political developments in the Middle East.
Although the Trading Managers trade natural gas to a limited extent, oil is by
far the dominant energy market exposure of the Partnership. Oil prices are
currently depressed, but they can be volatile and substantial profits and losses
have been and are expected to continue to be experienced in this market.

CORNERSTONE III

Interest Rate. Interest rate risk is the principal market exposure of the
Partnership. 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 is
to interest rate fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes futures positions in the government debt of
smaller nations -- e.g. New Zealand and Australia. The General Partner
anticipates that G-7 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, as opposed to
short-term, rates. Most of the speculative futures positions held by the
Partnership are in medium-to-long term instruments. Consequently, even a
material change in short-term rates would have little effect on the Partnership
were the medium-to-long term rates to remain steady.

Currency. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes, as well as political and
general economic conditions. 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/Japanese yen, dollar/German mark and dollar/British
pound positions. The General Partner does not 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 Managers' currency trading strategies.

S-16
<PAGE>
Equity. The Partnership's primary equity exposure is to equity price risk
in the G-7 countries. 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 primary exposures were in the S&P 500, Financial Times (England),
and NASDAQ 100 stock indices. The General Partner 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., European 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. The Partnership's primary metals market exposure is to fluctuations
in the price of gold and silver. Although certain of the Trading Managers will
from time to time trade base metals such as aluminum, copper, nickel, zinc and
lead, the principal market exposures of the Partnership have consistently been
in the precious metals, gold and silver (and, to a much lesser extent,
platinum). The Trading Managers' gold trading has been increasingly limited due
to the long-lasting and mainly non-volatile decline in the price of gold over
the last 10-15 years. However, silver prices have remained volatile over this
period, and the Trading Managers have from time to time taken substantial
positions as they have perceived market opportunities to develop. The General
Partner anticipates that gold and silver will remain the primary metals market
exposure for the Partnership.

Soft Commodities. One of the Partnership's primary commodities exposure is
to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions. Grains, soybean oil and
sugar accounted for the substantial bulk of the Partnership's commodities
exposure at December 31, 1998. In the past the Partnership has had material
market exposure to live cattle and hogs/bellies and may do so again in the
future. However, the General Partner anticipates that the Trading Managers will
maintain an emphasis on grains, soybean oil and sugar, in which the Partnership
has historically taken its largest positions.

CORNERSTONE IV

Currency. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes, as well as political and
general economic conditions. 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/Japanese yen, dollar/German mark, dollar/Australian
dollar and dollar/British pound positions. The General Partner does not
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 Managers'
currency trading strategies.

S-17
<PAGE>
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE

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

FOREIGN CURRENCY BALANCES. Each Partnership's primary foreign currency
balances are in Japanese yen, German marks, British pounds, and French francs
and euros. Each Partnership controls the non-trading risk of these balances by
regularly converting these balances back into U.S. dollars (no less frequently
than twice a month, and more frequently if a particular foreign currency balance
becomes unusually high).

QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE

The means by which each Partnership and the Trading Managers, severally,
attempt to manage the risk of each Partnership's open positions are essentially
the same in all market categories traded. The General Partner attempts to manage
each Partnership's market exposure by (i) diversifying a Partnership's assets
among different Trading Managers, each of whose strategies focus on different
market sectors and trading approaches, and (ii), monitoring the performance of
the Trading Managers on a daily basis. In addition, the Trading Managers
establish diversification guidelines often set in terms of the maximum margin to
be committed to positions in any one market sector or market sensitive
instrument. One should be aware that certain Trading Managers treat their risk
control policies as strict rules, whereas others treat such policies as general
guidelines.

The General Partner monitors and controls the risk of each Partnership's
non-trading instrument, cash, which is the only Partnership investment directed
by the General Partner, rather than the Trading Managers.

DESCRIPTION OF CHARGES TO EACH PARTNERSHIP

THE FOLLOWING INFORMATION UPDATES AND SUPPLEMENTS "DESCRIPTION OF CHARGES
TO EACH PARTNERSHIP--1. COMMODITY BROKER" ON PAGE 39.

As more fully described under "The Commodity Brokers" on page S-35, DWR
sold its institutional futures and foreign currency trading operations in 1997
to CFI. Since that transaction, DWR has served as the non-clearing commodity
broker for the Partnerships, and CFI has served as the clearing commodity broker
for the Partnerships' commodity interests trades and as the counterparty on the
Partnerships' foreign currency forward contracts.

DWR, as the non-clearing commodity broker for the Partnerships, continues
to charge each Partnership a roundturn brokerage commission for each commodity
interest contract traded equal to 80% of DWR's published non-member rate (which
is currently an average rate of $75), which DWR may change from time to time. In
addition, CFI, as the clearing commodity broker, now charges the Partnerships
the transaction fees and costs incurred on each trade executed on behalf of the
Partnerships, including floor brokerage fees, exchange fees, clearinghouse fees,
NFA fees, "give up" fees, any taxes (other than income taxes), any third party
clearing costs, costs associated with taking delivery of commodity interests,
and fees for execution of forward contract transactions. The aggregate
transaction fees and costs and brokerage commissions continue to be capped at
13/20 of 1% per month (a 7.8% annual rate) of each Partnership's Net Assets at
month-end allocated to each Trading Manager. In addition, these fees and costs
continue to be subject to the 14% annual cap on aggregate brokerage commissions,
transaction fees and costs, and net excess interest and compensating balance
benefits.

FOR A BREAKDOWN OF EACH PARTNERSHIP'S EXPENSES FOR EACH OF THE THREE YEARS
ENDED DECEMBER 31, 1998, SEE "SELECTED FINANCIAL DATA" BEGINNING ON PAGE S-5 AND
EACH PARTNERSHIP'S STATEMENTS OF OPERATIONS BEGINNING ON PAGE S-40.

S-18
<PAGE>
THE FOLLOWING INFORMATION UPDATES THE BREAK EVEN INFORMATION UNDER "SUMMARY
OF THE PROSPECTUS--THE DEAN WITTER CORNERSTONE FUNDS" ON PAGES 1-2 AND 6, AND
"DESCRIPTION OF CHARGES TO EACH PARTNERSHIP--4. BREAK EVEN ANALYSIS" ON PAGES
42-43.

<TABLE>
<CAPTION>
CORNERSTONE II CORNERSTONE III CORNERSTONE IV
-------------- --------------- --------------
<S> <C> <C> <C>
$ $ $
Selling Price per Unit (as of
April 30, 1999) (1).................... 4,282.86 3,193.09 4,823.92
Management Fee (2)....................... 178.45 133.05 201.00
Brokerage Commissions (3)................ 238.98 195.74 144.72
Less: Interest Income (4)................ (145.62) (108.57) (164.01)
Transaction Costs (5).................... 20.13 17.88 7.24
Administrative Expenses (6).............. 3.43 4.47 5.31
Incentive Fee (7)........................ -- -- --
Amount of Trading Income Required for a
Limited Partner to Recoup its
Investment at the End of One Year...... 295.37 242.57 194.26
Percentage of Selling Price.............. 6.90% 7.60% 4.03%
</TABLE>

- ------------------------------

(1) Units of each Partnership are offered for sale in Exchanges at Monthly
Closings to be held as of the last day of each month at a purchase price
equal to 100% of the Net Asset Value of the Unit.

(2) Monthly management fees are equal to 1/3 of 1% of the Net Assets allocated
to each Trading Manager on the last day of each month (a 4% annual rate).

(3) Each Partnership pays brokerage commissions at an average rate of
approximately $75 per roundturn. Effective September 1, 1996, aggregate
brokerage commissions and transaction fees and costs with respect to each
Trading Manager's allocated Net Assets were capped at 13/20 of 1% per month
(a maximum 7.8% annual rate) (in the case of Trading Managers which employ
multiple trading systems in trading on behalf of a Partnership, the
foregoing 13/20 of 1% cap is applied on a per trading system basis).
Brokerage commissions have averaged since 1994 5.64%, 6.86% and 3.00% of
average annual Net Assets of Cornerstone II, III and IV, respectively. For
purposes of the above table, the rates utilized reflect the reduced
brokerage commissions which would have been paid had the new monthly cap
been employed earlier. As such, brokerage commissions were assumed to be
5.58%, 6.13% and 3.00% for Cornerstone II, III and IV, respectively.

(4) DWR credits each Partnership at month-end with interest income on 80% of
such Partnership's average daily Net Assets for the month at a rate equal to
the average yield on 13-week U.S. Treasury bills issued during such month.
Such rate was estimated at 4.25%.

(5) Transaction fees and costs have averaged 0.47%, 0.56% and 0.15% of average
annual Net Assets of Cornerstone II, III and IV, respectively. For purposes
of the above table, transaction fees and costs were assumed to be the
foregoing percentages. Effective September 1, 1996, aggregate transaction
fees and costs and brokerage commissions were capped at 13/20 of 1% per
month of a Partnership's month-end Net Assets allocated to each Trading
Manager.

(6) Administrative expenses have averaged 0.08%, 0.14% and 0.11% of average
annual Net Assets of Cornerstone II, III and IV, respectively. For purposes
of the above table, administrative expenses were assumed to be the foregoing
percentages.

(7) Incentive fees are assumed to be zero because each Trading Manager's trading
profits are assumed to equal expenses.

S-19
<PAGE>
CAPITALIZATION

THE FOLLOWING UPDATES AND REPLACES "CAPITALIZATION" ON PAGES 47-48.

The following table sets forth the actual capitalization of the
Partnerships as of April 30, 1999. Since unsold Units may only be sold in
Exchanges, which requires a redemption of Units from one Partnership and the
purchase of Units in one or two of the other Partnerships, it is impractical to
provide a pro forma table reflecting the capitalization of the Partnerships if
all unsold Units are sold, since redemptions would, of necessity, offset sales.

There is no difference insofar as sharing of profits and losses is
concerned between Units of Limited Partnership Interest and Units of General
Partnership Interest.

<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING
AS OF
APRIL 30,
TITLE OF CLASS 1999
-------------- -----------
<S> <C>
$
Cornerstone II:
Limited Partnership Interest.................. 30,661,750
General Partnership Interest.................. 502,808
------------
Total...................................... 31,164,558
------------
------------
Cornerstone III:
Limited Partnership Interest.................. 37,581,732
General Partnership Interest.................. 453,748
------------
Total...................................... 38,035,480
------------
------------
Cornerstone IV:
Limited Partnership Interest.................. 112,736,189
General Partnership Interest.................. 1,297,100
------------
Total...................................... 114,033,289
------------
------------
</TABLE>

THE TRADING MANAGERS

CERTAIN CHANGES RELATING TO THE TRADING MANAGERS ARE PROVIDED BELOW.

DEAN WITTER CORNERSTONE FUND II

1. ABACUS TRADING CORPORATION
(CURRENT ALLOCATION -- 0%)

THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION RELATING TO ABACUS
TRADING CORPORATION BEGINNING ON PAGE 51.

Effective February 28, 1997, Abacus Trading Corporation ceased to be a
Trading Manager for Cornerstone II.

2. JOHN W. HENRY & COMPANY, INC. ("JWH"REGISTERED)
(CURRENT ALLOCATION -- 82.69%)

THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION RELATING TO JWH
BEGINNING ON PAGE 54.

The following persons have changed titles and/or positions as follows:

Mr. Mark H. Mitchell is vice chairman, counsel to the firm and a
member of the JWH Board of Directors.

Ms. Elizabeth A.M. Kenton is a senior vice president, compliance.

Mr. David M. Kozak is a senior vice president, general counsel, and
secretary to the corporation.

S-20
<PAGE>

Mr. Kevin S. Koshi is a senior vice president, proprietary trading,
and a member of the JWH Investment Policy Committee.

The following persons have been added as principals of JWH:

Mr. Verne O. Sedlacek is the president and chief operating officer and a
member of the JWH Investment Policy Committee. He is responsible for the
day-to-day management of the firm. Mr. Sedlacek is also the president and
director of Westport Capital Management Corporation and Global Capital
Management Limited and vice president of JWH Financial Products, Inc. Prior to
joining JWH in July 1998, Mr. Sedlacek was the executive vice president and
chief financial officer of Harvard Management Company, Inc., a wholly-owned
subsidiary of Harvard University, which at the time of his departure managed
approximately $14 billion of University-related funds. At Harvard Management
Company, he was responsible for managing the areas of personnel, budgets,
systems, performance analysis, contracts, credit, compliance, custody,
operations, cash management, securities lending and market risk evaluation; he
joined Harvard Management in March 1983.

Mr. Sedlacek currently serves on the Board of Directors of the FIA and the
Chicago Mercantile Exchange, and is a member of the Global Markets Advisory
Committee of the CFTC. He received an A.B. in Economics from Princeton
University, and an M.B.A in Accounting from New York University and was
certified as a C.P.A. by the State of New York in 1978.

Mr. E. Lyndon Tefft is a senior vice president and the chief financial
officer. He is also the treasurer of Westport Capital Management Corporation and
JWH Asset Management, Inc. and vice president of JWH Financial Products, Inc.
Prior to joining JWH in October 1998, Mr. Tefft was the Director of MIS and a
vice president at Harvard Management Company, Inc. where he was responsible for
directing the design, development, and operation of global equity, bond, and
derivative trading, accounting, and settlement systems beginning in May 1994.
Mr. Tefft was the director of the Office of Financial Systems (controller) at
Harvard University from July 1983 to April 1994. He was responsible for the
University's centralized controllership, financial reporting, debt management,
and financial operations. Mr. Tefft received a B.S. in Industrial Management
from Purdue University, and an M.B.A. from Wharton School of Business at the
University of Pennsylvania.

Dr. Mark S. Rzepczynski is a senior vice president, research and trading
and a member of the JWH Investment Policy Committee. He is also a vice president
of JWH Financial Products, Inc. Prior to joining JWH in May 1998, he was vice
president and director of taxable credit and quantitative research in the fixed
income division of Fidelity Management and Research from May 1995 to April 1998,
where he oversaw credit and quantitative research recommendations for all
Fidelity taxable fixed income funds. From April 1993 to April 1995, he was a
portfolio manager and director of research for CSI Asset Management, Inc., a
fixed income money management subsidiary of Prudential Insurance. Dr.
Rzepczynski has a B.A. (Cum Laude) Honors in Economics from Loyola University of
Chicago, and an A.M. and Ph.D. in Economics from Brown University.

Mr. Matthew J. Driscoll is a vice president, trading and chief trader. He
is also a member of the JWH Investment Policy Committee. He is responsible for
the supervision and administration of all aspects of order execution strategies
and implementation of trading policies and procedures. Mr. Driscoll joined JWH
in March 1991 as a member of the trading department. Since joining the firm, he
has held positions of increasing responsibility as they relate to the
development and implementation of JWH's trading strategies and procedures; he
has played a major role in the development of JWH's 24 hour trading operation.
Mr. Driscoll attended Pace University.

Mr. Julius A. Staniewicz is a vice president, senior strategist and a
member of the JWH Investment Policy Committee. He is also President of JWH Asset
Management, Inc. and JWH

S-21
<PAGE>
Financial Products, Inc., and a vice president of Westport Capital Management
Corporation. He joined JWH in March of 1992. Mr. Staniewicz received a B.A. in
Economics from Cornell University.

Mr. Chris E. Deakins is a vice president, investor services.

Ms. Nancy O. Fox, C.P.A., is a vice president, investment support.

Mr. Andrew D. Willard is a vice president, information technology.

Mr. Paul D. Braica is a vice president, analytics.

Ms. Florence Y. Sofer is a vice president, marketing.

Mr. William G. Kelley is a vice president, investor services,
international.

Mr. Robert B. Lendrim is a vice president, investor services.

The following persons are no longer principals or employees of JWH: David
R. Bailin, Peter F. Karpen, James E. Johnson, Jr., Mary Beth Hardy, Barry S.
Fox, Glenda G. Twist, Michael D. Gould, Jack M. Ryng, Michael J. Scoyni, and
Chris J. Lautenslager.

Legal Concerns

There neither now exists nor has there ever previously been any
administrative, civil, or criminal action against JWH or its principals which is
material.

JWH and Mr. Henry may engage in discretionary trading for their own
accounts, and may trade for the purpose of testing new investment programs and
concepts, as long as such trading does not amount to a breach of fiduciary duty.
In the course of such trading, JWH and Mr. Henry may take positions in their own
accounts which are the same or opposite from client positions due to testing a
new quantitative model or program, a neutral allocation system, and/or trading
pursuant to individual discretionary methods; on occasion their orders may
receive better fills than client accounts. Records for these accounts will not
be made available to clients.

Employees and principals of JWH (other than Mr. Henry) are not permitted to
trade in futures, options on futures or forward contracts. However, such
principals and employees may invest in investment vehicles that trade futures,
options on futures, or forward contracts, when an independent trader manages
trading in that vehicle, and in the JWH Employee Fund, L.P., for which JWH is
the CTA. The records of these accounts also will not be made available to
clients.

THE FOLLOWING INFORMATION UPDATES AND REPLACES THE INFORMATION CONTAINED IN
"THE INVESTMENT POLICY COMMITTEE" ON PAGE 57:

Investment Policy Committee

The Investment Policy Committee ("IPC") is a senior level advisory group,
broadly responsible for evaluating and overseeing the firm's trading policies.
The IPC provides a forum for shared responsibility for the development and
implementation of investment policies. The IPC meets periodically to discuss
issues relating to implementation of the firm's investment process and its
application to markets, including research on new investments and strategies in
relation to the trading models JWH employs. Typical issues analyzed by the IPC
include liquidity, position size, capacity, performance cycles, and new product
and market strategies. The IPC also examines regularly the impact of changing
market conditions on the firm's strategic allocation program, a multi-program
trading strategy which is currently part of an exclusivity arrangement with one
fund manager.

Composition of the IPC, and participation in its discussions and its
decisions by non-members, may vary over time. All recommendations of the IPC are
subject to final approval by the chairman. The IPC does not make day-to-day
trading decisions.

S-22
<PAGE>
THE FOLLOWING INFORMATION UPDATES AND REPLACES THE INFORMATION CONTAINED IN
"TRADING TECHNIQUES," "PROGRAM MODIFICATIONS," "LEVERAGE," AND "ADDITION,
REDEMPTION AND REALLOCATION OF CAPITAL FOR COMMODITY POOL OR FUND ACCOUNTS" ON
PAGES 57-59.

JWH Investment Policies

Commencement of Trading. Each new allocation to JWH will encounter a
startup period during which it may incur certain risks related to the initial
investment of assets. For instance, an amount may commence trading following
sustained moves in a number of markets which are subsequently retraced after the
amount enters the market.

In an effort to manage such risk, JWH has developed procedures governing
the appropriate timing for the commencement of trading and the appropriate means
of moving toward full portfolio commitment for new allocations. JWH, at its
discretion, may delay the actual start of trading for a new allocation for an
extended period of time or adjust position size in relation to account equity in
certain markets or in an entire program. The firm may also invest a new
allocation more slowly than it would a more mature account. These procedures may
be modified from time to time, and no assurance is given that they will be
successful in moving an allocation toward full portfolio commitment without
substantial losses which might have been avoided, or foregoing substantial
profits which might have been achieved, by other means of initiating investment
in the markets.

Duration of Positions Held. JWH's historical performance demonstrates
that, because trends often last longer than most market participants expect,
significant returns can be generated from positions held over a long period of
time. Therefore, profitable positions are allowed to mature; positions held for
two to four months are not unusual, and positions have been held for more than
one year. Losing positions are generally pared relatively quickly, with most
closing within a few days or weeks. However, if the JWH system detects a
profitable underlying trend, a losing position may be retained in order to
capture the potential benefits of participating in that trend. Throughout the
investment process, risk controls designed to reduce the possibility of an
extraordinary loss in any one market are maintained.

Discretionary Aspects. JWH at its sole discretion may override
computer-generated signals and may at times use discretion in the application of
its quantitative models, which may affect performance positively or negatively.
This could occur, for example, when JWH determines that markets are illiquid or
erratic, such as may occur cyclically during holiday seasons, or on the basis of
irregularly occurring market events. Subjective aspects of JWH's quantitative
models also include the determination of position size in relation to account
equity, timing of commencement of trading an account, contracts and contract
months traded, and effective trade execution.

Program Modifications. Proprietary research is conducted on an ongoing
basis to refine the JWH investment strategies and attempt to reduce volatility
while maintaining the potential for excellent performance. While the basic
philosophy underlying the firm's investment methodology has remained intact
throughout its history, the potential benefits of employing more than one
investment methodology, or in varying combinations, is a subject of continual
testing, review and evaluation. Extensive research may suggest substitution of
alternative investment methodologies with respect to particular contracts; this
may occur, for example, when the testing of a different methodology has
indicated that its use might have resulted in different historical performance.
In addition, risk management research and analysis may suggest modifications
regarding the relative weighting among various contracts, the addition or
deletion of particular contracts for a program, or a change in position size in
relation to account equity. However, most investment programs maintain a
consistent portfolio composition to allow opportunities in as many major market
trends as possible. In total, JWH participates in over 60 markets, encompassing
interest rates, foreign exchange, and commodities such as agricultural products,
energy and precious metals.

S-23
<PAGE>
All cash in a JWH investment program is available to be used to trade in a
JWH program, although the amounts committed to margin will vary from time to
time. As capital in each JWH program increases, additional emphasis and
weighting may be placed on certain markets which historically have demonstrated
the greatest liquidity and profitability. Furthermore, the weighting of capital
committed to various markets in the investment programs is dynamic, and JWH may
vary the weighting at its discretion as market conditions, liquidity, position
limit considerations and other factors warrant. Investors generally will not be
informed of such changes.

Position Size. Adjustments in position size in relation to account equity
have been and continue to be an integral part of JWH's investment strategy. At
its discretion, JWH may adjust the size of a position in relation to equity in
the account that is taken in certain markets or entire programs. Such
adjustments may be made at certain times for some programs but not for others.
Factors which may affect the decision to adjust the size of a position in
relation to account equity include ongoing research, program volatility, current
market volatility, risk exposure, and subjective judgment, and evaluation of
these and other general market conditions. Such decisions to change the size of
a position may positively or negatively affect performance and will alter risk
exposure for an account. Adjustments in position size relative to account equity
may lead to greater profits or losses, more frequent and larger margin calls,
and greater brokerage expense. No assurance is given that such adjustments will
be to the financial advantage of JWH clients. JWH reserves the right to alter,
at its sole discretion and without notification to clients, its policy regarding
adjustments in position size relative to account equity.

Addition, Redemption and Reallocation of Capital for Commodity Pool or Fund
Accounts. JWH has developed the following procedures for fund accounts that
provide for the addition, redemption and/or reallocation of capital. Investors
who purchase or redeem units in a fund are most frequently permitted to do so at
a price equal to the net asset value per unit (NAV) on the close of business on
the last business day of the month or quarter. In addition, funds may reallocate
capital among advisors at the close of business on the last business day of the
month. In order to provide market exposure commensurate with equity in the JWH
account on the date of these transactions, JWH may, at its sole discretion,
adjust its investment of the assets associated with the addition, redemption and
reallocation of capital as near as possible to the close of business on the last
business day of the month to reflect the amount then available for trading. The
intention is to provide for additions, redemptions and reallocations at an NAV
that will be the same for each of these transactions, and to eliminate possible
variations in NAVs that could occur as a result of inter-day price changes if,
for example, additions were calculated on the first day of the subsequent month.
Therefore, JWH requests all fund managers to notify JWH three days in advance of
month-end modifications.

Based on JWH's determination of liquidity or other market conditions, JWH
may decide to commence trading earlier in the day on, or before, the last
business day of the month, or at its sole discretion, delay adjustments to
trading for an account to a date or time after the close of business on the last
day of the month. No assurance is given that JWH will be able to achieve the
objectives described above in connection with funding level changes. The use of
discretion by JWH in the application of this procedure may affect performance
positively or negatively.

Physical or Cash Commodities

In addition to futures contracts, JWH may from time to time for certain
clients trade spot and forward contracts on physical or cash commodities,
including specifically gold bullion, when it believes that such markets offer
comparable or superior market liquidity or a greater ability to execute
transactions at a single price. Such transactions, as opposed to futures
transactions, relate to the purchase and sale of specific physical commodities.
Whereas futures contracts are generally uniform except for price and delivery
time, cash contracts may differ from each other with respect to such terms as
quantity, grade, mode of shipment, terms of payment, penalties, risk of loss and
the like. There is no limitation on the daily price movements of spot or forward

S-24
<PAGE>
contracts transacted through banks, brokerage firms or dealers, and those
entities are not required to continue to make markets in any commodity. In
addition, the CFTC does not comprehensively regulate such transactions, which
are subject to the risk of the foregoing entities' failure, inability or refusal
to perform with respect to such contracts. No such trading has previously been
undertaken on behalf of the Partnerships, nor will any such trading be
undertaken on behalf of the Partnerships without the consent of the General
Partner. It has not been determined at this time whether any such trading will
be undertaken on behalf of the Partnerships in the future.

THE FOLLOWING INFORMATION UPDATES AND REPLACES THE INFORMATION CONTAINED IN
"THE ORIGINAL INVESTMENT PROGRAM" ON PAGE 59.

The Original Investment Program. The Original Investment Program seeks to
capitalize on long-term trends in broad spectrum of world wide financial and
nonfinancial markets. The Program always maintains a position--long or short--in
every market traded. Historically, it has had a low statistical correlation to
the S&P 500.

In 1992, a broad research effort was initiated to enhance the risk-reward
ratios of the Original Investment Program, without changing its fundamental
trading approach. Except for the removal of a few markets traded, the program
had remained virtually unchanged from its inception in 1982 through the middle
of 1992. After extensive testing, a number of strategic adjustments were made
beginning in July 1992: global markets were added; sector allocations were
shifted, with greater weighting given to financial markets; and some contracts
which had become too illiquid to support sizeable assets were eliminated. The
quantitative model underlying the program was not changed. Today, the Original
Investment Program is one of JWH's largest and best-performing programs,
manifesting lower volatility since 1992.

THE FOLLOWING INFORMATION UPDATES AND REPLACES THE INFORMATION CONTAINED IN
"THE GLOBAL DIVERSIFIED PORTFOLIO" ON PAGE 59.

The Global Diversified Portfolio. The Global Diversified Portfolio is one
of JWH's most diversified programs. The Global Diversified Portfolio seeks to
capitalize on long-term price movements in a broad spectrum of financial and
nonfinancial markets. The program does not maintain continuous positions and, in
fact, may take a neutral stance if a long-term trend fails to develop or during
periods of non-trending markets. Historically, the program has had a low
correlation to the S&P 500.

THE FOLLOWING INFORMATION UPDATES AND REPLACES THE INFORMATION CONTAINED IN
"INTERNATIONAL FOREIGN EXCHANGE PROGRAM" ON PAGE 59.

The International Foreign Exchange Program. The International Foreign
Exchange Program (Forex) seeks to identify and capitalize on intermediate and
long-term price movements in a broad range of major and minor currencies on the
interbank market. Positions are taken as outrights against the U.S. dollar, or
as cross rates, which eliminates dependence on the dollar. Forex attempts to
take a position if a trend is identified and attempts to eliminate the position
quickly--i.e. a neutral stance is taken--if long-term trends fail to continue or
during periods of nontrending markets. Historically, the program has had a low
statistical correlation to the S&P 500.

THE FOLLOWING INFORMATION UPDATES AND REPLACES THE INFORMATION CONTAINED IN
"OTHER JWH PROGRAMS" BEGINNING ON PAGE 59.

OTHER JWH PROGRAMS

In addition to the Original Investment Program, the Global Diversified
Portfolio and the International Foreign Exchange Program, JWH currently operates
eight different programs in three categories for U.S. and foreign investors,
none of which are utilized by JWH for Cornerstone II or Cornerstone IV. Each
program is operated separately and independently.

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Broadly Diversified Programs

The JWH Global AnalyticsTM Family of Programs, which began trading client
capital in June 1997, seeks to identify and invest in a wide range of price
trends--from very short to exceptionally long term. The firm's most broadly
diversified investment program, JWH GlobalAnalytics remains neutral if no
substantive trends are apparent, and builds or reduces positions over time as
the system indicates. The program invests in both financial and commodity
markets, including certain energy and agricultural contracts not available
through other JWH investment programs.

Financial Programs

The Financial and Metals Portfolio seeks to identify and capitalize on
intermediate and long-term price movements in global financial and precious
metals markets. If a trend is identified, the program attempts to take a
position; in nontrending market environments, the program may remain neutral or
liquidate open positions.

The World Financial Perspective began trading client capital in 1987 and
seeks to capitalize on long-term price movements in financial, metals and energy
markets and holds positions from multiple currency perspectives, including the
British pound, euro, Japanese yen, Swiss franc, and the U.S. dollar. This
program always maintains a position--long or short--in every market traded.

Using a more conservative approach to position size in relation to account
equity than in the other JWH programs, The International Currency and Bond
Portfolio, which began trading client capital in 1993, seeks to identify and
capitalize on intermediate and long-term price movements in the world's bond and
foreign exchange markets. If a trend is identified, the program will take a
position; in nontrending market environments, the program may liquidate
positions and remain neutral.

The Global Financial Portfolio, which began trading client capital in June
1994, seeks to identify and capitalize on long-term price movements in a small
group of energy, metals, and financial markets. The program always maintains a
position--long or short--in every market traded.

The Worldwide Bond Program, which began trading client capital in 1996,
seeks to capitalize on intermediate and long-term trends by investing through
financial futures in the long-term portion of global interest rate markets. The
program may take a neutral stance during periods of nontrending markets.

Foreign Exchange Programs

The G-7 Currency Portfolio, which began trading client capital in 1991
seeks to identify and capitalize on the intermediate and long-term price
movements in the highly liquid currencies of the Group of Seven industrialized
nations and Switzerland. The program attempts to take a position if a trend is
identified, and takes a neutral stance during periods of nontrending markets.
Not all of these currencies are traded at all times.

The Dollar Program began trading client capital in 1996 and seeks to
identify and capitalize on the intermediate and long-term price movements in the
foreign exchange sector, trading major currencies against the U.S. dollar
(outright trading). The program may employ a neutral stance during periods of
nontrending markets. The program invests in the Japanese yen, euro, Swiss franc,
and British pound. Because this program invests in a limited number of
contracts, it may experience greater volatility than other JWH foreign exchange
programs.

Closed Programs

InterRateTM began trading client capital in 1988 and closed in 1996. This
program was designed to enhance returns available in short-term instruments
investing in U.S. Treasury bills

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to provide both secure income and collateral for a portfolio of interbank
forward and exchange-traded futures contracts. The Yen Financial Portfolio,
which began trading client capital in 1992 and closed in 1997, offered investors
access to a select group of Japanese financial futures. The program was designed
to capitalize on intermediate and long-term price movements and attempted to
exit the markets during periods when sustained trends were not identified. The
Delevered Yen Financial and Metals Profile, which began trading client capital
in 1995 and closed in 1996, was opened at the request of a client. This program
was traded at approximately one half of the position size of traditional
Financial and Metals Portfolio and was traded from the perspective of the
Japanese yen.

As of April 30, 1999, the aggregate amount of funds under management
pursuant to the Original Investment Program was approximately $415 million; the
aggregate amount of funds under management pursuant to the Global Diversified
Portfolio was approximately $200 million; and the aggregate amount of funds
under management pursuant to the International Foreign Exchange Program was $118
million. As of April 30, 1999, the aggregate amount of all funds under
management pursuant to all JWH programs was approximately $2.3 billion.

As of April 30, 1999, JWH was managing approximately $25.8 million of
Cornerstone II pursuant to its Original Investment Program and Global
Diversified Portfolio. Such amount and the percentage of assets of Cornerstone
II managed by JWH will change as a result of allocations of assets from the
Exchange of Units of Cornerstone II, allocations and reallocations among Trading
Managers and/or trading systems, and the performance of JWH and the other
Trading Manager for Cornerstone II.

JWH EXCLUSIVE FUND ACCOUNTS

Pursuant to a special JWH multi-program trading strategy that is currently
the subject of an exclusive arrangement with one client operating two funds (the
"Exclusive Fund Accounts"), JWH can make various discretionary trading
adjustments for the accounts of those funds, including ongoing allocations and
reallocations of fund assets among the investment programs and periodic trading
leverage adjustments. As a result of a change made to these accounts on May 8,
1998, these accounts have traded differently than the other accounts in the
respective JWH investment programs. These modified programs are not currently
available for investment by other clients. As of April 30, 1999, JWH was
managing approximately $112 million in the Original Investment Program Exclusive
Fund Account and $55.8 million in the Global Diversified Portfolio Exclusive
Fund Account, and 27.9 million in the International Foreign Exchange Program
Exclusive Fund Account.

THE FOLLOWING INFORMATION IS ADDED BEFORE "DEAN WITTER CORNERSTONE III" ON
PAGE 60.

3. NORTHFIELD TRADING L.P.
(CURRENT ALLOCATION -- 17.31%)

Beginning April 16, 1997, Northfield Trading L.P. became a Trading Manager
for
Cornerstone II.

Northfield is a Delaware limited partnership with its principal place of
business at 3609 S. Wadsworth, Suite 250, Denver, Colorado 80235-2110.
Northfield was formed in August 1990. The limited partnership was formed to use
emerging computer technology to develop systematic approaches to trading.
Northfield became registered in March 1990 as a commodity trading advisor and in
November 1990 as commodity pool operator with the CFTC, and is a trading advisor
and commodity pool operator member of the National Futures Association, the
futures industry self-regulatory organization. Northfield is not affiliated with
the General Partner or DWR or any of the other Trading Managers for the
Partnership.

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There have been no administrative, civil or criminal actions, pending, on
appeal or concluded against Northfield or its principals during the five years
preceding the date of this Prospectus.

PRINCIPALS OF NORTHFIELD

Northfield Investment L.P. ("NILP"), the general partner of Northfield, is
a Delaware limited partnership, whose general partner is Northfield Investment
Company, an entity owned equally by Douglas Bry and Philip Spertus, and whose
limited partners are Douglas Bry, Philip Spertus and members of their families.
NILP's sole function is to serve as the general partner of Northfield.

Douglas Bry is the President of Northfield. Mr. Bry has an extensive
history, dating from 1972, in analyzing and understanding complex databases
through the use of computerized statistical approaches. In January 1987, Mr. Bry
and Philip Spertus formed Technical Trading Strategies, Inc. ("TTS"), an
Illinois corporation of which Mr. Bry is the President. In conjunction with Mr.
Spertus and through TTS, Mr. Bry developed and marketed the "Volatility Breakout
System," a trading methodology that was offered for sale to the public. In
December 1987, Douglas Bry and Philip Spertus formed Northfield Trading Company
("NTC"), also an Illinois corporation of which Mr. Bry is President. NTC's
primary business was to provide brokerage services to customers by introducing
their accounts to clearing firms on a commission basis. NTC also provided
discretionary trading advice to customers, and licensed proprietary trading
software to introducing brokers and CTAs. Mr. Bry, an attorney, graduated from
Beloit College in 1974 with a B.A. in Philosophy and Sociology and obtained his
J.D. from the University of Colorado in 1978. From September 1978 until June
1982, he was a trial attorney with the Defender Association of Philadelphia, and
from June 1982 through January 1987, he was a Senior Trial Deputy with the
Colorado State Public Defender. Mr. Bry began trading futures for his own
account in 1985 and became registered with the CFTC as a CTA in 1986. In June
1997, Mr. Bry was elected to a second two-year term on the Board of Directors of
the Managed Funds Association and currently serves as Chairperson of the
Emerging Manager Council. In January 1997, he was elected to the National
Futures Association's Board of Directors in the Commodity Trading Advisor
category and in February 1998, he was elected to the Executive Committee of the
National Futures Association.

Philip Spertus is Vice President of Northfield. Mr. Spertus graduated from
the Massachusetts Institute of Technology in 1956. From 1979 to 1992, Mr.
Spertus served in various senior capacities, including positions of Chairman and
President, with Intercraft Industries Inc., a multinational manufacturer of
picture frames and related products. In 1992, Intercraft Industries was sold to
Newell Corporation and Mr. Spertus assumed the position of Vice President with
Newell until late 1993. Philip Spertus owned a special seat and was a registered
Broker/Dealer and member of the Chicago Board Options Exchange from August 1984
through February 1986. He has traded futures for his own account since 1983 but
is not currently doing so. Mr. Spertus serves as Chairman of both TTS and NTC.

Northfield and its principals may trade commodity interests for their own
proprietary accounts. Such trades may or may not be in accordance with the
Northfield trading system described below.

THE NORTHFIELD TRADING SYSTEM

Douglas Bry has sole management authority over the day to day activities of
Northfield and is primarily responsible for its nondiscretionary, technical
trading program.

Northfield makes trading decisions pursuant to a multiple-system, technical
approach (the "Diversified Program") that was conceived, tested and refined by
Douglas Bry and Philip Spertus. The approach is fully computerized and
nondiscretionary. Money management principles are a

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critical element in the Diversified Program and have been carefully constructed
and are rigorously applied to minimize risk exposure and to protect asset
appreciation.

Northfield's approach is purely technical. A technical approach utilizes
price action itself as analyzed by charts, numerical indicators, pattern
recognition, or other techniques designed to provide information about market
direction. Since sustained price moves offer the greatest opportunity for profit
with the least amount of risk, Northfield has focused on studying the
characteristics of "random" versus "non-random" market behavior. The resulting
systems are highly sensitive to changes in price discretion and volatility, and
often detect non-random behavior before a trend is obvious. In order to validate
the trading methodology, extensive testing was conducted on over 13 years of
price history in more than 50 markets worldwide.

Northfield is very sensitive to the risk of "curve-fitting" results to
particular markets or time periods, and, as a result, utilizes a similar
approach in each market that it trades. The decision to subject all markets to
similar trading rules has led to the identification of techniques that work
independent of the market to which they are applied.

Northfield implements its systems via proprietary software that generates
and prints orders, monitors the markets in real time, and keeps track of
positions. The selection of trades is not subject to intervention by
Northfield's principals. No override of the Diversified Program will take place
absent extraordinary circumstances which Northfield believes threaten the
customer's capital, such as an outbreak of war, a major natural disaster or a
threat to the integrity of exchange clearing systems. A full-time staff of
computer programmers works with the principals of Northfield to refine existing
systems and develop new ones.

As of April 30, 1999, the aggregate amount of funds under Northfield's
management was approximately $50.6 million ("notional funds" excluded). As of
April 30, 1999, Northfield was managing approximately $5.4 million of
Cornerstone II.

DEAN WITTER CORNERSTONE FUND III

1. WELTON INVESTMENT CORPORATION (FORMERLY, WELTON INVESTMENT SYSTEMS
CORPORATION)
(CURRENT ALLOCATION -- 31.30%)

THE FOLLOWING INFORMATION UPDATES AND SUPPLEMENTS THE INFORMATION RELATING
TO WELTON INVESTMENT CORPORATION BEGINNING ON PAGE 60.

Welton Investment Corporation ("WIC") is a Delaware corporation which was
merged in July 1997 from Welton Investment Systems Corporation, a California
corporation originally formed in 1988.

The following persons have changed titles and/or positions as follows:

Patrick L. Welton is the Chief Executive Officer, and Chairman of Welton
Investment Corporation.

Annette L. Welton is a Cofounder of Welton Investment Corporation, a
Director, Chief Operational and Chief Financial Officer.

WIC and its principals trade futures, options and securities for their own
accounts and provide management services to other clients. Investments made on
behalf of WIC, its principals, and its clients, as well as any policies related
thereto, will remain confidential. In the course of such trading, WIC or its
principals may take positions in their own accounts which are in the same market
and in the same direction as positions advocated for clients. In a case where
WIC or its principals place the same trade orders for their accounts as they do
for their clients in a single block order with a brokerage firm, the brokerage
firm shall allocate the trade fill prices assigned to each account in a manner
consistent with that firm's policy. This equalizes the likelihood of WIC or its
principals receiving a superior or inferior price compared to any of their
clients or, in

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the case of a partial fill of a block order, equalizes the likelihood of WIC or
its principals receiving a trade that some customers will not receive or vice
versa.

THE FOLLOWING INFORMATION UPDATES AND REPLACES THE SIXTH SENTENCE OF THE
FOURTH PARAGRAPH ON PAGE 62.

Assets committed to meet minimum exchange margin for all positions usually
remain between 5% and 20% of the trading size of the account.

THE FOLLOWING INFORMATION UPDATES AND SUPPLEMENTS THE INFORMATION CONTAINED
IN THE THIRD PARAGRAPH UNDER "DIVERSIFIED PORTFOLIO" ON PAGE 63.

As of April 30, 1999, the aggregate amount of funds under management
pursuant to the Diversified Portfolio program was approximately $138 million
("notional funds" excluded). As of April 30, 1999, the aggregate amount of funds
under management pursuant to all WIC's programs was approximately $159 million
("notional funds" excluded). As of April 30, 1999, WIC was managing
approximately $11.9 million of Cornerstone III pursuant to its Diversified
Portfolio program.

2. ABRAHAM TRADING CO.
(CURRENT ALLOCATION -- 20.06%)

THE FOLLOWING INFORMATION UPDATES AND SUPPLEMENTS THE INFORMATION RELATING
TO ABRAHAM TRADING CO. ON PAGE 67.

Craig L. Caudle is no longer an employee of ATC. Edward C. Abraham is no
longer involved in the day-to-day trading and marketing of the firm, but remains
as an employee.

There have been no administrative, civil or criminal actions, pending, on
appeal or concluded against ATC or its principals during the five years
preceding the date of this Prospectus.

THE FOLLOWING INFORMATION UPDATES AND SUPPLEMENTS THE INFORMATION RELATING
TO ABRAHAM TRADING CO. ON PAGE 69.

DESCRIPTION OF ORDERS AND ORDER PLACEMENT

ATC determines the timing and method by which orders are placed and will
place all orders for futures contracts directly with the FCM's trading desk or
floor brokers. ATC also will select the types of orders placed. Order placement
will vary in accordance with the type of market encountered and the type of
order that can be used on the exchange or market on which a particular commodity
interest is traded.

ATC trades all customer accounts in parallel, making equivalent trades for
all accounts and apportioning the number of each commodity interest traded
ratably among the accounts in a neutral manner based on the capital in each
account.

Since all trading methods and strategies utilized by ATC are proprietary
and confidential, the foregoing discussion is necessarily of a general nature.

THE FOLLOWING INFORMATION UPDATES AND REPLACES THE INFORMATION CONTAINED IN
THE LAST PARAGRAPH ON PAGE 69.

As of April 30, 1999, the aggregate amount of funds under ATC's management
was approximately $14.5 million and was managing approximately $7.6 million of
Cornerstone III pursuant to its Diversified Program.

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3. SUNRISE CAPITAL MANAGEMENT, INC.
(CURRENT ALLOCATION -- 48.64%)

THE FOLLOWING REPLACES THE INFORMATION CONTAINED IN THE FIRST FOUR
PARAGRAPHS UNDER "DESCRIPTION OF SUNRISE'S TRADING APPROACH" ON PAGE 72.

DESCRIPTION OF SUNRISE'S TRADING PROGRAMS

Sunrise has historically traded four programs, all of which are traded in
accordance with the description below.

Sunrise utilizes technical trend-following systems, trading a wide
continuum of time windows. Most of these time frames are decidedly long term by
industry standards. Pro-active money management strategies are designed to
protect open profits and to minimize exposure to non-directional markets.

Effective November 1, 1993, the General Partner reallocated the assets of
Cornerstone III managed by Sunrise in proportions of approximately 50% pursuant
to the Diversified Program and approximately 50% to the CIMCO portfolio.

The Sunrise Diversified Program may follow approximately twenty different
markets. These markets may include, but are not limited to, precious and
industrial metals, grains, petroleum products, soft commodities, domestic and
foreign interest rate futures, stock indices (including S&P 500), currencies and
their crossrates.

The Sunrise CIMCO -- Diversified Financial Program was designed by Sunrise
to participate exclusively in the highly liquid financial markets. This program
trades the major currencies as outrights against the U.S.dollar and selectively
against each other. Interest rate futures, both long and short term (including
U.S. and foreign bonds, notes and Euro products), stock indices (including S&P
500), natural gas, precious and industrial metals (including aluminum, gold,
silver and copper) and crude oil are also traded in this program. These
commodity interests are traded on futures exchanges but may also be traded in
the interbank or cash markets when appropriate.

The Sunrise Currency Program follows approximately ten different major and
minor currency markets, which may include, but are not limited to, the Japanese
yen, British pound, Euro Currency, Swiss franc, Canadian dollar, Australian
dollar, Swedish krona, New Zealand dollar, Singapore dollar, and South African
rand. The Currency Program trades currency futures contracts on the
International Monetary Market (IMM) Division of the Chicago Mercantile Exchange
and forward currency contracts in the interbank markets. In order to achieve
adequate diversification for the Currency Program, major and minor currencies
are traded as crossrates selectively against each other and/or as outrights
against the U.S. dollar.

The Sunrise Expanded Diversified Program gives clients further
diversification than in the standard Diversified Program. Additional commodity
interests may include, but are not limited to, industrial metals, and minor
currency markets. Given liquidity constraints in certain of these additional
commodity markets, Sunrise may restrict money under management for this program.

THE FOLLOWING INFORMATION REPLACES THE SECOND FULL PARAGRAPH ON PAGE 73.

Trend-following trading systems, such as those employed by Sunrise, will
seldom effect market entry or exit at the most favorable price in the particular
market trend. Rather, this type of trading system seeks to close out losing
positions quickly and to hold portions of profitable positions for as long as
the trading system determines that the particular market trend continues to
offer reasonable profit potential. The number of losing transactions may exceed
substantially the number of profitable transactions. However, if Sunrise's
approach is successful, these losses should be more than offset by gains.

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THE FOLLOWING INFORMATION UPDATES AND REPLACES THE INFORMATION CONTAINED IN
THE LAST PARAGRAPH ON PAGE 73 AND THE FIRST PARAGRAPH ON PAGE 74.

As of April 30, 1999, the aggregate amount of funds under management
pursuant to the Diversified Program was $98.5 million and $77.1 million pursuant
to the CIMCO portfolio. As of April 30, 1999, the aggregate amount under
management pursuant to all Sunrise's programs was $543.9 million.

As of April 30, 1999, Sunrise was managing approximately $18.5 million of
Cornerstone III. Such amount and percentage of assets of Cornerstone III managed
by Sunrise will change as a result of allocations of net proceeds from the
Exchange of Units of Cornerstone III, allocations and reallocations among
trading managers and/or trading systems, and the performance of Sunrise and
other trading managers for Cornerstone III.

DEAN WITTER CORNERSTONE FUND IV

1. JOHN W. HENRY & COMPANY, INC.
(CURRENT ALLOCATION -- 61.31%)

THE FOLLOWING UPDATES AND REPLACES THE FIRST SENTENCE OF THE SECOND
PARAGRAPH OF THE INFORMATION RELATING TO JOHN W. HENRY & COMPANY, INC. ON PAGE
74.

As of April 30, 1999, JWH was managing approximately $69.9 of Cornerstone
IV pursuant to its International Foreign Exchange Program.

2. SUNRISE CAPITAL MANAGEMENT, INC.
(CURRENT ALLOCATION -- 38.69%)

THE FOLLOWING UPDATES AND REPLACES THE LAST SENTENCE OF THE FIRST PARAGRAPH
OF THE INFORMATION RELATING TO SUNRISE CAPITAL MANAGEMENT, INC. ON PAGE 74.

Sunrise normally commits between 5 and 25% of an account's equity as margin
on open positions pursuant to its trading system.

THE FOLLOWING UPDATES AND REPLACES THE FIRST SENTENCE OF THE SECOND
PARAGRAPH OF THE INFORMATION RELATING TO SUNRISE CAPITAL MANAGEMENT, INC. ON
PAGE 74.

As of April 30, 1999, Sunrise was managing approximately $44.1 of
Cornerstone IV pursuant to the Sunrise Currency Program.

THE GENERAL PARTNER

THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION UNDER "THE GENERAL
PARTNER" ON PAGE 78.

The General Partner and DWR are each wholly-owned subsidiaries of Morgan
Stanley Dean Witter & Co. ("MSDW"). MSDW was created in 1997 when Dean Witter,
Discover & Co. (which at that time was the parent company of DWR and the General
Partner) merged with Morgan Stanley Group Inc. Each of MSDW, DWR and the General
Partner may be deemed to be a "parent" and "promoter" of the Partnerships within
the meaning of the federal securities laws.

As reflected in MSDW's 1998 Annual Report and Form 10-Q for the quarter
ended February 28, 1999 (unaudited), MSDW had total shareholders' equity of
$14,119 million and total assets of $317,590 million as of November 30, 1998 and
total shareholders' equity of $14,837 million and total assets of $321,778
million as of February 28, 1999 (unaudited). Additional financial information
regarding MSDW is included in the financial statements filed as part of such
Annual Report and Form 10-Q. MSDW will provide to investors, upon request,
copies of its most recent Forms 10-K, 10-Q and 8-K, as filed from time to time
with the SEC. Such reports will be available for review or copying at the
offices of the SEC, 450 Fifth Street, N.W., Room 1024, Judiciary Plaza,
Washington, D.C. 20549 or will be available at no charge by writing to MSDW at
1585 Broadway, New York, New York 10036 (Attn: Investor Relations).

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THE FOLLOWING UPDATES AND REPLACES THE INFORMATION UNDER "DIRECTORS AND
OFFICERS OF THE GENERAL PARTNER" ON PAGE 78-79.

DIRECTORS AND OFFICERS OF THE GENERAL PARTNER

Mark J. Hawley, age 55, is Chairman of the Board and a Director of the
General Partner. Mr. Hawley is also Chairman of the Board and a Director of Dean
Witter Futures & Currency Management Inc. ("DWFCM"). 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.

Robert E. Murray, age 38, is President and a Director of the General
Partner. Mr. Murray is also President and a Director of DWFCM. Mr. Murray is
currently a Senior Vice President of DWR's Managed Futures Department. 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.

Mitchell M. Merin, age 45, is a Director of the General Partner. Mr. Merin
is also a Director of DWFCM. Mr. Merin was appointed the chief operating officer
of asset 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.

Joseph G. Siniscalchi, age 53, is a Director of the General Partner. Mr.
Siniscalchi joined DWR in July 1984 as a First Vice President, Director of
General Accounting and served as 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 the General Partner. Mr.
Oelsner is currently an Executive Vice President and head of the Product
Development Group at Morgan Stanley Dean Witter Advisors, 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.

Lewis A. Raibley, III, age 36, is Vice President, Chief Financial Officer,
and a Director of the General Partner. Mr. Raibley is also a Director of DWFCM.
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

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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.

Richard A. Beech, age 47, is a Director of the General Partner. 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, is a Director of the General Partner. Mr. Harris is
currently Senior Vice President, Planning and Administration for Morgan Stanley
Dean Witter Asset Management and has 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.

Laurence E. Mollner, Richard M. DeMartini, and Lawrence Volpe are no longer
Directors of the General Partner. Patti L. Behnke is no longer a Vice President
and Chief Financial Officer of the General Partner.

The General Partner and its officers and directors may, from time to time,
trade commodity interest contracts for their own proprietary accounts. The
records of trading in such accounts will not be made available to Limited
Partners for inspection.

As of April 30, 1999, the General Partner had contributed a total of
$3,771,003 to Cornerstone II, III and IV in order to meet its minimum capital
requirements. Such contribution is evidenced by approximately 117.400 units of
general partnership interest of Cornerstone II, 142.103 units of general
partnership interest of Cornerstone III and 268.889 units of general partnership
interest of Cornerstone IV. Each such unit of general partnership interest has a
net asset value equal to the Net Asset Value of a Unit of Limited Partnership
Interest of the respective Partnership. The General Partner has agreed to make
additional contributions to each Partnership so that the General Partner's
aggregate capital contribution will at all times be equal to the sum of (i) the
lesser of $100,000 or 3% of the first $10,000,000 in aggregate capital
contributions to such Partnership by all partners (including the General
Partner's contribution) and (ii) 1% of any such aggregate capital contributions
in excess of $10,000,000; but not less than $50,000. The General Partner and its
principals are not obligated to purchase Units of Limited Partnership Interest
and do not presently own any Units of Cornerstone II.

THE FOLLOWING UPDATES AND REPLACES "THE COMMODITY BROKER" ON PAGES 79-80.

THE COMMODITY BROKERS

DESCRIPTION OF THE COMMODITY BROKERS

DWR, a Delaware corporation, acts as the Partnerships' non-clearing
commodity broker, and Carr Futures Inc. ("CFI"; together with DWR, the
"Commodity Brokers"), a Delaware corporation, acts as the clearing broker for
the Partnerships' commodity interests trades and as the counterparty on the
Partnerships' foreign currency forward contracts. DWR also serves as the
non-clearing commodity broker for all but one of the other commodity pools for
which Demeter serves as general partner and commodity pool operator, and CFI
serves as the clearing broker and foreign currency forward counterparty for such
commodity pools.

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<PAGE>
DWR is a principal operating subsidiary of MSDW, which is a publicly-owned
company. DWR is a financial services company which provides to its individual,
corporate and institutional clients services as a broker in securities and
commodity interests, a dealer in corporate, municipal and government securities,
an investment adviser, and an agent in the sale of life insurance and various
other products and services. DWR is a member firm of the New York Stock
Exchange, the American Stock Exchange, the Chicago Board Options Exchange, other
major securities exchanges, and the National Association of Securities Dealers,
Inc. ("NASD"). DWR is registered with the CFTC as a futures commission merchant
and is a member of the NFA in such capacity. DWR is currently servicing its
clients through a network of 438 offices nationwide with over 11,000 financial
advisors servicing individual and institutional client accounts.

CFI is a subsidiary of Credit Agricole Indosuez, which had total equity of
approximately $6.28 billion at December 31, 1997 and which is itself a
subsidiary of Caisse Nationale de Credit Agricole, one of the ten largest banks
in the world. CFI's parent has guaranteed to each Partnership payment of the net
liquidating value of the transactions in the Partnership's account with CFI. CFI
has been registered under the CEAct as a futures commission merchant and has
been a member of the NFA in such capacity since August 1987. CFI's global
headquarters is located at 10 South Wacker Drive, Suite 1100, Chicago, Illinois
60606. CFI acts as a commodity broker to individuals, corporate and
institutional clients and is a clearing member of the Chicago Board of Trade,
the Chicago Mercantile Exchange, the Commodity Exchange Inc., and other major
commodities exchanges.

In 1997, following the merger of the parent of DWR and Morgan Stanley Group
Inc., DWR sold its institutional futures business and foreign currency trading
operations (including futures exchange and clearinghouse memberships, equipment,
records and relevant personnel) to CFI. The sale did not involve or otherwise
affect the operations or personnel of DWR's Managed Futures Department or
Demeter Management Corporation, the general partner of the Partnerships. Because
DWR no longer maintained a futures clearing and foreign currency business, and
so as to provide continuity of trading operations, the Partnerships' futures
clearing and foreign currency accounts (along with the accounts of Demeter's
other commodity pools), were transferred to CFI. While CFI now acts as the
counterparty on the Partnerships' foreign currency trades and acts as the
clearing broker for the Partnerships' futures contracts and futures options
trades, DWR acts as the non-clearing commodity broker for the Partnerships and
continues to hold most (70-80%) of the Partnerships' assets.

BROKERAGE ARRANGEMENTS

In light of DWR's role as the non-clearing commodity broker and CFI's role
as the clearing commodity broker, the Partnership's brokerage arrangements
discussed in "Conflicts of Interest--Relationship of the General Partner to the
Commodity Broker" and "--Customer Agreement with DWR" and "Description of
Charges to Each Partnership--1. Commodity Broker" should be read to reflect such
change.

RELATED RISK FACTORS

THE FOLLOWING UPDATES "RISK FACTORS--SPECIAL RISKS ASSOCIATED WITH FORWARD
TRADING" ON PAGE 10.

The risks relating to the principal on the forward trades should now be
read as applying solely to CFI, which, as described above, is the counterparty
on the Partnerships' foreign currency forward contract trades.

S-35
<PAGE>
THE FOLLOWING REPLACES THE FOURTH SENTENCE OF THE FIRST PARAGRAPH UNDER
"RISK FACTORS--SPECIAL RISKS ASSOCIATED WITH TRADING ON FOREIGN EXCHANGES" ON
PAGE 10.

The General Partner attempts to monitor and control the credit exposure of
trading on foreign exchanges. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Financial Instruments" beginning
on page 34, as updated by the information beginning on page S-10.

THE FOLLOWING REPLACES "RISK FACTORS--THE PARTNERSHIPS HAVE CREDIT RISKS TO
DWR" ON PAGE 11.

THE PARTNERSHIPS HAVE CREDIT RISK TO THE COMMODITY BROKERS. The
Partnerships have credit risk because DWR and CFI act as the futures commission
merchants or the counterparty with respect to most of the Partnerships' assets.
Exchange-traded futures and futures styled options contracts are marked to
market on a daily basis, with variations in value credited or charged to a
Partnership's account on a daily basis. Each of DWR and CFI, as a futures
commission merchant for each Partnership's exchange-traded futures contracts, is
required, pursuant to CFTC regulations, to segregate from its own assets, and
for the sole benefit of its commodity customers, all funds held by it with
respect to exchange-traded futures and futures styled options contracts,
including an amount equal to the net unrealized gain on all open futures and
futures styled options contracts. With respect to a Partnership's
off-exchange-traded foreign currency forward contracts with CFI, there are no
daily settlements of variations in value.

THE FOLLOWING SECTION IS TO BE INSERTED BEFORE "THE COMMODITIES MARKET" ON
PAGE 80.

CERTAIN LITIGATION

At any given time, DWR is involved in numerous legal actions, some of which
seek significant damages.

On May 16, 1996, an NASD arbitration panel awarded damages and costs
against DWR and one of its account executives in the amount of approximately
$1.1 million, including punitive damages, to three customers who alleged, among
other things, fraud and misrepresentation in connection with their individually
managed futures accounts (not commodity pools).

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 and Currency Management Inc., MSDW (all such parties
referred to hereafter as the "Dean Witter Parties"), the Partnerships and
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 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 Partnerships, 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.

S-36
<PAGE>

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. On April 12, 1999, the
defendants also filed a motion in the California action to oppose certification
by the court of the class in the California litigation. The 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 Partnerships 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 Partnerships.

During the five years preceding the date of this Prospectus, other than as
described above, there have been no material criminal, civil or administrative
actions pending, on appeal or concluded against DWR, Demeter or any of their
principals, which DWR or Demeter believes would be material to an investor's
decision to invest in the Partnerships.

At any given time, CFI is involved in various legal actions. On July 31,
1992, a CFTC Administrative Law Judge ("ALJ") ordered CFI to pay a former client
of the firm approximately $1.7 million in damages, plus interest and costs,
based upon certain alleged misrepresentations made by a former account
executive. Al Baraka Investment and Development Corp. vs. Indosuez Carr Futures,
Inc. (CFTC Docket No. 91-R-126). On May 3, 1993, the CFTC issued an Order of
Summary Affirmance, which affirmed the ALJ's decision, and the U.S. Court of
Appeals for the Seventh Circuit affirmed the CFTC order in June, 1994.

During the five years preceding the date of this Prospectus, other than as
described above, there have been no material criminal, civil or administrative
actions pending, on appeal or concluded against CFI or any of its principals,
which CFI believes would be material to an investor's decision to invest in the
Partnerships.

PLAN OF DISTRIBUTION AND EXCHANGE PROCEDURE

THE FOLLOWING UPDATES THE INFORMATION UNDER "SUMMARY OF THE
PROSPECTUS--PURCHASE OF UNITS PURSUANT TO AN EXCHANGE--SECURITIES AVAILABLE FOR
EXCHANGE" ON PAGE 7 AND "PLAN OF DISTRIBUTION AND EXCHANGE PROCEDURE" ON PAGE
91.

As of April 30, 1999, 14,575,469 unsold Units of Limited Partnership
Interest were available for purchase pursuant to Exchanges.

MATERIAL FEDERAL INCOME TAX CONSIDERATIONS

THE FOLLOWING SUPPLEMENTS THE INFORMATION UNDER "MATERIAL FEDERAL INCOME
TAX CONSIDERATIONS" ON PAGES 92-99.

The Taxpayer Relief Act of 1997, among other things, provides that
long-term capital gains for individual Limited Partners are taxed at a maximum
marginal rate of 20%. Prospective investors should consult their tax advisors
regarding this change and other changes in federal, state and local tax laws.

S-37
<PAGE>
EXPERTS

THE FOLLOWING INFORMATION UPDATES AND REPLACES THE INFORMATION UNDER
"EXPERTS" ON PAGE 100.

The statements of financial condition of Dean Witter Cornerstone Fund II,
Dean Witter Cornerstone Fund III and Dean Witter Cornerstone Fund IV as of
December 31, 1998 and 1997, and the related statements of operations, changes in
partners' capital and cash flows for the years ended December 31, 1998, 1997 and
1996, and the statements of financial condition of Demeter Management
Corporation as of November 30, 1998 and 1997 included in this Prospectus
Supplement, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein, and have been so included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing. Deloitte & Touche LLP also acts as independent auditors
for MSDW.

S-38
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Limited Partners and the General Partner of
Dean Witter Cornerstone Fund II
Dean Witter Cornerstone Fund III
Dean Witter Cornerstone Fund IV:

We have audited the accompanying statements of financial condition of Dean
Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III and Dean Witter
Cornerstone Fund IV (collectively, the "Partnerships"), as of December 31, 1998
and 1997 and the related statements of operations, changes in partners' capital,
and cash flows for each of the three years in the period ended December 31,
1998. These financial statements are the responsibility of the Partnerships'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Dean Witter Cornerstone Fund II, Dean
Witter Cornerstone Fund III and Dean Witter Cornerstone Fund IV, at December 31,
1998 and 1997 and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.

February 15, 1999
New York, New York

S-39
<PAGE>
DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
---------- ----------
$ $
<S> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 29,949,571 29,293,294
Net unrealized gain on open contracts 2,056,152 2,003,679
---------- ----------
Total Trading Equity 32,005,723 31,296,973
Interest receivable (DWR) 91,948 106,167
Due from DWR 15,425 27,883
---------- ----------
Total Assets 32,113,096 31,431,023
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued incentive fees 413,951 618,270
Redemptions payable 173,375 199,022
Accrued management fees 106,613 104,350
Accrued administrative expenses 22,428 21,640
---------- ----------
Total Liabilities 716,367 943,282
---------- ----------
PARTNERS' CAPITAL
Limited Partners (7,372.211 and 7,967.401 Units,
respectively) 30,904,584 29,677,943
General Partner (117.400 and 217.400 Units, respectively) 492,145 809,798
---------- ----------
Total Partners' Capital 31,396,729 30,487,741
---------- ----------
Total Liabilities and Partners' Capital 32,113,096 31,431,023
---------- ----------
---------- ----------
NET ASSET VALUE PER UNIT 4,192.04 3,724.92
---------- ----------
---------- ----------
</TABLE>

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------------
1998 1997 1996
---------- ---------- ----------
$ $ $
<S> <C> <C> <C>
REVENUES
Trading Profit (loss):
Realized 5,592,885 6,363,803 7,321,679
Net change in unrealized 52,473 687,245 (2,051,673)
---------- ---------- ----------
Total Trading Results 5,645,358 7,051,048 5,270,006
Interest income (DWR) 1,180,971 1,228,298 1,179,784
---------- ---------- ----------
Total Revenues 6,826,329 8,279,346 6,449,790
---------- ---------- ----------
EXPENSES
Brokerage commissions (DWR) 1,401,238 1,383,112 1,719,932
Management fees 1,224,365 1,159,248 1,167,223
Incentive fees 426,277 650,800 329,590
Transaction fees and costs 133,569 128,692 170,971
Common administrative expenses 44,337 41,330 14,612
---------- ---------- ----------
Total Expenses 3,229,786 3,363,182 3,402,328
---------- ---------- ----------
NET INCOME 3,596,543 4,916,164 3,047,462
---------- ---------- ----------
---------- ---------- ----------
NET INCOME ALLOCATION:
Limited Partners 3,514,833 4,792,341 2,976,870
General Partner 81,710 123,823 70,592
NET INCOME PER UNIT:
Limited Partners 467.12 569.56 324.71
General Partner 467.12 569.56 324.71
</TABLE>

The accompanying notes are an integral part of these financial statements.

S-40
<PAGE>
DEAN WITTER CORNERSTONE FUND III
STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
---------- ----------
$ $
<S> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 38,504,975 39,762,715
Net unrealized gain on open contracts 2,102,810 1,938,295
Net option premiums (50,047) (158,765)
---------- ----------
Total Trading Equity 40,557,738 41,542,245
Interest receivable (DWR) 120,465 145,100
Due from DWR 81,647 94,981
---------- ----------
Total Assets 40,759,850 41,782,326
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 220,184 429,759
Accrued management fees 135,067 138,480
Accrued administrative expenses 104,780 99,713
---------- ----------
Total Liabilities 460,031 667,952
---------- ----------
PARTNERS' CAPITAL
Limited Partners (12,193.413 and 13,352.334 Units,
respectively) 39,835,572 39,970,539
General Partner (142.103 and 382.103 Units, respectively) 464,247 1,143,835
---------- ----------
Total Partners' Capital 40,299,819 41,114,374
---------- ----------
Total Liabilities and Partners' Capital 40,759,850 41,782,326
---------- ----------
---------- ----------
NET ASSET VALUE PER UNIT 3,266.97 2,993.52
---------- ----------
---------- ----------
</TABLE>

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------------
1998 1997 1996
---------- ---------- ----------
$ $ $
<S> <C> <C> <C>
REVENUES
Trading Profit (loss):
Realized 5,912,923 7,439,669 8,925,181
Net change in unrealized 164,515 (642,508) (2,997,491)
---------- ---------- ----------
Total Trading Results 6,077,438 6,797,161 5,927,690
Interest income (DWR) 1,640,345 1,786,271 1,657,400
---------- ---------- ----------
Total Revenues 7,717,783 8,583,432 7,585,090
---------- ---------- ----------
EXPENSES
Brokerage commissions (DWR) 2,088,096 2,294,914 2,772,496
Management fees 1,682,394 1,728,062 1,629,715
Transaction fees and costs 212,795 229,570 379,973
Common administrative expenses 76,892 69,344 24,702
---------- ---------- ----------
Total Expenses 4,060,177 4,321,890 4,806,886
---------- ---------- ----------
NET INCOME 3,657,606 4,261,542 2,778,204
---------- ---------- ----------
---------- ---------- ----------
NET INCOME ALLOCATION:
Limited Partners 3,564,790 4,155,313 2,699,171
General Partner 92,816 106,229 79,033
NET INCOME PER UNIT:
Limited Partners 273.45 278.01 206.83
General Partner 273.45 278.01 206.83
</TABLE>

The accompanying notes are an integral part of these financial statements.

S-41
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1998 1997
----------- -----------
$ $
<S> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 119,800,551 119,181,131
Net unrealized gain (loss) on open contracts (2,827,252) 1,815,112
----------- -----------
Total Trading Equity 116,973,299 120,996,243
Interest receivable (DWR) 350,412 382,307
----------- -----------
Total Assets 117,323,711 121,378,550
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued incentive fees 1,154,685 1,594,371
Redemptions payable 459,703 899,127
Accrued management fees 389,518 403,011
Accrued administrative expenses 78,706 72,297
----------- -----------
Total Liabilities 2,082,612 2,968,806
----------- -----------
PARTNERS' CAPITAL
Limited Partners (24,059.670 and 26,057.228 Units,
respectively) 113,967,408 115,575,973
General Partner (268.889 and 638.889 Units, respectively) 1,273,691 2,833,771
----------- -----------
Total Partners' Capital 115,241,099 118,409,744
----------- -----------
Total Liabilities and Partners' Capital 117,323,711 121,378,550
----------- -----------
----------- -----------
NET ASSET VALUE PER UNIT 4,736.86 4,435.47
----------- -----------
----------- -----------
</TABLE>

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------------
1998 1997 1996
---------- ---------- ----------
$ $ $
REVENUES
<S> <C> <C> <C>
Trading Profit (loss):
Realized 15,855,401 42,691,318 10,304,825
Net change in unrealized (4,642,364) (3,515,408) 5,260,377
---------- ---------- ----------
Total Trading Results 11,213,037 39,175,910 15,565,202
Interest income (DWR) 4,462,904 4,200,571 3,924,420
---------- ---------- ----------
Total Revenues 15,675,941 43,376,481 19,489,622
---------- ---------- ----------
EXPENSES
Management fees 4,817,623 4,287,974 3,904,737
Brokerage commissions (DWR) 2,170,551 2,656,715 3,781,486
Common administrative expenses 147,731 134,041 47,685
Transaction fees and costs 114,925 171,578 222,993
Incentive fees 594,331 1,594,371 --
---------- ---------- ----------
Total Expenses 7,845,161 8,844,679 7,956,901
---------- ---------- ----------
NET INCOME 7,830,780 34,531,802 11,532,721
---------- ---------- ----------
---------- ---------- ----------
NET INCOME ALLOCATION:
Limited Partners 7,611,778 33,745,453 11,297,656
General Partner 219,002 786,349 235,065
NET INCOME (LOSS) PER UNIT:
Limited Partners 301.39 1,230.81 367.93
General Partner 301.39 1,230.81 367.93
</TABLE>

The accompanying notes are an integral part of these financial statements.

S-42
<PAGE>
DEAN WITTER CORNERSTONE FUNDS
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
----------- -------- ------- -----
<S> <C> <C> <C> <C>
$ $ $
DEAN WITTER CORNERSTONE FUND II
Partners' Capital, December 31, 1995 10,891.098 30,213,505 615,383 30,828,888
Offering of units 56.043 155,468 -- 155,468
Net income -- 2,976,870 70,592 3,047,462
Redemptions (1,741.799) (4,985,648) -- (4,985,648)
----------- ------------ ---------- ------------
Partners' Capital, December 31, 1996 9,205.342 28,360,195 685,975 29,046,170
Offering of units 94.328 314,932 -- 314,932
Net income -- 4,792,341 123,823 4,916,164
Redemptions (1,114.869) (3,789,525) -- (3,789,525)
----------- ------------ ---------- ------------
Partners' Capital, December 31, 1997 8,184.801 29,677,943 809,798 30,487,741
Offering of units 9.990 38,137 -- 38,137
Net income -- 3,514,833 81,710 3,596,543
Redemptions (705.180) (2,326,329) (399,363) (2,725,692)
----------- ------------ ---------- ------------
Partners' Capital, December 31, 1998 7,489.611 30,904,584 492,145 31,396,729
----------- ------------ ---------- ------------
----------- ------------ ---------- ------------

DEAN WITTER CORNERSTONE FUND III
Partners' Capital, December 31, 1995 18,714.921 45,991,101 958,573 46,949,674
Offering of units 3.594 8,388 -- 8,388
Net income -- 2,699,171 79,033 2,778,204
Redemptions (3,238.809) (7,700,908) -- (7,700,908)
----------- ------------ ---------- ------------
Partners' Capital, December 31, 1996 15,479.706 40,997,752 1,037,606 42,035,358
Offering of units 1.841 5,000 -- 5,000
Net income -- 4,155,313 106,229 4,261,542
Redemptions (1,747.110) (5,187,526) -- (5,187,526)
----------- ------------ ---------- ------------
Partners' Capital, December 31, 1997 13,734.437 39,970,539 1,143,835 41,114,374
Offering of units 5.184 15,998 -- 15,998
Net income -- 3,564,790 92,816 3,657,606
Redemptions (1,404.105) (3,715,755) (772,404) (4,488,159)
----------- ------------ ---------- ------------
Partners' Capital, December 31, 1998 12,335.516 39,835,572 464,247 40,299,819
----------- ------------ ---------- ------------
----------- ------------ ---------- ------------

DEAN WITTER CORNERSTONE FUND IV
Partners' Capital, December 31, 1995 36,544.514 101,854,654 1,812,357 103,667,011
Offering of units 37.715 108,665 -- 108,665
Net income -- 11,297,656 235,065 11,532,721
Redemptions (6,783.053) (19,812,153) -- (19,812,153)
----------- ------------ ---------- ------------
Partners' Capital, December 31, 1996 29,799.176 93,448,822 2,047,422 95,496,244
Offering of units 57.083 223,794 -- 223,794
Net income -- 33,745,453 786,349 34,531,802
Redemptions (3,160.142) (11,842,096) -- (11,842,096)
----------- ------------ ---------- ------------
Partners' Capital, December 31, 1997 26,696.117 115,575,973 2,833,771 118,409,744
Offering of units 60.266 269,706 -- 269,706
Net income -- 7,611,778 219,002 7,830,780
Redemptions (2,427.824) (9,490,049) (1,779,082) (11,269,131)
----------- ------------ ---------- ------------
Partners' Capital, December 31, 1998 24,328.559 113,967,408 1,273,691 115,241,099
----------- ------------ ---------- ------------
----------- ------------ ---------- ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

S-43
<PAGE>
DEAN WITTER CORNERSTONE FUNDS
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Dean Witter Cornerstone Fund II $ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 3,596,543 4,916,164 3,047,462
Noncash item included in net income:
Net change in unrealized (52,473) (687,245) 2,051,673
(INCREASE) DECREASE IN OPERATING ASSETS:
Interest receivable (DWR) 14,219 (8,352) 9,670
Due from DWR 12,458 95,444 (97,802)
INCREASE (DECREASE) IN OPERATING LIABILITIES:
Accrued incentive fees (204,319) 301,520 9,183
Accrued management fees 2,263 4,998 (4,886)
Accrued administrative expenses 788 (30,699) (28,975)
Accrued brokerage commissions (DWR) -- (83,967) (10,486)
Accrued transaction fees and costs -- (5,558) (1,399)
----------- ----------- -----------
Net cash provided by operating activities 3,369,479 4,502,305 4,974,440
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 38,137 314,932 155,468
Increase (decrease) in redemptions payable (25,647) (243,684) 307,817
Redemptions of units (2,725,692) (3,789,525) (4,985,648)
----------- ----------- -----------
Net cash used for financing activities (2,713,202) (3,718,277) (4,522,363)
----------- ----------- -----------
Net increase in cash 656,277 784,028 452,077
Balance at beginning of period 29,293,294 28,509,266 28,057,189
----------- ----------- -----------
Balance at end of period 29,949,571 29,293,294 28,509,266
----------- ----------- -----------
----------- ----------- -----------

DEAN WITTER CORNERSTONE FUND III
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 3,657,606 4,261,542 2,778,204
Noncash item included in net income:
Net change in unrealized (164,515) 642,508 2,997,491
(INCREASE) DECREASE IN OPERATING ASSETS:
Net option premiums (108,718) (132,647) 291,412
Interest receivable (DWR) 24,635 (6,733) 21,313
Due from DWR 13,334 27,720 1,755
INCREASE (DECREASE) IN OPERATING LIABILITIES:
Accrued management fees (3,413) (3,907) (16,243)
Accrued administrative expenses 5,067 (37,835) (84,488)
Accrued brokerage commissions (DWR) -- (129,098) (37,030)
Accrued transaction fees and costs -- (12,349) (8,629)
----------- ----------- -----------
Net cash provided by operating activities 3,423,996 4,609,201 5,943,785
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 15,998 5,000 8,388
Increase (decrease) in redemptions payable (209,575) (250,971) 41,381
Redemptions of units (4,488,159) (5,187,526) (7,700,908)
----------- ----------- -----------
Net cash used for financing activities (4,681,736) (5,433,497) (7,651,139)
----------- ----------- -----------
Net decrease in cash (1,257,740) (824,296) (1,707,354)
Balance at beginning of period 39,762,715 40,587,011 42,294,365
----------- ----------- -----------
Balance at end of period 38,504,975 39,762,715 40,587,011
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

S-44
<PAGE>
DEAN WITTER CORNERSTONE FUNDS
STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Dean Witter Cornerstone Fund IV $ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 7,830,780 34,531,802 11,532,721
Noncash item included in net income:
Net change in unrealized 4,642,364 3,515,408 (5,260,377)
(INCREASE) DECREASE IN OPERATING ASSETS:
Interest receivable (DWR) 31,895 (76,916) 59,356
INCREASE (DECREASE) IN OPERATING LIABILITIES:
Accrued incentive fees (439,686) 1,594,371 --
Accrued management fees (13,493) 80,459 (26,487)
Accrued administrative expenses 6,409 (53,710) (141,781)
Accrued brokerage commissions (DWR) -- (74,340) 41,760
Accrued transaction fees and costs -- (3,654) 2,025
----------- ----------- -----------
Net cash provided by (used for) operating activities 12,058,269 39,513,420 6,207,217
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 269,706 223,794 108,665
Increase (decrease) in redemptions payable (439,424) (370,386) 224,709
Redemptions of units (11,269,131) (11,842,096) (19,812,153)
----------- ----------- -----------
Net cash used for financing activities (11,438,849) (11,988,688) (19,478,779)
----------- ----------- -----------
Net increase (decrease) in cash 619,420 27,524,732 (13,271,562)
Balance at beginning of period 119,181,131 91,656,399 104,927,961
----------- ----------- -----------
Balance at end of period 119,800,551 119,181,131 91,656,399
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

S-45
<PAGE>
DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION--Dean Witter Cornerstone Fund II ("Cornerstone II"), Dean
Witter Cornerstone Fund III ("Cornerstone III"), and Dean Witter Cornerstone
Fund IV ("Cornerstone IV"), (individually, a "Partnership", or collectively, the
"Partnerships") are limited partnerships organized to engage in the speculative
trading of commodity futures contracts and forward contracts on foreign
currencies (collectively, "futures interests"). The general partner for each
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. Demeter and DWR are wholly-owned subsidiaries of Morgan
Stanley Dean Witter & Co. ("MSDW").

On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean
Witter, Discover & Co. ("DWD"). At that time, DWD changed its corporate name to
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"). Effective February 19,
1998, MSDWD changed its corporate name to Morgan Stanley Dean Witter & Co.

Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by the General and Limited Partners
based upon their proportional ownership interests.

USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION--Futures interests are open commitments until
settlement date. They are valued at market and the resulting unrealized gains
and losses are reflected in income. Monthly, DWR pays each Partnership interest
income based upon 80% of its average daily Net Assets at a rate equal to the
average yield on 13-Week U.S. Treasury bills issued during such month. For
purposes of such interest payments in Dean Witter Cornerstone Fund IV, Net
Assets do not include monies due the Partnership on futures interests, but not
actually received.

NET INCOME (LOSS) PER UNIT--Net income (loss) per Unit is computed using
the weighted average number of units outstanding during the period.

EQUITY IN FUTURES INTERESTS TRADING ACCOUNTS--Each Partnership's asset
"Equity in futures interests trading accounts" consists of cash on deposit at
DWR and Carr to be used as margin for trading, the net asset or liability
related to unrealized gains or losses on open contracts and the net option
premiums paid and/or received. The asset or liability related to the unrealized
gains or losses on forward contracts is presented as a net amount due to master
netting agreements.

BROKERAGE COMMISSIONS AND RELATED TRANSACTION FEES AND COSTS--Brokerage
commissions for each Partnership are accrued at 80% of DWR's published
non-member rates on a half-turn basis. Related transaction fees and costs are
accrued on a half-turn basis.

From January 1, 1996 through August 31, 1996, brokerage commissions were
capped at 3/4 of 1% per month (a 9% maximum annual rate) of the adjusted Net
Assets allocated to each trading program employed by the Partnerships' Trading
Managers.

Since September 1, 1996, brokerage commissions and transaction fees have
been capped at 13/20 of 1% per month (a 7.8% maximum annual rate) of the
adjusted Net Assets, allocated to each trading program employed by the
Partnerships' Trading Managers.

S-46
<PAGE>
DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

OPERATING EXPENSES--Each Partnership has entered into an exchange agreement
pursuant to which certain common administrative expenses (i.e., legal, auditing,
accounting, filing fees and other related expenses) are shared by each of the
Partnerships based upon the number of Units of each Partnership outstanding
during the month in which such expenses are incurred. In addition, the
Partnerships incur monthly management fees and may incur incentive fees. Demeter
bears all other operating expenses.

INCOME TAXES--No provision for income taxes has been made in the
accompanying financial statements, as partners are individually responsible for
reporting income or loss based upon their respective share of each Partnership's
revenues and expenses for income tax purposes.

DISTRIBUTIONS--Distributions, other than on redemptions of Units, are made
on a pro-rata basis at the sole discretion of Demeter. No distributions have
been made to date.

REDEMPTIONS--Limited Partners may redeem some or all of their Units at 100%
of the Net Asset Value per Unit as of the last day of any month upon fifteen
days advance notice by redemption form to Demeter.

EXCHANGES--Limited Partners may transfer their investment among the
Partnerships (subject to certain restrictions outlined in the Limited
Partnership Agreement) without paying additional charges.

DISSOLUTION OF THE PARTNERSHIP--Each Partnership will terminate on
September 30, 2025 regardless of its financial condition at such time, upon a
decline in Net Assets to less than $250,000, a decline in the Net Asset Value
per Unit to less than $250, or under certain other circumstances defined in each
Limited Partnership Agreement.

2. RELATED PARTY TRANSACTIONS

Each Partnership pays brokerage commissions to DWR on trades executed on
its behalf as described in Note 1. Each Partnership's cash is on deposit with
DWR and Carr in futures interests trading accounts to meet margin requirements
as needed. DWR pays interest on these funds as described in Note 1.

3. TRADING MANAGERS

Demeter, on behalf of each Partnership, retains certain commodity trading
managers to make all trading decisions for the Partnerships. The trading
managers for each Partnership as of December 31, 1998 were as follows:

Dean Witter Cornerstone Fund II
Northfield Trading L.P.
John W. Henry & Company, Inc. ("JWH")

Dean Witter Cornerstone Fund III
Abraham Trading Company
Welton Investment Corporation (formerly, Welton Investment Systems
Corporation, Inc.)
Sunrise Capital Management, Inc.

Dean Witter Cornerstone Fund IV
John W. Henry & Company, Inc.
Sunrise Capital Management, Inc.

S-47
<PAGE>
DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Compensation to the trading managers by the Partnerships consists of a
management fee and an incentive fee as follows:

MANAGEMENT FEE--The management fee is accrued at the rate of 1/3 of 1% per
month (a 4% annual rate) of the Net Assets under management by each trading
managers at each month end.

INCENTIVE FEE--Each Partnership pays an annual incentive fee equal to 15%
of the "New Appreciation" in Net Assets, as defined in the Limited Partnership
Agreements, as of the end of each annual incentive period ending December 31,
except for Dean Witter Cornerstone Fund IV, which pays incentive fees at the end
of each annual incentive period ending May 31. Such incentive fee is accrued in
each month in which New Appreciation occurs. In those months in which New
Appreciation is negative, previous accruals, if any, during the incentive period
will be reduced. In those instances in which a Limited Partner redeems an
investment, the incentive fee (if earned through a redemption date) is to be
paid on those redemptions to the trading advisor in the month of such
redemption.

4. FINANCIAL INSTRUMENTS

The Partnerships trade futures and forward contracts in interest rates,
stock indices, commodities, currencies, petroleum and precious metals. 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.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for fiscal years beginning after
June 15, 1999. Each Partnership has elected to adopt the provisions of SFAS
No. 133 for the fiscal year ended December 31, 1998. SFAS No. 133 supersedes
SFAS No. 119 and No. 105, which required the disclosure of average aggregate
fair values and contract/notional values, respectively, of derivative financial
instruments for an entity which carries its assets at fair value. The
application of SFAS No. 133 does not have a significant effect on the
Partnership's financial statements.

At December 31, 1997, open contracts were:

<TABLE>
<CAPTION>
CORNERSTONE II
-----------------
CONTRACT OR
NOTIONAL AMOUNT
----------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS
Financial Futures:
Commitments to Purchase................................ 30,057,000
Commitments to Sell.................................... 13,539,000
Commodity Futures:
Commitments to Purchase................................ 6,148,000
Commitments to Sell.................................... 15,082,000
Foreign Futures:
Commitments to Purchase................................ 25,543,000
Commitments to Sell.................................... 20,799,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS
Commitments to Purchase................................ 17,705,000
Commitments to Sell.................................... 46,518,000
</TABLE>

S-48
<PAGE>
DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
CORNERSTONE III
-----------------
CONTRACT OR
NOTIONAL AMOUNT
----------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS
Financial Futures:
Commitments to Purchase................................ 50,242,000
Commitments to Sell.................................... 21,172,000
Commodity Futures:
Commitments to Purchase................................ 8,055,000
Commitments to Sell.................................... 31,622,000
Foreign Futures:
Commitments to Purchase................................ 50,870,000
Commitments to Sell.................................... 42,064,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS
Commitments to Purchase................................ 27,863,000
Commitments to Sell.................................... 41,794,000
</TABLE>

<TABLE>
<CAPTION>
CORNERSTONE IV
-----------------
CONTRACT OR
NOTIONAL AMOUNT
-----------------
$
<S> <C>
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS
Commitments to Purchase................................ 218,670,000
Commitments to Sell.................................... 427,237,000
</TABLE>

A portion of the amounts indicated as off-exchange-traded forward currency
contracts is offset by 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 (losses) on open contracts are reported as a component
of "Equity in futures interests trading accounts" on the Statements of Financial
Condition and totaled at December 31, 1998 and 1997, respectively, $2,056,152
and $2,003,679 for Cornerstone II, $2,102,810 and $1,938,295 for Cornerstone III
and $(2,827,252) and $1,815,112 for Cornerstone IV.

For Cornerstone II, of the $2,056,152 net unrealized gain on open contracts
at December 31, 1998, $2,421,869 related to exchange-traded futures contracts
and $(365,717) 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.

For Cornerstone III, of the $2,102,810 net unrealized gain on open
contracts at December 31, 1998, $2,250,314 related to exchange-traded futures
and futures-styled options contracts and $(147,504) related to
off-exchange-traded forward currency contracts. Of the $1,938,295 net unrealized
gain on open contracts at December 31, 1997, $2,168,497 related to
exchange-traded futures contracts and $(230,202) related to off-exchange-traded
forward currency contracts.

For Cornerstone IV, of the $(2,827,252) net unrealized loss on open
contracts at December 31, 1998 all related to off-exchange-traded forward
currency contracts. Of the $1,815,112 net unrealized gain on open contracts at
December 31, 1997 all related to off-exchange-traded forward currency contracts.

S-49
<PAGE>
DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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 the instruments in which the Partnership is involved is limited
to the amounts reflected in the Partnership's Statements of Financial Condition.

Exchange-traded contracts and off-exchange-traded forward currency
contracts held by the Partnerships at December 31, 1998 and 1997 mature as
follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CORNERSTONE II
Exchange-Traded Contracts..................... December 1999 December 1998
Off-Exchange-Traded
Forward Currency
Contracts................................ March 1999 March 1998

CORNERSTONE III
Exchange-Traded Contracts..................... June 1999 June 1998
Off-Exchange-Traded
Forward Currency
Contracts................................ March 1999 March 1998

CORNERSTONE IV
Exchange-Traded Contracts..................... -- September 1998
Off-Exchange-Traded
Forward Currency
Contracts................................ March 1999 April 1998
</TABLE>

The Partnerships also have credit risk because DWR and Carr act as the
futures commission merchants or the counterparties, with respect to most of the
Partnerships' assets. Exchange-traded futures and futures-styled options
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 each Partnership's exchange-traded futures and futures-styled options
contracts, are required, pursuant to regulations of the Commodity Futures
Trading Commission, 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 and futures-styled options contracts, including an
amount equal to the net unrealized gain on all open futures and futures-styled
options contracts, which funds, in the aggregate, totaled at December 31, 1998
and 1997 respectively, $32,371,440 and $30,968,637 for Cornerstone II,
$40,755,289 and $41,931,212 for Cornerstone III, and $119,800,551 and
$119,181,131 for Cornerstone IV. With respect to each 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 equal to the net
unrealized gain on open forward contracts be segregated. With respect to those
off-exchange-traded forward currency contracts, the Partnerships are 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 Partnerships
payment of the net liquidating value of the transactions in the Partnerships'
account with Carr (including foreign currency contracts).

S-50
<PAGE>
DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

For the year ended December 31, 1997 the average fair value of financial
instruments held for trading purposes was as follows:

<TABLE>
CORNERSTONE II
ASSETS LIABILITIES
----------- -----------
$ $
<S> <C> <C>
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

CORNERSTONE III
ASSETS LIABILITIES
----------- -----------
$ $
EXCHANGE-TRADED CONTRACTS:
Financial Futures............................... 82,881,000 46,462,000
Options on Financial Futures.................... 698,000 64,639,000
Commodity Futures............................... 26,095,000 21,377,000
Options on Commodity Futures.................... 1,117,000 4,712,000
Foreign Futures................................. 44,764,000 26,219,000
Options on Foreign Futures...................... 7,229,000 --
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS....... 12,599,000 13,558,000

CORNERSTONE IV
ASSETS LIABILITIES
----------- -----------
$ $
EXCHANGE-TRADED CONTRACTS:
Financial Futures............................... 34,008,000 57,577,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS....... 299,407,000 414,754,000
</TABLE>

5. LEGAL MATTERS

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., MSDW (all such parties referred
to hereafter as the "Dean Witter Parties"), the Partnerships, 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 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 Partnerships, 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.

S-51
<PAGE>
DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)

On December 16, 1997, upon motion of the plaintiffs, the action pending in
the Supreme 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. On April 12, 1999, the
defendants also filed a motion in the California action to oppose certification
by the court of the class in the California litigation. The 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 Partnerships 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 Partnerships.

S-52
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Demeter Management Corporation:

We have audited the accompanying statements of financial condition of Demeter
Management Corporation (a wholly-owned subsidiary of Morgan Stanley Dean Witter
& Co.) (the "Company") as of November 30, 1998 and 1997. These statements of
financial condition are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements of financial
condition based on our audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of financial condition is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of financial condition.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement of
financial condition presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such statements of financial condition present fairly, in all
material respects, the financial position of Demeter Management Corporation at
November 30, 1998 and 1997 in conformity with generally accepted accounting
principles.

January 11, 1999
New York, New York

S-53
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO. ("MSDW"))

STATEMENTS OF FINANCIAL CONDITION

NOVEMBER 30,
FEBRUARY 28, ------------------------------
ASSETS 1999 1998 1997
------------ ------------ ------------
(UNAUDITED)
$ $ $
<S> <C> <C> <C>
Investments in affiliated partnerships (Note 2) 17,793,747 16,959,248 22,016,069
Income taxes receivable 305,150 708,505 429,885
Receivable from affiliated partnership 20,632 25,716 968
------------ ------------ ------------
Total Assets 18,119,529 17,693,469 22,446,922
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Payable to MSDW (Note 3) 11,824,302 11,648,971 17,995,100
Accrued expenses 54,341 62,198 34,072
------------ ------------ ------------
Total Liabilities 11,878,643 11,711,169 18,029,172
------------ ------------ ------------

STOCKHOLDER'S EQUITY:
Common stock, no par value:
Authorized 1,000 shares; Issued and outstanding
100 shares at stated value of $500 per share 50,000 50,000 50,000
Additional paid-in capital 111,170,000 111,170,000 111,170,000
Retained earnings 6,090,886 5,832,300 4,267,750
------------ ------------ ------------
117,310,886 117,052,300 115,487,750
Less: Notes receivable from MSDW (Note 4) (111,070,000) (111,070,000) (111,070,000)
------------ ------------ ------------

Total Stockholder's Equity 6,240,886 5,982,300 4,417,750
------------ ------------ ------------

Total Liabilities and Stockholder's Equity 18,119,529 17,693,469 22,446,922
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

The accompanying notes are an integral part of this financial statement.

S-54
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)

NOTES TO STATEMENTS OF FINANCIAL CONDITION
(THE INFORMATION RELATED TO 1999 IS UNAUDITED.)

1. BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES

Demeter Management Corporation ("Demeter") is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co. ("MSDW").

On May 31, 1997, Morgan Stanley Group Inc. ("Morgan Stanley") was merged with
and into Dean Witter, Discover & Co. ("DWD"). At that time, DWD changed its
corporate name to Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD").
Effective February 19, 1998, MSDWD changed its corporate name to Morgan Stanley
Dean Witter & Co. Prior to the merger, DWD's fiscal year ended on December 31.
Subsequent to the merger, MSDW and Demeter adopted a fiscal year end of November
30.

Demeter manages the following commodity pools as sole general partner: Dean
Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III, Dean Witter
Cornerstone Fund IV, Columbia Futures Fund, Dean Witter Diversified Futures Fund
Limited Partnership, Dean Witter Diversified Futures Fund II L.P., Dean Witter
Diversified Futures Fund III L.P., Dean Witter Multi-Market Portfolio L.P.
(formerly, Dean Witter Principal Guaranteed Fund L.P.), Dean Witter Principal
Plus Fund L.P., Dean Witter Principal Plus Fund Management L.P., Dean Witter
Portfolio Strategy Fund L.P. (formerly, Dean Witter Principal Secured Futures
Fund L.P.) ("DWPSF"), Dean Witter Global Perspective Portfolio L.P., Dean Witter
World Currency Fund L.P., Dean Witter Institutional Account II L.P. ("DWIA II"),
DWFCM International Access Fund L.P., Dean Witter Anchor Institutional Balanced
Portfolio Account L.P. ("Anchor"), Dean Witter Spectrum Global Balanced L.P.
(formerly, Dean Witter Spectrum Balanced L.P.), Dean Witter Spectrum Strategic
L.P., Dean Witter Spectrum Technical L.P., Dean Witter Spectrum Select L.P.
(formerly, Dean Witter Select Futures Fund L.P.), DWR Chesapeake L.P., DWR
Institutional Balanced Portfolio Account III L.P., ("DWIBP III"), DWR/JWH
Futures Fund L.P., Morgan Stanley Tangible Asset Fund L.P. ("MSTAF"), DWR/Market
Street Futures Fund L.P. ("MKTST"), Morgan Stanley Dean Witter Charter Graham
L.P. ("Charter Graham"), Morgan Stanley Dean Witter Charter Millburn L.P.
("Charter Millburn"), and Morgan Stanley Dean Witter Charter Welton L.P.
("Charter Welton").

Each of the commodity pools is a limited partnership organized to engage in the
speculative trading of commodity futures contracts, forward contracts on foreign
currencies and other commodity interests.

Demeter reopened DWPSF for additional investment and on May 12, 1997, DWPSF
registered with the SEC 50,000 units which were offered to investors for a
limited time in a public offering.

On July 31, 1997, Demeter entered into a limited partnership agreement as
general partner in MSTAF. On November 4, 1997, MSTAF registered with the SEC
5,000,000 units and began trading on January 2, 1998. Units were made available
to investors in a public offering that ended March 12, 1998 ("Offering Period").
Subsequently, MSTAF, Demeter, the trading advisor and Dean Witter Reynolds
agreed to extend the Offering Period until no later than October 16, 1998
("Extended Offering Period"), and offered to the public unsold units remaining
at the end of the Offering Period.

On September 18, 1997, Demeter ceased trading activities in Anchor and
subsequently distributed its net assets.

S-55
<PAGE>
In January of 1998, Demeter entered into a limited partnership agreement as
general partner in MKTST, which offers units to investors in a continuing
private offering. MKTST began trading on October 1, 1998.

On April 20, 1998, Dean Witter Spectrum Balanced L.P. changed its name to Dean
Witter Spectrum Global Balanced L.P.

On April 20, 1998, Dean Witter Select Futures Fund L.P. changed its name to Dean
Witter Spectrum Select L.P. ("DWSF"). Effective May 1, 1998 DWSF became part of
the Spectrum family of funds and consequently revised its fee structure,
instituted an exchange provision with other funds in the Spectrum family and is
offered to investors in a continuing public offering.

On April 30, 1998, Demeter ceased trading activities in DWIA II and subsequently
distributed its net assets.

On May 11, 1998, Demeter registered with the SEC 5,000,000 additional units of
Dean Witter Spectrum Technical L.P. and 1,500,000 units of DWSF, both of which
are being offered to investors in a continuing public offering with previously
registered units of Dean Witter Spectrum Strategic L.P. and Dean Witter Spectrum
Global Balanced L.P.

On July 15, 1998, Demeter entered into a limited partnership agreement as
general partner in the Morgan Stanley Dean Witter Charter Series. The three
partnerships that comprise the Charter Series are Morgan Stanley Dean Witter
Charter Graham L.P. ("Charter Graham"), Morgan Stanley Dean Witter Charter
Millburn L.P. ("Charter Millburn") and Morgan Stanley Dean Witter Charter Welton
L.P. ("Charter Welton"). On July 29, 1998, the Charter Series individually
registered with the SEC 3,000,000 units of Charter Graham, 3,000,000 units of
Charter Millburn and 3,000,000 units of Charter Welton to be offered to
investors for a limited time in a public offering.

On September 30, 1998, Demeter ceased trading activities in DWIBP III, and
subsequently distributed its net assets.

INCOME TAXES--The results of operations of Demeter are included in the
consolidated federal income tax return of MSDW, computed on a separate company
basis and due to MSDW.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2. INVESTMENTS IN AFFILIATED PARTNERSHIPS

The limited partnership agreement of each commodity pool requires Demeter to
maintain a general partnership interest in each partnership, generally in an
amount equal to, but not less than 1 percent of the aggregate capital
contributed to the partnership by all partners.

The total assets, liabilities and partners' capital of all the funds managed by
Demeter at February 28, 1999, and November 30, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
FEBRUARY 28, 1999
(UNAUDITED) 1998 1997
----------------- -------------- --------------
<S> <C> <C> <C>
$ $ $
Total assets........................ 1,371,547,320 1,316,093,947 1,195,307,516
Total liabilities................... 26,195,171 21,644,069 19,346,113
Total partners' capital............. 1,345,352,149 1,294,449,878 1,175,961,403
</TABLE>

Demeter's investments in such limited partnerships are carried at market value
with changes in such market value reflected currently in operations.

S-56
<PAGE>
3. PAYABLE TO MSDW

The payable to MSDW is primarily for amounts due for the purchase of partnership
investments, income tax payments made by MSDW on behalf of Demeter and the
cumulative results of operations.

4. NET WORTH REQUIREMENT

At February 28, 1999, November 30, 1998 and 1997, Demeter held non-interest
bearing notes from MSDW that were payable on demand. These notes were received
in connection with additional capital contributions aggregating $111,070,000.

The limited partnership agreement of each commodity pool requires Demeter to
maintain its net worth at an amount not less than 10% of the capital
contributions by all partners in each pool in which Demeter is the general
partner (15% if the capital contributions to any partnership are less than
$2,500,000, or $250,000, whichever is less).

In calculating this requirement, Demeter's interests in each limited partnership
and any amounts receivable from or payable to such partnerships are excluded
from net worth. Notes receivable from MSDW are included in net worth for
purposes of this calculation.

5. LEGAL MATTERS

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, an affiliate of Demeter. Named defendants include
DWR, Demeter, Dean Witter Futures and Currency Management Inc., MSDW (all such
parties referred to hereafter as the "Dean Witter Parties"), certain 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 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 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. On April 12, 1999 the
defendants also filed a motion in the California action to oppose certification
by the court of the class in the California litigation. The 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 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.

S-57
<PAGE>
AMENDED ANNEX A TO LIMITED PARTNERSHIP AGREEMENT

THIS REQUEST SHOULD BE DELIVERED TO A LIMITED PARTNER'S LOCAL DWR BRANCH OFFICE
AND MUST BE RECEIVED BY THE GENERAL PARTNER AT LEAST 15 DAYS PRIOR TO THE LAST
DAY OF THE CALENDAR MONTH IN WHICH AN EXCHANGE IS TO BE EFFECTIVE.

DEAN WITTER CORNERSTONE FUNDS
REQUEST FOR EXCHANGE

EACH PARTNERSHIP WILL EXCHANGE UNITS OF LIMITED PARTNERSHIP INTEREST ONLY IN
WHOLE UNITS OR IN
MULTIPLES OF $1,000, UNLESS A LIMITED PARTNER IS LIQUIDATING HIS ENTIRE INTEREST
IN SUCH PARTNERSHIP.

___________________________, 19___
(Please date)

DEAN WITTER CORNERSTONE FUNDS
c/o Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Managed Futures Account Department

Dear Sirs:

I hereby request an Exchange, as of the last day of the next calendar month
occurring at least 15 days after receipt of this request, as defined in and
subject to all of the terms and conditions of the Limited Partnership Agreement
of the partnership(s) specified below. I hereby authorize Demeter Management
Corporation to redeem the following quantity of Units of Limited Partnership
Interest ("Units") set forth opposite the name of each such partnership at the
respective Net Asset Value thereof, as defined therein, less any amounts
specified in Section 11(b) of each such Limited Partnership Agreement, and to
utilize the net proceeds thereof to purchase Units in the partnership(s)
specified below.

<TABLE>
<CAPTION>
SPECIFY QUANTITY OF UNITS SPECIFY PARTNERSHIP IN
TO BE REDEEMED WHICH UNITS TO
(CHECK BOX AND INSERT BE PURCHASED
NAME OF PARTNERSHIP NUMBER, IF APPLICABLE (CHECK APPLICABLE BOX)
------------------- ------------------------- ----------------------
<S> <C> <C>
Dean Witter / / --------- Whole Units or / / Dean Witter Cornerstone Fund III
Cornerstone Fund II / / $ --,000 of Units or or
/ / Entire Interest / / Dean Witter Cornerstone Fund IV
----------------------------------
Dean Witter / / --------- Whole Units or / / Dean Witter Cornerstone Fund II
Cornerstone Fund III / / $ --,000 of Units or or
/ / Entire Interest / / Dean Witter Cornerstone Fund IV
----------------------------------
Dean Witter / / --------- Whole Units or / / Dean Witter Cornerstone Fund II
Cornerstone Fund IV / / $ --,000 of Units or or
/ / Entire Interest / / Dean Witter Cornerstone Fund III
----------------------------------
</TABLE>

A-1
<PAGE>
I understand that this Exchange will be effective as of the last day of the
next calendar month occurring at least 15 days after this Request for Exchange
is received by the above addressee. I understand that I may not Exchange any
Units before the last business day of any calendar month which occurs more than
180 days after I first became a limited partner of any of the above
partnerships. I (either in my individual capacity or as an authorized
representative of any entity, if applicable) hereby represent and warrant that I
am the true, lawful, beneficial owner of the Unit or Units to which this Request
for Exchange relates, with full power and authority to request an Exchange of
such Units. Such Units are not subject to any pledge or otherwise encumbered in
any fashion.

I hereby certify that the representations and warranties and all other
information set forth in the Subscription Agreement and Power of Attorney
delivered in connection with my initial purchase of Units being redeemed hereby
is true and correct as of the date hereof. I have received the Prospectus, dated
August 28, 1996, and the Supplement to Prospectus, dated May 14, 1999, relating
to the above partnerships delivered to me, or any later supplement to such
Prospectus relating to the specific offering of Units which I am purchasing on
this Exchange. I represent and warrant that I have either: (a) net worth of at
least $75,000 (exclusive of home, furnishings, and automobiles); or (b) net
worth of at least $30,000 (exclusive of home, furnishings, and automobiles) and
annual gross income of at least $30,000. However, if I am a resident and/or
subject to regulation by one of the following states, my net worth and/or income
satisfies the requirements of such state (if this Exchange is by spouses as
joint owners, their joint net worth and annual income may be used to satisfy
applicable state suitability requirements; as used below, "NW" means net worth
exclusive of home, furnishings, and automobiles; "AI" means annual gross income;
and "TI" means annual taxable income for federal income tax purposes):

<TABLE>
<S> <C>
ARIZONA (a) $250,000 NW and investment may not exceed 10% of NW, or
(b) $75,000 NW, $75,000 AI and investment may not exceed 10%
of NW.
CALIFORNIA $100,000 NW and $50,000 AI.
MAINE (a) $100,000 NW, or (b) $35,000 NW and $35,000 AI.
MASSACHUSETTS (a) $175,000 NW and investment may not exceed 10% of NW, or
PENNSYLVANIA (b) $100,000 NW, $50,000. TI during the last calendar year
and anticipated during the current calendar year and
investment may not exceed 10% of NW.
MICHIGAN (a) Solely as to Michigan residents who purchased Units in
any of the Partnerships on or before May 3, 1992: (i)
$100,000 NW and investment may not exceed 10% of NW, or (ii)
$50,000 NW, $50,000 AI and investment may not exceed 10% of
NW; (b) solely as to Michigan residents who purchased Units
in any of the Partnerships, or who purchased Units in any of
the Partnerships on or after May 4, 1992: (i) $225,000 NW
and investment may not exceed 10% of NW, or (ii) $60,000 NW,
$60,000 AI and investment may not exceed 10% of NW.
VERMONT (1) Solely as to Vermont residents who purchased Units in
any of the Partnerships prior to May 31, 1993: (a) $75,000
NW, or (b) $30,000 NW and $30,000 AI; (2) solely as to
Vermont residents who purchased Units in any of the
Partnerships on or after May 31, 1993: (a) $150,000 NW, or
(b) $45,000 NW and $45,000 AI.
WASHINGTON (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
</TABLE>

I authorize Demeter Management Corporation, pursuant to the aforementioned
Power of Attorney, to take all such further actions and file all such further
documents, pursuant to said Power of Attorney and in accordance with the terms
thereof, as may be necessary to effectuate the transactions described herein.

A-2
<PAGE>
SIGNATURES MUST BE IDENTICAL TO NAME(S)
IN WHICH UNITS OF LIMITED PARTNERSHIP INTEREST ARE REGISTERED

<TABLE>
<S> <C>
- ------------------------------------------- ---------------------------------------------------------
Print DWR Account Number Type or Print Name of Partner

---------------------------------------------------------
Street

---------------------------------------------------------
City State Zip Code

Individual Partner(s) or assignee(s)

X
---------------------------------------------------------

X
---------------------------------------------------------
(Signature(s) of partner(s) or assignee(s))

Entity Partner (or assignee)

---------------------------------------------------------
(Name of Entity)

By: X
---------------------------------------------------------
(Authorized officer, partner, trustee, or custodian.
If a corporation, include certified
copy of authorizing resolution.)
</TABLE>

If Individual Retirement Account or other self-directed employee benefit plan,
please also complete the following:

--------------------------------------
(Name of Plan Participant)

X
--------------------------------------
(Signature of Plan Participant)

A-3
<PAGE>
DEAN WITTER CORNERSTONE FUND II
DEAN WITTER CORNERSTONE FUND III
DEAN WITTER CORNERSTONE FUND IV
SUPPLEMENT TO THE PROSPECTUS DATED AUGUST 28, 1996

The Prospectus dated August 28, 1996 is supplemented by a Supplement dated
May 14, 1999. The Supplement is an integral part of, and must be read together
with, the Prospectus.

May 14, 1999