UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the period ended June 30, 1996 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from ________________to_____________
Commission File Number 0-13299
DEAN WITTER CORNERSTONE FUND III
(Exact name of registrant as specified in its charter)
New York 13-3190919
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
c/o Demeter Management Corp.
Two World Trade Center, New York, NY 62 Fl. 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changes
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND III
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 1996
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
June 30, 1996 (Unaudited) and December 31, 1995............2
Statements of Operations for the Quarters Ended
June 30, 1996 and 1995 (Unaudited).........................3
Statements of Operations for the Six Months Ended
June 30, 1996 and 1995 (Unaudited).........................4
Statements of Changes in Partners' Capital for the
Six Months Ended June 30, 1996 and 1995 (Unaudited)........5
Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 (Unaudited).........................6
Notes to Financial Statements (Unaudited)...............7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............11-16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................... 17
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND III
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
June 30, December 31,
1996 1995
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in commodity futures trading accounts:
Cash 39,629,167 42,294,365
Net unrealized gain on open contracts 202,859 5,578,294
Total Trading Equity 39,832,026 47,872,659
Receivable from DWR 160,667 124,456
Interest receivable (DWR) 136,274 159,680
Total Assets 40,128,967 48,156,795
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 596,153 639,349
Common administrative expenses payable 165,182 222,036
Accrued management fees 132,583 158,630
Accrued brokerage commissions (DWR) 40,543 166,128
Accrued transaction fees and costs 15,712 20,978
Total Liabilities 950,173 1,207,121
Partners' Capital
Limited Partners (16,838.237 and
18,332.818 Units, respectively) 38,309,454 45,991,101
General Partner (382.103 Units) 869,340 958,573
Total Partners' Capital 39,178,794 46,949,674
Total Liabilities and Partners' Capital 40,128,967 48,156,795
NET ASSET VALUE PER UNIT 2,275.15 2,508.68
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND III
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended June 30,
1996 1995
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 4,107,491 8,003,588
Net change in unrealized (1,099,665) (3,928,861)
Total Trading Results 3,007,826 4,074,727
Interest Income (DWR) 418,859 558,636
Total Revenues 3,426,685 4,633,363
EXPENSES
Brokerage commissions (DWR) 767,070 808,499
Management fees 405,751 481,671
Transaction fees and costs 91,860 168,113
Common administrative expenses 4,824 -
Total Expenses 1,269,505 1,458,283
NET INCOME 2,157,180 3,175,080
NET INCOME ALLOCATION
Limited Partners 2,111,549 3,120,117
General Partner 45,631 54,963
NET INCOME PER UNIT
Limited Partners 119.43 143.84
General Partner 119.43 143.84
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND III
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Six Months Ended June 30,
1996 1995
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 2,878,851 11,836,860
Net change in unrealized (5,375,435) (3,783,673)
Total Trading Results (2,496,584) 8,053,187
Interest Income (DWR) 852,476 1,084,659
Total Revenues (1,644,108) 9,137,846
EXPENSES
Brokerage commissions (DWR) 1,642,356 2,029,632
Management fees 830,166 933,853
Transaction fees and costs 207,271 283,803
Administrative expenses 9,357 21,158
Total Expenses 2,689,150 3,268,446
NET INCOME (LOSS) (4,333,258) 5,869,400
NET INCOME (LOSS) ALLOCATION
Limited Partners (4,244,025) 5,768,287
General Partner (89,233) 101,113
NET INCOME (LOSS) PER UNIT
Limited Partners (233.53) 264.62
General Partner (233.53) 264.62
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND III
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital
December 31, 1994 23,887.701 $46,250,611 $ 751,842 $47,002,453
Continuous Offering 21.629 40,000 - 40,000
Net Income - 5,768,287 101,113 5,869,400
Redemptions (2,859.633) (5,923,354) - (5,923,354)
Partners' Capital
June 30, 1995 21,049.697 $46,135,544 $ 852,955 $46,988,499
Partners' Capital
December 31, 1995 18,714.921 $45,991,101 $ 958,573 $46,949,674
Net Loss - (4,244,025) (89,233) (4,333,258)
Redemptions (1,494.581) (3,437,622) - (3,437,622)
Partners' Capital
June 30, 1996 17,220.340 $38,309,454 $869,340 $39,178,794
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND III
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Six Months Ended June 30,
1996 1995
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) (4,333,258) 5,869,400
Noncash item included in net income (loss):
Net change in unrealized 5,375,435 3,783,673
(Increase) decrease in operating assets:
Receivable from DWR (36,211) 30,781
Interest receivable (DWR) 23,406 11,255
Increase (decrease) in operating liabilities:
Common administrative expenses payable (56,854) (26,829)
Accrued management fees (26,047) 243
Accrued brokerage commissions (DWR) (125,585) (55,244)
Accrued transaction fees and costs (5,266) 13,287
Net cash provided by operating activities 815,620 9,626,566
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units - 40,000
Increase (decrease) in redemptions payable (43,196) 86,700
Redemptions of units (3,437,622) (5,923,354)
Net cash used for financing activities (3,480,818) (5,796,654)
Net increase (decrease) in cash (2,665,198) 3,829,912
Balance at beginning of period 42,294,365 42,884,780
Balance at end of period 39,629,167 46,714,692
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The financial statements include, in the opinion of management, all
adjustments necessary for a fair presentation of the results of
operations and financial condition. The financial statements and
condensed notes herein should be read in conjunction with the
Partnership's December 31, 1995 Annual Report on Form 10-K.
1. Organization
Dean Witter Cornerstone Fund III (the "Partnership") is a limited
partnership organized to engage in the speculative trading of
commodity futures contracts and forward contracts on foreign
currencies. The Partnership is one of the Dean Witter Cornerstone
Funds, comprised of Dean Witter Cornerstone Fund II, Dean Witter
Cornerstone Fund III, and Dean Witter Cornerstone Fund IV. The
trading managers who make all trading decisions for the Partnership
are Computerized Commodity Advisory, Inc. and Sunrise Commodities,
Inc. Both Demeter Management Corporation (the "General Partner")
and the commodity broker, Dean Witter Reynolds Inc. ("DWR") are
wholly owned subsidiaries of Dean Witter, Discover & Co.
2. Related Party Transactions
The Partnership's cash is on deposit with DWR in commodity trading
accounts to meet margin requirements as needed. DWR pays interest
on these funds based on current 13-week U.S. Treasury Bill rates.
Brokerage expenses incurred by the Partnership are paid to DWR.
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. Financial Instruments
The Partnership trades futures and forward contracts in interest
rates, stock indices, commodities, currencies, petroleum and
precious metals. Futures and forwards represent contracts for
delayed delivery of an instrument at a specified date and price.
Risk arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms of
the contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest
rate volatility. At June 30, 1996, open contracts were:
Contract or
Notional Amount
$
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 14,740,000
Commitments to Sell 72,652,000
Commodity Futures:
Commitments to Purchase 6,076,000
Foreign Futures:
Commitments to Purchase 20,334,000
Commitments to Sell 26,516,000
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The unrealized gain on open contracts is reported as a component of
"Equity in Commodity futures trading accounts" on the Statement of
Financial Condition and totaled $202,859 at June 30, 1996 and are
related entirely to exchange-traded futures contracts. Exchange-
traded futures contracts held by the Partnership at June 30, 1996
mature through October 1996. The contract amounts in the above
table represent the Partnership's extent of involvement in the
particular class of financial instrument, but not the credit risk
associated with counterparty nonperformance. The credit risk
associated with these instruments is limited to the amounts
reflected in the Partnership's Statements of Financial Condition.
The Partnership also has credit risk because DWR acts as the
futures commission merchant or the sole counterparty, with respect
to most of the Partnership's assets. Exchange-traded futures
contracts are marked to market on a daily basis, with variations in
value settled on a daily basis. DWR, as the futures commission
merchant for all of the Partnership's exchange-traded-futures
contracts, is required pursuant to regulations of the Commodity
Futures Trading Commission to segregate from its own assets and for
the sole benefit of its commodity customers, all funds held by DWR
with respect to exchange-traded futures contracts including an
amount equal to the net unrealized gain on all open futures
contracts, which funds totaled $39,832,026 at June 30, 1996.
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
For the quarter ended June 30 1996, the average fair value of
financial instruments held for trading purposes was as follows:
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 102,597,000 89,415,000
Commodity Futures 72,416,000 7,591,000
Foreign Futures 90,259,000 54,883,000
4. Subsequent Event
Effective July 1, 1996, CCA Capital Management Inc. was removed as
the advisor to the Partnership and replaced by Abraham Trading
Company and Welton Investment Systems Corporation. Effective
September 1, 1996, maximum total brokerage commissions and
transaction fees chargeable to the Partnership will be capped at
.65% per month of adjusted Net Assets as defined in the Limited
Partnership Agreement.
<PAGE>
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Liquidity The Partnership's assets are deposited in separate
commodity trading accounts with DWR and are used by the Partnership
as margin to engage in trading commodity futures contracts and
forward contracts on foreign currency. DWR holds such assets in
either designated depositories or in securities approved by the
Commodity Futures Trading Commission for investment of customer
funds. The Partnership's assets held by DWR may be used as margin
solely for the Partnership's trading. Since the Partnership's sole
purpose is to trade in commodity futures contracts and forward
contracts on foreign currency, it is expected that the Partnership
will continue to own such liquid assets for margin purposes.
The Partnership's investment in commodity futures, forward
contracts and other commodity interests may be illiquid. If the
price for a futures contract for a particular commodity has
increased or decreased by an amount equal to the "daily limit,"
positions in the commodity can neither be taken nor liquidated
unless traders are willing to effect trades at or within the limit.
Commodity futures prices have occasionally moved the daily limit
for several consecutive days with little or no trading. Such
market conditions could prevent the Partnership from promptly
liquidating its commodity futures positions.
<PAGE>
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in profitable markets or
prevent the Partnership from promptly liquidating unfavorable
positions in such markets and subjecting it to substantial losses.
Either of these market conditions could result in restrictions
on redemptions.
Capital Resources The Partnership does not have, nor does it
expect to have, any capital assets. Redemptions and exchanges of
Units in the future will impact the amount of funds available for
investments in commodity futures contracts and other commodity
interests. As redemptions are at the discretion of the Limited
Partners, it is not possible to estimate the amount and therefore,
the impact of future redemptions.
Results of Operations
For the Quarter and Six Months Ended June 30, 1996
For the quarter ended June 30, 1996, the Partnership's total
trading revenues including interest income were $3,426,685. During
the second quarter, the Partnership posted an increase in Net Asset
Value per Unit. The most significant gains were recorded during
April as long corn and wheat futures positions profited from an
upward move in prices. Additional gains were recorded in corn
futures during May as prices continued to increase early in the
month. In currency trading, gains were recorded from short Swiss
franc positions during April and May as the value of the Swiss
<PAGE>
franc moved lower versus the U.S. dollar and other world
currencies. In the energy markets, long positions in crude oil and
natural gas futures profited during the quarter as prices moved
higher. Gains were also recorded from short position in copper
futures during June as prices plunged on news of significant losses
incurred by Sumitomo Corporation. These gains were partially
offset by losses recorded in financial futures trading as non-U.S.
interest rate futures, particularly Japanese and Australian
interest rate futures, experienced trendless price movement
throughout the quarter. Smaller losses were recorded in soft
commodities as coffee prices were choppy during May. Total
expenses for the quarter were $1,269,505, resulting in net income
of $2,157,180. The value of an individual Unit in the Partnership
increased from $2,155.72 at March 31, 1996 to $2,275.15 at June 30,
1996.
For the six months ended June 30, 1996, the Partnership's total
trading revenues net of interest income were $3,426,685. During
the first half of the year, the Partnership posted a decrease in
Net Asset Value per Unit. The most significant losses were
recorded in financial futures during February as long positions in
global interest rate futures, which had been profitable for the
Partnership during January, experienced a dramatic downward price
move. Smaller losses were recorded in non-U.S. interest rate
futures during March, as well as a majority of the second quarter,
as short-term volatile price movement followed. Additionally,
losses were recorded in soft commodities and base metals futures as
prices moved in a choppy pattern during the first quarter. These
<PAGE>
losses were partially offset by gains recorded in agricultural
futures as long corn future positions profited as prices moved
higher between February and May. Gains were also recorded in the
currency markets as short positions in the Japanese yen profited
during January as the value of the yen moved lower versus the U.S.
dollar. Smaller profits were recorded from short Swiss franc
positions as its value declined versus other major currencies
during April and May. Gains recorded during the second quarter
from long crude oil and natural gas futures positions also helped
to mitigate a portion of the losses recorded during the first half
of the year. Total expenses for the period were $2,689,150,
resulting in a net loss of $4,333,258. The value of an individual
Unit in the Partnership decreased from $2,508.68 at December 31,
1995 to $2,275.15 at June 30, 1996.
For the Quarter and Six Months Ended June 30, 1995
For the quarter ended June 30, 1995, the Partnership's total
trading revenues including interest income were $4,633,363. During
the second quarter, the Partnership posted an increase in Net Asset
Value per Unit. The most significant trading gains were recorded
in global interest rate futures during April and May. As bond
prices moved higher globally, the Partnership was able to take
advantage of the resulting trends and record trading gains from
U.S. Treasury bond and Treasury note futures, as well as from
Japanese government bond, Australian bond and European bond
futures. Smaller gains were experienced from trading Nikkei and
S&P 500 stock index futures. Gains in June from trading wheat and
coffee futures also contributed to the overall Partnership gains,
<PAGE>
although losses in soybean products, livestock and cotton resulted
in net losses for the agricultural and soft commodities complexes.
April's losses in the agricultural and soft commodities markets,
were coupled with losses recorded in metals and energy futures.
These losses offset a portion of the Partnership's overall gains
for the quarter. Total expenses for the period were $1,458,283,
resulting in net income of $3,175,080. The value of an individual
Unit in the Partnership increased from $2,088.42 at March 31, 1995
to $2,232.26 at June 30, 1995.
For the six months ended June 30, 1995, the Partnership's total
trading revenues including interest income were $9,137,846. During
the first six months, the Partnership posted an increase in Net
Asset Value per Unit. The most significant trading gains were
recorded in global interest rate futures, as bond prices trended
higher between February and May. Gains in U.S., Japanese,
Australian and European interest rate futures resulted in strong
gains for the Partnership. Gains were recorded in currency
trading, as the U.S. dollar weakened versus the Japanese yen and a
majority of the major European currencies during February, March
and April. Smaller gains were also recorded throughout the first
half in Nikkei and S&P 500 stock index futures. Trading losses
recorded in the soybean products, aluminum, gold, cotton, pork
bellies, crude oil and heating oil offset a portion of the overall
gains experienced by the Partnership during the first half of the
year. Total expenses for the period were $3,268,446, resulting in
<PAGE>
net income of $5,869,400. The value of an individual Unit in the
Partnership increased from $1,967.64 at December 31, 1994 to
$2,232.26 at June 30, 1995.
<PAGE>
PART II. OTHER INFORMATION
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - None.
(B) Reports on Form 8-K - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dean Witter Cornerstone Fund III
(Registrant)
By: Demeter Management Corporation
(General Partner)
August 13, 1996 By: /s/ Patti L. Behnke
Patti L. Behnke
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean
Witter Cornerstone Fund III and is qualified in its entirety by reference
to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 39,629,167
<SECURITIES> 0
<RECEIVABLES> 296,941<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,128,967<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 40,128,967<F3>
<SALES> 0
<TOTAL-REVENUES> (1,644,108)<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,689,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,333,258)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,333,258)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,333,258)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $136,274 and receivable from
DWR of $160,667.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $202,859.
<F3>Liabilities include redemptions payable of $596,153, accrued management
fees of $132,583, accrued brokerage commissions of $40,543, common
administrative expenses payable of $165,182 and accrued transaction fees
and costs of $15,712.
<F4>Total revenue includes realized trading revenue of $2,878,851, net
change in unrealized of $(5,375,435) and interest income of $852,476.
</FN>
</TABLE>
