UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the period ended September 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from ________________to_____________
Commission File Number 0-13299
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
September 30, 1997
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
September 30, 1997 (Unaudited) and December 31, 1996........2
Statements of Operations for the Quarters Ended
September 30, 1997 and 1996 (Unaudited).....................3
Statements of Operations for the Nine Months Ended
September 30, 1997 and 1996 (Unaudited).....................4
Statements of Changes in Partners' Capital for the
Nine Months Ended September 30, 1997 and 1996
(Unaudited).................................................5
Statements of Cash Flows for the Nine Months Ended
September 30, 1997 and 1996 (Unaudited).....................6
Notes to Financial Statements (Unaudited)............... 7-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............13-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................19-20
Item 2. Changes in Securities and Use of Proceeds.........20-22
Item 5. Other Information....................................22
Item 6. Exhibits and Reports on Form 8-K.................... 23
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND III
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
September 30, December 31,
1997 1996
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 42,555,067 40,587,011
Net unrealized gain on open contracts 798,104 2,580,803
Net option premiums (298,284) (291,412)
Total Trading Equity 43,054,887 42,876,402
Interest receivable (DWR) 145,221 138,367
Due from DWR 57,294 122,701
Total Assets 43,257,402 43,137,470
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 480,835 680,730
Common administrative expenses payable 146,523 137,548
Accrued management fees 142,885 142,387
Accrued brokerage commissions (DWR) 95,690 129,098
Accrued transaction fees and costs 6,878 12,349
Total Liabilities 872,811 1,102,112
Partners' Capital
Limited Partners (13,669.711 and
15,097.603 Units, respectively) 41,232,051 40,997,752
General Partner (382.103 Units) 1,152,540 1,037,606
Total Partners' Capital 42,384,591 42,035,358
Total Liabilities and Partners' Capital 43,257,402 43,137,470
NET ASSET VALUE PER UNIT 3,016.31 2,715.51
<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 September 30,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 1,591,335 (2,423,822)
Net change in unrealized (511,267) 2,687,470
Total Trading Results 1,080,068 263,648
Interest Income (DWR) 456,621 389,412
Total Revenues 1,536,689 653,060
EXPENSES
Brokerage commissions (DWR) 544,996 618,554
Management fees 440,963 372,913
Transaction fees and costs 54,218 85,572
Common administrative expenses 19,651 10,787
Total Expenses 1,059,828 1,087,826
NET INCOME (LOSS) 476,861 (434,766)
NET INCOME (LOSS) ALLOCATION
Limited Partners 464,881 (425,996)
General Partner 11,980 (8,770)
NET INCOME (LOSS) PER UNIT
Limited Partners 31.36 (22.95)
General Partner 31.36 (22.95)
<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 Nine Months Ended September 30,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 8,294,807 455,028
Net change in unrealized (1,782,699) (2,687,965)
Total Trading Results 6,512,108 (2,232,937)
Interest Income (DWR) 1,356,529 1,241,889
Total Revenues 7,868,637 (991,048)
EXPENSES
Brokerage commissions (DWR) 1,729,266 2,260,911
Management fees 1,318,572 1,203,080
Transaction fees and costs 168,308 292,842
Administrative expenses 56,005 20,142
Total Expenses 3,272,151 3,776,975
NET INCOME (LOSS) 4,596,486 (4,768,023)
NET INCOME (LOSS) ALLOCATION
Limited Partners 4,481,552 (4,670,020)
General Partner 114,934 (98,003)
NET INCOME (LOSS) PER UNIT
Limited Partners 300.80 (256.48)
General Partner 300.80 (256.48)
<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 Nine Months Ended September 30, 1997 and 1996
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C>
<C> <C>
Partners' Capital
December 31, 1995 18,714.921 $45,991,101 $958,573 $46,949,674
Continuous Offering 2.423 5,239 - 5,239
Net Loss - (4,670,020) (98,003) (4,768,023)
Redemptions (2,301.914) (5,216,141) - (5,216,141)
Partners' Capital
September 30, 1996 16,415.430 $36,110,179 $860,570 $36,970,749
Partners' Capital
December 31, 1996 15,479.706 $40,997,752 $1,037,606 $42,035,358
Continuous Offering 1.841 5,000 - 5,000
Net Income - 4,481,552 114,934 4,596,486
Redemptions (1,429.733) (4,252,253) - (4,252,253)
Partners' Capital
September 30, 1997 14,051.814 $41,232,051 $1,152,540 $42,384,591
<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 Nine Months Ended September 30,
1997 1996
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) 4,596,486 (4,768,023)
Noncash item included in net income (loss):
Net change in unrealized 1,782,699 2,687,965
(Increase) decrease in operating assets:
Net option premiums 6,872 -
Interest receivable (DWR) (6,854) 33,159
Due from DWR 65,407 (47,985)
Increase (decrease) in operating liabilities:
Common administrative expenses payable 8,975 (54,110)
Accrued management fees 498 (33,207)
Accrued brokerage commissions (DWR) (33,408) (18,575)
Accrued transaction fees and costs (5,471) (6,376)
Net cash provided by (used for) operating activities 6,415,204 (2,207,152)
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 5,000 5,239
Increase (decrease) in redemptions payable (199,895) 16,762
Redemptions of units (4,252,253) (5,216,141)
Net cash provided by (used for) financing activities (4,447,148) (5,194,140)
Net increase (decrease) in cash 1,968,056 (7,401,292)
Balance at beginning of period 40,587,011 42,294,365
Balance at end of period 42,555,067 34,893,073
<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, 1996 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 (collectively, "futures interests"). The
Partnership is one of the Dean Witter Cornerstone Funds,
comprised of Dean Witter Cornerstone Fund II, Dean Witter
Cornerstone Fund III, and Dean Witter Cornerstone Fund IV. The
general partner for the partnership is Demeter Management
Corporation ("Demeter"). The commodity broker for most of the
Partnership's transactions is Dean Witter Reynolds Inc. ("DWR").
Both Demeter and DWR are wholly owned subsidiaries of Morgan
Stanley, Dean Witter, Discover & Co. ("MSDWD"). The trading
advisors who make all trading decisions for the Partnership are
Abraham Trading Co., Welton Investment Systems Corporation and
Sunrise Capital Management.
On July 31, 1997, DWR closed the sale of its institutional
futures business and foreign currency trading operations to Carr
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Futures Inc. ("Carr"), a subsidiary of Credit Agricole Indosuez.
Following the sale, Carr became the counterparty on the
Partnership's foreign currency trades. However, during a
transition period of about four months, DWR will continue to
perform certain services relating to the Partnership's futures
trading including clearance. After such transition period, DWR
will continue to serve as a non-clearing commodity broker for the
Partnership with Carr providing all clearing services for
Partnership transactions.
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in
commodity trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on current 13-week U.S.
Treasury Bill rates. Brokerage expenses incurred by the
Partnership are paid to DWR.
3. Financial Instruments
The Partnership trades futures and forward contracts in interest
rates, stock indices, commodities, currencies, petroleum and
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
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
significantly influence the market value of these contracts,
including interest rate volatility. At September 30, 1997 and
December 31, 1996, open contracts were:
Contract or Notional Amount
September 30, 1997 December 31, 1996
$ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 115,607,000 118,163,000
Commitments to Sell 7,785,000 59,405,000
Options Written 62,986,000 18,613,000
Commodity Futures:
Commitments to Purchase 13,194,000 17,683,000
Commitments to Sell 15,608,000 22,811,000
Options Written - 18,407,000
Foreign Futures:
Commitments to Purchase 50,809,457 62,344,000
Commitments to Sell 22,325,000 22,390,000
Options Written - -
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 17,550,000 420,000
Commitments to Sell 26,170,000 1,379,000
A portion of the amounts indicated as off-balance-sheet risk in
forward currency contracts is due to offsetting forward
commitments to purchase and sell the same currency on the same
date in the futures. These commitments are economically
offsetting, but are not offset in the forward market until the
settlement date.
The net unrealized gains on open contracts are reported as a
component of "Equity in Commodity futures trading accounts" on
the
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Statements of Financial Condition and totaled $798,104 and
$2,580,803 at September 30, 1997 and December 31, 1996
respectively. Of the $798,104 net unrealized gain on open
contracts at September 30, 1997, $994,901 related to exchange-
traded futures contracts and $(196,797)related to off-exchange-
traded forward currency contracts. Of the $2,580,803 net
unrealized gain on open contracts at December 31, 1996,
$2,589,289 related to exchange-traded futures contracts and
$(8,486) related to off-exchange-traded forward currency
contracts.
Exchange-traded futures contracts held by the Partnership at
September 30, 1997 and December 31, 1996 mature through March
1998 and June 1997 respectively. Off-exchange-traded forward
currency contracts held by the Partnership at September 30, 1997
and December 31, 1996 mature through December 1997 and January
1997. 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 either DWR or Carr
acts as the futures commission merchant or the counterparty, with
respect to most of the Partnership's assets. Exchange-traded
futures contracts are marked to market on a daily basis, with
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
variations in value settled on a daily basis. DWR, as the
futures commission merchant for all of the Partnership's exchange-
traded-futures contracts, is required pursuant to regulations of
the Commodity Futures Trading Commission ("CFTC") to segregate
from its own assets and for the sole benefit of its commodity
customers, all funds held by DWR with respect to exchange-traded
futures contracts including an amount equal to the net unrealized
gain on all open futures contracts, which funds totaled
$43,336,770 and $43,176,300 at September 30, 1997 and December
31, 1996, respectively. With respect to the Partnership's off-
exchange-traded forward currency contracts, there are no daily
settlements of variations in value nor is there any requirement
that an amount equal to the net unrealized gain on open forward
contracts be segregated. With respect to those off-exchange
traded forward currency contracts, the Partnership is at risk to
the ability of Carr, the sole counterparty on all of such
contracts, to perform. Carr's parent, Credit Agricole Indosuez,
has guaranteed Carr's obligations to the Partnership.
For the nine months ended September 30, 1997 and the year ended
December 31, 1996, the average fair value of financial
instruments held for trading purposes was as follows:
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
September 30, 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 74,052,000 54,151,000
Options on Financial Futures 907,000 72,099,000
Commodity Futures 28,317,000 19,145,000
Options on Commodity Futures 1,452,000 5,962,000
Foreign Futures 49,305,000 20,141,000
Options on Foreign Futures - 9,397,000
Off-Exchange-Traded Forward
Currency Contracts 2,081,000 3,015,000
December 31, 1996
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 105,128,000 74,480,000
Options on Financial Futures - 10,138,000
Commodity Futures 44,276,000 18,531,000
Options on Commodity Futures - 2,763,000
Foreign Futures 80,000,000 27,228,000
Options on Foreign Futures - 1,000
Off-Exchange-Traded Forward
Currency Contracts 233,000 354,000
<PAGE>
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Liquidity The Partnership's assets are deposited in futures
interest trading accounts with DWR and Carr, and are used by the
Partnership as margin to engage in futures interest trading. DWR
and Carr hold such assets in either designated depositories or in
securities approved by the CFTC for investment of customer funds.
The Partnership's assets held by DWR and Carr may be used as
margin solely for the Partnership's trading. Since the
Partnership's sole purpose is to trade in futures interests, it
is expected that the Partnership will continue to own such liquid
assets for margin purposes.
The Partnership's investment in futures interests may, from time
to time, be illiquid. Most United States futures exchanges limit
fluctuations in certain futures interest prices during a single
day by regulations referred to as "daily price fluctuations
limits" or "daily limits". Pursuant to such regulations, during
a single trading day no trades may be executed at prices beyond
the daily limit. If the price of a particular futures interest
has increased or decreased by an amount equal to the "daily
limit," positions in such futures interest can neither be taken
nor liquidated unless traders are willing to effect trades at or
within the limit. Futures interest 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 futures interests and result in
restrictions on redemptions. However, since the commencement of
trading by the Partnership, there has never been a time when
<PAGE>
illiquidity has affected a material portion of the Partnership's
assets.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in profitable markets or
prevent the Partnership from promptly liquidating unfavorable
positions in such markets and subjecting it to substantial
losses.
Either of these market conditions could result in restrictions
on redemptions.
Capital Resources The Partnership does not have, nor does it
expect to have, any capital assets. Redemptions and exchanges of
Units of Limited Partnership Interest in the future will affect the
amount of funds available for investments in futures interests
in subsequent periods. As redemptions are at the discretion of 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 Nine Months Ended September 30, 1997
For the quarter ended September 30, 1997, the Partnership's total
trading revenues including interest income were $1,536,689.
During the third quarter, the Partnership posted an increase in
Net Asset Value per Unit. The most significant gains were
recorded in the financial futures markets, particularly in
Australian, Japanese and European bond futures, due to an upward
move in global interest rate futures prices during July and
September.
<PAGE>
Smaller gains were recorded from long U.S. and European stock
index futures as prices in these markets also increased during
July. In currencies, profits were recorded during July from
short positions in the German mark as the value of the U.S.
dollar increased versus the mark. Smaller gains were recorded in
the energy markets from long natural gas futures positions as
prices moved dramatically higher during August and September. A
portion of the Partnership's overall gains for the quarter was
offset by losses recorded from trendless price movement in
agriculturals and soft commodities throughout a majority of the
quarter. Total expenses for the quarter were $1,059,828,
resulting in net income of $476,861. The value of an individual
Unit in the Partnership increased from $2,984.95 at June 30, 1997
to $3,016.31 at September 30, 1997.
For the nine months ended September 30, 1997, the Partnership's
total trading revenues including interest income were $7,868,637.
During the first nine months of the year, the Partnership posted
an increase in Net Asset Value per Unit. The most significant
trading gains were recorded in the soft commodities markets from
long coffee futures positions as coffee prices trended higher
during January and February and again during April and May.
Gains were also recorded in the currency markets as the value of
the U.S. dollar strengthened relative to most world currencies
during the first and third quarters of the year. In financial
futures trading, gains were recorded from long global stock index
futures positions as global equity prices trended higher between
May and July. Smaller gains were recorded during the third
quarter from a bullish trend in global interest rate futures
<PAGE>
prices. Smaller profits were experienced in the metals markets
during January, February and July from long zinc futures
positions as prices in this market moved higher. A portion of
the Partnership's gains was offset by losses recorded from
trading energy futures as oil and gas prices moved without
consistent direction for a majority of the year. One exception
in the energy complex was natural gas futures prices, which
increased steadily during the third quarter, thus resulting in
profits from long positions. In the agricultural markets,
smaller losses were experienced from trading livestock futures
earlier in the year. Total expenses for the period were
$3,272,151, resulting in net income of $4,596,486. The value of
an individual Unit in the Partnership increased from $2,715.51 at
December 31, 1996 to $3,016.31 at September 30, 1997.
For the Quarter and Nine Months Ended September 30, 1996
For the quarter ended September 30, 1996, the Partnership's total
trading revenues including interest income were $653,060. During
the third quarter, the Partnership posted a decrease in Net Asset
Value per Unit. Trading gains during the quarter were offset by
brokerage commissions resulting in net trading losses. The most
significant losses were recorded in soft commodities as coffee,
cocoa and cotton futures prices moved in a choppy pattern
throughout the quarter. Additional losses were recorded in
agricultural futures as soybean products prices also moved
without consistent direction between July and September. In
currency trading, losses were recorded as the value of the German
mark and Swiss franc experienced short-term volatility versus the
U.S. dollar and other world currencies. These losses were
partially
<PAGE>
offset by gains recorded from long crude and heating oil futures
positions as prices trended higher during the quarter.
Additional profits recorded from long Australian, European and
Japanese bond futures positions, as prices trended higher, also
helped to offset a portion of the Partnership's losses for the
quarter. Total expenses for the quarter were $1,087,826,
resulting in a net loss of $434,766. The value of an individual
Unit in the Partnership decreased from $2,275.15 at June 30, 1996
to $2,252.20 at September 30, 1996.
For the nine months ended September 30, 1996, the Partnership's
total trading losses net of interest income were $991,048. During
the first nine months, the Partnership posted a decrease in Net
Asset Value per Unit. The most significant losses were recorded
in soft commodities as coffee, sugar and cocoa futures prices
moved in a trendless pattern for a majority of the year.
Additional losses were recorded in currency trading as the value
of the Swiss franc and British pound moved without consistent
direction versus other world currencies during a majority of the
first and third quarters. Gains recorded from short Japanese yen
positions, as the value of the yen moved lower versus the U.S.
dollar, helped to offset a portion of these losses. In other
markets, small losses were recorded from trendless price movement
experienced in metals during the first quarter and in soybean
products throughout the year. These losses were partially offset
by gains recorded from long crude oil futures positions due to a
strong upward price trend, particularly during the third quarter.
Additional gains recorded during the third quarter from long
international interest rate futures positions more than offset
<PAGE>
losses experienced during February in these same markets from a
dramatic price reversal lower. Total expenses for the period
were $3,776,975, resulting in a net loss of $4,768,023. The
value of an individual Unit in the Partnership decreased from
$2,508.68 at December 31, 1995 to $2,252.20 at September 30,
1996.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar
purported class actions were filed in the Supreme Court of the
State of California, County of Los Angeles, on behalf of all
purchasers of interests in limited partnership commodity pools
sold by DWR. Named defendants include DWR, Demeter, Dean Witter
Futures & Currency Management, Inc., MSDWD (all such parties
referred to hereafter as the "Dean Witter Parties"), the
Partnership, certain other limited partnership commodity pools of
which Demeter is the general partner, and certain trading
advisors to those pools. On June 16, 1997, the plaintiffs in the
above actions filed a consolidated amended complaint. Similar
purported class actions were also filed on September 18 and 20,
1996 in the Supreme Court of the State of New York, New York
County, and on November 14, 1996 in the Superior Court of the
State of Delaware, New Castle County, against the Dean Witter
Parties and certain trading advisors on behalf of all purchasers
of interests in various limited partnership commodity pools,
including the Partnership, sold by DWR. Generally, these
complaints allege, among other things, that the defendants
committed fraud, deceit, misrepresentation, breach of fiduciary
duty, fraudulent and unfair business practices, unjust
enrichment, and conversion in connection with the sale and
operation of the various limited partnership commodity pools.
The 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
<PAGE>
defendants. The Dean Witter Parties believe that they and the
Partnership have strong defenses to, and they will vigorously
contest, the actions. Although the ultimate outcome of legal
proceedings cannot be predicted with certainty, it is the opinion
of management of the Dean Witter Parties that the resolution of
the actions will not have a material adverse effect on the
financial condition or the results of operations of any of the
Dean Witter Parties or the Partnership.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Dean Witter Cornerstone Fund I ("Cornerstone I"); Dean Witter
Cornerstone Fund II ("Cornerstone II"), and Dean Witter
Cornerstone III ("Cornerstone III") collectively registered
250,000 Units of Limited Partnership Interest ("Units") pursuant
to a Registration Statement on Form S-1, which became effective
on May 31, 1984 (the "Registration Statement") (SEC File Numbers
2-88587; 88587-01; 88587-02). As contemplated in the
Registration Statement, an additional fund, Dean Witter
Cornerstone Fund IV ("Cornerstone IV" and, collectively with
Cornerstone I, Cornerstone II and Cornerstone III, the
"Partnerships") was registered pursuant to Post-Effective
Amendment No. 5 to the Registration Statement, which became
effective on February 6, 1987. The managing underwriter for the
Partnerships is DWR.
The offering for Cornerstone I originally commenced on May 31,
1984, and 18,679.643 Units of Cornerstone I were sold prior to
its dissolution on December 31, 1991. The offering for
Cornerstone II and Cornerstone III also originally commenced on
May 31, 1984 and currently continues, with 41,693.538 and
74,400.002 Units of
<PAGE>
Cornerstone II and Cornerstone III, respectively, sold through
September 30, 1997. The offering for Cornerstone IV originally
commenced on February 6, 1987 and currently continues, with
100,550.782 Units sold through September 30, 1997. Through
September 30, 1997, an aggregate of 235,323.965 Units of the
Partnership have been sold, leaving 14,676.035 Units remaining
available for sale as of October 1, 1997.
The aggregate offering amount registered was $262,496,000, based
upon the initial offering price of $1,050 per Unit ($1,000
initial Net Asset Value per Unit, plus a $50 per Unit sales
charge on all but 80 Units sold to the Partnerships' initial
trading managers) during the Initial Offering Periods of May 31,
1984 through November 30, 1984 with respect to Cornerstone I,
Cornerstone II and Cornerstone III, and February 6, 1987 through
May 6, 1987 with respect to Cornerstone IV.
After the respective Initial Offering Periods, Units in the
Partnerships were sold at 107.625% of Net Asset Value per Unit,
including a charge for offering expenses of 2.5% of Net Asset
Value per Unit, and a sales charge of 5% of the sum of the Net
Asset Value per Unit and the charge for offering expenses, during
the "Continuing Offering".
The aggregate price of Units sold through September 30, 1997 with
respect to Cornerstone III is $137,116,764.
Effective September 30, 1994, Cornerstone II, Cornerstone II and
Cornerstone IV were closed to new investors; Units have been sold
since then solely in "Exchanges" with existing investors, at 100%
of Net Asset Value
<PAGE>
per Unit. DWR has been paying all expenses in connection with
the offering of Units since September 30, 1994, without
reimbursement.
Item 5. OTHER INFORMATION
On July 21, 1997, MSDWD, the sole shareholder of Demeter,
appointed a new Board of Directors consisting of Richard M.
DeMartini, Mark J. Hawley, Lawrence Volpe, Joseph G. Siniscalchi,
Edward C. Oelsner III, and Robert E. Murray.
<PAGE>
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - None.
(B) Reports on Form 8-K - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dean Witter Cornerstone Fund III
(Registrant)
By: Demeter Management Corporation
(General Partner)
November 12, 1997 By: /s/ Patti L. Behnke
Patti L. Behnke
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean
Witter Cornerstone Fund III and is qualified in its entirety by reference
to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 42,555,067
<SECURITIES> 0
<RECEIVABLES> 202,515<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 43,257,402<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 43,257,402<F3>
<SALES> 0
<TOTAL-REVENUES> 7,868,637<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,272,151
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,596,486
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 4,596,486
<CHANGES> 0
<NET-INCOME> 4,596,486
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $145,221 and due from DWR
of $57,294.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $798,104 and net option premiums of $(298,284).
<F3>Liabilities include redemptions payable of $480,835, accrued management
fees of $142,885, accrued brokerage commissions of $95,690, common
administrative expenses payable of $146,523 and accrued transaction fees
and costs of $6,878.
<F4>Total revenue includes realized trading revenue of $8,294,807, net
change in unrealized of $(1,782,699) and interest income of $1,356,529.
</FN>
</TABLE>
