UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________________to_____________
Commission File Number 0-13299
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 Corporation
Two World Trade Center, 62 Fl., New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND III
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 1998
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
September 30, 1998 (Unaudited) and December 31, 1997.......2
Statements of Operations for the Quarters Ended
September 30, 1998 and 1997 (Unaudited)....................3
Statements of Operations for the Nine Months Ended
September 30, 1998 and 1997 (Unaudited)....................4
Statements of Changes in Partners' Capital for the
Nine Months Ended September 30, 1998 and 1997 (Unaudited)..5
Statements of Cash Flows for the Nine Months Ended
September 30, 1998 and 1997 (Unaudited)....................6
Notes to Financial Statements (Unaudited)...............7-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............13-21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................22
Item 2. Changes in Securities and Use of Proceeds...........22
Item 6. Exhibits and Reports on Form 8-K................... 23
</TABLE>
<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER CORNERSTONE FUND III
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
September 30, December 31,
1998 1997
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 40,026,415 39,762,715
Net unrealized gain on open contracts5,041,458 1,938,295
Net option premiums (150,813) (158,765)
Total Trading Equity 44,917,060 41,542,245
Interest receivable (DWR) 138,562 145,100
Due from DWR 97,120 94,981
Total Assets 45,152,742 41,782,326
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 300,992 429,759
Accrued management fees 149,521 138,480
Accrued administrative expenses 147,029 99,713
Total Liabilities 597,542 667,952
Partners' Capital
Limited Partners (12,460.124 and
13,352.334 Units, respectively)43,229,521 39,970,539
General Partner (382.103 Units) 1,325,679 1,143,835
Total Partners' Capital 44,555,200 41,114,374
Total Liabilities and Partners' Capital 45,152,742 41
,782,326
NET ASSET VALUE PER UNIT 3,469.43 2,993.52
<FN>
The accompanying notes 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,
1998 1997
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 1,195,020 1,591,335
Net change in unrealized 3,556,398 (511,267)
Total Trading Results 4,751,418 1,080,068
Interest Income (DWR) 422,909 456,621
Total Revenues 5,174,327 1,536,689
EXPENSES
Brokerage commissions (DWR) 543,426 544,996
Management fees 434,472 440,963
Transaction fees and costs 57,477 54,218
Administrative expenses 20,852 19,651
Total Expenses 1,056,227 1,059,828
NET INCOME 4,118,100 476,861
NET INCOME ALLOCATION
Limited Partners 3,997,158 464,881
General Partner 120,942 11,980
NET INCOME PER UNIT
Limited Partners 316.52 31.36
General Partner 316.52 31.36
<FN>
The accompanying notes 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,
1998 1997
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 5,018,082 8,294,807
Net change in unrealized 3,103,163 (1,782,699)
Total Trading Results 8,121,245 6,512,108
Interest Income (DWR) 1,280,723 1,356,529
Total Revenues 9,401,968 7,868,637
EXPENSES
Brokerage commissions (DWR) 1,636,282 1,729,266
Management fees 1,270,563 1,318,572
Transaction fees and costs 168,130 168,308
Administrative expenses 53,026 56,005
Total Expenses 3,128,001 3,272,151
NET INCOME 6,273,967 4,596,486
NET INCOME ALLOCATION
Limited Partners 6,092,123 4,481,552
General Partner 181,844 114,934
NET INCOME PER UNIT
Limited Partners 475.91 300.80
General Partner 475.91 300.80
<FN>
The accompanying notes 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, 1998 and 1997
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C>
<C>
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 - 4,481,552 114,934
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
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 - 6,092,123 181,844
6,273,967
Redemptions (897.394) (2,849,139) -
(2,849,139)
Partners' Capital
September 30, 1998 12,842.227 $43,229,521 $1,325,679
$44,555,200
<FN>
The accompanying notes 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,
1998 1997
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income 6,273,967 4
,596,486
Noncash item included in net income:
Net change in unrealized (3,103,163) 1
,782,699
(Increase) decrease in operating assets:
Net option premiums (7,952) 6,872
Interest receivable (DWR) 6,538 (6,854)
Due from DWR (2,139) 65,407
Increase (decrease) in operating liabilities:
Accrued management fees 11,041 498
Acccrued administrative expenses 47,316 8,975
Accrued brokerage commissions (DWR) - (33,408)
Accrued transaction fees and costs -
(5,471)
Net cash provided by operating activities 3,225,608
6,415,204
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 15,998 5,000
Decrease in redemptions payable (128,767) (
199,895)
Redemptions of units (2,849,139) (
4,252,253)
Net cash used for financing activities (2,961,908) (
4,447,148)
Net increase in cash 263,700 1
,968,056
Balance at beginning of period 39,762,715 4
0,587,011
Balance at end of period 40,026,415 4
2,555,067
<FN>
The accompanying notes 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 of Dean Witter Cornerstone
Fund III (the "Partnership"). The financial statements and
condensed notes herein should be read in conjunction with the
Partnership's December 31, 1997 Annual Report on Form 10-K.
1. Organization
Dean Witter Cornerstone Fund III 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, the Partnership, and Dean Witter Cornerstone
Fund IV. The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter
Reynolds Inc. ("DWR"), an affiliate of Demeter. The clearing
commodity broker is Carr Futures Inc. ("Carr"), providing
clearing and execution services. Both Demeter and DWR are wholly-
owned subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW").
The trading advisors who make all trading decisions for the
Partnership are Abraham Trading Co., Welton Investment
Corporation and Sunrise Capital Management, Inc. (the "Trading
Advisors").
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interest trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on current 13-week U.S.
Treasury bill rates. Brokerage expenses incurred by the
Partnership are paid to DWR.
3. Financial Instruments
The Partnership trades futures, options, and forward contracts in
interest rates, stock indices, commodities and currencies.
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 September 30, 1998 and December 31, 1997,
open contracts were:
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Contract or Notional Amount
September 30, 1998 December 31, 1997
$ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 170,529,000 50,242,000
Commitments to Sell 5,520,000 21,172,000
Options Written 13,334,000 -
Commodity Futures:
Commitments to Purchase 6,276,000 8,055,000
Commitments to Sell 13,801,000 31,622,000
Options Written 6,835,000 -
Foreign Futures:
Commitments to Purchase 224,483,000 50,870,000
Commitments to Sell 12,223,000 42,064,000
Options Written 5,000 -
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 35,575,000 27,863,000
Commitments to Sell 11,845,000 41,794,000
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 future. These commitments are economically
offsetting, but are not offset in the forward market until the
settlement date.
The net unrealized gain on open contracts are reported as a
component of "Equity in Commodity futures trading accounts" on
the Statements of Financial Condition and totaled $5,041,458 and
$1,938,295 at September 30, 1998 and December 31, 1997,
respectively.
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Of the $5,041,458 net unrealized gain on open contracts at
September 30, 1998, $4,489,038 related to exchange-traded futures
contracts and $552,420 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.
Exchange-traded futures contracts held by the Partnership at
September 30, 1998 and December 31, 1997 mature through June 1999
and June 1998, respectively. Off-exchange-traded forward
currency contracts held by the Partnership at September 30, 1998
and December 31, 1997 mature through December 1998 and March
1998, respectively.
The contract amounts in the above table represent the
Partnership's extent of involvement in a particular class of
financial instrument, but not the credit risk associated with
counterparty non-performance. The credit risk associated with
these instruments is limited to the amounts reflected in the
Partnership's Statements of Financial Condition.
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Partnership also has credit risk because DWR and Carr act as
the futures commission merchants or the counterparties, with
respect to most of the Partnership's assets. Exchange-traded
futures contracts are marked to market on a daily basis, with
variations in value settled on a daily basis. Each of DWR and
Carr, as a futures commission merchant for the Partnership's
exchange-traded futures and futures styled options contracts, are
required, pursuant to regulations of the Commodity Futures
Trading Commission ("CFTC"), to segregate from their own assets,
and for the sole benefit of their commodity customers, all funds
held by them with respect to exchange-traded futures 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 $44,515,453 and
$41,931,212 at September 30, 1998 and December 31, 1997,
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 such contracts, to perform.
Carr's parent, Credit Agricole Indosuez, has guaranteed to the
Partnership payment of the net liquidating value of the
transactions in the
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Partnership's account with Carr (including foreign currency
contracts).
For the nine months ended September 30, 1998 and the year ended
December 31, 1997, the average fair value of financial
instruments held for trading purposes was as follows:
September 30, 1998
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 94,147,000 18,544,000
Options on Financial Futures - 33,597,000
Commodity Futures 5,493,000 24,922,000
Options on Commodity Futures - 1,555,000
Foreign Futures 100,022,000 24,662,000
Options on Foreign Futures - 1,000
Off-Exchange-Traded Forward
Currency Contracts 45,041,000 46,002,000
December 31, 1997
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
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - Assets of the Partnership are deposited with DWR as
non-clearing broker and Carr as clearing broker in separate
futures interest trading accounts established for each Trading
Advisor and are used by the Partnership as margin to engage in
futures interest trading. Such assets are held in either non-
interest bearing bank accounts or in securities approved by the
CFTC for investment of customer funds. The Partnership's assets
held by DWR and Carr may be used as margin solely for the
Partnership's trading. Since the Partnership's sole purpose is
to trade in futures interests, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.
The Partnership's investment in futures interests may, from time
to time, be illiquid. Most United States futures exchanges limit
fluctuations in certain futures interest prices during a single
day by regulations referred to as "daily price fluctuations
limits" or "daily limits." Pursuant to such regulations, during
a single trading day no trades may be executed at prices beyond
the daily limit. If the price for a particular futures interest
has increased or decreased by an amount equal to the daily limit,
positions in such futures interest can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Futures interests prices have occasionally
moved the daily limit for several consecutive days with little or
no trading. Such market conditions could prevent the Partnership
<PAGE>
from promptly liquidating its futures interests and result in
restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
Capital Resources The Partnership does not have, nor does it
expect to have, any capital assets. Future redemptions and
exchanges of Units of Limited Partnership Interest will affect
the amount of funds available for investment in futures interests
in subsequent periods. Since they are at the discretion of the
Limited Partners, it is not possible to estimate the amount and
therefore, the impact of future redemptions and exchanges.
Results of Operations
For the Quarter and Nine Months Ended September 30, 1998
For the quarter ended September 30, 1998, the Partnership
recorded total trading revenues including interest income of
$5,174,327 and posted an increase in Net Asset Value per Unit.
The most significant gains were recorded in the global interest
rate futures markets during August and September from long
positions in U.S. and European bond futures as prices in these
<PAGE>
markets trended higher. Most global bond prices rallied higher
during the last two months of the quarter as investors continued
to flock to these perceived "safe havens" due to worldwide
economic uncertainty and the subsequent volatility. Additional
gains were recorded in this market complex as long Japanese bond
futures positions profited from the upward trend in prices. In
the agricultural markets, profits were recorded from short
positions in the livestock and corn futures as prices in these
markets decreased during July and August due to increasing
supplies and declining demand. A portion of these gains was
offset by losses recorded in global stock index futures from long
S&P 500 Index futures positions as domestic stock prices plunged
during late July and throughout August after reaching record
levels early in the quarter. Additional losses were recorded in
the metals markets during July from short positions in base
metals futures as prices moved higher early in the month. As a
result of this move higher, long positions in these markets were
established only to result in additional losses in late July as
prices regained their previous downward momentum. Smaller losses
were recorded in energy futures trading during September. Total
expenses for the three months ended September 30, 1998 were
$1,056,227, resulting in net income of $4,118,100. The value of
an individual Unit in the Partnership increased from $3,152.91 at
June 30, 1998 to $3,469.43 at September 30, 1998.
For the nine months ended September 30, 1998, the Partnership
recorded total trading revenues including interest income of
$9,401,968 and posted an increase in Net Asset Value per Unit. The
<PAGE>
most significant profits were recorded from long global bond
futures positions, particularly U.S. and German bond futures,
during the third quarter as a result of a strong upward trend in
prices during August and September. Most global bond prices were
pushed significantly higher during this period as investors sought
a "safe haven" in lieu of the worldwide economic instability,
particularly in emerging markets. Smaller profits were recorded
from long positions in Japanese bond futures as prices in this
market also trended higher. In global stock index futures, profits
were recorded from long U.S. and European stock index futures
positions as prices in these markets trended consistently higher to
record highs throughout the first six months of the year before
reversing sharply lower during late July and early August.
Additional gains were recorded in livestock futures from short
cattle and hog futures as prices declined during the second and
third quarters. Gains were recorded in energies from short crude
oil futures positions as oil prices declined during January and
February on news of easing tensions in the Middle East, and again
during May, June and July on reports of increasing supplies.
Smaller gains were recorded from short positions in sugar futures
as sugar prices trended lower between January and April. A portion
of these gains was offset by losses recorded in the metals markets
from short gold futures positions as gold prices reversed higher
during January and September. Smaller losses were recorded from
long silver futures during March as silver prices reversed lower
after trending steadily higher during January and early February.
In currencies, losses were recorded from transactions involving the
British pound, as its
<PAGE>
value moved in a trendless pattern relative to the U.S. dollar
during the first nine months of the year. Total expenses for the
nine months ended September 30, 1998 were $3,128,001, resulting in
net income of $6,273,967. The value of an individual Unit in the
Partnership increased from $2,993.52 at December 31, 1997 to
$3,469.43 at September 30, 1998.
For the Quarter and Nine Months Ended September 30, 1997
For the quarter ended September 30, 1997, the Partnership
recorded total trading revenues including interest income of
$1,536,689 and 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. 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
three months ended September 30, 1997 were $1,059,828, resulting
in net income of $476,861. The value of an individual Unit in
the Partnership
<PAGE>
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
recorded total trading revenues including interest income of
$7,868,637 and posted an increase in Net Asset Value per Unit.
The most significant 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 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 nine months ended
September 30, 1997 were $3,272,151, resulting in net income of
<PAGE>
$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.
Year 2000 Problem - Commodity pools, like financial and business
organizations and individuals around the world, depend on the
smooth functioning of computer systems. Many computer systems in
use today cannot recognize the computer code for the year 2000,
but revert to 1900 or some other date. This is commonly known as
the "Year 2000 Problem." The Partnership could be adversely
affected if computer systems used by it or any third party with
whom it has a material relationship do not properly process and
calculate date-related information and data concerning dates on
or after January 1, 2000. Such a failure could have a negative
impact on the handling or determination of futures trades and
prices and the services provided to the Partnership.
MSDW began its planning in response to the Year 2000 Problem in
1995 and currently has several hundred employees working on such
response. It has developed its own Year 2000 compliance plan to
deal with the problem and had the plan approved by the company's
executive management, Board of Directors and Information
Technology Department. Demeter is coordinating with MSDW in
taking steps that both believe are reasonably designed to address
the Year 2000 Problem with respect to Demeter's computer systems
that relate to the Partnership. This includes hardware and
software upgrades, systems consulting and computer maintenance.
<PAGE>
Beyond the challenge facing internal computer systems, the
systems failure of any of the third parties with whom the
Partnership has a material relationship - the futures exchanges
and clearing organizations through which it trades, Carr, or the
Trading Advisors - could result in a material financial risk to
the Partnership. Regarding the futures exchanges, all U.S.
futures exchanges will be subject to the monitoring of the CFTC
for their Year 2000 preparedness and the major foreign futures
exchanges are also expected to be subject to market-wide testing
of their Year 2000 compliance during 1999. With respect to Carr
and the Trading Advisors, Demeter intends to monitor their
progress throughout 1999 in their Year 2000 compliance and, where
applicable, to test its external interface with Carr and the
Trading Advisors.
Finally, MSDW has begun developing various "contingency plans" in
the event that the systems of such third parties fail, and
Demeter intends to consult closely with MSDW in implementing
those plans. MSDW has also recently reported that its
development of such contingency plans is proceeding on schedule.
Despite the best efforts of both Demeter and MSDW, however, there
can be no assurance that the above steps will be sufficient to
avoid any adverse impact to the Partnership, whether from
failures in their own computer systems or those of Carr, the
Trading Advisors or any other third party.
Risks Associated with the Euro - On January 1, 1999, eleven
countries in the European Union intend to establish fixed
<PAGE>
conversion rates on their existing sovereign currencies and
convert to a common single currency (the "euro"). During a three-
year transition period, the existing sovereign currencies will
continue to exist but only as a fixed denomination of the euro.
Conversion to the euro will prevent the Trading Advisors from
trading in certain currencies and thereby limit its ability to
take advantage of potential market opportunities that might
otherwise have existed had separate currencies been available to
trade, and could result in losses with respect to those
positions.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Previously filed. See Form 10-Q for the quarter ended March 31,
1998.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Dean Witter Cornerstone Fund I ("Cornerstone I"), Dean Witter
Cornerstone Fund II ("Cornerstone II"), and the Partnership
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 the Partnership, the
"Cornerstone Funds"), was registered pursuant to Post-Effective
Amendment No. 5 to the Registration Statement, which became
effective on February 6, 1987. The managing underwriter for the
Cornerstone Funds is DWR.
The offering for the Partnership originally commenced on May 31,
1984 and currently continues with 74,405.186 Units sold through
September 30, 1998. Through September 30, 1998, the Cornerstone
Funds have sold an aggregate of 235,414.617 Units leaving
14,585.383 Units remaining available for sale as of October 1,
1998.
The aggregate price of Units sold through September 30, 1998 with
respect to the Partnership is $137,132,762.
<PAGE>
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K - No reports have been filed for the quarter
ended September 30, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dean Witter Cornerstone Fund III
(Registrant)
By: Demeter Management Corporation
(General Partner)
November 13, 1998 By: /s/ Lewis A. Raibley, III
Lewis A. Raibley, III
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean
Witter Cornerstone Fund III and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 40,026,415
<SECURITIES> 0
<RECEIVABLES> 235,682<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,152,742<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 45,152,742<F3>
<SALES> 0
<TOTAL-REVENUES> 9,401,968<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,128,001
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,273,967
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 6,273,967
<CHANGES> 0
<NET-INCOME> 6,273,967
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $138,562 and due from
DWR of $97,120.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $5,041,458 and net option
premiums of $(150,813).
<F3>Liabilities include redemptions payable of $300,992, accrued management
fee of $149,521, and accrued administrative expenses of $147,029.
<F4>Total revenues include realized trading revenue of $5,018,082, net
change in unrealized of $3,103,163 and interest income of $1,280,723.
</FN>
</TABLE>
