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 _________________to______________.
Commission File Number 0-15442
DEAN WITTER CORNERSTONE FUND IV
(Exact name of registrant as specified in its charter)
New York 13-3393597
(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 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 IV
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)...............7-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............12-17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................18
</TABLE>
<PAGE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND IV
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
June 30, December 31,
1996 1995
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 97,026,194 104,927,961
Net unrealized gain on open contracts 2,579,256 70,143
Total Trading Equity 99,605,450 104,998,104
Interest receivable (DWR) 342,500 364,747
Total Assets 99,947,950 105,362,851
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 1,787,267 1,044,804
Accrued management fees 331,245 349,039
Common administrative expenses payable 157,242 267,788
Accrued brokerage commissions (DWR) 82,044 32,580
Accrued transaction fees and costs 4,102 1,629
Total Liabilities 2,361,900 1,695,840
Partners' Capital
Limited Partners (32,468.760 and
35,905.625 Units, respectively) 95,702,901 101,854,654
General Partner (638.889 Units) 1,883,149 1,812,357
Total Partners' Capital 97,586,050 103,667,011
Total Liabilities and Partners' Capital 99,947,950 105,362,851
NET ASSET VALUE PER UNIT 2,947.54 2,836.73
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND IV
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended June 30,
1996 1995
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 3,865,319 13,459,422
Net change in unrealized 1,144,346 (16,823,526)
Total Trading Results 5,009,665 (3,364,104)
Interest Income (DWR) 1,018,979 1,249,614
Total Revenues 6,028,644 (2,114,490)
EXPENSES
Brokerage commissions (DWR) 1,044,984 466,867
Management fees 1,008,992 1,222,016
Transaction fees and costs 58,978 25,634
Common administrative expenses 9,332 -
Total Expenses 2,122,286 1,714,517
NET INCOME (LOSS) 3,906,358 (3,829,007)
NET INCOME (LOSS) ALLOCATION
Limited Partners 3,834,695 (3,770,994)
General Partner 71,663 (58,013)
NET INCOME (LOSS) PER UNIT
Limited Partners 112.17 (90.80)
General Partner 112.17 (90.80)
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND IV
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Six Months Ended June 30,
1996 1995
$ $
REVENUES
<S> <C> <C>
Trading profit:
Realized 3,377,864 23,221,027
Net change in unrealized 2,509,113 367,966
Total Trading Results 5,886,977 23,588,993
Interest Income (DWR) 2,039,400 2,494,527
Total Revenues 7,926,377 26,083,520
EXPENSES
Management fees 2,030,247 2,348,957
Brokerage commissions (DWR) 1,888,542 1,761,793
Transaction fees and costs 109,211 106,358
Common administrative expenses 18,143 39,890
Total Expenses 4,046,143 4,256,998
NET INCOME 3,880,234 21,826,522
NET INCOME ALLOCATION
Limited Partners 3,809,442 21,521,138
General Partner 70,792 305,384
NET INCOME PER UNIT
Limited Partners 110.81 477.99
General Partner 110.81 477.99
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND IV
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 47,632.891 $108,418,306 $1,473,960 $109,892,266
Continuous Offering 63.107 172,049 - 172,049
Net Income - 21,521,138 305,384 21,826,522
Redemptions (5,985.376) (15,724,253) - (15,724,253)
Partners' Capital
June 30, 1995 41,710.622 $114,387,240 $1,779,344 $116,166,584
Partners' Capital
December 31, 1995 36,544.514 $101,854,654 $1,812,357 $103,667,011
Continuous Offering 25.735 73,609 - 73,609
Net Income - 3,809,442 70,792 3,880,234
Redemptions (3,462.600) (10,034,804) - (10,034,804)
Partners' Capital
June 30, 1996 33,107.649 $95,702,901 $1,883,149 $97,586,050
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER CORNERSTONE FUND IV
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 3,880,234 21,826,522
Noncash item included in net income:
Net change in unrealized (2,509,113) (367,966)
Decrease in operating assets:
Interest receivable (DWR) 22,247 25,927
Increase (decrease) in operating liabilities:
Accrued management fees (17,794) 20,928
Common administrative expenses payable (110,546) (54,586)
Accrued brokerage commissions (DWR) 49,464 7,200
Accrued transaction fees and costs 2,473 360
Net cash provided by operating activities 1,316,965 21,458,385
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 73,609 172,049
Increase in redemptions payable 742,463 4,009
Redemptions of units (10,034,804) (15,724,253)
Net cash used for financing activities (9,218,732) (15,548,195)
Net increase (decrease) in cash (7,901,767) 5,910,190
Balance at beginning of period 104,927,961 111,508,180
Balance at end of period 97,026,194 117,418,370
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
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 IV (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 John W. Henry & Co., 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.
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
3. Financial Instruments
The Partnership trades futures and forward contracts in interest
rates, stock indices 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 June 30, 1996,
open contracts were:
Contract or
Notional Amount
$
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 65,167,000
Commitments to Sell 173,687,000
Off Exchange Traded Forward
Currency Contracts
Commitments to Purchase 251,928,000
Commitments to Sell 274,343,000
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A portion of the amounts indicated as off-balance-sheet risk in
forward currency contracts is due to offsetting forward commitments
to purchase and to sell the same currency on the same date in the
future. These commitments are economically offsetting, but are not
offset in the forward market until the settlement date.
The 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 $2,579,256 at June 30, 1996. Of
this amount, $1,269,588 related to exchange-traded futures
contracts and $1,309,668 related to off-exchange-traded forward
currency contracts.
Exchange-traded futures contracts held by the Partnership at June
30, 1996 mature through September 1996. Off-exchange-traded
forward currency contracts held by the Partnership at June 30, 1996
mature through September 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.
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 credited or charged to the Fund's account 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, 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
$98,295,782 at June 30, 1996. 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 DWR, the counterparty on all such contracts, to perform.
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
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 Financial
Futures Contracts 29,805,000 123,214,000
Off-Exchange-Traded Forward
Currency Contracts 289,606,000 280,953,000
4. Subsequent Event
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.
<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, and other
commodity interest trading, it is expected that the Partnership
will continue to own such liquid assets for margin purposes.
The Partnership's investment in commodity futures 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 $6,028,644. During
the second quarter, the Partnership posted an increase in Net Asset
Value per Unit. The most significant gains were recorded in this
currency-only Fund during April from short positions in the German
mark, as well as in the Swiss and French franc, as the value of
these currencies moved lower relative to other world currencies.
Short Swiss franc positions also profited during May as the franc's
value continued to move lower versus the U.S. dollar. Additional
gains were recorded from long positions in the Australian dollar as
<PAGE>
the value of the Australian dollar moved higher relative to other
major currencies during April and May. These gains were partially
offset by losses recorded during June as the Australian dollar lost
its upward momentum. Long positions in the British pound also
profited during May as its value experienced an upward move
relative to the U.S. dollar. Losses recorded from previously
established short positions in the Japanese yen during April, as
its value moved sharply higher late in the month, more than offset
gains recorded from short yen positions during June. Total
expenses for the quarter were $2,122,286, resulting in net income
of $3,906,358. The value of an individual Unit in the Partnership
increased from $2,835.37 at March 31, 1996 to $2,947.54 at June 30,
1996.
For the six months ended June 30, 1996, the Partnership's total
trading revenues including interest income were $7,926,377. During
the first half of the year, the Partnership posted an increase in
Net Asset Value per Unit. The most significant gains were recorded
from long positions in the Australian dollar as its value moved
higher relative to other world currencies from February to mid-May.
Gains were also recorded from short positions in the Japanese yen,
as the value of the yen moved lower during January, March and June,
were partially offset by losses recorded from transactions
involving the yen during February and April. Additional gains were
recorded from transactions involving the New Zealand dollar during
January and March. A portion of overall gains was offset by losses
<PAGE>
recorded from transactions involving the Singapore dollar
throughout the first quarter. Losses recorded in most major world
currencies during February, due to sharp reversals and volatile
price movement, also offset a portion of the gains recorded in the
first half of the year. Total expenses for the period were
$4,046,143, resulting in net income of $3,880,234. The value of an
individual Unit in the Partnership increased from $2,836.73 at
December 31, 1995 to $2,947.54 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 losses net of interest income were $2,114,490. During the
second quarter, the Partnership posted a decrease in Net Asset
Value per Unit. The most significant trading losses were recorded
in this currency only Fund during May as a result of a reversal in
the downward price trend of the U.S. dollar versus the major
European currencies and the Japanese yen. The majority of these
losses were recorded from transactions involving the German mark,
French franc, Norwegian kroner and Japanese yen. Smaller losses in
June compounded the Partnership's overall losses for the quarter
due to small losses recorded in transactions involving the Japanese
yen, French franc and British pound. In April, gains recorded from
transactions involving the Japanese yen, Australian and New Zealand
dollars and the Spanish peseta helped to offset a portion of the
losses that followed in May and June. Total expenses for the
period were $1,714,517, resulting in a net loss of $3,829,007. The
value of an individual Unit in the Partnership decreased from
$2,875.86 at March 31, 1995 to $2,785.06 at June 30, 1995.
<PAGE>
For the six months ended June 30, 1995, the Partnership's total
trading revenues including interest income were $26,083,520.
During the first six months, the Partnership posted an increase in
Net Asset Value per Unit. The most significant trading gains were
recorded during March as a result of the increased value in world
currencies versus the U.S. and Canadian dollars. The majority of
the gains recorded in March were from transactions involving the
Japanese yen, German mark and Swiss franc. Additional gains were
the result of trading involving the French franc and Norwegian
kroner. In February, gains were also recorded from transactions
involving the German mark, Swiss and French francs and the
Norwegian kroner both versus the U.S. dollar and in crossrate
trading versus the Canadian dollar. Small gains were recorded in
April, as the downward trend in the U.S. dollar continued and the
Partnership was able to experience gains from transactions
involving the Japanese yen, Australian and New Zealand dollars and
Spanish peseta. However, the Partnership began the year with
losses as a result of a volatile but trendless currency environment
throughout January. In May, the Partnership also sustained losses
in trading as a result of a reversal in the U.S. dollar from its
previous decline against the major world currencies, primarily the
German mark, French franc, Norwegian kroner and Japanese yen.
Losses were also experienced in crossrate trading versus the
Canadian, New Zealand and Australian dollars. The short-term
choppy environment that followed this reversal continued into June
and resulted in losses from transactions involving the Japanese
<PAGE>
yen, British pound and French franc. Total expenses for the period
were $4,256,998, resulting in net income of $21,826,522. The value
of an individual Unit in the Partnership increased from $2,307.07
at December 31, 1994 to $2,785.06 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 IV
(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 IV 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> 97,026,194
<SECURITIES> 0
<RECEIVABLES> 342,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 99,947,950<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 99,947,950<F2>
<SALES> 0
<TOTAL-REVENUES> 7,926,377<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,046,143
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,880,234
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,880,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,880,234
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net unrealized
loss on open contracts of $2,579,256.
<F2>Liabilities include redemptions payable of $1,787,267, accrued management
fees of $331,245, common administrative expenses payable of $157,242,
accrued brokerage commissions of $82,044 and accrued transaction fees
and costs of $4,102.
<F3>Total revenue includes realized trading revenue of $3,377,864, net change
in unrealized of $2,509,113 and interest income of $2,039,400.
</FN>
</TABLE>
