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 March 31, 1997 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
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<TABLE>
DEAN WITTER CORNERSTONE FUND IV
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 1997
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
March 31, 1997 (Unaudited) and December 31, 1996...........2
Statements of Operations for the Quarters Ended
March 31, 1997 and 1996 (Unaudited)........................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 1997 and 1996
(Unaudited)................................................4
Statements of Cash Flows for the Quarters Ended
March 31, 1997 and 1996 (Unaudited)........................5
Notes to Financial Statements (Unaudited)...............6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................12-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................17-18
Item 6. Exhibits and Reports on Form 8-K....................19
</TABLE>
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<TABLE>
DEAN WITTER CORNERSTONE FUND IV
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
1997 1996
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 105,242,085 91,656,399
Net unrealized gain on open contracts 908,554 5,330,520
Total Trading Equity 106,150,639 96,986,919
Interest receivable (DWR) 352,092 305,391
Total Assets 106,502,731 97,292,310
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 1,805,169 1,269,513
Accrued management fees 353,147 322,552
Common administrative expenses payable 163,158 126,007
Accrued brokerage commissions (DWR) 40,428 74,340
Accrued transaction fees and costs 1,987 3,654
Total Liabilities 2,363,889 1,796,066
Partners' Capital
Limited Partners (27,899.872 and
29,160.287 Units, respectively 101,807,516 93,448,822
General Partner (638.889 Units) 2,331,326 2,047,422
Total Partners' Capital 104,138,842 95,496,244
Total Liabilities and Partners' Capital 106,502,731 97,292,310
NET ASSET VALUE PER UNIT 3,649.03 3,204.66
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 March 31,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 18,386,077 (487,455)
Net change in unrealized (4,421,966) 1,364,767
Total Trading Results 13,964,111 877,312
Interest Income (DWR) 1,011,502 1,020,421
Total Revenues 14,975,613 1,897,733
EXPENSES
Management fees 1,041,674 1,021,255
Brokerage commissions (DWR) 726,311 843,558
Transaction fees and costs 43,411 50,233
Common administrative expenses 37,151 8,811
Total Expenses 1,848,547 1,923,857
NET INCOME (LOSS) 13,127,066 (26,124)
NET INCOME (LOSS) ALLOCATION:
Limited Partners 12,843,162 (25,253)
General Partner 283,904 (871)
NET INCOME (LOSS) PER UNIT:
Limited Partners 444.37 (1.36)
General Partner 444.37 (1.36)
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 Quarters Ended March 31, 1997 and 1996
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital
December 31, 1995 36,544.514 $101,854,654 $1,812,357 $103,667,011
Offering of Units 17.140 48,482 - 48,482
Net Loss - (25,253) (871) (26,124)
Redemptions (1,591.230) (4,535,310) - (4,535,310)
Partners' Capital
March 31, 1996 34,970.424 $97,342,573 $1,811,486 $99,154,059
Partners' Capital
December 31, 1996 29,799.176 $93,448,822 $2,047,422 $95,496,244
Offering of Units 4.194 13,442 - 13,442
Net Income - 12,843,162 283,904 13,127,066
Redemptions (1,264.609) (4,497,910) - (4,497,910)
Partners' Capital
March 31, 1997 28,538.761 $101,807,516 $2,331,326 $104,138,842
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 Quarters Ended March 31,
1997 1996
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) 13,127,066 (26,124)
Noncash item included in net income (loss):
Net change in unrealized 4,421,966 (1,364,767)
(Increase) decrease in operating assets:
Interest receivable (DWR) (46,701) 33,363
Increase (decrease) in operating liabilities:
Accrued management fees 30,595 (14,425)
Common administrative expenses payable 37,151 (97,527)
Accrued brokerage commissions (DWR) (33,912) 17,316
Accrued transaction fees and costs (1,667) 865
Net cash provided by (used for) operating activities 17,534,498 (1,451,299)
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 13,442 48,482
Increase in redemptions payable 535,656 185,269
Redemptions of units (4,497,910) (4,535,310)
Net cash used for financing activities (3,948,812) (4,301,559)
Net increase (decrease) in cash 13,585,686 (5,752,858)
Balance at beginning of period 91,656,399 104,927,961
Balance at end of period 105,242,085 99,175,103
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, 1996 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 general partner for the Partnership is Demeter
Management Corporation ("Demeter"). The commodity broker is Dean
Witter Reynolds Inc. ("DWR"). Both Demeter and DWR are wholly
owned subsidiaries of Dean Witter, Discover & Co. ("DWD"). The
trading advisors who make all trading decisions for the
Partnership are John W. Henry & Company, Inc. ("JWH") and Sunrise
Capital Management.
<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 March
31, 1997 and December 31, 1996, open contracts were:
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Contract or Notional Amount
March 31, 1997 December 31,
1996
$ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 34,820,000 93,583,000
Commitments to Sell 78,601,000 118,029,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 213,826,000 208,140,000
Commitments to Sell 247,257,000 205,227,000
A portion of the amounts indicated as off-balance-sheet risk in
forward currency contracts is due to offsetting forward
commitments to purchase and 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 $908,554 and
$5,330,520 at March 31, 1997 and December 31, 1996, respectively.
Of the $908,554 net unrealized gain on open contracts at March
31, 1997, $589,763 related to exchange-traded futures contracts
and $318,791 related to off-exchange-traded forward currency
contracts. Of the
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
$5,330,520 net unrealized gain on open contracts at December 31,
1996, $5,350,525 related to exchange-traded futures contracts and
$(20,005) related to off-exchange-traded forward currency
contracts.
Exchange-traded futures contracts held by the Partnership at
March 31, 1997 and December 31, 1996 mature through June 1997 and
March 1997, respectively. Off-exchange-traded forward currency
contracts held by the Partnership at March 31, 1997 and December
31, 1996 mature through June 1997 and March 1997, respectively.
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 the sole
counterparty, with respect to most of the Partnership's assets is
DWR. Exchange-traded futures contracts are marked to market on a
daily basis, with variations in value settled 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, all funds held
by DWR with respect to exchange-traded futures contracts
including an amount equal to the net unrealized gains or losses
on all open futures contracts, which funds totaled $105,831,848
and $97,006,924 at March 31, 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
DWR, the counterparty on all of such contracts, to perform.
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
For the quarter ended March 31, 1997 and the year ended December
31, 1996, the average fair value of financial instruments held
for trading purposes was as follows:
March 31, 1997
Assets Liabilities
$ $
Exchange-Traded Contracts
Financial Futures 43,653,000 102,156,000
Off-Exchange-Traded Forward
Currency Contracts 279,700,000 337,244,000
December 31, 1996
Assets Liabilities
$ $
Exchange-Traded Contracts
Financial Futures 67,114,000 125,331,000
Off-Exchange-Traded Forward
Currency Contracts 334,452,000 334,461,000
<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 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
<PAGE>
consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly
liquidating its commodity futures positions.
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 Limited
Partners, it is not possible to estimate the amount and
therefore, the impact of future redemptions.
<PAGE>
Results of Operations
For the Quarter Ended March 31, 1997
For the quarter ended March 31, 1997, the Partnership's total
trading revenues including interest income were $14,975,613.
During the first quarter, the Partnership posted an increase in
Net Asset Value per Unit. The quarter's profits were primarily a
result of a strong upward trend in the value of the U.S. dollar
versus most major world currencies during January and February.
The most significant of these gains were recorded from short
positions in the Singapore dollar, most European currencies,
particularly the German mark, French and Swiss francs, as well as
the Japanese yen. A portion of these gains was offset by losses
recorded from long British pound positions as its value reversed
lower during January. Smaller currency gains were recorded from
long Malaysian ringgit positions. Trading losses recorded from
short positions in the Swiss and French francs during March, as
the value of these currencies moved higher after trending lower
during January and February, offset a portion of these gains.
Smaller losses were recorded from transactions involving the
British pound during March. Total expenses for the period were
$1,848,547, generating net income of $13,127,066. The value of
an
<PAGE>
individual Unit in the Partnership increased from $3,204.66 at
December 31, 1996 to $3,649.03 at March 31, 1997.
For the Quarter Ended March 31, 1996
For the quarter ended March 31, 1996, the Partnership's total
trading revenues including interest income were $1,897,733.
During the first quarter, the Partnership posted a small loss in
Net Asset Value per Unit. During February, losses were recorded
from previously established short positions in the Japanese yen
as the value of the yen moved dramatically higher. Losses were
also recorded during February from transactions involving several
European currencies, particularly the German mark, Norwegian
krone and both the French and Swiss francs. A majority of the
losses recorded during February were offset by gains recorded in
January and March. During January and March, short positions in
the Japanese yen profited from a decline in the value of the yen
versus the U.S. dollar. Additional profits were recorded during
March from long positions in the Australian dollar as the value
of the Australian dollar moved higher relative to the U.S. dollar
and other world currencies. These gains, coupled with smaller
gains recorded from transactions involving the New Zealand dollar
during both January and March, mitigated the losses recorded
during
<PAGE>
February. Total expenses for the period were $1,923,857,
resulting in a net loss of $26,124. The value of an individual
Unit in the partnership decreased from $2,836.73 at December 31,
1995 to $2,835.37 at March 31, 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 Superior Court of the
State of California, County of Los Angeles, on behalf of all
purchasers of interests in limited partnership commodity pools
sold by DWR. Named defendants include DWR, Demeter, Dean Witter
Futures & Currency Management, Inc., DWD (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 (including JWH) to those pools. Similar purported class
actions were also filed on September 18 and 20, 1996 in the
Supreme Court of the State of New York, New York County, and on
November 14, 1996 in the Superior Court of the State of Delaware,
New Castle County, against the Dean Witter Parties and certain
trading advisors (including JWH) 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
<PAGE>
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 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.
<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 IV
(Registrant)
By: Demeter Management Corporation
(General Partner)
May 13, 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 IV and is qualified in its entirety by reference
to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 105,242,085
<SECURITIES> 0
<RECEIVABLES> 352,092
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 106,502,731<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 106,502,731<F2>
<SALES> 0
<TOTAL-REVENUES> 14,975,613<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,848,547
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,127,066
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,127,066
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,127,066
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $908,554.
<F2>Liabilities include redemptions payable of $1,805,169, accrued
management fees of $353,147, common administrative expenses payable
of $163,158, accrued brokerage commissions of $40,428 and accrued
transaction fees and costs of $1,987.
<F3>Total revenue includes realized trading revenue of $18,386,077, net
change in unrealized of $(4,421,966) and interest income of $1,011,502.
</FN>
</TABLE>
