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, 1998 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 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 IV
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 1998
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
March 31, 1998 (Unaudited) and December 31, 1997...........2
Statements of Operations for the Quarters Ended
March 31, 1998 and 1997 (Unaudited)........................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 1998 and 1997
(Unaudited)................................................4
Statements of Cash Flows for the Quarters Ended
March 31, 1998 and 1997 (Unaudited)........................5
Notes to Financial Statements (Unaudited)...............6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............11-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................15-16
Item 2. Changes in Securities and Use of Proceeds.........16-18
Item 6. Exhibits and Reports on Form 8-K.....................19
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEAN WITTER CORNERSTONE FUND IV
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
1998 1997
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 112,897,192 119,181,131
Net unrealized gain on open contracts 2,770,167 1,815,112
Total Trading Equity 115,667,359 120,996,243
Interest receivable (DWR) 381,493 382,307
Total Assets 116,048,852 121,378,550
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Incentive fees payable 1,184,852 1,594,371
Redemptions payable 808,741 899,127
Accrued management fees 385,216 403,011
Common administrative expenses payable 98,651
72,297
Total Liabilities 2,477,460 2,968,806
Partners' Capital
Limited Partners (25,569.928 and
26,057.228 Units, respectively 110,802,877 115,575,973
General Partner (638.889 Units) 2,768,515 2,833,771
Total Partners' Capital 113,571,392 118,409,744
Total Liabilities and Partners' Capital 116,048,852 121,37
8,550
NET ASSET VALUE PER UNIT 4,333.33 4,435.47
<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 March 31,
1998 1997
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized (3,606,536) 18,386,077
Net change in unrealized 955,055 (4,421,966)
Total Trading Results (2,651,481) 13,964,111
Interest Income (DWR) 1,174,972 1,011,502
Total Revenues (1,476,509) 14,975,613
EXPENSES
Management fees 1,155,472 1,041,674
Brokerage commissions (DWR) 467,394 726,311
Common administrative expenses 26,354 37,151
Transaction fees and costs 23,798 43,411
Incentive fees (409,519) -
Total Expenses 1,263,499 1,848,547
NET INCOME (LOSS) (2,740,008) 13,127,066
NET INCOME (LOSS) ALLOCATION:
Limited Partners (2,674,752) 12,843,162
General Partner (65,256) 283,904
NET INCOME (LOSS) PER UNIT:
Limited Partners (102.14) 444.37
General Partner (102.14) 444.37
<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 Quarters Ended March 31, 1998 and 1997
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C>
<C>
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 $104,1
38,842
Partners' Capital
December 31, 1997 26,696.117 $115,575,973 $2,833,771 $118
,409,744
Offering of Units 26.273 112,938 - 112,938
Net Loss - (2,674,752) (65,256)(2,740,008)
Redemptions (513.573) (2,211,282) -
(2,211,282)
Partners' Capital
March 31, 1998 26,208.817 $110,802,877 $2,768,515 $113
,571,392
<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 Quarters Ended March 31,
1998 1997
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) (2,740,008) 13,127,066
Noncash item included in net income (loss):
Net change in unrealized (955,055) 4,421,966
(Increase) decrease in operating assets:
Interest receivable (DWR) 814 (46,701)
Increase (decrease) in operating liabilities:
Incentive fees payable (409,519) -
Accrued management fees (17,795) 30,595
Common administrative expenses payable26,354 37,151
Accrued brokerage commissions (DWR)- (33,912)
Accrued transaction fees and costs -
(1,667)
Net cash provided by (used for) operating activities (4,095,209)
17,534,498
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 112,938 13,442
Increase (decrease) in redemptions payable(90,386)535,656
Redemptions of units (2,211,282) (4,497,910)
Net cash used for financing activities (2,188,730)(3,948,812)
Net increase (decrease) in cash (6,283,939) 13,585,686
Balance at beginning of period 119,181,131 91,656,399
Balance at end of period 112,897,192 105,242,085
<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 of Dean Witter Cornerstone
Fund IV (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 IV 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 non-clearing commodity broker is
Dean Witter Reynolds Inc. ("DWR"), with an unaffiliated broker,
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 John W.
Henry & Company, Inc. ("JWH") and Sunrise Capital Management.
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 1998 and December 31, 1997, open contracts were:
Contract or Notional Amount
March 31, 1998 December 31,
1997
$ $
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 147,983,000 218,670,000
Commitments to Sell 254,468,000 427,237,000
<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 net unrealized gain on open contracts is reported as a
component of "Equity in Commodity futures trading accounts" on
the Statements of Financial Condition and totaled $2,770,167 and
$1,815,112 at March 31, 1998 and December 31, 1997, respectively.
The entire $2,770,167 net unrealized gain on open contracts at
March 31, 1998 related to off-exchange-traded forward currency
contracts.
The entire $1,815,112 net unrealized gain on open contracts at
December 31, 1997 related to off-exchange-traded forward currency
contracts.
Off-exchange-traded forward currency contracts held by the
Partnership at March 31, 1998 and December 31, 1997 mature
through June 1998 and April 1998, respectively.
The contract amounts in the above table represent the
Partnership's extent of involvement in the particular class of
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 and options contracts are marked to market on a daily
basis, with variations in value settled on a daily basis. DWR
and Carr, as the futures commission merchants for all of the
Partnership's exchange-traded futures and 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 contracts including
an amount equal to the net unrealized gain on all open futures
and options contracts, which funds totaled $112,897,192 and
$119,181,131 at March 31, 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
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 quarter ended March 31, 1998 and the year ended December
31, 1997, the average fair value of financial instruments held
for trading purposes was as follows:
March 31, 1998
Assets Liabilities
$ $
Off-Exchange-Traded Forward
Currency Contracts 341,247,000 467,588,000
December 31, 1997
Assets Liabilities
$ $
Exchange-Traded Contracts
Financial Futures 34,008,000 57,577,000
Off-Exchange-Traded Forward
Currency Contracts 299,407,000 414,754,000
<PAGE>
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Liquidity. The Partnership's assets are on deposit in separate
commodity interest trading accounts with DWR and Carr, the
commodity brokers, and are used by the Partnership as margin to
engage in commodity futures, forward contracts and other
commodity 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 commodity futures contracts and other commodity
interests, it is expected that the Partnership will continue to
own such liquid assets for margin purposes.
The Partnership's investment in commodity futures contracts,
forward contracts, and other commodity interests may be illiquid.
If the price for a futures contract for a particular commodity
has increased or decreased by an amount equal to the "daily
limit," positions in the commodity can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Commodity futures prices have occasionally
moved the daily limit for several consecutive days with little or
no trading. Such market conditions could prevent the Partnership
from promptly liquidating its commodity futures positions.
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
<PAGE>
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. Redemptions and exchanges of
Units of Limited Partnership Interest in the future will affect
the amount of funds available for investments in subsequent
periods. As redemptions are at the discretion of Limited
Partners, it is not possible to estimate the amount and
therefore, the impact of future redemptions.
Results of Operations
For the Quarter Ended March 31, 1998
For the quarter ended March 31, 1998, the Partnership's total
trading losses net of interest income were $1,476,509. During the
first quarter, the Partnership recorded a loss in Net Asset Value
per Unit. The most significant losses were recorded from choppy
movement in the value of the South African rand and Australian
dollar relative to the U.S. dollar during January and March.
Additional currency losses were experienced from short Japanese
yen positions as the value of the yen increased during January in
reaction to the Japanese government's proposed economic stimulus
plan. During February, smaller losses were recorded from
transactions involving the yen as its value moved in a short-term
<PAGE>
volatile pattern. These losses were mitigated by gains recorded
from short positions in the German mark and Swiss franc as the
value of the U.S. dollar strengthened relative to these
currencies during March. Additional profits were recorded from
short New Zealand dollar positions as its value also decreased
versus the U.S. dollar during March. Total expenses for the
quarter were $1,263,499, resulting in a net loss of $2,740,008.
The value of an individual Unit in the Partnership decreased from
$4,435.47 at December 31, 1997 to $4,333.33 at March 31, 1998.
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
<PAGE>
British pound during March. Total expenses for the period were
$1,848,547, generating net income of $13,127,066. The value of
an individual Unit in the Partnership increased from $3,204.66 at
December 31, 1996 to $3,649.03 at March 31, 1997.
<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., MSDW, (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. On June 16, 1997, the
plaintiffs in the above actions filed a consolidated amended
complaint, alleging, among other things, that the defendants
committed fraud, deceit, negligent misrepresentation, various
violations of the California Corporations Code, intentional and
negligent breach of fiduciary duty, fraudulent and unfair
business practices, unjust enrichment, and conversion in the sale
and operation of the various limited partnership commodity 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. A
consolidated and amended complaint in the action pending in the
<PAGE>
Supreme Court of the State of New York was filed on August 13,
1997, alleging that the defendants committed fraud, breach of
fiduciary duty, and negligent misrepresentation in the sale and
operation of the various limited partnership commodity pools. On
December 16, 1997, upon motion of the plaintiffs, the action
pending in the Superior Court of the State of Delaware was
voluntarily dismissed without prejudice. 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.
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
<PAGE>
("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 IV originally commenced on February
6, 1987 and currently continues, with 100,607.447 Units sold
through March 31, 1998. Through March 31, 1998, an aggregate of
235,388.674 Units of the Partnership have been sold, leaving
14,611.326 Units remaining available for sale as of April 1,
1998.
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 "Continuous Offering".
<PAGE>
The aggregate price of Units sold through March 31, 1998 with
respect to Cornerstone IV is $167,936,749.
Effective September 30, 1994, Cornerstone II, Cornerstone III 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 per Unit. DWR has been paying all expenses in
connection with the offering of Units since September 30, 1994,
without reimbursement.
<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 11, 1998 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 112,897,192
<SECURITIES> 0
<RECEIVABLES> 381,493
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 116,048,852<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 116,048,852<F2>
<SALES> 0
<TOTAL-REVENUES> (1,476,509)<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,263,499
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,740,008)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,740,008)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,740,008)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $2,770,167.
<F2>Liabilities include redemptions payable of $808,741, accrued
management fees of $385,216, common administrative expenses payable
of $98,651 and incentive fees payable of $1,184,852.
<F3>Total revenue includes realized trading revenue of $(3,606,536), net
change in unrealized of $955,055 and interest income of $1,174,972.
</FN>
</TABLE>
