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, 1999 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, 1999
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
March 31, 1999 (Unaudited) and December 31, 1998...........2
Statements of Operations for the Quarters Ended
March 31, 1999 and 1998 (Unaudited)........................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 1999 and 1998
(Unaudited)................................................4
Statements of Cash Flows for the Quarters Ended
March 31, 1999 and 1998 (Unaudited)........................5
Notes to Financial Statements (Unaudited)...............6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............11-16
Item 3. Quantitative and Qualitative Disclosures about
Market Risk . . . . . . . . . . . . . . . . . . . 17-25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................. 26
Item 2. Changes in Securities and Use of Proceeds.........26-27
Item 6. Exhibits and Reports on Form 8-K.....................27
</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,
1999 1998
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 113,741,942 119,800,551
Net unrealized gain (loss) on open contracts 1,726,693 (
2,827,252)
Total Trading Equity 115,468,635 116,973,299
Interest receivable (DWR) 342,904 350,412
Total Assets 115,811,539 117,323,711
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued incentive fees 991,263 1,154,685
Redemptions payable 774,811 459,703
Accrued management fees 384,374 389,518
Accrued administrative expenses 115,094 78,706
Total Liabilities 2,265,542 2,082,612
Partners' Capital
Limited Partners (23,549.400 and
24,059.670 Units, respectively 112,264,156 113,967,408
General Partner (268.889 Units) 1,281,841 1,273,691
Total Partners' Capital 113,545,997 115,241,099
Total Liabilities and Partners' Capital 115,811,539 117,32
3,711
NET ASSET VALUE PER UNIT 4,767.18 4,736.86
<FN>
The accompanying notes 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,
1999 1998
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized (3,058,578) (3,606,536)
Net change in unrealized 4,553,945 955,055
Total Trading Results 1,495,367 (2,651,481)
Interest Income (DWR) 1,014,755 1,174,972
Total Revenues 2,510,122 (1,476,509)
EXPENSES
Management fees 1,139,154 1,155,472
Brokerage commissions (DWR) 664,723 467,394
Administrative expenses 36,388 26,354
Transaction fees and costs 31,341 23,798
Incentive fees (56,436) (409,519)
Total Expenses 1,815,170 1,263,499
NET INCOME (LOSS) 694,952 (2,740,008)
NET INCOME (LOSS) ALLOCATION:
Limited Partners 686,802 (2,674,752)
General Partner 8,150 (65,256)
NET INCOME (LOSS) PER UNIT:
Limited Partners 30.32 (102.14)
General Partner 30.32 (102.14)
<FN>
The accompanying notes 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, 1999 and 1998
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C>
<C>
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
Partners' Capital
December 31, 1998 24,328.559 $113,967,408 $1,273,691$115,2
41,099
Offering of Units 2.311 10,825 - 10,825
Net Income - 686,802 8,150 694,952
Redemptions (512.581) (2,400,879) -
(2,400,879)
Partners' Capital
March 31, 1999 23,818.289 $112,264,156 $1,281,841$113,5
45,997
<FN>
The accompanying notes 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,
1999 1998
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) 694,952 (2,740,008)
Noncash item included in net income (loss):
Net change in unrealized (4,553,945) (955,055)
Decrease in operating assets:
Interest receivable (DWR) 7,508 814
Increase (decrease) in operating liabilities:
Accrued incentive fees (163,422) (409,519)
Accrued management fees (5,144) (17,795)
Accrued administrative expenses 36,388 26,354
Net cash used for operating activities (3,983,663) (4,095,209)
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units 10,825 112,938
Increase (decrease) in redemptions payable315,108 (90,386)
Redemptions of units (2,400,879) (2,211,282)
Net cash used for financing activities (2,074,946) (2,
188,730)
Net decrease in cash (6,058,609) (6,283,939)
Balance at beginning of period 119,800,551 119,181,131
Balance at end of period 113,741,942 112,897,192
<FN>
The accompanying notes 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, 1998 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
futures contracts and forward contracts on foreign currencies
(collectively, "futures interests"). The Partnership is one of
the Dean Witter Cornerstone Funds, comprised of Dean Witter
Cornerstone Fund II, Dean Witter Cornerstone Fund III, and the
Partnership. The Partnership's general partner is Demeter
Management Corporation ("Demeter"). The non-clearing commodity
broker is Dean Witter Reynolds Inc. ("DWR") and an unaffiliated
clearing commodity broker, Carr Futures Inc. ("Carr"), provides
clearing and execution services. Both Demeter and DWR are wholly-
owned subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW").
The trading advisors to the Partnership are John W. Henry &
Company, Inc. and Sunrise Capital Management, Inc. (collectively,
the "Trading Advisors").
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interests trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on current 13-week U.S.
Treasury bill rates. The Partnership pays brokerage commissions
to DWR.
3. Financial Instruments
The Partnership trades futures and forward contracts on foreign
currencies. 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.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
effective for fiscal years beginning after June 15, 1999. The
Partnership has elected to adopt the provisions of SFAS No. 133
beginning with the fiscal year ended December 31, 1998. SFAS No.
133 supersedes SFAS No. 119 and No. 105, which required the
disclosure of average aggregate fair values and contract/notional
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
values, respectively, of derivative financial instruments for an
entity which carries its assets at fair value. The application
of SFAS No. 133 does not have a significant effect on the
Partnership's financial statements.
The net unrealized gain (loss) on open contracts is reported as a
component of "Equity in futures interests trading accounts" on
the Statements of Financial Condition and totaled $1,726,693 and
$(2,827,252) at March 31, 1999 and December 31, 1998,
respectively.
Of the $1,726,693 net unrealized gain on open contracts at March
31, 1999, all related to off-exchange-traded forward currency
contracts.
Of the $(2,827,252) net unrealized loss on open contracts at
December 31, 1998, all related to off-exchange-traded forward
currency contracts.
Off-exchange-traded forward currency contracts held by the
Partnership at March 31, 1999 and December 31, 1998 mature
through June 1999 and March 1999, respectively.
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The Partnership is subject to the credit risk associated with
counterparty non-performance. The credit risk associated with
the instruments in which the Partnership is involved is limited
to the amounts reflected in the Partnership's Statements of
Financial Condition. 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 all of the Partnership's exchange-traded
futures 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 contracts, which funds, in
the aggregate, totaled $113,741,942 and $119,800,551 at March 31,
1999 and December 31, 1998, 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
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
net unrealized gain on open forward contracts be segregated.
With respect to those off-exchange-traded forward currency
contracts, the Partnership is at risk to the ability of Carr, the
sole counterparty on all of such contracts, to perform. Carr's
parent, Credit Agricole Indosuez, has guaranteed to the
Partnership payment of the net liquidating value of the
transactions in the Partnership's account with Carr (including
foreign currency contracts).
<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. 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 from promptly
liquidating its futures interests and result in restrictions on
redemptions.
<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 potentially
profitable markets or from promptly liquidating unfavorable
positions, 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 ("Unit(s)")
will affect the amount of funds available for investment in
futures interests in subsequent periods. Since they are at the
discretion of 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 Ended March 31, 1999
For the quarter ended March 31, 1999, the Partnership recorded
total trading revenues including interest income of $2,510,122
and posted an increase in Net Asset Value per Unit. The most
significant gains were recorded from short positions in the
European common currency, the euro, as its value declined versus
the U.S. dollar during February due to a recent economic slowdown
in Europe and fears that the European Central Bank would lower
interest rates in an effort to stimulate growth. During March,
<PAGE>
gains were recorded from short positions in the euro, as well as
the Swiss franc, as the value of most European currencies dropped
due to the growing uncertainty regarding military action in
Yugoslavia. Additional gains were recorded from short positions
in the Singapore dollar as its value slid lower against the U.S.
dollar during January as the Singapore government allowed its
currency to weaken in order to provide more of a cushion for its
economy against a downturn. Gains were also recorded during
February from continued weakness in the Singapore dollar as its
value slid to a five-month low in reaction to regional economic
concerns in the Pacific Rim. These gains were partially offset
by losses incurred during January from long Japanese yen
positions as the value of the yen reversed lower versus the U.S.
dollar after the Bank of Japan intervened to help ease concerns
about the impact of a strong yen on Japanese exports. The yen
experienced additional downward pressure later in January
following a devaluation of the Brazilian real, reports that China
may devalue its currency and strong U.S. economic data. Losses
recorded from long yen positions were also experienced during
February as the value of the yen fell to a 2 1/2 month low versus
the U.S. dollar after several key Tokyo officials suggested that
Japanese policy markets were satisfied with a weaker yen.
Smaller losses were recorded during January from short South
African rand positions during early January and short British
pound positions during mid-January, as the value of these
currencies strengthened versus the U.S. dollar. Total expenses
for the three months ended March 31, 1999 were $1,815,170,
<PAGE>
resulting in net income of $694,952. The value of a Unit in the
Partnership increased from $4,736.86 at December 31, 1998 to
$4,767.18 at March 31, 1999.
For the Quarter Ended March 31, 1998
For the quarter ended March 31, 1998, the Partnership recorded
total trading losses net of interest income of $1,476,509 and
posted a decrease 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 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 three months
ended March 31, 1998 were $1,263,499, resulting in a net loss of
$2,740,008. The value of a Unit decreased from $4,435.47 at
December 31, 1997 to $4,333.33 at March 31, 1998.
Year 2000 Problem. Commodity pools, like financial and business
organizations and individuals around the world, depend on the
<PAGE>
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 adversely affect
the handling or determination of futures trades and prices and
other services.
MSDW began its planning for the Year 2000 Problem in 1995,
and currently has several hundred employees working on the
matter. 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 to
address the Year 2000 Problem with respect to Demeter's computer
systems that affect the Partnership. This includes hardware and
software upgrades, systems consulting and computer maintenance.
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. All U.S. futures exchanges are subject to
monitoring by the CFTC of 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.
<PAGE> Demeter intends to monitor the
progress of Carr and the Trading Advisors throughout 1999 in
their Year 2000 compliance and, where applicable, to test its
external interface with Carr and the Trading Advisors.
A worst case scenario would be one in which trading of
contracts on behalf of the Partnership becomes impossible as a
result of the Year 2000 problem encountered by any third parties.
A less catastrophic but more likely scenario would be one in
which trading opportunities diminish as a result of technical
problems resulting in illiquidity and fewer opportunities to make
profitable trades. MSDW has begun developing various "contingency
plans" in the event that the systems of such third parties fail.
Demeter intends to consult closely with MSDW in implementing
those plans. Despite the best efforts of both Demeter and MSDW,
however, it is possible that these steps will not be sufficient
to avoid any adverse impact to the Partnership.
Risks Associated With the Euro. On January 1, 1999, eleven
countries in the European Union established fixed conversion
rates on their existing sovereign currencies and converted to a
common single currency (the "euro"). During a three-year
transition period, the sovereign currencies will continue to
exist but only as a fixed denomination of the euro. Conversion
to the euro prevents the Trading Advisors from trading in certain
currencies and thereby limits their ability to take advantage of
potential market opportunities that might otherwise have existed
had separate currencies been available to trade. This could
adversely affect the performance results of the Partnership.
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures interests. The market sensitive
instruments held by the Partnership are acquired solely for
speculative trading purposes and, as a result, all or
substantially all of the Partnership's assets are subject to the
risk of trading loss. Unlike an operating company, the risk of
market sensitive instruments is integral, not incidental, to the
Partnership's primary business activities.
The futures interests traded by the Partnership involve varying
degrees of related market risk. Such market risk is often
dependent upon changes in the level or volatility of interest
rates, exchange rates, and/or market values of financial
instruments and commodities. Fluctuations in related market risk
based upon the aforementioned factors result in frequent changes
in the fair value of the Partnership's open positions, and,
consequently, in its earnings and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification effects among
the Partnership's existing open positions, the volatility present
within the market(s), and the liquidity of the market(s). At
varying times, each of these factors may act to exacerbate or
mute the market risk associated with the Partnership.
<PAGE>
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt at quantifying the
Partnership's market risk must be qualified by the inherent
uncertainty of its speculative trading, which may cause future
losses and volatility (i.e. "risk of ruin") far in excess of the
Partnership's experience to date and/or any reasonable
expectation premised upon historical changes in the fair value of
its market sensitive instruments.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). All quantitative disclosures in this section are
deemed to be forward-looking statements for purposes of the safe
harbor, except for statements of historical fact.
The Partnership accounts for open positions on the basis of mark-
to-market accounting principles. As such, any loss in the fair
value of the Partnership's open positions is directly reflected
in the Partnership's earnings, whether realized or unrealized,
and the Partnership's cash flow, as profits and losses on open
positions of exchange-traded futures interests are settled daily
through variation margin.
<PAGE>
The Partnership's risk exposure in the various market sectors
traded by the Trading Advisors is estimated below in terms of
Value at Risk ("VaR"). The VaR model employed by the Partnership
incorporates numerous variables that could impact the fair value
of the Partnership's trading portfolio. The Partnership
estimates VaR using a model based on historical simulation with a
confidence level of 99%. Historical simulation involves
constructing a distribution of hypothetical daily changes in
trading portfolio value. The VaR model generally takes into
account linear exposures to price and interest rate risk. Market
risks that are incorporated in the VaR model include equity and
commodity prices, interest rates, foreign exchange rates, as well
as correlation that exists among these variables. The
hypothetical changes in portfolio value are based on daily
observed percentage changes in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. In the case of the Partnership's VaR, the historical
observation period is approximately four years. The
Partnership's one-day 99% VaR corresponds to the negative change
in portfolio value that, based on observed market risk factor
moves, would have been exceeded once in 100 trading days.
VaR models such as the Partnership's are continually evolving as
trading portfolios become more diverse and modeling techniques
and systems capabilities improve. It must also be noted that the
VaR model is used to quantify market risk for historic reporting
purposes only and is not utilized by either Demeter or the
<PAGE>
Trading Advisors in their daily risk management activities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by market category as of March 31, 1999. As of March 31, 1999,
the Partnership's total capitalization was approximately $113
million.
Primary Market March 31, 1999
Risk Category Value at Risk
Currency (2.68)%
Aggregate Value at Risk (2.68)%
The table above represents the VaR of the Partnership's open
positions at March 31, 1999 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. As the Partnership's sole
business is the speculative trading of primarily futures
interests, the composition of its portfolio of open positions can
change significantly over any given time period or even within a
single trading day. Such changes in open positions could
materially impact market risk as measured by VaR either
positively or negatively.
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR as a percentage of total
<PAGE>
net assets for the four quarterly reporting periods from April 1,
1998 through March 31, 1999.
Primary Market Risk Category High Low Average
Currency (2.68)% (0.79)% (1.74)%
Aggregate Value at Risk (2.68)% (0.79)% (1.74)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements, as such margin requirements generally range between
2% and 15% of contract face value. Additionally, due to the use
of leverage, the face value of the market sector instruments held
by the Partnership is typically many times the total
capitalization of the Partnership. The financial magnitude of
the Partnership's open positions thus creates a "risk of ruin"
not typically found in other investment vehicles. Due to the
relative size of the positions held, certain market conditions
may cause the Partnership to incur losses greatly in excess of
VaR within a short period of time. The foregoing VaR tables, as
well as the past performance of the Partnership, gives no
indication of such "risk of ruin". In addition, VaR risk measures
should be interpreted in light of the methodology's limitations,
which include the following: past changes in market risk factors
will not always yield accurate predictions of the distributions
and correlations of future market movements; changes in portfolio
value in response to market movements may differ from the
responses implicit in a VaR model; published VaR results reflect
<PAGE>
past trading positions while future risk depends on future
positions; VaR using a one-day time horizon does not fully
capture the market risk of positions that cannot be liquidated or
hedged within one day; and the historical market risk factor data
used for VaR estimation may provide only limited insight into
losses that could be incurred under certain unusual market
movements.
The foregoing VaR tables present the results of the Partnership's
VaR at March 31, 1999 and for the end of the four quarterly
reporting periods from April 1, 1998 through March 31, 1999.
Since VaR is based on historical data, VaR should not be viewed
as predictive of the Partnership's future financial performance
or its ability to manage and monitor risk and there can be no
assurance that the Partnership's actual losses on a particular
day will not exceed the VaR amounts indicated or that such losses
will not occur more than 1 in 100 trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. However, such balances, as well
as any market risk they may represent, are immaterial. The
Partnership also maintains a substantial portion (approximately
94%) of its available assets in cash at DWR. A decline in short-
term interest rates will result in a decline in the Partnership's
cash management income. This cash flow risk is not considered
material.
<PAGE>
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and the
potential losses caused by such movements, taking into account
the leverage, optionality and multiplier features of the
Partnership's market sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (i) those disclosures that are
statements of historical fact and (ii) the descriptions of how
the Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisors for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expro-
priations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation and many other factors could result in
material losses as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
<PAGE>
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.
The following was the primary trading risk exposure of the
Partnership as of March 31, 1999. It may be anticipated however,
that market exposures will vary materially over time.
Currency. The Partnership's currency exposure is to exchange
rate fluctuations, primarily fluctuations which disrupt the
historical pricing relationships between different currencies and
currency pairs. These fluctuations are influenced by interest
rate changes as well as political and general economic
conditions. The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar. However, the
Partnership's major exposures have typically been in the
dollar/euro, dollar/ British pound, dollar/Singapore dollar and
dollar/ Swiss franc positions. Demeter does not anticipate that
the risk profile of the Partnership's currency sector will change
significantly in the future, although it is difficult at this
point to predict the effect of the introduction of the Euro on
the Trading Advisors' currency trading strategies.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of March 31, 1999:
<PAGE>
Foreign Currency Balances. The Partnership's primary foreign
currency balances are in Euros, British pounds, Singapore dollars
and Swiss francs. The Partnership controls the non-trading risk
of these balances by regularly converting these balances back
into U.S. dollars at varying intervals, depending upon such
factors as size, volatility, etc.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Partnership and the Trading Advisors,
severally, attempt to manage the risk of the Partnership's open
positions are essentially the same in all market categories
traded. Demeter attempts to manage the Partnership's market
exposure by (i) diversifying the Partnership's assets among
different Trading Advisors, each of whose strategies focus on
different market sectors and trading approaches, and (ii),
monitoring the performance of the Trading Advisors on a daily
basis. In addition, the Trading Advisors establish
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market sensitive instrument. One should be aware that certain
Trading Advisors treat their risk control policies as strict
rules, whereas others treat such policies as general guidelines.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash, which is the only Partnership
investment directed by Demeter, rather than the Trading Advisors.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The following supplements Legal Proceedings previously disclosed
in Item 3. of the Partnership's 1998 Form 10-K:
On April 12, 1999, the defendants filed a motion in the
California action to oppose certification by the court of the
class in the California litigation.
With respect to JWH, the New York Supreme Court complaint was
dismissed with prejudice when the plaintiffs failed to replead
against JWH in December, 1998. Further, JWH has been dismissed
as a defendant in the California actions without prejudice
pursuant to a tolling agreement with plaintiffs executed in
January, 1999.
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 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,
the Partnership, (collectively with Cornerstone I, Cornerstone II
and Cornerstone III, 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.
<PAGE>
The offering for Cornerstone IV originally commenced on February
6, 1987 and 100,633.696 Units have been sold through April 1,
1999. Through April 1, 1999, an aggregate of 235,422.053 Units
have been sold, leaving 14,577.947 Units remaining available for
sale as of April 1, 1999.
The aggregate price of Units sold through April 1, 1999 with
respect to Cornerstone IV is $168,060,778.
Effective September 30, 1994, Cornerstone II, Cornerstone III and
Cornerstone IV were closed to new investors; Units have been sold
since then solely through "Exchanges" between the Cornerstone
Funds only, by existing Cornerstone 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.
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 17, 1999 By: /s/ Lewis A. Raibley, III
Lewis A. Raibley, III
Director and 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 statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 113,741,942
<SECURITIES> 0
<RECEIVABLES> 342,904<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 115,811,539<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 115,811,539<F3>
<SALES> 0
<TOTAL-REVENUES> 2,510,122<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,815,170
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 694,952
<INCOME-TAX> 0
<INCOME-CONTINUING> 694,952
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 694,952
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable DWR $342,904.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $1,726,693.
<F3>Liabilities include redemptions payable of $774,811, accrued
management fees of $384,374, accrued administrative expenses payable
of $115,094 and accrued incentive fees of $991,263.
<F4>Total revenue includes realized trading revenue of $(3,058,578), net
change in unrealized of $4,553,945 and interest income of $1,014,755.
</FN>
</TABLE>
