UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000 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, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
March 31, 2000 (Unaudited) and December 31, 1999...........2
Statements of Operations for the Quarters Ended
March 31, 2000 and 1999 (Unaudited)........................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 2000 and 1999
(Unaudited)................................................4
Statements of Cash Flows for the Quarters Ended
March 31, 2000 and 1999 (Unaudited)........................5
Notes to Financial Statements (Unaudited)...............6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............12-18
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ......................................18-28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................29
Item 2. Changes in Securities and Use of Proceeds........29-30
Item 5. Other Information...................................31
Item 6. Exhibits and Reports on Form 8-K....................31
</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,
2000 1999
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 98,187,391 104,055,664
Net unrealized gain on open contracts 448,220 281,510
Total Trading Equity 98,635,611 104,337,174
Interest receivable (DWR) 373,391 357,520
Total Assets 99,009,002 104,694,694
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 2,490,504 1,225,890
Accrued management fees 328,490 347,338
Accrued administrative expenses 133,412 145,813
Total Liabilities 2,952,406 1,719,041
Partners' Capital
Limited Partners (20,396.498 and
21,718.366 Units, respectively)94,806,750 101,716,331
General Partner (268.889 Units) 1,249,846 1,259,322
Total Partners' Capital 96,056,596 102,975,653
Total Liabilities and Partners' Capital 99,009,002 104,
694,694
NET ASSET VALUE PER UNIT 4,648.19 4,683.42
<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,
2000 1999
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 8,883 (3,058,578)
Net change in unrealized 166,710 4,553,945
Total Trading Results 175,593 1,495,367
Interest Income (DWR) 1,100,520 1,014,755
Total Revenues 1,276,113 2,510,122
EXPENSES
Management fees 1,014,342 1,139,154
Brokerage commissions (DWR) 922,192 664,723
Administrative expenses 37,086 36,388
Transaction fees and costs 30,104 31,341
Incentive fees - (56,436)
Total Expenses
2,003,724 1,815,170
NET INCOME (LOSS) (727,611) 694,952
NET INCOME (LOSS) ALLOCATION:
Limited Partners (718,135) 686,802
General Partner (9,476) 8,150
NET INCOME (LOSS) PER UNIT:
Limited Partners (35.23) 30.32
General Partner (35.23) 30.32
<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, 2000 and 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C>
<C>
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
Partners' Capital,
December 31, 1999 21,987.255$101,716,331 $1,259,322$102,9
75,653
Offering of Units 2.646 12,392 - 12,392
Net Loss - (718,135) (9,476) (727,611)
Redemptions (1,324.514) (6,203,838) -
(6,203,838)
Partners' Capital,
March 31, 2000 20,665.387 $94,806,750 $1,249,846$96,05
6,596
<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,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) (727,611) 694,952
Noncash item included in net income (loss):
Net change in unrealized (166,710) (4,553,945)
(Increase) decrease in operating assets:
Interest receivable (DWR) (15,871) 7,508
Increase (decrease) in operating liabilities:
Accrued management fees (18,848) (5,144)
Accrued administrative expenses (12,401) 36,388
Accrued incentive fees - (163,422)
Net cash used for operating activities (941,441) (3,983,663)
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 12,392 10,825
Increase in redemptions payable 1,264,614 315,108
Redemptions of Units (6,203,838) (2,400,879)
Net cash used for financing activities (4,926,832) (2,074,946)
Net decrease in cash (5,868,273) (6,058,609)
Balance at beginning of period 104,055,664 119,800,551
Balance at end of period 98,187,391 113,741,942
<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, 1999 Annual Report on Form 10-K.
1. Organization.
Dean Witter Cornerstone Fund IV is a New York limited partnership
organized to engage in the speculative trading of futures and
forward contracts on foreign currencies (collectively, "futures
interests"). The Partnership is one of the Dean Witter
Cornerstone Funds, comprised of the Dean Witter Cornerstone Fund
II, Dean Witter Cornerstone Fund III and the Partnerhsip.
The 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. The trading
managers to the
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Partnership are John W. Henry & Company, Inc. and Sunrise Capital
Management, Inc., (collectively, the "Trading Managers").
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. Brokerage expenses incurred by the
Partnershp are paid to DWR.
3. Financial Instruments
The Partnership trades futures and forward contracts on foreign
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.
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
In June 1998, the Financial Accounting Standards Board ("FASB")
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. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133," which defers the required
implementation of SFAS No. 133 until fiscal years beginning after
June 15, 2000. However, the Partnership had previously 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 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 on open contracts are reported as a
component of "Equity in futures interests trading accounts" on
the statements of financial condition and totaled $448,220 and
$281,510 at March 31, 2000 and December 31, 1999, respectively.
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The $448,220 net unrealized gain on open contracts at March 31,
2000, and the $281,510 net unrealized gain on open contracts at
December 31, 1999 related to off-exchange-traded forward currency
contracts.
Off-exchange-traded forward currency contracts held by the
Partnership at March 31, 2000 and December 31, 1999 mature
through June 2000 and March 2000, respectively.
The Partnership has 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.
The Partnership also has credit risk because DWR and Carr act as
the futures commission merchants or the counterparties, with
respect to most of the Partnership's assets. Exchange-traded
futures contracts are marked to market on a daily basis, with
variations in value settled on a daily basis. Each of DWR and
Carr, as a futures commission merchant for all of the
Partnership's exchange-traded futures contracts, are required,
<PAGE>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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 $98,187,391 and
$104,055,664 at March 31, 2000 and December 31, 1999,
respectively. With respect to the Partnership's off-exchange-
traded forward currency contracts, there are no daily settlements
of variations in value nor is there any requirement that an
amount equal to the net unrealized gain on open forward contracts
be segregated. With respect to those off-exchange-traded forward
currency contracts, the Partnership is at risk to the ability of
Carr, the sole counterparty on all of such contracts, to perform.
The partnership has a netting agreement with Carr. This
agreement, which seeks to reduce both the Partnership's and
Carr's exposure on off-exchange-traded forward currency
contracts, should materially decrease the Partnership's credit
risk in the event of Carr's bankruptcy or insolvency. 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>
DEAN WITTER CORNERSTONE FUND IV
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
4. Subsequent Event
The current exchange privilege among the Cornerstone funds (a
"Series Exchange") will be terminated effective with the April
30,2000 monthly closing. Limited partners will retain the ability
to execute an exchange from a Cornerstone fund into other funds
outside the Cornerstone Series (a "Non-Series Exchange") subject
to certain restrictions set forth in the applicable limited
partnership agreements.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and Carr as clearing broker in separate futures
trading accounts established for each Trading Manager, which
assets are used as margin to engage in trading. The assets are
held in either non-interest-bearing bank accounts or in
securities and instruments permitted by the CFTC for investment
of customer segregated or secured funds. The Partnership's
assets held by the commodity brokers may be used as margin solely
for the Partnership's trading. Since the Partnership's sole
purpose is to trade in futures and forwards, it is expected that
the Partnership will continue to own such liquid assets for
margin purposes.
The Partnership's investment in futures and forwards, may, from
time to time, be illiquid. Most U.S. futures exchanges limit
fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures contract has
increased or decreased by an amount equal to the daily limit,
positions in that futures contract can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading. These market
<PAGE>
conditions could prevent the Partnership from promptly
liquidating its futures contracts and result in restrictions on
redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources - The Partnership does not have, or expect to
have, any capital assets. Redemptions and exchanges of
additional units of limited partnership interest ("Unit(s)") in
the future will affect the amount of funds available for
investments in futures interests in subsequent periods. It is
not possible to estimate the amount and therefore, the impact of
future redemptions of Units.
<PAGE>
Results of Operations
General. The Partnership's results depend on its Trading
Managers and the ability of the Trading Managers' trading
programs to take advantage of price movements or other profit
opportunities in the futures and forwards markets. The following
presents a summary of the Partnership's operations for the three
months ended March 31, 2000 and 1999, respectively, and a general
discussion of its trading activities during each period. It is
important to note, however, that the Trading Managers trade in
various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Managers or will be profitable in the
future. Consequently, the results of operations of the
Partnership are difficult to discuss other than in the context of
its Trading Managers' trading activities on behalf of the
Partnership as a whole and how the Partnership has performed in
the past.
For the Quarter Ended March 31, 2000
For the quarter ended March 31, 2000, the Partnership recorded
trading revenues, including interest income, of $1,276,113 and,
after expenses, posted a decrease in Net Asset Value per Unit.
The most significant losses of approximately 3.1% were recorded
from long Japanese yen positions during January as the value of
the yen weakened versus the U.S. dollar following a Bank of Japan
<PAGE>
intervention and improving sentiment in the U.S. bond market
later in the month. Newly established short Japanese yen
positions resulted in additional losses as the value of the yen
reversed higher relative to the U.S. dollar and major European
currencies on repatriation by institutions ahead of the Japanese
fiscal year-end on March 31. Additional losses of approximately
3.0% were experienced during January and February from long
positions in the British pound as the value of the pound reversed
lower versus the U.S. dollar amid the dollar's strength versus
other major currencies and interest rate increases by the
European Central Bank and U.S. Federal Reserve. Smaller losses
of approximately 2.5% were incurred during January from long
Australian dollar positions as its value plunged sharply lower
versus the U.S. dollar due to weakness in the euro and weaker oil
prices. A portion of overall Partnership losses was offset by
gains of approximately 3.9% recorded from short euro positions as
its value weakened to a lifetime low versus the U.S. dollar
during January on skepticism about Europe's economic outlook.
The European common currency finished the quarter lower versus
the U.S. dollar on expectations that interest rates would be held
steady by the European Central Bank, resulting in additional
gains for short positions. Short Swiss franc positions were also
profitable as it shared many of the same woes as the euro.
Smaller gains of approximately 1.2% were recorded from long
<PAGE>
Mexican peso positions as its value strengthened relative to the
U.S. dollar amid gains for Mexico's benchmark IPC stock index
during March. Total expenses for the three months ended March 31,
2000 were $2,003,724, resulting in a net loss of $727,611. The
value of a Unit decreased from $4,683.42 at December 31, 1999 to
$4,648.19 at March 31, 2000.
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 of approximately 3.6% 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, 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 of approximately
2.6% 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.
<PAGE>
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 of approximately 2.8%
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
makers were satisfied with a weaker yen. Smaller losses of
approximately 1.0% 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,
resulting in net income of $694,952. The value of a Unit
increased from $4,736.86 at December 31, 1998 to $4,767.18 at
March 31, 1999.
<PAGE>
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 Managers from trading in those
sovereign 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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
<PAGE>
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these 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 among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
<PAGE>
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 using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and cash
flow. Profits and losses on open positions of exchange-traded
futures interests are settled daily through variation margin.
The Partnership's risk exposure in the market sectors traded by
the Trading Managers is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
<PAGE>
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model 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, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the
Partnership's VaR is approximately four years. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Managers in their daily risk management
activities.
<PAGE>
The Partnership's Value at Risk in Different Market Sectors
The following tables indicate the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category at March 31, 2000 and 1999. At
March 31, 2000 and 1999, the Partnership's total capitalization
was approximately $96 million and $114 million, respectively.
Primary Market March 31, 2000 March 31, 1999
Risk Category Value at Risk Value at Risk
Currency (3.48)% (2.68)%
The table above represents the VaR of the Partnership's open
positions at March 31, 2000 and 1999 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures interests, the
composition of its trading portfolio can change significantly
over any given time period, or even within a single trading day.
Any changes in open positions could positively or negatively
materially impact market risk as measured by VaR.
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,
1999 through March 31, 2000.
Primary Market Risk Category High Low Average
Currency (3.48)% (2.52)% (3.04)%
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. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership to typically be many times the total
capitalization of the Partnership. The value of the
Partnership's open positions thus creates a "risk of ruin" not
typically found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, gives
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
<PAGE>
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect 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 VaR tables above present the results of the Partnership's VaR
for the Partnership's market risk exposures at March 31, 2000 and
for the end of the four quarterly reporting periods from Arpil 1,
1999 through March 31, 2000. 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 or monitor
risk. There can be no assurance that the Partnership's actual
losses on a particular day will not exceed the VaR amounts
indicated above or that such losses will not occur more than 1 in
100 trading days.
<PAGE>
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial. The Partnership also
maintains a substantial portion (approximately 91%) 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.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, 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 (A) those disclosures that are
statements of historical fact and (B) 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
<PAGE>
exposures as well as the strategies used and to be used by
Demeter and the Trading Managers 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.
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, 2000. It may be anticipated however,
that market exposure 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. Interest rate changes as well as political and
general economic conditions influence these fluctuations. The
<PAGE>
Partnership trades in a large number of currencies. For the
first quarter of 2000, the Partnership's major exposures were in
outright U.S. dollar positions. (Outright positions consist of
the U.S. dollar vs. other currencies. These other currencies
include the major and minor currencies). Demeter does not
anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future. The currency
trading VaR figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Partnership in
expressing VaR in a functional currency other than dollars.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of March 31, 2000:
Foreign Currency Balances - The Partnership did not have
foreign currency balances as of March 31, 2000.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Managers, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
<PAGE>
Partnership's assets among different Trading Managers, each of
whose strategies focus on different trading approaches, and
monitoring the performance of the Trading Managers daily. In
addition, the Trading Managers establish diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market-sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Managers.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On March 3, 2000, the plaintiffs in the New York action filed an
appeal of the order dismissing the consolidated complaint.
(Please refer to Legal Proceedings previously disclosed in the
Partnership's form 10-K for the year ended December 31, 1999 for
a more detailed discussion).
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 Fund 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 currently continues with 100,645.098 Units sold
through April 1, 2000. The aggregate price of Units sold through
April 1, 2000 was $168,114,264.
For the Cornerstone Funds in aggregate, 235,435.933 Units have
been sold through April, 2000, leaving 14,564.067 Units remaining
available for sale as of April 1, 2000.
Effective September 30, 1984, Cornerstone II, Cornerstone III and
the Partnership 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.
Effective April 30, 2000, the current exchange privilege among
the Cornerstone funds (a "Series Exchange") will be terminated.
Limited partners will retain the ability to execute an exchange
from a Cornerstone fund into other funds outside the Cornerstone
Series (a "Non-Series Exchange") subject to certain restrictions
set forth in the applicable limited partnership agreement.
<PAGE>
Item 5. OTHER INFORMATION
Effective January 31, 2000, Mark J. Hawley resigned as Chairman
of the Board and a Director of Demeter and Dean Witter Futures
and Currency Management, Inc. ("DWFCM") and Robert E. Murray
replaced him as Chairman of the Board of Demeter and DWFCM.
Demeter has determined, commencing in May 2000, to transfer the
Partnership's futures and options clearing from Carr to Morgan
Stanley & Co. Incorporated ("MS & Co."), an affiliate of Demeter,
while trades on the London Metal Exchange will be cleared by
Morgan Stanley & Co. International Limited ("MSIL"), also an
affiliate of Demeter. In addition, MS & Co. and MSIL, rather
than Carr, will act as the counterparty on all of the
Partnership's foreign currency forward trades. Dean Witter
Reynolds Inc. will continue to act as the non-clearing commodity
broker for the Partnership.
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 12, 2000 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 98,187,391
<SECURITIES> 0
<RECEIVABLES> 373,391<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 99,009,002<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 99,009,002<F3>
<SALES> 0
<TOTAL-REVENUES> 1,276,113<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,003,724
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (727,611)
<INCOME-TAX> 0
<INCOME-CONTINUING> (727,611)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (727,611)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable DWR $373,391.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $448,220.
<F3>Liabilities include redemptions payable of $2,490,504, accrued
management fees of $328,490 and accrued administrative expenses
of $133,412.
<F4>Total revenues include realized trading revenue of $8,883, net
change in unrealized of $166,710 and interest income of $1,100,520.
</FN>
</TABLE>
