UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                           FORM 10-K

[X]   Annual  report  pursuant to Section  13  or  15(d)  of  the
Securities Exchange Act of 1934 [No Fee Required]
For the period ended December 31, 1997 or

[  ]   Transition report pursuant to Section 13 or 15 (d) of  the
Securities Exchange Act of 1934 [No Fee Required]
For          the          transition         period          from
________________to___________________
Commission File Number 0-13299

                DEAN WITTER CORNERSTONE FUND III

(Exact name of registrant as specified in its Limited Partnership
                           Agreement)

          DELAWARE                                     13-3190919
(State          or         other         jurisdiction          of
(I.R.S. Employer
             incorporation            of            organization)
Identification No.)

c/o Demeter Management Corporation
Two   World   Trade   Center,  New  York,  N.Y.   -   62nd   Flr.
10048            (Address   of   principal   executive   offices)
(Zip Code)
Registrant's    telephone    number,    including    area    code
(212) 392-5454

Securities registered pursuant to Section 12(b) of the Act:

                                                   Name  of  each
exchange
Title                 of                each                class
on which registered
          None                                         None

Securities registered pursuant to Section 12(g) of the Act:

             Units of Limited Partnership Interest

                        (Title of Class)


                        (Title of Class)

      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

      Indicate  by check mark if disclosure of delinquent  filers
pursuant to Item 405 of Regulation S-K (section 229.405  of  this
chapter)  is not contained herein, and will not be contained,  to
the  best  of  registrant's knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part  III  of
this Form 10-K or any amendment of this Form 10K. [X ]

State  the  aggregate  market  value  of  the  Units  of  Limited
Partnership  Interest held by non-affiliates of  the  registrant.
The  aggregate market value shall be computed by reference to the
price  at  which units were sold, or the average  bid  and  asked
prices of such units, as of a specified date within 60 days prior
to the date of filing: $39,592,741.35 at January 31, 1998.

              DOCUMENTS INCORPORATED BY REFERENCE
                          (See Page 1)
<PAGE>
<TABLE>
              DEAN WITTER CORNERSTONE FUND III
            INDEX TO ANNUAL REPORT ON FORM 10-K
                     DECEMBER 31, 1997
<CAPTION>
Page No.
<S>
<C>
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . .  .
 . . . . . . .  1  Part I .

  Item 1. Business. . . . . . . . . . . . . . . . . . .
 . . . .  2-4

  Item 2. Properties. . . . . . . . . . . . . . . . . .
 . . . .    5

   Item 3. Legal Proceedings. . . . . . . . . . . . . .
 . . . .   5-6

   Item  4. Submission of Matters to a Vote of Security
Holders .    7

Part II.
  Item 5. Market for the Registrant's Partnership Units
and
          Related Security Holder Matters . . . . . . .
 . . . . 8-10

  Item 6. Selected Financial Data . . . . . . . . . . .
 . . . .   11

   Item  7.  Management's Discussion  and  Analysis  of
Financial
           Condition and Results of Operations. . . . .
 . . .   12-19

   Item 8. Financial Statements and Supplementary Data.
 . . . .    19

  Item 9. Changes in and Disagreements with Accountants
on
           Accounting and Financial Disclosure. . . . .
 . . . .    19
Part III.
  Item10. Directors, Executive Officers, Promoters and
          Control Persons of the Registrant . . . . . .
 . .    20-26

   Item11. Executive Compensation . . . . . . . . . . .
 . . . .    26

   Item12.  Security  Ownership of  Certain  Beneficial
Owners
           and Management . . . . . . . . . . . . . . .
 . . .      26

     Item13.   Certain   Relationships   and    Related
Transactions . . .    26
Part IV.

  Item14. Exhibits, Financial Statement Schedules, and
          Reports on Form 8-K . . . . . . . . . . . . .
 . . . .   28

</TABLE>
      <PAGE>
<TABLE>
            DOCUMENTS INCORPORATED BY REFERENCE


Portions of the following documents are incorporated by
reference as follows:
<CAPTION>

  Documents Incorporated              Part of Form 10-K
<S>                                               <C>
     Partnership's Registration Statement
     on Form S-1, File No. 2-88587, as           I
     amended (including the Partnership's
     latest Prospectus dated August 28, 1996
     together with the Supplement to
     Prospectus and Disclosure Document
     dated May 14, 1997).

     December 31, 1997 Annual Report          II and V
     for the Dean Witter Cornerstone Funds
     II, III and IV.









</TABLE>













<PAGE>

                        PART I

Item 1.  BUSINESS

      (a)  General Development of Business. Dean Witter

Cornerstone Fund III (the "Partnership") is a New  York

limited partnership formed to engage in the speculative

trading  of  commodity  futures  contracts  and   other

commodity  interests, including, but  not  limited  to,

forward   contracts   on   foreign   currencies.    The

Partnership's  General  Partner is  Demeter  Management

Corporation  ("Demeter").  Demeter  is  a  wholly-owned

subsidiary  of Morgan Stanley, Dean Witter, Discover  &

Co. ("MSDWD").

      Through July 31, 1997, the sole commodity  broker

for  the  Partnership's transactions  was  Dean  Witter

Reynolds Inc. ("DWR"), also a subsidiary of MSDWD.   On

July 31, 1997, DWR closed the sale of its institutional

futures   business   and   foreign   currency   trading

operations to Carr Futures, Inc. ("Carr"), a subsidiary

of  Credit Agricole Indosuez.  Following the sale, Carr

became   the   clearing  commodity   broker   for   the

Partnership's  futures and futures options  trades  and

the  counterparty on the Partnership's foreign currency

trades.   DWR  serves  as  the  non-clearing  commodity

broker  for  the Partnerships with Carr  providing  all

clearing services for the Partnerships' transactions.

<PAGE>

      The partnership's net asset value per unit, as of

December  31,  1997,  was  $2,993.52,  representing  an

increase of 10.23 percent from the net asset value  per

unit of $2,715.51 at December 31,

1996.    For  a  more  detailed  description   of   the

Partnership's business, see subparagraph (c).

     (b) Financial Information about Industry Segments.

The  Partnership's business comprises only one  segment

for  financial reporting purposes, speculative  trading

of  commodity  futures contracts  and  other  commodity

interests.   The  relevant  financial  information   is

presented in Items 6 and 8.

       (c)  Narrative  Description  of  Business.   The

Partnership  is in the business of speculative  trading

in  commodity  futures contracts  and  other  commodity

interests, pursuant to trading instructions provided by

Abraham   Trading   Co.,  Welton   Investment   Systems

Corporation  and Sunrise Capital Management  Inc.,  its

independent   trading   advisors.    For   a   detailed

description   of   the   different   facets   of    the

Partnership's  business,  see  those  portions  of  the

Partnership's latest Prospectus, dated August 28,  1996

(the "Prospectus") together with the supplement to  the

Prospectus dated May 14, 1997 (the "Supplement"), filed

as part of a post effective



<PAGE>

amendment  to the Registration Statement  on  Form  S-1

(see "Documents Incorporated by Reference" Page 1), set

forth below.

  Facets of Business

     1.  Summary                   1.  "Summary of  the
Prospectus" (Pages
                                        1-9   of    the
Prospectus and Pages                               S-12
and               S-22              of              the
Supplement).

     2.  Commodity Markets         2.  "The Commodities
Markets" (Pages 80-                               84 of
the Prospectus.

      3.   Partnership's  Commodity    3.    Investment
Program,                                        Trading
Arrnagements and                      Use  of  Proceeds
Policies                             "Trading Policies"
(Pages             45-47             of             the
Prospectus)  and "The                           Trading
Manager"
(Pages             51-74,            of             the
Prospectus                                          and
Pages  S-12  -  S-21  of                            the
Supplement).

      4.   Management of the Part- 4.  "The Cornerstone
nership                               Funds" (Pages 19-
24                                           of     the
Prospectus                                          and
Pages  S-1 - S-3                                     of
the  Supplement).                                  "The
General Partner"                             (Pages 77-
79                        of                        the
Prospectus and Pages                          S-21 - S-
22                        of                        the
Supplement)                                        "The
Commodity                                       Broker"
(Pages             79-80             of             the
Prospectus).
"The Limited Partner-                         ship  and
Agreements"
<PAGE>
                                      (Pages  86-90  of
the                                      Prospectus).

     5.  Taxation  of  the Partnership's  5.  "Material
Federal                                         Limited
Partners                                 Income     Tax
Considerations"
and"State                   and                   Local
Income                   Tax                   Aspects"
(Pages 92-99 of the
                                      Prospectus).

(d)   Financial Information About Foreign and  Domestic
Operations     and Export Sales.


      The Partnership has not engaged in any operations

in foreign countries; however, the Partnership (through

the  commodity  brokers) enters into  forward  contract

transactions  where foreign banks are  the  contracting

party  and  trades  in  futures  interests  on  foreign

exchanges.

Item 2.  PROPERTIES

      The  executive  and  administrative  offices  are

located  within  the offices of DWR.  The  DWR  offices

utilized  by the Partnership are located at  Two  World

Trade Center, 62nd Floor, New York, NY 10048.

Item 3.  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

<PAGE>

purchasers of interest in limited partnership commodity

pools  sold  by  DWR.   Named defendants  include  DWR,

Demeter, Dean Witter Futures & Currency Management Inc.

("DWFCM"),   MSDWD  (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 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 partnerships 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  on  behalf  of  all  purchasers   of

interests  in  various  limited  partnership  commodity

pools, including the Partnership sold by DWR.



<PAGE>

A  consolidated  and amended complaint  in  the  action

pending  in the 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 amount of compensatory

and  punitive damages and other relief. It is  possible

that  additional similar actions may be filed and that,

in  the course of these actions, other parties could be

added  as  defendants. The Dean Witter Parties  believe

that they and the Partnership have strong defenses  to,

and   they   will  vigorously  contest,  the   actions.

Although  the  ultimate outcome  of  legal  proceedings

cannot  be predicted with certainty, it is the  opinion

of  management  of  the Dean Witter  Parties  that  the

resolution  of  the actions will not  have  a  material

adverse  effect  on  the  financial  condition  or  the

results of operations of any of the Dean Witter Parties

or the Partnership.





<PAGE>

Item  4.   SUBMISSION OF MATTERS TO A VOTE OF  SECURITY

HOLDERS

     None.








































<PAGE>

                        PART II

Item  5.  MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS
AND RELATED
         SECURITY HOLDER MATTERS

      There is no established public trading market for

the  Units  of  Limited  Partnership  Interest  in  the

Partnership.   The  number  of  holders  of  Units   at

December   31,  1997  was  approximately   5,050.    No

distributions  have been made by the Partnership  since

it  commenced  trading operations on January  2,  1985.

Demeter   has   sole   discretion   to   decide    what

distributions,  if any, shall be made to  investors  in

the Partnership.  No determination has yet been made as

to future distributions.

     Limited Partnership Units were registered for sale

to the public in certain Canadian provinces.

      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,  Dean  Witter  Cornerstone  Fund   IV

("Cornerstone IV" and, collectively with Cornerstone I,

Cornerstone II and Cornerstone III, the "Partnerships")

was

<PAGE>

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  I   originally

commenced  on  May  31, 1984, and 18,679.643  Units  of

Cornerstone  I  were sold prior to its  dissolution  on

December 31, 1991.  The offering for Cornerstone II and

Cornerstone III also originally commenced  on  May  31,

1984  and  currently  continues,  with  41,701.582  and

74,400.002 Units of Cornerstone II and Cornerstone III,

respectively,  sold  through December  31,  1997.   The

offering  for  Cornerstone IV originally  commenced  on

February   6,   1987  and  currently  continues,   with

100,579.559  Units  sold  through  December  31,  1997.

Through  December 31, 1997, an aggregate of 235,360.786

Units  of  the  Partnership  have  been  sold,  leaving

14,639.214  Units remaining available for  sale  as  of

January 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,

<PAGE>

Cornerstone  II  and Cornerstone III, and  February  6,

1987  through  May 6, 1987 with respect to  Cornerstone

IV.

     After the respective initial ofering priods, 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 "Continuing Offering".

     The aggregate price of Units sold through December

31,   1997   with   respect  to  Cornerstone   III   is

$137,116,764.

      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>

<TABLE>
Item 6.  SELECTED FINANCIAL DATA (in dollars)





<CAPTION>
                             For the Years Ended December 31,

                        1997         1996       1995         1994
1993
<S>                        <C>          <C>      <C>          <C>
<C>
Total Revenues
(including interest) 8,583,432  7,585,090  16,882,940   1,307,961
4,632,967


Net Income (Loss)    4,261,542  2,778,204  11,031,694  (5,680,495)   (2,829,361)


Net Income (Loss)
Per Unit (Limited
& General Partners)     278.01     206.83     541.04     (219.67)       (109.91)


Total Assets          41782,326   43,137,470 48,156,795  48,308,274    57,323,283


Total Limited Partners'
Capital              39,970,539  40,997,752  45,991,101  46,250,611
55,270,605


Net Asset Value Per
Unit of Limited
Partnership Interest   2,993.52   2,715.51   2,508.68    1,967.64
2,187.31










</TABLE>


<PAGE>

Item  7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS   OF
FINANCIAL                    CONDITION AND  RESULTS  OF
OPERATIONS

     Liquidity.  The Partnership's assets are deposited

in  separate  commodity trading accounts with  DWR  and

Carr,  the  commodity  brokers, and  are  used  by  the

Partnership  as  margin to engage in commodity  futures

contract  trading.  DWR and Carr hold  such  assets  in

either   designated  depositories  or   in   securities

approved  by  the Commodity Futures Trading  Commission

("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   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

<PAGE>

could prevent the Partnership from promptly liquidating

its commodity futures positions.

      There  is no limitation on daily price  moves  in

trading  forward  contracts on foreign  currency.   The

markets  for  some  world currencies have  low  trading

volume   and   are  illiquid  which  may  prevent   the

Partnership  from  trading  in  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.

      Market  Risk.   The Partnership  trades  futures,

options and forward contracts in interest rates,  stock

indices, commodities and currencies.  In entering  into

these  contracts there exists a risk to the Partnership

(market  risk) that such contracts may be significantly

influenced by market conditions, such as interest  rate

volatility,  resulting  in such  contracts  being  less

valuable.   If the markets should move against  all  of

the   commodity   interest  positions   held   by   the

Partnership at the same time, and if the

Trading   Advisors  were  unable  to  offset  commodity

interest  positions of the Partnership, the Partnership

could lose all of its assets,



<PAGE>

and  the  limited partners would realize a  100%  loss.

The Partnership has established Trading Policies, which

include

standards for liquidity and leverage which help control

market  risk.   Both the Trading Advisors  and  Demeter

monitor the Partnership's trading activities on a daily

basis  to  ensure compliance with the Trading Policies.

Demeter may (under terms of

the   Management  Agreements)  override   the   trading

instructions  of  a  Trading  Advisor  to  the   extent

necessary  to  comply  with the  Partnership's  Trading

Policies.

      Credit  Risk.  In  addition to  market  risk,  in

entering  into  futures, options and forward  contracts

there  is  a  credit risk to the Partnership  that  the

counterparty on a contract will not be able to meet its

obligations   to   the   Partnership.    The   ultimate

counterparty  of the Partnership for futures  contracts

traded  in the United States and most foreign exchanges

on  which  the  Partnership trades is the clearinghouse

associated   with  such  exchange.    In   general,   a

clearinghouse  is  backed  by  the  membership  of  the

exchange  and  will act in the event of non-performance

by one of its members or one of its member's customers,

and,  as such, should significantly reduce this  credit

risk.  For example, a clearinghouse may cover a default

by (i) drawing upon a defaulting

<PAGE>

member's  mandatory contributions and/or non-defaulting

members'  contributions  to a  clearinghouse  guarantee

fund,  established  lines or  letters  of  credit  with

banks,  and/or the clearinghouse's surplus capital  and

other   available   assets   of   the   exchange    and

clearinghouse, or (ii) assessing its members.  In cases

where  the  Partnership trades on  a  foreign  exchange

where the clearinghouse is not funded or guaranteed  by

the  membership or where the exchange is a "principals'

market"  in which performance is the responsibility  of

the exchange member and not the exchange or a

clearinghouse, or when the Partnership enters into off-

exchange  contracts  with  a  counterparty,  the   sole

recourse  of the Partnership will be the clearinghouse,

the   exchange  member  or  the  off-exchange  contract

counterparty, as the case may be.

      There  can  be no assurance that a clearinghouse,

exchange  or  other  exchange  member  will  meet   its

obligations to the Partnership, and the Partnership  is

not  indemnified against a default by such parties from

Demeter  or MSDWD or DWR.  Further, the law is  unclear

as  to whether a commodity broker has any obligation to

protect  its  customers from loss in the  event  of  an

exchange,   clearinghouse  or  other  exchange   member

default  on trades effected for the broker's customers;

any such obligation on the

<PAGE>

part  of  the broker appears even less clear where  the

default occurs in a non-US jurisdiction.

      Demeter  deals  with  the  credit  risks  of  all

partnership's for which it serves as General Partner in

several  ways.   First, it monitors each  partnership's

credit  exposure  to each exchange on  a  daily  basis,

calculating not only the amount of margin required  for

it  but also the amount of its unrealized gains at each

exchange,  if any.  The Commodity Brokers  inform  each

partnership, as with all their customers,  of  its  net

margin   requirements  for  all   its   existing   open

positions,  but  do  not break that  net  figure  down,

exchange  by exchange.  Demeter, however, has installed

a system which permits it to monitor each partnership's

potential

margin  liability,  exchange by exchange.   Demeter  is

then  able  to  monitor  the  individual  partnership's

potential  net  credit exposure  to  each  exchange  by

adding  the unrealized trading gains on that  exchange,

if any, to the partnership's margin liability thereon.

      Second,  as discussed earlier, each partnership's

trading  policies limit the amount of  partnership  Net

Assets  that  can  be committed at any  given  time  to

futures  contracts and require, in addition, a  certain

minimum  amount of diversification in the partnership's

trading, usually over several different products.

<PAGE>

One  of  the aims of such trading policies has been  to

reduce  the credit exposure of any partnership  to  any

single  exchange  and, historically,  such  partnership

exposure  has  typically  amounted  to  only  a   small

percentage   of  its  total  Net  Assets.    On   those

relatively  few occasions where a partnership's  credit

exposure  has  climbed above that  level,  Demeter  has

dealt  with  the  situations on a case by  case  basis,

carefully  weighing  whether  the  increased  level  of

credit  exposure remained appropriate.  Demeter expects

to  continue to deal with such situations in a  similar

manner in the future.

      Third, Demeter has secured, with respect to  Carr

acting  as the clearing broker for the partnerships,  a

guarantee  by Credit Agricole Indosuez, Carr's  parent,

of  the  payment of the "net liquidating value" of  the

transactions  (futures, options and forward  contracts)

in each partnership's account.  As of December

31,  1997, Credit Agricole Indosuez' total capital  was

over  $3.25  billion and it is currently rated  AA2  by

Moody's.

      With  respect  to forward contract  trading,  the

partnerships trade with only those counterparties which

Demeter,  together  with DWR,  have  determined  to  be

creditworthy.   At  the  date  of  this   filing,   the

partnerships deal only with Carr as their counterparty

<PAGE>

on  forward contracts.  The guarantee by Carr's parent,

discussed above, covers these forward contracts.

       See  "Financial  Instruments"  under  Notes   to

Financial  Statements in the Partnership's 1997  Annual

Report  to Partners, incorporated by reference in  this

Form 10-K.

     Capital Resources.  The Partnership does not have,

nor  does  it  expect  to  have,  any  capital  assets.

Redemptions  and  exchanges  of  additional  Units   of

Limited Partnership Interest in the future will  impact

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.  As of December 31,  1997,

the  partnership's  total capital  was  $41,114,374,  a

decrease  of  $920,984  from  the  Partnership's  total

capital of $42,035,358, at December 31, 1996.  For  the

year ended December 31, 1997, the Partnership generated

net income of $4,261,542, total









<PAGE>

subscriptions  aggregated $5,000 and total  redemptions

aggregated $5,187,526.

       For  the  year  ended  December  31,  1997,  the

Partnership's   total   trading   revenues,   including

interest  income,  were $8,583,432.  The  Partnership's

total  expenses for the year were $4,321,890, resulting

in   net  income  of  $4,261,542.   The  value  of   an

individual  unit  in  the  Partnership  increased  from

$2,715.51 at December 31, 1996 to $2,993.52 at December

31, 1997.

      As  of December 31, 1996, the Partnership's total

capital was $42,035,358, a decrease of $4,914,316  from

the  Partnership's  total  capital  of  $46,949,674  at

December  31,  1995.  For the year ended  December  31,

1996,   the   Partnership  generated  net   income   of

$2,778,204, total subscriptions aggregated $8,388,  and

total redemptions aggregated $7,700,908.

       For  the  year  ended  December  31,  1996,  the

partnership's   total   trading   revenues,   including

interest  income  were, $7,585,090.  The  Partnership's

total  expenses for the year were $4,806,886  resulting

in   net  income  of  $2,778,204.   The  value  of   an

individual  unit  in  the  Partnership  increased  from

$2,508.68 at December 31, 1995 to $2,715.51 at December

31, 1996.



<PAGE>

      As  of December 31, 1995, the Partnership's total

capital was $46,949,674, a decrease of $52,779 from the

Partnership's total capital of $47,002,453 at  December

31,  1994.   For the year ended December 31, 1995,  the

Partnership generated net income of

$11,031,694,  total  subscriptions aggregated  $49,000,

and total redemptions aggregated $11,133,473.

       For  the  year  ended  December  31,  1995,  the

Partnership's total trading revenues including interest

income  were  $16,882,940.   The  Partnership's   total

expenses for the year were $5,851,246 resulting in  net

income of $11,031,694.  The value of an individual unit

in the Partnership increased from $1,967.64 at December

31, 1994 to $2,508.68 at December 31, 1995.

       The  Partnership's  overall  performance  record

represents  varied  results  of  trading  in  different

commodity  markets.   For  a  further  description   of

trading  results, refer to the letter  to  the  Limited

Partners  in  the  accompanying 1997 Annual  Report  to

Partners, incorporated by reference in this From  10-K.

The  Partnership's gains and losses are allocated among

its Limited Partners for income tax purposes.





<PAGE>

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The information required by this Item appears  in

the  attached  1997 Annual Report to  Partners  and  is

incorporated by reference in this Annual Report on Form

10-K.


Item  9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON
        ACCOUNTING AND FINANCIAL DISCLOSURE

     None.






























<PAGE>

                       PART III

Item 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS  AND
CONTROL
          PERSONS OF THE REGISTRANT

General Partner

      Demeter,  a Delaware corporation, was  formed  on

August 18, 1977 to act as a commodity pool operator and

is  registered  with  the  CFTC  as  a  commodity  pool

operator  and  currently is a member  of  the  National

Futures  Association ("NFA") in such capacity.  Demeter

is  wholly-owned by MSDWD and is an affiliate  of  DWR.

MSDWD,  DWR  and  Demeter may  each  be  deemed  to  be

"promoters" and/or a "parent" of the Partnership within

the meaning of the federal securities laws.

      On July 21, 1997, MSDWD, the sole shareholder  of

Demeter,  appointed a new Board of Directors consisting

of  Richard  M.  DeMartini, Mark  J.  Hawley,  Lawrence

Volpe,  Joseph G. Siniscalchi, Edward C.  Oelsner  III,

and Robert E. Murray.

Dean Witter Reynolds Inc.

     DWR is a financial services company which provides

to  its individual, corporate and institutional clients

services  as  a  broker  in  securities  and  commodity

interest  contracts,  a dealer in corporate,  municipal

and government securities, an investment adviser and an

agent  in the sale of life insurance and various  other

products and services.  DWR is a member firm of the New

York

<PAGE>

Stock  Exchange,  the  American  Stock  Exchange,   the

Chicago   Board  Options  Exchange,  and  other   major

securities exchanges.

      DWR  is  registered with the CFTC  as  a  futures

commission merchant and is a member of the NFA in  such

capacity.   As  of December 31, 1997, DWR is  servicing

its  clients  through a network of 401  branch  offices

with  approximately 10,155 account executives servicing

individual and institutional client accounts.


Directors and Officers of the General Partner

      The  directors  and officers  of  Demeter  as  of

December 31, 1997 are as follows:

      Richard M. DeMartini, age 45, is the Chairman  of

the Board and a Director of Demeter.  Mr. DeMartini  is

also  Chairman  of  the Board and a  Director  of  Dean

Witter  Futures  & Currency Management Inc.  ("DWFCM").

Mr.  DeMartini is president and chief operating officer

of  MSDWD's Individual Asset Management Group.  He  was

named   to  this  position  in  May  of  1997  and   is

responsible  for Dean Witter InterCapital,  Van  Kampen

American  Capital, insurance services, managed futures,

unit trust, investment consulting services, Dean Witter

Realty, and NOVUS Financial Corporation.  Mr. DeMartini

is  a  member  of  the  MSDWD management  committee,  a

director  of the InterCapital funds, a trustee  of  the

TCW/DW funds

<PAGE>

and  a  trustee of the Van Kampen American Capital  and

Morgan  Stanley retail funds.  Mr. DeMartini  has  been

with Dean Witter his entire career, joining the firm in

1975  as  an account executive.  He served as a  branch

manager, regional director and national sales director,

before being appointed president and chief

operating officer of the Dean Witter Consumer  Markets.

In  1988  he  was  named president and chief  operating

officer  of  Sears' Consumer Banking  Division  and  in

January  1989  he became president and chief  operating

officer  of  Dean  Witter Capital.  Mr.  DeMartini  has

served  as  chairman of the board of the  Nasdaq  Stock

Market,  Inc.  and vice chairman of the  board  of  the

National  Association of Securities  Dealers,  Inc.   A

native   of  San  Francisco,  Mr.  DeMartini  holds   a

bachelor's  degree in marketing from  San  Diego  State

University.

      Mark  J.  Hawley,  age 54,  is  President  and  a

Director of Demeter.  Mr. Hawley is also President  and

a Director of DWFCM.  Mr. Hawley joined DWR in February

1989  as  Senior  Vice President and is  currently  the

Executive Vice President and Director of DWR's  Managed

Futures Department.  From 1978 to 1989, Mr. Hawley  was

a member of the senior management team at Heinold Asset

Management,  Inc.,  a CPO, and was  responsible  for  a

variety of

<PAGE>

projects  in public futures funds.  From 1972 to  1978,

Mr.   Hawley  was  a  Vice  President  in   charge   of

institutional  block trading for the Mid-West  at  Kuhn

Loeb & Company.

      Lawrence Volpe, age 50, is a Director of  Demeter

and  DWFCM.   Mr.  Volpe joined DWR as  a  Senior  Vice

President   and  Controller  in  September  1983,   and

currently  holds those positions.  From  July  1979  to

September  1983, he was associated with E.F.  Hutton  &

Company  Inc.  and  prior to his  departure,  held  the

positions of

First  Vice  President and Assistant Controller.   From

1970  to  July  1979,  he  was associated  with  Arthur

Anderson  &  Co. and prior to his departure  served  as

audit manager in the financial services division.

      Joseph  G. Siniscalchi, age 52, is a Director  of

Demeter.  Mr. Siniscalchi joined DWR in July 1984 as  a

First  Vice  President, Director of General  Accounting

and  served  as a Senior Vice President and  Controller

for  DWR's  Securities division through  1997.   He  is

currently Executive Vice President and Director of  the

Operations Division of DWR. From February 1980 to  July

1984, Mr. Siniscalchi was Director of Internal Audit at

Lehman Brothers Kuhn Loeb, Inc.



<PAGE>

      Edward C. Oelsner, III, age 55, is a Director  of

Demeter.   Mr.  Oelsner is currently an Executive  Vice

President and head of the Product Development Group  at

Dean Witter InterCapital Inc., an affiliate of DWR. Mr.

Oelsner  joined DWR in 1981 as a Managing  Director  in

DWR's  Investment  Banking Department  specializing  in

coverage  of  regulated industries  and,  subsequently,

served as head of the DWR Retail Products Group.  Prior

to joining DWR, Mr. Oelsner held positions at The First

Boston  Corporation  as a member of  the  Research  and

Investment Banking Departments from 1967 to 1981.   Mr.

Oelsner received his M.B.A. in Finance from the

Columbia University Graduate School of Business in 1966

and  an  A.B. in Politics from Princeton University  in

1964.

      Robert  E.  Murray,  age 37,  is  a  Director  of

Demeter.  Mr. Murray is also a Director of DWFCM.   Mr.

Murray  is currently a Senior Vice President  of  DWR's

Managed   Futures   Department  and   is   the   Senior

Administrative Officer of DWFCM.  Mr. Murray began  his

career at DWR in 1984 and is currently the Director  of

Product Development for the Managed Futures Department.

He  is  responsible for the development and maintenance

of  the proprietary Fund Management System utilized  by

DWFCM   and  Demeter  in  organizing  information   and

producing reports for monitoring clients'

<PAGE>

accounts.  Mr. Murray currently serves as a Director of

the  Managed  Funds Association.  Mr. Murray  graduated

from  Geneseo State University in May 1983 with a  B.A.

degree in Finance.

      Patti  L.  Behnke, age 37, is Vice President  and

Chief  Financial Officer of Demeter.  Ms. Behnke joined

DWR  in  April  1991  as Assistant  Vice  President  of

Financial  Reporting  and is  currently  a  First  Vice

President  and  Director  of  Financial  Reporting  and

Managed  Futures  Accounting in  the  Individual  Asset

Management  Group.  Prior to joining  DWR,  Ms.  Behnke

held  positions  of increasing responsibility  at  L.F.

Rothschild & Co. and Carteret Savings Bank.  Ms. Behnke

began  her  career at Arthur Anderson & Co., where  she

was employed in the audit division from 1982-1986.

She  is  a  member of the AICPA and the New York  State

Society of Certified Public Accountants.

Item 11.   EXECUTIVE COMPENSATION

      The  Partnership has no directors  and  executive

officers.   As a limited partnership, the  business  of

the   Partnership  is  managed  by  Demeter  which   is

responsible  for  the administration  of  the  business

affairs of the Partnership but receives no compensation

for such services.



<PAGE>

Item  12.   SECURITY  OWNERSHIP OF  CERTAIN  BENEFICIAL

OWNERS AND              MANAGEMENT

      (a)   Security  Ownership of  Certain  Beneficial

Owners  - As of December 31, 1997 there were no persons

known to be beneficial owners of more than 5 percent of

the  Units  of  Limited  Partnership  Interest  in  the

Partnership.

       (b)   Security  Ownership  of  Management  -  At

December  31,  1997,  Demeter owned  382.103  Units  of

General  Partnership  Interest  representing   a   2.78

percent interest in the Partnership.

     (c)  Changes in Control - None



Item    13.    CERTAIN   RELATIONSHIPS   AND    RELATED

TRANSACTIONS

      Refer to Note 2 - "Related Party Transactions" of

"Notes  to  Financial Statements," in the  accompanying

1997   Annual  Report  to  Partners,  incorporated   by

reference in this Form 10-K.  In its

capacity as the Partnership's retail commodity  broker,

DWR  received commodity brokerage commissions (paid and

accrued by the Partnership) of $2,294,914 for the  year

ended December 31, 1997.







<PAGE>

                          PART IV

Item  14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,  AND

REPORTS ON FORM 8-K

(a)  1. Listing of Financial Statements

      The following financial statements and reports of

independent  public accountants, all appearing  in  the

accompanying  1997  Annual  Report  to  Partners,   are

incorporated by reference in this Form 10-K:

          -      Report  of  Deloitte  &  Touche   LLP,
          independent  auditors, for  the  years  ended
          December 31, 1997, 1996 and 1995.

          -     Statements of Financial Condition as of
          December 31, 1997 and 1996.

          -     Statements  of Operations,  Changes  in
          Partners'  Capital, and Cash  Flows  for  the
          years ended December 31, 1997, 1996 and 1995.

          -    Notes to Financial Statements.

       With   the   exception  of  the   aforementioned

information and the information incorporated  in  Items

7, 8, and 13, the 1997 Annual Report to Partners is not

deemed to be filed with this report.

     2.  Listing of Financial Statement Schedules

      No financial statement schedules are required  to

be filed with this report.

(b)  Reports on Form 8-K

      No  reports  on Form 8-K have been filed  by  the

Partnership  during  the last  quarter  of  the  period

covered by this report.

(c)  Exhibits

     Refer to Exhibit Index on Page E-1.


<PAGE>
                           SIGNATURES

     Pursuant to the requirement of Sections 13 or
15(d) 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
                         III

(Registrant)

                                               BY:
                         Demeter        Management
                         Corporation,

General Partner

March   24,  1998       BY:  /s/  Mark  J.  Hawley
Mark J. Hawley, Director and
                           President

       Pursuant   to  the  requirements   of   the
Securities  Exchange Act of 1934, this report  has
been  signed  below  by the following  persons  on
behalf of the registrant and in the capacities and
on the dates indicated.

Demeter Management Corporation.

BY: /s/  Mark J. Hawley                      March
24, 1998
        Mark J. Hawley, Director and
          President

    /s/  Richard M. DeMartini                March
24, 1998
        Richard M. DeMartini, Director
          and Chairman of the Board

    /s/  Lawrence Volpe                      March
24, 1998
        Lawrence Volpe, Director

    /s/  Joseph G. Siniscalchi               March
24, 1998
        Joseph G. Siniscalchi, Director

    /s/  Edward C. Oelsner III               March
24, 1998
        Edward C. Oelsner III, Director

    /s/  Robert E. Murray                    March
24, 1998
        Robert E. Murray, Director

    /s/  Patti L. Behnke                     March
24, 1998
        Patti L. Behnke, Chief Financial
          Officer

<PAGE>

                     EXHIBIT INDEX
                                              ITEM
METHOD OF FILING
-3.  Limited Partnership Agreement of
     the Partnership, dated as of
     December 7, 1983, as amended as
     of May 11, 1984.                                (1)
-10. Management Agreement among the
     Partnership, Demeter and Sunrise
     Commodities Inc. (former name of
     Sunrise Capital Management Inc.),
     dated as of November 15, 1983.                  (2)
-10. Dean Witter Cornerstone Funds
     Exchange Agreement, dated as of
     May 31, 1984.                                   (3)
-10. Amended and restated Customer
     Agreement Between the
     Partnership and DWR, dated as
     of September 1, 1986.                           (4)

-10.   Management Agreement among the
       Partnership, Demeter and Abraham
     Trading Co. dated as
     of July 1, 1996                                 (5)

-10. Management Agreement among the
     Partnership, Demeter and Welton
     Investment Systems Corporation
     dated as of July 1, 1996                        (5)

-13.  December 31, 1997 Annual Report  to  Limited
Partners.                                            (6)

(1)  Incorporated by reference to Exhibit 3.01 to Partnership's Annual Report
 on Form 10-K for the fiscal
     year ended September 30, 1984
                                            (File No. 0-13299).
(2)  Incorporated by reference to Exhibit 10.03 to the Partnership's Annual
     Report on Form 10-K for the f
     iscal year ended September 30, 1984 (File No. 0-13299).
(3)  Incorporated by reference to Exhibit 10.06 to the Partnership's Annual
     Report on Form 10-K for the f
     iscal year ended September 30, 1984 (File No. 0-13299).
(4)  Incorporated by reference to Exhibit 10.01(d) to Post Effective amendment
     No. 23 to the Partnership'
     s Registration Statement on Form S-1 File No. 2-88587 filed on August
     26, 1996.
(5)                                            Filed herewith.

<PAGE>



                 MANAGEMENT AGREEMENT

          THIS  AGREEMENT, made the 1st  day  of  July,
1996 among DEAN WITTER CORNERSTONE FUND III, a New York
limited   partnership   (the  "Partnership"),   DEMETER
MANAGEMENT  CORPORATION,  a Delaware  corporation  (the
"General  Partner"),  and  WELTON  INVESTMENT   SYSTEMS
CORPORATION,  a  California corporation  (the  "Trading
Manager");

                 W I T N E S S E T H:

          WHEREAS,  the Partnership has been  organized
to   engage   in  speculative  trading  of  commodities
(including    foreign    currencies,    mortgage-backed
securities,  money market instruments,  and  any  other
securities  or items which are now or may hereafter  be
the  subject  of  futures contract trading),  commodity
futures contracts, commodity forward contracts, foreign
exchange  commitments, commodity options,  spot  (cash)
commodities  and currencies, and any rights  pertaining
thereto   (hereinafter  referred   to   as   "commodity
interests");   the   Trading  Manager   has   extensive
experience  trading  in  commodity  interests  and   is
willing  to  provide  certain  services  and  undertake
certain obligations as set forth herein;

          WHEREAS,   the  Partnership   is   a   member
partnership of the Dean Witter Cornerstone  Funds  (the
"Cornerstone  Funds")  by entering  into  an  agreement
pursuant to which units of limited partnership interest
("Units") of such member partnerships will be  sold  to
investors in a common offering under the Securities Act
of  1933,  as  amended  (the  "Act"),  pursuant  to   a
Registration  Statement on Form S-1 (No.  2-88587)  (as
amended   from   time   to  time,   the   "Registration
Statement")  and  the Prospectus, constituting  a  part
thereof    (as    amended   and    supplemented,    the
"Prospectus"), and thereafter, pursuant to  which  such
Units can be exchanged by a limited partner of a member
partnership of the Cornerstone Funds at the end of  any
month  for  Units of other member partnerships  of  the
Cornerstone Funds at 100% of the respective  Net  Asset
Value thereof;

          WHEREAS, the Partnership desires the  Trading
Manager to act as a trading manager for the Partnership
and  to  make  investment  decisions  with  respect  to
commodity  interests  for its allocated  share  of  the
Partnership's  Net  Assets  and  the  Trading   Manager
desires so to act; and

          WHEREAS,   the   Partnership,   the   General
Partner,  and  the Trading Manager wish to  enter  into
this  Management Agreement which, among  other  things,
set forth certain terms and conditions upon which

          <PAGE>

          the Trading Manager will conduct a portion of
the Partnership's commodity interest trading;

          NOW,  THEREFORE,  the parties  hereto  hereby
agree as follows:

          1.    Undertakings  in  Connection  with  the
Offering of Units

          (a)   The Trading Manager agrees with respect
to  the continuing offering of Units:  (i) to make  all
disclosures   regarding  itself,  its  principals   and
affiliates,   its  trading  performance,  its   trading
systems,  methods, and strategies (subject to the  need
to  preserve  the  secrecy  of proprietary  information
concerning such systems, methods, and strategies),  any
client  accounts over which it has direct  or  indirect
discretionary trading authority (other than  the  names
of  such clients), and otherwise as the Partnership may
reasonably  require (x) to be made in the Partnership's
Prospectus  required by Section 4.21 of the regulations
of  the  CFTC, including any amendments or  supplements
thereto,  or (y) to comply with any applicable  federal
or  state law or rule or regulation, including those of
the Securities and Exchange Commission (the "SEC"), the
CFTC, the National Futures Association (the "NFA"), the
National  Association of Securities Dealers, Inc.  (the
"NASD")  or  any  other regulatory body,  exchange,  or
board;  and  (ii)  otherwise  to  cooperate  with   the
Partnership  and  the  General  Partner  by   providing
information regarding the Trading Manager in connection
with  the  preparation and filing of  the  Registration
Statement  and Prospectus, including any amendments  or
supplements thereto, with the SEC, CFTC, NFA, NASD, and
with  appropriate governmental authorities as  part  of
making application for registration of the Units  under
the  securities or Blue Sky laws of such  jurisdictions
as  the  Partnership  may deem  appropriate.   As  used
herein,  the  term  "principal"  shall  have  the  same
meaning  as defined in Section 4.10(e)(1) of  the  CFTC
Regulations  and  the term "affiliate"  shall  mean  an
entity   or   individual  (including   a   stockholder,
director,  officer, employee, or agent) or entity  that
directly or indirectly controls, is controlled  by,  or
is  under  common  control with, any  other  entity  or
individual.

          (b)   If,  while Units continue to be offered
and  sold,  the Trading Manager becomes  aware  of  any
untrue  or  misleading statement  or  omission  in  the
Registration Statement or the Prospectus regarding  the
Trading  Manager,  its principals or affiliates,  their
trading performance, or their trading systems, methods,
or  strategies, or of the occurrence of  any  event  of
change  in  circumstances which would result  in  their
being  any  such  untrue  or  misleading  statement  or
omission, the Trading Manager shall immediately  notify
the General

          <PAGE>

          Partner  in writing and shall cooperate  with
it  in  the preparation of any necessary amendments  or
supplements  to  the  Registration  Statement  or   the
Prospectus.  Neither the Trading Manager nor any of its
principals   or   affiliates,  or   any   stockholders,
officers,  directors,  employees,  or  agents  thereof,
shall  use  or  distribute the Registration  Statement,
Prospectus   (including   any   final,   amended,    or
supplemented  prospectus),  or  selling  literature  or
shall  engage  in any selling activities whatsoever  in
connection with the offering of Units.

          2.   Duties of the Trading Manager

          (a)  The Trading Manager hereby agrees to act
as  a Trading Manager for the Partnership and, as such,
shall  have  sole  authority  and  responsibility   for
directing  the  investment  and  reinvestment  of   its
allocable  share  of  Net  Assets  of  the  Partnership
pursuant to its DiversifiedPortfolio trading program on
the  terms  and conditions and in accordance  with  the
prohibitions  and trading policies set  forth  in  this
Agreement,   the   Partnership's  Limited   Partnership
Agreement as from time to time in effect (the  "Limited
Partnership Agreement"), and the Prospectus;  provided,
however,  that  the General Partner  may  override  the
instructions  of  the  Trading Manager  to  the  extent
necessary  (i) to comply with the trading  policies  of
the  Partnership  as  described in the  Prospectus  and
Limited   Partnership  Agreement  and  with  applicable
speculative   position  limits,  (ii)   to   fund   any
distributions,  redemptions, or reapportionments  among
other trading managers to the Partnership, (iii) to pay
the  Partnership's  expenses, (iv) to  the  extent  the
General Partner believes doing so is necessary for  the
protection  of  the Partnership, (v) to  terminate  the
commodity interests trading of the Partnership, or (vi)
to  comply with any applicable law or regulation.   The
General  Partner  agrees  not  to  override  any   such
instructions for the reasons specified in clauses  (ii)
or  (iii) of the preceding sentence unless the  Trading
Manager  fails to comply with a request of the  General
Partner to make the necessary amount of funds available
to  the  Partnership within five days of such  request.
The  Trading  Manager  shall  not  be  liable  for  the
consequences of any decision by the General Partner  to
override instructions of the Trading Manager, except to
the  extent  that the Trading Manager is in  breach  of
this   Agreement.   In  performing  services  for   the
Partnership,  the  Trading Manager may  not  materially
alter or change the program used by the Trading Manager
in investing and reinvesting its allocable share of the
Partnership's   Net   Assets  in   commodity   interest
contracts   as  described  in  the  Trading   Manager's
Disclosure Document dated January 31, 1996 without  the
prior consent of the General Partner.

          <PAGE>

          (b)  The Trading Manager shall:

               (i)  Exercise good faith and due care in
trading  commodity  interests for the  account  of  the
Partnership  in  accordance with the  prohibitions  and
trading policies of the Partnership as described in the
Prospectus  and  Limited Partnership Agreement  to  the
Trading  Manager and the trading systems, methods,  and
strategies  of  the Trading Manager  described  in  the
Prospectus,  with  such changes and additions  to  such
trading  systems, methods or strategies as the  Trading
Manager,  from  time  to  time, incorporates  into  its
trading   approach  for  accounts  the  size   of   the
Partnership.

               (ii) Subject to reasonable assurances of
confidentiality  by  the  General  Partners   and   the
Partnership,  provide the General  Partner,  within  30
days of a request therefor by the General Partner, with
information   comparing   the   performance   of    the
Partnership's account and the performance of all  other
client  accounts directed by the Trading Manager  using
the trading systems used by the Trading Manager for the
Partnership  over  a  specified  period  of  time.   In
providing  such  information, the Trading  Manager  may
take  such  steps  as  are  necessary  to  assure   the
confidentiality  of  the  Trading  Manager's   clients'
identities.   The  Trading  Manager  shall,  upon   the
General  Partner's request, consult  with  the  General
Partner   concerning  any  discrepancies  between   the
performance   of   such   other   accounts   and    the
Partnership's  account.   The  Trading  Manager   shall
promptly  inform  the General Partner of  any  material
discrepancies  of which the Trading Manager  is  aware.
The General Partner acknowledges that different trading
strategies  or  methods may be utilized  for  differing
sizes  of  accounts,  accounts with  different  trading
policies,  accounts experiencing differing  inflows  or
outflows of equity, accounts which commence trading  at
different   times,   accounts   with   different    fee
structures, accounts which have different portfolios or
different  fiscal years and that such  differences  may
cause divergent trading results.

               (iii)      Upon  request of the  General
Partner   and  subject  to  reasonable  assurances   of
confidentiality   by  the  General  Partner   and   the
Partnership,  provide  the  General  Partner  with  all
material  information concerning  the  Trading  Manager
other  than proprietary information (including, without
limitation, information relating to changes in control,
personnel,  trading approach, or financial  condition).
The  General  Partner  acknowledges  that  all  trading
instructions made by the Trading Manager will  be  held
in  confidence  by the General Partner, except  to  the
extent  necessary  to  conduct  the  business  of   the
Partnership or as required by law.



               <PAGE>

               (iv) Inform the General Partner when the
Trading  Manager's  open positions  maintained  by  the
Trading Manager exceed the Trading Manager's applicable
speculative position limits.

          (c)   All  purchases and sales  of  commodity
interests pursuant to this Agreement shall be  for  the
account and at the risk of the Partnership and not  for
the  account or at the risk of the Trading  Manager  or
any of its stockholder, directors, officers, employees,
or  any  other person, if any, who controls the Trading
Manager  within the meaning of the Act.  All  brokerage
commissions  arising from the trading  by  the  Trading
Manager  shall  be for the account of the  Partnership,
but  shall  only be charged against the assets  of  the
Partnership managed by the Trading Manager.

          (d)   Notwithstanding any provision  of  this
Agreement  to  the contrary, the Trading Manager  shall
assume   financial  responsibility   for   any   errors
committed  or caused by it in transmitting  orders  for
the  purchase  or sale of commodity interests  for  the
Partnership's   account,  including  payment   to   the
commodity  broker  of the floor brokerage  commissions,
exchange  and  NFA fees, and other transaction  charges
and give-up charges incurred by the commodity broker on
such  trades  but only for the amount of the  commodity
broker's  out-of-pocket costs in respect thereof.   The
Trading  Manager's  errors shall include,  but  not  be
limited  to,  inputting  improper  trading  signals  or
communicating incorrect orders to any commodity  broker
for  the  Partnership.  However,  the  Trading  Manager
shall not be responsible for errors committed or caused
by  any  commodity  broker for  the  Partnership.   The
Trading  Manager  and  any  commodity  broker  for  the
Partnership  each shall have an affirmative  obligation
to  notify promptly the other party of its own  errors,
and  the Trading Manager shall use its best efforts  to
identify and promptly notify the General Partner of any
order  or  trade  which the Trading Manager  reasonably
believes  was  not  executed  in  accordance  with  its
instructions   to   any  commodity   broker   for   the
Partnership.

          (e)  Prior to the commencement of trading  by
the  Trading Manager on behalf of the Partnership,  the
General  Partner,  on behalf of the Partnership,  shall
deliver  to the Trading Manager a trading authorization
in  the form annexed hereto as Exhibit A appointing the
Trading Manager the Partnership's attorney-in-fact  for
such purpose.

          3.     Designation   of  Additional   Trading
Managers

          The  Trading Manager understands  and  agrees
that if the General Partner at any time deems it to  be
in  the  best interests of the Partnership, the General
Partner  may designate and retain an additional trading
manager  or  managers  for  the  Partnership  and   may
apportion  to  such additional trading  manager(s)  the
management of such amounts of

          <PAGE>

          "Net  Assets"  (as defined  in  Section  7(c)
hereof) as the General Partner shall determine  in  its
absolute  discretion.  The replacement of  any  trading
manager  for  the  Partnership by the  General  Partner
shall  not require any approval of the existing trading
managers   (including   the  Trading   Manager).    The
designation   and   retention  of  an   additional   or
replacement  trading  manager  or  managers   and   the
apportionment  of  Net  Assets  to  any  such   trading
manager(s)  pursuant to this Section  3  shall  neither
terminate  this Agreement nor modify in any regard  the
respective  rights and obligations of the  Partnership,
the General Partner, and the Trading Manager hereunder.

          4.   Trading Manager Independent

          For  all  purposes  of  this  Agreement,  the
Trading  Manager shall be deemed to be  an  independent
contractor   and  shall,  unless  otherwise   expressly
provided herein or authorized, have no authority to act
for or represent the Partnership or General Partner  in
any  way  or  otherwise  be  deemed  an  agent  of  the
Partnership  or  General  Partner.   Nothing  contained
herein  shall  be deemed to require the Partnership  or
General  Partner  to take any action  contrary  to  the
Limited  Partnership  Agreement,  the  Certificate   of
Limited Partnership of the Partnership as from time  to
time   in   effect   (the   "Certificate   of   Limited
Partnership"),  or  any  applicable  law  or  rule   or
regulation of any regulatory body, exchange, or  board.
Nothing  herein contained shall constitute the  Trading
Manager  and any other trading manager or managers  for
the  Partnership, the General Partner, or other  member
partnerships of the Cornerstone Funds or their  trading
managers  as members of any partnership, joint venture,
association, syndicate, or other entity, or  be  deemed
to  confer  on  any  of them any express,  implied,  or
apparent authority to incur any obligation or liability
on behalf of any other.

          5.    Apportionment of Funds to  the  Trading
Manager

          Effective as of the close of business on June
30,  1996,  the  General Partner  will  reallocate  the
Partnership's Net Assets.  The Trading Manager will  be
allocated  approximately 25% of the  Partnership's  Net
Assets  effective as of the date hereof.   The  General
Partner  agrees to apportion approximately 25%  of  the
proceeds  from  any  Exchanges  (as  defined   in   the
Prospectus)  to  the  Trading  Manager.   However,  the
General   Partner  may,  in  its  absolute  discretion,
reapportion  the  funds  of the Partnership  among  the
trading  managers  for the Partnership  (including  the
Trading Manager) when  (i) an additional or replacement
trading  manager  or  managers are designated  for  the
Partnership by the General Partner pursuant to  Section
3 hereof; (ii) a trading manager for the Partnership is
terminated; (iii) there is a 35% decline in  the  value
of  the Managed Net Assets (as defined in Section  7(c)
hereof)  of  the Trading Manager or any  other  trading
manager for

          <PAGE>

          the Partnership during any twelve consecutive
month   period  (after  adding  back  the   amount   of
distributions,     redemptions,      exchanges,      or
reapportionments charged to such Managed Net Assets and
subtracting  increases in such Managed Net Assets  from
Units   acquired  by  purchase  or  exchange  or   from
reapportionments  among  trading  managers  during  the
relevant  portion  of  such  twelve  consecutive  month
period);  (iv) a fiscal year or "incentive period"  (as
defined  in  Section  7(a) hereof) of  the  Partnership
ends;  or  (v) speculative position limits are exceeded
or  about  to be exceeded in any one commodity  by  the
Trading  Manager or any other trading manager  for  the
Partnership or any principal or affiliate thereof.

          6.   Commodity Broker

          The  Trading Manager shall place  orders  for
all   transactions  in  commodity  interests  for   the
Partnership's account through such commodity broker  or
brokers  as the General Partner shall direct.   At  the
present  time,  Dean Witter Reynolds Inc.,  a  Delaware
corporation  and  an affiliate of the  General  Partner
("Dean  Witter"),  shall act as  sole  broker  for  the
Partnership.   Accordingly,  the  Trading  Manager   is
hereby directed to place all orders for transactions in
commodity  interests  for  the  Partnership's   account
through  Dean  Witter until the General  Partner  shall
give  the  Trading  Manager  other  instructions.   The
General Partner shall provide the Trading Manager  with
copies  of brokerage statements.  Notwithstanding  that
Dean  Witter  shall  act as commodity  broker  for  the
Partnership,  the  Trading Manager may  execute  trades
through floor brokers other than those employed by Dean
Witter so long as arrangements are made for such  floor
brokers to "give-up" or transfer the positions to  Dean
Witter  and  provided that the rates  charged  by  such
floor  brokers  have been approved in advance  by  Dean
Witter.

          7.   Fees

          (a)   For the services to be rendered to  the
Partnership   by   the  Trading  Manager   under   this
Agreement,  the  Partnership  shall  pay  the   Trading
Manager the following fees:

          (i)  A monthly management fee, without regard
to  whether the Partnership is profitable, equal to 1/3
of  1%  of  the  "Managed Net Assets"  (as  defined  in
Section  7(c)) as of the end of each calendar month  (a
4%  annual rate) commencing with the month in which the
Partnership begins to receive trading advice  from  the
Trading Manager pursuant to this Agreement, adding back
for purposes of determining such fee any incentive fees
accrued  or  payable on such Managed Net Assets  as  of
such  date  and without reduction for any distributions
or redemptions accrued or payable as of such date.

          <PAGE>

          (ii)  An  annual incentive fee equal  to  the
portion  of  15  percent of the "New Appreciation"  (as
defined  below),  if  any, in the  value  of  the  "Net
Assets" (as defined in Section 7(c)) as of the last day
of  any "incentive period" (as defined below) as  shall
be  allocated to the Trading Manager in accordance with
the provisions set forth in Exhibit B annexed hereto.

          An  "incentive  period" shall be  the  twelve
month  period  commencing on January 1  and  ending  on
December 31.

          The  term "Appreciation" shall mean  (A)  the
value  of  the  Net Assets as of the last  day  of  any
incentive period (reduced by management fees accrued or
payable  for  the account of the Partnership  for  such
incentive period, but before reduction for the  current
annual  incentive fee, if any, accrued or  payable  for
the  account  of  the  Partnership for  such  incentive
period),  minus (B) the highest value of Net Assets  as
of the last day of any preceding incentive period.

          The    term    "New    Appreciation"    means
Appreciation   increased  by  (A)   distributions   and
redemptions paid or payable on Units and (B)  exchanges
of Units for units of another member partnership of the
Cornerstone  Funds, and decreased by (C)  contributions
to  the Partnership arising from Units acquired upon an
exchange  or from the continuing offering of Units  and
(D)  interest  income earned for  the  account  of  the
Partnership,  with  each item of increase  or  decrease
determined from the date of such highest value  of  Net
Assets  to the last day of the incentive period  as  of
which such incentive fee calculation is made.

          The    aggregate   dollar   amount   of   all
distributions and redemptions paid or payable on  Units
and  all exchange of Units shall be divided by the then
number   of   trading  managers  for  the   Partnership
(including  the  Trading Manager) and an  equal  dollar
amount  in  respect of such distributions, redemptions,
or exchanges shall be charged to the Managed Net Assets
of each such trading manager unless the General Partner
shall  select  an alternative means of  allocation  and
shall  so  notify the trading managers.  All  incentive
fees  accrued at the end of a month or paid at the  end
of  an incentive period shall be charged to the Managed
Net  Assets of each trading manager for the Partnership
(including the Trading Manager) in the same manner  and
to  the  same extent as such amounts would or  will  be
paid  to  each such trading manager as of the  date  of
accrual or payment.

          It is understood that limited partners of the
Partnership may redeem or exchange Units other than  at
the  end  of  an  incentive  period  and  that  accrued
incentive fees, if any, shall be a deduction  from  the
"Net   Asset   Value"  (as  defined  in   the   Limited
Partnership

          <PAGE>

          Agreement)  of such Units upon redemption  or
exchange.   The  Partnership agrees that the  incentive
fee  accrued  on any such Units shall be  paid  to  the
Trading  Manager in accordance with the terms  of  this
Agreement  as  if  a  month-end  were  the  end  of  an
incentive  period.   Any amounts  so  paid  to  trading
managers  for  the Partnership (including  the  Trading
Manager)   shall   be  deducted  from  any   subsequent
incentive  fee to be paid as of the end of an incentive
period  which  includes New Appreciation  allocable  to
such Units.

          (b)   If any payment shall have been made  by
the  Partnership to the Trading Manager on  account  of
New  Appreciation in the value of the  Net  Assets  and
thereafter  the Net Assets shall decline  in  value  or
fail  to experience New Appreciation for any subsequent
incentive period, the Trading Manager shall be entitled
to   retain  such  amounts  previously  paid   by   the
Partnership   in  respect  of  New  Appreciation.    No
subsequent payment based on New Appreciation as of  the
end of an incentive period shall be made to the Trading
Manager,  however,  until  the  Partnership  has  again
experienced  New  Appreciation and the Trading  Manager
has   contributed  thereto  and  is  entitled   to   an
allocation of such incentive fee.

          If  this  Agreement is terminated on  a  date
other  than  the  end  of  an  incentive  period,   the
incentive fee described above shall be determined as if
such date were the end of an incentive period.  If this
Agreement is terminated on a date other than the end of
a  calendar  month, the management fee described  above
shall be determined as if such date were the end  of  a
month,  but  such fee shall be prorated  based  on  the
ratio  of  the  number of trading  days  in  the  month
through the date of termination to the total number  of
trading  days  in  the  month.   If  during  any  month
(including the month in which the Partnership commences
trading  operations) the Partnership does  not  conduct
business  operations, or suspends  trading,  or,  as  a
result  of  an  act or failure to act  by  the  Trading
Manager,  is  otherwise unable to utilize  the  trading
advice  of  the Trading Manager on any of  the  trading
days of that period for any reason, the management  fee
described above shall be prorated based on the ratio of
the  number of trading days in the month on  which  the
Partnership engaged in trading operations to the  total
number  of  trading days in the month.  The  management
fee  payable  to the Trading Manager for the  month  in
which  the Partnership begins to receive trading advice
from  the  Trading Manager pursuant to  this  Agreement
shall  be prorated based on the ratio of the number  of
trading  days in the month from the day the Partnership
begins  to  receive such trading advice  to  the  total
number of trading days in the month.

          Any  management or incentive fees payable  to
the   Trading   Manager  pursuant  to   the   foregoing
provisions  shall be paid within ten and  thirty  days,
respectively, after the end of the applicable period.

          <PAGE>

          (c)   As  used herein, the term "Net  Assets"
shall   mean  the  total  assets  of  the  Partnership,
including  all  cash  and cash equivalents  (valued  at
cost),  accrued interest, and the market value  of  all
open  commodity  positions  and  other  assets  of  the
Partnership,   less  (i)  one-half  of  the   brokerage
commissions that would be payable with respect  to  the
closing  of  each of the Partnership's  open  commodity
positions  and  (ii)  all  other  liabilities  of   the
Partnership,  including  incentive  fees   accrued   or
payable,  determined in accordance with the  principles
specified  in  the Limited Partnership  Agreement  and,
where  no  principle is specified, in  accordance  with
generally  accepted accounting principles  consistently
applied under the accrual basis of accounting.

          As used herein, the term "Managed Net Assets"
shall   mean   the  total  assets  of  the  Partnership
allocated  to  the  management  of  a  trading  manager
(including the Trading Manager), including all cash and
cash  equivalents  (valued at cost), accrued  interest,
and  the  market value of all open commodity  positions
and  other  assets  allocated to such trading  manager,
less  (i)  one-half of the brokerage  commissions  that
would be payable with respect to the closing of each of
such  trading manager's open commodity positions,  (ii)
its  proportionate  share of  incentive  fees  for  the
Partnership   accrued  or  payable  pursuant   to   the
provisions  of  this  Section,  and  (iii)  all   other
liabilities  of  the  Partnership  allocated  to   such
trading   manager,   including  brokerage   commissions
attributable  to  the  trading  manager   and   monthly
management  fees of the trading manager, determined  in
accordance with the principles specified in the Limited
Partnership  Agreement  and,  where  no  principle   is
specified,   in  accordance  with  generally   accepted
accounting  principles consistently applied  under  the
accrual basis of accounting.

          (d)   The  Trading Manager shall not  receive
any  share  of the brokerage commissions  paid  by  the
Partnership  to  any commodity broker, whether  in  the
form of rebates or otherwise.

          8.   Term

          This Agreement shall continue in effect for a
period  of  three  years following  the  date  of  this
Agreement.  Thereafter, this Agreement shall be renewed
automatically  for  additional  one-year  terms  unless
either  the  Partnership or the Trading  Manager,  upon
written notice given not less than 60 days prior to the
original  termination date or any extended  termination
date, notifies the other party of its intention not  to
renew.    This   Agreement  shall  terminate   if   the
Partnership terminates.  The Partnership shall have the
right  to terminate this Agreement at any time  without
penalty  upon  15  days' prior written  notice  to  the
Trading Manager.  In addition, this

          <PAGE>

          Agreement   may   be   terminated   by    the
Partnership  at any time without penalty  upon  written
notice  to  the Trading Manager upon the occurrence  of
any  of  the following events:  (i) the Trading Manager
becomes bankrupt or insolvent; (ii) the Trading Manager
is  unable  to  use  its Diversified Portfolio  trading
system  or  methods as in effect on the  date  of  this
Agreement  and  as refined and modified in  the  future
with the written consent of the General Partner for the
benefit of the Partnership; (iii) the registration,  as
a  commodity  trading  advisor  or  otherwise,  of  the
Trading Manager with the CFTC or its membership in  the
NFA  is  revoked, suspended, terminated, or not renewed
or limited, conditioned, restricted or qualified in any
respect; (iv) except as permitted in Section 14 hereof,
the  Trading  Manager merges or consolidates  with,  or
sells or otherwise transfers its advisory business,  or
all or a substantial portion of its assets, any portion
of  its  commodity trading systems or methods,  or  its
goodwill to, any individual or entity; (v) a decline in
the  Net  Asset  Value of a Unit, without  taking  into
account distributions, if any, to less than 40% of  the
Net  Asset  Value  of  a  Unit on  the  date  that  the
Partnership  commenced  trading  operations;   (vi)   a
decline  in  the Net Asset Value of a Unit  during  any
fiscal year to less than 50% of the Net Asset Value  of
a  Unit as of the beginning of such fiscal year of  the
Partnership;  (vii)  a  decline  by  50%   during   any
consecutive  12-month period in the value  of  the  Net
Assets  managed  by the Trading Manager  (after  adding
back   the   amount   of  distributions,   redemptions,
exchanges  or  reapportionments  charged  to  such  Net
Assets  and  subtracting increases in such  Net  Assets
from    Units    acquired   by   Exchange    or    from
reapportionments  among  Trading  Managers  during  the
relevant  portion  of  such  twelve  consecutive  month
period); (viii) the Trading Manager violates any of the
Partnership's  trading policies or  any  administrative
policy  described  in writing to the  General  Partner,
except  with  the prior written consent of the  General
Partner;  or (ix) the Trading Manager fails to  perform
any  of  its  obligations under  this  Agreement.   The
indemnities set forth in Sections 9 and 10 hereof shall
survive any termination of this Agreement.

          9.   Standard of Liability and Indemnity

          (a)   Subject  to Section 2 and  Sections  10
through   14  hereof,  the  Trading  Manager  and   its
stockholders,  directors, officers, employees,  agents,
and  its  or  their respective successors  and  assigns
shall  not  be liable to the Partnership,  the  General
Partner,  its  stockholder,  officers,  directors,   or
employees, the limited partners of the Partnership,  or
any  of  its or their respective successors or assigns,
except  by reason of acts of, or omissions due to,  bad
faith,  misconduct, or negligence, or  for  not  having
acted in good faith in the reasonable belief that  such
acts  or omissions were in, or not opposed to, the best
interests  of  the  Partnership,  or  by  reason  of  a
material

          <PAGE>

          breach of this Agreement, or by reason  of  a
breach   of  a  representation  or  warranty  in   this
Agreement.

          (b)   The Partnership and the General Partner
shall  indemnify, defend, and hold harmless the Trading
Manager,   its   stockholders,   directors,   officers,
employees,  and its or their respective successors  and
assigns from and against all liabilities (including  in
connection  with the defense or settlement  of  claims)
incurred in the performance of the services required by
this  Agreement,  provided that a  court  of  competent
jurisdiction  upon entry of final judgment  shall  find
(or,  if  no  final judgment is entered, an opinion  is
rendered  to  the  Partnership  by  independent   legal
counsel) to the effect that such liability was not  the
result  of bad faith, misconduct, or negligence on  the
part of the indemnified person, or that the conduct  by
the  indemnified  person was done  in  the  good  faith
belief  that  it was in, or not opposed  to,  the  best
interests of the Partnership.`

          (c)   The  Trading  Manager shall  indemnify,
defend,  and hold harmless the Partnership, the General
Partner,  its  stockholders, officers,  directors,  and
employees, the limited partners of the Partnership, and
any  of  its or their respective successors or  assigns
from  and against all liabilities incurred as a  result
of   the   activities  of  the  Trading  Manager,   its
stockholders,  directors, officers, employees,  agents,
or  its  or  their respective successors  and  assigns,
provided that such liability arises out of, or is based
upon,  conduct  by the Trading Manager or  any  of  its
stockholders,  directors, officers, employees,  agents,
or  its or their respective successors or assigns which
is  found  by  a  court of competent jurisdiction  upon
entry  of  final judgment (or, if no final judgment  is
entered,  by an opinion rendered to the Partnership  by
independent  legal  counsel) to be the  result  of  bad
faith,  misconduct, or negligence, or conduct not  done
in the good faith belief that it was in, or not opposed
to, the best interests of the Partnership.

          (d)  The indemnities provided in this Section
9  by  the Partnership and the General Partner  to  the
Trading   Manager  and  its  stockholders,   directors,
officers,   employees,  and  its  or  their  respective
successors  and  assigns shall be inapplicable  in  the
event  of any liability arising out of, or based  upon,
any   misrepresentation  or  material  breach  of   any
warranty, covenant, or agreement of the Trading Manager
contained  in  this Agreement to the extent  caused  by
such event.  Likewise, the indemnities provided in this
Section  9  by  the Trading Manager to the Partnership,
the   General  Partner,  its  stockholders,   officers,
directors, and employees, the limited partners  of  the
Partnership,  and  any  of  its  or  their   respective
successors  and  assigns shall be inapplicable  in  the
event  of any liability arising out of, or based  upon,
any   misrepresentation  or  material  breach  of   any
warranty,

          <PAGE>

          covenant, or agreement of the Partnership  or
the  General Partner contained in this Agreement to the
extent caused by such event.

          10.  Indemnification in Connection with the
               Registration Statement and the
               Prospectus

          (a)   The Partnership and the General Partner
shall  indemnify, defend, and hold harmless the Trading
Manager  from and against any losses, claims,  damages,
or  liabilities, joint or several, to which the Trading
Manager may become subject, under the Act or otherwise,
insofar as such losses, claims, damages, or liabilities
(or  actions in respect thereof) arise out of,  or  are
based  upon,  any  untrue  or misleading  statement  or
alleged  untrue or misleading statement of any material
fact  contained  in  the  Registration  Statement,  the
Prospectus, or any amendment or supplement thereto,  or
any related preliminary prospectus, or arise out of, or
are based upon, the omission or the alleged omission to
state  therein a material fact required  to  be  stated
therein or necessary to make the statements therein (in
the   case   of  the  Prospectus,  in  light   of   the
circumstances   under  which  they   were   made)   not
misleading; provided, however, that the Partnership and
the  General  Partner shall not be liable in  any  such
case  to  the extent that any such loss, claim, damage,
or  liability  arises out of, or  is  based  upon,  any
untrue or misleading statement or omission made in  any
of  such  documents in reliance upon, and in conformity
with,  information furnished to the Partnership or  the
General Partner or any of their agents by or on  behalf
of  the Trading Manager or its agents.  The Partnership
and  the General Partner also shall reimburse any legal
or  other  expenses,  including  reasonable  attorneys'
fees,  reasonably  incurred by the Trading  Manager  in
connection  with investigating or defending  any  loss,
claim,  damage,  liability, or action covered  by  this
indemnity agreement.  The indemnity agreement  in  this
subsection  (a) shall be in addition to  any  liability
which  the  Partnership  and the  General  Partner  may
otherwise  have and shall extend, upon the  same  terms
and conditions, to each officer, director, and employee
of  the Trading Manager and to each person, if any, who
controls the Trading Manager within the meaning of  the
Act.

          (b)   The  Trading  Manager shall  indemnify,
defend,  and hold harmless the Partnership, the General
Partner,  any  member partnership  of  the  Cornerstone
Funds,   and   any  other  trading  manager   for   the
Partnership  or  for  a  member  partnership   of   the
Cornerstone Funds from and against any losses,  claims,
damages, or liabilities, joint or several, to which any
indemnified person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages,  or
liabilities (or actions in respect thereof)  arise  out
of,  or  are  based  upon,  any  untrue  or  misleading
statement or alleged untrue or

          <PAGE>

          misleading  statement of  any  material  fact
contained   in   the   Registration   Statement,    the
Prospectus, or any amendment or supplement thereto,  or
any related preliminary prospectus, or arise out of, or
are based upon, the omission or the alleged omission to
state  therein a material fact required  to  be  stated
therein or necessary to make the statement therein  (in
the   case   of  the  Prospectus,  in  light   of   the
circumstances   under  which  they   were   made)   not
misleading, provided that any such loss, claim, damage,
or liability arises out of, or is based upon, an untrue
or  misleading statement or omission or alleged  untrue
or misleading statement or omission made in any of such
documents  in  reliance upon, and in  conformity  with,
information furnished to the Partnership or the General
Partner or any of their agents by or on behalf  of  the
Trading  Manager  or its agents.  The  Trading  Manager
also  shall  reimburse  any legal  or  other  expenses,
including   reasonable  attorneys'   fees,   reasonably
incurred  by any indemnified person in connection  with
investigating  or  defending any loss,  claim,  damage,
liability,   or   action  covered  by  this   indemnity
agreement.   The indemnity agreement in this subsection
(b)  shall  be in addition to any liability  which  the
Trading  Manager may otherwise have and  shall  extend,
upon  the  same terms and conditions, to each  partner,
officer,  director,  and employee  of  any  indemnified
person  and  to each person, if any, who  controls  any
indemnified person within the meaning of the Act.

          (c)  Promptly after receipt by an indemnified
party  under this Section of notice of the commencement
of  any action, the indemnified party shall notify  the
indemnifying  party of the commencement  thereof  if  a
claim  in  respect  thereof is to be made  against  the
indemnifying party under this Section; but the omission
so  to  notify the indemnifying party shall not relieve
the  indemnifying  party from any liability  which  the
indemnifying  party may have to any  indemnified  party
under  this  Section (except where such omission  shall
have  materially prejudiced the indemnifying party)  or
otherwise than under this Section.  In case any  action
is  brought  against  any indemnified  party,  and  the
indemnified  party notifies the indemnifying  party  of
the  commencement thereof, the indemnifying party shall
be  entitled to participate therein and, to the  extent
that the indemnifying party may wish, jointly with  any
other  indemnifying party similarly notified, to assume
the defense thereof, with legal counsel satisfactory to
the  indemnified  party,  and  after  notice  from  the
indemnifying  party  to the indemnified  party  of  the
indemnifying party's election so to assume the  defense
thereof, the indemnifying party shall not be liable  to
the  indemnified party under this Section for any legal
or   other  expenses  subsequently  incurred   by   the
indemnified  party  in  connection  with  the   defense
thereof  other  than reasonable costs of investigation.
Notwithstanding any other provision of this Section, if
in  any  claim  as  to which indemnify  is  or  may  be
available  any indemnified party reasonably  determines
that its interests are or may

          <PAGE>

          be  adverse,  in  whole or in  part,  to  the
interests  of the indemnifying party or that there  may
be  legal  defenses available to the indemnified  party
which are or may be different from, in addition to,  or
inconsistent  with  the  defenses  available   to   the
indemnifying  party, the indemnified party  may  retain
its own legal counsel in connection with such claim, in
which  case  the indemnified part shall be  responsible
for   any   legal  or  any  other  expenses,  including
reasonable attorneys' fees, incurred by or on behalf of
it  in connection with investigating or defending  such
claim.

          11.  Right to Advise Others and Uniformity of
Acts and Practices

          (a)   The Trading Manager is engaged  in  the
business  of advising investors as to the purchase  and
sale  of commodity interests.  During the term of  this
Agreement, subject to Section 11(c) hereof, the Trading
Manager  and its principals and affiliates may or  will
be  advising other investors (including their officers,
directors,  and  employees and  their  families,  their
principals and affiliates, and stockholders,  officers,
directors,   and  employees  of  such  principals   and
affiliates  and their families) and trading  for  their
accounts.   However, under no circumstances  shall  the
Trading  Manager or any of its principals or affiliates
by  any act or omission knowingly or deliberately favor
any  account advised or managed by the Trading  Manager
or any of its principals or affiliates over the account
of  the Partnership in any way or manner (other than by
charging different management and/or incentive fees) or
employ  a trading system, method, or strategy on behalf
of  any other account advised or managed by the Trading
Manager or any of its principals or affiliates which is
materially different from the trading system, method or
strategy  employed by the Trading Manager on behalf  of
the  Partnership's account unless the  Trading  Manager
has  first offered to employ such other system, method,
or  strategy on behalf of the Partnership's account and
the  General Partner has expressly declined such  offer
in  writing.   The  General Partner agrees  to  respond
promptly to such requests.  The Trading Manager and its
principals   and   affiliates  agree   to   treat   the
Partnership  in  a  fiduciary capacity  to  the  extent
recognized  by  applicable law, but,  subject  to  that
standard and Section 11(c) hereof, the Trading  Manager
and  its  principals and affiliates shall  be  free  to
advise  and  manage  accounts for other  investors  and
shall be free to trade on the basis of the same trading
system  or other methods or strategies employed by  the
Trading Manager for the account of the Partnership,  or
trading  systems,  methods,  or  strategies  which  are
entirely  independent of, or materially different  from
(if  the  General Partner has expressly  declined  such
offer   pursuant  to  the  preceding  sentence),  those
employed for the account of the Partnership, and  shall
be  free to compete for the same commodity interests as
the Partnership

          <PAGE>

          or   to   take  positions  opposite  to   the
Partnership,  where such actions do  not  knowingly  or
deliberately  favor  any  of  such  accounts  over  the
account  of  the  Partnership.  At the request  of  the
General Partner, the Trading Manager shall use its best
efforts to make available for inspection and copying by
the  General  Partner  copies of  the  normal  monthly,
quarterly, and annual (as the case may be) reports sent
to participants in commodity pools (without identifying
such participants) for which the Trading Manager or any
of  its  principals or affiliates acts as  a  commodity
trading advisor and similar information with respect to
any other accounts of theirs with respect to which such
reports  are  not  required to be  delivered.   At  the
request of the General Partner, the Trading Manager and
its principals and affiliates shall provide the General
Partner with a written explanation, acceptable  to  the
General Partner, of material differences in performance
between  the  Partnership's  account  and  such   other
accounts.

          (b)   Subject  to Section 11(c)  hereof,  the
Trading Manager and its principals and affiliates shall
not  be restricted as to the number of nature of  their
clients,  except  that:   (i)  they  shall  not  accept
additional   advisory  clients   or   open   additional
positions  in  commodity interests if to  do  so  would
result  in  aggregate positions in  any  one  commodity
exceeding the applicable speculative position limits of
the  CFTC  or  any other regulatory body, exchange,  or
board having jurisdiction; and (ii) if they at any time
become  aware that the positions in commodity interests
of   the  Partnership,  the  Trading  Manager,  or  any
principal  or affiliate of the Trading Manager  (either
alone  or  aggregated with the positions of  any  other
person)  exceed  or  are  about  to  exceed  applicable
speculative  position limits of the CFTC or  any  other
regulatory    body,   exchange,   or    board    having
jurisdiction, they shall immediately notify the General
Partner  of  that  fact  and shall  take  such  action,
consistent with their fiduciary responsibility  to  the
Partnership,  their obligation not to favor  any  other
account  over  the  Partnership's  account,  and  their
obligations  under this Agreement, as may be  necessary
to  prevent  to  the  extent possible  the  significant
modification  of  positions taken or intended  for  the
Partnership.

          (c)    The  Trading  Manager  represents  and
agrees  that so long as the Trading Manager acts  as  a
trading  manager  for  the  Partnership,  neither   the
Trading Manager nor any of its principals or affiliates
shall  hold knowingly any position or control any other
account  which would cause the Partnership, the Trading
Manager, or the principals or affiliates of the Trading
Manager  to  be in violation of the Commodity  Exchange
Act   (the  "CEAct")  or  any  regulations  promulgated
thereunder,  any applicable rule or regulation  of  the
CFTC  or any other regulatory body, exchange, or board.
The  Trading Manager further represents and agrees that
neither the Trading Manager nor any of its

          <PAGE>

          principals   or   affiliates   shall   render
commodity  trading  advice to any other  individual  or
entity  or  otherwise  engage in activity  which  shall
knowingly cause positions in commodity interests to  be
attributed  to  the  Trading  Manager  or  any  of  its
principals or affiliates under the rules or regulations
of  the CFTC or any other regulatory body, exchange, or
board so as to require the significant modification  of
positions  taken  or intended for the  account  of  the
Partnership.  If applicable speculative position limits
are  exceeded  by the Trading Manager  or  any  of  its
principals  or affiliates in the opinion of independent
legal  counsel (who shall be other than counsel to  the
Partnership),  the CFTC, or any other regulatory  body,
exchange,  or  board,  the  Trading  Manager  and   its
principals  and  affiliates  shall  promptly  liquidate
positions  in  all  of  their accounts,  including  the
Partnership's  account,  as  to  which  positions   are
attributed  to  the  Trading  Manager  or  any  of  its
principals  or  affiliates as  nearly  as  possible  in
proportion  to their respective equities to the  extent
necessary to comply with the applicable position limits
and  shall  deliver  to the General Partner  a  written
explanation of the manner in which it or they  complied
with this provision.

          12.   Additional Undertakings by the  Trading
Manager

          The  Trading Manager warrants and agrees that
neither   the   Trading  Manager   nor   any   of   its
stockholders,    officers,    directors,     employees,
principals,   affiliates,  or  any  of  the   officers,
directors,   employees,   or   stockholders   of   such
principals  or  affiliates  shall  knowingly   use   or
distribute the Certificate of Limited Partnership,  any
amendment  thereto, or any list excerpted  or  complied
therefrom   containing  the  names   and/or   residence
addresses  of,  and/or  other biographical  information
about, the limited partners of the Partnership for  the
purpose  of soliciting any such person for a  commodity
pool or commodity trading program similar in nature  to
the Partnership.

          13.  Aggregation

          If   it   should  prove  necessary,  in   the
reasonable  opinion  of  the  legal  counsel   to   the
Partnership with respect to commodity interests subject
to speculative position limits established by the CFTC,
an  exchange, or any other commodity trading regulatory
agency   or   authority,  for  positions  in  commodity
interests taken by the Trading Manager for the  account
of  the  Partnership to be aggregated, for purposes  of
speculative   position  limits,   with   positions   in
commodity interests taken by each of the other  trading
managers for the account of the Partnership, or  if  an
order  to  that  effect  is  made  by  the  CFTC,  such
exchange,  or  such  other  agency  or  authority,  the
General  Partner  may require the Trading  Manager  and
each  other trading manager affected thereby to utilize
only that portion of the speculative position limit

          <PAGE>

          in  each  commodity interest as  the  General
Partner  shall determine from time to time in its  sole
discretion.

          14.   Merger or Transfer of Assets of Trading
Manager

          The  Trading Manager may merge or consolidate
with,  or  sell  or  otherwise  transfer  its  advisory
business, or all or a substantial portion of its assets
or  its  goodwill  to,  any  entity  that  directly  or
indirectly  is  controlled by, controls,  or  is  under
common control with, the Trading Manager, provided that
such  entity expressly assumes all obligations  of  the
Trading  Manager  under this Agreement  and  agrees  to
continue  to  operate  the  business  of  the   Trading
Manager,  substantially  as  such  business  is   being
conducted  on  the  date  hereof,  as  a  separate  and
distinct division of such entity.  The Trading  Manager
agrees to provide written notice to the General Partner
at  least 30 days before the effective date of any such
merger,   consolidation,  sale,  or  transfer,  whether
permitted under this Section or otherwise.

          15.  Complete Agreement

          This   Agreement   constitutes   the   entire
agreement among the parties with respect to the matters
referred  to herein, and no other agreement, verbal  or
otherwise, shall be binding as among the parties unless
it  is in writing and signed by the party against  whom
enforcement is sought.

          16.  Assignment

          This  Agreement  may not be assigned  by  any
party  hereto without the prior written consent of  the
other  parties hereto, except that the Partnership  and
General Partner may assign this Agreement to any entity
that directly or indirectly controls, is controlled by,
or  is under common control with, them, and the Trading
Manager may assign this Agreement to a successor entity
expressly permitted under Section 17 hereof.

          17.  Amendment; Waiver

          This Agreement may not be amended except by a
written  instrument signed by the parties  hereto.   No
waiver  of  any  provision of this Agreement  shall  be
implied from any course of dealing between or among the
parties hereto or from any failure by any party  hereto
to  assert  its  rights hereunder on  any  occasion  or
series of occasions.

          18.  Severability

          The  invalidity  or unenforceability  of  any
provision  of  this  Agreement or any  covenant  herein
contained shall not affect the

          <PAGE>

          validity  or  enforceability  of  any   other
provision  or covenant hereof or herein contained,  and
any  such invalid provision or covenant shall be deemed
to be severable.

          19.  Notices

          All   notices  required  or  desired  to   be
delivered under this Agreement shall be in writing  and
shall be effective when delivered personally on the day
delivered  or,  when given by registered  or  certified
mail, postage prepaid, return receipt requested, on the
second business day following the day on which it is so
mailed,  addressed as follows (or to such other address
as   the  party  entitled  to  notice  shall  hereafter
designate in accordance with the terms hereof):

          if to the Partnership or the General Partner:

               c/o Demeter Management Corporation
               2 World Trade Center, 62nd Floor
               New York, New York  10048
               Attn:  Mr. Mark J. Hawley, President

               and with copies to:

               Dean Witter Reynolds Inc.
               130 Liberty Street
               New York, New York  10006
               Attn:  Michael T. Gregg, Esq.

                          and

               Cadwalader, Wickersham & Taft
               100 Maiden Lane
               New York, New York  10038
               Attn:  Edwin L. Lyon, Esq.

          if to the Trading Manager:

               Welton Investment Systems Corporation
               The Eastwood Building
               San Carlos between 5th and 6th
               P.O. Box 6147
               Carmel, California 93921-6147
               Attn:  President

          20.  Survival

          The   provisions  of  this  Agreement   shall
survive  the termination of this Agreement with respect
to any matter arising while

          <PAGE>

          this  Agreement was in effect, provided  that
the  restriction  in  Section 11(c)  hereof  shall  not
survive the termination of this Agreement.

          21.  Governing Law

          This  Agreement  shall be  governed  by,  and
construed in accordance with, the law of the  State  of
New  York (excluding the law thereof which requires the
application  of or reference to the law  of  any  other
jurisdiction).

          22.  Consent to Jurisdiction

          The  parties hereto agree that any action  or
proceeding  arising directly, indirectly, or  otherwise
in  connection with, out of, related to, or  from  this
Agreement,   any  breach  hereof,  or  any  transaction
covered   hereby,   shall  be  resolved,   whether   by
arbitration or otherwise, within the County, City,  and
State  of  New York.  Accordingly, the parties  consent
and submit to the jurisdiction of the federal and state
courts  and any applicable arbitral body located within
the  County, City, and State of New York.  The  parties
further  agree  that  any  such  action  or  proceeding
brought  by  either party to enforce any right,  assert
any   claim,   or  obtain  any  relief  whatsoever   in
connection with this Agreement shall be brought by such
party exclusively in the federal or state courts, or if
appropriate before an arbitral body, located within the
County, City, and State of New York.

          23.  Counterparts

          This    Agreement   may   be   executed    in
counterparts, each of which shall be deemed an original
but  all of which together shall constitute one and the
same instrument.

          24.  Headings

          Headings  to  sections  herein  are  for  the
convenience of the parties only and are not intended to
be a part of or to affect the meaning or interpretation
of this Agreement.

          <PAGE>

          IN  WITNESS WHEREOF, this Agreement has  been
executed for and on behalf of the undersigned as of the
day and year first above written.

               DEAN WITTER CORNERSTONE FUND III

               By:  Demeter Management Corporation,
                         General Partner



               By: /s/ Mark J. Hawley___________
                    Mark J. Hawley, President

               DEMETER MANAGEMENT CORPORATION


               By: /s/ Mark J. Hawley  _________
               Mark J. Hawley, President

               WELTON INVESTMENT SYSTEMS CORPORATION


               By: /s/ Patrick L. Welton_________




<PAGE>

                                              EXHIBIT A

                 TRADING AUTHORIZATION

Welton Investment System Corpooration
The Eastwood Building
San Carlos between 5th and 6th
P.O. Box 6147
Carmel, California 93921-6147
Attn: President


Dear Sirs:

          Dean  Witter Cornerstone Fund III, a New York
limited  partnership (the "Partnership"),  does  hereby
make, constitute, and appoint Welton Investment Systems
Corporation    (the   "Trading   Manager")    as    the
Partnership's  agent and attorney-in-fact  to  purchase
and   sell  commodity  interests  through  Dean  Witter
Reynolds Inc., as commodity broker, as described in and
in   accordance  with  the  terms  of  the   Management
Agreement   dated  as  of  July  1,  1996   among   the
Partnership,  Demeter Management  Corporation  and  the
Trading  Manager, until further notice to  the  Trading
Manager.

          This  authorization shall  terminate  and  be
null,  void,  and  of no further effect  simultaneously
with the termination of the said Management Agreement.

               Very truly yours,

               DEAN WITTER CORNERSTONE FUND III

               By:  Demeter Management Corporation,
                      General Partner


               By: /s/ Mark J. Hawley_

                    Mark J. Hawley

Dated:  July 1, 1996

<PAGE>

                                              EXHIBIT B



          The  total Partnership incentive fee,  F,  in
any  incentive period is the sum of the incentive  fees
payable as a result of New Appreciation.  The change in
New   Appreciation  each  incentive  period  shall  for
accounting  purposes  be  apportioned  each   incentive
period  among  all  of  the trading  managers  for  the
Partnership  in accordance with their net contribution,
after  allocations for expenses and fees  as  described
above, to the change in New Appreciation.  Thus, if the
total  change in New Appreciation during the  incentive
period is X, then

                     X = A + B + C

where A, B, and C are the contributions of each of  the
trading   managers   to  the  total   change   in   New
Appreciation.   The  General  Partner  shall   prepare,
update annually, and maintain running totals of  A,  B,
and C as indicators of the cumulative contributions  of
each trading manager.  Thus, the cumulative sum of  the
value  of  A, TA, represents the total contribution  of
trading  manager  A  to  New  Appreciation  since   the
inception  of  trading on behalf of the Partnership  by
such trading manager.  Similarly, the values TB and  TC
are the cumulative contributions of trading managers  B
and C, respectively.

          The  General Partner shall maintain a  record
of  cumulative  total Partnership  incentive  fees  and
cumulative incentive fees paid to each trading manager.
The  cumulative  total Partnership incentive  fee,  TF,
shall  equal the sum of all Partnership incentive  fees
paid.   The cumulative total of incentive fees paid  to
trading manager A, PA, shall equal the sum of all prior
incentive  fees  received  by  that  trading   manager.
Similarly,  the  values PB and PC  are  the  cumulative
total of incentive fees paid to trading managers B  and
C,   respectively.   Since  the  incentive   fees   are
allocated  among  the Partnership's  trading  managers,
then

                   TF = PA + PB + PC

Consequently, the following three ratios are indicators
of   cumulative  incentive  fee  payments  relative  to
cumulative performance for each trading manager:

               PA/TA     PB/TB     PC/TC

To  the  extent  possible, the goal of  the  allocation
rules  of  the  next  paragraph is  to  equalize  these
indicators for each trading manager,

<PAGE>

i.e.,  to  make  cumulative  individual  incentive  fee
payments    proportional   to   cumulative   individual
performance.

          At  the  end  of each incentive  period,  the
following  rules  shall be used to allocate  the  total
Partnership  incentive  fee,  F,  among  each   trading
manager:

          1)   A    trading    manager   whose    total
               contribution  is zero shall  receive  no
               incentive fee.  Thus, if at the  end  of
               the   incentive  period,  TB  is   zero,
               trading  manager B shall not  receive  a
               portion of the fee, F.

          2)   The  total Partnership fee, F, shall  be
               allocated  among  trading  managers  one
               dollar   at  a  time.   Each  successive
               dollar  will  be  given to  the  trading
               manager   with  the  lowest   ratio   of
               cumulative    payments   to   cumulative
               performance.   Thus, if  PB/TB  is  less
               than  both PA/TA and PC/TC, then trading
               manager B is given the next dollar.  The
               values  of PA, PB, and PC and the ratios
               PA/TA,   PB/TB,  and  PC/TC   are   then
               recalculated before allocating the  next
               dollar.   Thus,  the trading  manager(s)
               with  the  lowest  ratio  continues   to
               receive  dollars  until  his  ratio   is
               larger  than  one of the  other  trading
               managers.

          3)   Each  trading manager shall be  entitled
               to retain any incentive fees paid in any
               prior incentive period.




















<PAGE>



                 MANAGEMENT AGREEMENT

          THIS  AGREEMENT, made the 1st  day  of  July,
1996 among DEAN WITTER CORNERSTONE FUND III, a New York
limited   partnership   (the  "Partnership"),   DEMETER
MANAGEMENT  CORPORATION,  a Delaware  corporation  (the
"General  Partner"), and ABRAHAM TRADING CO.,  a  Texas
corporation (the "Trading Manager");

                 W I T N E S S E T H:

          WHEREAS,  the Partnership has been  organized
to   engage   in  speculative  trading  of  commodities
(including    foreign    currencies,    mortgage-backed
securities,  money market instruments,  and  any  other
securities  or items which are now or may hereafter  be
the  subject  of  futures contract trading),  commodity
futures contracts, commodity forward contracts, foreign
exchange  commitments, commodity options,  spot  (cash)
commodities  and currencies, and any rights  pertaining
thereto   (hereinafter  referred   to   as   "commodity
interests");   the   Trading  Manager   has   extensive
experience  trading  in  commodity  interests  and   is
willing  to  provide  certain  services  and  undertake
certain obligations as set forth herein;

          WHEREAS,   the  Partnership   is   a   member
partnership of the Dean Witter Cornerstone  Funds  (the
"Cornerstone  Funds")  by entering  into  an  agreement
pursuant to which units of limited partnership interest
("Units") of such member partnerships will be  sold  to
investors in a common offering under the Securities Act
of  1933,  as  amended  (the  "Act"),  pursuant  to   a
Registration  Statement on Form S-1 (No.  2-88587)  (as
amended   from   time   to  time,   the   "Registration
Statement")  and  the Prospectus, constituting  a  part
thereof    (as    amended   and    supplemented,    the
"Prospectus"), and thereafter, pursuant to  which  such
Units can be exchanged by a limited partner of a member
partnership of the Cornerstone Funds at the end of  any
month  for  Units of other member partnerships  of  the
Cornerstone Funds at 100% of the respective  Net  Asset
Value thereof;

          WHEREAS, the Partnership desires the  Trading
Manager to act as a trading manager for the Partnership
and  to  make  investment  decisions  with  respect  to
commodity  interests  for its allocated  share  of  the
Partnership's  Net  Assets  and  the  Trading   Manager
desires so to act; and

          WHEREAS,   the   Partnership,   the   General
Partner,  and  the Trading Manager wish to  enter  into
this  Management Agreement which, among  other  things,
set forth certain terms and conditions upon which

          <PAGE>

          the Trading Manager will conduct a portion of
the Partnership's commodity interest trading;

          NOW,  THEREFORE,  the parties  hereto  hereby
agree as follows:

          1.    Undertakings  in  Connection  with  the
Offering of Units

          (a)   The Trading Manager agrees with respect
to  the continuing offering of Units:  (i) to make  all
disclosures   regarding  itself,  its  principals   and
affiliates,   its  trading  performance,  its   trading
systems,  methods, and strategies (subject to the  need
to  preserve  the  secrecy  of proprietary  information
concerning such systems, methods, and strategies),  any
client  accounts over which it has direct  or  indirect
discretionary trading authority (other than  the  names
of  such clients), and otherwise as the Partnership may
reasonably  require (x) to be made in the Partnership's
Prospectus  required by Section 4.21 of the regulations
of  the  CFTC, including any amendments or  supplements
thereto,  or (y) to comply with any applicable  federal
or  state law or rule or regulation, including those of
the Securities and Exchange Commission (the "SEC"), the
CFTC, the National Futures Association (the "NFA"), the
National  Association of Securities Dealers, Inc.  (the
"NASD")  or  any  other regulatory body,  exchange,  or
board;  and  (ii)  otherwise  to  cooperate  with   the
Partnership  and  the  General  Partner  by   providing
information regarding the Trading Manager in connection
with  the  preparation and filing of  the  Registration
Statement  and Prospectus, including any amendments  or
supplements thereto, with the SEC, CFTC, NFA, NASD, and
with  appropriate governmental authorities as  part  of
making application for registration of the Units  under
the  securities or Blue Sky laws of such  jurisdictions
as  the  Partnership  may deem  appropriate.   As  used
herein,  the  term  "principal"  shall  have  the  same
meaning  as defined in Section 4.10(e)(1) of  the  CFTC
Regulations  and  the term "affiliate"  shall  mean  an
entity   or   individual  (including   a   stockholder,
director,  officer, employee, or agent) or entity  that
directly or indirectly controls, is controlled  by,  or
is  under  common  control with, any  other  entity  or
individual.

          (b)   If,  while Units continue to be offered
and  sold,  the Trading Manager becomes  aware  of  any
untrue  or  misleading statement  or  omission  in  the
Registration Statement or the Prospectus regarding  the
Trading  Manager,  its principals or affiliates,  their
trading performance, or their trading systems, methods,
or  strategies, or of the occurrence of  any  event  of
change  in  circumstances which would result  in  their
being  any  such  untrue  or  misleading  statement  or
omission, the Trading Manager shall immediately  notify
the General

          <PAGE>

          Partner  in writing and shall cooperate  with
it  in  the preparation of any necessary amendments  or
supplements  to  the  Registration  Statement  or   the
Prospectus.  Neither the Trading Manager nor any of its
principals   or   affiliates,  or   any   stockholders,
officers,  directors,  employees,  or  agents  thereof,
shall  use  or  distribute the Registration  Statement,
Prospectus   (including   any   final,   amended,    or
supplemented  prospectus),  or  selling  literature  or
shall  engage  in any selling activities whatsoever  in
connection with the offering of Units.

          2.   Duties of the Trading Manager

          (a)  The Trading Manager hereby agrees to act
as  a Trading Manager for the Partnership and, as such,
shall  have  sole  authority  and  responsibility   for
directing  the  investment  and  reinvestment  of   its
allocable  share  of  Net  Assets  of  the  Partnership
pursuant  to  its  trading program  on  the  terms  and
conditions and in accordance with the prohibitions  and
trading  policies  set  forth in  this  Agreement,  the
Partnership's  Limited Partnership  Agreement  as  from
time  to  time  in  effect  (the  "Limited  Partnership
Agreement"),  and  the Prospectus;  provided,  however,
that  the General Partner may override the instructions
of  the Trading Manager to the extent necessary (i)  to
comply with the trading policies of the Partnership  as
described  in  the  Prospectus and Limited  Partnership
Agreement  and  with  applicable  speculative  position
limits, (ii) to fund any distributions, redemptions, or
reapportionments among other trading  managers  to  the
Partnership,  (iii) to pay the Partnership's  expenses,
(iv)  to the extent the General Partner believes  doing
so  is necessary for the protection of the Partnership,
(v) to terminate the commodity interests trading of the
Partnership, or (vi) to comply with any applicable  law
or  regulation.   The  General Partner  agrees  not  to
override   any  such  instructions  for   the   reasons
specified  in  clauses (ii) or (iii) of  the  preceding
sentence  unless  the Trading Manager fails  to  comply
with  a  request  of the General Partner  to  make  the
necessary  amount of funds available to the Partnership
within  five days of such request.  The Trading Manager
shall  not  be  liable  for  the  consequences  of  any
decision   by   the   General   Partner   to   override
instructions  of  the Trading Manager,  except  to  the
extent  that the Trading Manager is in breach  of  this
Agreement.  In performing services for the Partnership,
the  Trading Manager may not materially alter or change
the  program  used by the Trading Manager in  investing
and    reinvesting   its   allocable   share   of   the
Partnership's   Net   Assets  in   commodity   interest
contracts   as  described  in  the  Trading   Manager's
Disclosure  Document dated June 20,  1996  (a  copy  of
which has been received by the General Partner) without
the prior consent of the General Partner.

          <PAGE>

          (b)  The Trading Manager shall:

               (i)  Exercise good faith and due care in
trading  commodity  interests for the  account  of  the
Partnership  in  accordance with the  prohibitions  and
trading policies of the Partnership as described in the
Prospectus  and  Limited Partnership Agreement  to  the
Trading  Manager and the trading systems, methods,  and
strategies  of  the Trading Manager  described  in  the
Prospectus,  with  such changes and additions  to  such
trading  systems, methods or strategies as the  Trading
Manager,  from  time  to  time, incorporates  into  its
trading   approach  for  accounts  the  size   of   the
Partnership.

               (ii) Subject to reasonable assurances of
confidentiality  by  the  General  Partners   and   the
Partnership,  provide the General  Partner,  within  30
days of a request therefor by the General Partner, with
information   comparing   the   performance   of    the
Partnership's account and the performance of all  other
client  accounts directed by the Trading Manager  using
the trading systems used by the Trading Manager for the
Partnership  over  a  specified  period  of  time.   In
providing  such  information, the Trading  Manager  may
take  such  steps  as  are  necessary  to  assure   the
confidentiality  of  the  Trading  Manager's   clients'
identities.   The  Trading  Manager  shall,  upon   the
General  Partner's request, consult  with  the  General
Partner   concerning  any  discrepancies  between   the
performance   of   such   other   accounts   and    the
Partnership's  account.   The  Trading  Manager   shall
promptly  inform  the General Partner of  any  material
discrepancies  of which the Trading Manager  is  aware.
The General Partner acknowledges that different trading
strategies  or  methods may be utilized  for  differing
sizes  of  accounts,  accounts with  different  trading
policies,  accounts experiencing differing  inflows  or
outflows of equity, accounts which commence trading  at
different   times,   accounts   with   different    fee
structures, accounts which have different portfolios or
different  fiscal years and that such  differences  may
cause divergent trading results.

               (iii)      Upon  request of the  General
Partner   and  subject  to  reasonable  assurances   of
confidentiality   by  the  General  Partner   and   the
Partnership,  provide  the  General  Partner  with  all
material  information concerning  the  Trading  Manager
other  than proprietary information (including, without
limitation, information relating to changes in control,
personnel,  trading approach, or financial  condition).
The  General  Partner  acknowledges  that  all  trading
instructions made by the Trading Manager will  be  held
in  confidence  by the General Partner, except  to  the
extent  necessary  to  conduct  the  business  of   the
Partnership or as required by law.



               <PAGE>

               (iv) Inform the General Partner when the
Trading  Manager's  open positions  maintained  by  the
Trading Manager exceed the Trading Manager's applicable
speculative position limits.

          (c)   All  purchases and sales  of  commodity
interests pursuant to this Agreement shall be  for  the
account and at the risk of the Partnership and not  for
the  account or at the risk of the Trading  Manager  or
any of its stockholder, directors, officers, employees,
or  any  other person, if any, who controls the Trading
Manager  within the meaning of the Act.  All  brokerage
commissions  arising from the trading  by  the  Trading
Manager  shall  be for the account of the  Partnership,
but  shall  only be charged against the assets  of  the
Partnership managed by the Trading Manager.

          (d)   Notwithstanding any provision  of  this
Agreement  to  the contrary, the Trading Manager  shall
assume   financial  responsibility   for   any   errors
committed  or caused by it in transmitting  orders  for
the  purchase  or sale of commodity interests  for  the
Partnership's   account,  including  payment   to   the
commodity  broker  of the floor brokerage  commissions,
exchange  and  NFA fees, and other transaction  charges
and give-up charges incurred by the commodity broker on
such  trades  but only for the amount of the  commodity
broker's  out-of-pocket costs in respect thereof.   The
Trading  Manager's  errors shall include,  but  not  be
limited  to,  inputting  improper  trading  signals  or
communicating incorrect orders to any commodity  broker
for  the  Partnership.  However,  the  Trading  Manager
shall not be responsible for errors committed or caused
by  any  commodity  broker for  the  Partnership.   The
Trading  Manager  and  any  commodity  broker  for  the
Partnership  each shall have an affirmative  obligation
to  notify promptly the other party of its own  errors,
and  the Trading Manager shall use its best efforts  to
identify and promptly notify the General Partner of any
order  or  trade  which the Trading Manager  reasonably
believes  was  not  executed  in  accordance  with  its
instructions   to   any  commodity   broker   for   the
Partnership.

          (e)  Prior to the commencement of trading  by
the  Trading Manager on behalf of the Partnership,  the
General  Partner,  on behalf of the Partnership,  shall
deliver  to the Trading Manager a trading authorization
in  the form annexed hereto as Exhibit A appointing the
Trading Manager the Partnership's attorney-in-fact  for
such purpose.

          3.     Designation   of  Additional   Trading
Managers

          The  Trading Manager understands  and  agrees
that if the General Partner at any time deems it to  be
in  the  best interests of the Partnership, the General
Partner  may designate and retain an additional trading
manager  or  managers  for  the  Partnership  and   may
apportion  to  such additional trading  manager(s)  the
management of such amounts of

          <PAGE>

          "Net  Assets"  (as defined  in  Section  7(c)
hereof) as the General Partner shall determine  in  its
absolute  discretion.  The replacement of  any  trading
manager  for  the  Partnership by the  General  Partner
shall  not require any approval of the existing trading
managers   (including   the  Trading   Manager).    The
designation   and   retention  of  an   additional   or
replacement  trading  manager  or  managers   and   the
apportionment  of  Net  Assets  to  any  such   trading
manager(s)  pursuant to this Section  3  shall  neither
terminate  this Agreement nor modify in any regard  the
respective  rights and obligations of the  Partnership,
the General Partner, and the Trading Manager hereunder.

          4.   Trading Manager Independent

          For  all  purposes  of  this  Agreement,  the
Trading  Manager shall be deemed to be  an  independent
contractor   and  shall,  unless  otherwise   expressly
provided herein or authorized, have no authority to act
for or represent the Partnership or General Partner  in
any  way  or  otherwise  be  deemed  an  agent  of  the
Partnership  or  General  Partner.   Nothing  contained
herein  shall  be deemed to require the Partnership  or
General  Partner  to take any action  contrary  to  the
Limited  Partnership  Agreement,  the  Certificate   of
Limited Partnership of the Partnership as from time  to
time   in   effect   (the   "Certificate   of   Limited
Partnership"),  or  any  applicable  law  or  rule   or
regulation of any regulatory body, exchange, or  board.
Nothing  herein contained shall constitute the  Trading
Manager  and any other trading manager or managers  for
the  Partnership, the General Partner, or other  member
partnerships of the Cornerstone Funds or their  trading
managers  as members of any partnership, joint venture,
association, syndicate, or other entity, or  be  deemed
to  confer  on  any  of them any express,  implied,  or
apparent authority to incur any obligation or liability
on behalf of any other.

          5.    Apportionment of Funds to  the  Trading
Manager

          Effective as of the close of business on June
30,  1996,  the  General Partner  will  reallocate  the
Partnership's Net Assets.  The Trading Manager will  be
allocated  approximately 25% of the  Partnership's  Net
Assets  effective as of the date hereof.   The  General
Partner  agrees to apportion approximately 25%  of  the
proceeds  from  any  Exchanges  (as  defined   in   the
Prospectus)  to  the  Trading  Manager.   However,  the
General   Partner  may,  in  its  absolute  discretion,
reapportion  the  funds  of the Partnership  among  the
trading  managers  for the Partnership  (including  the
Trading Manager) when  (i) an additional or replacement
trading  manager  or  managers are designated  for  the
Partnership by the General Partner pursuant to  Section
3 hereof; (ii) a trading manager for the Partnership is
terminated; (iii) there is a 35% decline in  the  value
of  the Managed Net Assets (as defined in Section  7(c)
hereof)  of  the Trading Manager or any  other  trading
manager for

          <PAGE>

          the Partnership during any twelve consecutive
month   period  (after  adding  back  the   amount   of
distributions,     redemptions,      exchanges,      or
reapportionments charged to such Managed Net Assets and
subtracting  increases in such Managed Net Assets  from
Units   acquired  by  purchase  or  exchange  or   from
reapportionments  among  trading  managers  during  the
relevant  portion  of  such  twelve  consecutive  month
period);  (iv) a fiscal year or "incentive period"  (as
defined  in  Section  7(a) hereof) of  the  Partnership
ends;  or  (v) speculative position limits are exceeded
or  about  to be exceeded in any one commodity  by  the
Trading  Manager or any other trading manager  for  the
Partnership or any principal or affiliate thereof.

          6.   Commodity Broker

          The  Trading Manager shall place  orders  for
all   transactions  in  commodity  interests  for   the
Partnership's account through such commodity broker  or
brokers  as the General Partner shall direct.   At  the
present  time,  Dean Witter Reynolds Inc.,  a  Delaware
corporation  and  an affiliate of the  General  Partner
("Dean  Witter"),  shall act as  sole  broker  for  the
Partnership.   Accordingly,  the  Trading  Manager   is
hereby directed to place all orders for transactions in
commodity  interests  for  the  Partnership's   account
through  Dean  Witter until the General  Partner  shall
give  the  Trading  Manager  other  instructions.   The
General Partner shall provide the Trading Manager  with
copies  of brokerage statements.  Notwithstanding  that
Dean  Witter  shall  act as commodity  broker  for  the
Partnership,  the  Trading Manager may  execute  trades
through floor brokers other than those employed by Dean
Witter so long as arrangements are made for such  floor
brokers to "give-up" or transfer the positions to  Dean
Witter  and  provided that the rates  charged  by  such
floor  brokers  have been approved in advance  by  Dean
Witter.

          7.   Fees

          (a)   For the services to be rendered to  the
Partnership   by   the  Trading  Manager   under   this
Agreement,  the  Partnership  shall  pay  the   Trading
Manager the following fees:

          (i)  A monthly management fee, without regard
to  whether the Partnership is profitable, equal to 1/3
of  1%  of  the  "Managed Net Assets"  (as  defined  in
Section  7(c)) as of the end of each calendar month  (a
4%  annual rate) commencing with the month in which the
Partnership begins to receive trading advice  from  the
Trading Manager pursuant to this Agreement, adding back
for purposes of determining such fee any incentive fees
accrued  or  payable on such Managed Net Assets  as  of
such  date  and without reduction for any distributions
or redemptions accrued or payable as of such date.

          <PAGE>

          (ii)  An  annual incentive fee equal  to  the
portion  of  15  percent of the "New Appreciation"  (as
defined  below),  if  any, in the  value  of  the  "Net
Assets" (as defined in Section 7(c)) as of the last day
of  any "incentive period" (as defined below) as  shall
be  allocated to the Trading Manager in accordance with
the provisions set forth in Exhibit B annexed hereto.

          An  "incentive  period" shall be  the  twelve
month  period  commencing on January 1  and  ending  on
December 31.

          The  term "Appreciation" shall mean  (A)  the
value  of  the  Net Assets as of the last  day  of  any
incentive period (reduced by management fees accrued or
payable  for  the account of the Partnership  for  such
incentive period, but before reduction for the  current
annual  incentive fee, if any, accrued or  payable  for
the  account  of  the  Partnership for  such  incentive
period),  minus (B) the highest value of Net Assets  as
of the last day of any preceding incentive period.

          The    term    "New    Appreciation"    means
Appreciation   increased  by  (A)   distributions   and
redemptions paid or payable on Units and (B)  exchanges
of Units for units of another member partnership of the
Cornerstone  Funds, and decreased by (C)  contributions
to  the Partnership arising from Units acquired upon an
exchange  or from the continuing offering of Units  and
(D)  interest  income earned for  the  account  of  the
Partnership,  with  each item of increase  or  decrease
determined from the date of such highest value  of  Net
Assets  to the last day of the incentive period  as  of
which such incentive fee calculation is made.

          The    aggregate   dollar   amount   of   all
distributions and redemptions paid or payable on  Units
and  all exchange of Units shall be divided by the then
number   of   trading  managers  for  the   Partnership
(including  the  Trading Manager) and an  equal  dollar
amount  in  respect of such distributions, redemptions,
or exchanges shall be charged to the Managed Net Assets
of each such trading manager unless the General Partner
shall  select  an alternative means of  allocation  and
shall  so  notify the trading managers.  All  incentive
fees  accrued at the end of a month or paid at the  end
of  an incentive period shall be charged to the Managed
Net  Assets of each trading manager for the Partnership
(including the Trading Manager) in the same manner  and
to  the  same extent as such amounts would or  will  be
paid  to  each such trading manager as of the  date  of
accrual or payment.

          It is understood that limited partners of the
Partnership may redeem or exchange Units other than  at
the  end  of  an  incentive  period  and  that  accrued
incentive fees, if any, shall be a deduction  from  the
"Net   Asset   Value"  (as  defined  in   the   Limited
Partnership

          <PAGE>

          Agreement)  of such Units upon redemption  or
exchange.   The  Partnership agrees that the  incentive
fee  accrued  on any such Units shall be  paid  to  the
Trading  Manager in accordance with the terms  of  this
Agreement  as  if  a  month-end  were  the  end  of  an
incentive  period.   Any amounts  so  paid  to  trading
managers  for  the Partnership (including  the  Trading
Manager)   shall   be  deducted  from  any   subsequent
incentive  fee to be paid as of the end of an incentive
period  which  includes New Appreciation  allocable  to
such Units.

          (b)   If any payment shall have been made  by
the  Partnership to the Trading Manager on  account  of
New  Appreciation in the value of the  Net  Assets  and
thereafter  the Net Assets shall decline  in  value  or
fail  to experience New Appreciation for any subsequent
incentive period, the Trading Manager shall be entitled
to   retain  such  amounts  previously  paid   by   the
Partnership   in  respect  of  New  Appreciation.    No
subsequent payment based on New Appreciation as of  the
end of an incentive period shall be made to the Trading
Manager,  however,  until  the  Partnership  has  again
experienced  New  Appreciation and the Trading  Manager
has   contributed  thereto  and  is  entitled   to   an
allocation of such incentive fee.

          If  this  Agreement is terminated on  a  date
other  than  the  end  of  an  incentive  period,   the
incentive fee described above shall be determined as if
such date were the end of an incentive period.  If this
Agreement is terminated on a date other than the end of
a  calendar  month, the management fee described  above
shall be determined as if such date were the end  of  a
month,  but  such fee shall be prorated  based  on  the
ratio  of  the  number of trading  days  in  the  month
through the date of termination to the total number  of
trading  days  in  the  month.   If  during  any  month
(including the month in which the Partnership commences
trading  operations) the Partnership does  not  conduct
business  operations, or suspends  trading,  or,  as  a
result  of  an  act or failure to act  by  the  Trading
Manager,  is  otherwise unable to utilize  the  trading
advice  of  the Trading Manager on any of  the  trading
days of that period for any reason, the management  fee
described above shall be prorated based on the ratio of
the  number of trading days in the month on  which  the
Partnership engaged in trading operations to the  total
number  of  trading days in the month.  The  management
fee  payable  to the Trading Manager for the  month  in
which  the Partnership begins to receive trading advice
from  the  Trading Manager pursuant to  this  Agreement
shall  be prorated based on the ratio of the number  of
trading  days in the month from the day the Partnership
begins  to  receive such trading advice  to  the  total
number of trading days in the month.

          Any  management or incentive fees payable  to
the   Trading   Manager  pursuant  to   the   foregoing
provisions  shall be paid within ten and  thirty  days,
respectively, after the end of the applicable period.

          <PAGE>

          (c)   As  used herein, the term "Net  Assets"
shall   mean  the  total  assets  of  the  Partnership,
including  all  cash  and cash equivalents  (valued  at
cost),  accrued interest, and the market value  of  all
open  commodity  positions  and  other  assets  of  the
Partnership,   less  (i)  one-half  of  the   brokerage
commissions that would be payable with respect  to  the
closing  of  each of the Partnership's  open  commodity
positions  and  (ii)  all  other  liabilities  of   the
Partnership,  including  incentive  fees   accrued   or
payable,  determined in accordance with the  principles
specified  in  the Limited Partnership  Agreement  and,
where  no  principle is specified, in  accordance  with
generally  accepted accounting principles  consistently
applied under the accrual basis of accounting.

          As used herein, the term "Managed Net Assets"
shall   mean   the  total  assets  of  the  Partnership
allocated  to  the  management  of  a  trading  manager
(including the Trading Manager), including all cash and
cash  equivalents  (valued at cost), accrued  interest,
and  the  market value of all open commodity  positions
and  other  assets  allocated to such trading  manager,
less  (i)  one-half of the brokerage  commissions  that
would be payable with respect to the closing of each of
such  trading manager's open commodity positions,  (ii)
its  proportionate  share of  incentive  fees  for  the
Partnership   accrued  or  payable  pursuant   to   the
provisions  of  this  Section,  and  (iii)  all   other
liabilities  of  the  Partnership  allocated  to   such
trading   manager,   including  brokerage   commissions
attributable  to  the  trading  manager   and   monthly
management  fees of the trading manager, determined  in
accordance with the principles specified in the Limited
Partnership  Agreement  and,  where  no  principle   is
specified,   in  accordance  with  generally   accepted
accounting  principles consistently applied  under  the
accrual basis of accounting.

          (d)   The  Trading Manager shall not  receive
any  share  of the brokerage commissions  paid  by  the
Partnership  to  any commodity broker, whether  in  the
form of rebates or otherwise.

          8.   Term

          This Agreement shall continue in effect for a
period   of  one  year  following  the  date  of   this
Agreement.  Thereafter, this Agreement shall be renewed
automatically  for  additional  one-year  terms  unless
either  the  Partnership or the Trading  Manager,  upon
written notice given not less than 60 days prior to the
original  termination date or any extended  termination
date, notifies the other party of its intention not  to
renew.    This   Agreement  shall  terminate   if   the
Partnership terminates.  The Partnership shall have the
right  to terminate this Agreement at any time  without
penalty  upon  15  days' prior written  notice  to  the
Trading Manager.  In addition, this

          <PAGE>

          Agreement   may   be   terminated   by    the
Partnership  at any time without penalty  upon  written
notice  to  the Trading Manager upon the occurrence  of
any  of  the following events:  (i) the Trading Manager
becomes bankrupt or insolvent; (ii) the Trading Manager
is  unable to use its trading system or methods  as  in
effect on the date of this Agreement and as refined and
modified in the future with the written consent of  the
General  Partner  for the benefit of  the  Partnership;
(iii)  the registration, as a commodity trading advisor
or  otherwise, of the Trading Manager with the CFTC  or
its  membership  in  the  NFA  is  revoked,  suspended,
terminated,  or  not  renewed or limited,  conditioned,
restricted or qualified in any respect; (iv) except  as
permitted  in  Section 14 hereof, the  Trading  Manager
merges  or  consolidates with, or  sells  or  otherwise
transfers   its  advisory  business,  or   all   or   a
substantial portion of its assets, any portion  of  its
commodity  trading systems or methods, or its  goodwill
to,  any individual or entity; (v) a decline in the Net
Asset  Value  of  a Unit, without taking  into  account
distributions,  if any, to less than  40%  of  the  Net
Asset  Value of a Unit on the date that the Partnership
commenced trading operations; (vi) a decline in the Net
Asset  Value of a Unit during any fiscal year  to  less
than  50%  of the Net Asset Value of a Unit as  of  the
beginning of such fiscal year of the Partnership; (vii)
a decline by 50% during any consecutive 12-month period
in  the  value of the Net Assets managed by the Trading
Manager (after adding back the amount of distributions,
redemptions, exchanges or reapportionments  charged  to
such  Net Assets and subtracting increases in such  Net
Assets   from  Units  acquired  by  Exchange  or   from
reapportionments  among  Trading  Managers  during  the
relevant  portion  of  such  twelve  consecutive  month
period); (viii) the Trading Manager violates any of the
Partnership's  trading policies or  any  administrative
policy  described  in writing to the  General  Partner,
except  with  the prior written consent of the  General
Partner;  or (ix) the Trading Manager fails to  perform
any  of  its  obligations under  this  Agreement.   The
indemnities set forth in Sections 9 and 10 hereof shall
survive any termination of this Agreement.

          9.   Standard of Liability and Indemnity

          (a)   Subject  to Section 2 and  Sections  10
through   14  hereof,  the  Trading  Manager  and   its
stockholders,  directors, officers, employees,  agents,
and  its  or  their respective successors  and  assigns
shall  not  be liable to the Partnership,  the  General
Partner,  its  stockholder,  officers,  directors,   or
employees, or any of its or their respective successors
or  assigns, except by reason of acts of, or  omissions
due  to, bad faith, misconduct, or negligence,  or  for
not having acted in good faith in the reasonable belief
that such acts or omissions were in, or not opposed to,
the best interests of the Partnership, or by reason  of
a  material breach of this Agreement, or by reason of a
breach   of  a  representation  or  warranty  in   this
Agreement.

          <PAGE>

          (b)   The Partnership and the General Partner
shall  indemnify, defend, and hold harmless the Trading
Manager,   its   stockholders,   directors,   officers,
employees,  and its or their respective successors  and
assigns from and against all liabilities (including  in
connection  with the defense or settlement  of  claims)
incurred in the performance of the services required by
this  Agreement,  provided that a  court  of  competent
jurisdiction  upon entry of final judgment  shall  find
(or,  if  no  final judgment is entered, an opinion  is
rendered  to  the  Partnership  by  independent   legal
counsel) to the effect that such liability was not  the
result  of bad faith, misconduct, or negligence on  the
part of the indemnified person, or that the conduct  by
the  indemnified  person was done  in  the  good  faith
belief  that  it was in, or not opposed  to,  the  best
interests of the Partnership.`

          (c)   The  Trading  Manager shall  indemnify,
defend,  and hold harmless the Partnership, the General
Partner,  its  stockholders, officers,  directors,  and
employees, or any of its or their respective successors
or  assigns, from and against all liabilities  incurred
as  a  result of the activities of the Trading Manager,
its   stockholders,  directors,  officers,   employees,
agents,  or  its  or  their respective  successors  and
assigns, provided that such liability arises out of, or
is based upon, conduct by the Trading Manager or any of
its   stockholders,  directors,  officers,   employees,
agents,  or  its  or  their  respective  successors  or
assigns   which  is  found  by  a  court  of  competent
jurisdiction upon entry of final judgment  (or,  if  no
final  judgment is entered, by an opinion  rendered  to
the Partnership by independent legal counsel) to be the
result  of  bad  faith, misconduct, or  negligence,  or
conduct not done in the good faith belief that  it  was
in,  or  not  opposed  to, the best  interests  of  the
Partnership.

          (d)  The indemnities provided in this Section
9  by  the Partnership and the General Partner  to  the
Trading   Manager  and  its  stockholders,   directors,
officers,   employees,  and  its  or  their  respective
successors  and  assigns shall be inapplicable  in  the
event  of any liability arising out of, or based  upon,
any   misrepresentation  or  material  breach  of   any
warranty, covenant, or agreement of the Trading Manager
contained  in  this Agreement to the extent  caused  by
such event.  Likewise, the indemnities provided in this
Section  9  by  the Trading Manager to the Partnership,
the   General  Partner,  its  stockholders,   officers,
directors,  and  employees, and any  of  its  or  their
respective successors and assigns shall be inapplicable
in  the  event of (i) any liability arising out of,  or
based upon, any misrepresentation or material breach of
any warranty, covenant, or agreement of the Partnership
or  the General Partner contained in this Agreement  to
the  extent  caused  by such event or  (ii)  any  event
unrelated  to the Trading Manager which occurred  prior
to the date of this Agreement.

          <PAGE>

          10.  Indemnification in Connection with the
               Registration Statement and the
               Prospectus

          (a)   The Partnership and the General Partner
shall  indemnify, defend, and hold harmless the Trading
Manager  from and against any losses, claims,  damages,
or  liabilities, joint or several, to which the Trading
Manager may become subject, under the Act or otherwise,
insofar as such losses, claims, damages, or liabilities
(or  actions in respect thereof) arise out of,  or  are
based  upon,  any  untrue  or misleading  statement  or
alleged  untrue or misleading statement of any material
fact  contained  in  the  Registration  Statement,  the
Prospectus, or any amendment or supplement thereto,  or
any related preliminary prospectus, or arise out of, or
are based upon, the omission or the alleged omission to
state  therein a material fact required  to  be  stated
therein or necessary to make the statements therein (in
the   case   of  the  Prospectus,  in  light   of   the
circumstances   under  which  they   were   made)   not
misleading; provided, however, that the Partnership and
the  General  Partner shall not be liable in  any  such
case  to  the extent that any such loss, claim, damage,
or  liability  arises out of, or  is  based  upon,  any
untrue or misleading statement or omission made in  any
of  such  documents in reliance upon, and in conformity
with,  information furnished to the Partnership or  the
General Partner or any of their agents by or on  behalf
of  the Trading Manager or its agents.  The Partnership
and  the General Partner also shall reimburse any legal
or  other  expenses,  including  reasonable  attorneys'
fees,  reasonably  incurred by the Trading  Manager  in
connection  with investigating or defending  any  loss,
claim,  damage,  liability, or action covered  by  this
indemnity agreement.  The indemnity agreement  in  this
subsection  (a) shall be in addition to  any  liability
which  the  Partnership  and the  General  Partner  may
otherwise  have and shall extend, upon the  same  terms
and conditions, to each officer, director, and employee
of  the Trading Manager and to each person, if any, who
controls the Trading Manager within the meaning of  the
Act.

          (b)   The  Trading  Manager shall  indemnify,
defend,  and hold harmless the Partnership, the General
Partner,  any  member partnership  of  the  Cornerstone
Funds,   and   any  other  trading  manager   for   the
Partnership  or  for  a  member  partnership   of   the
Cornerstone Funds from and against any losses,  claims,
damages, or liabilities, joint or several, to which any
indemnified person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages,  or
liabilities (or actions in respect thereof)  arise  out
of,  or  are  based  upon,  any  untrue  or  misleading
statement or alleged untrue or misleading statement  of
any   material   fact  contained  in  the  Registration
Statement,   the  Prospectus,  or  any   amendment   or
supplement   thereto,   or  any   related   preliminary
prospectus, or arise out of, or are based upon,

          <PAGE>

          the omission or the alleged omission to state
therein  a material fact required to be stated  therein
or necessary to make the statement therein (in the case
of  the Prospectus, in light of the circumstances under
which they were made) not misleading, provided that any
such  loss, claim, damage, or liability arises out  of,
or  is based upon, an untrue or misleading statement or
omission  or alleged untrue or misleading statement  or
omission  made  in  any of such documents  in  reliance
upon, and in conformity with, information furnished  to
the  Partnership or the General Partner or any of their
agents  by or on behalf of the Trading Manager  or  its
agents.   The Trading Manager also shall reimburse  any
legal   or   other   expenses,   including   reasonable
attorneys' fees, reasonably incurred by any indemnified
person  in  connection with investigating or  defending
any  loss, claim, damage, liability, or action  covered
by  this  indemnity agreement.  The indemnity agreement
in  this  subsection (b) shall be in  addition  to  any
liability which the Trading Manager may otherwise  have
and  shall  extend, upon the same terms and conditions,
to each partner, officer, director, and employee of any
indemnified  person  and to each person,  if  any,  who
controls  any indemnified person within the meaning  of
the Act.

          (c)  Promptly after receipt by an indemnified
party  under this Section of notice of the commencement
of  any action, the indemnified party shall notify  the
indemnifying  party of the commencement  thereof  if  a
claim  in  respect  thereof is to be made  against  the
indemnifying party under this Section; but the omission
so  to  notify the indemnifying party shall not relieve
the  indemnifying  party from any liability  which  the
indemnifying  party may have to any  indemnified  party
under  this  Section (except where such omission  shall
have  materially prejudiced the indemnifying party)  or
otherwise than under this Section.  In case any  action
is  brought  against  any indemnified  party,  and  the
indemnified  party notifies the indemnifying  party  of
the  commencement thereof, the indemnifying party shall
be  entitled to participate therein and, to the  extent
that the indemnifying party may wish, jointly with  any
other  indemnifying party similarly notified, to assume
the defense thereof, with legal counsel satisfactory to
the  indemnified  party,  and  after  notice  from  the
indemnifying  party  to the indemnified  party  of  the
indemnifying party's election so to assume the  defense
thereof, the indemnifying party shall not be liable  to
the  indemnified party under this Section for any legal
or   other  expenses  subsequently  incurred   by   the
indemnified  party  in  connection  with  the   defense
thereof  other  than reasonable costs of investigation.
Notwithstanding any other provision of this Section, if
in  any  claim  as  to which indemnify  is  or  may  be
available  any indemnified party reasonably  determines
that  its interests are or may be adverse, in whole  or
in  part, to the interests of the indemnifying party or
that  there  may  be legal defenses  available  to  the
indemnified  party which are or may be different  from,
in addition to, or

          <PAGE>

          inconsistent  with the defenses available  to
the  indemnifying  party,  the  indemnified  party  may
retain  its own legal counsel in connection  with  such
claim,  in  which case the indemnified  part  shall  be
responsible  for  any  legal  or  any  other  expenses,
including reasonable attorneys' fees, incurred by or on
behalf  of  it  in  connection  with  investigating  or
defending such claim.

          11.  Right to Advise Others and Uniformity of
Acts and Practices

          (a)   The Trading Manager is engaged  in  the
business  of advising investors as to the purchase  and
sale  of commodity interests.  During the term of  this
Agreement, subject to Section 11(c) hereof, the Trading
Manager  and its principals and affiliates may or  will
be  advising other investors (including their officers,
directors,  and  employees and  their  families,  their
principals and affiliates, and stockholders,  officers,
directors,   and  employees  of  such  principals   and
affiliates  and their families) and trading  for  their
accounts.   However, under no circumstances  shall  the
Trading  Manager or any of its principals or affiliates
by  any act or omission knowingly or deliberately favor
any  account advised or managed by the Trading  Manager
or any of its principals or affiliates over the account
of  the Partnership in any way or manner (other than by
charging different management and/or incentive fees) or
employ  a trading system, method, or strategy on behalf
of  any other account advised or managed by the Trading
Manager or any of its principals or affiliates which is
materially different from the trading system, method or
strategy  employed by the Trading Manager on behalf  of
the  Partnership's  account  unless:  (i)  the  Trading
Manager  has first offered to employ such other system,
method,  or  strategy  on behalf of  the  Partnership's
account  and the General Partner has expressly declined
such  offer  in  writing, or (ii)  the  above-mentioned
trading system, method, or strategy is only offered  to
a specific client (for whom the trading system, method,
or  strategy  was  customized) and is  not  offered  to
clients  in the Trading Manager's Disclosure  Document.
The  General Partner agrees to respond promptly to such
requests.   The Trading Manager and its principals  and
affiliates  agree  to  treat  the  Partnership   in   a
fiduciary   capacity  to  the  extent   recognized   by
applicable  law,  but,  subject to  that  standard  and
Section  11(c)  hereof,  the Trading  Manager  and  its
principals  and affiliates shall be free to advise  and
manage  accounts for other investors and shall be  free
to  trade  on the basis of the same trading  system  or
other  methods  or strategies employed by  the  Trading
Manager  for the account of the Partnership, or trading
systems,  methods,  or strategies  which  are  entirely
independent  of, or materially different from  (if  the
General  Partner  has  expressly  declined  such  offer
pursuant to the preceding sentence), those employed for
the  account of the Partnership, and shall be  free  to
compete for the same commodity

          <PAGE>

          interests  as  the  Partnership  or  to  take
positions  opposite  to  the  Partnership,  where  such
actions do not knowingly or deliberately favor  any  of
such accounts over the account of the Partnership.   At
the request of the General Partner, the Trading Manager
shall  use  its  best  efforts to  make  available  for
inspection and copying by the General Partner copies of
the  normal monthly, quarterly, and annual (as the case
may be) reports sent to participants in commodity pools
(without  identifying such participants) for which  the
Trading  Manager or any of its principals or affiliates
acts   as  a  commodity  trading  advisor  and  similar
information  with  respect to  any  other  accounts  of
theirs  with  respect  to which such  reports  are  not
required  to  be  delivered.  At  the  request  of  the
General Partner, the Trading Manager and its principals
and affiliates shall provide the General Partner with a
written explanation, acceptable to the General Partner,
of  material  differences  in performance  between  the
Partnership's account and such other accounts.

          (b)   Subject  to Section 11(c)  hereof,  the
Trading Manager and its principals and affiliates shall
not  be restricted as to the number of nature of  their
clients,  except  that:   (i)  they  shall  not  accept
additional   advisory  clients   or   open   additional
positions  in  commodity interests if to  do  so  would
result  in  aggregate positions in  any  one  commodity
exceeding the applicable speculative position limits of
the  CFTC  or  any other regulatory body, exchange,  or
board having jurisdiction; and (ii) if they at any time
become  aware that the positions in commodity interests
of   the  Partnership,  the  Trading  Manager,  or  any
principal  or affiliate of the Trading Manager  (either
alone  or  aggregated with the positions of  any  other
person)  exceed  or  are  about  to  exceed  applicable
speculative  position limits of the CFTC or  any  other
regulatory    body,   exchange,   or    board    having
jurisdiction, they shall immediately notify the General
Partner  of  that  fact  and shall  take  such  action,
consistent with their fiduciary responsibility  to  the
Partnership,  their obligation not to favor  any  other
account  over  the  Partnership's  account,  and  their
obligations  under this Agreement, as may be  necessary
to  prevent  to  the  extent possible  the  significant
modification  of  positions taken or intended  for  the
Partnership.

          (c)    The  Trading  Manager  represents  and
agrees  that so long as the Trading Manager acts  as  a
trading  manager  for  the  Partnership,  neither   the
Trading Manager nor any of its principals or affiliates
shall  hold knowingly any position or control any other
account  which would cause the Partnership, the Trading
Manager, or the principals or affiliates of the Trading
Manager  to  be in violation of the Commodity  Exchange
Act   (the  "CEAct")  or  any  regulations  promulgated
thereunder,  any applicable rule or regulation  of  the
CFTC  or any other regulatory body, exchange, or board.
The Trading Manager further

          <PAGE>

          represents   and  agrees  that  neither   the
Trading Manager nor any of its principals or affiliates
shall  render  commodity trading advice  to  any  other
individual  or entity or otherwise engage  in  activity
which  shall  knowingly  cause positions  in  commodity
interests  to be attributed to the Trading  Manager  or
any of its principals or affiliates under the rules  or
regulations  of the CFTC or any other regulatory  body,
exchange,  or  board so as to require  the  significant
modification  of  positions taken or intended  for  the
account  of the Partnership.  If applicable speculative
position limits are exceeded by the Trading Manager  or
any  of its principals or affiliates in the opinion  of
independent  legal  counsel (who shall  be  other  than
counsel  to  the Partnership), the CFTC, or  any  other
regulatory  body,  exchange,  or  board,  the   Trading
Manager   and  its  principals  and  affiliates   shall
promptly  liquidate positions in all of their accounts,
including  the  Partnership's  account,  as  to   which
positions are attributed to the Trading Manager or  any
of  its  principals or affiliates as nearly as possible
in  proportion  to  their respective  equities  to  the
extent necessary to comply with the applicable position
limits  and  shall  deliver to the  General  Partner  a
written  explanation of the manner in which it or  they
complied with this provision.

          12.   Additional Undertakings by the  Trading
Manager

          The  Trading Manager warrants and agrees that
neither   the   Trading  Manager   nor   any   of   its
stockholders,    officers,    directors,     employees,
principals,   affiliates,  or  any  of  the   officers,
directors,   employees,   or   stockholders   of   such
principals  or  affiliates  shall  knowingly   use   or
distribute the Certificate of Limited Partnership,  any
amendment  thereto, or any list excerpted  or  complied
therefrom   containing  the  names   and/or   residence
addresses  of,  and/or  other biographical  information
about, the limited partners of the Partnership for  the
purpose  of soliciting any such person for a  commodity
pool or commodity trading program similar in nature  to
the Partnership.

          13.  Aggregation

          If   it   should  prove  necessary,  in   the
reasonable  opinion  of  the  legal  counsel   to   the
Partnership with respect to commodity interests subject
to speculative position limits established by the CFTC,
an  exchange, or any other commodity trading regulatory
agency   or   authority,  for  positions  in  commodity
interests taken by the Trading Manager for the  account
of  the  Partnership to be aggregated, for purposes  of
speculative   position  limits,   with   positions   in
commodity interests taken by each of the other  trading
managers for the account of the Partnership, or  if  an
order  to  that  effect  is  made  by  the  CFTC,  such
exchange,  or  such  other  agency  or  authority,  the
General  Partner  may require the Trading  Manager  and
each other trading manager affected

          <PAGE>

          thereby to utilize only that portion  of  the
speculative  position limit in each commodity  interest
as  the  General Partner shall determine from  time  to
time in its sole discretion.

          14.   Merger or Transfer of Assets of Trading
Manager

          The  Trading Manager may merge or consolidate
with,  or  sell  or  otherwise  transfer  its  advisory
business, or all or a substantial portion of its assets
or  its  goodwill  to,  any  entity  that  directly  or
indirectly  is  controlled by, controls,  or  is  under
common control with, the Trading Manager, provided that
such  entity expressly assumes all obligations  of  the
Trading  Manager  under this Agreement  and  agrees  to
continue  to  operate  the  business  of  the   Trading
Manager,  substantially  as  such  business  is   being
conducted  on  the  date  hereof,  as  a  separate  and
distinct division of such entity.  The Trading  Manager
agrees to provide written notice to the General Partner
at  least 30 days before the effective date of any such
merger,   consolidation,  sale,  or  transfer,  whether
permitted under this Section or otherwise.

          15.  Complete Agreement

          This   Agreement   constitutes   the   entire
agreement among the parties with respect to the matters
referred  to herein, and no other agreement, verbal  or
otherwise, shall be binding as among the parties unless
it  is in writing and signed by the party against  whom
enforcement is sought.

          16.  Assignment

          This  Agreement  may not be assigned  by  any
party  hereto without the prior written consent of  the
other  parties hereto, except that the Partnership  and
General Partner may assign this Agreement to any entity
that directly or indirectly controls, is controlled by,
or  is under common control with, them, and the Trading
Manager may assign this Agreement to a successor entity
expressly permitted under Section 17 hereof.

          17.  Amendment; Waiver

          This Agreement may not be amended except by a
written  instrument signed by the parties  hereto.   No
waiver  of  any  provision of this Agreement  shall  be
implied from any course of dealing between or among the
parties hereto or from any failure by any party  hereto
to  assert  its  rights hereunder on  any  occasion  or
series of occasions.

          <PAGE>

          18.  Severability

          The  invalidity  or unenforceability  of  any
provision  of  this  Agreement or any  covenant  herein
contained   shall   not   affect   the   validity    or
enforceability  of  any  other  provision  or  covenant
hereof  or  herein  contained,  and  any  such  invalid
provision or covenant shall be deemed to be severable.

          19.  Notices

          All   notices  required  or  desired  to   be
delivered under this Agreement shall be in writing  and
shall be effective when delivered personally on the day
delivered  or,  when given by registered  or  certified
mail, postage prepaid, return receipt requested, on the
second business day following the day on which it is so
mailed,  addressed as follows (or to such other address
as   the  party  entitled  to  notice  shall  hereafter
designate in accordance with the terms hereof):

          if to the Partnership or the General Partner:

               c/o Demeter Management Corporation
               2 World Trade Center, 62nd Floor
               New York, New York  10048
               Attn:  Mr. Mark J. Hawley, President

               and with copies to:

               Dean Witter Reynolds Inc.
               130 Liberty Street
               New York, New York  10006
               Attn:  Michael T. Gregg, Esq.

                          and

               Cadwalader, Wickersham & Taft
               100 Maiden Lane
               New York, New York  10038
               Attn:  Edwin L. Lyon, Esq.

          if to the Trading Manager:

               Abraham Trading Co.
               Moody Building
               2nd & Main
               Canadian, Texas  79014
               Attn:  Salem A. Abraham

          <PAGE>

          20.  Survival

          The   provisions  of  this  Agreement   shall
survive  the termination of this Agreement with respect
to  any  matter  arising while this  Agreement  was  in
effect, provided that the restriction in Section  11(c)
hereof  shall  not  survive  the  termination  of  this
Agreement.

          21.  Governing Law

          This  Agreement  shall be  governed  by,  and
construed in accordance with, the law of the  State  of
New  York (excluding the law thereof which requires the
application  of or reference to the law  of  any  other
jurisdiction).

          22.  Consent to Jurisdiction

          The  parties hereto agree that any action  or
proceeding  arising directly, indirectly, or  otherwise
in  connection with, out of, related to, or  from  this
Agreement,   any  breach  hereof,  or  any  transaction
covered   hereby,   shall  be  resolved,   whether   by
arbitration or otherwise, within the County, City,  and
State  of  New York.  Accordingly, the parties  consent
and submit to the jurisdiction of the federal and state
courts  and any applicable arbitral body located within
the  County, City, and State of New York.  The  parties
further  agree  that  any  such  action  or  proceeding
brought  by  either party to enforce any right,  assert
any   claim,   or  obtain  any  relief  whatsoever   in
connection with this Agreement shall be brought by such
party exclusively in the federal or state courts, or if
appropriate before an arbitral body, located within the
County, City, and State of New York.

          23.  Counterparts

          This    Agreement   may   be   executed    in
counterparts, each of which shall be deemed an original
but  all of which together shall constitute one and the
same instrument.

          24.  Headings

          Headings  to  sections  herein  are  for  the
convenience of the parties only and are not intended to
be a part of or to affect the meaning or interpretation
of this Agreement.

          <PAGE>

          IN  WITNESS WHEREOF, this Agreement has  been
executed for and on behalf of the undersigned as of the
day and year first above written.

                DEAN WITTER CORNERSTONE FUND III

                By:  Demeter Management Corporation,
                          General Partner


                By: /s/ Mark J. Hawley ________
                     Mark J. Hawley, President

                DEMETER MANAGEMENT CORPORATION


                By: /s/ Mark J. Hawley _______
                     Mark J. Hawley, President

                ABRAHAM TRADING CO.


                By: /s/ Salem A. Abraham_____

<PAGE>

                                              EXHIBIT A

                 TRADING AUTHORIZATION

Abraham Trading Co.
Moody Building
2nd & Main
Canadian, Texas  79014

Dear Sirs:

          Dean  Witter Cornerstone Fund III, a New York
limited  partnership (the "Partnership"),  does  hereby
make, constitute, and appoint Abraham Trading Co.  (the
"Trading  Manager")  as  the  Partnership's  agent  and
attorney-in-fact   to  purchase  and   sell   commodity
interests  through  Dean  Witter  Reynolds   Inc.,   as
commodity  broker,  as described in and  in  accordance
with the terms of the Management Agreement dated as  of
July  1, 1996 among the Partnership, Demeter Management
Corporation  and  the  Trading Manager,  until  further
notice to the Trading Manager.

          This  authorization shall  terminate  and  be
null,  void,  and  of no further effect  simultaneously
with the termination of the said Management Agreement.

                  Very truly yours,

                  DEAN WITTER CORNERSTONE FUND III

                  By:Demeter Management Corporation,
                             General Partner

                  By:/s/Mark J. Hawley_______

                       Mark J. Hawley

Dated:  July 1, 1996

<PAGE>

                                              EXHIBIT B



          The  total Partnership incentive fee,  F,  in
any  incentive period is the sum of the incentive  fees
payable as a result of New Appreciation.  The change in
New   Appreciation  each  incentive  period  shall  for
accounting  purposes  be  apportioned  each   incentive
period  among  all  of  the trading  managers  for  the
Partnership  in accordance with their net contribution,
after  allocations for expenses and fees  as  described
above, to the change in New Appreciation.  Thus, if the
total  change in New Appreciation during the  incentive
period is X, then

                     X = A + B + C

where A, B, and C are the contributions of each of  the
trading   managers   to  the  total   change   in   New
Appreciation.   The  General  Partner  shall   prepare,
update annually, and maintain running totals of  A,  B,
and C as indicators of the cumulative contributions  of
each trading manager.  Thus, the cumulative sum of  the
value  of  A, TA, represents the total contribution  of
trading  manager  A  to  New  Appreciation  since   the
inception  of  trading on behalf of the Partnership  by
such trading manager.  Similarly, the values TB and  TC
are the cumulative contributions of trading managers  B
and C, respectively.

          The  General Partner shall maintain a  record
of  cumulative  total Partnership  incentive  fees  and
cumulative incentive fees paid to each trading manager.
The  cumulative  total Partnership incentive  fee,  TF,
shall  equal the sum of all Partnership incentive  fees
paid.   The cumulative total of incentive fees paid  to
trading manager A, PA, shall equal the sum of all prior
incentive  fees  received  by  that  trading   manager.
Similarly,  the  values PB and PC  are  the  cumulative
total of incentive fees paid to trading managers B  and
C,   respectively.   Since  the  incentive   fees   are
allocated  among  the Partnership's  trading  managers,
then

                   TF = PA + PB + PC

Consequently, the following three ratios are indicators
of   cumulative  incentive  fee  payments  relative  to
cumulative performance for each trading manager:

               PA/TA     PB/TB     PC/TC

To  the  extent  possible, the goal of  the  allocation
rules  of  the  next  paragraph is  to  equalize  these
indicators  for  each trading manager,  i.e.,  to  make
cumulative    individual   incentive    fee    payments
proportional to cumulative individual performance.



          <PAGE>

          At  the  end  of each incentive  period,  the
following  rules  shall be used to allocate  the  total
Partnership  incentive  fee,  F,  among  each   trading
manager:

          1)   A    trading    manager   whose    total
               contribution  is zero shall  receive  no
               incentive fee.  Thus, if at the  end  of
               the   incentive  period,  TB  is   zero,
               trading  manager B shall not  receive  a
               portion of the fee, F.

                         2)   The total Partnership
                         fee, F, shall be allocated
                         among trading managers one
                         dollar at a time.  Each
                         successive dollar will be
                         given to the trading manager
                         with the lowest ratio of
                         cumulative payments to
                         cumulative performance.  Thus,
                         if PB/TB is less than both
                         PA/TA and PC/TC, then trading
                         manager B is given the next
                         dollar.  The values of PA, PB,
                         and PC and the ratios PA/TA,
                         PB/TB, and PC/TC are then
                         recalculated before allocating
                         the next dollar.  Thus, the
                         trading manager(s) with the
                         lowest ratio continues to
                         receive dollars until his
                         ratio is larger than one of
                         the other trading managers.

          3)   Each  trading manager shall be  entitled
               to retain any incentive fees paid in any
               prior incentive period.

<PAGE>


    Cornerstone
    Funds




    December 31, 1997
    Annual Report


                                                                 LOGO
<PAGE>

DEAN WITTER
Two World Trade Center
62nd Floor
New York, NY 10048
Telephone (212) 392-8899

DEAN WITTER CORNERSTONE FUNDS
ANNUAL REPORT
1997

Dear Limited Partner:

This marks the thirteenth annual report for Cornerstone Funds II and III and
the eleventh for Cornerstone Fund IV. The Net Asset Value per Unit for each of
the three Cornerstone Funds on December 31, 1997 was as follows:

<TABLE>
<CAPTION>
                                                                                         % CHANGE
       FUNDS                              N.A.V.                                         FOR YEAR
       -----                             ---------                                       --------
<S>                                      <C>                                             <C>
Cornerstone Fund II                      $3,724.92                                         18.0%
Cornerstone Fund III                     $2,993.52                                         10.2%
Cornerstone Fund IV                      $4,435.47                                         38.4%
</TABLE>

CORNERSTONE FUND IV, the currency fund, recorded strong gains during January
from a significant rise in the value of the U.S. dollar. As a result, profits
were recorded from short positions in the Japanese yen, Swiss and French
francs, as well as the German mark. During February, a continued strengthening
in the value of the U.S. dollar resulted in significant profits from short
positions in the Singapore dollar, most European currencies and the Japanese
yen. Gains were also recorded during March as the U.S. dollar continued to move
higher versus most Asian currencies. Smaller profits were recorded from short
positions in the Singapore dollar and Japanese yen. Fund IV also benefited from
a strengthening in the value of the Malaysian ringgit.

A continued decline in the value of the Japanese yen relative to the U.S.
dollar resulted in additional profits during April. Smaller gains were recorded
from short Singapore dollar and French franc positions. Losses were recorded
during May due primarily to short positions in the Singapore dollar and
Japanese yen as the value of these currencies reversed higher early in the
month. Smaller losses were recorded from long Japanese yen positions
established mid-month, as the value of the yen decreased during late May. Fund
IV recorded gains during June
<PAGE>

from long Japanese yen positions established in late May as the value of the
yen moved higher versus the U.S. dollar.

Significant gains were recorded during July from short positions in the German
mark, New Zealand and Singapore dollars. Smaller profits were recorded from
short positions in the French franc and Malaysian ringgit. Fund IV recorded
gains during August due primarily to the Asian currency crisis, thus resulting
in profits from short positions in the Malaysian ringgit and Singapore dollar.
During September, a continued decline in the value of the Malaysian ringgit and
Singapore dollar resulted in profits. Smaller gains were recorded from long
positions in the Norwegian krone and German mark as the value of these
currencies increased versus the U.S. dollar.

Fund IV recorded gains during October from short positions in the Singapore and
Australian dollars, as the value of the U.S. dollar strengthened versus these
Pacific Rim currencies. Smaller profits were recorded from long British pound
positions as its value moved higher late in the month. Fund IV recorded strong
profits during November from short positions in Pacific Rim currencies as the
value of the Japanese yen, Singapore dollar, Malaysian ringgit and Australian
dollar weakened relative to the U.S. dollar due to economic uncertainty in the
Asian financial markets. As the economic turmoil in the Far East continued
during December, significant profits were recorded from short positions in
Pacific Rim currencies, particularly the Singapore dollar, Malaysian ringgit
and Australian dollar.

CORNERSTONE FUND II, a diversified fund, recorded gains during January from a
strengthening in the value of the U.S. dollar relative to the Japanese yen and
German mark. Additional profits were recorded as gold prices declined to their
lowest levels in over three years. Profits were recorded during February due to
the continued strengthening in the value of the U.S. dollar relative to most
major world currencies. Additional gains were recorded from an upward trend in
coffee prices, as well as a downward move in gas and oil prices. Fund II
recorded gains during March as the value of the U.S. dollar continued to
strengthen versus the
<PAGE>

Japanese yen and Singapore dollar. Additional gains were experienced from a
continued upward move in coffee prices.

Losses were experienced during April from short positions in interest rate
futures markets as domestic bond prices rallied late in the month after showing
signs of trending lower previously. Smaller losses were experienced from long
corn futures positions as prices in this market moved lower. In May, losses
were experienced from transactions involving the Japanese yen and Singapore
dollar. Smaller losses were recorded in the energy markets as oil prices moved
in a short-term volatile pattern. These losses were partially offset by gains
recorded from continued strengthening in coffee prices, as well as global stock
index futures prices. Fund II recorded losses during June as coffee prices
reversed sharply lower, thus giving back a portion of previous months' profits.
Additional losses were experienced from trading crude oil futures as oil prices
continued to move without consistent direction.

Significant gains were recorded during July from long U.S., Japanese and
Australian bond futures positions as global interest rate futures prices
trended higher. Additional gains were recorded in currencies from short
positions in the German mark and Swiss franc as the value of these currencies
decreased relative to the U.S. dollar. Small losses were experienced during
August as gains recorded from short positions in the Malaysian ringgit and
Singapore dollar were more than offset by losses experienced from long
positions in U.S. and European interest rate futures as prices in these markets
moved lower after trending higher previously. During September, Fund II
recorded losses from trendless price movement in coffee, sugar and cocoa
futures. Additional losses were experienced in the energy and agricultural
markets as prices in these markets also moved without consistent direction.
Smaller losses were experienced from transactions involving the Swiss franc,
British pound and Japanese yen.

Fund II recorded profits during October from long positions in the British
pound as its value increased relative to the U.S. dollar, and from short
positions in the Singapore and Australian
<PAGE>

dollars as the value of the U.S. dollar strengthened versus these Pacific Rim
currencies. Smaller gains were recorded from long positions in corn and soybean
oil futures. Gains were recorded during November from short positions in the
Japanese yen, Australian dollar and Malaysian ringgit as the value of these
currencies declined versus the U.S. dollar due to economic uncertainty in Asia.
Short gold futures positions resulted in smaller profits as gold prices broke
below $300 an ounce for the first time in over twelve years. Fund II recorded
significant gains during December from short positions in most Pacific Rim
currencies, particularly the Japanese yen and Singapore dollar, as the economic
turmoil in the Far East continued. Smaller profits were recorded from short
crude oil futures positions as prices declined on news of increased supplies.

CORNERSTONE FUND III, also a diversified Fund, recorded profits during January
due primarily to an increase in coffee prices during the month. Additional
profits were recorded from a strengthening in the value of the U.S. dollar
versus most major European currencies and the Japanese yen. In February, Fund
III recorded significant gains as increasing price trends in coffee and the
U.S. dollar continued throughout the month. As a result, profits were recorded
from long coffee futures positions, as well as short positions in the Swiss
franc, German mark and Japanese yen. Performance during March resulted in
losses as many of the markets that produced gains during January and February
experienced trend reversals and choppy price movement. The most significant
losses were recorded in the currency markets as the value of most European
currencies reversed higher relative to the U.S. dollar.

Fund III recorded losses during April as trendless price movement that began in
March continued. The most significant losses were recorded from short positions
in U.S. interest rate futures. Smaller losses were recorded in the currency,
metals and agricultural markets. In May, gains were recorded from a continued
upward trend in coffee prices. Additional gains were recorded from an increase
in copper and zinc prices. Fund III recorded gains in June as the value of the
Japanese yen moved higher
<PAGE>

versus the U.S. dollar. Additional profits were recorded from long global stock
index futures positions as global equity prices trended higher.

During July, profits were recorded from long positions in global interest rate
futures as Australian, U.S. and European bond futures prices trended higher.
Additional gains were recorded from short European currency positions as the
U.S. dollar again strengthened. A sharp trend reversal in global interest rate
futures prices during August resulted in a give back of a portion of July's
profits. Additional losses were experienced in the currency markets as the
value of most European currencies reversed higher relative to the U.S. dollar.
September was profitable as international bond futures prices moved higher,
thus resulting in gains for long positions. Smaller gains were recorded from a
dramatic increase in natural gas futures prices during the month.

During October, trend reversals in the value of the Mexican peso, as well as in
global interest rate futures prices, resulted in losses for Fund III. Smaller
losses were experienced from long positions in Australian stock index futures
and silver futures. Fund III recorded profits during November from short
Japanese yen positions as its value moved sharply lower amid concerns over
Asian economic stability. Additional currency gains were recorded from long
British pound positions as its value moved higher on news of an interest rate
increase in Great Britain. Gains were also recorded from short gold futures
positions as gold prices broke below $300 an ounce for the first time in over
twelve years. In December, profits were recorded by Fund III from short
positions in crude and heating oil futures as prices declined on reports of
increasing inventories. Smaller gains were recorded from long silver futures
positions as prices moved higher, and from short positions in gold futures as
gold prices continued to drop below $290 an ounce.

Each of the three Cornerstone Funds recorded profits for the year primarily by
taking advantage of price trends in the currency markets during January and
February, as well as in the fourth quarter. Cornerstone Funds II and III also
profited from long global interest rate
<PAGE>

futures positions during July as prices in these markets made a strong upward
move. These gains, coupled with smaller gains from trading gold futures as gold
prices declined late in the year, as well as the Trading Advisors' ability to
limit losses from trend reversals and choppy price movement in the middle of
the year, contributed to each of the Fund's success in 1997. Effective March 1,
1997, Abacus Trading Corporation ("Abacus") was removed as a Trading Advisor to
Cornerstone Fund II. All assets formally managed by Abacus were allocated to
Northfield Trading L.P. ("Northfield") during April. We believe Fund II has
benefited from this mix of advisors, and will continue to do so given the
opportunity for trending market conditions.

Since their inception in 1985, Cornerstone Funds II and III have increased by
282.0% (a compound annualized return of 10.8%), and 207.0% (a compound
annualized return of 9.0%) respectively. Since its inception in 1987,
Cornerstone Fund IV has increased by 354.9% (a compound annualized return of
15.1%).

Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation at Two World Trade Center, 62nd Floor,
New York, NY 10048, or your Dean Witter Account Executive.

I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is not a
guarantee of future results.

    Sincerely,

    LOGO
    Mark J. Hawley
    President
    Demeter Management Corporation
    General Partner
<PAGE>

DEAN WITTER CORNERSTONE FUNDS
INDEPENDENT AUDITORS' REPORT

The Limited Partners and the General Partner of
Dean Witter Cornerstone Fund II
Dean Witter Cornerstone Fund III
Dean Witter Cornerstone Fund IV:

We have audited the accompanying statements of financial condition of Dean
Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III and Dean Witter
Cornerstone Fund IV (collectively, the "Partnerships") as of December 31, 1997
and 1996 and the related statements of operations, changes in partners'
capital, and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Partnerships' management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Dean Witter Cornerstone Fund II, Dean
Witter Cornerstone Fund III and Dean Witter Cornerstone Fund IV as of December
31, 1997 and 1996 and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.

LOGO

February 17, 1998
New York, New York
<PAGE>

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                       DECEMBER 31,
                                                   ---------------------
                                                      1997       1996
                                                   ---------- ----------
                                                       $          $
 <S>                                               <C>        <C>
                                 ASSETS
 Equity in Commodity futures trading
  accounts:
  Cash                                             29,293,294 28,509,266
  Net unrealized gain on open contracts             2,003,679  1,316,434
                                                   ---------- ----------
  Total Trading Equity                             31,296,973 29,825,700
 Interest receivable (DWR)                            106,167     97,815
 Due from DWR                                          27,883    123,327
                                                   ---------- ----------
  Total Assets                                     31,431,023 30,046,842
                                                   ========== ==========
                   LIABILITIES AND PARTNERS' CAPITAL
 LIABILITIES
 Accrued incentive fees                               618,270    316,750
 Redemptions payable                                  199,022    442,706
 Accrued management fees                              104,350     99,352
 Common administrative expenses payable                21,640     52,339
 Accrued brokerage commissions (DWR)                      --      83,967
 Accrued transaction fees and costs                       --       5,558
                                                   ---------- ----------
  Total Liabilities                                   943,282  1,000,672
                                                   ---------- ----------
 PARTNERS' CAPITAL
 Limited Partners (7,967.401 and 8,987.942 Units,
   respectively)                                   29,677,943 28,360,195
 General Partner (217.400 Units)                      809,798    685,975
                                                   ---------- ----------
  Total Partners' Capital                          30,487,741 29,046,170
                                                   ---------- ----------
  Total Liabilities and Partners'
    Capital                                        31,431,023 30,046,842
                                                   ========== ==========
 NET ASSET VALUE PER UNIT                            3,724.92   3,155.36
                                                   ========== ==========
</TABLE>
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
                                  1997       1996        1995
                                --------- ----------  ----------
<S>                             <C>       <C>         <C>
                                    $         $           $
REVENUES
Trading Profit (Loss):
 Realized                       6,363,803  7,321,679  11,081,716
 Net change in unrealized         687,245 (2,051,673)   (947,973)
                                --------- ----------  ----------
  Total Trading Results         7,051,048  5,270,006  10,133,743
Interest income (DWR)           1,228,298  1,179,784   1,471,022
                                --------- ----------  ----------
  Total Revenues                8,279,346  6,449,790  11,604,765
                                --------- ----------  ----------
EXPENSES
Brokerage commissions (DWR)     1,383,112  1,719,932   1,864,093
Management fees                 1,159,248  1,167,223   1,307,872
Incentive fees                    650,800    329,590     381,720
Transaction fees and costs        128,692    170,971     160,238
Common administrative expenses     41,330     14,612       8,183
                                --------- ----------  ----------
  Total Expenses                3,363,182  3,402,328   3,722,106
                                --------- ----------  ----------
NET INCOME                      4,916,164  3,047,462   7,882,659
                                ========= ==========  ==========
NET INCOME ALLOCATION:
Limited Partners                4,792,341  2,976,870   7,753,763
General Partner                   123,823     70,592     128,896
NET INCOME PER UNIT:
Limited Partners                   569.56     324.71      592.90
General Partner                    569.56     324.71      592.90
</TABLE>


   The accompanying notes are an integral part of these financial statements.
<PAGE>

DEAN WITTER CORNERSTONE FUND III
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                     ----------------------
                                                        1997        1996
                                                     ----------  ----------
                                                         $           $
 <S>                                                 <C>         <C>
                                  ASSETS
 Equity in Commodity futures trading
  accounts:
  Cash                                               39,762,715  40,587,011
  Net unrealized gain on open contracts               1,938,295   2,580,803
  Net option premiums                                  (158,765)   (291,412)
                                                     ----------  ----------
  Total Trading Equity                               41,542,245  42,876,402
 Interest receivable (DWR)                              145,100     138,367
 Due from DWR                                            94,981     122,701
                                                     ----------  ----------
  Total Assets                                       41,782,326  43,137,470
                                                     ==========  ==========
                    LIABILITIES AND PARTNERS' CAPITAL
 LIABILITIES
 Redemptions payable                                    429,759     680,730
 Accrued management fees                                138,480     142,387
 Common administrative expenses payable                  99,713     137,548
 Accrued brokerage commissions (DWR)                        --      129,098
 Accrued transaction fees and costs                         --       12,349
                                                     ----------  ----------
  Total Liabilities                                     667,952   1,102,112
                                                     ----------  ----------
 PARTNERS' CAPITAL
 Limited Partners (13,352.334 and 15,097.603 Units,
   respectively)                                     39,970,539  40,997,752
 General Partner (382.103 Units)                      1,143,835   1,037,606
                                                     ----------  ----------
  Total Partners' Capital                            41,114,374  42,035,358
                                                     ----------  ----------
  Total Liabilities and Partners'
    Capital                                          41,782,326  43,137,470
                                                     ==========  ==========
 NET ASSET VALUE PER UNIT                              2,993.52    2,715.51
                                                     ==========  ==========
</TABLE>
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
                                  1997        1996        1995
                                ---------  ----------  ----------
<S>                             <C>        <C>         <C>
                                    $          $           $
REVENUES
Trading Profit (Loss):
 Realized                       7,439,669   8,925,181  14,260,042
 Net change in unrealized        (642,508) (2,997,491)    561,437
                                ---------  ----------  ----------
  Total Trading Results         6,797,161   5,927,690  14,821,479
Interest income (DWR)           1,786,271   1,657,400   2,061,461
                                ---------  ----------  ----------
  Total Revenues                8,583,432   7,585,090  16,882,940
                                ---------  ----------  ----------
EXPENSES
Brokerage commissions (DWR)     2,294,914   2,772,496   3,499,743
Management fees                 1,728,062   1,629,715   1,828,013
Transaction fees and costs        229,570     379,973     502,332
Common administrative expenses     69,344      24,702      21,158
                                ---------  ----------  ----------
  Total Expenses                4,321,890   4,806,886   5,851,246
                                ---------  ----------  ----------
NET INCOME                      4,261,542   2,778,204  11,031,694
                                =========  ==========  ==========
NET INCOME ALLOCATION:
Limited Partners                4,155,313   2,699,171  10,824,963
General Partner                   106,229      79,033     206,731
NET INCOME PER UNIT:
Limited Partners                   278.01      206.83      541.04
General Partner                    278.01      206.83      541.04
</TABLE>


   The accompanying notes are an integral part of these financial statements.
<PAGE>

DEAN WITTER CORNERSTONE FUND IV
STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                     ----------------------
                                                        1997        1996
                                                     ----------- ----------
                                                          $          $
 <S>                                                 <C>         <C>
                                  ASSETS
 Equity in Commodity futures trading
  accounts:
  Cash                                               119,181,131 91,656,399
  Net unrealized gain on open contracts                1,815,112  5,330,520
                                                     ----------- ----------
  Total Trading Equity                               120,996,243 96,986,919
 Interest receivable (DWR)                               382,307    305,391
                                                     ----------- ----------
  Total Assets                                       121,378,550 97,292,310
                                                     =========== ==========
                     LIABILITIES AND PARTNERS' CAPITAL
 LIABILITIES
 Incentive fees payable                                1,594,371        --
 Redemptions payable                                     899,127  1,269,513
 Accrued management fees                                 403,011    322,552
 Common administrative expenses payable                   72,297    126,007
 Accrued brokerage commissions (DWR)                         --      74,340
 Accrued transaction fees and costs                          --       3,654
                                                     ----------- ----------
  Total Liabilities                                    2,968,806  1,796,066
                                                     ----------- ----------
 PARTNERS' CAPITAL
 Limited Partners (26,057.228 and 29,160.287 Units,
   respectively)                                     115,575,973 93,448,822
 General Partner (638.889 Units)                       2,833,771  2,047,422
                                                     ----------- ----------
  Total Partners' Capital                            118,409,744 95,496,244
                                                     ----------- ----------
  Total Liabilities and Partners'
    Capital                                          121,378,550 97,292,310
                                                     =========== ==========
 NET ASSET VALUE PER UNIT                               4,435.47   3,204.66
                                                     =========== ==========
</TABLE>

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
                                      1997              1996             1995
                                   ----------        ----------       ----------
<S>                                <C>               <C>              <C>
                                       $                 $                $
REVENUES
Trading Profit (Loss):
 Realized                          42,691,318        10,304,825       27,041,974
 Net change in unrealized          (3,515,408)        5,260,377         (198,148)
                                   ----------        ----------       ----------
  Total Trading Results            39,175,910        15,565,202       26,843,826
Interest income (DWR)               4,200,571         3,924,420        4,912,698
                                   ----------        ----------       ----------
  Total Revenues                   43,376,481        19,489,622       31,756,524
                                   ----------        ----------       ----------
EXPENSES
Management fees                     4,287,974         3,904,737        4,575,372
Brokerage commissions (DWR)         2,656,715         3,781,486        2,776,225
Incentive fees                      1,594,371               --               --
Transaction fees and costs            171,578           222,993          168,718
Common administrative expenses        134,041            47,685           39,890
                                   ----------        ----------       ----------
  Total Expenses                    8,844,679         7,956,901        7,560,205
                                   ----------        ----------       ----------
NET INCOME                         34,531,802        11,532,721       24,196,319
                                   ==========        ==========       ==========
NET INCOME ALLOCATION:
Limited Partners                   33,745,453        11,297,656       23,857,922
General Partner                       786,349           235,065          338,397
NET INCOME PER UNIT:
Limited Partners                     1,230.81            367.93           529.66
General Partner                      1,230.81            367.93           529.66
</TABLE>


   The accompanying notes are an integral part of these financial statements.
<PAGE>

DEAN WITTER CORNERSTONE FUNDS

STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
                              UNITS OF
                             PARTNERSHIP    LIMITED     GENERAL
                              INTEREST     PARTNERS     PARTNER     TOTAL
                             -----------  -----------  --------- -----------
                                               $           $          $
DEAN WITTER CORNERSTONE FUND II
<S>                          <C>          <C>          <C>       <C>
Partners' Capital, December
31, 1994                     14,019.450    30,885,515    486,487  31,372,002
Offering of Units                70.020       178,837        --      178,837
Net Income                          --      7,753,763    128,896   7,882,659
Redemptions                  (3,198.372)   (8,604,610)       --   (8,604,610)
                             ----------   -----------  --------- -----------
Partners' Capital, December
31, 1995                     10,891.098    30,213,505    615,383  30,828,888
Offering of Units                56.043       155,468        --      155,468
Net Income                          --      2,976,870     70,592   3,047,462
Redemptions                  (1,741.799)   (4,985,648)       --   (4,985,648)
                             ----------   -----------  --------- -----------
Partners' Capital, December
31, 1996                      9,205.342    28,360,195    685,975  29,046,170
Offering of Units                94.328       314,932        --      314,932
Net Income                          --      4,792,341    123,823   4,916,164
Redemptions                  (1,114.869)   (3,789,525)       --   (3,789,525)
                             ----------   -----------  --------- -----------
Partners' Capital,
December 31, 1997             8,184.801    29,677,943    809,798  30,487,741
                             ==========   ===========  ========= ===========
<CAPTION>
DEAN WITTER CORNERSTONE FUND III
<S>                          <C>          <C>          <C>       <C>
Partners' Capital, December
31, 1994                     23,887.701    46,250,611    751,842  47,002,453
Offering of Units                25.778        49,000        --       49,000
Net Income                          --     10,824,963    206,731  11,031,694
Redemptions                  (5,198.558)  (11,133,473)       --  (11,133,473)
                             ----------   -----------  --------- -----------
Partners' Capital, December
31, 1995                     18,714.921    45,991,101    958,573  46,949,674
Offering of Units                 3.594         8,388        --        8,388
Net Income                          --      2,699,171     79,033   2,778,204
Redemptions                  (3,238.809)   (7,700,908)       --   (7,700,908)
                             ----------   -----------  --------- -----------
Partners' Capital, December
31, 1996                     15,479.706    40,997,752  1,037,606  42,035,358
Offering of Units                 1.841         5,000        --        5,000
Net Income                          --      4,155,313    106,229   4,261,542
Redemptions                  (1,747.110)   (5,187,526)       --   (5,187,526)
                             ----------   -----------  --------- -----------
Partners' Capital,
December 31, 1997            13,734.437    39,970,539  1,143,835  41,114,374
                             ==========   ===========  ========= ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.
<PAGE>

DEAN WITTER CORNERSTONE FUNDS

STATEMENT OF CHANGES IN PARTNERS' CAPITAL--(CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
                              UNITS OF
                             PARTNERSHIP    LIMITED     GENERAL
                              INTEREST     PARTNERS     PARTNER     TOTAL
                             -----------  -----------  --------- -----------
                                               $           $          $
DEAN WITTER CORNERSTONE FUND IV
<S>                          <C>          <C>          <C>       <C>
Partners' Capital, December
31, 1994                      47,632.891  108,418,306  1,473,960 109,892,266
Offering of Units                 77.319      212,691        --      212,691
Net Income                           --    23,857,922    338,397  24,196,319
Redemptions                  (11,165.696) (30,634,265)       --  (30,634,265)
                             -----------  -----------  --------- -----------
Partners' Capital, December
31, 1995                      36,544.514  101,854,654  1,812,357 103,667,011
Offering of Units                 37.715      108,665        --      108,665
Net Income                           --    11,297,656    235,065  11,532,721
Redemptions                   (6,783.053) (19,812,153)       --  (19,812,153)
                             -----------  -----------  --------- -----------
Partners' Capital, December
31, 1996                      29,799.176   93,448,822  2,047,422  95,496,244
Offering of Units                 57.083      223,794        --      223,794
Net Income                           --    33,745,453    786,349  34,531,802
Redemptions                   (3,160.142) (11,842,096)       --  (11,842,096)
                             -----------  -----------  --------- -----------
Partners' Capital,
December 31, 1997             26,696.117  115,575,973  2,833,771 118,409,744
                             ===========  ===========  ========= ===========
</TABLE>



   The accompanying notes are an integral part of these financial statements.
<PAGE>

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                     FOR THE YEARS
                                                         ENDED
                                                      DECEMBER 31,
                                            ----------------------------------
                                               1997        1996        1995
                                            ----------  ----------  ----------
                                                $           $           $
<S>                                         <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                   4,916,164   3,047,462   7,882,659
Noncash item included in net income:
 Net change in unrealized                     (687,245)  2,051,673     947,973
(Increase) decrease in
  operating assets:
 Interest receivable (DWR)                      (8,352)      9,670      17,183
 Due from DWR                                   95,444     (97,802)     24,860
Increase (decrease) in
  operating liabilities:
 Accrued incentive fees                        301,520       9,183     307,567
 Accrued management fees                         4,998      (4,886)     (1,622)
 Common administrative expenses payable        (30,699)    (28,975)    (29,854)
 Accrued brokerage commissions (DWR)           (83,967)    (10,486)     13,185
 Accrued transaction fees
   and costs                                    (5,558)     (1,399)      1,237
                                            ----------  ----------  ----------
Net cash provided by operating activities    4,502,305   4,974,440   9,163,188
                                            ----------  ----------  ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units                              314,932     155,468     178,837
Increase (decrease) in redemptions payable    (243,684)    307,817    (251,210)
Redemptions of units                        (3,789,525) (4,985,648) (8,604,610)
                                            ----------  ----------  ----------
Net cash used for financing activities      (3,718,277) (4,522,363) (8,676,983)
                                            ----------  ----------  ----------
Net increase in cash                           784,028     452,077     486,205
Balance at beginning of period              28,509,266  28,057,189  27,570,984
                                            ----------  ----------  ----------
Balance at end of period                    29,293,294  28,509,266  28,057,189
                                            ==========  ==========  ==========
</TABLE>


   The accompanying notes are an integral part of these financial statements.
<PAGE>

DEAN WITTER CORNERSTONE FUND III
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                     FOR THE YEARS
                                                         ENDED
                                                     DECEMBER 31,
                                           -----------------------------------
                                              1997        1996        1995
                                           ----------  ----------  -----------
                                               $           $            $
<S>                                        <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                  4,261,542   2,778,204   11,031,694
Noncash item included in net income:
 Net change in unrealized                     642,508   2,997,491     (561,437)
(Increase) decrease in
  operating assets:
 Net option premiums                         (132,647)    291,412          --
 Interest receivable (DWR)                     (6,733)     21,313       33,368
 Due from DWR                                  27,720       1,755       89,133
Increase (decrease) in
  operating liabilities:
 Accrued management fees                       (3,907)    (16,243)        (265)
 Common administrative expenses payable       (37,835)    (84,488)     (44,369)
 Accrued brokerage
   commissions (DWR)                         (129,098)    (37,030)     (34,476)
 Accrued transaction fees
   and costs                                  (12,349)     (8,629)       7,239
                                           ----------  ----------  -----------
Net cash provided by operating activities   4,609,201   5,943,785   10,520,887
                                           ----------  ----------  -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of units                               5,000       8,388       49,000
Increase (decrease) in
  redemptions payable                        (250,971)     41,381      (26,829)
Redemptions of units                       (5,187,526) (7,700,908) (11,133,473)
                                           ----------  ----------  -----------
Net cash used for financing activities     (5,433,497) (7,651,139) (11,111,302)
                                           ----------  ----------  -----------
Net decrease in cash                         (824,296) (1,707,354)    (590,415)
Balance at beginning of period             40,587,011  42,294,365   42,884,780
                                           ----------  ----------  -----------
Balance at end of period                   39,762,715  40,587,011   42,294,365
                                           ==========  ==========  ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.
<PAGE>

DEAN WITTER CORNERSTONE FUND IV
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                   FOR THE YEARS
                                                       ENDED
                                                   DECEMBER 31,
                                        -------------------------------------
                                           1997         1996         1995
                                        -----------  -----------  -----------
                                             $            $            $
<S>                                     <C>          <C>          <C>
CASH FLOWS FROM
  OPERATING ACTIVITIES
Net income                               34,531,802   11,532,721   24,196,319
Noncash item included in net income:
 Net change in unrealized                 3,515,408   (5,260,377)     198,148
(Increase) decrease in operating
  assets:
 Interest receivable (DWR)                  (76,916)      59,356       69,406
Increase (decrease) in operating
  liabilities:
 Accrued incentive fee                    1,594,371          --           --
 Accrued management fees                     80,459      (26,487)     (22,567)
 Common administrative expenses payable     (53,710)    (141,781)     (89,342)
 Accrued brokerage commissions (DWR)        (74,340)      41,760       32,580
 Accrued transaction fees
   and costs                                 (3,654)       2,025        1,629
                                        -----------  -----------  -----------
Net cash provided by operating
  activities                             39,513,420    6,207,217   24,386,173
                                        -----------  -----------  -----------
CASH FLOWS FROM
  FINANCING ACTIVITIES
Offering of units                           223,794      108,665      212,691
Increase (decrease) in redemptions
  payable                                  (370,386)     224,709     (544,818)
Redemptions of units                    (11,842,096) (19,812,153) (30,634,265)
                                        -----------  -----------  -----------
Net cash used for financing activities  (11,988,688) (19,478,779) (30,966,392)
                                        -----------  -----------  -----------
Net increase (decrease) in cash          27,524,732  (13,271,562)  (6,580,219)
Balance at beginning of period           91,656,399  104,927,961  111,508,180
                                        -----------  -----------  -----------
Balance at end of period                119,181,131   91,656,399  104,927,961
                                        ===========  ===========  ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.
<PAGE>

DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION--Dean Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III
and Dean Witter Cornerstone Fund IV (individually, a "Partnership", or
collectively, the "Partnerships") are limited partnerships organized to engage
in the speculative trading of commodity futures contracts and forward contracts
on foreign currencies. The general partner for each Partnership is Demeter
Management Corporation ("Demeter"). Demeter is a wholly-owned subsidiary of
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD").

On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean
Witter, Discover & Co. ("DWD"). At the time DWD changed its corporate name to
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD").

Through July 31, 1997, the sole commodity broker for the Partnership's
transactions was Dean Witter Reynolds Inc. ("DWR"), also a subsidiary of MSDWD.
On July 31, 1997, DWR closed the sale of its institutional futures business and
foreign currency trading operations to Carr Futures Inc. ("Carr"), a subsidiary
of Credit Agricole Indosuez. Following the sale, Carr became the clearing
commodity broker for the Partnerships' futures and futures options trades and
the counterparty on the Partnerships' foreign currency trades. DWR serves as a
non-clearing commodity broker for the Partnerships' with Carr providing all
clearing services for the Partnerships' transactions.

Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by the General and Limited Partners
based upon their proportional ownership interests.

BASIS OF ACCOUNTING--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements.

REVENUE RECOGNITION--Commodity futures contracts and forward contracts on
foreign currencies are open commitments until settlement date. They are valued
at market and the resulting unrealized gains and losses are reflected in
income. Monthly, DWR pays each Partnership interest income based upon 80% of
its average daily Net Assets at a rate equal to the average yield on 13-Week
U.S. Treasury Bills issued during such month. For purposes of such interest
payments in Dean Witter Cornerstone Fund IV, Net
<PAGE>

DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Assets do not include monies due the Partnership on forward contracts and other
commodity interests, but not actually received.

NET INCOME (LOSS) PER UNIT--Net income (loss) per Unit is computed using the
weighted average number of units outstanding during the period.

EQUITY IN COMMODITY FUTURES TRADING ACCOUNTS-- Each Partnerships' assets
"Equity in Commodity futures trading accounts" consists of cash on deposit at
DWR and Carr to be used as margin for trading, the net asset or liability
related to unrealized gains or losses on open contracts and the net option
premiums paid and/or received. The asset or liability related to the unrealized
gains or losses on forward contracts is presented as a net amount in each
period due to master netting agreements with DWR.

BROKERAGE COMMISSIONS AND RELATED TRANSACTION FEES AND COSTS--Brokerage
commissions for each Partnership are accrued at 80% of DWR's published non-
member rates on a half-turn basis. Related transaction fees and costs are
accrued on a half-turn basis.

Through March 31, 1995, brokerage commissions were capped at 1% per month of
the adjusted Net Assets allocated to each trading program employed by a Trading
Advisor. From April 1, 1995 through August 31, 1996, the cap was reduced to 3/4
of 1%.

As of September 1, 1996, brokerage commissions and transaction fees chargeable
to each Partnership have been capped at 13/20 of 1% per month of the
Partnership's month end Net Assets (as defined in the Limited Partnership
Agreement) applied on a per trading system basis, allocated to each such
trading program.

OPERATING EXPENSES--Each Partnership has entered into an exchange agreement
pursuant to which certain common administrative expenses (i.e., legal,
auditing, accounting, filing fees and other related expenses) are shared by
each of the Partnerships based upon the number of Units of each Partnership
outstanding during the month in which such expenses are incurred. In addition,
the Partnerships incur monthly management fees and may incur incentive fees.
Demeter bears all other operating expenses.

INCOME TAXES--No provision for income taxes has been made in the accompanying
financial statements,
as partners are individually responsible for reporting income or loss based
upon their respective share of each Partnership's revenues and expenses for
income tax purposes.
<PAGE>


DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DISTRIBUTIONS--Distributions, other than on redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.

REDEMPTIONS--Limited Partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit as of the last day of any month upon fifteen days
advance notice by redemption form to the General Partner.

EXCHANGES--Limited Partners may transfer their investment among the
Partnerships (subject to certain restrictions outlined in the Limited
Partnership Agreement) without paying additional charges.

DISSOLUTION OF THE PARTNERSHIP--Each Partnership will terminate on September
30, 2025 regardless of its financial condition at such time, upon a decline in
Net Assets to less than $250,000, a decline in the Net Asset Value per Unit to
less than $250, or under certain other circumstances defined in each Limited
Partnership Agreement.

2. RELATED PARTY TRANSACTIONS

Each Partnership pays brokerage commissions to DWR on trades executed on its
behalf as described in Note 1. Each Partnership's cash is on deposit with DWR
in commodity trading accounts to meet margin requirements as needed. DWR pays
interest on these funds as described in Note 1.

3. TRADING ADVISORS

Demeter, on behalf of each Partnership, retains certain commodity trading
advisors to make all trading decisions for the Partnerships. The trading
advisors for each Partnership as of December 31, 1997 were as follows:

Dean Witter Cornerstone Fund II
 Northfield Trading L.P.
 John W. Henry & Company, Inc. ("JWH")

Dean Witter Cornerstone Fund III
 Abraham Trading Co.
 Welton Investment Systems Corporation
 Sunrise Capital Management, Inc.

Dean Witter Cornerstone Fund IV
 John W. Henry & Company, Inc.
 Sunrise Capital Management, Inc.
<PAGE>


DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Compensation to the trading advisors by the Partnerships consists of a
management fee and an incentive fee as follows:

MANAGEMENT FEE--The management fee is accrued at the rate of 1/3 of 1% per
month of the Net Assets
under management by each trading advisor at each month end.

INCENTIVE FEE--Each Partnership pays an annual incentive fee equal to 15% of
the "New Appreciation" in Net Assets as of the end of each annual incentive
period ending December 31, except for Dean Witter Cornerstone Fund IV, which
pays incentive fees at the end of each annual incentive period ending May 31.
Such incentive fee is accrued in each month in which "New Appreciation" occurs.
In those months in which "New Appreciation" is negative, previous accruals, if
any, during the incentive period will be reduced. In those instances in which a
Limited Partner redeems an investment, the incentive fee (if earned through a
redemption date) is to be paid on those redemptions to the trading advisor in
the month of such redemption.

4. FINANCIAL INSTRUMENTS

The Partnerships trade futures and forward contracts in interest rates, stock
indices, commodities, currencies, petroleum and precious metals. 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 December 31, 1997 and 1996, open
contracts were:

<TABLE>
<CAPTION>
                                 CORNERSTONE II
                              ---------------------
                               CONTRACT OR NOTIONAL AMOUNT
                              -----------------------------
                                 1997       1996
                              ---------- ----------
                                  $          $
 <S>                          <C>        <C>
 EXCHANGE-TRADED CONTRACTS
 Financial Futures:
  Commitments to Purchase     30,057,000 18,287,000
  Commitments to Sell         13,539,000 70,723,000
 Commodity Futures:
  Commitments to Purchase      6,148,000  6,346,000
  Commitments to Sell         15,082,000 14,596,000
 Foreign Futures:
  Commitments to Purchase     25,543,000 57,075,000
  Commitments to Sell         20,799,000  8,798,000
 OFF-EXCHANGE-TRADED FORWARD
   CURRENCY CONTRACTS
  Commitments to Purchase     17,705,000 26,688,000
  Commitments to Sell         46,518,000 18,334,000
</TABLE>
<PAGE>


DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
                                                CORNERSTONE III
                                            -----------------------
                                              CONTRACT OR NOTIONAL AMOUNT
                                            -------------------------------
                                               1997        1996
                                            ----------- -----------
                                                 $           $
 <S>                                        <C>         <C>
 EXCHANGE-TRADED CONTRACTS
 Financial Futures:
  Commitments to Purchase                    50,242,000 118,163,000
  Commitments to Sell                        21,172,000  59,405,000
  Options Written                                   --   18,613,000
 Commodity Futures:
  Commitments to Purchase                     8,055,000  17,683,000
  Commitments to Sell                        31,622,000  22,811,000
  Options Written                                   --   18,407,000
 Foreign Futures:
  Commitments to Purchase                    50,870,000  62,344,000
  Commitments to Sell                        42,064,000  22,390,000
 OFF-EXCHANGE-TRADED FORWARD CURRENCY CON-
   TRACTS
  Commitments to Purchase                    27,863,000     420,000
  Commitments to Sell                        41,794,000   1,379,000
<CAPTION>
                                                CORNERSTONE IV
                                            -----------------------
                                              CONTRACT OR NOTIONAL AMOUNT
                                            -------------------------------
                                               1997        1996
                                            ----------- -----------
                                                 $           $
 <S>                                        <C>         <C>
 EXCHANGE-TRADED CONTRACTS
 Financial Futures:
  Commitments to Purchase                           --   93,583,000
  Commitments to Sell                               --  118,029,000
 OFF-EXCHANGE-TRADED FORWARD CURRENCY CON-
   TRACTS
  Commitments to Purchase                   218,670,000 208,140,000
  Commitments to Sell                       427,237,000 205,227,000
</TABLE>

A portion of the amounts indicated as off-balance-sheet risk in forward
currency contracts is offset by forward commitments to purchase and to sell the
same currency on the same date in the future. These commitments are
economically offsetting, but are not offset in the forward market until the
settlement date.

The unrealized gains on open contracts are reported as a component of "Equity
in Commodity futures trading accounts" on the Statements of Financial Condition
and totaled at December 31, 1997 and 1996, respectively, $2,003,679 and
$1,316,434 for Cornerstone II, $1,938,295 and $2,580,803 for Cornerstone III
and $1,815,112 and $5,330,520 for Cornerstone IV.

For Cornerstone II, of the $2,003,679 net unrealized gain on open contracts at
December 31, 1997, $1,675,343 related to exchange-traded futures contracts and
$328,336 related to off-exchange-traded forward currency contracts. Of the
$1,316,434 net unrealized gain on open contracts at December 31, 1996,
$1,342,050 related to exchange-traded futures contracts and $(25,616) related
to off-exchange-traded forward currency contracts.
<PAGE>

DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

For Cornerstone III, of the $1,938,295 net unrealized gain on open contracts at
December 31, 1997, $2,168,497 related to exchange-traded futures contracts and
$(230,202) related to off-exchange-traded forward currency contracts. Of the
$2,580,803 net unrealized gain on open contracts at December 31, 1996,
$2,589,289 related to exchange-traded futures contracts and $(8,486) related to
off-exchange-traded forward currency contracts.

For Cornerstone IV, of the $1,815,112 net unrealized gain on open contracts at
December 31, 1997 all related to off-exchange-traded forward currency
contracts. Of the $5,330,520 net unrealized gain on open contracts at December
31, 1996, $5,350,525 related to exchange-traded futures contracts and $(20,005)
related to off-exchange-traded forward currency contracts.

The contract amounts in the above table represent each Partnership's extent of
involvement in the particular class of financial instrument, but not the credit
risk associated with counterparty nonperformance. The credit risk associated
with these instruments is limited to the amounts reflected in each
Partnerships' Statement of Financial Condition.

Exchange-traded contracts and off-exchange-traded forward currency contracts
held by the Partnerships at December 31, 1997 and 1996 mature as follows:

<TABLE>
<CAPTION>
                                                       1997          1996
                                                  -------------- ------------
 <S>                                              <C>            <C>
 CORNERSTONE II
 Exchange-Traded Contracts                        December 1998  June 1998
 Off-Exchange-Traded Forward Currency Contracts   March 1998     March 1997
 CORNERSTONE III
 Exchange-Traded Contracts                        June 1998      June 1997
 Off-Exchange-Traded Forward Currency Contracts   March 1998     January 1997
 CORNERSTONE IV
 Exchange-Traded Contracts                        September 1998 March 1997
 Off-Exchange-Traded Forward Currency Contracts   April 1998     March 1997
</TABLE>

The Partnerships also have credit risk because either DWR or Carr act as the
futures commission merchant or the counterparty with respect to most of the
Partnerships' assets. Exchange-traded futures 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 of all of each Partnership's exchange-
traded futures contracts, are required pursuant to regulations of the Commodity
Futures Trading Commission to segregate from their own assets, and for the sole
benefit of their commodity
<PAGE>

DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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 totaled at December 31, 1997 and 1996
respectively, $30,968,637 and $29,851,316 for Cornerstone II, $41,931,212 and
$43,176,300 for Cornerstone III, and $119,181,131 and $97,006,924 for
Cornerstone IV. With respect to each 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 Partnerships are at risk to the ability of
Carr, the counterparty on all of such contracts, to perform. Carr's parent,
Credit Agricole Indosuez, has guaranteed Carr's obligations to the
Partnerships.

For the years ended December 31, 1997 and 1996 the average fair value of
financial instruments held for trading purposes was as follows:

<TABLE>
<CAPTION>
CORNERSTONE II                                           1997
--------------                                  ----------------------
                                                  ASSETS   LIABILITIES
                                                ---------- -----------
                                                    $           $
<S>                                             <C>        <C>
EXCHANGE-TRADED CONTRACTS:
 Financial Futures                              32,004,000 25,556,000
 Commodity Futures                              14,417,000 12,696,000
 Foreign Futures                                26,042,000 10,396,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS  36,907,000 46,749,000
<CAPTION>
                                                         1996
                                                ----------------------
                                                  ASSETS   LIABILITIES
                                                ---------- -----------
                                                    $           $
<S>                                             <C>        <C>
EXCHANGE-TRADED CONTRACTS:
 Financial Futures                              48,469,000 47,433,000
 Commodity Futures                              24,459,000 22,228,000
 Foreign Futures                                43,821,000 14,875,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS  38,522,000 44,536,000
<CAPTION>
CORNERSTONE III                                          1997
---------------                                 ----------------------
                                                  ASSETS   LIABILITIES
                                                ---------- -----------
                                                    $           $
<S>                                             <C>        <C>
EXCHANGE-TRADED CONTRACTS:
 Financial Futures                              82,881,000 46,462,000
 Options on Financial Futures                      698,000 64,639,000
 Commodity Futures                              26,095,000 21,377,000
 Options on Commodity Futures                    1,117,000  4,712,000
 Foreign Futures                                44,764,000 26,219,000
 Options on Foreign Futures                      7,229,000        --
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS  12,599,000 13,558,000
</TABLE>
<PAGE>

DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
                                                         1996
                                                -----------------------
                                                  ASSETS    LIABILITIES
                                                ----------- -----------
                                                     $           $
<S>                                             <C>         <C>
EXCHANGE-TRADED CONTRACTS:
 Financial Futures                              105,128,000  74,480,000
 Options on Financial Futures                           --   10,138,000
 Commodity Futures                               44,276,000  18,531,000
 Options on Commodity Futures                           --    2,763,000
 Foreign Futures                                 80,000,000  27,228,000
 Options on Foreign Futures                             --          584
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS      233,000     354,000
<CAPTION>
CORNERSTONE IV                                           1997
--------------                                  -----------------------
                                                  ASSETS    LIABILITIES
                                                ----------- -----------
                                                     $           $
<S>                                             <C>         <C>
EXCHANGE-TRADED CONTRACTS:
 Financial Futures                               34,008,000  57,577,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS  299,407,000 414,754,000
<CAPTION>
                                                         1996
                                                -----------------------
                                                  ASSETS    LIABILITIES
                                                ----------- -----------
                                                     $           $
<S>                                             <C>         <C>
EXCHANGE-TRADED FINANCIAL FUTURES CONTRACTS      67,114,000 125,331,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS  334,452,000 334,461,000
</TABLE>

5. LEGAL MATTERS

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., MSDWD (all such parties
referred to hereafter as the "Dean Witter Parties"), the Partnerships, 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 partnerships 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
<PAGE>

DEAN WITTER CORNERSTONE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)

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 Partnerships, sold by DWR. A consolidated and amended complaint
in the action pending in the 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 Supreme 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 Partnerships 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 Partnerships.
<PAGE>

DEAN WITTER REYNOLDS INC.

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62nd Floor

New York, NY 10048
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