UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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 year ended December 31, 1998 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)

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

c/o Demeter Management Corporation
Two World Trade Center, - 62nd Flr., New York, N.Y.              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:

Title of each class                                  Name of each exchange
                                                     on which registered

      None                                                   None          
--------------------                                 ----------------------

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

                      Units of Limited Partnership Interest
--------------------------------------------------------------------------------
                                (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 10-K. [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 as of a specified
date within 60 days prior to the date of filing:  $38,138,069.44  at January 31,
1999.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                  (See Page 1)


<PAGE>

                        DEAN WITTER CORNERSTONE FUND III
                       INDEX TO ANNUAL REPORT ON FORM 10-K
                                DECEMBER 31, 1998
                                                                 Page No.
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . .          1
-----------------------------------

Part I.

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

     Item      2.  Properties. . . . . . . . . . . . . . . . . . . . .    4

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

     Item      4.  Submission of Matters to a Vote of Security Holders    6

Part II.

     Item      5.  Market for the Registrant's Partnership Units
                   and Related Security Holder Matters . . . . . . .      7

     Item      6.  Selected Financial Data . . . . . . . . . . . .        8

     Item      7.  Management's Discussion and Analysis of Financial
                   Condition and Results of Operations. . . . . . .    9-18

     Item      7A. Quantitative and Qualitative Disclosures About
                   Market Risk . . . . . . . . . . . . . . . . . . .   18-30

     Item      8.  Financial Statements and Supplementary Data. .         31

     Item      9.  Changes in and Disagreements with Accountants on
                   Accounting and Financial Disclosure. . . . . .         31
Part III.

     Item     10.  Directors and Executive Officers of the Registrant .32-36

     Item     11.  Executive Compensation . . . . . . . . . . . .         36

     Item     12.  Security Ownership of Certain Beneficial Owners
                   and Management . . . . . . . . . . . . . . . .         37

     Item     13.  Certain Relationships and Related Transactions         37

Part IV.

     Item     14.  Exhibits, Financial Statement Schedules, and
                   Reports on Form 8-K . . . . . . . . . . .              38

<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE


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


      Documents Incorporated                        Part of Form 10-K
      ----------------------                        -----------------

          Partnership's Prospectus
          dated August 28, 1996,
          together with the Supplement
          to the Prospectus dated
          October 14, 1998                                     I

          Annual Report to the Dean Witter
          Cornerstone Funds II, III and
          IV Limited Partners for the
          year ended December 31, 1998                 II, III and IV




                                       -1-
<PAGE>

                                     PART I
Item 1.  BUSINESS

         (a) General  Development of Business.  Dean Witter Cornerstone Fund III
(the "Partnership") is a New York limited partnership organized to engage in the
speculative trading of futures, options, forward contracts on foreign currencies
and  other  commodity  interests   (collectively,   "futures  interests").   The
Partnership  is one of the Dean  Witter  Cornerstone  Funds,  comprised  of Dean
Witter  Cornerstone Fund II, the Partnership,  and Dean Witter  Cornerstone Fund
IV.  The  Partnership's  general  partner  is  Demeter  Management   Corporation
("Demeter").  The  non-clearing  commodity  broker is Dean Witter  Reynolds Inc.
("DWR")  and an  unaffiliated  clearing  commodity  broker,  Carr  Futures  Inc.
("Carr"),  provides  clearing and execution  services.  Both Demeter and DWR are
wholly-owned  subsidiaries  of Morgan  Stanley Dean Witter & Co.  ("MSDW").  The
trading  advisors to the Partnership are Abraham Trading Co., Welton  Investment
Corporation and Sunrise Capital  Management  Inc.,  (collectively,  the "Trading
Advisors").

         The  Partnership's  Net Asset Value per Unit,  as of December 31, 1998,
was $3,266.97, representing an increase of 9.13 percent from the Net Asset Value
per Unit of $2,993.52 at December 31, 1997.

         For a more detailed  description  of the  Partnership's  business,  see
subparagraph (c).

                                      - 2 -
<PAGE>

         (b)  Financial  Information  about  Industry  Segments.  For  financial
information  reporting  purposes,  the  Partnership  is  deemed to engage in one
industry segment,  the speculative  trading of futures  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 of  futures  interests,  pursuant  to trading
instructions provided by the Trading Advisors. For a detailed description of the
different  facets  of the  Partnership's  business,  see those  portions  of the
Partnership's  prospectus,  dated August 28, 1996, (the  "Prospectus")  together
with the supplement to the Prospectus dated October 14, 1998 (the  "Supplement")
incorporated by reference in this Form 10-K, set forth below.

            Facets of Business
            ------------------
         1.  Summary                    1."Summary of the Prospectus"
                                           (Pages 1-9 of the Prospectus   
                                           and Pages S-18 - S-34 of  the
                                           Supplement).

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

         3.  Partnership's Commodity   3."Investment Program, Use of
             Trading Arrangements and     Proceeds and Trading Policies"
             Policies                     (Pages 45-47 of the Prospectus)
                                          and "The Trading Managers"
                                          (Pages 51-74 of the  Prospectus
                                          and Pages S-18 - S-29 of the
                                          Supplement).



                                      - 3 -

<PAGE>

         4.  Management of the Part-   4.  "The Cornerstone Funds"
             nership                        (Pages 19-24 of the Prospectus
                                            and Pages S-1 - S-4 of the
                                            Supplement).  "The General
                                            Partner" (Pages 77-79 of the
                                            Prospectus and Pages S-29 - S-31
                                            of the Supplement). "The
                                            Commodity Brokers" (Pages
                                            79-80 of the Prospectus and
                                            Pages S-31 - S-32 of the
                                            Supplement). "The Limited 
                                            Partnership Agreements"
                                            Pages 86-90 of the
                                            Prospectus).

         5.  Taxation of the Partner-  5.  "Material Federal Income
             ship's Limited Partners        Tax Considerations" and "State and 
                                            Local Income Tax Aspects" (Pages 
                                            92-99 of the Prospectus and  Page
                                            S-34  of  the Supplement ).

         (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.

                                      - 4 -
<PAGE>

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 purchasers of interests in
limited  partnership  commodity pools sold by DWR. Named defendants include DWR,
Demeter,  Dean Witter Futures & Currency  Management Inc.  ("DWFCM"),  MSDW (all
such  parties   referred  to  hereafter  as  the  "Dean  Witter   Parties")  the
Partnership,  certain other limited partnership commodity pools of which Demeter
is the general partner, and certain trading advisors to those pools. On June 16,
1997,  the  plaintiffs  in  the  above  actions  filed  a  consolidated  amended
complaint,  alleging,  among other things, that the defendants  committed fraud,
deceit,  negligent  misrepresentation,  various  violations  of  the  California
Corporations   Code,   intentional  and  negligent  breach  of  fiduciary  duty,
fraudulent and unfair business practices,  unjust enrichment,  and conversion in
the sale and  operation  of the various  limited  partnership  commodity  pools.
Similar purported class actions were also filed on September 18 and 20, 1996, in
the Supreme Court of the State of New York, New York County, and on November 14,
1996 in the Superior Court of the State of Delaware,  New Castle County, against
the Dean Witter Parties and certain trading advisors on behalf of all purchasers
of interests in various  limited  partnership  commodity  pools,  including  the
Partnership, sold by DWR. A consolidated and amended

                                      - 5 -
<PAGE>

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 New York
Supreme  Court  dismissed  the New York  action in  November  1998,  but granted
plaintiffs leave to file an amended complaint,  which they did in early December
1998. The defendants  have filed a motion to dismiss the amended  complaint with
prejudice  on February  1, 1999.  The  complaints  seek  unspecified  amounts of
compensatory  and  punitive  damages  and  other  relief.  It is  possible  that
additional  similar  actions  may be filed  and  that,  in the  course  of these
actions,  other parties could be added as  defendants.  The Dean Witter  Parties
believe  that they and the  Partnership  have strong  defenses to, and they will
vigorously  contest,  the  actions.  Although  the  ultimate  outcome  of  legal
proceedings cannot be predicted with certainty,  it is the opinion of management
of the Dean Witter  Parties that the  resolution  of the actions will not have a
material adverse effect on the financial  condition or the results of operations
of any of the Dean Witter Parties.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         None.
                                       -6-
<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  ("Units")  in the  Partnership.  The number of holders of
Units at December 31, 1998 was approximately  4,606. 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.

         The offering for the  Partnership  originally  commenced  May 31, 1984.
Effective  September 30, 1994, Dean Witter  Cornerstone Fund II, the Partnership
and Dean Witter  Cornerstone  Fund 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.  Through
December 31, 1998, the Partnership has sold 74,405.186 Units and the Cornerstone
Funds have sold an aggregate of  235,419,742  Units,  leaving  14,580.258  Units
remaining available for sale as of January 1, 1999. The aggregate price of Units
sold through December 31, 1998 with respect to the Partnership is $137,132,762.

                                      - 7 -
<PAGE>



Item 6.  SELECTED FINANCIAL DATA (in dollars)



<TABLE>
<CAPTION>


                                    For the Years Ended December 31,              

                            1998          1997       1996        1995       1994   
                          --------      --------   --------    --------   ---------
<S>                       <C>           <C>        <C>        <C>          <C>      
Total Revenues
(including interest)      7,717,783     8,583,432  7,585,090  16,882,940   1,307,961


Net Income (Loss)         3,657,606     4,261,542  2,778,204  11,031,694  (5,680,495)


Net Income (Loss)
Per Unit (Limited
& General Partners)          273.45       278.01      206.83       541.04    (219.67)


Total Assets             40,759,850   41,782,326  43,137,470   48,156,795   48,308,274

Total Limited Partners'
Capital                  39,835,572   39,970,539  40,997,752    45,991,101  46,250,611


Net Asset Value Per
Unit of Limited
Partnership Interest       3,266.97     2,993.52    2,715.51   2,508.68    1,967.64

</TABLE>



                                     - 8 -
<PAGE>


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

         Liquidity.  Assets  of  the  Partnership  are  deposited  with  DWR  as
non-clearing  broker and Carr as clearing  broker in separate  futures  interest
trading  accounts.  Such  assets are held in either  non-interest  bearing  bank
accounts or in securities  approved by the 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 futures interests, it is expected that
the Partnership will continue to own such liquid assets for margin purposes.

         The  Partnership's  investment in futures  interests  may, from time to
time, be illiquid.  Most United States futures  exchanges limit  fluctuations in
certain futures  interest prices during a single day by regulations  referred to
as "daily  price  fluctuations  limits"  or  "daily  limits."  Pursuant  to such
regulations,  during a single  trading  day no trades may be  executed at prices
beyond the daily  limit.  If the price for a  particular  futures  interest  has
increased or decreased by an amount equal to the daily limit,  positions in such
futures interest can neither be taken nor liquidated  unless traders are willing
to  effect  trades  at or  within  the  limit.  Futures  interests  prices  have
occasionally  moved the daily limit for several  consecutive days with little or
no trading. Such

                                      - 9 -
<PAGE>

market  conditions could prevent the Partnership  from promptly  liquidating its
futures interests and result in restrictions on redemptions.

         There  is no  limitation  on  daily  price  moves  in  trading  forward
contracts on foreign  currency.  The markets for some world  currencies have low
trading volume and are illiquid,  which may prevent the Partnership from trading
in  potentially  profitable  markets or from  promptly  liquidating  unfavorable
positions,   subjecting  it  to  substantial  losses.  Either  of  these  market
conditions could result in restrictions on redemptions.

         Capital Resources. The Partnership does not have, nor does it expect to
have, any capital assets.  Future redemptions and exchanges of Units will affect
the amount of funds available for investment in futures  interests in subsequent
periods.  Since  they  are at the  discretion  of  Limited  Partners,  it is not
possible to estimate the amount and therefore,  the impact of future redemptions
and exchanges.

         Results of Operations. As of December 31, 1998, the Partnership's total
capital was  $40,299,819,  a decrease of $814,555 from the  Partnership's  total
capital of  $41,114,374  at December 31, 1997.  For the year ended  December 31,
1998, the Partnership  generated net income of $3,657,606,  total  subscriptions
aggregated $15,998 and total redemptions aggregated $4,488,159.

                                     - 10 -
<PAGE>


         For the year ended December 31, 1998, the  Partnership's  total trading
revenues,  including interest income,  were $7,717,783.  The Partnership's total
expenses for the year were  $4,060,177,  resulting in net income of  $3,657,606.
The value of an individual unit in the  Partnership  increased from $2,993.52 at
December 31, 1997 to $3,266.97 at December 31, 1998.

         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 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,

                                     - 11 -
<PAGE>

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.

         The Partnership's  overall performance record represents varied results
of trading in different futures interests markets.  For a further description of
1998  trading  results,  refer to the  letter  to the  Limited  Partners  in the
accompanying  Annual Report to Limited  Partners for the year ended December 31,
1998,  incorporated by reference in this Form 10-K. The Partnership's  gains and
losses are allocated among its partners for income tax purposes.

         Credit Risk. In entering into futures 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

                                     - 12 -
<PAGE>

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  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-traded  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, MSDW 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 part of

                                     - 13 -
<PAGE>

the  broker  appears  even  less  clear  where  the  default  occurs in a non-US
jurisdiction.

         Demeter  deals with the credit risks of all  partnerships  for which it
serves as general partner in several ways.  First, it monitors the 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 the 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 the  Partnership's
potential  margin  liability,  exchange  by  exchange.  Demeter  is then able to
monitor the  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, the Partnership's  trading policies limit the amount of its 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.  One of the  aims of such
trading  policies has been to reduce the credit exposure of the Partnership to a
single  exchange and,  historically,  the  Partnership's  exposure has typically
amounted to only a small percentage of its total net assets. On those relatively
few occasions where the 

                                     - 14 -
<PAGE>

Partnership's credit exposure may climb above that level, Demeter deals with the
situation  on a case by case basis,  carefully  weighing  whether the  increased
level of credit exposure remains appropriate.
     
         Third, Demeter has secured, with respect to Carr acting as the clearing
broker for the  Partnership,  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 the Partnership's account.

         With respect to forward contract trading,  the Partnership  trades with
only those counterparties  which Demeter,  together with DWR, have determined to
be  creditworthy.  At the date of this filing,  the Partnership  deals only with
Carr as its counterparty 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  Annual Report to Limited Partners for the year ended December 31,
1998, incorporated by reference in this Form 10-K.

         Year  2000  Problem.  Commodity  pools,  like  financial  and  business
organizations and individuals around the world, depend on the smooth functioning
of computer  systems.  Many computer  systems in use today cannot  recognize the
computer code for the year 2000, but revert to 1900 or some other date.  This is
commonly known as the "Year 2000 Problem".

                                     - 15 -
<PAGE>

The Partnership  could be adversely  affected if computer  systems used by it or
any third party with whom it has a material relationship do not properly process
and calculate  date-related  information and data  concerning  dates on or after
January  1,  2000.  Such a  failure  could  adversely  affect  the  handling  or
determination of futures trades and prices and other services.

         MSDW  began  its  planning  for the Year  2000  Problem  in  1995,  and
currently has several hundred  employees working on the matter. It has developed
its own Year  2000  compliance  plan to deal with the  problem  and had the plan
approved  by  the  company's  executive  management,   Board  of  Directors  and
Information Technology Department.  Demeter is coordinating with MSDW to address
the Year 2000 Problem with respect to Demeter's computer systems that affect the
Partnership.  This includes hardware and software  upgrades,  systems consulting
and computer maintenance.

         Beyond the challenge  facing  internal  computer  systems,  the systems
failure of any of the third  parties  with whom the  Partnership  has a material
relationship - the futures exchanges and clearing organizations through which it
trades,  Carr,  or the Trading  Advisors - could result in a material  financial
risk to the Partnership. All U.S. futures exchanges are subject to monitoring by
the CFTC of their Year 2000 preparedness and the major foreign futures exchanges
are also expected 


                                     - 16 -

<PAGE>

 to be subject to  market-wide  testing of their Year 2000
compliance during 1999.  Demeter intends to monitor the progress of Carr and the
Trading  Advisors  throughout  1999 in their  Year 2000  compliance  and,  where
applicable, to test its external interface with Carr and the Trading Advisors.

         A worst case  scenario  would be one in which  trading of  contracts on
behalf  of the  Partnership  becomes  impossible  as a result  of the Year  2000
Problem  encountered by any third parties.  A less  catastrophic but more likely
scenario  would be one in which  trading  opportunities  diminish as a result of
technical  problems  resulting in illiquidity  and fewer  opportunities  to make
profitable trades. MSDW has begun developing various  "contingency plans" in the
event that the systems of such third  parties fail.  Demeter  intends to consult
closely with MSDW in implementing those plans.  Despite the best efforts of both
Demeter  and  MSDW,  however,  it is  possible  that  these  steps  will  not be
sufficient to avoid any adverse impact to the Partnership.

         Risks Associated With the Euro. On January 1, 1999, eleven countries in
the  European  Union  established  fixed  conversion  rates  on  their  existing
sovereign  currencies  and converted to a common  single  currency (the "euro").
During a three-year transition period, the sovereign currencies will continue to
exist  but only as a fixed  denomination  of the  euro.  Conversion  to the euro
prevents the Trading  Advisors  from trading in certain  currencies  and thereby
limits their

                                     - 17 -
<PAGE>

ability to take advantage of potential market opportunities that might otherwise
have  existed  had  separate  currencies  been  available  to trade.  This could
adversely affect the performance results of the Partnership.

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Introduction

         The   Partnership  is  a  commodity  pool  engaged   primarily  in  the
speculative trading of futures interests.  The market sensitive instruments held
by the Partnership are acquired solely for speculative  trading purposes and, as
a result,  all or substantially all of the  Partnership's  assets are subject to
the risk of  trading  loss.  Unlike  an  operating  company,  the risk of market
sensitive instruments is integral, not incidental,  to the Partnership's primary
business activities.

         The futures interests traded by the Partnership involve varying degrees
of related market risk.  Such market risk is often dependent upon changes in the
level or volatility of interest rates,  exchange rates,  and/or market values of
financial instruments and commodities. Fluctuations in related market risk based
upon the aforementioned  factors result in frequent changes in the fair value of
the Partnership's open positions,  and,  consequently,  in its earnings and cash
flow.


                                     - 18 -
<PAGE>


         The Partnership's  total market risk is influenced by a wide variety of
factors,  including the diversification effects among the Partnership's existing
open positions, the volatility present within the market(s) and the liquidity of
the market(s).  At varying times, each of these factors may act to exacerbate or
mute the market risk associated with the Partnership.

         The Partnership's past performance is not necessarily indicative of its
future results. Any attempt at quantifying the Partnership's market risk must be
qualified by the inherent  uncertainty  of its  speculative  trading,  which may
cause future losses and  volatility  (i.e.  "risk of ruin") far in excess of the
Partnership's experience to date and/or any reasonable expectation premised upon
historical changes in the fair value of its market sensitive instruments.

Quantifying  the  Partnership's  Trading  Value at Risk  

         The following  quantitative  disclosures  regarding  the  Partnership's
market risk exposures contain "forward-looking statements" within the meaning of
the safe harbor from civil liability provided for such statements by the Private
Securities  Litigation  Reform  Act of 1995  (set  forth in  Section  27A of the
Securities Act of 1933 and Section 21E of the Securities  Exchange Act of 1934).
All quantitative disclosures in this section are

                                     - 19 -
<PAGE>

deemed to be forward-looking  statements for purposes of the safe harbor, except
for statements of historical fact.

         The   Partnership   accounts  for  open   positions  on  the  basis  of
mark-to-market accounting principles. As such, any loss in the fair value of the
Partnership's   open  positions  is  directly  reflected  in  the  Partnership's
earnings,  whether realized or unrealized,  and the Partnership's  cash flow, as
profits and losses on open positions of  exchange-traded  futures  interests are
settled daily through variation margin.

         The Partnership's risk exposure in the various market sectors traded by
the Trading  Advisors is estimated below in terms of Value at Risk ("VaR").  The
VaR model employed by the Partnership incorporates numerous variables that could
impact the fair value of the Partnership's  trading  portfolio.  The Partnership
estimates  VaR using a model based on  historical  simulation  with a confidence
level of 99%.  Historical  simulation  involves  constructing a distribution  of
hypothetical  daily changes in trading  portfolio value. The VaR model generally
takes into account  linear  exposures to price and  interest  rate risk.  Market
risks  that are  incorporated  in the VaR model  include  equity  and  commodity
prices,  interest rates,  foreign  exchange  rates, as well as correlation  that
exists among these variables.  The  hypothetical  changes in portfolio value are
based on daily observed percentage changes in key

                                     - 20 -
<PAGE>

market  indices or other market  factors  ("market  risk  factors") to which the
portfolio is sensitive.  In the case of the  Partnership's  VaR, the  historical
observation  period is approximately  four years. The Partnership's  one-day 99%
VaR  corresponds  to the  negative  change in  portfolio  value  that,  based on
observed market risk factor moves,  would have been exceeded once in 100 trading
days.

         VaR  models  such as the  Partnership's  are  continually  evolving  as
trading  portfolios  become more  diverse and  modeling  techniques  and systems
capabilities  improve.  It must  also be  noted  that  the VaR  model is used to
quantify market risk for historic reporting purposes only and is not utilized by
either  Demeter  or  the  Trading   Advisors  in  their  daily  risk  management
activities.

The  Partnership's  Value  at  Risk in  Different  Market  Sectors

         The following table indicates the VaR associated with the Partnership's
open  positions  as a  percentage  of total net assets by market  category as of
December  31,  1998.  As  of  December  31,  1998,   the   Partnership's   total
capitalization was approximately $40 million.



                                     - 21 -

<PAGE>

                  Primary Market                 December 31, 1998
                  Risk Category                    Value at Risk
                  -------------                    -------------

                  Interest Rate                       (1.32)%
                  Currency                             (.72)%
                  Equity                               (.91)%
                  Commodity                            (.73)%
                  Aggregate Value at Risk             (1.61)%
    

         Aggregate   value  at  risk   represents   the  aggregate  VaR  of  the
Partnership's  open  positions  and not  the  sum of the  VaR of the  individual
categories  listed  above.  Aggregate VaR will be lower as it takes into account
correlation among different positions and categories.

         The table above represents the VaR of the Partnership's  open positions
at December 31, 1998 only and is not  necessarily  representative  of either the
historic  or  future  risk  of  an  investment  in  the   Partnership.   As  the
Partnership's  sole  business is the  speculative  trading of primarily  futures
interests,  the  composition  of its  portfolio  of open  positions  can  change
significantly  over any given time period or even within a single  trading  day.
Such changes in open positions could  materially  impact market risk as measured
by VaR either positively or negatively.

         The  table  below  supplements  the  year  end  VaR by  presenting  the
Partnership's high, low and average VaR as a percentage of total net

                                     - 22 -
<PAGE>

assets for the four  quarterly  reporting  periods  from January 1, 1998 through
December 31, 1998.

Primary Market Risk Category        High        Low        Average
----------------------------        ----        ---        -------
Interest Rate                      (1.74)%      (.63)%      (1.20)%
Currency                           (1.75)%      (.72)%      (1.09)%
Equity                              (.94)%      (.08)%       (.64)%
Commodity                           (.93)%      (.66)%       (.75)%
Aggregate Value at Risk            (2.24)%     (1.61)%      (1.95)%


Limitations on Value at Risk as an Assessment of Market Risk

         The face value of the market sector instruments held by the Partnership
is  typically  many times the  applicable  margin  requirements,  as such margin
requirements  generally  range  between  2% and  15%  of  contract  face  value.
Additionally,  due to the use of leverage,  the face value of the market  sector
instruments   held  by  the  Partnership  is  typically  many  times  the  total
capitalization of the Partnership.  The financial magnitude of the Partnership's
open  positions  thus  creates  a "risk of ruin"  not  typically  found in other
investment  vehicles.  Due to the relative size of the positions  held,  certain
market conditions may cause the Partnership to incur losses greatly in excess of
VaR within a short period of time. The foregoing VaR tables, as well as the past
performance of the Partnership, gives no indication of such "risk of ruin".

                                     - 23 -
<PAGE>

         In addition,  VaR risk measures  should be  interpreted in light of the
methodology's  limitations,  which include the following: past changes in market
risk factors will not always yield accurate predictions of the distributions and
correlations of future market movements;  changes in portfolio value in response
to market  movements  may differ  from the  responses  implicit  in a VaR model;
published VaR results  reflect past trading  positions while future risk depends
on future positions; VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged within one day; and
the historical  market risk factor data used for VaR estimation may provide only
limited  insight into losses that could be incurred under certain unusual market
movements.

         The foregoing VaR tables present the results of the  Partnership's  VaR
for each of the Partnership's market risk exposures and on an aggregate basis at
December 31, 1998 and for the end of quarter periods during calendar 1998. Since
VaR is based on historical  data,  VaR should not be viewed as predictive of the
Partnership's future financial  performance or its ability to manage and monitor
risk and there can be no assurance  that the  Partnership's  actual  losses on a
particular  day will not exceed  the VaR  amounts  indicated  below or that such
losses will not occur more than 1 in 100 trading days.

                                     - 24 -
<PAGE>

Non-Trading Risk

         The  Partnership  has  non-trading  market  risk  on its  foreign  cash
balances not needed for margin.  However,  such balances,  as well as any market
risk they may  represent,  are  immaterial.  The  Partnership  also  maintains a
substantial portion  (approximately 87%) of its available assets in cash at DWR.
A  decline  in  short-term  interest  rates  will  result  in a  decline  in the
Partnership's  cash  management  income.  This cash flow risk is not  considered
material.

         Materiality, as used throughout this section, is based on an assessment
of reasonably  possible market movements and the potential losses caused by such
movements, taking into account the leverage, optionality and multiplier features
of the Partnership's market sensitive instruments.

Qualitative Disclosures Regarding Primary Trading Risk Exposures

         The  following  qualitative  disclosures  regarding  the  Partnership's
market risk exposures - except for (i) those  disclosures that are statements of
historical fact and (ii) the  descriptions  of how the  Partnership  manages its
primary market risk exposures - constitute forward-looking statements within the
meaning of Section 27A of the  Securities  Act and Section 21E of the Securities
Exchange Act. The  Partnership's  primary  market risk  exposures as well as the
strategies used and to be used by Demeter and the Trading  Advisors for managing
such exposures are subject to numerous  uncertainties,  contingencies and risks,
any one of which

                                     - 25 -
<PAGE>

could  cause the actual  results of the  Partnership's  risk  controls to differ
materially  from the objectives of such  strategies.  Government  interventions,
defaults  and  expropriations,  illiquid  markets,  the  emergence  of  dominant
fundamental   factors,   political   upheavals,   changes  in  historical  price
relationships,  an influx of new market  participants,  increased regulation and
many  other  factors  could  result in  material  losses as well as in  material
changes  to the  risk  exposures  and  the  risk  management  strategies  of the
Partnership.  Investors  must be  prepared to lose all or  substantially  all of
their investment in the Partnership. The following were the primary trading risk
exposures of the  Partnership as of December 31, 1998, by market sector.  It may
be anticipated,  however,  that these market exposures will vary materially over
time.

         Interest Rate.  Interest rate risk is the principal  market exposure of
the  Partnership.  Interest  rate  movements  directly  affect  the price of the
sovereign  bond futures  positions  held by the  Partnership  and indirectly the
value of its stock index and currency positions.  Interest rate movements in one
country as well as relative interest rate movements between countries materially
impact the Partnership's profitability.  The Partnership's primary interest rate
exposure is to interest rate fluctuations in the United States and the other G-7
countries.  However,  the  Partnership  also  takes  futures  positions  in  the
government debt of smaller nations - e.g. New Zealand and Australia.


                                     - 26 -
<PAGE>


         Demeter  anticipates  that G-7  interest  rates will remain the primary
market exposure of the Partnership  for the foreseeable  future.  The changes in
interest  rates  which have the most  effect on the  Partnership  are changes in
long-term,  as opposed to short-term,  rates.  Most of the  speculative  futures
positions  held  by the  Partnership  are in  medium-to-long  term  instruments.
Consequently,  even a material  change in  short-term  rates  would have  little
effect on the Partnership were the medium-to-long term rates to remain steady.

         Currency.  The  Partnership's  currency  exposure is to  exchange  rate
fluctuations,  primarily  fluctuations  which  disrupt  the  historical  pricing
relationships   between   different   currencies  and  currency   pairs.   These
fluctuations  are  influenced  by interest rate changes as well as political and
general  economic  conditions.  The  Partnership  trades  in a large  number  of
currencies, including cross-rates - i.e., positions between two currencies other
than the U.S. dollar.  However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound positions. Demeter does not
anticipate  that the risk  profile of the  Partnership's  currency  sector  will
change  significantly  in the future,  although it is difficult at this point to
predict  the effect of the  introduction  of the Euro on the  Trading  Advisors'
currency trading strategies.

                                     - 27 -
<PAGE>


         Equity.  The  Partnership's  primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Partnership are
by law limited to futures on broadly based indices. As of December 31, 1998, the
Partnership's  primary exposures were in the S&P 500, Financial Times (England),
and NASDAQ 100 stock indices.  Demeter  anticipates  little,  if any, trading in
non-G-7  stock  indices.  The  Partnership  is primarily  exposed to the risk of
adverse price trends or static markets in the major U.S.,  European and Japanese
indices.  (Static markets would not cause major market changes but would make it
difficult for the  Partnership  to avoid being  "whipsawed"  into numerous small
losses). 

Commodity.

         Metals.  The  Partnership's   primary  metals  market  exposure  is  to
fluctuations  in the price of gold and silver.  Although  certain of the Trading
Advisors  will from time to time trade base  metals  such as  aluminum,  copper,
nickel,  zinc and lead, the principal  market  exposures of the Partnership have
consistently been in the precious metals, gold and silver (and, to a much lesser
extent,  platinum).  The Trading  Advisor's  gold trading has been  increasingly
limited due to the long-lasting and mainly non-volatile  decline in the price of
gold over the last 10-15 years.  However,  silver prices have remained  volatile
over  this  period,  and the  Trading  Advisors  have  from  time to time  taken
substantial positions as they have perceived market opportunities to 

                                     - 28 -
<PAGE>

develop. Demeter anticipates that gold and silver will remain the primary metals
market exposure for the Partnership.

         Soft Commodities. One of the Partnership's primary commodities exposure
is to  fluctuations in the price of soft  commodities,  which are often directly
affected by severe or unexpected  weather  conditions.  Grains,  soybean oil and
sugar  accounted  for  the  substantial  bulk of the  Partnership's  commodities
exposure at December  31,  1998.  In the past the  Partnership  has had material
market exposure to live cattle and hogbellies and may do so again in the future.
However, Demeter anticipates that the Trading Advisors will maintain an emphasis
on grains,  soybean oil and sugar,  in which the  Partnership  has  historically
taken it's largest positions.

         Energy. The Partnership's  primary energy market exposure is to gas and
oil price movements,  often resulting from political  developments in the Middle
East.  Although the Trading Advisors trade natural gas to a limited extent,  oil
is by far the dominant energy market exposure of the Partnership. Oil prices are
currently depressed, but they can be volatile and substantial profits and losses
have been and are expected to continue to be experienced in this market.

Qualitative Disclosures Regarding Non-Trading Risk Exposure

         The following was the only non-trading risk exposure of the Partnership
at December 31, 1998.

                                     - 29 -
<PAGE>

         Foreign Currency Balances.  The Partnership's  primary foreign currency
balances are in Japanese yen, German marks,  British  pounds,  French francs and
euros.  The  Partnership  controls  the  non-trading  risk of these  balances by
regularly converting these balances back into U.S. dollars at varying intervals,
depending upon such factors as size, volatility, etc.

Qualitative Disclosures Regarding Means of Managing Risk Exposure

         The means by which the Partnership and the Trading Advisors, severally,
attempt to manage the risk of the  Partnership's  open positions are essentially
the same in all  market  categories  traded.  Demeter  attempts  to  manage  the
Partnership's market exposure by (i) diversifying the Partnership's assets among
different Trading advisors, each of whose strategies focus on market sectors and
trading approaches, and (ii), monitoring the performance of the Trading Advisors
on a daily basis. In addition,  the Trading Advisors  establish  diversification
guidelines,  often  set in  terms  of the  maximum  margin  to be  committed  to
positions in any one market sector or market sensitive instrument. One should be
aware that certain Trading  Advisors treat their risk control policies as strict
rules, whereas others treat such policies as general guidelines.

         Demeter monitors and controls the risk of the Partnership's non-trading
instrument,  cash, which is the only Partnership investment directed by Demeter,
rather than the Trading Advisors.

                                     - 30 -
<PAGE>

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The  information  required by this Item appears in the Annual Report to
Limited  Partners for the year ended  December 31, 1998 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.


                                     - 31 -
<PAGE>


                                    PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         There are no directors or executive  officers of the  Partnership.  The
Partnership is managed by Demeter.

Directors and Officers of the General Partner

The directors and officers of Demeter are as follows:

         Mark J.  Hawley,  age 55, is  Chairman  of the Board and a Director  of
Demeter.  Mr. Hawley is also Chairman of the Board and a Director of DWFCM.  Mr.
Hawley  previously  served as President of Demeter  throughout  1998. Mr. Hawley
joined DWR in  February  1989 as Senior  Vice  President  and is  currently  the
Executive Vice President and Director of DWR's Product Management for Individual
Asset Management.  In this capacity, Mr. Hawley is responsible for directing the
activities of the firm's Managed Futures,  Insurance,  and Unit Investment Trust
Business.  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 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.

         Joseph  G.  Siniscalchi,   age  53,  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

                                     - 32 -
<PAGE>


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.

         Edward C. Oelsner,  III, age 56, 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 38, is President and a Director of Demeter.  Mr.
Murray is also  President and a Director of DWFCM.  Effective as of the close of
business  December  31, 1998,  Mr.  Murray  replaced Mr.  Hawley as President of
Demeter.  Mr. Murray is also 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 the Managed  Futures
Department.  In this  capacity,  Mr. Murray is  responsible  for  overseeing all
aspects of the

                                     - 33 -
<PAGE>

firm's Managed Futures Department.  Mr. Murray currently serves as a Director of
the  Managed  Funds   Association,   an  industry   association  for  investment
professionals in futures,  hedge funds and other  alternative  investments.  Mr.
Murray graduated from Geneseo State University in May 1983 with a B.A. degree in
Finance.

         Lewis A.  Raibley,  III,  age 36, is Vice  President,  Chief  Financial
Officer  and a Director  of  Demeter.  Effective  as of the close of business on
December 31, 1998, Mr. Raibley was elected to Demeter's Board of Directors.  Mr.
Raibley is currently  Senior Vice  President and  Controller  in the  Individual
Asset  Management  Group of MSDW. From July 1997 to May 1998, Mr. Raibley served
as Senior Vice  President and Director in the Internal  Reporting  Department of
MSDW and prior to that,  from 1992 to 1997,  he served as Senior Vice  President
and  Director  in the  Financial  Reporting  and Policy  Division of Dean Witter
Discover & Co. He has been with MSDW and its affiliates since June 1986.

         Mitchell  M. Merin,  age 45,  became a Director of Demeter on March 17,
1999. Mr. Merin was appointed the Chief  Operating  Officer of Asset  Management
for MSDW in  December  1998 and the  President  and Chief  Executive  Officer of
Morgan  Stanley Dean Witter  Advisors in February 1998. He has been an Executive
Vice  President  of DWR since 1990,  during  which time he has been  director of
DWR's Taxable Fixed Income and Futures divisions, managing director in Corporate
Finance and corporate  treasurer.  Mr. Merin received his Bachelor's degree from
Trinity

                                     - 34 -
<PAGE>

College in Connecticut and his M.B.A.  degree in finance and accounting from the
Kellogg Graduate School of Management of Northwestern University in 1977.

         Richard A.  Beech,  age 47,  became a Director  of Demeter on March 17,
1999. Mr. Beech has been associated with the futures industry for over 23 years.
He has been at DWR since August 1984 where he is presently Senior Vice President
and head of Branch Futures. Mr. Beech began his career at the Chicago Mercantile
Exchange,  where  he  became  the  Chief  Agricultural  Economist  doing  market
analysis,  marketing  and  compliance.  Prior to joining DWR, Mr. Beech also had
worked at two investment banking firms in Operations,  Research, Managed Futures
and Sales Management.

         Ray Harris, age 42, became a Director of Demeter on March 17, 1999. Mr.
Harris is  currently  Senior Vice  President,  Planning and  Administration  for
Morgan  Stanley  Dean  Witter  Asset  Management  and has  worked  at DWR or its
affiliates  since  July  1982,  serving  in both  financial  and  administrative
capacities.  From August 1994 to January  1999,  he worked in two  separate  DWR
affiliates,  Discover Financial Services and Novus Financial Corp.,  culminating
as Senior  Vice  President.  Mr.  Harris  received  his B.A.  degree from Boston
College and his M.B.A. in finance from the University of Chicago.


                                     - 35 -
<PAGE>

         Richard M. DeMartini,  age 46, previously served as the Chairman of the
Board and as a Director of Demeter throughout 1998. Effective as of the close of
business on December 31,  1998,  Mr.  DeMartini  resigned as the Chairman of the
Board and as a Director of Demeter due to changes in his responsibilities within
MSDW.

         Lawrence  Volpe,  age 51,  served as a Director  to Demeter  throughout
1998.  Effective  as of the close of business on December  31,  1998,  Mr. Volpe
resigned as a Director of Demeter.

         Patti L. Behnke,  age 38, served as Vice President and Chief  Financial
Officer of Demeter through May 1998. Effective June 1, 1998, Ms. Behnke resigned
as Vice President and Chief Financial Officer of Demeter in order to take on new
responsibilities as Operations Officer - Controllers  Division for MSDW, and was
replaced by Mr. Raibley.

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.


                                     - 36 -
<PAGE>



Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         (a) Security  Ownership of Certain  Beneficial  Owners - As of December
31,  1998  there were no persons  known to be  beneficial  owners of more than 5
percent of the Units.

         (b) Security  Ownership of  Management - At December 31, 1998,  Demeter
owned 142.103 Units of General Partnership Interest  representing a 1.15 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  Annual Report to Limited Partners for the year
ended  December 31, 1998,  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 $2,088,096 for
the year ended December 31, 1998.


                                     - 37 -
<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 report of independent  auditors,
all appearing in the accompanying Annual Report to Limited Partners for the year
ended December 31, 1998, are incorporated by reference in this Form 10-K:

         -        Report of Deloitte & Touche LLP, independent auditors, for the
                  years ended December 31, 1998, 1997 and 1996.

         -        Statements of Financial  Condition as of December 31, 1998 and
                  1997.

         -        Statements of Operations,  Changes in Partners'  Capital,  and
                  Cash Flows for the years ended  December  31,  1998,  1997 and
                  1996.

         -        Notes to Financial Statements.

         With  the  exception  of  the   aforementioned   information   and  the
information  incorporated  in Items 7, 8, and 13, the  Annual  Report to Limited
Partners  for the year ended  December  31,  1998 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.

                                      -38-
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements 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 25, 1999                      BY: /s/ Robert E. Murray               
                                        -----------------------------------
                                            Robert E. Murray, 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/  Robert E. Murray                                   March 25, 1999
    -----------------------------------------
         Robert E. Murray, Director
              and President

    /s/  Mark J. Hawley                                     March 25, 1999
    -----------------------------------------
            Mark J. Hawley, Director and
              Chairman of the Board

    /s/  Joseph G. Siniscalchi                              March 25, 1999
    ----------------------------------------
            Joseph G. Siniscalchi, Director

    /s/  Edward C. Oelsner III                              March 25, 1999
    ----------------------------------------
            Edward C. Oelsner III, Director

    /s/   Mitchell M. Merin                                  March 25, 1999
    ----------------------------------------
           Mitchell M. Merin, Director

    /s/   Richard A. Beech                                   March 25, 1999
    ----------------------------------------
          Richard A. Beech, Director

    /s/   Ray Harris                                          March 25, 1999 
    ----------------------------------------
          Ray Harris, Director


    /s/  Lewis A. Raibley, III                                March 25, 1999
    -----------------------------------------
         Lewis A. Raibley, III, Director, Chief
              Financial Officer and Principal
              Accounting Officer

                                     - 39 -

<PAGE>


                                  EXHIBIT INDEX
   ITEM                                                     METHOD OF FILING

- 3.01    Limited Partnership Agreement of
          the Partnership, dated as of
          December 7, 1983, as amended as
          of May 11, 1984.                                         (1)

-10.01    Management Agreement among the
          Partnership, Demeter and Sunrise
          Commodities Inc. (former name of
          Sunrise Capital Management Inc.),
          dated as of November 15, 1983.                           (2)

-10.02    Management Agreement among the
          Partnership, Demeter and Welton
          Investment Systems Corporation
          dated as of July 1, 1996                                 (4)

-10.03    Management Agreement among the
          Partnership, Demeter and Abraham
          Trading Co. dated as of July
          1, 1996                                                  (4)

-10.04    Dean Witter Cornerstone Funds
          Exchange Agreement, dated as of
          May 31, 1984.                                            (3)

-10.05    Amended and Restated Customer
          Agreement, dated as of December
          1, 1997, between the Partnership
          and Dean Witter Reynolds Inc. is
          filed herewith                                           (5)

-10.06    Customer Agreement, dated as of
          December 1, 1997, among the
          Partnership, Carr Futures, Inc.
          and Dean Witter Reynolds Inc.
          is filed herewith                                        (5)

-10.07    International Foreign Exchange Master
          Agreement, dated as of August 1, 1997,
          between the Partnership and Carr
          Futures, Inc. is filed herewith                          (5)

-13.01    Annual Report to Limited Partners
          for the year ended December 31, 1998.                    (5)

(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 fiscal 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 fiscal year ended September 30, 1984 (File
          No. 0-13299).

(4)       Incorporated by reference to Exhibit 10 Annual Report on Form 10-K for
          the fiscal year ended December 31, 1997 (File No. 0-13299).

(5)       Filed herewith.

                                       E-1