WITTER DEAN CORNERSTONE FUND II - 10-Q Quarterly Report

Back to GetFilings.com

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

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2003 or

[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to

Commission File No. 0-13298

DEAN WITTER CORNERSTONE FUND II

(Exact name of registrant as specified in its charter)

New York 13-3212871
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Demeter Management Corporation
825 Third Ave., 9th Floor
New York, NY 10022
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 310-6444

(Former name, former address, and former fiscal year, if changed
since last report)

Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No

DEAN WITTER CORNERSTONE FUND II

INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31, 2003

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF FINANCIAL CONDITION

of these financial statements.
DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF OPERATIONS
(Unaudited)

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Quarters Ended March 31, 2003 and 2002
(Unaudited)

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF CASH FLOWS
(Unaudited)

DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS
March 31, 2003
(Unaudited)

The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Dean Witter Cornerstone Fund II (the ?Partnership?). The
financial statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 2002 Annual Report
on Form 10-K.

1. Organization
Dean Witter Cornerstone Fund II is a New York limited partnership
organized to engage primarily in the speculative trading of
futures contracts, options on futures contracts and forward
contracts on foreign currencies and other commodity interests.
The Partnership is one of the Dean Witter Cornerstone Funds,
comprised of the Partnership, Dean Witter Cornerstone Fund III,
and Dean Witter Cornerstone Fund IV.

The Partnership?s general partner is Demeter Management
Corporation (?Demeter?). The non-clearing commodity broker is
Morgan Stanley DW Inc. (?Morgan Stanley DW?). The clearing
commodity brokers are Morgan Stanley & Co. Incorporated (?MS &
Co.?) and Morgan Stanley & Co. International Limited (?MSIL?).

DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Demeter, Morgan Stanley DW, MS & Co. and MSIL are wholly-owned
subsidiaries of Morgan Stanley. The trading managers to the
Partnership are Northfield Trading L.P. and John W. Henry &
Company, Inc. (collectively, the ?Trading Managers?).

2. Related Party Transactions
The Partnership's cash is on deposit with Morgan Stanley DW, MS &
Co. and MSIL in futures, forwards, and options trading accounts to
meet margin requirements as needed. Morgan Stanley DW pays
interest on these funds based on a rate equal to the average yield
on current 13-week U.S. Treasury bills. The Partnership pays
brokerage commissions to Morgan Stanley DW.

3. Financial Instruments
The Partnership trades futures contracts, options on futures
contracts and forward contracts on foreign currencies and other
commodity interests. Futures and forwards represent contracts for
delayed delivery of an instrument at a specified date and price.
Risk arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms
of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.

DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The market value of contracts is based on closing prices quoted
by the exchange, bank or clearing firm through which the
contracts are traded.

The Partnership?s contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting Standard No. 133,
?Accounting for Derivative Instruments and Hedging Activities?
(?SFAS No. 133?). SFAS No. 133 defines a derivative as a
financial instrument or other contract that has all three of the
following characteristics:

1) One or more underlying notional amounts or payment
provisions;
2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
3) Terms require or permit net settlement.

Generally, derivatives include futures, forward, swaps or options
contracts and other financial instruments with similar
characteristics such as caps, floors and collars.

DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The net unrealized gains (losses) on open contracts, reported as a
component of ?Equity in futures interests trading accounts? on the
statements of financial condition, and their longest contract
maturities were as follows:

Net Unrealized Gains (Losses)
On Open Contracts Longest Maturities

Exchange- Off-Exchange- Exchange- Off-Exchange-
Date Traded Traded Total Traded Traded
$ $ $

Mar. 31, 2003 241,092 (362,323) (121,231) Mar. 2004 Jun. 2003
Dec. 31, 2002 1,077,589 973,551 2,051,140 Dec. 2003 Mar. 2003

The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership's statements of financial condition.

The Partnership also has credit risk because Morgan Stanley DW, MS
& Co. and MSIL act as the futures commission merchants or the
counterparties with respect to most of the Partnership?s assets.
Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Morgan Stanley DW, MS & Co. and MSIL,
each as a futures commission merchant for the Partnership?s
exchange-traded futures and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures Trading
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

Commission (?CFTC?), to segregate from their own assets, and for
the sole benefit of their commodity customers, all funds held by
them with respect to exchange-traded futures and futures-styled
options contracts, including an amount equal to the net unrealized
gains (losses) on all open futures and futures-styled options
contracts, which funds, in the aggregate, totaled $25,817,246 and
$22,780,027 at March 31, 2003 and December 31, 2002, respectively.
With respect to the Partnership?s off-exchange-traded forward
currency contracts, there are no daily settlements of variations
in value nor is there any requirement that an amount equal to the
net unrealized gains (losses) on open forward contracts be
segregated. With respect to those off-exchange-traded forward
currency contracts, the Partnership is at risk to the ability of
MS & Co., the sole counterparty on all of such contracts, to
perform. The Partnership has a netting agreement with MS & Co.
This agreement, which seeks to reduce both the Partnership?s and
MS & Co.?s exposure on off-exchange-traded forward currency
contracts, should materially decrease the Partnership?s credit
risk in the event of MS & Co.?s bankruptcy or insolvency.

Item 2. MANAGEMENT?S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Liquidity. The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker and MS & Co. and MSIL as
clearing brokers in separate futures, forwards and options trading
accounts established for each Trading Manager, which assets are
used as margin to engage in trading. The assets are held in either
non-interest bearing bank accounts or in securities and
instruments permitted by the CFTC for investment of customer
segregated or secured funds. The Partnership?s assets held by the
commodity broker may be used as margin solely for the
Partnership?s trading. Since the Partnership?s sole purpose is to
trade in futures, forwards and options, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.

The Partnership?s investment in futures, forwards and options may,
from time to time, be illiquid. Most U.S. futures exchanges limit
fluctuations in prices during a single day by regulations referred
to as ?daily price fluctuations limits? or ?daily limits?. Trades
may not be executed at prices beyond the daily limit. If the
price for a particular futures or options contract has increased
or decreased by an amount equal to the daily limit, positions in
that futures or options contract can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading. These market conditions could prevent the
Partnership from promptly liquidating its futures or options
contracts 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 prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.

The Partnership has never had illiquidity affect a material
portion of its assets. Furthermore, there are no material
trends, demands, commitments, events or uncertainties known at the
present time that will result in, or that are reasonably likely to
result, in the Partnership?s liquidity increasing or decreasing in
any material way.

Capital Resources. The Partnership does not have, nor expect to
have, any capital assets. Redemptions of units of limited
partnership interest (?Unit(s)?) in the future will affect the
amount of funds available for investment in futures, forwards and
options in subsequent periods. It is not possible to estimate the
amount, and therefore, the impact of future redemptions of Units.
There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership?s capital resource arrangements at the present
time. The Partnership has no off-balance sheet arrangements, nor
contractual obligations or commercial commitments to make future
payments that would affect the Partnership?s liquidity or capital
resources. The contracts traded by the Partnership are accounted
for on a trade-date basis and marked to market on a daily basis.
The value of futures contracts is the settlement price on the
exchange on which that futures contract is traded on a particular
day and the value of foreign currency forward contracts is based
on the spot rate as of the close of business, New York City time,
on a given day.

Results of Operations
General. The Partnership?s results depend on the Trading Managers
and the ability of the Trading Managers? trading programs to take
advantage of price movements or other profit opportunities in the
futures, forwards, and options markets. The following presents a
summary of the Partnership?s operations for the three month
periods ended March 31, 2003 and 2002 and a general discussion of
its trading activities during each period. It is important to
note, however, that the Trading Managers trade in various markets
at different times and that prior activity in a particular market
does not mean that such market will be actively traded by the
Trading Managers or will be profitable in the future.
Consequently, the results of operations of the Partnership
are difficult to discuss other than in the context of the Trading
Managers? trading activities on behalf of the Partnership and how
the Partnership has performed in the past.

The Partnership?s results of operations set forth in the
financial statements on pages 2 through 10 of this report were
prepared in accordance with accounting principles generally
accepted in the United States of America, which require the use
of certain accounting policies that affect the amounts reported
in these financial statements, including the following: The
contracts the Partnership trades are accounted for on a trade-
date basis and marked to market on a daily basis. The difference
between their cost and market value is recorded on the Statements
of Operations as ?Net change in unrealized profit/loss? for open
(unrealized) contracts, and recorded as ?Realized profit/loss?
when open positions are closed out, and the sum of these amounts
constitutes the Partnership?s trading revenues. Interest income
revenue, as well as management fees, incentive fees and brokerage
commissions expenses of the Partnership are recorded on an
accrual basis.

Demeter believes that, based on the nature of the operations of
the Partnership, no assumptions relating to the application of
critical accounting policies other than those presently used
could reasonably affect reported amounts.

For the Quarter Ended March 31, 2003
For the quarter ended March 31, 2003, the Partnership recorded
total trading revenues, including interest income, of $2,744,027
and posted an increase in net asset value per Unit. The most
significant gains of approximately 4.6% were recorded in the
energy markets during January and February from long positions in
natural gas futures as prices increased sharply due to prolonged
frigid temperatures in the northeastern and midwestern U.S.
Elsewhere in the energy markets, long futures positions in crude
oil and its related products resulted in gains as prices trended
higher during January and February amid the looming threat of a
Coalition-led war against Iraq and an overall decline in
inventories. Additional gains of approximately 2.6% were
recorded in the global interest rate markets from long positions
in U.S., Japanese, and European interest rate futures as prices
trended higher during January and February as investors continued
to seek the ?safe haven? of fixed income investments in response
to continued uncertainty in the global equity markets. Gains of
approximately 1.9% were recorded in the currency markets
primarily from long positions in the euro, Australian dollar, and
South African rand relative to the U.S. dollar as the value of
these currencies strengthened versus the dollar amid weak U.S.
economic data and the fear of military action against Iraq. A
portion of the Partnership?s gains was offset by losses of
approximately 0.3% recorded in the global stock index markets
from long positions in U.S. stock index futures as equity
prices declined during January and February amid continued
political and economic uncertainty. Total expenses for the three
months ended March 31, 2003 were $925,744, resulting in net
income of $1,818,283. The net asset value of a Unit increased
from $4,963.25 at December 31, 2002 to $5,346.51 at March 31,
2003.

For the Quarter Ended March 31, 2002
For the quarter ended March 31, 2002, the Partnership recorded
total trading losses, net of interest income, of $1,229,444 and
posted a decrease in net asset value per Unit. The most
significant losses of approximately 7.4% were recorded in the
currency markets primarily during March from previously
established short positions in the Japanese yen relative to the
U.S. dollar. The yen strengthened against the dollar following
asset repatriation from the U.S. to Japan and a drop in Japan?s
unemployment rate. Continued strength in the yen through mid
March resulted in the establishment of new long positions,
however, adding to earlier losses when the value of the yen fell
on news that asset repatriation would end with the Japanese fiscal
year. Additional losses were recorded in the South African rand
from previously established long positions when the rand weakened
against the U.S. dollar ahead of growing concerns over Zimbabwe?s
presidential elections. Smaller losses of approximately 1.6% were
recorded in global stock index futures markets in early February
from previously established long positions in DAX index
futures when German equity prices declined on telecom sector
weakness. Partially offsetting gains of approximately 3.9% were
recorded in the energy markets during March from previously
established long positions in crude oil as prices continued
trending higher following supply concerns and escalating Middle
East tensions. Total expenses for the three months ended March
31, 2002 were $493,526, resulting in a net loss of $1,722,970.
The net asset value of a Unit decreased from $4,360.39 at December
31, 2001 to $4,026.54 at March 31, 2002.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards and options. The market-
sensitive instruments held by the Partnership are acquired for
speculative trading purposes only and, as a result, all or
substantially all of the Partnership?s assets are at risk of
trading loss. Unlike an operating company, the risk of market-
sensitive instruments is central, not incidental, to the
Partnership?s main business activities.

The futures, forwards and options traded by the Partnership
involve varying degrees of related market risk. Market risk is
often dependent upon changes in the level or volatility of
interest rates, exchange rates, and prices of financial
instruments and commodities. Fluctuations in market risk based
upon these factors result in frequent changes in the fair value
of the Partnership?s open positions, and consequently, in its
earnings and cash flow.

The Partnership?s total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership?s open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the
market risk associated with the Partnership.

The Partnership?s past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership?s market risk is limited by the uncertainty of its
speculative trading. The Partnership?s speculative trading may
cause future losses and volatility (i.e., ?risk of ruin?) that
far exceed the Partnership?s experience to date or any reasonable
expectations based upon historical changes in market value.

Quantifying the Partnership?s Trading Value at Risk
The following quantitative disclosures regarding the Partnership?s
market risk exposures contain ?forward-looking statements? within
the meaning of the safe harbor from civil liability provided for
such statements by the Private Securities Litigation Reform Act of
1995 (set forth in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934). All
quantitative disclosures in this section are deemed to be forward-
looking statements for purposes of the safe harbor, except for
statements of historical fact.

The Partnership accounts for open positions on the basis of mark-
to-market accounting principles. Any loss in the market value of
the Partnership?s open positions is directly reflected in the
Partnership?s earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of
exchange-traded futures, forwards, and options are settled daily
through variation margin.

The Partnership?s risk exposure in the market sectors traded by
the Trading Managers is estimated below in terms of Value at Risk
(?VaR?). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership?s
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the VaR
model include equity and commodity prices, interest rates, foreign
exchange rates, and correlation among these variables. The
hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors (?market risk factors?) to which the portfolio is
sensitive. The historical observation period of the Partner-
ship?s VaR is approximately four years. The one-day 99%
confidence level of the Partnership?s VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
In other words, one-day VaR for a portfolio is a number such that
losses in this portfolio are estimated to exceed the VaR only one
day in 100. VaR typically does not represent the worst
case of outcome.

VaR is calculated using historical simulation. Demeter uses
approximately four years of daily market data (1,000
observations) and revalues its portfolio (using delta-gamma
approximations) for each of the historical market moves that
occurred over this time period. This generates a probability
distribution of daily ?simulated profit and loss? outcomes. The
VaR is the appropriate percentile of this distribution. For
example, 99% one-day VaR would represent the 10th worst outcome
from Demeter?s simulated profit and loss series.

The Partnership?s VaR computations are based on the risk
representation of the underlying benchmark for each instrument or
contract and does not distinguish between exchange and non-
exchange-traded instruments and is also not based on exchange
and/or dealer-based margin requirements.

VaR models, including the Partnership?s, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Managers in their daily risk management
activities. Please further note that VaR as described above may
not be comparable to similarly titled measures used by
other entities.

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 primary market risk category at March 31, 2003 and 2002. At
March 31, 2003 and 2002, the Partnership?s total capitalization
was approximately $25 million and $20 million, respectively.

Primary Market March 31, 2003 March 31, 2002
Risk Category Value at Risk Value at Risk

Currency (0.74)% (1.06)%
Interest Rate (0.57) (1.14)
Equity (0.34) (0.73)
Commodity (0.56) (1.05)
Aggregate Value at Risk (1.13)% (2.18)%

The VaR for a market category represents the one-day downside
risk for the aggregate exposures associated with this market
category. The Aggregate Value at Risk above represents the VaR
of the Partnership?s open positions across all the market
categories, and is less than the sum of the VaR(s) for all such
market categories due to the diversification benefit across asset
classes.

The table above represents the VaR of the Partnership?s
open positions at March 31, 2003 and 2002 only and is not
necessarily representative of either the historic or future risk
of an investment in the Partnership. Because the Partnership?s
only business is the speculative trading of futures, forwards,
and options, the composition of its trading portfolio can change
significantly over any given time period, or even within a single
trading day. Any changes in open positions could positively or
negatively materially impact market risk as measured by VaR.

The table below supplements the quarter-end VaR by presenting the
Partnership?s high, low and average VaR, as a percentage of total
net assets for the four quarterly reporting periods from April 1,
2002 through March 31, 2003.

Primary Market Risk Category High Low Average
Currency (2.38)% (0.74)% (1.82)%

Interest Rate (1.06) (0.57) (0.86)

Equity (0.60) (0.34) (0.45)

Commodity (1.38) (0.56) (1.00)

Aggregate Value at Risk (2.70)% (1.13)% (2.26)%

Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held
by the Partnership to typically be many times the total
capitalization of the Partnership. The value of the Partnership?s
open positions thus creates a ?risk of ruin? not usually found in
other investments. The relative size of the positions held may
cause the Partnership to incur losses greatly in excess of VaR
within a short period of time, given the effects of the leverage
employed and market volatility. The VaR tables above, as well as
the past performance of the Partnership, give no indication of
such ?risk of ruin?. In addition, VaR risk measures should be
viewed in light of the methodology?s limitations, which include
the following:
* past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
* changes in portfolio value caused by market movements may
differ from those of the VaR model;
* VaR results reflect past trading positions while future risk
depends on future positions;
* VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
* the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.

The VaR tables above present the results of the
Partnership?s VaR for each of the Partnership?s market risk
exposures and on an aggregate basis at March 31, 2003 and 2002,
and for the end of the four quarterly reporting periods from April
1, 2002 through March 31, 2003. Since VaR is based on historical
data, VaR should not be viewed as predictive of the Partnership?s
future financial performance or its ability to manage or monitor
risk. There can be no assurance that the Partnership?s actual
losses on a particular day will not exceed the VaR amounts
indicated above or that such losses will not occur more than once
in 100 trading days.

Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial.

At March 31, 2003, the Partnership?s cash balance at Morgan
Stanley DW was approximately 95% of its total net asset value. 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 to be material.

Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership?s
market-sensitive instruments, in relation to the Partnership?s net
assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures - constitute
forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act.
The Partnership?s primary market risk exposures as well as the
strategies used and to be used by Demeter and the Trading Managers
for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual
results of the Partnership?s risk controls to differ materially
from the objectives of such strategies. Government interventions,
defaults and 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 at March 31, 2003, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Currency. The primary market exposure of the Partnership at March
31, 2003 was to the currency sector. The Partnership?s currency
exposure is to exchange rate fluctuations, primarily fluctuations
which disrupt the historical pricing relationships between
different currencies and currency pairs. Interest rate changes as
well as political and general economic conditions influence these
fluctuations. The Partnership trades a large number of currencies,
including cross-rates - i.e., positions between two currencies
other than the U.S. dollar. At March 31, 2003, the Partnership?s
major exposure was to outright U.S. dollar positions. Outright
positions consist of the U.S. dollar vs. other currencies. These
other currencies include major and minor currencies. Demeter does
not anticipate that the risk profile of the Partnership?s currency
sector will change significantly in the future. The currency
trading VaR figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the U.S.-based Partnership in
expressing VaR in a functional currency other than U.S. dollars.

Interest Rate. The second largest market exposure of the
Partnership at March 31, 2003 was to the global interest rate
complex. Exposure was primarily spread across the U.S.,
Japanese and European interest rate sectors. Interest rate
movements directly affect the price of the sovereign bond futures
positions held by the Partnership and indirectly affect 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 interest rate exposure is
generally to interest rate fluctuations in the U.S. and the other
G-7 countries. The G-7 countries consist of France, the U.S.,
Britain, Germany, Japan, Italy and Canada. However, the
Partnership also takes futures positions in the government debt of
smaller nations - e.g., Australia. Demeter anticipates that the
G-7 countries and Australian interest rates will remain the
primary interest rate exposure of the Partnership for the
foreseeable future. The speculative futures positions held by the
Partnership may range from short to long-term instruments.
Consequently, changes in short, medium or long-term interest rates
may have an effect on the Partnership.

Equity. The Partnership?s primary equity exposure at March 31,
2003 was 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. At March 31, 2003, the
Partnership?s primary exposures were to the NASDAQ (U.S.), Hang
Seng (Hong Kong), Euro Stoxx 50 (Europe) and DAX (Germany) stock
indices. The Partnership is primarily exposed to the risk
of adverse price trends or static markets in the U.S., European
and Hong Kong stock 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.
Energy. At March 31, 2003, the Partnership?s energy exposure
was shared primarily by futures contracts in crude oil and
its related products, and natural gas. Price movements in
these markets result from political developments in the
Middle East, weather patterns and other economic
fundamentals. Significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in the future. Natural gas has exhibited
volatility in price resulting from weather patterns and
supply and demand factors and will likely continue in this
choppy pattern.

Soft Commodities and Agriculturals. At March 31, 2003, the
Partnership had exposure to the markets that comprise these
sectors. Most of the exposure was to the sugar, corn, cocoa
and cotton markets. Supply and demand inequalities, severe
weather disruptions and market expectations affect price
movements in these markets.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at March 31, 2003:

Foreign Currency Balances. The Partnership?s primary foreign
currency balances at March 31, 2003 were in Hong Kong
dollars, euros, and Japanese yen. The Partnership controls
the non-trading risk of these balances by regularly
converting them back into U.S. dollars upon liquidation of
their respective positions.

Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Managers, separately, attempt to
manage the risk of the Partnership?s open positions in essentially
the same manner in all market categories traded. Demeter attempts
to manage market exposure by diversifying the Partnership?s assets
among different Trading Managers, each of whose strategies focus
on different market sectors and trading approaches, and by
monitoring the performance of the Trading Managers daily. In
addition, the Trading Managers establish diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-
sensitive instrument.

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

Item 4. CONTROLS AND PROCEDURES

(a) As of a date within 90 days of the filing date of this
quarterly report, the President and Chief Financial
Officer of the general partner, Demeter, have evaluated
the effectiveness of the Partnership?s disclosure
controls and procedures (as defined in the Rules 13a-14
and 15d-14 of the Exchange Act), and have judged such
controls and procedures to be effective.

(b) There have been no significant changes in the
Partnership?s internal controls or in other factors that
could significantly affect these controls subsequent to
the date of their evaluation.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
None.

Item 5. OTHER INFORMATION
Changes in Management. The following changes have been made to
the Board of Directors and Officers of Demeter Management
Corporation, the general partner:

Mr. Anthony J. DeLuca resigned the position of Director of
Demeter.

Mr. Edward C. Oelsner resigned the position of Director of
Demeter.

Mr. Joseph G. Siniscalchi resigned the position of Director of
Demeter.

Mr. Douglas J. Ketterer, age 37, was named a Director of Demeter,
subject to Mr. Ketterer being confirmed as a principal of Demeter
by the National Futures Association. Mr. Ketterer is a Managing
Director and head of the Strategic Solutions Group, which is
comprised of the Global Product Development Group, Financial
Planning, Mutual Fund Advisory Group, Retirement Strategies,
Education Strategies, Gifting Strategies, External Mutual Funds
and the Global Portfolio Analysis and Research Departments. Mr.
Ketterer joined the firm in 1990 in the Corporate Finance
Division as a part of the Retail Products Group. He later moved
to the origination side of Investment Banking, and then, after
the merger between Morgan Stanley and Dean Witter, served in the
Product Development Group at Morgan Stanley Dean Witter Advisors
(now known as Morgan Stanley Funds). From the summer of 2000 to
the summer of 2002, Mr. Ketterer served as the Chief
Administrative Officer for Morgan Stanley Investment Management,
where he headed the Strategic Planning & Administrative Group.
Mr. Ketterer received his M.B.A. from New York University?s
Leonard N. Stern School of Business and his B.S. in Finance from
the University at Albany?s School of Business.

Mr. Jeffrey S. Swartz, age 36, was named a Director of Demeter,
subject to Mr. Swartz being confirmed as a principal of Demeter
by the National Futures Association. Mr. Swartz is a Managing
Director and Chief Operating Officer of Investor Advisory
Services (?IAS?). Mr. Swartz began his career with Morgan
Stanley in 1990, working as a Financial Advisor in Boston. He
was appointed Sales Manager of the Boston office in 1994, and
served in that role for two years. In 1996, he was named Branch
Manager of the Cincinnati office. In 1999, Mr. Swartz was named
Associate Director of the Midwest region, which consisted of 10
states and approximately 90 offices. Mr. Swartz served in this
capacity until October of 2001, when he was named Director of IAS
Strategy and relocated to IAS headquarters in New York. In
December of 2002, Mr. Swartz was promoted to Managing Director
and Chief Operating Officer of IAS. Mr. Swartz received
his degree in Business Administration from the University of New
Hampshire.

Mr. Jeffrey D. Hahn, Chief Financial Officer of Demeter, was
named a Director of Demeter.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

3.01 Limited Partnership Agreement of the Partnership, dated as
of December 7, 1983, as amended as of May 11, 1984, is
incorporated by reference to Exhibit 3.01 of the
Partnership?s Annual Report on Form 10-K for the fiscal
year ended September 30, 1984 (File No. 0-13298).

10.01 Management Agreement among the Partnership, Demeter and
John W. Henry & Company, Inc. dated November 15, 1983, is
incorporated by reference to Exhibit 10.03 of the
Partnership?s Annual Report on Form 10-K for the fiscal
year ended September 30, 1984 (File No. 0-13298).

10.02 Dean Witter Cornerstone Funds Exchange Agreement, dated as
of May 31, 1984, is incorporated by reference to Exhibit
10.04 of the Partnership?s Annual Report on Form 10-K for
the fiscal year ended September 30, 1984 (File No. 0-
13298).

10.03 Management Agreement among the Partnership, Demeter and
Northfield Trading L.P., dated as of April 16, 1997, is
incorporated by reference to Exhibit 10.03 of the
Partnership?s Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 (File No. 0-13298).

10.04 Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW Inc., dated as of June
22, 2000, is incorporated by reference to Exhibit 10.01 of
the Partnership?s Form 8-K (File No. 0-13298) filed with
the Securities and Exchange Commission on November 13,
2001.

10.05 Commodity Futures Customer Agreement between Morgan
Stanley & Co. Incorporated and the Partnership, and
acknowledged and agreed to by Morgan Stanley DW Inc.,
dated as of May 1, 2000, is incorporated by reference to
Exhibit 10.02 of the Partnership?s Form 8-K (File No. 0-
13298) filed with the Securities and Exchange Commission
on November 13, 2001.

10.06 Customer Agreement between the Partnership and Morgan
Stanley & Co. International Limited, dated as of May 1,
2000, is incorporated by reference to Exhibit 10.04 of the
Partnership?s Form 8-K (File No. 0-13298) filed with the
Securities and Exchange Commission on November 13, 2001.

10.07 Foreign Exchange and Options Master Agreement between
Morgan Stanley & Co. Incorporated and the Partnership,
dated as of April 30, 2000, is incorporated by reference
to Exhibit 10.05 of the Partnership?s Form 8-K (File No.
0-13298) filed with the Securities and Exchange Commission
on November 13, 2001.

10.08 Amendment to Management Agreement between the Partnership
and John W. Henry & Company, Inc., dated as of November
30, 2000, is incorporated by reference to Exhibit 10.1 of
the Partnership?s Form 8-K (File No. 0-13298) filed with
the Securities and Exchange Commission on January 3, 2001.

10.09 Amendment to Management Agreement between the Partnership
and Northfield Trading L.P., dated as of November 30,
2000, is incorporated by reference to Exhibit 10.2 of the
Partnership?s Form 8-K (File No. 0-13298) filed with the
Securities and Exchange Commission on January 3, 2001.

10.10 Securities Account Control Agreement among the
Partnership, Morgan Stanley & Co. Incorporated, and Morgan
Stanley DW Inc., dated as of May 1, 2000, is incorporated
by reference to Exhibit 10.03 of the Partnership?s Form 8-
K (File No. 0-13298) filed with the Securities and
Exchange Commission on November 13, 2001.

99.01 Certification of President of Demeter Management
Corporation, general partner of the Partnership, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
99.02 Certification of Chief Financial Officer of Demeter
Management Corporation, general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

(B) Reports on Form 8-K ? None.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dean Witter Cornerstone Fund II
(Registrant)

By: Demeter Management Corporation
(General Partner)

May 15, 2003 By: /s/Jeffrey D. Hahn
Jeffrey D. Hahn
Director and Chief Financial Officer

The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.

CERTIFICATIONS

I, Jeffrey A. Rothman, President of Demeter Management Corporation,
the general partner of the registrant, certify that:

1. I have reviewed this quarterly report on Form 10-Q of the
registrant;

2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;

4. The registrant?s other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant?s disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the
?Evaluation Date?); and

c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;

5. The registrant?s other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant?s auditors and the audit committee of Demeter?s
board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant?s ability to record, process, summarize and
report financial data and have identified for the
registrant?s auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant?s internal controls; and

6. The registrant?s other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material
weaknesses.

Date: May 15, 2003 /s/ Jeffrey A. Rothman
Jeffrey A. Rothman
President,
Demeter Management Corporation,
general partner of the registrant

CERTIFICATIONS
I, Jeffrey D. Hahn, Chief Financial Officer of Demeter Management
Corporation, the general partner of the registrant, certify that:

1. I have reviewed this quarterly report on Form 10-Q of the
registrant;

2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;

4. The registrant?s other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant?s disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the
?Evaluation Date?); and

c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;

5. The registrant?s other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant?s auditors and the audit committee of Demeter?s
board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant?s ability to record, process, summarize and
report financial data and have identified for the
registrant?s auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant?s internal controls; and

6. The registrant?s other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material
weaknesses.

Date: May 15, 2003 /s/Jeffrey D. Hahn
Jeffrey D. Hahn
Chief Financial Officer,
Demeter Management Corporation,
general partner of the
registrant

EXHIBIT 99.01

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Dean Witter Cornerstone
Fund II (the ?Partnership?) on Form 10-Q for the period ended
March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the ?Report?), I, Jeffrey A.
Rothman, President, Demeter Management Corporation, general
partner of the Partnership, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:

(1) The Report fully complies with the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.

By: /s/ Jeffrey A. Rothman

Name: Jeffrey A. Rothman
Title: President

Date: May 15, 2003

EXHIBIT 99.02

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Dean Witter Cornerstone
Fund II (the ?Partnership?) on Form 10-Q for the period ended
March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the ?Report?), I, Jeffrey D. Hahn,
Chief Financial Officer, Demeter Management Corporation, general
partner of the Partnership, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:

(1) The Report fully complies with the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.

By: /s/ Jeffrey D. Hahn

Name: Jeffrey D. Hahn
Title: Chief Financial Officer

Date: May 15, 2003