WITTER DEAN CORNERSTONE FUND II - 10-Q Quarterly Report

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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 June 30, 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

June 30, 2003

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF FINANCIAL CONDITION

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF OPERATIONS
(Unaudited)

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF OPERATIONS
(Unaudited)

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 30, 2003 and 2002
(Unaudited)

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

DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS
June 30, 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 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 Standards 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
$ $ $

Jun. 30, 2003 (970,756) (494,314) (1,465,070) Jun. 2004 Sep. 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 $24,620,901 and
$22,780,027 at June 30, 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 additional 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 and six
month periods ended June 30, 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 11 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 and Six Months Ended June 30, 2003
For the quarter ended June 30, 2003, the Partnership recorded
total trading losses, net of interest income, of $228,825 and
posted a decrease in net asset value per Unit. The most
significant losses of approximately 2.4% were recorded in the
metals markets, primarily during June, from long positions in
gold futures as prices declined in response to the rise of the
U.S. dollar. Elsewhere in the metals markets, short positions in
copper, nickel, and aluminum futures generated losses during May
as prices reversed higher, buoyed by a rebound in U.S. equity
prices and hopes for increased industrial demand. Losses of
approximately 1.1% were recorded in the agricultural markets
primarily during May from long positions in coffee futures as
prices reversed lower on technically-based factors. Elsewhere in
the agricultural markets, losses were experienced during June
from short positions in cotton futures as increased exports and
weather-related supply concerns forced prices higher. In the
energy markets, losses of approximately 0.9% were recorded
primarily during May from short futures positions in crude oil as
prices moved higher amid supply concerns and renewed fears
concerning security at Middle Eastern refining facilities. A
portion of the Partnership?s overall losses for the quarter was
offset by gains of approximately 1.4% recorded in the global
stock index markets during April and May from long positions in
U.S. stock index futures as prices increased due to investors
focusing on positive comments and profits by technology
companies instead of weak economic data and geopolitical
concerns. Additional gains in the global stock index futures
markets were recorded during June from long positions in Japanese
stock index futures as prices rallied amid increased foreign
demand for Japanese equities. Smaller gains of approximately
0.4% were experienced in the global interest rate markets from
long positions in U.S. interest rate futures primarily during May
as prices trended higher amid speculation of an interest rate cut
by the U.S. Federal Reserve and lingering doubts concerning a
global economic recovery. Total expenses for the three months
ended June 30, 2003 were $501,675, resulting in a net loss of
$730,500. The net asset value of a Unit decreased from $5,346.51
at March 31, 2003 to $5,187.29 at June 30, 2003.

For the six months ended June 30, 2003, the Partnership recorded
total trading revenues, including interest income, of $2,515,202
and posted an increase in net asset value per Unit. In the
energy markets, gains of approximately 3.7% were recorded
primarily during January and February from long positions in
natural gas futures as prices trended higher in response to
prolonged frigid temperatures in the northeastern and midwestern
United States. Additional gains of approximately 3.0% were
established in the global interest rate markets during January,
February and May from long positions in U.S. and European
interest rate futures as prices trended higher amid
continued uncertainty in the global equity markets and investor
demand for fixed income investments. In the currency markets,
gains of approximately 1.3% were experienced primarily during
January, February and April from long positions in the euro and
Australian dollar versus the U.S. dollar as the value of these
currencies strengthened versus the U.S. dollar amid uncertainty
regarding the Bush Administration?s economic policy, renewed
fears of potential terrorist attacks against American interests,
and investor preference for non-U.S. dollar denominated assets.
Additional gains of approximately 1.1% were recorded in the
global stock index markets from long positions in European stock
index futures as prices strengthened amid the release of positive
economic data and expectations for a U.S. interest rate cut. A
portion of the Partnership?s overall gains was offset by losses
of approximately 2.3% recorded in the metals markets from
positions in gold and silver futures as precious metals prices
experienced short-term volatility throughout a majority of the
first half of the year. Smaller losses of approximately 0.9%
were experienced in the agricultural futures markets during May
from long positions in coffee futures as prices reversed lower on
technically-based factors, and from short positions in wheat
futures as prices moved higher amid news that continued hot-dry
weather in the midwest was hurting crops. Total expenses for the
six months ended June 30, 2003 were $1,427,419, resulting in net
income of $1,087,783. The net asset value of a Unit
increased from $4,963.25 at December 31, 2002 to $5,187.29 at
June 30, 2003.

For the Quarter and Six Months Ended June 30, 2002
For the quarter ended June 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $4,192,870
and posted an increase in net asset value per Unit. The most
significant gains of approximately 21.7% were recorded in the
currency markets primarily during May and June from previously
established long positions in the euro, Japanese yen and Swiss
franc relative to the U.S. dollar as the value of these currencies
strengthened against the dollar amid falling equity prices,
concerns regarding corporate accounting integrity and weak U.S.
economic data. Additional currency gains were recorded from long
positions in the Norwegian krone, Czech koruna and Australian
dollar. Losses of approximately 2.3% were recorded in the energy
markets primarily during May from previously established long
positions in crude oil futures as prices moved lower following
supply and demand concerns. Continued weakness in crude oil during
June resulted in newly established short futures positions which
added to earlier losses as crude oil strengthened over supply and
demand concerns and renewed Middle East tensions. Losses of
approximately 1.7% were recorded in the agricultural markets from
long positions in sugar futures as prices moved lower during June
upon news of heavy exports from Brazil. Total expenses for the
three months ended June 30, 2002 were $552,557, resulting
in net income of $3,640,313. The net asset value of a Unit
increased from $4,026.54 at March 31, 2002 to $4,753.05 at June
30, 2002.

For the six months ended June 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $2,963,426
and posted an increase in net asset value per Unit. The most
significant gains of approximately 12.7% were recorded in the
currency markets primarily during May and June from previously
established long positions in the euro, Japanese yen and Swiss
franc relative to the U.S. dollar as the value of these currencies
strengthened against the U.S. dollar amid falling equity prices,
concerns regarding corporate accounting integrity and weak U.S.
economic data. Currency gains were also recorded from long
Australian dollar positions. Additional gains of approximately
1.5% were recorded in the energy markets primarily during March
from previously established long positions in crude oil as prices
trended higher following supply and demand concerns and escalating
Middle East tensions. Losses of approximately 2.8% were recorded
in the agricultural markets from long positions in sugar futures
as prices moved lower primarily during January and June upon news
of heavy exports from Brazil. Losses of approximately 2.4% were
recorded in the global interest rate futures markets primarily
during April from short positions in European and U.S. interest
rate futures as prices moved higher following weakness in U.S.
equity markets, geopolitical concerns and uncertainty surrounding
a global economic recovery. Total expenses for the six
months ended June 30, 2002 were $1,046,083, resulting in net
income of $1,917,343. The net asset value of a Unit increased from
$4,360.39 at December 31, 2001 to $4,753.05 at June 30, 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
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 do not distinguish between exchange and non-
exchange-traded instruments and are 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 June 30, 2003 and 2002. At
both June 30, 2003 and 2002, the Partnership?s total
capitalization was approximately $24 million.

Primary Market June 30, 2003 June 30, 2002
Risk Category Value at Risk Value at Risk

Currency (1.40)% (2.38)%
Interest Rate (0.89) (1.06)
Equity (0.64) (0.60)
Commodity (1.65) (0.84)
Aggregate Value at Risk (2.43)% (2.70)%

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 June 30, 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 July 1,
2002 through June 30, 2003.

Primary Market Risk Category High Low Average
Currency (2.18)% (0.75)% (1.58)%

Interest Rate (1.00) (0.57) (0.82)

Equity (0.64) (0.34) (0.47)

Commodity (1.65) (0.56) (1.20)

Aggregate Value at Risk (2.67)% (1.13)% (2.19)%

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 June 30, 2003 and 2002, and for the end of the
four quarterly reporting periods from July 1, 2002 through June
30, 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 June 30, 2003, the Partnership?s cash balance at Morgan Stanley
DW was approximately 98% 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 June 30, 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 June
30, 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. At June 30, 2003, the Partnership?s
exposure was primarily 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 June 30, 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
exposures 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 June 30,
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 June 30, 2003, the
Partnership?s primary exposures were to the MIB 30 (Italy), NASDAQ
(U.S.) and S&P 500 (U.S.) stock indices. The Partnership is
primarily exposed to the risk of adverse price trends or static
markets in the U.S. and European 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 June 30, 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 fund-
amentals. 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.

Metals. The Partnership?s metals exposure at June 30, 2003
was to fluctuations in the price of precious metals, such as
gold and silver, and base metals, such as copper, nickel,
aluminum and zinc. Economic forces, supply and demand
inequalities, geopolitical factors and market expectations
influence price movements in these markets. The Trading
Managers, from time to time, take positions when market
opportunities develop and Demeter anticipates that the
Partnership will continue to do so.

Soft Commodities and Agriculturals. At June 30, 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 June 30, 2003:

Foreign Currency Balances. The Partnership?s primary foreign
currency balances at June 30, 2003 were in euros, Hong Kong
dollars and Japanese yen. The Partnership controls the non-
trading risk of foreign currency 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 the end of the period covered by 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-15(e) and
15d-15(e) 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:

Mr. Robert E. Murray resigned the position of Chairman of the
Board of Directors of Demeter.

Mr. Jeffrey A. Rothman, President and Director of Demeter, was
named Chairman of the Board of Directors 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.

31.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to rules 13(a)-15(e) and 15d-15(e), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to rules 13(a)-15(e) and 15d-15(e),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

32.01 Certification of President of Demeter Management
Corporation, the 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.

32.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the 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)

August 11, 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.