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 September 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 Avenue, 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

September 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 Nine Months Ended September 30, 2003 and 2002
(Unaudited)

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

DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS
September 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. (individually, a "Trading Manager", or
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 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
On Open Contracts Longest Maturities

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

Sep. 30, 2003 415,326 711,608 1,126,934 Dec. 2004 Dec. 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 on all open futures and futures-styled options contracts,
which funds, in the aggregate, totaled $21,659,101 and $22,780,027
at September 30, 2003 and December 31, 2002, respectively. With
respect to the Partnership's off-exchange-traded forward currency
contracts, there are no daily exchange-required settlements of
variations in value nor is there any requirement that an amount
equal to the net unrealized gains on open forward contracts be
segregated, however, MS & Co. and Morgan Stanley DW will make
daily settlements of losses as needed. 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 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, and no expected material changes
to, the Partnership's capital resource arrangements at the present
time. The Partnership does not have any off-balance sheet
arrangements, nor does it have contractual obligations or
commercial commitments to make future payments that would affect
its liquidity or capital resources. The contracts the Partnership
trades 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. 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 each Trading Manager's 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 nine
month periods ended September 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 Nine Months Ended September 30, 2003
For the quarter ended September 30, 2003, the Partnership
recorded total trading losses, net of interest income, of
$794,806 and posted a decrease in net asset value per Unit. The
most significant losses of approximately 3.1% were recorded in
the agricultural markets, primarily during August, from long
sugar futures positions as prices reversed sharply lower in
response to speculative selling and weak volume. Additional
losses were recorded from positions in cotton futures during July
and August as prices moved without consistent direction. Losses
of approximately 1.6% were experienced in the currency markets
from long positions in the British pound and Australian dollar
relative to the U.S. dollar during July as the value of the U.S.
dollar increased amid expectations for a recovery of the U.S.
economy following an optimistic outlook unveiled by U.S. Federal
Reserve Chairman Alan Greenspan, negative economic data out of
Australia and the United Kingdom, and narrowing interest rate
differentials between the U.S. and these countries. Currency
losses were recorded in September from short positions in the
British pound and the euro versus the U.S. dollar as the pound's
value strengthened after speculation that Britain would raise
interest rates while the value of the euro moved higher on fears
that the U.S. economic recovery was unsustainable and concerns
regarding the potential impact of a statement by the G-7
countries supporting "more flexible exchange rates." The G-7
countries consist of France, the U.S., Britain, Germany,
Japan, Italy and Canada. In the energy markets, losses of
approximately 1.4% were experienced primarily in September from
short positions in crude oil futures after prices reversed
sharply higher amid news that OPEC would move to reduce
production in an effort to stem falling oil prices. Other losses
of approximately 1.0% were incurred in the global interest rate
futures markets during September from short positions in U.S.
interest rate futures as prices reversed higher amid falling
global equity prices outside the U.S. and investor demand for
safe haven investments. A portion of the Partnership's overall
losses for the third quarter was offset by gains of approximately
0.7% in the global stock index markets, primarily during August,
from long positions in Asian stock index futures as Asian equity
prices drew strength from robust Japanese economic data and
overall strength in U.S. equity markets. In the metals markets,
gains of approximately 0.7% were experienced during July and
September from long positions in nickel and copper futures as
prices trended higher amid renewed optimism concerning a U.S.
economic recovery and hopes for an increase in industrial
production. Total expenses for the three months ended September
30, 2003 were $422,150, resulting in a net loss of $1,216,956.
The net asset value of a Unit decreased from $5,187.29 at June
30, 2003 to $4,919.64 at September 30, 2003.

For the nine months ended September 30, 2003, the
Partnership recorded total trading revenues, including interest
income, of $1,720,396 and after expenses, posted a decrease in
net asset value per Unit. The most significant gains of
approximately 2.2% were recorded in the energy markets, primarily
during January and February, from long positions in natural gas
futures as prices jumped sharply higher amid fears that extremely
cold weather in the U.S. northeast and midwest could further
deplete already diminished supplies. In the global interest rate
markets, gains of approximately 2.0% were recorded primarily
during February and May from long positions in U.S. interest rate
futures 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. Additional gains of
approximately 1.8% were experienced in the global stock index
markets from long positions in Asian stock index futures during
June and August as Asian equity prices drew strength from robust
Japanese economic data and rising prices in the U.S. equity
markets. A portion of the Partnership's overall gains for the
first nine months of the year was offset by losses of
approximately 4.0% recorded in the agricultural markets from
positions in cotton futures during August and September as prices
moved without consistent direction. Additional losses were
recorded during May and September from long positions in coffee
futures as prices reversed lower on speculative selling and news
of increased supply. In the metals markets, losses of
approximately 1.6% were recorded from positions in gold and
silver futures as precious metals prices experienced short-term
volatile price movements throughout a majority of the first half
of the year amid an inconsistent outlook for the U.S. economy.
Total expenses for the nine months ended September 30, 2003 were
$1,849,569, resulting in a net loss of $129,173. The net asset
value of a Unit decreased from $4,963.25 at December 31, 2002 to
$4,919.64 at September 30, 2003.

For the Quarter and Nine Months Ended September 30, 2002
For the quarter ended September 30, 2002, the Partnership
recorded total trading revenues, including interest income, of
$2,141,607 and posted an increase in net asset value per Unit.
The most significant gains of approximately 7.7% were recorded in
the global interest rate markets from previously established long
positions in U.S., European, and Japanese interest rate futures,
as prices trended higher throughout the quarter due to investors
seeking a safe haven from falling equity prices and increased
pessimism regarding a global economic recovery. Additional gains
of approximately 3.1% were recorded in the global stock index
markets, primarily during July and September, from short
positions in European, U.S., and Japanese stock index futures as
prices weakened amid suspicions regarding corporate accounting
practices and global political and economic uncertainty. In the
energy markets, gains of approximately 2.2% were recorded,
primarily during August and September, from long positions in
crude oil futures and its related products as prices trended
higher on the increasing possibility of military action against
Iraq. A portion of the Partnership's overall gains was offset by
losses of approximately 6.0% in the currency markets from
previously established long positions in the euro, Swiss franc,
and Japanese yen relative to the U.S. dollar as these currencies
weakened against the dollar due to the emphasis on a "strong
dollar" policy by the Bush Administration during July and the
persistence of trendless price activity during August and
September. On February 27, 2002, the Partnership received
notification of a preliminary entitlement to payment from the
Sumitomo Copper Litigation Settlement Administrator. The
Partnership received payment of this settlement award in the
amount of $76,613 as of August 30, 2002. Total expenses for the
three months ended September 30, 2002 were $683,270, resulting in
net income of $1,458,337. The net asset value of a Unit increased
from $4,753.05 at June 30, 2002 to $5,049.00 at September 30,
2002.

For the nine months ended September 30, 2002, the Partnership
recorded total trading revenues, including interest income, of
$5,105,033 and posted an increase in net asset value per Unit.
The most significant gains of approximately 5.9% were recorded in
the currency markets, primarily during May and June, from
previously established long positions in the euro, Norwegian
krone, and Swiss franc relative to the U.S. dollar as the value
of these currencies strengthened against the dollar amid
falling U.S. equity prices and increased tensions in the Israeli-
Palestinian conflict. Gains of approximately 5.2% were recorded
from long positions in the global interest rate futures markets
as prices trended higher during a majority of the second and
third quarters due to uncertainty regarding a global economic
recovery. In the energy markets, gains of approximately 3.8% were
recorded from long positions in crude oil futures and its related
products as prices moved higher during March, August, and
September due to escalating tensions in the Middle East.
Additional gains of approximately 2.6% were recorded in the
global stock index markets from short positions in U.S.,
Japanese, and European stock index futures as prices trended
lower during July and August due to suspicions regarding
corporate accounting practices and weak economic data. A portion
of the Partnership's overall gains was offset by losses of
approximately 2.8% in the agricultural markets primarily from
positions in sugar and coffee futures as prices moved without
consistent direction amid supply and demand concerns. Total
expenses for the nine months ended September 30, 2002 were
$1,729,353, resulting in net income of $3,375,680. The net asset
value of a Unit increased from $4,360.39 at December 31, 2001 to
$5,049.00 at September 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, but not limited to, 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 for a 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
dealer-based instruments. They are also not based on exchange
and/or dealer-based maintenance margin requirements.

VaR models, including the Partnership's, are continually 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 September 30, 2003 and 2002.
At September 30, 2003 and 2002, the Partnership's total
capitalization was approximately $22 million and $25 million,
respectively.

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

Currency (2.46)% (1.97)%
Interest Rate (0.95) (1.00)
Equity (0.40) (0.46)
Commodity (1.57) (1.22)
Aggregate Value at Risk (3.19)% (2.51)%

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 listed 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 September 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 only business of
the Partnership 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 set forth above
by presenting the Partnership's high, low and average VaR, as a
percentage of total net assets for the four quarter-end reporting
periods from October 1, 2002 through September 30, 2003.

Primary Market Risk Category High Low Average
Currency (2.46)% (0.75)% (1.70)%

Interest Rate (0.95) (0.57) (0.81)

Equity (0.64) (0.34) (0.45)

Commodity (1.65) (0.56) (1.29)

Aggregate Value at Risk (3.19)% (1.13)% (2.36)%

Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by the
Partnership to typically be many times the total capitalization of
the Partnership. The value of the Partnership's open positions
thus creates a "risk of ruin" not typically found in other
investments. The relative size of the positions held may cause
the Partnership to incur losses greatly in excess of VaR
within a short period of time, given the effects of the leverage
employed and market volatility. The VaR tables above, as well as
the past performance of the Partnership, 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 September 30, 2003 and 2002, and for the four
quarter-end reporting periods from October 1, 2002 through
September 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.

The Partnership also maintains a substantial portion
(approximately 94% as of September 30, 2003) of its available
assets in cash at Morgan Stanley DW. 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 September 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 September 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 September 30, 2003,
the Partnership's primary 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 September 30, 2003 was to the global interest rate
complex. Exposure was primarily spread across the Japanese, U.S.
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 third largest market exposure of the Partnership at
September 30, 2003 was to the global stock index sector, primarily
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 September 30, 2003, the Partnership's
primary exposures were to the NASDAQ (U.S.), DAX (Germany) and
Euro Stoxx 50 (Europe) 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 trendless price movements resulting
in numerous small losses.

Commodity.
Energy. At September 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 geopolitical
developments, particularly in the Middle East, as well as
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 September 30, 2003,
the Partnership had exposure to the markets that comprise
these sectors. Most of the exposure was to the coffee, sugar
and cotton markets. Supply and demand inequalities, severe
weather disruptions and market expectations affect price
movements in these markets.

Metals. The Partnership's metals exposure at September 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.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at September 30, 2003:
Foreign Currency Balances. The Partnership's primary foreign
currency balances at September 30, 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 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
Management. The following individuals were named to the Board of
Directors of Demeter in the quarter ended March 31, 2003 and were
subsequently confirmed as principals of Demeter by the National
Futures Association:

Mr. Douglas J. Ketterer was confirmed as a principal of Demeter
by the National Futures Association on October 27, 2003.

Mr. Jeffrey S. Swartz was confirmed as a principal of Demeter by
the National Futures Association on October 23, 2003.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

3.01 Limited Partnership Agreement of the Partnership, dated
December 7, 1983, as amended 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 13a-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 13a-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)

November 14, 2003 By: /s/Jeffrey D. Hahn
Jeffrey D. Hahn
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.

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