WITTER DEAN CORNERSTONE FUND II - 10-K Annual Report

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

FORM 10-K

[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the year ended December 31, 2003 or

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

Commission File Number 0-13298

DEAN WITTER CORNERSTONE FUND II

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

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

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

Name of each exchange
Title of each class on which registered

None None

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

Units of Limited Partnership Interest

(Title of Class)

Indicate by check-mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _____

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

Indicate by check-mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No X

State the aggregate market value of the Units of Limited Partnership Interest
held by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which Units were sold as of the last
business day of the registrant's most recently completed second fiscal quarter:
$23,287,391 at June 30, 2003.

DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)

DEAN WITTER CORNERSTONE FUND II
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2003

DOCUMENTS INCORPORATED BY REFERENCE

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

Documents Incorporated Part of Form 10-K

Partnership's Prospectus dated
August 28, 1996, together with
the Supplement to the Prospectus
dated May 14, 1999 I

Annual Report to the Dean Witter
Cornerstone Funds II, III and IV
Limited Partners for the year
ended December 31, 2003 II, III and IV

PART I
Item 1. BUSINESS

(a) General Development of Business. Dean Witter Cornerstone Fund
II (the "Partnership") 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 commenced
operations on January 2, 1985. 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
(collectively, the "Cornerstone Series").

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").
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").

The Partnership's net asset value per unit of limited partnership
interest ("Unit(s)") at December 31, 2003 was $4,981.39,
representing an increase of 0.4 percent from the net asset value
per Unit of $4,963.25 at December 31, 2002. For a more
detailed description of the Partnership's business, see
subparagraph (c).

(b) Financial Information about Segments. For financial infor-
mation reporting purposes, the Partnership is deemed to engage in
one industry segment, the speculative trading of futures, forwards
and options. The relevant financial information is presented in
Items 6 and 8.

(c) Narrative Description of Business. The Partnership is in the
business of speculative trading of futures, forwards and options
pursuant to trading instructions provided by the Trading Managers.
For a detailed description of the different facets of the
Partnership's business, see those portions of the Partnership's
prospectus, dated August 28, 1996, (the "Prospectus") together
with the supplement to the Prospectus dated May 14, 1999, (the
"Supplement") incorporated by reference in this Form 10-K, set
forth below.

Facets of Business

1. Summary 1. "Summary of the Prospectus"
(Pages 1-9 of the Pros-
pectus).

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

3. Partnership's Commodity 3. "Investment Program, Use
Trading Arrangements and of Proceeds and Trading
Policies Policies" (Pages 45-47
of the Prospectus) and
"The Trading Managers"
(Pages 51-74 of the
Prospectus and Pages
S-20 - S-32 of the
Supplement).

4. Management of the Part- 4. "The Cornerstone Funds"
nership (Pages 19-24 of the
Prospectus and Pages S-2 -
S-5 of the Supplement).
"The General Partner" (Pages
77-79 of the Prospectus
and Pages S-32 - S-34 of the
Supplement) and "The
Commodity Brokers" (Pages
79-80 of the Prospectus and
Pages S-34 - S-36 of the
Supplement). "The Limited
Partnership Agreements"
(Pages 86-90 of the
Prospectus).

5. Taxation of the Partner- 5. "Material Federal Income
ship's Limited Partners Tax Considerations" and
"State and Local Income
Tax Aspects" (Pages 92-
99 of the Prospectus and
Page S-37 of the Supplement).

(d) Financial Information about Geographic Areas. The Partnership
has not engaged in any operations in foreign countries; however,
the Partnership (through the commodity brokers) enters into
forward contract transactions where foreign banks are the
contracting party and trades futures, forwards and options on
foreign exchanges.

(e) Available Information. The Partnership files annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and all amendments to these reports with the Securities
and Exchange Commission ("SEC"). You may read and copy any
document filed by the Partnership at the SEC's public reference
room at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for information on
the public reference room. The Partnership does not maintain an
internet website, however, the SEC maintains a website that
contains annual, quarterly, and current reports, proxy statements
and other information that issuers (including the Partnership)
file electronically with the SEC. The SEC's website address is
http://www.sec.gov.

Item 2. PROPERTIES
The Partnership's executive and administrative offices are located
within the offices of Morgan Stanley DW. The Morgan Stanley DW
offices utilized by the Partnership are located at 825 Third
Avenue, 9th Floor, New York, NY 10022.

Item 3. LEGAL PROCEEDINGS
None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.

PART II

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

(a) Market Information. There is no established public trading
market for Units of the Partnership.

(b) Holders. The number of holders of Units at December 31, 2003
was approximately 1,632.

(c) Distributions. No distributions have been made by the
Partnership since it commenced trading operations on January 2,
1985. Demeter has sole discretion to decide what distributions, if
any, shall be made to investors in the Partnership. Demeter
currently does not intend to make any distributions of Partnership
profits.

(d) Use of Proceeds. The offering for the Partnership originally
commenced on May 31, 1984 and was closed to new investors
September 30, 1994. Units of the Partnership were sold afterwards
solely through "exchanges" between existing investors within the
Cornerstone Series at 100% of net asset value per Unit. Effective
with the April 30, 2000 monthly closing, the exchange privilege
within the Cornerstone Series was terminated. However, limited
partners retained the ability to execute exchanges out of a
Cornerstone fund into other funds outside the Cornerstone Series
subject to certain restrictions set forth in the applicable
Limited Partnership Agreements. Morgan Stanley DW pays all
expenses in connection with the exchanging of Units without
reimbursement and therefore, 100% of the proceeds from exchanges
out of the Partnership are applied to the working capital of the
funds outside the Cornerstone Series receiving the exchanges in.
Please refer to the "Investment Programs, Use of Proceeds and
Trading Policies" section of the Prospectus.

Item 6. SELECTED FINANCIAL DATA (in dollars)

Item 7. 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 and may be used as margin
solely for the Partnership's trading. The assets are held in
either non-interest bearing bank accounts or in securities and
instruments permitted by the Commodity Futures Trading Commission
for investment of customer segregated or secured funds. 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 currencies. 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. Illiquidity has not
materially affected the Partnership's assets.

There are no known material trends, demands, commitments, events
or uncertainties 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 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 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.

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 each of the three
years in the period ended December 31, 2003 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.
Past performance is not necessarily indicative of future results.
The Partnership's results of operations are set forth in
its financial statements 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. The
market value of a futures contract 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. 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.

The Partnership recorded revenues including interest
totaling $2,515,377 and expenses totaling $2,381,342, resulting
in net income of $134,035 for the year ended December 31, 2003.
The Partnership's net asset value per Unit increased from
$4,963.25 at December 31, 2002 to $4,981.39 at December 31, 2003.
Total redemptions for the year were $1,566,534 and the
Partnership's ending capital was $22,049,409 at December 31,
2003, a decrease of $1,432,499 from ending capital at December
31, 2002 of $23,481,908.

The most significant trading gains of approximately 12.1% were
recorded in the currency markets, mainly throughout the fourth
quarter, from long positions in a variety of major and minor
currencies versus the U.S. dollar. A confluence of factors
including concerns regarding U.S. budget and trade deficits, a
dip in consumer confidence, an outbreak of Mad Cow Disease in the
U.S., and fears of a potential terrorist attack forced the U.S.
dollar to retreat. The Partnership's largest gains were achieved
during December from long positions in the euro, British pound,
and Australian and New Zealand dollars versus the U.S. dollar.
Weakness in the U.S. dollar during the first quarter also
contributed to currency gains for the year. Additional gains of
approximately 2.5% were incurred in the metals markets by long
futures positions in base and precious metals. During December,
profits were made on long futures positions in base metals, such
as copper, aluminum and nickel, as well as from long futures
positions in precious metals such as gold and silver.
Copper and nickel prices rose to six and fourteen year highs
respectively, benefiting from increased demand from China and the
strengthening of the global economy. Meanwhile, gold and silver
prices continued to soar as investors sought a safe haven from
the falling U.S. dollar and an increased risk of terrorism. In
the global stock index markets, gains of approximately 1.3%
contributed to the Partnership's gains for the year. During
June, long positions in European stock index futures resulted in
profits as prices strengthened amid the release of positive
economic data and expectations of a U.S. interest rate cut. Long
positions in Japanese stock index futures also produced gains as
prices rallied amid increased foreign demand for Japanese
equities. Long positions in Asian stock index futures resulted
in further gains during August as Asian equity prices drew
strength from robust Japanese economic data and gains in the U.S.
equity markets. A portion of the Partnership's overall gains for
the year was offset by losses of approximately 7.2% in the
agricultural markets. During August, positions in cotton futures
returned losses as prices moved without consistent direction.
Additional losses were recorded from positions in corn futures
during August and September as volatile prices resulted from
supply data and weather related concerns. Long positions in
coffee futures during September and sugar positions during
December compounded sector losses. In the energy markets, losses
of approximately 4.4%, largely incurred during October, also
offset a portion of the Partnership's gains for the year.
During October, the Partnership entered the month with short
natural gas positions, but these positions proved unprofitable as
prices rallied during the first part of the month. In response
to rising natural gas prices, the Partnership reversed its
position from short to long, only to see prices decline in the
latter part of the month. December also added to losses from
short natural gas futures positions. Additional losses were
incurred from short crude oil positions during September and
October as prices moved higher in response to supply fears
resulting primarily from geopolitical tensions. Additional
losses of approximately 2.2% were incurred in the global interest
rate markets, primarily during the fourth quarter. Long
positions in European interest rate futures recorded losses
during October as bond prices were negatively impacted by the
release of positive U.S. economic data and inflation concerns.
During December, short European interest rate futures positions
suffered losses as economic data released throughout the month
indicated that inflation in the U.S. remained under control,
despite the strengthening of the U.S. economy and reinforcing the
belief that the U.S. Federal Reserve would remain committed to
keeping U.S. rates at their current low levels.

The Partnership recorded revenues including interest totaling
$5,181,204 and expenses totaling $2,229,956, resulting in net
income of $2,951,248 for the year ended December 31, 2002. The
Partnership's net asset value per Unit increased from
$4,360.39 at December 31, 2001 to $4,963.25 at December 31, 2002.
Total redemptions for the year were $2,167,076, and the
Partnership's ending capital was $23,481,908 at December 31,
2002, an increase of $784,172 from ending capital at December 31,
2001 of $22,697,736.

The most significant trading gains of approximately 11.8% were
recorded in the currency markets from long positions in the euro,
Norwegian krone, and Swiss franc relative to the U.S. dollar as
the value of the dollar weakened during the second quarter, as
well as in December, amid investors' fears concerning increased
tensions in the Middle East and prolonged uncertainty regarding
the U.S. economy. Elsewhere in the currency markets, gains were
recorded from long positions in the Australian dollar and South
African rand versus the U.S. dollar as the value of both
currencies strengthened amid rising gold prices. Additional
gains of approximately 2.2% were recorded in the global interest
rate futures markets from long positions in Japanese interest
rate futures as prices trended higher during the second and third
quarters amid continued uncertainty regarding a Japanese economic
recovery. Smaller gains of approximately 0.8% were recorded in
the energy futures markets from long positions in natural gas
futures during March, August, September, and December as prices
trended higher on supply concerns and weather related factors. A
portion of the Partnership's gains was offset by losses of
approximately 2.0% in the agricultural futures markets
from positions in sugar and coffee futures as prices moved
erratically throughout most of the year. Smaller losses in the
agricultural futures markets were incurred from long positions in
cotton futures as prices moved without consistent direction
during the first and third quarters amid shifting supply and
demand concerns. In the metals futures markets, losses of
approximately 1.2% were recorded from positions in copper and
aluminum futures as an uncertain economic outlook resulted in
trendless price activity among industrial metals throughout most
of the year. As of August 30, 2002, the Partnership received a
settlement award payment from the Sumitomo Copper Litigation
Settlement Administrator in the amount of $76,613.

The Partnership recorded revenues including interest totaling
$1,898,394 and expenses totaling $2,257,246, resulting in a net
loss of $358,852 for the year ended December 31, 2001. The
Partnership's net asset value per Unit decreased from $4,419.13
at December 31, 2000 to $4,360.39 at December 31, 2001. Total
redemptions for the year were $1,631,103 and the Partnership's
ending capital was $22,697,736 at December 31, 2001, a decrease
of $1,989,955 from ending capital at December 31, 2000 of
$24,687,691.

The most significant trading losses of approximately 9.5% were
recorded in the energy markets throughout the first nine months
of the year from trading in crude oil futures and its
related products as a result of volatility in oil prices due to a
continually changing outlook for supply, production and demand.
In the metals markets, losses of approximately 1.1% were
experienced primarily from trading in silver futures. Additional
losses were incurred during October and November from long gold
futures positions as prices reversed lower on the heels of sharp
gains in the U.S. stock market. In the agricultural markets,
losses of approximately 1.0% were recorded primarily during July
from previously established short corn futures positions as
prices increased on forecasts for hotter and drier weather in the
U.S. midwest. Smaller losses of approximately 0.9% were
experienced in the soft commodities markets from short positions
in sugar futures as prices reversed higher on supply concerns. A
portion of the Partnership's overall losses was partially offset
by gains of approximately 8.8% recorded in the currency markets
throughout a majority of the fourth quarter from previously
established short positions in the South African rand as its
value trended lower relative to the U.S. dollar as investors
targeted the emerging market currency while global economic
jitters persisted. Additional profits of approximately 2.0% were
recorded in the global interest rate futures markets primarily
during September from long positions in U.S. interest rate
futures as prices rose following an interest rate cut by the U.S.
Federal Reserve and as investors sought a safe haven from
declining stock prices.
For an analysis of unrealized gains and (losses) by
contract type and a further description of 2003 trading results,
refer to the Partnership's Annual Report to Limited Partners for
the year ended December 31, 2003, which is incorporated by
reference to Exhibit 13.01 of this Form 10-K.

The Partnership's gains and losses are allocated among its
partners for income tax purposes.

Market Risk.
Financial Instruments. The Partnership is a party to financial
instruments with elements of off-balance sheet market and credit
risk. The Partnership trades futures, forwards and options in
interest rates, stock indices, currencies, agriculturals, energies
and metals. In entering into these contracts, the Partnership is
subject to the market risk that such contracts may be
significantly influenced by market conditions, such as interest
rate volatility, resulting in such contracts being less valuable.
If the markets should move against all of the positions held by
the Partnership at the same time, and if the Trading Managers were
unable to offset positions of the Partnership, the Partnership
could lose all of its assets and the limited partners would
realize a 100% loss.

In addition to the Trading Managers' internal controls, the
Trading Managers must comply with the Partnership's trading
policies that include standards for liquidity and leverage
that must be maintained. The Trading Managers and Demeter monitor
the Partnership's trading activities to ensure compliance with the
trading policies and Demeter can require the Trading Managers to
modify positions of the Partnership if Demeter believes they
violate the Partnership's trading policies.

Credit Risk.
In addition to market risk, in entering into futures, forwards and
options contracts there is a credit risk to the Partnership that
the counterparty on a contract will not be able to meet its
obligations to the Partnership. The ultimate counterparty or
guarantor of the Partnership for futures contracts traded in the
United States and the foreign exchanges on which the Partnership
trades is the clearinghouse associated with such exchange. In
general, a clearinghouse is backed by the membership of the
exchange and will act in the event of non-performance by one of
its members or one of its member's customers, which should
significantly reduce this credit risk. There is no assurance that
a clearinghouse, exchange or other exchange member will meet its
obligations to the Partnership, and Demeter and the commodity
brokers will not indemnify the Partnership against a default by
such parties. Further, the law is unclear as to whether a
commodity broker has any obligation to protect its customers from
loss in the event of an exchange or clearinghouse defaulting on
trades effected for the broker's customers. In cases where the
Partnership trades off-exchange forward contracts with a
counterparty, the sole recourse of the Partnership will be the
forward contracts counterparty.

Demeter deals with these credit risks of the Partnership in
several ways. First, it monitors the Partnership's credit
exposure to each exchange on a daily basis. The commodity brokers
inform the Partnership, as with all their customers, of its net
margin requirements for all its existing open positions and
Demeter has installed a system which permits it to monitor the
Partnership's potential net credit exposure, exchange by exchange,
by adding the unrealized trading gains on each exchange, if any,
to the Partnership's margin liability thereon.

Second, the Partnership's trading policies limit the amount of its
net assets that can be committed at any given time to futures
contracts and require a minimum amount of diversification in the
Partnership's trading, usually over several different products and
exchanges. Historically, the Partnership's exposure to any one
exchange has typically amounted to only a small percentage of its
total net assets and on those relatively few occasions where the
Partnership's credit exposure climbs above an acceptable level,
Demeter deals with the situation on a case by case basis,
carefully weighing whether the increased level of credit exposure
remains appropriate. Material changes to the trading policies may
be made only with the prior written approval of the limited
partners owning more than 50% of Units then outstanding.

Third, with respect to forward contract trading, the Partnership
trades with only those counterparties which Demeter, together with
Morgan Stanley DW, have determined to be creditworthy. The
Partnership presently deals with MS & Co. as the sole counterparty
on forward contracts.

See "Financial Instruments" under "Notes to Financial Statements"
in the Partnership's Annual Report to Limited Partners for the
year ended December 31, 2003, which is incorporated by reference
to Exhibit 13.01 of this Form 10-K.

Inflation has not been a major factor in the Partnership's
operations.

Item 7A.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, factors that result in frequent
changes in the fair value of the Partnership's open positions, and
consequently in its earnings, whether realized or unrealized, and
cash flow. Profits and losses on open positions of exchange-
traded futures, forwards and options are settled daily through
variation margin.

The Partnership's total market risk may increase or decrease as
it's 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.

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 experiences 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 Partner-
ship'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 and cash flow.

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 Partnership estimates VaR using a model based upon
historical simulation (with a confidence level of 99%) which
involves constructing a distribution of hypothetical daily changes
in the value of a trading portfolio. The VaR model takes into
account linear exposures to risk including 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 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, or one day in
100. VaR typically does not represent the worst case of outcome.
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, the 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 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 Manager 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 December 31, 2003 and 2002. At
December 31, 2003 and 2002, the Partnership's total capital-
ization was approximately $22 million and $23 million,
respectively.

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

Currency (2.50)% (2.18)%
Interest Rate (0.96) (0.81)

Equity (0.87) (0.42)

Commodity (1.74) (1.38)

Aggregate Value at Risk (3.32)% (2.67)%

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 VaRs for all such market
categories due to the diversification benefit across asset
classes.

Because the 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, which could positively or
negatively materially impact market risk as measured by VaR.

The table below supplements the December 31, 2003 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 January 1, 2003 through December 31, 2003.

Primary Market Risk Category High Low Average
Currency (2.50)% (0.75)% (1.78)%
Interest Rate (0.96) (0.57) (0.84)
Equity (0.87) (0.34) (0.56)
Commodity (1.74) (0.56) (1.38)
Aggregate Value at Risk (3.32)% (1.13)% (2.52)%

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 provided present the results of the Partnership's
VaR for each of the Partnership's market risk exposures and on an
aggregate basis at December 31, 2003 and 2002 and for the four
quarter-end reporting periods during calendar year 2003. VaR is
not necessarily representative of the historic risk, nor should it
be used to predict 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 79% as of December 31, 2003) of its available
assets in cash at Morgan Stanley DW. A decline in short-term
interest rates would 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 December 31, 2003, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Currency. The primary market exposure of the Partnership at
December 31, 2003 was to the currency sector. The Partnership's
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. Interest rate
changes as well as political and general economic conditions
influence these fluctuations. The Partnership's primary exposure
at December 31, 2003 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 December 31, 2003 was to the global interest rate
sector. 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 primary 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 third largest market exposure of the Partnership at
December 31, 2003 was to equity price risk in the G-7 countries.
The stock index futures traded by the Partnership are by law
limited to futures on broadly-based indices. At December 31,
2003, the Partnership's primary exposures were to the Euro Stoxx
50 (Europe), DAX (Germany) and NASDAQ (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 trendless
price movements resulting in numerous small losses.

Commodity.
Energy. At December 31, 2003, the Partnership's energy
exposure was primarily to 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 prices resulting
from weather patterns and supply and demand factors and will
likely continue in this choppy pattern.

Metals. The Partnership's metals exposure at December 31,
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 December 31, 2003,
the Partnership had exposure to the markets that comprise
these sectors. Most of the exposure was to the cotton,
sugar, corn and cocoa 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 December 31, 2003:

Foreign Currency Balances. The Partnership's primary foreign
currency balances at December 31, 2003 were in Hong Kong
dollars, euros and British pounds. 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 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are incorporated by reference to the
Partnership's Annual Report which is filed as Exhibit 13.01
hereto.

Supplementary data specified by Item 302 of Regulation S-K:

Summary of Quarterly Results (Unaudited)

Quarter Revenues/ Net Net Income/
Ended (Net Losses) Income/(Loss) (Loss) Per Unit

2003
March 31 $ 2,744,027 $ 1,818,283 $ 383.26
June 30 (228,825) (730,500) (159.22)
September 30 (794,806) (1,216,956) (267.65)
December 31 794,981 263,208 61.75

Total $ 2,515,377 $ 134,035 $ 18.14

2002
March 31 $(1,229,444) $(1,722,970) $(333.85)
June 30 4,192,870 3,640,313 726.51
September 30 2,141,607 1,458,337 295.95
December 31 76,171 (424,432) (85.75)

Total $ 5,181,204 $ 2,951,248 $ 602.86

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

None.

Item 9A. CONTROLS AND PROCEDURES
(a) As of the end of the period covered by this annual
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 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 III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

Directors and Officers of the General Partner
The directors and executive officers of Demeter are as follows:

Jeffrey A. Rothman, age 42, is the Chairman of the Board of
Directors and President of Demeter. Mr. Rothman is the Executive
Director of Morgan Stanley Managed Futures, responsible for
overseeing all aspects of the firm's managed futures department.
He is also the Chairman of the Board of Directors of Morgan
Stanley Futures & Currency Management Inc. Mr. Rothman has been
with the managed futures department for seventeen years.
Throughout his career, Mr. Rothman has helped with the
development, marketing and administration of approximately 39
commodity pools. Mr. Rothman is an active member of the Managed
Funds Association and serves on its Board of Directors. Mr.
Rothman has a B.A. degree in Liberal Arts from Brooklyn College,
New York.

Richard A. Beech, age 52, is a Director of Demeter. Mr. Beech has
been associated with the futures industry for over 25 years. He
has been at Morgan Stanley DW since August 1984 where he is
presently an Executive Director and head of Futures, Forex
& Metals. Mr. Beech began his career at the Chicago Mercantile
Exchange, where he became the Chief Agricultural Economist doing
market analysis, marketing and compliance. Prior to joining Morgan
Stanley DW, Mr. Beech worked at two investment banking firms in
operations, research, managed futures and sales management. Mr.
Beech has a B.S. degree in Business Administration from Ohio State
University and an M.B.A. degree from Virginia Polytechnic
Institute and State University.

Raymond A. Harris, age 47, is a Director of Demeter and of Morgan
Stanley Futures & Currency Management Inc. Mr. Harris is
currently Managing Director and head of Client Solutions for
Morgan Stanley Individual Investor Group. Mr. Harris joined
Morgan Stanley in 1982 and served in financial and operational
assignments for Dean Witter Reynolds. In 1994, he joined the
Discover Financial Services division, leading restructuring and
product development efforts. Mr. Harris became Chief
Administrative Officer for Morgan Stanley Investment Management in
1999. In 2001, he was named head of Global Products and Services
for Investment Management. Mr. Harris has an M.B.A. in Finance
from the University of Chicago and a B.A. degree from Boston
College.

Frank Zafran, age 48, is a Director of Demeter and of Morgan
Stanley Futures & Currency Management Inc. Mr. Zafran is an
Executive Director of Morgan Stanley and, in September 2002, was
named Chief Administrative Officer of Morgan Stanley's Client
Solutions Division. Mr. Zafran joined the firm in 1979 and has
held various positions in Corporate Accounting and the Insurance
Department, including Senior Operations Officer - Insurance
Division, until his appointment in 2000 as Director of 401(k) Plan
Services, responsible for all aspects of 401(k) Plan Services
including marketing, sales and operations. Mr. Zafran received a
B.S. degree in Accounting from Brooklyn College, New York.

Douglas J. Ketterer, age 38, was named a Director of Demeter, and
confirmed by the National Futures Association as a principal of
Demeter on October 27, 2003. Mr. Ketterer is a Managing Director
and head of the Investment Solutions Group, which is comprised of
a number of departments which offer products and services through
Morgan Stanley's Individual Investor Group (including Managed
Futures, Alternative Investments, Insurance Services, Personal
Trust, Corporate Services, and others). Mr. Ketterer joined the
firm in 1990 in the Corporate Finance Division as a part of the
Retail Products Group. He later moved to the origination side of
Investment Banking, and then, after the merger between Morgan
Stanley and Dean Witter, served in the Product Development Group
at Morgan Stanley Dean Witter Advisors (now known as Morgan
Stanley Funds). From the summer of 2000 to the summer of 2002,
Mr. Ketterer served as the Chief Administrative Officer for Morgan
Stanley Investment Management, where he headed the Strategic
Planning & Administrative Group. Mr. Ketterer received his
M.B.A. from New York University's Leonard N. Stern School of
Business and his B.S. in Finance from the University at Albany's
School of Business.

Jeffrey S. Swartz, age 36, was named a Director of Demeter, and
confirmed by the National Futures Association as a principal of
Demeter on October 23, 2003. Mr. Swartz is a Managing Director
and Director of the Mass Affluent Segment of Morgan Stanley's
Individual Investor Group. Mr. Swartz began his career with Morgan
Stanley in 1990, working as a Financial Advisor in Boston. He was
appointed Sales Manager of the Boston office in 1994, and served
in that role for two years. In 1996, he was named Branch Manager
of the Cincinnati office. In 1999, Mr. Swartz was named Associate
Director of the Midwest Region, which consisted of 10 states and
approximately 90 offices. Mr. Swartz served in this capacity
until October of 2001, when he was named Director of Investor
Advisory Services ("IAS") Strategy and relocated to IAS
headquarters in New York. In December of 2002, Mr. Swartz was
promoted to Managing Director and Chief Operating Officer of IAS
and has recently assumed the responsibility for managing the Mass
Affluent Client Segment. Mr. Swartz received his degree in
Business Administration from the University of New Hampshire.

Jeffrey D. Hahn, age 46, is the Chief Financial Officer of
Demeter. Mr. Hahn began his career at Morgan Stanley in 1992 and
is currently an Executive Director responsible for the
management and supervision of the accounting, reporting, tax and
finance functions for the firm's private equity, managed futures,
and certain legacy real estate investing activities. He is also
the Chief Financial Officer of Morgan Stanley Futures & Currency
Management Inc. From August 1984 through May 1992, Mr. Hahn held
various positions as an auditor at Coopers & Lybrand, specializing
in manufacturing businesses and venture capital organizations. Mr.
Hahn received his B.A. in Economics from St. Lawrence University
in 1979, an M.B.A. from Pace University in 1984, and is a
Certified Public Accountant.

All of the foregoing directors have indefinite terms.

The Audit Committee
The Partnership is operated by its general partner, Demeter, and
does not have an audit committee. As such, the entire Board of
Directors of Demeter serves as the audit committee. None of the
directors are considered to be "independent" as that term is used
in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange
Act of 1934, as amended. The Board of Directors of Demeter has
determined that Mr. Jeffrey D. Hahn is the audit committee
financial expert.

Section 16(a) Beneficial Ownership Reporting Compliance
The Partnership has no directors, executive officers or greater
than 10 percent beneficial owners and none of the directors or
executive officers of Demeter, the general partner of the
Partnership, own Units of the Partnership. As such, no Forms 3,
4, or 5 have been filed.

Code of Ethics
The Partnership has not adopted a code of ethics that applies to
the Partnership's principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions. The Partnership is operated by its
general partner, Demeter. The President, Chief Financial Officer
and each member of the Board of Directors of Demeter are employees
of Morgan Stanley and are subject to the code of ethics adopted by
Morgan Stanley, the text of which can be viewed on Morgan
Stanley's website at www.morganstanley.com/ourcommitment/codeofcon
duct.html.

Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers. As a
limited partnership, the business of the Partnership is managed by
Demeter, which is responsible for the administration of the
business affairs of the Partnership but receives no compensation
for such services.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

(a) Security Ownership of Certain Beneficial Owners - At December
31, 2003, there were no persons known to be beneficial owners of
more than 5 percent of the Units.

(b) Security Ownership of Management - At December 31, 2003,
Demeter owned 100.567 Units of general partnership interest,
representing a 2.27 percent interest in the Partnership.

(c) Changes in Control - None.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of "Notes to
Financial Statements", in the accompanying Annual Report to
Limited Partners for the year ended December 31, 2003, which is
incorporated by reference to Exhibit 13.01 of this Form 10-K. In
its capacity as the Partnership's retail commodity broker, Morgan
Stanley DW received commodity brokerage commissions (paid and
accrued by the Partnership) of $1,373,338 for the year ended
December 31, 2003.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The Partnership pays accounting fees as discussed in Note 1 to the
Financial Statements, "Operating Expenses", in the Annual Report
to the Limited Partners for the year ended December 31, 2003.

(1) Audit Fees. The aggregate fees for professional services
rendered by Deloitte & Touche LLP in connection with their audit
of the Partnership's financial statements and reviews of the
financial statements included in the Quarterly Reports on Form
10-Q and in connection with statutory and regulatory filings for
the years ended December 31, 2003 and 2002 were approximately
$31,300 and $31,201, respectively.

(2) Audit-Related Fees. There were no fees for assurance and
related services rendered by Deloitte & Touche LLP for the years
ended December 31, 2003 and 2002.

(3) Tax Fees. The aggregate fees for tax compliance services
rendered by Deloitte & Touche LLP for the years ended December 31,
2003 and 2002 were approximately $29,914 and $29,066,
respectively.

(4) All Other Fees. None.

As of the date of this Report, the Board of Directors of Demeter
has not adopted pre-approval policies and procedures. As a
result, all services provided by Deloitte & Touche LLP must be
directly pre-approved by the Board of Directors of Demeter.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K

(a) 1. Listing of Financial Statements
The following financial statements and report of independent
auditors, all appearing in the accompanying Annual Report to
Limited Partners for the year ended December 31, 2003, are
incorporated by reference to Exhibit 13.01 of this Form 10-K:
- - Report of Deloitte & Touche LLP, independent auditors, for the
years ended December 31, 2003, 2002, and 2001.

- - Statements of Financial Condition, including the Schedules of
Investments, as of December 31, 2003 and 2002.

- - Statements of Operations, Changes in Partners' Capital, and
Cash Flows for the years ended December 31, 2003, 2002, and
2001.

- - Notes to Financial Statements.

With the exception of the aforementioned information and the
information incorporated in Items 7, 8, and 13, the Annual Report
to Limited Partners for the year ended December 31, 2003 is not
deemed to be filed with this report.

2. Listing of Financial Statement Schedules
No financial statement schedules are required to be filed with
this report.

(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Partnership during
the last quarter of the period covered by this report.

(c) Exhibits
Refer to Exhibit Index on Pages E-1 to E-2.

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

DEAN WITTER CORNERSTONE FUND II
(Registrant)

BY: Demeter Management Corporation,
General Partner

March 30, 2004 BY: /s/Jeffrey A. Rothman
Jeffrey A. Rothman,
President

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

Demeter Management Corporation.

BY: /s/ Jeffrey A. Rothman March 30, 2004
Jeffrey A. Rothman, President

/s/ Douglas J. Ketterer March 30, 2004
Douglas J. Ketterer, Director

/s/ Jeffrey S. Swartz March 30, 2004
Jeffrey S. Swartz, Director

/s/ Richard A. Beech March 30, 2004
Richard A. Beech, Director

/s/ Raymond A. Harris March 30, 2004
Raymond A. Harris, Director

/s/ Frank Zafran March 30, 2004
Frank Zafran, Director

/s/ Jeffrey D. Hahn March 30, 2004
Jeffrey D. Hahn, Chief
Financial Officer

EXHIBIT INDEX
ITEM
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.

E-1
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.
13.01 December 31, 2003 Annual Report to Limited Partners is
filed herewith.
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.
E-2

Cornerstone
Funds

December 31, 2003
Annual Report

[LOGO] Morgan Stanley

DEAN WITTER CORNERSTONE FUNDS

HISTORICAL FUND PERFORMANCE

Presented below is the percentage change in Net Asset Value per Unit from the
start of each calendar year each Fund has traded. Also provided is the
inception-to-date return and the compound annualized return since inception for
each Fund. Past performance is not necessarily indicative of future results.

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
FUND % % % % % % % % % % % % % % % % % % %
- ---------------------------------------------------------------------------------------------------------------------------

Cornerstone
Fund II... 20.1 (17.6) 71.6 0.1 (15.1) 47.9 11.0 (1.3) 7.8 (8.9) 26.5 11.5 18.1 12.5 (5.4) 11.5 (1.3) 13.8 0.4
- ---------------------------------------------------------------------------------------------------------------------------
Cornerstone
Fund III.. 54.6 (8.0) 32.5 19.4 (11.4) 18.7 12.0 (11.1) (4.8) (10.0) 27.5 8.2 10.2 9.1 (6.8) (0.3) 0.3 17.9 8.8
- ---------------------------------------------------------------------------------------------------------------------------
Cornerstone
Fund IV... -- -- 10.6 37.5 (14.1) 57.8 33.5 10.4 (9.1) (14.3) 23.0 13.0 38.4 6.8 (1.1) 14.7 15.9 12.3 13.6
(8 mos.)
- ---------------------------------------------------------------------------------------------------------------------------

INCEPTION- COMPOUND
TO-DATE ANNUALIZED
RETURN RETURN
FUND % %
- ---------------------------------

Cornerstone
Fund II... 410.9 9.0
- ---------------------------------
Cornerstone
Fund III.. 301.0 7.6
- ---------------------------------
Cornerstone
Fund IV... 714.7 13.4

- ---------------------------------

DEMETER MANAGEMENT CORPORATION

825 Third Avenue, 9th Floor
New York, NY 10022
Telephone (212) 310-6444

DEAN WITTER CORNERSTONE FUNDS
ANNUAL REPORT
2003

Dear Limited Partner:
This marks the nineteenth annual report for Cornerstone Funds II and III and
the seventeenth annual report for Cornerstone Fund IV. The Net Asset Value per
Unit for each of the three Cornerstone Funds ("Fund(s)") as of December 31,
2003 was as follows:

% CHANGE
FUNDS N.A.V. FOR 2003
- -------------------------------------------------------------------------------

Cornerstone Fund II $4,981.39 0.4%
- -------------------------------------------------------------------------------
Cornerstone Fund III $3,909.31 8.8%
- -------------------------------------------------------------------------------
Cornerstone Fund IV $7,943.73 13.6%
- -------------------------------------------------------------------------------

Since their inception in 1985, Cornerstone Funds II and III have increased by
410.9% (a compound annualized return of 9.0%) and 301.0% (a compound annualized
return of 7.6%), respectively. Since its inception in 1987, Cornerstone Fund IV
has increased by 714.7% (a compound annualized return of 13.4%).

Detailed performance information for each Fund is located in the body of the
financial report. For each Fund, we provide a trading results by sector chart
that portrays trading gains and trading losses for the year in each sector in
which the Fund participates. In the case of Cornerstone Fund IV, we provide the
trading gains and trading losses for the five major currencies in which the
Fund participates, and composite information for all other "minor" currencies
traded within the Fund.

The trading results by sector charts indicate the year's composite percentage
returns generated by the specific assets dedicated to trading within each
market sector in which each Fund participates. Please note that there is not an
equal amount of assets in each market sector, and the specific allocations of
assets by a Fund to each sector will vary over time within a predetermined
range. Below each chart is a description of the factors that influenced trading
gains and trading losses within each Fund during the year.

Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation, 825 Third Avenue, 9th Floor, New York,
NY 10022 or your Morgan Stanley Financial Advisor.

I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is no
guarantee of future results.

Sincerely,

/s/ Jeffrey A. Rothman
Jeffrey A. Rothman
Chairman and President
Demeter Management Corporation
General Partner for
Dean Witter Cornerstone Fund II
Dean Witter Cornerstone Fund III
Dean Witter Cornerstone Fund IV

CORNERSTONE FUND II

[CHART]

Year ended December 31, 2003
----------------------------
Currencies 12.13%
Interest Rates -2.19%
Stock Indices 1.27%
Energies -4.37%
Metals 2.49%
Agriculturals -7.17%

Note:Includes trading results and commissions but does not include other fees
or interest income.

FACTORS INFLUENCING ANNUAL TRADING GAINS:

.. In the currency markets, gains were recorded, mainly throughout the fourth
quarter, from long positions in a variety of major and minor currencies
versus the U.S. dollar. A confluence of factors including concerns regarding
U.S. budget and trade deficits, a dip in consumer confidence, an outbreak of
Mad Cow Disease in the U.S., and fears of a potential terrorist attack
forced the U.S. dollar to retreat. The Fund's largest gains were achieved
during December from long positions in the euro, British pound, and
Australian and New Zealand dollars versus the U.S. dollar. Weakness in the
U.S. dollar during the first quarter also contributed to currency gains for
the year.

.. In the metals markets, gains were supplied by long futures positions in base
and precious metals. During December, profits were made on long futures
positions in base metals, such as copper, aluminum and nickel, as well as
from long futures positions in precious metals, such as gold and silver.
Copper and nickel prices rose to six and fourteen year highs respectively,
benefiting from increased demand from China and the strengthening of the
global economy. Meanwhile, gold and silver prices continued to soar as
investors sought a safe haven from the falling U.S. dollar and an increased
risk of terrorism.

.. Profits were also recorded in the global stock index markets. During June,
long positions in European stock index futures resulted in profits as prices
strengthened amid the release of positive economic data and expectations of
a U.S. interest rate cut. Long positions in Japanese stock index futures
also produced gains as prices rallied amid increased foreign demand for
Japanese equities. Long positions in Asian stock index futures resulted in
further gains during August as Asian equity prices drew strength from robust
Japanese economic data and gains in the U.S. equity markets.

CORNERSTONE FUND II
(continued)

FACTORS INFLUENCING ANNUAL TRADING LOSSES:

.. In the agricultural markets, positions in cotton futures returned losses
during August as prices moved without consistent direction. Additional
losses were recorded from positions in corn futures during August and
September as volatile prices resulted from supply data and weather related
concerns. Long positions in coffee futures during September and sugar
positions during December compounded sector losses.

.. In the energy markets, the greatest losses were incurred during October. The
Fund entered the month with short natural gas positions, but these positions
proved unprofitable as prices rallied during the first part of the month. In
response to rising natural gas prices, the Fund reversed its position from
short to long, only to see prices decline in the latter part of the month.
December also added to losses from short natural gas futures positions.
Additional losses were incurred from short crude oil positions during
September and October as prices moved higher in response to supply fears
resulting primarily from geopolitical tensions.

.. Losses were also incurred in the global interest rate markets, primarily
during the fourth quarter. Long positions in European interest rate futures
recorded losses during October as bond prices were negatively impacted by
the release of positive U.S. economic data and inflation concerns. During
December, short European interest rate futures positions suffered losses as
economic data released throughout the month indicated that inflation in the
U.S. remained under control, despite the strengthening of the U.S. economy,
and reinforcing the belief that the U.S. Federal Reserve would remain
committed to keeping U.S. rates at their current low levels.

CORNERSTONE FUND III

[CHART]

Year ended December 31, 2003
----------------------------
Currencies 7.16%
Interest Rates -2.96%
Stock Indices 4.61%
Energies -2.10%
Metals 5.42%
Agriculturals 0.62%

Note: Includes trading results and commissions but does not include other fees
or interest income.

FACTORS INFLUENCING ANNUAL TRADING GAINS:

.. Gains were produced in the currency markets, mainly throughout the fourth
quarter, from long positions in a variety of major and minor currencies
versus the U.S. dollar. A confluence of factors including concerns regarding
U.S. budget and trade deficits, a dip in consumer confidence, an outbreak of
Mad Cow Disease in the U.S., and fears of a potential terrorist attack
forced the U.S. dollar to retreat. The Fund's largest currency sector gains
were achieved during January, May and December from long positions in the
euro, British pound, Australian dollar, South African rand and New Zealand
dollar versus the U.S. dollar.

.. Additional gains were recorded in the metals markets primarily during the
fourth quarter from long futures positions in base metals, such as copper
and nickel, as well as from long futures positions in precious metals, such
as gold. During October and December, industrial metals prices rallied in
response to growing investor sentiment that the global economy was on the
path to recovery and amid increased demand, especially from China.
Meanwhile, gold soared as investors sought a safe haven from the falling
U.S. dollar and an increased risk of terrorism.

.. Gains were also achieved in the global equity markets, again primarily
during the fourth quarter of the year. During October and December, long
U.S. equity index futures positions profited amid the release of favorable
economic data and increased confidence that the global economic recovery was
materializing.

CORNERSTONE FUND III
(continued)

FACTORS INFLUENCING ANNUAL TRADING LOSSES:

.. In the global interest rate markets, losses stemmed from positions in
European and U.S. interest rate futures. Long positions suffered losses
during July as prices declined amid rising interest rates and a rally in
global equity prices prompted by renewed hope for a global economic
recovery. During September, short positions in the same markets recorded
losses as bond prices reversed higher due to renewed skepticism regarding a
global economic recovery and lower equity prices.

.. Further losses were experienced in the energy markets. During October, the
Fund entered the month with short natural gas positions, but these positions
proved unprofitable as prices rallied during the first part of the month. In
response to rising natural gas prices, the Fund reversed its position from
short to long, only to see prices decline in the latter part of the month.
December also added to losses from short natural gas futures positions.
Additional losses were incurred from short crude oil positions during
September and October as prices moved higher in response to supply fears
primarily caused by geopolitical tensions. Crude oil prices continued to
trade in a volatile fashion during November, moving in one direction for a
few days and then sharply reversing, resulting in additional losses.

CORNERSTONE FUND IV

[CHART]

Year ended December 31, 2003
----------------------------
Australian dollar 8.92%
British pound -3.18%
Euro 12.10%
Japanese yen -0.53%
Swiss franc -2.43%
Minor Currencies 3.97%

Note: Includes trading results and commissions but does not include other fees
or interest income.

Minor currencies may include, but are not limited to, the South African
rand, Thai baht, Greek drachma, Singapore dollar, Mexican peso, New
Zealand dollar and Norwegian krone.

FACTORS INFLUENCING ANNUAL TRADING GAINS:

.. The most significant gains were recorded from long positions in the euro
versus the U.S. dollar as the dollar's value weakened throughout a majority
of the year. Fears of a military conflict with Iraq, skepticism regarding
the likelihood of a U.S. economic recovery and fears of a potential
terrorist attack resulted in gains from long euro positions during January,
April and May. A confluence of factors during December including concerns
regarding U.S. budget and trade deficits, a dip in consumer confidence, an
outbreak of Mad Cow Disease in the U.S., and continued fears of a potential
terrorist attack forced the U.S. dollar to retreat further and the euro to
climb.

.. Long positions in the Australian dollar versus the U.S. dollar supplied
additional gains as the Australian currency strengthened during April, May
and June and again during November and December in response to continued
weakness in the U.S. dollar, higher interest rates in Australia relative to
those in the U.S. and higher gold prices.

.. Gains were also provided by long positions in the South African rand versus
the U.S. dollar during April and December due to significant interest rate
differentials between the two countries, economic concerns regarding U.S.
budget and trade deficits and fears of a potential terrorist attack.

.. Finally, smaller profits were experienced from long positions in the New
Zealand dollar versus the U.S. dollar primarily during November as the U.S.
dollar's value tumbled to a six-year low versus the New Zealand currency.

CORNERSTONE FUND IV
(continued)

FACTORS INFLUENCING ANNUAL TRADING LOSSES:

.. Positions in the British pound versus the U.S. dollar resulted in losses as
the value of the pound strengthened during April and May amid expectations
that the Bank of England would likely leave interest rates unchanged and the
release of lower-than-expected unemployment data from Great Britain. During
June, losses stemmed from positions in the pound versus the U.S. dollar as
the pound's value increased early in the month, amid expectations that the
Bank of England would likely leave interest rates unchanged again, and then
reversed lower, after the British Finance Minister released positive
comments regarding the U.K.'s entry prospects into the European Union.

.. Additional losses stemmed from short positions in the Swiss franc versus the
U.S. dollar as the dollar's value declined during September amid concerns
for the strength of the U.S. economy and the potential impact of a statement
by the G-7 nations supporting "more flexible exchange rates."

DEAN WITTER CORNERSTONE FUNDS

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying statements of financial condition of Dean
Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III and Dean Witter
Cornerstone Fund IV (collectively, the "Partnerships"), including the schedules
of investments, as of December 31, 2003 and 2002, and the related statements of
operations, changes in partners' capital, and cash flows for each of the three
years in the period ended December 31, 2003. These financial statements are the
responsibility of the Partnerships' management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Dean Witter Cornerstone Fund II, Dean
Witter Cornerstone Fund III and Dean Witter Cornerstone Fund IV at December 31,
2003 and 2002, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2003 in conformity
with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

New York, New York
March 2, 2004

DEAN WITTER CORNERSTONE FUND II

STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31,
---------------------
2003 2002
---------- ----------
$ $

ASSETS
Equity in futures interests trading accounts:
Cash 20,927,464 21,702,438

Net unrealized gain on open contracts (MS&Co.) 796,998 1,627,315
Net unrealized gain on open contracts (MSIL) 501,462 423,825
---------- ----------
Total net unrealized gain on open contracts 1,298,460 2,051,140
---------- ----------
Total Trading Equity 22,225,924 23,753,578
Due from Morgan Stanley DW 62,699 107,236
Interest receivable (Morgan Stanley DW) 13,072 18,316
---------- ----------
Total Assets 22,301,695 23,879,130
========== ==========

LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 141,402 236,692
Accrued management fees 64,913 69,501
Accrued administrative expenses 45,971 50,546
Accrued incentive fee -- 40,483
---------- ----------
Total Liabilities 252,286 397,222
---------- ----------
PARTNERS' CAPITAL
Limited Partners (4,325.789 and 4,613.758 Units,
respectively) 21,548,446 22,899,223
General Partner (100.567 and 117.400 Units, respectively) 500,963 582,685
---------- ----------
Total Partners' Capital 22,049,409 23,481,908
---------- ----------
Total Liabilities and Partners' Capital 22,301,695 23,879,130
========== ==========
NET ASSET VALUE PER UNIT 4,981.39 4,963.25
========== ==========

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31,
-------------------------------
2003 2002 2001
--------- --------- ----------
$ $ $

REVENUES
Trading profit (loss):
Realized 3,071,019 4,300,258 2,978,000
Net change in unrealized (752,680) 511,624 (1,728,062)
--------- --------- ----------
2,318,339 4,811,882 1,249,938
Proceeds from Litigation Settlement -- 76,613 --
--------- --------- ----------
Total Trading Results 2,318,339 4,888,495 1,249,938
Interest income (Morgan Stanley DW) 197,038 292,709 648,456
--------- --------- ----------
Total 2,515,377 5,181,204 1,898,394
--------- --------- ----------
EXPENSES
Brokerage commissions (Morgan Stanley DW) 1,373,338 1,196,563 1,279,146
Management fees 843,500 798,116 816,137
Transaction fees and costs 106,566 133,591 115,808
Common administrative expenses 48,477 59,809 46,155
Incentive fees 9,461 41,877 --
--------- --------- ----------
Total 2,381,342 2,229,956 2,257,246
--------- --------- ----------
NET INCOME (LOSS) 134,035 2,951,248 (358,852)
========= ========= ==========
NET INCOME (LOSS) ALLOCATION:
Limited Partners 125,757 2,880,472 (351,955)
General Partner 8,278 70,776 (6,897)
NET INCOME (LOSS) PER UNIT:
Limited Partners 18.14 602.86 (58.74)
General Partner 18.14 602.86 (58.74)

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

DEAN WITTER CORNERSTONE FUND III

STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31,
---------------------
2003 2002
---------- ----------
$ $

ASSETS
Equity in futures interests trading accounts:
Cash 25,869,355 26,372,589

Net unrealized gain on open contracts (MS&Co.) 1,572,599 1,996,397
Net unrealized gain (loss) on open contracts (MSIL) 889,391 (443,790)
---------- ----------
Total net unrealized gain on open contracts 2,461,990 1,552,607
---------- ----------
Total Trading Equity 28,331,345 27,925,196
Interest receivable (Morgan Stanley DW) 16,293 21,594
Due from Morgan Stanley DW -- 264,529
---------- ----------
Total Assets 28,347,638 28,211,319
========== ==========

LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES
Accrued administrative expenses 149,518 145,017
Redemptions payable 119,105 144,217
Accrued management fees 82,245 81,861
---------- ----------
Total Liabilities 350,868 371,095
---------- ----------
PARTNERS' CAPITAL
Limited Partners (7,059.053 and 7,608.072 Units,
respectively) 27,596,004 27,329,760
General Partner (102.516 and 142.103 Units,
respectively) 400,766 510,464
---------- ----------
Total Partners' Capital 27,996,770 27,840,224
---------- ----------
Total Liabilities and Partners' Capital 28,347,638 28,211,319
========== ==========
NET ASSET VALUE PER UNIT 3,909.31 3,592.21
========== ==========

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31,
------------------------------
2003 2002 2001
--------- --------- ----------
$ $ $

REVENUES
Trading profit (loss):
Realized 3,641,193 2,266,403 5,761,442
Net change in unrealized 909,383 1,480,039 (3,780,263)
--------- --------- ----------
4,550,576 3,746,442 1,981,179
Proceeds from Litigation Settlement -- 2,842,492 --
--------- --------- ----------
Total Trading Results 4,550,576 6,588,934 1,981,179
Interest income (Morgan Stanley DW) 233,160 337,401 773,760
--------- --------- ----------
Total 4,783,736 6,926,335 2,754,939
--------- --------- ----------
EXPENSES
Brokerage commissions (Morgan Stanley DW) 1,257,269 1,386,685 1,453,337
Management fees 998,731 903,361 978,766
Common administrative expenses 78,892 98,459 76,385
Transaction fees and costs 68,929 177,181 134,490
--------- --------- ----------
Total 2,403,821 2,565,686 2,642,978
--------- --------- ----------
NET INCOME 2,379,915 4,360,649 111,961
========= ========= ==========
NET INCOME ALLOCATION:
Limited Partners 2,339,613 4,283,008 110,780
General Partner 40,302 77,641 1,181
NET INCOME PER UNIT:
Limited Partners 317.10 546.37 8.31
General Partner 317.10 546.37 8.31

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

DEAN WITTER CORNERSTONE FUND IV

STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31,
-----------------------
2003 2002
----------- -----------
$ $

ASSETS
Equity in futures interests trading accounts:
Cash 110,416,089 103,560,309

Net unrealized gain on open contracts (MS&Co.) 3,046,277 6,834,888
----------- -----------
Total Trading Equity 113,462,366 110,395,197
Interest receivable (Morgan Stanley DW) 61,521 80,149
----------- -----------
Total Assets 113,523,887 110,475,346
=========== ===========

LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 567,382 642,547
Accrued management fees 330,595 321,727
Accrued administrative expenses 177,019 169,156
Accrued incentive fees 6,682 1,500,021
----------- -----------
Total Liabilities 1,081,678 2,633,451
----------- -----------
PARTNERS' CAPITAL
Limited Partners (13,997.351 and 15,202.402 Units,
respectively) 111,191,238 106,345,673
General Partner (157.479 and 213.889 Units,
respectively) 1,250,971 1,496,222
----------- -----------
Total Partners' Capital 112,442,209 107,841,895
----------- -----------
Total Liabilities and Partners' Capital 113,523,887 110,475,346
=========== ===========
NET ASSET VALUE PER UNIT 7,943.73 6,995.32
=========== ===========

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
2003 2002 2001
---------- ---------- ----------
$ $ $

REVENUES
Trading profit (loss):
Realized 26,693,128 20,928,554 16,761,382
Net change in unrealized (3,788,611) (948,478) 3,787,359
---------- ---------- ----------
Total Trading Results 22,904,517 19,980,076 20,548,741
Interest income (Morgan Stanley DW) 858,078 1,290,361 2,669,364
---------- ---------- ----------
Total 23,762,595 21,270,437 23,218,105
---------- ---------- ----------
EXPENSES
Management fees 3,904,764 3,640,869 3,482,595
Brokerage commissions (Morgan Stanley DW) 3,456,636 3,568,609 2,563,321
Incentive fees 2,307,973 1,886,229 2,152,705
Common administrative expenses 156,630 195,738 151,459
---------- ---------- ----------
Total 9,826,003 9,291,445 8,350,080
---------- ---------- ----------
NET INCOME 13,936,592 11,978,992 14,868,025
========== ========== ==========
NET INCOME ALLOCATION:
Limited Partners 13,766,843 11,815,072 14,685,095
General Partner 169,749 163,920 182,930

NET INCOME PER UNIT:
Limited Partners 948.41 766.38 855.25
General Partner 948.41 766.38 855.25

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

DEAN WITTER CORNERSTONE FUND II

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
----------- ---------- -------- ----------
$ $ $

Partners' Capital,
December 31, 2000 5,586.548 24,168,885 518,806 24,687,691
Net loss -- (351,955) (6,897) (358,852)
Redemptions (381.107) (1,631,103) -- (1,631,103)
--------- ---------- -------- ----------
Partners' Capital, December 31,
2001 5,205.441 22,185,827 511,909 22,697,736
Net income -- 2,880,472 70,776 2,951,248
Redemptions (474.283) (2,167,076) -- (2,167,076)
--------- ---------- -------- ----------
Partners' Capital, December 31,
2002 4,731.158 22,899,223 582,685 23,481,908
Net income -- 125,757 8,278 134,035
Redemptions (304.802) (1,476,534) (90,000) (1,566,534)
--------- ---------- -------- ----------
Partners' Capital, December 31,
2003 4,426.356 21,548,446 500,963 22,049,409
========= ========== ======== ==========

DEAN WITTER CORNERSTONE FUND III

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
----------- ---------- -------- ----------
$ $ $
Partners' Capital, December 31,
2000 9,346.774 27,959,423 431,642 28,391,065
Net income -- 110,780 1,181 111,961
Redemptions (713.990) (2,208,965) -- (2,208,965)
--------- ---------- -------- ----------
Partners' Capital, December 31,
2001 8,632.784 25,861,238 432,823 26,294,061
Net income -- 4,283,008 77,641 4,360,649
Redemptions (882.609) (2,814,486) -- (2,814,486)
--------- ---------- -------- ----------
Partners' Capital, December 31,
2002 7,750.175 27,329,760 510,464 27,840,224
Net income -- 2,339,613 40,302 2,379,915
Redemptions (588.606) (2,073,369) (150,000) (2,223,369)
--------- ---------- -------- ----------
Partners' Capital, December 31,
2003 7,161.569 27,596,004 400,766 27,996,770
========= ========== ======== ==========

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

DEAN WITTER CORNERSTONE FUND IV

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
----------- ----------- --------- -----------
$ $ $

Partners' Capital,
December 31, 2000 18,538.214 98,469,183 1,149,372 99,618,555
Net income -- 14,685,095 182,930 14,868,025
Redemptions (1,422.938) (7,876,555) -- (7,876,555)
---------- ----------- --------- -----------
Partners' Capital,
December 31, 2001 17,115.276 105,277,723 1,332,302 106,610,025
Net income -- 11,815,072 163,920 11,978,992
Redemptions (1,698.985) (10,747,122) -- (10,747,122)
---------- ----------- --------- -----------
Partners' Capital,
December 31, 2002 15,416.291 106,345,673 1,496,222 107,841,895
Net income -- 13,766,843 169,749 13,936,592
Redemptions (1,261.461) (8,921,278) (415,000) (9,336,278)
---------- ----------- --------- -----------
Partners' Capital,
December 31, 2003 14,154.830 111,191,238 1,250,971 112,442,209
========== =========== ========= ===========

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

DEAN WITTER CORNERSTONE FUND II

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
2003 2002 2001
---------- ---------- ----------
$ $ $

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 134,035 2,951,248 (358,852)
Noncash item included in net income (loss):
Net change in unrealized 752,680 (511,624) 1,728,062
(Increase) decrease in operating assets:
Due from Morgan Stanley DW 44,537 (53,316) (32,602)
Interest receivable (Morgan Stanley DW) 5,244 7,246 67,028
Increase (decrease) in operating
liabilities:
Accrued management fees (4,588) 2,750 (6,524)
Accrued administrative expenses (4,575) 1,930 21,771
Accrued incentive fee (40,483) 40,483 --
---------- ---------- ----------
Net cash provided by operating activities 886,850 2,438,717 1,418,883
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable (95,290) 115,021 (240,275)
Redemptions of Units (1,566,534) (2,167,076) (1,631,103)
---------- ---------- ----------
Net cash used for financing activities (1,661,824) (2,052,055) (1,871,378)
---------- ---------- ----------
Net increase (decrease) in cash (774,974) 386,662 (452,495)

Balance at beginning of period 21,702,438 21,315,776 21,768,271
---------- ---------- ----------

Balance at end of period 20,927,464 21,702,438 21,315,776
========== ========== ==========

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

DEAN WITTER CORNERSTONE FUND III

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
2003 2002 2001
---------- ---------- ----------
$ $ $

CASH FLOWS FROM OPERATING ACTIVITIES
Net income 2,379,915 4,360,649 111,961
Noncash item included in net income:
Net change in unrealized (909,383) (1,480,039) 3,780,263
(Increase) decrease in operating assets:
Interest receivable (Morgan Stanley DW) 5,301 8,900 75,489
Due from Morgan Stanley DW 264,529 (130,959) (94,885)
Net option premiums -- (23,122) (9,300)
Increase (decrease) in operating
liabilities:
Accrued administrative expenses 4,501 2,721 36,117
Accrued management fees 384 4,445 (6,471)
---------- ---------- ----------
Net cash provided by operating activities 1,745,247 2,742,595 3,893,174
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in redemptions payable (25,112) (27,034) (115,008)
Redemptions of Units (2,223,369) (2,814,486) (2,208,965)
---------- ---------- ----------
Net cash used for financing activities (2,248,481) (2,841,520) (2,323,973)
---------- ---------- ----------

Net increase (decrease) in cash (503,234) (98,925) 1,569,201

Balance at beginning of period 26,372,589 26,471,514 24,902,313
---------- ---------- ----------
Balance at end of period 25,869,355 26,372,589 26,471,514
========== ========== ==========

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

DEAN WITTER CORNERSTONE FUND IV

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
2003 2002 2001
----------- ----------- -----------
$ $ $

CASH FLOWS FROM OPERATING ACTIVITIES
Net income 13,936,592 11,978,992 14,868,025
Noncash item included in net income:
Net change in unrealized 3,788,611 948,478 (3,787,359)
Decrease in operating assets:
Interest receivable (Morgan Stanley DW) 18,628 28,632 266,959
Increase (decrease) in operating
liabilities:
Accrued management fees 8,868 4,355 18,696
Accrued administrative expenses 7,863 5,357 71,662
Accrued incentive fees (1,493,339) 148,204 509,200
----------- ----------- -----------
Net cash provided by operating
activities 16,267,223 13,114,018 11,947,183
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions
payable (75,165) 108,571 (1,109,566)
Redemptions of Units (9,336,278) (10,747,122) (7,876,555)
----------- ----------- -----------
Net cash used for financing activities (9,411,443) (10,638,551) (8,986,121)
----------- ----------- -----------

Net increase in cash 6,855,780 2,475,467 2,961,062

Balance at beginning of period 103,560,309 101,084,842 98,123,780
----------- ----------- -----------
Balance at end of period 110,416,089 103,560,309 101,084,842
=========== =========== ===========

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

DEAN WITTER CORNERSTONE II

SCHEDULES OF INVESTMENTS

DECEMBER 31, 2003 AND 2002

LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS) OF NET ASSETS
- ------------------------------ --------------- ------------- ---------------- -------------
2003 PARTNERSHIP NET ASSETS: $22,049,409 $ % $ %

Foreign currency 605,088 2.75 (17,470) (0.08)
Commodity 550,044 2.49 (80,715) (0.37)
Interest rate 40,604 0.18 (26,475) (0.12)
Equity 124,756 0.57 (141,055) (0.64)
--------- ----- -------- -----
Grand Total: 1,320,492 5.99 (265,715) (1.21)
========= ===== ======== =====
Unrealized Currency Gain

Total Net Unrealized Gain per Statement of Financial
Condition

2002 PARTNERSHIP NET ASSETS: $23,481,908
Foreign currency 1,015,521 4.32 285 --
Commodity 450,244 1.92 158,752 0.68
Interest rate 344,456 1.47 (166,859) (0.71)
Equity (97,829) (0.42) 80,749 0.34
--------- ----- -------- -----
Grand Total: 1,712,392 7.29 72,927 0.31
========= ===== ======== =====
Unrealized Currency Gain

Total Net Unrealized Gain per Statement of Financial
Condition

FUTURES AND FORWARD CONTRACTS: NET UNREALIZED GAIN/(LOSS) # OF CONTRACTS/NOTIONAL AMOUNTS
- ------------------------------ -------------------------- -------------------------------
2003 PARTNERSHIP NET ASSETS: $22,049,409 $

Foreign currency 587,618 1,598,518,831
Commodity 469,329 713
Interest rate 14,129 378
Equity (16,299) 147
---------
Grand Total: 1,054,777

Unrealized Currency Gain 243,683
---------
Total Net Unrealized Gain per Statement of Financial
Condition 1,298,460
=========
2002 PARTNERSHIP NET ASSETS: $23,481,908
Foreign currency 1,015,806 504,828,717
Commodity 608,996 668
Interest rate 177,597 437
Equity (17,080) 122
---------
Grand Total: 1,785,319

Unrealized Currency Gain 265,821
---------
Total Net Unrealized Gain per Statement of Financial
Condition 2,051,140
=========

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

DEAN WITTER CORNERSTONE III

SCHEDULES OF INVESTMENTS

DECEMBER 31, 2003 AND 2002

LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE
FUTURES AND FORWARD CONTACTS: GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS) OF NET ASSETS
- ----------------------------- --------------- ------------- ---------------- -------------
2003 PARTNERSHIP NET ASSETS: $27,996,770 $ % $ %

Foreign currency 557,716 2.00 (67,418) (0.24)
Commodity 1,395,548 4.98 (1,310) --
Interest rate 9,410 0.03 (11,520) (0.04)
Equity 625,429 2.23 -- --
--------- ----- ---------- -----
Grand Total: 2,588,103 9.24 (80,248) (0.28)
========= ===== ========== =====
Unrealized Currency Loss

Total Net Unrealized Gain per Statement of Financial Condition

2002 PARTNERSHIP NET ASSETS: $27,840,224
Foreign currency 1,927,510 6.92* (1,063,204) (3.82)
Interest rate 1,071,951 3.85 (8,694) (0.03)
Commodity (305,430) (1.09) (4,875) (0.02)
Equity -- -- 27,282 0.10
--------- ----- ---------- -----
Grand Total: 2,694,031 9.68 (1,049,491) (3.77)
========= ===== ========== =====
Unrealized Currency Loss

Total Net Unrealized Gain per Statement of Financial Condition

NET UNREALIZED # OF CONTRACTS/NOTIONAL
FUTURES AND FORWARD CONTACTS: GAIN/(LOSS) AMOUNTS
- ----------------------------- -------------- -----------------------
2003 PARTNERSHIP NET ASSETS: $27,996,770 $

Foreign currency 490,298 655,430,138
Commodity 1,394,238 695
Interest rate (2,110) 285
Equity 625,429 220
---------
Grand Total: 2,507,855

Unrealized Currency Loss (45,865)
---------
Total Net Unrealized Gain per Statement of Financial Condition 2,461,990
=========
2002 PARTNERSHIP NET ASSETS: $27,840,224
Foreign currency 864,306 2,056,042,500
Interest rate 1,063,257 626
Commodity (310,305) 431
Equity 27,282 16
---------
Grand Total: 1,644,540

Unrealized Currency Loss (91,933)
---------
Total Net Unrealized Gain per Statement of Financial Condition 1,552,607
=========

*No single contract's value exceeds 5% of Net Assets.

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

DEAN WITTER CORNERSTONE IV

SCHEDULES OF INVESTMENTS

DECEMBER 31, 2003 AND 2002

LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) NET ASSETS GAIN/(LOSS) NET ASSETS
- ------------------------------ --------------- ------------- ---------------- -------------

2003 PARTNERSHIP NET ASSETS: $112,442,209 $ % $ %

Foreign currency 3,142,423 2.80 (96,146) (0.08)
---------- ----- ---------- -----
Grand Total: 3,142,423 2.80 (96,146) (0.08)
========== ===== ========== =====
Unrealized Currency Gain/(Loss)

Total Net Unrealized Gain per Statement of Financial Condition

2002 PARTNERSHIP NET ASSETS: $107,841,895
Foreign currency:
Other 5,698,117 5.28* (4,784,058) (4.43)
Euro/US dollar Mar. 03 5,843,488 5.42 -- --
---------- ----- ---------- -----
Grand Total: 11,541,605 10.70 (4,784,058) (4.43)
========== ===== ========== =====
Unrealized Currency Gain

Total Net Unrealized Gain per Statement of Financial Condition

FUTURES AND FORWARD CONTRACTS: NET UNREALIZED GAIN/(LOSS) NOTIONAL AMOUNTS
- ------------------------------ -------------------------- ----------------

2003 PARTNERSHIP NET ASSETS: $112,442,209 $

Foreign currency 3,046,277 6,364,827,569
---------
Grand Total: 3,046,277

Unrealized Currency Gain/(Loss) --
---------
Total Net Unrealized Gain per Statement of Financial Condition 3,046,277
=========
2002 PARTNERSHIP NET ASSETS: $107,841,895
Foreign currency:
Other 914,059 11,897,260,598
Euro/US dollar Mar. 03 5,843,488 172,375,000
---------
Grand Total: 6,757,547

Unrealized Currency Gain 77,341
---------
Total Net Unrealized Gain per Statement of Financial Condition 6,834,888
=========

* No single contract's value exceeds 5% of Net Assets.

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

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION. Dean Witter Cornerstone Fund II ("Cornerstone II"), Dean Witter
Cornerstone Fund III ("Cornerstone III"), and Dean Witter Cornerstone Fund IV
("Cornerstone IV") (individually, a "Partnership", or collectively, the
"Partnerships"), are limited partnerships organized to engage in the
speculative trading of futures contracts, options on futures contracts, and
forward contracts on foreign currencies and other commodity interests
(collectively, "futures interests").
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 for Cornerstone II and
Cornerstone III are Morgan Stanley & Co. Incorporated ("MS&Co.") and Morgan
Stanley & Co. International Limited ("MSIL"). Cornerstone IV's sole clearing
commodity broker is MS&Co. Demeter, Morgan Stanley DW, MS&Co. and MSIL are
wholly-owned subsidiaries of Morgan Stanley.
Effective June 20, 2002, Morgan Stanley Dean Witter & Co. changed its name to
Morgan Stanley.
Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by Demeter and the limited partners
based upon their proportional ownership interests.
Effective December 31, 2002, Welton Investment Corporation was terminated as
a trading manager of Cornerstone III and was replaced by Graham Capital
Management, L.P. on January 1, 2003.

USE OF ESTIMATES. The financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make estimates and assumptions that affect the reported
amounts in the financial statements and related disclosures. Management
believes that the estimates utilized in the preparation of the financial
statements are prudent and reasonable. Actual results could differ from those
estimates.

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)

REVENUE RECOGNITION. Futures interests are open commitments until settlement
date. They are valued at market on a daily basis and the resulting net change
in unrealized gains and losses is reflected in the change in unrealized profit
(loss) on open contracts from one period to the next in the statements of
operations. Monthly, Morgan Stanley DW pays each Partnership interest income
based upon 80% of its average daily Net Assets at a rate equal to the average
yield on 13-week U.S. Treasury bills. For purposes of such interest payments to
Cornerstone IV, Net Assets do not include monies owed to the Partnership on
futures interests.

NET INCOME (LOSS) PER UNIT. Net income (loss) per unit of limited partnership
interest ("Unit(s)") is computed using the weighted average number of Units
outstanding during the period.

CONDENSED SCHEDULES OF INVESTMENTS. In March 2001, the American Institute of
Certified Public Accountants' Accounting Standards Executive Committee ("AICPA
Executive Committee") issued Statement of Position 01-1 ("SOP 01-1") "Amendment
to the Scope of Statement of Position 95-2, Financial Reporting By Nonpublic
Investment Partnerships, to Include Commodity Pools". SOP 01-1 required
commodity pools to include a condensed schedule of investments identifying
those investments which constitute more than 5% of Net Assets, taking long and
short positions into account separately, beginning in fiscal years ending after
December 15, 2001.

In December 2003, the AICPA Executive Committee issued Statement of Position
03-4 ("SOP 03-4") "Reporting Financial Highlights and Schedule of Investments
by Nonregistered Investment Partnerships: An Amendment to the Audit and
Accounting Guide Audits Of Investment Companies and AICPA Statement of Position
95-2, Financial Reporting By Nonpublic Investment Partnerships". SOP 03-4
requires commodity pools to disclose on the Schedule of Investments the number
of contracts, the contracts' expiration dates and the cumulative unrealized
gains/(losses) on open futures contracts, when the cumulative

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)

unrealized gains/(losses) on an open futures contract exceeds 5% of Net Assets,
taking long and short positions into account separately. SOP 03-4 also requires
ratios for expenses and net income/(losses) based on average net assets to be
disclosed in Financial Highlights. SOP 03-4 is effective for fiscal years
ending after December 15, 2003.

EQUITY IN FUTURES INTERESTS TRADING ACCOUNTS. The Partnerships' asset "Equity
in futures interests trading accounts", reflected on the statements of
financial condition, consists of (A) cash on deposit with Morgan Stanley DW,
MS&Co. and MSIL for Cornerstone II and Cornerstone III, and Morgan Stanley DW
and MS&Co. for Cornerstone IV, to be used as margin for trading; (B) net
unrealized gains or losses on open contracts, which are valued at market and
calculated as the difference between original contract value and market value;
and (C) net option premiums, which represent the net of all monies paid and/or
received for such option premiums.

The Partnerships, in their normal course of business, enter into various
contracts with MS&Co. and/or MSIL acting as their commodity brokers. Pursuant
to brokerage agreements with MS&Co. and/or MSIL, to the extent that such
trading results in unrealized gains or losses, these amounts are offset and
reported on a net basis on the Partnerships' statements of financial condition.

The Partnerships have offset the fair value amounts recognized for forward
contracts executed with the same counterparty as allowable under the terms of
their master netting agreements with MS&Co., the sole counterparty on such
contracts. The Partnerships have consistently applied their right to offset.

BROKERAGE COMMISSIONS AND RELATED TRANSACTION FEES AND COSTS. Brokerage
commissions and related transaction fees and costs for each Partnership are
accrued on a half-turn basis at 80% and 100%, respectively, of the rates Morgan
Stanley DW charges parties that are not clearinghouse members. Brokerage
commissions and transaction fees and costs combined for each Partnership are
capped at 13/20 of 1% per

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)

month (a 7.8% maximum annual rate) of the adjusted Net Assets allocated to each
trading program employed by the Partnerships' trading managers.

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

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

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

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

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

LITIGATION SETTLEMENT. On February 27, 2002, Cornerstone II and Cornerstone
III received notification of a preliminary entitlement to payment from the
Sumitomo Copper Litigation Settlement Administrator and received payment of
these settlement awards in the amount of $76,613 and $2,842,492, respectively,
on August 30, 2002.

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)

- --------------------------------------------------------------------------------
2. RELATED PARTY TRANSACTIONS
Each Partnership pays brokerage commissions to Morgan Stanley DW as described
in Note 1. Cornerstone II and Cornerstone III's cash is on deposit with Morgan
Stanley DW, MS&Co. and MSIL, and Cornerstone IV's cash is on deposit with
Morgan Stanley DW and MS&Co., in futures interests trading accounts to meet
margin requirements as needed. Morgan Stanley DW pays interest on these funds
as described in Note 1.

- --------------------------------------------------------------------------------
3. TRADING MANAGERS
Demeter, on behalf of each Partnership, retains certain commodity trading
managers to make all trading decisions for the Partnerships. The trading
managers for each Partnership at December 31, 2003 were as follows:

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

Dean Witter Cornerstone Fund III
Graham Capital Management, L.P.
Sunrise Capital Management, Inc.

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

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

MANAGEMENT FEE. Each Partnership's management fee is accrued at the rate of
1/12 of 3.5% per month (a 3.5% annual rate) of the Net Assets under management
by each trading manager at each month end.

INCENTIVE FEE. Each Partnership pays an annual incentive fee equal to 15% of
the new appreciation in Net Assets, as defined in the Limited Partnership
Agreements, as of the end of each annual incentive period ending December 31,
except for Cornerstone

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)

IV, which pays incentive fees at the end of each annual incentive period ending
May 31. New appreciation represents the amount by which Net Assets are
increased by profits from futures, forwards and options trading that exceed
losses after brokerage commissions, management fees, transaction fees and costs
and common administrative expenses are deducted. Such incentive fee is accrued
in each month in which new appreciation occurs. In those months in which new
appreciation is negative, previous accruals, if any, during the incentive
period are reduced. In those instances in which a Limited Partner redeems an
investment, the incentive fee (if earned through a redemption date) is paid on
that redemption to the trading manager in the month of such redemption.

- --------------------------------------------------------------------------------
4. FINANCIAL INSTRUMENTS
The Partnerships trade 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.

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 Partnerships' contracts are accounted for on a trade-date basis and
market to market on a daily basis. Each 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;

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)

(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.

The net unrealized gains (losses) on open contracts at December 31, reported
as a component of "Equity in futures interests trading accounts" on the
statements of financial condition, and their longest contract maturities are as
follows:

CORNERSTONE II

NET UNREALIZED GAINS
ON OPEN CONTRACTS LONGEST MATURITIES
----------------------------- ------------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- --------- ------------- ----------
$ $ $

2003 748,037 550,423 1,298,460 December 2004 March 2004
2002 1,077,589 973,551 2,051,140 December 2003 March 2003

CORNERSTONE III

NET UNREALIZED GAINS
ON OPEN CONTRACTS LONGEST MATURITIES
----------------------------- ------------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- --------- ------------- ----------
$ $ $

2003 2,061,496 400,494 2,461,990 June 2005 March 2004
2002 688,301 864,306 1,552,607 December 2003 March 2003

CORNERSTONE IV

NET UNREALIZED GAINS
ON OPEN CONTRACTS LONGEST MATURITIES
----------------------------- --------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- --------- --------- ----------
$ $ $

2003 -- 3,046,277 3,046,277 -- March 2004
2002 -- 6,834,888 6,834,888 -- March 2003

The Partnerships have credit risk associated with counterparty
nonperformance. The credit risk asso-

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)

ciated with the instruments in which the Partnerships are involved is limited
to the amounts reflected in the Partnerships' statements of financial condition.

The Partnerships also have credit risk because Morgan Stanley DW, MS&Co.,
and/or MSIL act as the futures commission merchants or the counterparties, with
respect to most of the Partnerships' 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/or
MSIL, each as a futures commission merchant for each Partnership's
exchange-traded futures and futures-styled options contracts, are required,
pursuant to regulations of the Commodity Futures Trading Commission, to
segregate from their own assets, and for the sole benefit of their commodity
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 at December 31, 2003 and 2002
respectively, $21,675,501 and $22,780,027 for Cornerstone II and $27,930,851
and $27,060,890 for Cornerstone III. With respect to each 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 (losses) 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 Partnerships are at risk to
the ability of MS&Co., the sole counterparty on all such contracts, to perform.
Each Partnership has a netting agreement with MS&Co. These agreements, which
seek to reduce both the Partnerships' and MS&Co.'s exposure on
off-exchange-traded forward currency contracts, should materially decrease the
Partnerships' credit risk in the event of MS&Co.'s bankruptcy or insolvency.

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)

- --------------------------------------------------------------------------------
5. FINANCIAL HIGHLIGHTS

CORNERSTONE II

PER UNIT:
---------

NET ASSET VALUE, JANUARY 1, 2003: $4,963.25
---------
NET OPERATING RESULTS:
Realized Profit 659.01
Unrealized Loss (164.24)
Interest Income 43.00
Expenses (519.63)
---------
Net Income 18.14
---------

NET ASSET VALUE, DECEMBER 31, 2003: $4,981.39
=========

Expense Ratio 10.0%
Net Income Ratio 0.6%

TOTAL RETURN 2003 0.4%

INCEPTION-TO-DATE RETURN 410.9%

COMPOUND ANNUALIZED RETURN 9.0%

CORNERSTONE III

PER UNIT:
---------

NET ASSET VALUE, JANUARY 1, 2003: $3,592.21
---------
NET OPERATING RESULTS:
Realized Profit 486.69
Unrealized Profit 122.28
Interest Income 31.35
Expenses (323.22)
---------
Net Income 317.10
---------

NET ASSET VALUE, DECEMBER 31, 2003: $3,909.31
=========

Expense Ratio 8.5%
Net Income Ratio 8.4%

TOTAL RETURN 2003 8.8%

INCEPTION-TO-DATE RETURN 301.0%

COMPOUND ANNUALIZED RETURN 7.6%

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(concluded)

CORNERSTONE IV

PER UNIT:
---------

NET ASSET VALUE, JANUARY 1, 2003: $6,995.32
---------
NET OPERATING RESULTS:
Realized Profit 1,813.28
Unrealized Loss (256.86)
Interest Income 58.18
Expenses (666.19)
---------
Net Income 948.41
---------

NET ASSET VALUE, DECEMBER 31, 2003: $7,943.73
=========

Expense Ratio 9.0%
Net Income Ratio 12.8%

TOTAL RETURN 2003 13.6%

INCEPTION-TO-DATE RETURN 714.7%

COMPOUND ANNUALIZED RETURN 13.4%

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