WITTER DEAN CORNERSTONE FUND II - 10-Q Quarterly Report

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

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2004 or

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

Commission File No. 0-13298

DEAN WITTER CORNERSTONE FUND II

(Exact name of registrant as specified in its charter)

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

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

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

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

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

Yes X No

Indicate by check-mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

DEAN WITTER CORNERSTONE FUND II

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2004

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF OPERATIONS
(Unaudited)

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF OPERATIONS
(Unaudited)

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 30, 2004 and 2003
(Unaudited)

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

DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)

The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Dean Witter Cornerstone Fund II (the "Partnership"). The
financial statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 2003 Annual Report
on Form 10-K.

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

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

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

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

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

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

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

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

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

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

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

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

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

Net Unrealized Gains (Losses)
On Open Contracts Longest Maturities

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

Jun. 30, 2004 (517,173) (491,441) (1,008,614) Dec. 2005 Sep. 2004
Dec. 31, 2003 748,037 550,423 1,298,460 Dec. 2004 Mar. 2004

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

The Partnership also has credit risk because Morgan Stanley DW, MS
& Co. and MSIL act as the futures commission merchants or the
counterparties, with respect to most of the Partnership's assets.
Exchange-traded futures, forward, and futures-styled options
contracts are marked to market on a daily basis, with variations
in value settled on a daily basis. Morgan Stanley DW, MS & Co.,
and MSIL, each as a futures commission merchant for the
Partnership's exchange-traded futures, forward, and futures-styled

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

options contracts, are required, pursuant to regulations of the
Commodity Futures Trading Commission ("CFTC"), to segregate from

their own assets, and for the sole benefit of their commodity
customers, all funds held by them with respect to exchange-traded
futures, forward, and futures-styled options contracts, including
an amount equal to the net unrealized gains (losses) on all open
futures, forward and futures-styled options contracts, which
funds, in the aggregate, totaled $17,729,335 and $21,675,501 at
June 30, 2004 and December 31, 2003, respectively. With respect to
the Partnership's off-exchange-traded forward currency contracts,
there are no daily exchange-required settlements of variations in
value nor is there any requirement that an amount equal to the net
unrealized gains (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 Partnership is at
risk to the ability of MS & Co., the sole counterparty on all such
contracts, to perform. The Partnership has a netting agreement
with MS & Co. This agreement, which seeks to reduce both the
Partnership's and MS & Co.'s exposure on off-exchange-traded
forward currency contracts, should materially decrease the
Partnership's credit risk in the event of MS & Co.'s bankruptcy or
insolvency.

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

Liquidity. The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker and MS & Co. and MSIL as
clearing brokers in separate futures, forwards, and options
trading accounts established for each Trading Manager, which
assets are used as margin to engage in trading 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 CFTC 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. For the periods covered by
this report, 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 of
limited partnership interest ("Unit(s)") in the future will affect
the amount of funds available for investment in futures, forwards,
and options in subsequent periods. It is not possible to estimate
the amount, and therefore the impact, of future redemptions of
Units.

There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership's capital resource arrangements at the present
time.

Off-Balance Sheet Arrangements and Contractual Obligations. 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 each Trading Manager's trading programs to take
advantage of price movements in the futures, forwards, and options
markets. The following presents a summary of the Partnership's
operations for the three and six month periods ended June 30, 2004
and 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 during the period in question. Past performance is
no guarantee of future results.

The Partnership's results of operations set forth in the financial
statements on pages 2 through 11 of this report were prepared in
accordance with accounting principles generally accepted in the
United States of America, which require the use of certain
accounting policies that affect the amounts reported in these
financial statements, including the following: The contracts the
Partnership trades are accounted for on a trade-date basis and
marked to market on a daily basis. The difference between their
cost and market value is recorded on the Statements of Operations
as "Net change in unrealized trading profit/loss" for open
(unrealized) contracts, and recorded as "Realized trading
profit/loss" when open positions are closed out, and the sum of
these amounts constitutes the Partnership's trading results. The
market value of a future 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.

For the Quarter and Six Months Ended June 30, 2004
The Partnership recorded losses net of interest income totaling
$3,578,242 and expenses totaling $480,091, resulting in a net
loss of $4,058,333 for the quarter ended June 30, 2004. The
Partnership's net asset value per Unit decreased from $4,977.27
at March 31, 2004 to $4,033.75 at June 30, 2004.

The most significant trading losses of approximately 11.1% were
incurred in the currency markets from positions in the Japanese
yen, Singapore dollar, and European currencies versus the U.S.
dollar. Speculation for increases in U.S. interest rates and the
release of mixed U.S. economic data caused erratic trading
patterns in the value of the U.S. dollar. Better than anticipated
improvements in Japanese economic data encouraged speculation for
an increase in Japanese interest rates and caused choppy trading
in the yen also. Finally, positions in the South African rand
versus the U.S. dollar also contributed losses as long positions
were hurt during April as the dollar moved higher in response to
rising interest rate outlooks. During May, short rand positions
suffered losses as the rand's value benefited from strengthening
gold prices. Losses of approximately 4.0% were recorded in the
global interest rates markets, primarily during June, from
positions in Japanese interest rate futures. Long positions
experienced losses as prices first decreased amid anticipation
that the Bank of Japan would raise interest rates during June.
Later in the month, additional losses were recorded from newly
established short positions as prices rose following the
Japanese Central Bank's decision to leave their interest rate
policy unchanged. Long European and Australian interest rate
futures positions also incurred losses as fixed income prices
tumbled following the release of stronger than expected U.S. jobs
data during early April. Further Partnership losses of
approximately 3.9% were experienced in the global stock indices.
During May, long positions in Japanese and European equity index
futures resulted in losses as equity prices declined in response
to geopolitical concerns and expanding energy prices. Newly
established short positions in these markets, as well as in U.S.
stock indices, experienced additional losses as prices rebounded
later in May. During June, losses from short positions in
Japanese stock indices were incurred as prices strengthened on
renewed investor sentiment regarding the Japanese economic
recovery. Short positions in European stock indices followed as
prices benefited from the release of positive economic data. In
the metals markets, losses of approximately 3.2% were experienced
from positions in both precious and base metals. During April,
prices weakened from a stronger U.S. dollar and a decline in
Asian demand. During May, short futures positions in copper,
nickel and gold accounted for the majority of sector losses.

The Partnership recorded losses net of interest income totaling
$3,043,753 and expenses totaling $1,018,727, resulting in a net
loss of $4,062,480 for the six months ended June 30, 2004. The
Partnership's net asset value per Unit decreased from
$4,981.39 at December 31, 2003 to $4,033.75 at June 30, 2004.

The most significant trading losses of approximately 19.8% were
incurred in the currency markets from short positions in the
Japanese yen, South African rand, and euro versus the U. S.
dollar. Short Japanese yen positions experienced losses during
March as the yen reversed higher due to speculation that the Bank
of Japan was relaxing its efforts to weaken the yen. Short euro
positions suffered losses also during March as expectations for
an interest rate reduction by the European Central Bank
dissipated. During February, short positions in the South
African rand produced losses as the value of the rand reversed
upwards following the release of positive South African economic
data. During April, May, and June, losses stemmed from positions
in the Japanese yen, Singapore dollar, and European currencies
versus the U.S. dollar. Speculation for increases in U.S.
interest rates and the release of mixed U.S. economic data caused
erratic trading patterns in the value of the dollar. Additional
losses of approximately 3.6% stemmed from the global stock index
markets. During May, long positions in Japanese and European
equity index futures resulted in losses as equity prices declined
in response to geopolitical concerns and expanding energy prices.
Newly established short positions in these markets, as well as in
U.S. stock indices, experienced additional losses as prices
rebounded later in May. During June, losses from short positions
in Japanese stock indices were incurred as prices strengthened on
renewed investor sentiment regarding the Japanese economic
recovery. Short positions in European stock indices followed as
prices benefited from the release of positive economic data.
Additional losses of approximately 0.9% were incurred from the
global interest rate markets, primarily during June, from
positions in Japanese interest rate futures. Long positions
experienced losses as prices first decreased amid anticipation
that the Bank of Japan would raise interest rates. Later in the
month, additional losses were recorded from newly established
short positions as prices rose following the Japanese Central
Bank's decision to leave their interest rate policy unchanged.
Losses in the metals markets of approximately 0.8% resulted from
positions in both precious and base metals. During April,
industrial metals prices profited from a weaker U.S. dollar and
strong Asian demand. Gold prices also increased as investor
interest was reignited by a weaker U.S. dollar and fears of
potential terrorist attacks. During May, short futures positions
in copper, nickel, and gold accounted for the majority of sector
losses. A portion of the Partnership's overall losses for the
first six months of the year was offset by gains of approximately
5.5% recorded in the energy markets, primarily during February,
April, and May, from long futures positions in crude oil and its
related products as low market supply, falling inventory levels,
production cut announcements from OPEC, and fears of potential
terrorist activity in Saudi Arabia pushed prices higher. In the
agricultural markets, gains of approximately 1.4% were generated
from long futures positions in corn, soybeans, and soybean
related products. Growing U.S. exports and heightened demand
from Asia pushed prices for these commodities higher during the
first quarter. During April, short futures positions in cotton
gained as prices trended lower due to news of a decrease in
demand from China and a landmark decision by the World Trade
Organization that denounced U.S. and European cotton subsidies.
Long futures positions in live cattle supplemented sector gains
as inflationary concerns lifted agricultural commodity prices
higher.

For the Quarter and Six Months Ended June 30, 2003
The Partnership recorded losses net of interest income totaling
$228,825 and expenses totaling $501,675, resulting in a net loss
of $730,500 for the quarter ended June 30, 2003. The
Partnership's net asset value per Unit decreased from $5,346.51
at March 31, 2003 to $5,187.29 at June 30, 2003.

The most significant trading losses of approximately 2.4% were
recorded in the metals markets, primarily during June, from long
positions in gold futures as prices declined in response to the
rise of the U.S. dollar. Elsewhere in the metals markets, short
positions in copper, nickel, and aluminum futures generated
losses during May as prices reversed higher, buoyed by a rebound
in U.S. equity prices and hopes for increased industrial demand.
Losses of approximately 1.1% were recorded in the agricultural
markets primarily during May from long positions in coffee
futures as prices reversed lower on technically-based factors.
Elsewhere in the agricultural markets, losses were experienced
during June from short positions in cotton futures as increased
exports and weather related supply concerns forced prices higher.
In the energy markets, losses of approximately 0.9% were recorded
primarily during May from short futures positions in crude oil as
prices moved higher amid supply concerns and renewed fears
concerning security at Middle Eastern refining facilities. A
portion of the Partnership's overall losses for the quarter was
offset by gains of approximately 1.4% recorded in the global
stock index markets during April and May from long positions in
U.S. stock index futures as prices increased due to investors
focusing on positive comments and profits by technology companies
instead of weak economic data and geopolitical concerns.
Additional gains in the global stock index futures markets were
recorded during June from long positions in Japanese stock index
futures as prices rallied amid increased foreign demand for
Japanese equities. Smaller gains of approximately 0.4% were
experienced in the global interest rate markets from long
positions in U.S. interest rate futures primarily during May as
prices trended higher amid speculation of an interest rate cut by
the U.S. Federal Reserve and lingering doubts concerning a global
economic recovery.

The Partnership recorded revenues including interest
income totaling $2,515,202 and expenses totaling $1,427,419,
resulting in net income of $1,087,783 for the six months ended
June 30, 2003. The Partnership's net asset value per Unit
increased from $4,963.25 at December 31, 2002 to $5,187.29 at
June 30, 2003.

The most significant trading gains of approximately 3.7% were
recorded in the energy markets primarily during January and
February from long positions in natural gas futures as prices
trended higher in response to prolonged frigid temperatures in
the northeastern and midwestern United States. Additional gains
of approximately 3.0% were established in the global interest
rate markets during January, February, and May from long
positions in U.S. and European interest rate futures as prices
trended higher amid continued uncertainty in the global equity
markets and investor demand for fixed income investments. In the
currency markets, gains of approximately 1.3% were experienced
primarily during January, February, and April from long positions
in the euro and Australian dollar versus the U.S. dollar as the
value of these currencies strengthened versus the U.S. dollar
amid uncertainty regarding the Bush Administration's economic
policy, renewed fears of potential terrorist attacks against
American interests, and investor preference for non-U.S. dollar
denominated assets. Additional gains of approximately 1.1% were
recorded in the global stock index markets from long
positions in European stock index futures as prices strengthened
amid the release of positive economic data and expectations for a
U.S. interest rate cut. A portion of the Partnership's overall
gains was offset by losses of approximately 2.3% recorded in the
metals markets from positions in gold and silver futures as
precious metals prices experienced short-term volatility
throughout a majority of the first half of the year. Smaller
losses of approximately 0.9% were experienced in the agricultural
futures markets during May from long positions in coffee futures
as prices reversed lower on technically-based factors, and from
short positions in wheat futures as prices moved higher amid news
that continued hot-dry weather in the midwest was hurting crops.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards, and options. The
market-sensitive instruments held by the Partnership are acquired
for speculative trading purposes only and, as a result, all or
substantially all of the Partnership's assets are at risk of
trading loss. Unlike an operating company, the risk of market-
sensitive instruments is inherent to the primary business activity
of the Partnership.

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. Gains and losses on open positions of exchange-
traded futures, forward, and options are settled daily through
variation margin. Gains/losses on off-exchange-traded forward
currency contracts are settled at the termination of the contract
or more frequently, as agreed upon with each counterparty.

The Partnership's total market risk may increase or decrease as
it is influenced by a wide variety of factors, including, but not
limited to, the diversification among the Partnership's
open positions, the volatility present within the markets, and
the liquidity of the markets.

The Partnership's past performance is no guarantee of its future
results. Any attempt to numerically quantify the Partnership's
market risk is limited by the uncertainty of its speculative
trading. The Partnership's speculative trading may cause future
losses and volatility (i.e., "risk of ruin") that far exceed the
Partnership's experience to date or any reasonable expectations
based upon historical changes in market value.

Limited partners will not be liable for losses exceeding the
current net asset value of their investment.

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

The Partnership accounts for open positions on the basis
of mark to market accounting principles. Any loss in the market
value of the Partnership's open positions is directly reflected
in the Partnership's earnings 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 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 continually evolving
as trading portfolios become more diverse and modeling techniques
and systems capabilities improve. Please note that the VaR model
is used to numerically quantify market risk for historic
reporting purposes only and is not utilized by either Demeter or
the Trading Managers in their daily risk management activities.
Please further note that VaR as described above may not be
comparable to similarly titled measures used by other entities.

The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by primary market risk category at June 30, 2004 and 2003. At
June 30, 2004 and 2003, the Partnership's total capitalization
was approximately $17 million and $24 million, respectively.

Primary Market June 30, 2004 June 30, 2003
Risk Category Value at Risk Value at Risk

Currency (1.80)% (1.40)%
Interest Rate (0.90) (0.89)
Equity (0.73) (0.64)
Commodity (2.14) (1.65)
Aggregate Value at Risk (3.01)% (2.43)%

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 quarter-end VaR set forth above
by presenting the Partnership's high, low, and average VaR, as a
percentage of total net assets for the four quarter-end
reporting periods from July 1, 2003 through June 30, 2004.

Primary Market Risk Category High Low Average
Currency (2.50)% (1.53)% (2.07)%

Interest Rate (0.96) (0.83) (0.91)

Equity (0.87) (0.40) (0.70)

Commodity (2.14) (1.57) (1.87)

Aggregate Value at Risk (3.32)% (2.37)% (2.97)%

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 market fluctuations applied to current
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 June 30, 2004 and 2003, and for the four
quarter-end reporting periods from July 1, 2003 through June 30,
2004. VaR is not necessarily representative of the Partnership's
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 101% as of June 30, 2004) 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 June 30, 2004, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Currency. The primary market exposure of the Partnership at June
30, 2004 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 June 30, 2004 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.

Interest Rate. The second largest market exposure of the
Partnership at June 30, 2004 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
countries - 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
June 30, 2004 was to equity price risk in the G-7 countries. The
stock index futures traded by the Partnership are by law limited
to futures on broadly-based indices. At June 30, 2004, the
Partnership's primary exposures were to the DAX (Germany), Euro
Stoxx 50 (Europe), 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. The Partnership's energy exposure at June 30, 2004
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 price resulting from weather patterns and
supply and demand factors and will likely continue in this
choppy pattern.

Metals. The Partnership's metals exposure at June 30, 2004
was to fluctuations in the price of precious metals, such as
gold and silver, and base metals, such as copper, nickel,
aluminum, and zinc. Economic forces, supply and demand
inequalities, geopolitical factors and market expectations
influence price movements in these markets. The Trading
Managers, from time to time, take positions when market
opportunities develop, and Demeter anticipates that the
Partnership will continue to do so.

Soft Commodities and Agriculturals. At June 30, 2004, the
Partnership had exposure to the markets that comprise these
sectors. Most of the exposure was to the cotton, coffee,
sugar, 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 June 30, 2004:

Foreign Currency Balances. The Partnership's primary foreign
currency balances at June 30, 2004 were in Hong Kong dollars,
Japanese yen, 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 Trading Managers, each of whose strategies focus
on different market sectors and trading approaches, and by
monitoring the performance of the Trading Managers daily. In
addition, the Trading Managers establish diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-
sensitive instrument.

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

Item 4. CONTROLS AND PROCEDURES
(a) As of the end of the period covered by this quarterly
report, the President and Chief Financial Officer of
Demeter, the general partner of the Partnership, have
evaluated the effectiveness of the Partnership's
disclosure controls and procedures (as defined in the
Rules 13a-15(e) and 15d-15(e) of the Exchange Act), and
have judged such controls and procedures to be
effective.

(b) There have been no significant changes during the period
covered by this quarterly report in the Partnership's
internal controls or in other factors that could
significantly affect these controls subsequent to the
date of their evaluation.

PART II. OTHER INFORMATION

Item 5. OTHER INFORMATION

Management. Effective June 21, 2004, the following changes have
been made to the Board of Directors and Officers of Demeter:

Mr. Jeffrey D. Hahn resigned the position of Chief Financial
Officer and Director of Demeter.

Mr. Todd Taylor, age 41, is a Director of Demeter. Mr. Taylor
began his career with Morgan Stanley in June 1987 as a Financial
Advisor in the Dallas office. In 1995, he joined the Management
Training Program in New York and was appointed Branch Manager in
St. Louis in 1997. Three years later, in 2000, Mr. Taylor was
appointed to a newly created position, Director of Individual
Investor Group ("IIG") Learning and Development, before becoming
the Director of IIG Strategy in 2002. Most recently, Mr. Taylor
has taken on a new role as the High Net Worth Segment Director.
Currently a member of the firm's E-Learning Council, Mr. Taylor
is also a current member of the Securities Industry/Regulatory
Council on Continuing Education. Mr. Taylor graduated from Texas
Tech University with a B.B.A. in Finance.

Mr. William D. Seugling, age 34, will become a Director of
Demeter once he has registered with the National Futures
Association ("NFA") as a principal, which registration is
currently pending. Mr. Seugling is an Executive Director at
Morgan Stanley and currently serves as Director of Client
Solutions for US Private Wealth Management. Mr. Seugling joined
Morgan Stanley in June 1993 as an Associate in Equity Structured
Products having previously worked in research and consulting for
Greenwich Associates from October 1991 to June 1993. Since 1994,
he has focused broadly on analysis and solutions for wealthy
individuals and families culminating in his current role within
the division. He was named Vice President in 1996 and an
Executive Director in 1999. Mr. Seugling graduated cum laude
from Bucknell University with a B.S. in Management and a
concentration in Chemistry.

Mr. Kevin Perry, age 35, is the Chief Financial Officer of
Demeter. His registration with the NFA as a principal is
currently pending. He currently serves as an Executive Director
and Controller of Client Solutions at Morgan Stanley. Mr. Perry
joined Morgan Stanley in October 2000 and is also Chief Financial
Officer of Morgan Stanley Trust National Association, Van Kampen
Funds Inc. and Morgan Stanley Distribution, Inc. Prior to
joining Morgan Stanley, Mr. Perry worked as an auditor and
consultant in the financial services practice of Ernst & Young
from October 1991 to October 2000. Mr. Perry received a B.S.
degree in Accounting from the University of Notre Dame in 1991
and is a Certified Public Accountant.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SIGNATURE

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

Dean Witter Cornerstone Fund II
(Registrant)

By: Demeter Management Corporation
(General Partner)

August 16, 2004 By: /s/Kevin Perry
Kevin Perry
Chief Financial Officer

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