WITTER DEAN CORNERSTONE FUND II - 10-Q Quarterly Report

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

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 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
330 Madison Avenue, 8th Floor
New York, NY 10017
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 905-2700

825 Third Avenue, 9th Floor, New York, NY 10022

(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

September 30, 2004

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF FINANCIAL CONDITION

DEAN WITTER CORNERSTONE FUND II
STATEMENTS OF OPERATIONS
(Unaudited)

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

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

DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS
September 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").

On February 27, 2002, the Partnership received notification of a
preliminary entitlement to payment from the Sumitomo Copper
Litigation Settlement Administrator, and the Partnership has
received settlement award payments in the amount of $76,613 as of
August 30, 2002 and $755 as of July 30, 2004. Any amounts
received are accounted for in the period received, for the benefit
of the limited partners at the date of receipt.

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. Monthly, Morgan Stanley DW
pays the Partnership interest income equal to 80% of its average
daily Net Assets for the month at a rate equal to the average
yield on 13-week U.S. Treasury bills. The Partnership pays
brokerage commissions to Morgan Stanley DW.

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

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.

The market value of exchange-traded contracts is based on the
settlement price quoted by the exchange on the day with respect
to which market value is being determined. If an exchange-traded
contract could not have been liquidated on such day due to the
operation of daily limits or other rules of the exchange, the
settlement price shall be the settlement price on the first
subsequent day on which the contract could be liquidated. The
market value of off-exchange-traded contracts is based on the
fair market value quoted by the counterparty.

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

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.

The net unrealized gains on open contracts, reported as a
component of "Equity in futures interests trading accounts" on the
Statements of Financial Condition, and their longest contract
maturities were as follows:
Net Unrealized Gains
On Open Contracts Longest Maturities

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

Sep. 30, 2004 1,920,341 15,143 1,935,484 Dec. 2005 Dec. 2004
Dec. 31, 2003 748,037 550,423 1,298,460 Dec. 2004 Mar. 2004

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

The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership trades 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
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 $16,292,629 and $21,675,501 at
September 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
DEAN WITTER CORNERSTONE FUND II
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

variation in value nor is there any requirement that an amount
equal to the net unrealized gains (losses) on open forward
contracts be segregated. However, the Partnership is required to
meet margin requirements equal to the net unrealized loss on open
contracts in the Partnership accounts with the counterparty,
which is accomplished by daily maintenance of the cash balance in
a custody account held at Morgan Stanley DW for the benefit of MS
& Co. 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 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 expects to
have, any capital assets. Redemptions of units of limited
partnership interest ("Unit(s)") in the future will affect the
amount of funds available for investment in futures, forwards, and
options in subsequent periods. It is not possible to estimate the
amount, and therefore the impact, of future redemptions of Units.

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

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 program(s) 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 nine month periods
ended September 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. The sum of these
amounts, along with the "Proceeds from Litigation Settlement",
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 Three and Nine Months Ended September 30, 2004
The Partnership recorded revenues including interest income
totaling $108,193 and expenses totaling $441,352, resulting in a
net loss of $333,159 for the three months ended September 30,
2004. The Partnership's net asset value per Unit decreased from
$4,033.75 at June 30, 2004 to $3,957.17 at September 30, 2004.

The most significant trading losses of approximately 10.8% were
incurred in the currency markets, primarily during July and
August. During July, long positions in the Japanese yen versus
the U.S. dollar resulted in losses as the dollar advanced amid a
jump in July consumer confidence data. Long positions in
European currencies, such as the euro and Swiss franc, in
addition to the Australian dollar and South African rand, versus
the U.S. dollar also contributed to sector losses due to upbeat
market sentiment that strengthened the dollar. During August,
losses were recorded from positions in the euro relative to the
U.S. dollar as the euro experienced short-term volatility in
response to conflicting economic data and surging energy prices.
Additional losses resulted from short positions in the Japanese
yen versus the U.S. dollar as the dollar's value was pressed
lower by concerns for the rate of U.S. economic growth. Smaller
losses were incurred from long positions in the South African
rand against the U.S. dollar as the rand moved lower due
to a reduction in interest rates by the Reserve Bank of South
Africa. Additional losses of approximately 3.5% were incurred in
the metals markets during July and September. Losses resulted
during July from long futures positions in base metals as a
slowdown in demand from China negatively affected prices for
industrial metals and in precious metals as prices fell amid a
rebound in the value of the U.S. dollar. During September, short
positions in base and precious metals generated losses as base
metals prices moved higher in response to continued demand from
China and reports of lower-than-expected inventories, while
precious metals prices advanced amid a decline in the value of
the U.S. dollar. Partnership losses of approximately 2.5%
resulted from trading in the global stock index markets,
primarily during July and September. Long positions in Japanese,
European and U.S. stock index futures generated losses during
July as prices reversed lower due to the release of disappointing
U.S. employment data. During September, short positions in
European and U.S. stock index futures experienced losses after
tame U.S. inflation data and a better-than-expected jobless
outlook triggered global equity prices to move higher. Finally,
losses of approximately 1.0% stemmed from the agricultural
markets primarily during August. Long positions in live cattle
futures produced losses as prices reversed lower after Japan and
the United States failed to reach an agreement regarding the
resumption of U.S. beef exports. Short positions in cotton
futures also contributed to sector losses as prices moved higher
amid concerns regarding cooler-than-usual weather in U.S. growing
regions. A portion of the Partnership's overall losses for the
quarter was offset by gains of approximately 13.4% in the energy
markets from long futures positions in crude oil and its related
products as prices trended higher throughout the quarter due to
supply concerns and geopolitical worries. Additional profits of
approximately 3.0% were achieved in the global interest rates
sector primarily during August from long positions in European
and U.S. interest rate futures. Global bond prices trended
higher boosted by a surge in oil prices earlier in the month, a
drop in equity prices, and a mixed economic picture generated by
reports on retail sales, jobless claims, and the U.S. trade
deficit. Long positions in Japanese interest rate futures
provided additional gains during September as prices benefited
from geopolitical concerns and skepticism regarding a
continuation in the Japanese economic recovery.

The Partnership recorded losses net of interest income totaling
$2,935,560 and expenses totaling $1,460,079, resulting in a net
loss of $4,395,639 for the nine months ended September 30, 2004.
The Partnership's net asset value per Unit decreased from
$4,981.39 at December 31, 2003 to $3,957.17 at September 30,
2004.

The most significant trading losses of approximately 28.5% were
incurred in the currency markets. During the second quarter,
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. During the third quarter, long
positions in the Japanese yen versus the U.S. dollar resulted in
losses as the dollar advanced amid a jump in July consumer
confidence data. Long positions in European currencies, such as
the euro and Swiss franc, in addition to the Australian dollar
and South African rand, versus the U.S. dollar also contributed
to sector losses during the third quarter due to upbeat market
sentiment that strengthened the dollar. During August, losses
were recorded from positions in the euro relative to the U.S.
dollar as the euro experienced short-term volatility in response
to conflicting economic data and surging energy prices.
Additional losses resulted from short positions in the Japanese
yen versus the U.S. dollar as the dollar's value was pressed
lower by concerns for the rate of U.S. economic growth during the
final month of the third quarter. Losses during the first
quarter resulted from short Japanese yen positions 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. Additional losses of approximately 6.0% were incurred in
the global stock index markets primarily during the second and
third quarters of the year. During May, long positions in
European and Japanese 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 European and Japanese stock
indices were experienced as prices benefited from the release of
positive economic data. During the third quarter, long positions
in Japanese, European and U.S. stock index futures generated
losses during July as prices reversed lower due to the release of
disappointing U.S. employment data. During September, short
positions in European and U.S. stock index futures experienced
losses after tame U.S. inflation data and a better-than-expected
jobless outlook triggered global equity prices to move higher.
Losses of approximately 4.3% were incurred in the metals markets
from positions in both precious and base metals. Losses resulted
during July from long futures positions in base metals as a
slowdown in demand from China negatively affected prices for
industrial metals and in precious metals as prices fell amid a
rebound in the value of the U.S. dollar. During September, short
positions in base and precious metals generated losses as base
metals prices moved higher in response to continued demand
from China and reports of lower-than-expected inventories, while
precious metals prices advanced amid a decline in the value of
the U.S. dollar. During April, additional losses were
experienced in the metals markets from long positions in both
precious and base metals due to the U.S. dollar's move higher and
fears of reduced demand from China. 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 nine months of the year was offset by gains of
approximately 19.5% recorded in the energy markets from long
futures positions in crude oil and its related products as low
market supply, falling inventory levels, and fears of potential
terrorist activity in the Middle East pushed prices higher.
Additional profits of approximately 2.1% were established in the
global interest rate markets during the first and third quarters
as long positions in U.S. and European interest rate futures
benefited from the prospects for weak economic growth spurred by
fears of terrorism and higher energy prices. Smaller profits of
approximately 0.4% were achieved in the agricultural markets from
long futures positions in corn as growing U.S. exports and
heightened demand from Asia pushed prices higher primarily during
the first quarter.

For the Three and Nine Months Ended September 30, 2003
The Partnership recorded losses net of interest income totaling
$794,806 and expenses totaling $422,150, resulting in a net loss
of $1,216,956 for the three months ended September 30,
2003. The Partnership's net asset value per Unit decreased from
$5,187.29 at June 30, 2003 to $4,919.64 at September 30, 2003.

The most significant trading losses of approximately 3.1% were
recorded in the agricultural markets, primarily during August,
from long sugar futures positions as prices reversed sharply
lower in response to speculative selling and weak volume.
Additional losses were recorded from positions in cotton futures
during July and August as prices moved without consistent
direction. Losses of approximately 1.6% were experienced in the
currency markets from long positions in the British pound and
Australian dollar relative to the U.S. dollar during July as the
value of the U.S. dollar increased amid expectations for a
recovery of the U.S. economy following an optimistic outlook
unveiled by U.S. Federal Reserve Chairman Alan Greenspan,
negative economic data out of Australia and the United Kingdom,
and narrowing interest rate differentials between the U.S. and
these countries. Currency losses were recorded in September from
short positions in the British pound and the euro versus the U.S.
dollar as the pound's value strengthened after speculation that
Britain would raise interest rates while the value of the euro
moved higher on fears that the U.S. economic recovery was
unsustainable and concerns regarding the potential impact of a
statement by the G-7 countries supporting "more flexible exchange
rates." The G-7 countries consist of France, the U.S.,
Britain, Germany, Japan, Italy, and Canada. In the energy
markets, losses of approximately 1.4% were experienced primarily
in September from short positions in crude oil futures after
prices reversed sharply higher amid news that OPEC would move to
reduce production in an effort to stem falling oil prices. Other
losses of approximately 1.0% were incurred in the global interest
rate futures markets during September from short positions in
U.S. interest rate futures as prices reversed higher amid falling
global equity prices outside the U.S. and investor demand for
safe haven investments. A portion of the Partnership's overall
losses for the third quarter was offset by gains of approximately
0.7% in the global stock index markets, primarily during August,
from long positions in Asian stock index futures as Asian equity
prices drew strength from robust Japanese economic data and
overall strength in U.S. equity markets. In the metals markets,
gains of approximately 0.7% were experienced during July and
September from long positions in nickel and copper futures as
prices trended higher amid renewed optimism concerning a U.S.
economic recovery and hopes for an increase in industrial
production.

The Partnership recorded revenues including interest income
totaling $1,720,396 and expenses totaling $1,849,569, resulting
in a net loss of $129,173 for the nine months ended September 30,
2003. The Partnership's net asset value per Unit
decreased from $4,963.25 at December 31, 2002 to $4,919.64 at
September 30, 2003.

The most significant trading gains of approximately 2.2% were
recorded in the energy markets, primarily during January and
February, from long positions in natural gas futures as prices
jumped sharply higher amid fears that extremely cold weather in
the U.S. northeast and midwest could further deplete already
diminished supplies. In the global interest rate markets, gains
of approximately 2.0% were recorded primarily during February and
May from long positions in U.S. interest rate futures as prices
trended higher amid speculation of an interest rate cut by the
U.S. Federal Reserve and lingering doubts concerning a global
economic recovery. Additional gains of approximately 1.8% were
experienced in the global stock index markets from long positions
in Asian stock index futures during June and August as Asian
equity prices drew strength from robust Japanese economic data
and rising prices in the U.S. equity markets. A portion of the
Partnership's overall gains for the first nine months of the year
was offset by losses of approximately 4.0% recorded in the
agricultural markets from positions in cotton futures during
August and September as prices moved without consistent
direction. Additional losses were recorded during May and
September from long positions in coffee futures as prices
reversed lower on speculative selling and news of increased
supply. In the metals markets, losses of approximately 1.6% were
recorded from positions in gold and silver futures as precious
metals prices experienced short-term volatile price movements
throughout a majority of the first half of the year amid an
inconsistent outlook for the U.S. economy.
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 and losses on off-exchange-traded
forward currency contracts are settled upon termination of the
contract, however, the Partnership is required to meet margin
requirements equal to the net unrealized loss on open contracts
in the Partnership accounts with the counterparty, which is
accomplished by daily maintenance of the cash balance in a
custody account held at Morgan Stanley DW for the benefit of MS &
Co.

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 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 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 and use of
leverage may cause future losses and volatility (i.e., "risk of
ruin") that far exceed the Partnership's experience to date
under the "Partnership's Value at Risk in Different Market
Sectors" section and significantly exceed the Value at Risk
("VaR") tables disclosed.

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 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 September 30, 2004 and 2003.
At September 30, 2004 and 2003, the Partnership's total
capitalization was approximately $16 million and $22 million,
respectively.

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

Interest Rate (1.58)% (0.95)%
Currency (1.28) (2.46)
Equity (0.95) (0.40)
Commodity (4.18) (1.57)
Aggregate Value at Risk (4.75)% (3.19)%

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 October 1, 2003 through September 30, 2004.

Primary Market Risk Category High Low Average
Interest Rate (1.58)% (0.83)% (1.07)%

Currency (2.50) (1.28) (1.78)

Equity (0.95) (0.73) (0.84)

Commodity (4.18) (1.74) (2.52)

Aggregate Value at Risk (4.75)% (2.37)% (3.36)%

Limitations on Value at Risk as an Assessment of Market Risk
VaR models permit estimation of a portfolio's aggregate market
risk exposure, incorporating a range of varied market risks;
reflect risk reduction due to portfolio diversification or hedging
activities; and can cover a wide range of portfolio assets.
However, VaR risk measures should be viewed in light of the
methodology's limitations, which include, but may not be limited
to 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.

In addition, the VaR tables above, as well as the past performance
of the Partnership, give no indication of the Partnership's
potential "risk of ruin".

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 September 30, 2004 and 2003, and for the four
quarter-end reporting periods from October 1, 2003 through
September 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. These balances and any market risk they may represent
are immaterial.

The Partnership also maintains a substantial portion
(approximately 90% as of September 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 September 30, 2004, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Interest Rate. The primary market exposure of the Partnership at
September 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. 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.

Currency. At September 30, 2004, the Partnership had market
exposure in 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
September 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 associated
with the Partnership's currency trades will change significantly
in the future.

Equity. At September 30, 2004, the Partnership had exposure to
equity price risk in the G-7 countries. The stock index futures
traded by the Partnership are by law limited to futures on
broadly-based indices. At September 30, 2004, the Partnership's
primary exposures were to the NASDAQ (U.S.), DAX (Germany), and
Euro Stoxx 50 (Europe) stock indices. The Partnership is primarily
exposed to the risk of adverse price trends or static markets in
the U.S. and European stock indices. Static markets would not
cause major market changes, but would make it difficult for the
Partnership to avoid trendless price movements, resulting in
numerous small losses.

Commodity.
Energy. The second largest market exposure of the
Partnership at September 30, 2004 was to the energy sector.
The Partnership's energy exposure at September 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 September 30,
2004 was to fluctuations in the price of precious metals,
such as gold, 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 utilize the trading system(s) to take positions when
market opportunities develop, and Demeter anticipates that
the Partnership will continue to do so.

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

Foreign Currency Balances. The Partnership's primary foreign
currency balances at September 30, 2004 were in Hong Kong
dollars, Japanese yen, British pounds, and euros. 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. The following changes have been made to the Board
of Directors and Officers of Demeter:

Mr. Kevin Perry, Chief Financial Officer of Demeter, was confirmed
as a principal of Demeter by the National Futures Association on
September 3, 2004.

Mr. William D. Seugling, Director of Demeter, was confirmed as a
principal of Demeter by the National Futures Association on
October 11, 2004.

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)

November 15, 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.

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