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

	FORM 10-K/A

[X]	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the year ended December 31, 2005 or

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

Commission File Number 0-13298

	DEAN WITTER CORNERSTONE FUND II

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

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

Demeter Management Corporation
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

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

									Name of each exchange
   Title of each class  						on which registered

		None								  None

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

	Units of Limited Partnership Interest

	(Title of Class)

Indicate by check-mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.  Yes          No  X

Indicate by check-mark if the registrant
 is not required to file reports pursuant
to Section 13 or Section 15(d) of the Act.  Yes         No    X

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

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

Indicate by check-mark whether the registrant
 is a large accelerated filer, an accelerated filer, or a non-
accelerated filer.  See definitions of ?accelerated
 filer and large accelerated filer? in Rule 12b-2 of the
Exchange Act.  (Check one):

Large accelerated filer___  Accelerated filer____  Non-accelerated filer __X__

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

State the aggregate market value of the Units of Limited Partnership Interest
held by non-affiliates of the registrant.  The aggregate market value shall be
computed by reference to the price at which Units were sold as of the last
business day of the registrant?s most recently completed second fiscal quarter:
$13,478,178 at June 30, 2005.

DOCUMENTS INCORPORATED BY REFERENCE
	(See Page 1)





<page>  SIGNATURES

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


				DEAN WITTER CORNERSTONE FUND II
					(Registrant)

				BY:	Demeter Management Corporation,
					General Partner

March 31, 2006		BY:/s/Jeffrey A. Rothman
					 Jeffrey A. Rothman,
					 President

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

Demeter Management Corporation.

BY: /s/	Jeffrey A. Rothman					March 31, 2006
         	Jeffrey A. Rothman, President

    /s/	Richard A. Beech						March 31, 2006
 	    	Richard A. Beech, Director

    /s/	Shelley Hanan						March 31, 2006
 	    	Shelley Hanan, Director

    /s/	Frank Zafran						March 31, 2006
 	    	Frank Zafran, Director

    /s/ 	Douglas J. Ketterer 					March 31, 2006
        	Douglas J. Ketterer, Director

    /s/	Harry Handler						March 31, 2006
 	    	Harry Handler, Director

    /s/	Kevin Perry							March 31, 2006
         	Kevin Perry, Chief Financial Officer


















<page> EXHIBIT INDEX
ITEM
3.01	Limited Partnership Agreement of the Partnership, dated as
of December 7, 1983, as amended as of May 11, 1984, is
incorporated by reference to Exhibit 3.01 of the
Partnership?s Annual Report on Form 10-K for the fiscal
year ended September 30, 1984 (File No. 0-13298).
10.01	Management Agreement among the Partnership, Demeter, and
John W. Henry & Company, Inc. dated November 15, 1983, is
incorporated by reference to Exhibit 10.03 of the
Partnership?s Annual Report on Form 10-K for the fiscal
year ended September 30, 1984 (File No. 0-13298).
10.02	Dean Witter Cornerstone Funds Exchange Agreement, dated as
of May 31, 1984, is incorporated by reference to Exhibit
10.04 of the Partnership?s Annual Report on Form 10-K for
the fiscal year ended September 30, 1984 (File No. 0-
13298).
10.03	Management Agreement among the Partnership, Demeter, and
Northfield Trading L.P., dated as of April 16, 1997, is
incorporated by reference to Exhibit 10.03 of the
Partnership?s Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 (File No. 0-13298).
10.04	Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW Inc., dated as of June
22, 2000, is incorporated by reference to Exhibit 10.01 of
the Partnership?s Form 8-K (File No. 0-13298) filed with
the Securities and Exchange Commission on November 13,
2001.
10.05	Commodity Futures Customer Agreement between Morgan
Stanley & Co. Incorporated and the Partnership, and
acknowledged and agreed to by Morgan Stanley DW Inc.,
dated as of May 1, 2000, is incorporated by reference to
Exhibit 10.02 of the Partnership?s Form 8-K (File No. 0-
13298) filed with the Securities and Exchange Commission
on November 13, 2001.
10.06	Customer Agreement between the Partnership and Morgan
Stanley & Co. International Limited, dated as of May 1,
2000, is incorporated by reference to Exhibit 10.04 of the
Partnership?s Form 8-K (File No. 0-13298) filed with the
Securities and Exchange Commission on November 13, 2001.

E-1
<page> 10.07	Foreign Exchange and Options Master Agreement
between Morgan Stanley & Co. Incorporated and the
Partnership, dated as of April 30, 2000, is incorporated
by reference to Exhibit 10.05 of the Partnership?s Form 8-
K (File No. 0-13298) filed with the Securities and
Exchange Commission on November 13, 2001.
10.08	Amendment to Management Agreement between the Partnership
and John W. Henry & Company, Inc., dated as of November 30,
2000, is incorporated by reference to Exhibit 10.1 of the
Partnership?s Form 8-K (File No. 0-13298) filed with the
Securities and Exchange Commission on January 3, 2001.
10.09	Amendment to Management Agreement between the Partnership
and Northfield Trading L.P., dated as of November 30, 2000,
is incorporated by reference to Exhibit 10.2 of the
Partnership?s Form 8-K (File No. 0-13298) filed with the
Securities and Exchange Commission on January 3, 2001.
10.10	Securities Account Control Agreement among the Partnership,
Morgan Stanley & Co. Incorporated, and Morgan Stanley DW
Inc., dated as of May 1, 2000, is incorporated by reference
to Exhibit 10.03 of the Partnership?s Form 8-K (File No. 0-
13298) filed with the Securities and Exchange Commission on
November 13, 2001.
13.01	December 31, 2005 Annual Report to Limited Partners is filed
herewith.
31.01	Certification of President of Demeter Management
Corporation, the general partner of the Partnership
pursuant to 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 Section 302 of the Sarbanes-Oxley
Act of 2002.
32.01	Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.02	Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
E-2

<page>
<PAGE>

                  Cornerstone
                  Funds

       December 31, 2005
       Annual Report


    [LOGO] Morgan Stanley

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

HISTORICAL FUND PERFORMANCE

Presented below is the percentage change in Net Asset Value per Unit from the
start of each calendar year each Fund has traded. Also provided is the
inception-to-date return and the compound annualized return since inception for
each Fund. Past performance is no guarantee of future results.

<TABLE>
<CAPTION>


            1985  1986    1987   1988  1989  1990 1991  1992  1993   1994  1995 1996 1997 1998 1999  2000  2001  2002 2003 2004
FUND         %     %       %      %     %     %    %     %     %      %     %    %    %    %    %     %     %     %    %    %
---------------------------------------------------------------------------------------------------------------------------------
<S>         <C>  <C>    <C>      <C>  <C>    <C>  <C>  <C>    <C>   <C>    <C>  <C>  <C>  <C>  <C>   <C>   <C>   <C>  <C>  <C>
Cornerstone
 Fund II... 20.1 (17.6)   71.6   0.1  (15.1) 47.9 11.0 (1.3)   7.8  (8.9)  26.5 11.5 18.1 12.5 (5.4) 11.5  (1.3) 13.8 0.4  (6.5)
---------------------------------------------------------------------------------------------------------------------------------
Cornerstone
 Fund III.. 54.6 (8.0)    32.5   19.4 (11.4) 18.7 12.0 (11.1) (4.8) (10.0) 27.5 8.2  10.2 9.1  (6.8) (0.3)  0.3  17.9 8.8   7.9
---------------------------------------------------------------------------------------------------------------------------------
Cornerstone
 Fund IV...  --    --     10.6   37.5 (14.1) 57.8 33.5  10.4  (9.1) (14.3) 23.0 13.0 38.4 6.8  (1.1) 14.7  15.9  12.3 13.6 (8.3)
                        (8 mos.)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
                   INCEPTION-  COMPOUND
                    TO-DATE   ANNUALIZED
             2005    RETURN     RETURN
FUND          %        %          %
----------------------------------------
<S>         <C>    <C>        <C>
Cornerstone
 Fund II... (19.4)   285.0       6.6
----------------------------------------
Cornerstone
 Fund III.. (6.1)    306.3       6.9
----------------------------------------
Cornerstone
 Fund IV... (19.3)   503.1       10.1

----------------------------------------
</TABLE>

<PAGE>

DEMETER MANAGEMENT CORPORATION

330 Madison Avenue, 8th Floor
New York, NY 10017
Telephone (212) 905-2700

DEAN WITTER CORNERSTONE FUNDS
ANNUAL REPORT
2005

Dear Limited Partner:
 This marks the twenty-first annual report for Cornerstone Funds II and III and
the nineteenth annual report for Cornerstone Fund IV. The Net Asset Value per
Unit for each of the three Cornerstone Funds ("Fund(s)") as of December 31,
2005 was as follows:

<TABLE>
<CAPTION>
                                                                       % CHANGE
FUNDS                                                         N.A.V.   FOR YEAR
-------------------------------------------------------------------------------
<S>                                                          <C>       <C>
Cornerstone Fund II                                          $3,753.50  (19.4)%
-------------------------------------------------------------------------------
Cornerstone Fund III                                         $3,961.07   (6.1)%
-------------------------------------------------------------------------------
Cornerstone Fund IV                                          $5,879.98  (19.3)%
-------------------------------------------------------------------------------
</TABLE>

 Since their inception in 1985, Cornerstone Funds II and III have increased by
285.0% (a compound annualized return of 6.6%) and 306.3% (a compound annualized
return of 6.9%), respectively. Since its inception in 1987, Cornerstone Fund IV
has increased by 503.1% (a compound annualized return of 10.1%).

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

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

 Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation, 330 Madison Avenue, 8th Floor, New
York, NY 10017 or your Morgan Stanley Financial Advisor.

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

Sincerely,

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

<PAGE>

DEAN WITTER CORNERSTONE FUND II

                                    [CHART]

                              Year ended December 31, 2005
                              ----------------------------
Currencies                             -13.99%
Interest Rates                          -4.00%
Stock Indices                            3.13%
Energies                                -4.95%
Metals                                  -0.10%
Agriculturals                           -1.11%

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

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
..  Losses were incurred in the currency markets, primarily during the first and
   third quarter. During January, long positions in a variety of foreign
   currencies, primarily the South African rand, euro, Swiss franc, and
   Singapore dollar, recorded losses after the U.S. dollar's value reversed
   higher amid positive U.S. economic data and speculation for higher U.S.
   interest rates. During February, long positions in the Singapore dollar
   against the U.S. dollar experienced losses as the U.S. dollar's value rose
   in response to positive sentiment for the Bush Administration's budget
   proposal. Relaxed speculation that China would re-value its currency also
   boosted the U.S. dollar. Additional losses were recorded from newly
   established short positions in the Singapore dollar, as well as from
   existing short positions in the South African rand, euro, and Swiss franc.
   In early March, short European currency positions resulted in losses as
   their values moved higher amid a sharp rise in German industrial production.
   Additional losses were recorded from newly established long euro positions,
   as well as from existing long positions in the British pound and the
   Singapore dollar, versus the U.S. dollar after the value of the U.S. dollar
   reversed sharply higher amid an increase in U.S. interest rates. During
   August, long U.S. dollar positions against the British pound, Swiss franc,
   euro, and Singapore dollar, incurred losses as the value of the U.S. dollar
   declined amid higher crude oil prices, lower

<PAGE>

DEAN WITTER CORNERSTONE FUND II

FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)

 durable goods orders, the U.S. trade imbalance, and economic warnings from
  U.S. Federal Reserve Chairman Alan Greenspan. Short U.S. dollar positions
  against the British pound, Swiss franc, euro, and Norwegian krone, held
  during September also recorded losses as the value of the U.S. dollar
  advanced amid bolstered expectations that the U.S. Federal Reserve would
  continue to raise interest rates. Meanwhile, the British pound weakened after
  records of the slowest British economic growth led to expectations for
  further interest rate cuts by the Bank of England. In addition, the values of
  European currencies moved lower amid weaker growth forecasts for the European
  economy and developments of political uncertainty stemming from news that
  Germany's incumbent Chancellor, Gerhard Schroeder, would not concede defeat
  to the opposition leader Angela Merkel in the days after the election.
  Additional sector losses were experienced from long positions in the New
  Zealand and Australian dollars.

..  In the energy markets, losses were recorded during the second and fourth
   quarter from positions in natural gas, crude oil and its related products.
   During April, long futures positions in crude oil and its related products
   resulted in losses as prices reversed sharply lower after U.S. government
   data pointed to greater refinery production, slower demand growth forecasts,
   and news of growing supplies. Elsewhere in the energy markets, losses
   resulted from long natural gas positions as prices declined with crude oil
   prices. During June, losses were recorded from positions in natural gas,
   crude oil and its related products as short futures positions held early in
   the month resulted in losses as prices strengthened on supply-related
   concerns. Later in June, long crude oil futures positions experienced losses
   after prices declined amid reports of slowing demand from China and reduced
   concerns for U.S. supply disruptions. News of negligible production
   interruptions from the Gulf of Mexico caused natural gas prices to rise,
   thus resulting in additional losses for short positions. During October,
   long futures positions in natural gas, crude oil and its related products
   experienced losses after prices reversed lower amid a decline in energy
   consumption, an economic slowdown in parts of the U.S. affected by
   Hurricanes Katrina and Rita, and reports that more refineries in the U.S.
   Gulf region resumed operations at full capacity. Prices continued to decline
   during the month as supply worries eased on signs of adequate fuel stocks in
   the U.S. During December, long futures positions in natural gas recorded
   losses as prices reversed sharply lower due to weak demand, mild weather in
   Europe and the U.S., and the release of U.S. government data which showed a
   smaller-than-expected decline in supplies. Elsewhere in the energy markets,
   short futures positions in crude oil and its related

<PAGE>

DEAN WITTER CORNERSTONE FUND II

FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)

 products also experienced losses after December prices finished higher on news
  of a rebound in energy demand. Pushing crude oil prices further upwards was a
  bullish energy outlook for 2006 from the Energy Information Administration.

..  Additional losses were incurred in the global interest rate markets during
   February from long positions in Japanese interest rate futures as prices
   reversed lower after positive economic data and expectations for higher
   interest rates reduced investor demand for fixed-income investments. Newly
   established short Japanese positions held during March experienced losses
   after prices reversed higher amid overall weakness in global equity markets.
   During the third quarter, losses stemmed from positions in U.S and Japanese
   interest rate futures. During July, long U.S. interest rate futures
   positions experienced losses as prices declined following a rise in interest
   rates and after the U.S. Labor Department released its June employment
   report. Within the Japanese interest rate markets, losses were recorded as
   prices declined following positive comments on the Japanese economy by the
   Japanese Ministry of Finance. During August, short positions in U.S. and
   Japanese fixed-income futures incurred losses as prices reversed higher on
   worries about the global economic impact of Hurricane Katrina. Within
   Japanese interest rate futures markets, a bigger-than-expected decline in
   Japanese industrial output for July also contributed to higher prices.

..  Losses recorded in the agricultural markets stemmed from positions in cocoa
   futures as prices traded without consistent direction throughout much of the
   year. Additional losses resulted from long futures positions in corn and
   wheat during the second quarter after prices fell amid favorable weather in
   U.S. growing regions, and reduced foreign demand. During the fourth quarter,
   short futures positions in corn recorded losses after prices advanced on
   reports of strong demand and news of weaker-than-expected supplies.

..  Smaller losses resulted in metals during the first and second quarter
   primarily from positions in precious metals as prices in these markets
   experienced choppiness amid volatility in the value of the U.S. dollar and a
   negative outlook in demand.

<PAGE>

DEAN WITTER CORNERSTONE FUND II



FACTORS INFLUENCING ANNUAL TRADING GAINS:
..  Gains were recorded in the global stock indices during the third and fourth
   quarter. During the third quarter, long positions in European and Pacific
   Rim stock index futures benefited as prices rose amid positive economic data
   out of the U.S. and Japan. Prices continued to strengthen after China
   reformed its U.S. dollar currency peg policy, leading market participants to
   conclude that a re-valuation in the Chinese yuan would likely ease trade
   tensions between China, the U.S., Europe, and Japan. Finally, strong
   corporate earnings out of the European Union and the U.S. resulted in
   optimistic investor sentiment and pushed prices higher. During September,
   gains were produced from long positions in Japanese stock index futures as
   prices increased on positive economic comments from Bank of Japan Governor
   Toshihiko Fukui, improving business sentiment and a sustained upturn in
   consumer spending. Additional gains resulted from long positions in European
   stock index futures as prices increased due to a decline in oil prices.
   During the fourth quarter, long positions in European and Japanese stock
   index futures supplied gains as prices increased, largely in response to
   falling energy prices, strong corporate earnings from each respective
   region, positive economic data out of the U.S., and anticipation that a
   strong holiday shopping season would improve the retail sectors for both
   economies. European stock markets also found support from the possibility of
   an end to U.S. interest rate increases. Strong market optimism for continued
   improvements in the Japanese economy during 2006 also benefited prices.

<PAGE>

DEAN WITTER CORNERSTONE FUND III

                                    [CHART]

                              Year ended December 31, 2005
                              ----------------------------
Currencies                              -6.55%
Interest Rates                          -3.58%
Stock Indices                            1.82%
Energies                                -0.20%
Metals                                   4.34%
Agriculturals                           -0.92%

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

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
..  Losses were recorded in the currency markets primarily during the first
   quarter and in August. During January, long positions in a variety of
   foreign currencies, primarily the euro, South African rand, and both the New
   Zealand and Australian dollars, recorded losses after the U.S. dollar's
   value reversed sharply higher amid positive U.S. economic data and
   speculation for higher U.S. interest rates. The U.S. dollar's value also
   advanced during January in response to expectations that the Chinese
   government would announce postponement of its re-valuation of the Chinese
   yuan for the foreseeable future. During February, losses stemmed from short
   positions in the euro and South African rand against the U.S. dollar as the
   U.S. dollar weakened due to concern for the considerable U.S.
   Current-Account deficit as expressed by U.S. Federal Reserve Chairman Alan
   Greenspan. The U.S. dollar weakened further during the remainder of the
   month due to a larger-than-expected drop in economic indicators and news
   that South Korea's Central Bank planned to reduce its U.S. dollar currency
   reserves. Short European currency positions resulted in losses during early
   March as their values moved higher amid a sharp rise in German industrial
   production. Additional losses were recorded from newly established long
   European currency positions, as well as from existing long positions in the
   British pound, versus the U.S. dollar. During August, losses were recorded
   from long

<PAGE>

DEAN WITTER CORNERSTONE FUND III

FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)

 U.S. dollar positions against the British pound and euro as the value of the
  U.S. dollar declined amid higher crude oil prices, lower durable goods
  orders, the U.S. trade imbalance, and economic warnings from U.S. Federal
  Reserve Chairman Alan Greenspan.

..  Losses were recorded in the global interest rate markets primarily during
   February and July from long positions in U.S. interest rate futures. During
   February, prices reversed lower after positive economic data reduced
   investor demand for fixed-income investments. Prices fell further during
   July following a rise in interest rates and after the U.S. Labor Department
   released its June employment report. Smaller losses were incurred during
   November from short positions in U.S. interest rate futures after prices
   moved higher early in the month on strong demand at government debt auctions
   and then advanced again later in the month on reduced inflation fears and
   speculation that the U.S. Federal Reserve would potentially end its cycle of
   hiking interest rates in early 2006.

..  In the agricultural markets, losses were experienced during the second and
   third quarter from long futures positions in soybeans, its related products,
   and corn after prices moved lower on news of greater crop yields. During
   July and August, losses resulted from long futures positions in corn after
   prices declined from heavy rainfall in U.S. growing regions and forecasts
   for growth in supply increases.

..  In the energy markets, losses occurred primarily during the second quarter
   from positions in crude oil and its related products. During April, long
   futures positions in crude oil and its related products recorded losses as
   prices reversed lower amid greater refinery production and slower growth in
   demand. Losses also resulted from long positions in natural gas futures as
   prices declined with crude oil prices. Short crude oil futures positions
   also experienced losses during May after prices increased due to news of
   weak supply. Further losses were recorded later in June from newly
   established long crude oil positions as prices reversed lower on news of
   rising supplies and solid refinery output.

<PAGE>

DEAN WITTER CORNERSTONE FUND III



FACTORS INFLUENCING ANNUAL TRADING GAINS:
..  Gains achieved in the metals markets resulted primarily during the fourth
   quarter from long futures positions in copper, aluminum, and zinc, as prices
   increased on news of consistently strong demand from India, China, and the
   Middle East, and news of weak global supplies.

..  Gains resulted in the global stock indices sector primarily during the third
   quarter from long positions in European and Pacific Rim stock index futures.
   During July, long positions benefited as prices increased on positive
   economic data out of the U.S. and Japan. Prices continued to strengthen
   after China reformed its U.S. dollar currency peg policy. Finally, strong
   corporate earnings out of the European Union and the U.S. resulted in
   optimistic investor sentiment and pushed prices higher. During September,
   long positions in Japanese stock index futures experienced gains as prices
   increased on positive comments from Bank of Japan Governor Toshihiko Fukui,
   who said the Japanese economy was in the process of emerging from a soft
   patch. Additional gains resulted during September from long positions in
   European stock index futures.

<PAGE>

                      This page intentionally left blank.

<PAGE>

DEAN WITTER CORNERSTONE FUND IV

                                    [CHART]

                              Year ended December 31, 2005
                              ----------------------------
Australian dollar                       -3.30%
British pound                          -10.12%
Euro                                    -2.58%
Japanese yen                            11.85%
Swiss franc                              1.13%
Minor Currencies                       -14.78%

Note: Includes trading results and commissions but does not include other fees
      or interest income.
      Minor currencies may include, but are not limited to, the South African
      rand, Thai baht, Singapore dollar, Mexican peso, New Zealand dollar,
      Polish zloty, Brazilian real, Czech koruna and Norwegian krone.

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
..  Losses resulted from positions in European currencies against the U.S.
   dollar. Early during the first quarter, losses resulted from long positions
   in the British pound, euro, Norwegian krone, Czech koruna, and Polish zloty
   versus the U.S. dollar after the U.S. dollar's value reversed sharply higher
   amid an increase in U.S. interest rates and consumer prices. The U.S.
   dollar's value also advanced in response to expectations that the Chinese
   government would announce postponement of its re-valuation of the Chinese
   yuan. During February, losses were incurred from short European currency
   positions after the U.S. dollar's value weakened in response to concern for
   the considerable U.S. Current-Account deficit as expressed by U.S. Federal
   Reserve Chairman Alan Greenspan. During early March, short European currency
   positions continued to experience losses as their values moved higher amid a
   sharp rise in German industrial production. Further losses were recorded
   from newly established long European currency positions versus the U.S.
   dollar as the U.S. dollar's value reversed sharply higher amid an increase
   in U.S. interest rates and consumer prices. During the second quarter, long
   British pound positions incurred losses as the pound's value declined after
   British Prime Minister Tony Blair's Labour Party won

<PAGE>

DEAN WITTER CORNERSTONE FUND IV

FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)

 re-election with a reduced government majority, and then moved lower later in
  the quarter on growing speculation that the interest rate differential
  between the U.S. and the U.K. would tighten. During July, long British pound
  positions experienced additional losses as the value of the pound dropped
  sharply on geopolitical concerns after a terror attack on the London public
  transportation system. During August, short British pound positions incurred
  losses as the value of the U.S. dollar declined amid higher crude oil prices,
  lower durable goods orders, the U.S. trade imbalance, and economic warnings
  from U.S. Federal Reserve Chairman Alan Greenspan. During September, losses
  were recorded from long positions in the British pound, Norwegian krone, and
  Czech koruna, as the value of the U.S. dollar advanced amid bolstered
  expectations that the U.S. Federal Reserve would continue to raise interest
  rates. During the fourth quarter, long British pound positions versus the
  U.S. dollar incurred further losses as the pound's value weakened after the
  Bank of England indicated that a cut in its interest rates would likely take
  place in March of 2006. Short positions in European currencies, particularly
  the euro, Norwegian krone, and Czech koruna, versus the U.S. dollar also
  experienced losses as their values moved higher in response to a rise in the
  Euro-Zone Organization for Economic Cooperation & Development's leading
  indicator of 106 in August from a July figure of 105.5. European currency
  values also moved higher with the euro, which was boosted by expectations
  that the European Central Bank might raise interest rates next year.

..  Additional losses were recorded from positions in the South African rand and
   both the Australian and New Zealand dollars (collectively the "Commodity
   Currencies"). During the first quarter, losses stemmed from both long and
   short positions in these currencies versus the U.S. dollar as the Commodity
   Currencies values traded counter to the U.S. dollar. During the second
   quarter, long positions in the Australian dollar versus the U.S. dollar
   incurred losses as the Australian dollar declined amid falling gold prices.
   During the third quarter, short positions in the Australian and New Zealand
   dollars versus the U.S. dollar recorded losses as the values of the
   Commodity Currencies moved higher on strong economic data out of the region.
   During September, losses were recorded from long Australian and New Zealand
   dollar positions as the value of the U.S. dollar advanced amid bolstered
   expectations that the U.S. Federal Reserve would continue to raise interest
   rates. Also forcing the New Zealand dollar against the U.S. dollar lower
   were fears for an economic slow-down in New Zealand during 2006. During
   October, long positions in the Commodity Currencies versus the U.S. dollar
   resulted in losses as their values weakened in response to volatile gold
   prices. The Australian dollar was also

<PAGE>

DEAN WITTER CORNERSTONE FUND IV

FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)

 pressured lower after the Reserve Bank of Australia kept its overnight
  interest rate unchanged. During November, short positions in the South
  African rand and Australian dollar incurred losses as their values reversed
  higher on stronger gold prices. Finally, during December long positions in
  both the New Zealand and Australian dollars experienced losses amid
  weaker-than-expected economic growth data combined with a lack of confidence
  for further interest rate hikes from the Reserve Bank of New Zealand.

..  Losses were also experienced from positions in the Singapore dollar versus
   the U.S. dollar, primarily during the first quarter. During February, long
   positions in the Singapore dollar against the U.S. dollar incurred losses
   early in the month as the U.S. dollar's value benefited from positive
   economic sentiment. Newly established short Singapore dollar positions also
   incurred losses later in the month after the U.S. dollar weakened due to a
   larger-than-expected drop in January leading economic indicators and news
   that South Korea's Central Bank planned to reduce its U.S. dollar currency
   reserves. During March, long positions in the Singapore dollar versus the
   U.S. dollar resulted in losses as the value of the U.S. dollar reversed
   sharply higher amid an increase in U.S. interest rates and U.S. consumer
   prices. Positions in the Singapore dollar against the U.S. dollar held
   during the third quarter also contributed to losses.

FACTORS INFLUENCING ANNUAL TRADING GAINS:
..  Gains were achieved from short positions in the Japanese yen against the
   U.S. dollar. During March, gains resulted as the U.S. dollar advanced
   against the yen due to an increase in U.S. interest rates. Short Japanese
   yen positions held during the second quarter also recorded profits as the
   yen's value declined during May and June in response to weak Japanese
   economic data. During July, gains resulted after the U.S. dollar's value
   strengthened against the yen on significant interest-rate differentials
   between the U.S. and Japan. Market participants also drove the U.S. dollar
   higher against the yen during July following the release of strong U.S.
   economic data, and news that the U.S. Current-Account deficit had narrowed.
   During September, short Japanese yen positions profited after the yen's
   value declined in the wake of weak Japanese economic data. During the fourth
   quarter, short Japanese yen positions continued to record gains as the yen's
   value trended lower against the U.S. dollar after the potential for higher
   U.S. interest rates continued to bolster the value of the U.S. dollar. The
   Japanese yen was also pulled lower on investor sentiment that future action
   by the Chinese government regarding further Chinese yuan re-valuation was
   farther away than previously expected.

<PAGE>

DEAN WITTER CORNERSTONE FUND IV

FACTORS INFLUENCING ANNUAL TRADING GAINS: (continued)


..  Additional gains resulted during the second quarter from short positions in
   the Swiss franc versus the U.S. dollar after the U.S. dollar increased
   during May as China downplayed rumors of a move toward a flexible exchange
   rate and the franc moved lower on weaker-than-expected French economic data,
   the rejection of a proposed European Union constitution by French voters,
   and speculation that future European Constitution referendums would result
   in similar outcomes. During June, short franc positions continued to profit
   as its value declined amid market pessimism for future European integration,
   the release of weak European economic data, and greater-than-expected
   capital outflows into U.S. markets.

Managed futures investments are speculative, involve a high degree of risk, use
significant leverage, are generally illiquid, have substantial charges, are
subject to conflicts of interest, and are suitable only for the risk capital
portion of an investor's portfolio. Before investing in any managed futures
investment, qualified investors should read the prospectus or offering
documents carefully for additional information with respect to charges,
expenses, and risks. Past performance is no guarantee of future results.

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

  Demeter Management Corporation ("Demeter"), the general partner of Dean
Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III and Dean Witter
Cornerstone Fund IV (collectively, the "Partnerships"), is responsible for the
management of the Partnerships.

  Management of Demeter ("Management") is responsible for establishing and
maintaining adequate internal control over financial reporting. The internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles.

  The Partnerships' internal control over financial reporting includes those
policies and procedures that:

..  Pertain to the maintenance of records that, in reasonable detail, accurately
   and fairly reflect the transactions and dispositions of the assets of the
   Partnerships;

..  Provide reasonable assurance that transactions are recorded as necessary to
   permit preparation of financial statements in accordance with generally
   accepted accounting principles, and that the Partnerships' transactions are
   being made only in accordance with authorizations of Management and
   directors; and

..  Provide reasonable assurance regarding prevention or timely detection of
   unauthorized acquisition, use or disposition of the Partnerships' assets
   that could have a material effect on the financial statements.

  Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

<PAGE>

  Management assessed the effectiveness of each Partnership's internal control
over financial reporting as of December 31, 2005. In making this assessment,
Management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control--Integrated
Framework. Based on our assessment and those criteria, Management believes that
each Partnership maintained effective internal control over financial reporting
as of December 31, 2005.

  Deloitte & Touche LLP, the Partnerships' independent registered public
accounting firm, has issued an audit report on Management's assessment of the
Partnerships' internal control over financial reporting and on the
effectiveness of the Partnerships' internal control over financial reporting.
This report, which expresses unqualified opinions on Management's assessment
and on the effectiveness of the Partnerships' internal control over financial
reporting, appears under "Report of Independent Registered Public Accounting
Firm" on the following page.

/s/ Jeffrey A. Rothman
Jeffrey A. Rothman
President

/s/ Kevin Perry
Kevin Perry
Chief Financial Officer

New York, New York
March 21, 2006

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

  We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that Dean
Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III and Dean Witter
Cornerstone Fund IV (collectively, the "Partnerships") maintained effective
internal control over financial reporting as of December 31, 2005, based on
criteria established in Internal Control--Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The
Partnerships' management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an
opinion on management's assessment and an opinion on the effectiveness of the
Partnerships' internal control over financial reporting based on our audit.

  We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinions.

  A company's internal control over financial reporting is a process designed
by, or under the supervision of, the company's principal executive and
principal financial officers, or persons performing similar functions, and
effected by the company's board of directors, management, and other personnel
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly

<PAGE>

reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company's assets that could have a material effect on the financial
statements.

  Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

  In our opinion, management's assessment that the Partnerships maintained
effective internal control over financial reporting as of December 31, 2005, is
fairly stated, in all material respects, based on the criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Also in our opinion, the Partnerships
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2005, based on the criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

  We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the financial statements as of and
for the year ended December 31, 2005 of the Partnerships and our report dated
March 21, 2006 expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche LLP

New York, New York
March 21, 2006

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

  We have audited the accompanying statements of financial condition of Dean
Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III and Dean Witter
Cornerstone Fund IV (collectively, the "Partnerships"), including the schedules
of investments, as of December 31, 2005 and 2004, and the related statements of
operations, changes in partners' capital, and cash flows for each of the three
years in the period ended December 31, 2005. These financial statements are the
responsibility of the Partnerships' management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

  In our opinion, such financial statements present fairly, in all material
respects, the financial position of Dean Witter Cornerstone Fund II, Dean
Witter Cornerstone Fund III and Dean Witter Cornerstone Fund IV at December 31,
2005 and 2004, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2005, in conformity
with accounting principles generally accepted in the United States of America.

  As discussed in Note 1, in 2005 the Partnerships modified their
classification of cash within the statements of financial condition and the
related statements of cash flows.

  We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the
Partnerships' internal control over financial reporting as of December 31,
2005, based on the criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 21, 2006 expressed an unqualified opinion
on management's assessment of the effectiveness of the Partnerships' internal
control over financial reporting and an unqualified opinion on the
effectiveness of the Partnerships' internal control over financial reporting.

/s/ Deloitte & Touche LLP

New York, New York
March 21, 2006

<PAGE>

DEAN WITTER CORNERSTONE FUND II

STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                          ---------------------
                                                             2005       2004
                                                          ---------- ----------
                                                              $          $
<S>                                                       <C>        <C>
                                    ASSETS
Equity in futures interests trading accounts:
 Unrestricted cash                                        11,242,503 14,047,174
 Restricted cash                                           1,213,808  2,632,103
                                                          ---------- ----------
  Total Cash                                              12,456,311 16,679,277
                                                          ---------- ----------

 Net unrealized gain on open contracts (MS&Co.)              344,900  2,020,502
 Net unrealized gain (loss) on open contracts (MSIL)         173,143     (9,769)
                                                          ---------- ----------
  Total net unrealized gain on open contracts                518,043  2,010,733
                                                          ---------- ----------
  Total Trading Equity                                    12,974,354 18,690,010
Interest receivable (Morgan Stanley DW)                       35,476     27,129
Due from Morgan Stanley DW                                    11,710     62,388
                                                          ---------- ----------
  Total Assets                                            13,021,540 18,779,527
                                                          ========== ==========

                       LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable                                          333,219     57,887
Accrued management fees                                       37,886     54,665
Accrued administrative expenses                               32,208     37,292
                                                          ---------- ----------
  Total Liabilities                                          403,313    149,844
                                                          ---------- ----------
PARTNERS' CAPITAL
Limited Partners (3,261.160 and 3,898.182 Units,
 respectively)                                            12,240,749 18,161,153
General Partner (100.567 Units)                              377,478    468,530
                                                          ---------- ----------
  Total Partners' Capital                                 12,618,227 18,629,683
                                                          ---------- ----------
  Total Liabilities and Partners' Capital                 13,021,540 18,779,527
                                                          ========== ==========
NET ASSET VALUE PER UNIT                                    3,753.50   4,658.88
                                                          ========== ==========
</TABLE>

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                 FOR THE YEARS ENDED DECEMBER 31,
                                                ----------------------------------
                                                   2005        2004        2003
                                                ----------  ----------  ----------
                                                    $           $           $
<S>                                             <C>         <C>         <C>
INVESTMENT INCOME
 Interest income (Morgan Stanley DW)               367,313     208,174     197,038
                                                ----------  ----------  ----------

EXPENSES
 Brokerage commissions (Morgan Stanley DW)         833,584   1,104,683   1,373,338
 Management fees                                   506,875     672,937     843,500
 Transaction fees and costs                         48,642      83,591     106,566
 Common administrative expenses                     41,000      56,000      48,477
 Incentive fees                                     --           2,250       9,461
                                                ----------  ----------  ----------
  Total Expenses                                 1,430,101   1,919,461   2,381,342
                                                ----------  ----------  ----------

NET INVESTMENT LOSS                             (1,062,788) (1,711,287) (2,184,304)
                                                ----------  ----------  ----------

TRADING RESULTS
Trading profit (loss):
 Realized                                       (1,007,388)   (545,606)  3,071,019
 Net change in unrealized                       (1,492,690)    712,273    (752,680)
                                                ----------  ----------  ----------
                                                (2,500,078)    166,667   2,318,339
Proceeds from Litigation Settlement                  2,209         755      --
                                                ----------  ----------  ----------
  Total Trading Results                         (2,497,869)    167,422   2,318,339
                                                ----------  ----------  ----------

NET INCOME (LOSS)                               (3,560,657) (1,543,865)    134,035
                                                ==========  ==========  ==========

NET INCOME (LOSS) ALLOCATION:
Limited Partners                                (3,469,605) (1,511,432)    125,757
General Partner                                    (91,052)    (32,433)      8,278

NET INCOME (LOSS) PER UNIT:
Limited Partners                                   (905.38)    (322.51)      18.14
General Partner                                    (905.38)    (322.51)      18.14
</TABLE>

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

<PAGE>

DEAN WITTER CORNERSTONE FUND III

STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          ---------------------
                                                             2005       2004
                                                          ---------- ----------
                                                              $          $
 <S>                                                      <C>        <C>
                                    ASSETS
 Equity in futures interests trading accounts:
  Unrestricted cash                                       21,002,788 24,763,854
  Restricted cash                                          1,409,104  3,115,418
                                                          ---------- ----------
    Total Cash                                            22,411,892 27,879,272
                                                          ---------- ----------

  Net unrealized gain on open contracts (MSIL)               599,935     89,136
  Net unrealized gain on open contracts (MS&Co.)             271,196    372,392
                                                          ---------- ----------
    Total net unrealized gain on open contracts              871,131    461,528
                                                          ---------- ----------
    Total Trading Equity                                  23,283,023 28,340,800
 Interest receivable (Morgan Stanley DW)                      61,652     41,296
 Due from Morgan Stanley DW                                   41,210     15,120
                                                          ---------- ----------
    Total Assets                                          23,385,885 28,397,216
                                                          ========== ==========

                      LIABILITIES AND PARTNERS' CAPITAL
 LIABILITIES
 Redemptions payable                                         247,236    285,744
 Accrued administrative expenses                             112,360    119,670
 Accrued management fees                                      67,881     82,476
                                                          ---------- ----------
    Total Liabilities                                        427,477    487,890
                                                          ---------- ----------
 PARTNERS' CAPITAL
 Limited Partners (5,693.493 and 6,512.996 Units,
  respectively)                                           22,552,335 27,476,835
 General Partner (102.516 Units)                             406,073    432,491
                                                          ---------- ----------
    Total Partners' Capital                               22,958,408 27,909,326
                                                          ---------- ----------
    Total Liabilities and Partners' Capital               23,385,885 28,397,216
                                                          ========== ==========
 NET ASSET VALUE PER UNIT                                   3,961.07   4,218.77
                                                          ========== ==========
</TABLE>

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                 ----------------------------------
                                                    2005        2004        2003
                                                 ----------  ----------  ----------
                                                     $           $           $
<S>                                              <C>         <C>         <C>
INVESTMENT INCOME
 Interest income (Morgan Stanley DW)                602,016     306,275     233,160
                                                 ----------  ----------  ----------

EXPENSES
 Brokerage commissions (Morgan Stanley DW)          948,366   1,084,092   1,257,269
 Management fees                                    833,891     982,868     998,731
 Common administrative expenses                      70,000      88,000      78,892
 Transaction fees and costs                          51,605      57,678      68,929
                                                 ----------  ----------  ----------
   Total Expenses                                 1,903,862   2,212,638   2,403,821
                                                 ----------  ----------  ----------

NET INVESTMENT LOSS                              (1,301,846) (1,906,363) (2,170,661)
                                                 ----------  ----------  ----------

TRADING RESULTS
Trading profit (loss):
 Realized                                          (992,550)  6,007,562   3,641,193
 Net change in unrealized                           409,603  (2,000,462)    909,383
                                                 ----------  ----------  ----------
                                                   (582,947)  4,007,100   4,550,576
Proceeds from Litigation Settlement                  26,287      27,998      --
                                                 ----------  ----------  ----------
   Total Trading Results                           (556,660)  4,035,098   4,550,576
                                                 ----------  ----------  ----------

NET INCOME (LOSS)                                (1,858,506)  2,128,735   2,379,915
                                                 ==========  ==========  ==========

NET INCOME (LOSS) ALLOCATION:
Limited Partners                                 (1,832,088)  2,097,010   2,339,613
General Partner                                     (26,418)     31,725      40,302

NET INCOME (LOSS) PER UNIT:
Limited Partners                                    (257.70)     309.46      317.10
General Partner                                     (257.70)     309.46      317.10
</TABLE>

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

<PAGE>

DEAN WITTER CORNERSTONE FUND IV

STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          ---------------------
                                                             2005       2004
                                                          ---------- ----------
                                                              $          $
 <S>                                                      <C>        <C>
                                    ASSETS
 Equity in futures interests trading accounts:
  Unrestricted cash                                       64,125,073 89,655,633
  Restricted cash                                             --         12,902
                                                          ---------- ----------
    Total Cash                                            64,125,073 89,668,535

  Net unrealized gain on open contracts (MS&Co.)           1,973,887  6,347,857
                                                          ---------- ----------
    Total Trading Equity                                  66,098,960 96,016,392
 Interest receivable (Morgan Stanley DW)                     170,317    122,840
 Due from Morgan Stanley DW                                   55,750     32,362
                                                          ---------- ----------
    Total Assets                                          66,325,027 96,171,594
                                                          ========== ==========

                      LIABILITIES AND PARTNERS' CAPITAL
 LIABILITIES
 Redemptions payable                                       1,232,662    801,350
 Accrued management fees                                     193,125    280,141
 Accrued administrative expenses                             110,888    123,214
                                                          ---------- ----------
    Total Liabilities                                      1,536,675  1,204,705
                                                          ---------- ----------
 PARTNERS' CAPITAL
 Limited Partners (10,902.992 and 12,873.981 Units,
  respectively)                                           64,109,338 93,819,259
 General Partner (115.479 and 157.479 Units,
  respectively)                                              679,014  1,147,630
                                                          ---------- ----------
    Total Partners' Capital                               64,788,352 94,966,889
                                                          ---------- ----------
    Total Liabilities and Partners' Capital               66,325,027 96,171,594
                                                          ========== ==========
 NET ASSET VALUE PER UNIT                                   5,879.98   7,287.51
                                                          ========== ==========
</TABLE>

STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                   FOR THE YEARS ENDED DECEMBER 31,
                                                 -----------------------------------
                                                     2005        2004        2003
                                                 -----------  ----------  ----------
                                                      $           $           $
<S>                                              <C>          <C>         <C>
INVESTMENT INCOME
 Interest income (Morgan Stanley DW)               1,848,451     969,606     858,078
                                                 -----------  ----------  ----------

EXPENSES
 Brokerage commissions (Morgan Stanley DW)         2,714,539   2,978,359   3,456,636
 Management fees                                   2,619,089   3,269,250   3,904,764
 Common administrative expenses                      139,000     178,000     156,630
 Incentive fees                                       --          (6,682)  2,307,973
                                                 -----------  ----------  ----------
   Total Expenses                                  5,472,628   6,418,927   9,826,003
                                                 -----------  ----------  ----------

NET INVESTMENT LOSS                               (3,624,177) (5,449,321) (8,967,925)
                                                 -----------  ----------  ----------

TRADING RESULTS
Trading profit (loss):
 Realized                                        (10,036,703) (7,816,724) 26,693,128
 Net change in unrealized                         (4,373,970)  3,301,580  (3,788,611)
                                                 -----------  ----------  ----------
   Total Trading Results                         (14,410,673) (4,515,144) 22,904,517
                                                 -----------  ----------  ----------

NET INCOME (LOSS)                                (18,034,850) (9,964,465) 13,936,592
                                                 ===========  ==========  ==========

NET INCOME (LOSS) ALLOCATION:
Limited Partners                                 (17,820,295) (9,861,124) 13,766,843
General Partner                                     (214,555)   (103,341)    169,749

NET INCOME (LOSS) PER UNIT:
Limited Partners                                   (1,407.53)    (656.22)     948.41
General Partner                                    (1,407.53)    (656.22)     948.41
</TABLE>

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

<PAGE>

DEAN WITTER CORNERSTONE FUND II

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003

<TABLE>
<CAPTION>
                                   UNITS OF
                                  PARTNERSHIP  LIMITED     GENERAL
                                   INTEREST    PARTNERS    PARTNER     TOTAL
                                  ----------- ----------  --------  ----------
                                                  $           $          $
<S>                               <C>         <C>         <C>       <C>
Partners' Capital, December 31,
2002                               4,731.158  22,899,223   582,685  23,481,908
Net income                             --        125,757     8,278     134,035
Redemptions                         (304.802) (1,476,534)  (90,000) (1,566,534)
                                   ---------  ----------  --------  ----------
Partners' Capital, December 31,
2003                               4,426.356  21,548,446   500,963  22,049,409
Net loss                               --     (1,511,432)  (32,433) (1,543,865)
Redemptions                         (427.607) (1,875,861)    --     (1,875,861)
                                   ---------  ----------  --------  ----------
Partners' Capital, December 31,
2004                               3,998.749  18,161,153   468,530  18,629,683
Net loss                               --     (3,469,605)  (91,052) (3,560,657)
Redemptions                         (637.022) (2,450,799)    --     (2,450,799)
                                   ---------  ----------  --------  ----------
Partners' Capital,
December 31, 2005                  3,361.727  12,240,749   377,478  12,618,227
                                   =========  ==========  ========  ==========

DEAN WITTER CORNERSTONE FUND III

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003

                                   UNITS OF
                                  PARTNERSHIP  LIMITED     GENERAL
                                   INTEREST    PARTNERS    PARTNER     TOTAL
                                  ----------- ----------  --------  ----------
                                                  $           $          $
Partners' Capital, December 31,
2002                               7,750.175  27,329,760   510,464  27,840,224
Net income                             --      2,339,613    40,302   2,379,915
Redemptions                         (588.606) (2,073,369) (150,000) (2,223,369)
                                   ---------  ----------  --------  ----------
Partners' Capital, December 31,
2003                               7,161.569  27,596,004   400,766  27,996,770
Net income                             --      2,097,010    31,725   2,128,735
Redemptions                         (546.057) (2,216,179)    --     (2,216,179)
                                   ---------  ----------  --------  ----------
Partners' Capital, December 31,
2004                               6,615.512  27,476,835   432,491  27,909,326
Net loss                               --     (1,832,088)  (26,418) (1,858,506)
Redemptions                         (819.503) (3,092,412)    --     (3,092,412)
                                   ---------  ----------  --------  ----------
Partners' Capital,
December 31, 2005                  5,796.009  22,552,335   406,073  22,958,408
                                   =========  ==========  ========  ==========
</TABLE>

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

<PAGE>

DEAN WITTER CORNERSTONE FUND IV

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003

<TABLE>
<CAPTION>
                                 UNITS OF
                                PARTNERSHIP   LIMITED     GENERAL
                                 INTEREST     PARTNERS    PARTNER      TOTAL
                                ----------- -----------  ---------  -----------
                                                 $           $           $
<S>                             <C>         <C>          <C>        <C>
Partners' Capital,
December 31, 2002               15,416.291  106,345,673  1,496,222  107,841,895
Net income                          --       13,766,843    169,749   13,936,592
Redemptions                     (1,261.461)  (8,921,278)  (415,000)  (9,336,278)
                                ----------  -----------  ---------  -----------
Partners' Capital,
December 31, 2003               14,154.830  111,191,238  1,250,971  112,442,209
Net loss                            --       (9,861,124)  (103,341)  (9,964,465)
Redemptions                     (1,123.370)  (7,510,855)     --      (7,510,855)
                                ----------  -----------  ---------  -----------
Partners' Capital, December
31, 2004                        13,031.460   93,819,259  1,147,630   94,966,889
Net loss                            --      (17,820,295)  (214,555) (18,034,850)
Redemptions                     (2,012.989) (11,889,626)  (254,061) (12,143,687)
                                ----------  -----------  ---------  -----------
Partners' Capital,
December 31, 2005               11,018.471   64,109,338    679,014   64,788,352
                                ==========  ===========  =========  ===========
</TABLE>

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

<PAGE>

DEAN WITTER CORNERSTONE FUND II

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                              FOR THE YEARS ENDED DECEMBER 31,
                                             ----------------------------------
                                                2005        2004        2003
                                             ----------  ----------  ----------
                                                 $           $           $
<S>                                          <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                            (3,560,657) (1,543,865)    134,035
Noncash item included in net income (loss):
 Net change in unrealized                     1,492,690    (712,273)    752,680
(Increase) decrease in operating assets:
 Restricted cash                              1,418,295     312,473    (416,702)
 Interest receivable (Morgan Stanley DW)         (8,347)    (14,057)      5,244
 Due from Morgan Stanley DW                      50,678         311      44,537
Decrease in operating liabilities:
 Accrued management fees                        (16,779)    (10,248)     (4,588)
 Accrued administrative expenses                 (5,084)     (8,679)     (4,575)
 Accrued incentive fees                          --          --         (40,483)
                                             ----------  ----------  ----------
Net cash provided by (used for) operating
 activities                                    (629,204) (1,976,338)    470,148
                                             ----------  ----------  ----------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid from redemptions of Units          (2,175,467) (1,959,376) (1,661,824)
                                             ----------  ----------  ----------
Net cash used for financing activities       (2,175,467) (1,959,376) (1,661,824)
                                             ----------  ----------  ----------
Net decrease in unrestricted cash            (2,804,671) (3,935,714) (1,191,676)

Unrestricted cash at beginning of period     14,047,174  17,982,888  19,174,564
                                             ----------  ----------  ----------

Unrestricted cash at end of period           11,242,503  14,047,174  17,982,888
                                             ==========  ==========  ==========
</TABLE>

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

<PAGE>

DEAN WITTER CORNERSTONE FUND III

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                              FOR THE YEARS ENDED DECEMBER 31,
                                             ----------------------------------
                                                2005        2004        2003
                                             ----------  ----------  ----------
                                                 $           $           $
<S>                                          <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                            (1,858,506)  2,128,735   2,379,915
Noncash item included in net income (loss):
 Net change in unrealized                      (409,603)  2,000,462    (909,383)
(Increase) decrease in operating assets:
 Restricted cash                              1,706,314     783,002  (2,285,909)
 Interest receivable (Morgan Stanley DW)        (20,356)    (25,003)      5,301
 Due from Morgan Stanley DW                     (26,090)    (15,120)    264,529
Increase (decrease) in operating
 liabilities:
 Accrued administrative expenses                 (7,310)    (29,848)      4,501
 Accrued management fees                        (14,595)        231         384
                                             ----------  ----------  ----------
Net cash provided by (used for) operating
 activities                                    (630,146)  4,842,459    (540,662)
                                             ----------  ----------  ----------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid from redemptions of Units          (3,130,920) (2,049,540) (2,248,481)
                                             ----------  ----------  ----------
Net cash used for financing activities       (3,130,920) (2,049,540) (2,248,481)
                                             ----------  ----------  ----------
Net increase (decrease) in unrestricted cash (3,761,066)  2,792,919  (2,789,143)

Unrestricted cash at beginning of period     24,763,854  21,970,935  24,760,078
                                             ----------  ----------  ----------

Unrestricted cash at end of period           21,002,788  24,763,854  21,970,935
                                             ==========  ==========  ==========
</TABLE>

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

<PAGE>

DEAN WITTER CORNERSTONE FUND IV

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                            FOR THE YEARS ENDED DECEMBER 31,
                                         -------------------------------------
                                             2005         2004         2003
                                         -----------  -----------  -----------
                                              $            $            $
<S>                                      <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                        (18,034,850)  (9,964,465)  13,936,592
Noncash item included in net income
 (loss):
 Net change in unrealized                  4,373,970   (3,301,580)   3,788,611
(Increase) decrease in operating assets:
 Restricted cash                              12,902      (12,902)      --
 Interest receivable (Morgan Stanley DW)     (47,477)     (61,319)      18,628
 Due from Morgan Stanley DW                  (23,388)     (32,362)      --
Increase (decrease) in operating
 liabilities:
 Accrued management fees                     (87,016)     (50,454)       8,868
 Accrued administrative expenses             (12,326)     (53,805)       7,863
 Accrued incentive fees                       --           (6,682)  (1,493,339)
                                         -----------  -----------  -----------
Net cash provided by (used for)
 operating activities                    (13,818,185) (13,483,569)  16,267,223
                                         -----------  -----------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid from redemptions of Units      (11,712,375)  (7,276,887)  (9,411,443)
                                         -----------  -----------  -----------
Net cash used for financing activities   (11,712,375)  (7,276,887)  (9,411,443)
                                         -----------  -----------  -----------
Net increase (decrease) in unrestricted
 cash                                    (25,530,560) (20,760,456)   6,855,780

Unrestricted cash at beginning of period  89,655,633  110,416,089  103,560,309
                                         -----------  -----------  -----------

Unrestricted cash at end of period        64,125,073   89,655,633  110,416,089
                                         ===========  ===========  ===========
</TABLE>

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

<PAGE>

DEAN WITTER CORNERSTONE II

SCHEDULES OF INVESTMENTS

DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                  LONG UNREALIZED  PERCENTAGE   SHORT UNREALIZED  PERCENTAGE
FUTURES AND FORWARD CONTRACTS:                                      GAIN/(LOSS)   OF NET ASSETS   GAIN/(LOSS)    OF NET ASSETS
------------------------------                                    --------------- ------------- ---------------- -------------
2005 PARTNERSHIP NET ASSETS: $12,618,227                                 $              %              $               %
<S>                                                               <C>             <C>           <C>              <C>
Commodity                                                               98,649         0.78         (112,434)        (0.89)
Equity                                                                  59,908         0.48            --              --
Foreign currency                                                       (47,986)       (0.38)         322,181          2.56
Interest rate                                                            3,713         0.03          (34,872)        (0.28)
                                                                     ---------        -----         --------         -----
  Grand Total:                                                         114,284         0.91          174,875          1.39
                                                                     =========        =====         ========         =====
  Unrealized Currency Gain

  Total Net Unrealized Gain per Statement of Financial Condition


2004 PARTNERSHIP NET ASSETS: $18,629,683
Commodity                                                              257,829         1.38          247,455          1.33
Equity                                                                  52,788         0.28         (116,000)        (0.62)
Foreign currency                                                     1,392,929         7.48*           --              --
Interest rate                                                          (37,755)       (0.20)         (10,321)        (0.06)
                                                                     ---------        -----         --------         -----
  Grand Total:                                                       1,665,791         8.94          121,134          0.65
                                                                     =========        =====         ========         =====
  Unrealized Currency Gain

  Total Net Unrealized Gain per Statement of Financial Condition

</TABLE>
<TABLE>
<CAPTION>
                                                                  NET UNREALIZED
FUTURES AND FORWARD CONTRACTS:                                     GAIN/(LOSS)
------------------------------                                    --------------
2005 PARTNERSHIP NET ASSETS: $12,618,227                                $
<S>                                                               <C>
Commodity                                                             (13,785)
Equity                                                                 59,908
Foreign currency                                                      274,195
Interest rate                                                         (31,159)
                                                                    ---------
  Grand Total:                                                        289,159

  Unrealized Currency Gain                                            228,884
                                                                    ---------
  Total Net Unrealized Gain per Statement of Financial Condition      518,043
                                                                    =========

2004 PARTNERSHIP NET ASSETS: $18,629,683
Commodity                                                             505,284
Equity                                                                (63,212)
Foreign currency                                                    1,392,929
Interest rate                                                         (48,076)
                                                                    ---------
  Grand Total:                                                      1,786,925

  Unrealized Currency Gain                                            223,808
                                                                    ---------
  Total Net Unrealized Gain per Statement of Financial Condition    2,010,733
                                                                    =========
</TABLE>
* No single contract's value exceeds 5% of Net Assets.

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

<PAGE>

DEAN WITTER CORNERSTONE III

SCHEDULES OF INVESTMENTS

DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
                                                                  LONG UNREALIZED  PERCENTAGE   SHORT UNREALIZED  PERCENTAGE
FUTURES AND FORWARD CONTACTS:                                       GAIN/(LOSS)   OF NET ASSETS   GAIN/(LOSS)    OF NET ASSETS
-----------------------------                                     --------------- ------------- ---------------- -------------
2005 PARTNERSHIP NET ASSETS: $22,958,408                                 $              %              $               %
<S>                                                               <C>             <C>           <C>              <C>
Commodity                                                             873,591          3.81          (10,356)        (0.05)
Equity                                                                (15,962)        (0.07)           --              --
Foreign currency                                                     (196,636)        (0.86)         330,718          1.44
Interest rate                                                          10,772          0.05           41,064          0.18
                                                                     --------         -----         --------         -----
  Grand Total:                                                        671,765          2.93          361,426          1.57
                                                                     ========         =====         ========         =====
  Unrealized Currency Loss

  Total Net Unrealized Gain per Statement of Financial Condition


2004 PARTNERSHIP NET ASSETS: $27,909,326
Commodity                                                             196,582          0.70           26,779          0.09
Equity                                                                358,469          1.29            --               --
Foreign currency                                                      165,230          0.59         (371,243)        (1.33)
Interest rate                                                         125,718          0.45           71,812          0.26
                                                                     --------         -----         --------         -----
  Grand Total:                                                        845,999          3.03         (272,652)        (0.98)
                                                                     ========         =====         ========         =====
  Unrealized Currency Loss

  Total Net Unrealized Gain per Statement of Financial Condition

</TABLE>
<TABLE>
<CAPTION>
                                                                  NET UNREALIZED
FUTURES AND FORWARD CONTACTS:                                      GAIN/(LOSS)
-----------------------------                                     --------------
2005 PARTNERSHIP NET ASSETS: $22,958,408                                $
<S>                                                               <C>
Commodity                                                             863,235
Equity                                                                (15,962)
Foreign currency                                                      134,082
Interest rate                                                          51,836
                                                                    ---------
  Grand Total:                                                      1,033,191

  Unrealized Currency Loss                                           (162,060)
                                                                    ---------
  Total Net Unrealized Gain per Statement of Financial Condition      871,131
                                                                    =========

2004 PARTNERSHIP NET ASSETS: $27,909,326
Commodity                                                             223,361
Equity                                                                358,469
Foreign currency                                                     (206,013)
Interest rate                                                         197,530
                                                                    ---------
  Grand Total:                                                        573,347

  Unrealized Currency Loss                                           (111,819)
                                                                    ---------
  Total Net Unrealized Gain per Statement of Financial Condition      461,528
                                                                    =========
</TABLE>

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

<PAGE>


DEAN WITTER CORNERSTONE IV

SCHEDULES OF INVESTMENTS

DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                  LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF
FUTURES AND FORWARD CONTRACTS:                                      GAIN/(LOSS)    NET ASSETS     GAIN/(LOSS)     NET ASSETS
------------------------------                                    --------------- ------------- ---------------- -------------
2005 PARTNERSHIP NET ASSETS: $64,788,352                                 $              %              $               %
<S>                                                               <C>             <C>           <C>              <C>
Foreign currency                                                      (325,055)       (0.50)       2,298,942         3.55
                                                                     ---------        -----        ---------         ----
  Grand Total:                                                        (325,055)       (0.50)       2,298,942         3.55
                                                                     =========        =====        =========         ====
  Unrealized Currency Gain/(Loss)

  Total Net Unrealized Gain per Statement of Financial Condition

2004 PARTNERSHIP NET ASSETS: $94,966,889
Foreign currency                                                     6,231,832         6.56*         116,025         0.12
                                                                     ---------        -----        ---------         ----
  Grand Total:                                                       6,231,832         6.56          116,025         0.12
                                                                     =========        =====        =========         ====
  Unrealized Currency Gain/(Loss)

  Total Net Unrealized Gain per Statement of Financial Condition

</TABLE>
<TABLE>
<CAPTION>
                                                                  NET UNREALIZED
FUTURES AND FORWARD CONTRACTS:                                     GAIN/(LOSS)
------------------------------                                    --------------
2005 PARTNERSHIP NET ASSETS: $64,788,352                                $
<S>                                                               <C>
Foreign currency                                                    1,973,887
                                                                    ---------
  Grand Total:                                                      1,973,887

  Unrealized Currency Gain/(Loss)                                       --
                                                                    ---------
  Total Net Unrealized Gain per Statement of Financial Condition    1,973,887
                                                                    =========
2004 PARTNERSHIP NET ASSETS: $94,966,889
Foreign currency                                                    6,347,857
                                                                    ---------
  Grand Total:                                                      6,347,857

  Unrealized Currency Gain/(Loss)                                      --
                                                                    ---------
  Total Net Unrealized Gain per Statement of Financial Condition    6,347,857
                                                                    =========
</TABLE>

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

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

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS

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

ORGANIZATION.  Dean Witter Cornerstone Fund II ("Cornerstone II"), Dean Witter
Cornerstone Fund III ("Cornerstone III"), and Dean Witter Cornerstone Fund IV
("Cornerstone IV") (individually, a "Partnership", or collectively, the
"Partnerships"), are limited partnerships organized to engage in the
speculative trading of futures contracts, options on futures contracts, and
forward contracts on foreign currencies and other commodity interests
(collectively, "Futures Interests").
  The general partner for each Partnership is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Morgan Stanley DW Inc.
("Morgan Stanley DW"). The clearing commodity brokers for Cornerstone II and
Cornerstone III are Morgan Stanley & Co. Incorporated ("MS&Co.") and Morgan
Stanley & Co. International Limited ("MSIL"). Cornerstone IV's sole clearing
commodity broker is MS&Co. Demeter, Morgan Stanley DW, MS&Co., and MSIL are
wholly-owned subsidiaries of Morgan Stanley.
  Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by Demeter and the limited partners
based upon their proportional ownership interests.

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

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)


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

  The Partnerships' functional currency is the U.S. dollar; however, it
transacts business in currencies other than the U.S. dollar. Assets and
liabilities denominated in currencies other than the U.S. dollar are translated
into U.S. dollars at the rates in effect at the date of the Statements of
Financial Condition. Income and expense items denominated in currencies other
than the U.S. dollar are translated into U.S. dollars at the rates in effect
during the period. Gains and losses resulting from the translation to U.S.
dollars are reported in income currently.

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

CONDENSED SCHEDULES OF INVESTMENTS.  In December 2003, the American Institute
of Certified Public Accountants' Accounting Standards Executive Committee
issued Statement of Position 03-4 ("SOP 03-4") "Reporting Financial Highlights
and Schedule of Investments by Nonregistered Investment Partnerships: An
Amendment to the Audit and Accounting Guide Audits Of Investment Companies and
AICPA Statement of Position 95-2, Financial Reporting By Nonpublic Investment
Partnerships". SOP 03-4 requires commodity pools to disclose the number of
contracts, the contracts' expiration dates and the cumulative unrealized
gains/(losses) on open futures contracts, when the cumulative unrealized
gains/(losses) on an open futures contract exceeds 5% of Net Assets, taking
long and short positions into account separately. SOP 03-4 also requires ratios
for net investment income/(losses), expenses before and after incentive fees,
and net income/(losses) based on average net assets, and ratios for total
return before and after incentive fees based on average units outstanding to be
disclosed in Financial Highlights. SOP 03-4 was effective for fiscal years
ending after December 15, 2003.

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)


EQUITY IN FUTURES INTERESTS TRADING ACCOUNTS.  The Partnerships' asset "Equity
in futures interests trading accounts", reflected on the Statements of
Financial Condition, consists of (A) cash on deposit with Morgan Stanley DW,
MS&Co., and MSIL for Cornerstone II and Cornerstone III, and Morgan Stanley DW
and MS&Co. for Cornerstone IV, to be used as margin for trading; (B) net
unrealized gains or losses on open contracts, which are valued at market and
calculated as the difference between original contract value and market value;
and (C) net option premiums, which represent the net of all monies paid and/or
received for such option premiums.
  The Partnerships, in their normal course of business, enter into various
contracts with MS&Co. and/or MSIL acting as their commodity brokers. Pursuant
to brokerage agreements with MS&Co. and/or MSIL, to the extent that such
trading results in unrealized gains or losses, these amounts are offset and
reported on a net basis on the Partnerships' Statements of Financial Condition.
  The Partnerships have offset the fair value amounts recognized for forward
contracts executed with the same counterparty as allowable under the terms of
their master netting agreements with MS&Co., the sole counterparty on such
contracts. The Partnerships have consistently applied their right to offset.

BROKERAGE COMMISSIONS AND RELATED TRANSACTION FEES AND COSTS.  Brokerage
commissions and related transaction fees and costs for each Partnership are
accrued on a half-turn basis at 80% and 100%, respectively, of the rates Morgan
Stanley DW and MS&Co., respectively, charges parties that are not clearinghouse
members. Brokerage commissions and transaction fees and costs combined for each
Partnership are capped at  13/20 of 1% per month (a 7.8% maximum annual rate)
of the adjusted Net Assets allocated to each trading program employed by the
Partnerships' trading managers.

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)


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

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

DISTRIBUTIONS.  Distributions, other than redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date. Demeter does not intend to make any distributions of the
Partnerships' profits.

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

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

LITIGATION SETTLEMENT.  On February 27, 2002, Cornerstone II and Cornerstone
III received notification of a preliminary entitlement to payment from the
Sumitomo Copper Litigation Settlement Administrator, and each Partnership
received settlement award payments in the amount of $76,613 and $2,842,492,
respectively, during August 2002, $755 and $27,998, respectively, during July
2004 and $2,209 and $26,287, respectively, during November 2005. Any amounts
received are accounted for in the period received, for the benefit of the
limited partners at the date of receipt.

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)


RECLASSIFICATIONS.  Certain prior year amounts relating to cash balances were
reclassified on the Statements of Financial Condition and the related
Statements of Cash Flows to conform to 2005 presentation. Such
reclassifications have no impact on the Partnerships' reported net income
(loss).

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

--------------------------------------------------------------------------------
3. TRADING MANAGERS
Demeter, on behalf of each Partnership, retains certain commodity trading
managers to make all trading decisions for the Partnerships. The trading
managers for each Partnership at December 31, 2005 were as follows:

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

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

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

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

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

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)


INCENTIVE FEE.  Each Partnership pays an annual incentive fee equal to 15% of
the new appreciation in Net Assets, as defined in the Limited Partnership
Agreements, as of the end of each annual incentive period ending December 31,
except for Cornerstone IV, which pays incentive fee at the end of each annual
incentive period ending May 31. New appreciation represents the amount by which
Net Assets are increased by profits from futures, forwards, and options trading
that exceed losses after brokerage commissions, management fees, transaction
fees and costs, and common administrative expenses are deducted. Such incentive
fee is accrued in each month in which new appreciation occurs. In those months
in which new appreciation is negative, previous accruals, if any, during the
incentive period are reduced. In those instances in which a limited partner
redeems an investment, the incentive fee (if earned through a redemption date)
is paid on that redemption to the trading manager in the month of such
redemption.

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

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)


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

(1)One or more underlying notional amounts or payment provisions;

(2)Requires no initial net investment or a smaller initial net investment than
   would be required relative to changes in market factors;

(3)Terms require or permit net settlement.

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

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

CORNERSTONE II

<TABLE>
<CAPTION>
                      NET UNREALIZED GAINS
                        ON OPEN CONTRACTS       LONGEST MATURITIES
                  ----------------------------- -------------------
                              OFF-                          OFF-
                  EXCHANGE- EXCHANGE-           EXCHANGE- EXCHANGE-
             YEAR  TRADED    TRADED     TOTAL    TRADED    TRADED
             ---- --------- --------- --------- --------- ---------
                      $         $         $
             <S>  <C>       <C>       <C>       <C>       <C>
             2005  239,383    278,660   518,043 Dec. 2006 Mar. 2006
             2004  622,026  1,388,707 2,010,733 Dec. 2005 Mar. 2005
</TABLE>

CORNERSTONE III

<TABLE>
<CAPTION>
                     NET UNREALIZED GAINS /
                   (LOSSES) ON OPEN CONTRACTS  LONGEST MATURITIES
                   --------------------------- -------------------
                               OFF-                        OFF-
                   EXCHANGE- EXCHANGE-         EXCHANGE- EXCHANGE-
              YEAR  TRADED    TRADED    TOTAL   TRADED    TRADED
              ---- --------- --------- ------- --------- ---------
                       $         $        $
              <S>  <C>       <C>       <C>     <C>       <C>
              2005  730,649   140,482  871,131 Jun. 2007 Mar. 2006
              2004  664,621  (203,093) 461,528 Jun. 2006 Mar. 2005
</TABLE>

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)


CORNERSTONE IV

<TABLE>
<CAPTION>
                      NET UNREALIZED GAINS
                        ON OPEN CONTRACTS       LONGEST MATURITIES
                  ----------------------------- -------------------
                              OFF-                          OFF-
                  EXCHANGE- EXCHANGE-           EXCHANGE- EXCHANGE-
             YEAR  TRADED    TRADED     TOTAL    TRADED    TRADED
             ---- --------- --------- --------- --------- ---------
                      $         $         $
             <S>  <C>       <C>       <C>       <C>       <C>
             2005    --     1,973,887 1,973,887    --     Mar. 2006
             2004    --     6,347,857 6,347,857    --     Mar. 2005
</TABLE>

  The Partnerships have credit risk associated with counterparty
nonperformance. As of the date of the financial statement, the credit risk
associated with the instruments in which the Partnerships trade is limited to
the amounts reflected in the Partnerships' Statements of Financial Condition.

  The Partnerships also have credit risk because Morgan Stanley DW, MS&Co.,
and/or MSIL act as the futures commission merchants or the counterparties, with
respect to most of the Partnerships' assets. Exchange-traded futures, 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/or MSIL, each as a futures commission merchant for each Partnership's
exchange-traded futures, forward, and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures Trading Commission,
to segregate from their own assets, and for the sole benefit of their commodity
customers, all funds held by them with respect to exchange-traded futures,
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 at December 31, 2005
and 2004 respectively, $12,695,694 and $17,301,303 for Cornerstone II and
$23,142,541 and $28,543,893 for Cornerstone III. With respect to each
Partnership's off-exchange-traded forward currency contracts, there are no
daily exchange-required settlements of 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

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(continued)

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 Partnerships are at risk to the ability of MS&Co., the sole counterparty on
all such contracts, to perform. Each Partnership has a netting agreement with
MS&Co. These agreements, which seek to reduce both the Partnerships' and
MS&Co.'s exposure on off-exchange-traded forward currency contracts, should
materially decrease the Partnerships' credit risk in the event of MS&Co.'s
bankruptcy or insolvency.

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

CORNERSTONE II

<TABLE>
<S>                                                                   <C>
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1, 2005:                                     $4,658.88
                                                                      ---------
NET OPERATING RESULTS:
   Interest Income                                                        99.05
   Expenses                                                             (385.64)
   Realized Loss                                                        (216.88)
   Unrealized Loss                                                      (402.51)
   Proceeds from Litigation Settlement                                     0.60
                                                                      ---------
   Net Loss                                                             (905.38)
                                                                      ---------
NET ASSET VALUE, DECEMBER 31, 2005:                                   $3,753.50
                                                                      =========

FOR THE 2005 CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
   Net Investment Loss                                                   (7.5)%
   Expenses before Incentive Fees                                        10.0 %
   Expenses after Incentive Fees                                         10.0 %
   Net Loss                                                             (25.0)%
TOTAL RETURN BEFORE INCENTIVE FEES                                      (19.4)%
TOTAL RETURN AFTER INCENTIVE FEES                                       (19.4)%

INCEPTION-TO-DATE RETURN                                                285.0 %
COMPOUND ANNUALIZED RETURN                                                6.6 %
</TABLE>

<PAGE>

DEAN WITTER CORNERSTONE FUNDS

NOTES TO FINANCIAL STATEMENTS
(concluded)


CORNERSTONE III

<TABLE>
<S>                                                                   <C>
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1, 2005:                                     $4,218.77
                                                                      ---------
NET OPERATING RESULTS:
   Interest Income                                                        96.39
   Expenses                                                             (304.82)
   Realized Loss                                                        (119.06)
   Unrealized Gain                                                        65.58
   Proceeds from Litigation Settlement                                     4.21
                                                                      ---------
   Net Loss                                                             (257.70)
                                                                      ---------
NET ASSET VALUE, DECEMBER 31, 2005:                                   $3,961.07
                                                                      =========

FOR THE 2005 CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
   Net Investment Loss                                                   (5.5)%
   Expenses before Incentive Fees                                         8.1 %
   Expenses after Incentive Fees                                          8.1 %
   Net Loss                                                              (7.9)%
TOTAL RETURN BEFORE INCENTIVE FEES                                       (6.1)%
TOTAL RETURN AFTER INCENTIVE FEES                                        (6.1)%

INCEPTION-TO-DATE RETURN                                                306.3 %
COMPOUND ANNUALIZED RETURN                                                6.9 %
</TABLE>

CORNERSTONE IV

<TABLE>
<S>                                                                   <C>
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1, 2005:                                     $ 7,287.51
                                                                      ----------
NET OPERATING RESULTS:
   Interest Income                                                        151.80
   Expenses                                                              (449.43)
   Realized Loss                                                         (750.70)
   Unrealized Loss                                                       (359.20)
                                                                      ----------
   Net Loss                                                            (1,407.53)
                                                                      ----------
NET ASSET VALUE, DECEMBER 31, 2005:                                   $ 5,879.98
                                                                      ==========

FOR THE 2005 CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
   Net Investment Loss                                                    (4.9)%
   Expenses before Incentive Fees                                          7.4 %
   Expenses after Incentive Fees                                           7.4 %
   Net Loss                                                              (24.5)%
TOTAL RETURN BEFORE INCENTIVE FEES                                       (19.3)%
TOTAL RETURN AFTER INCENTIVE FEES                                        (19.3)%

INCEPTION-TO-DATE RETURN                                                 503.1 %
COMPOUND ANNUALIZED RETURN                                                10.1 %
</TABLE>

<PAGE>

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                                   STANDARD
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                                     PAID
                                  PERMIT #374
                                 LANCASTER, PA

                    Demeter Management Corporation
                    330 Madison Avenue, 8th Floor
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