WITTER DEAN DIVERSIFIED FUTURES FUND II L P - 10-Q Quarterly Report

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

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2005 or

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

Commission File Number 0-17446

DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.

(Exact name of registrant as specified in its charter)

Delaware 13-3490286
(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

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

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

Yes X No___________

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

Yes No X

DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31, 2005

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
STATEMENTS OF FINANCIAL CONDITION

DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
STATEMENTS OF OPERATIONS
(Unaudited)

DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
STATEMENTS OF CHANGES IN PARTNERS? CAPITAL
For the Quarters Ended March 31, 2005 and 2004
(Unaudited)

DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)

DEAN WITTER DIVERSIFIED FUTURES FUND II L.P.
NOTES TO FINANCIAL STATEMENTS

March 31, 2005

(Unaudited)

The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Dean Witter Diversified Futures Fund II L.P. (the
"Partnership"). The financial statements and condensed notes
herein should be read in conjunction with the Partnership?s
December 31, 2004 Annual Report on Form 10-K. Certain
reclassifications have been made to the prior year?s financial
statements to conform to the current year presentation. Such
reclassifications have no impact on the Partnership?s reported net
income (loss).

1. Organization
Dean Witter Diversified Futures Fund II L.P. is a Delaware limited
partnership organized in 1988 to engage primarily in the
speculative trading of futures and forward contracts on physical
commodities, and other commodity interests, including, but not
limited to, foreign currencies, financial instruments, metals,
energy, and agricultural products.

The Partnership?s general partner is Demeter Management
Corporation (?Demeter?). The non-clearing commodity broker is
DEAN WITTER DIVERSIFIED FUTURES FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Morgan Stanley DW Inc. (?Morgan Stanley DW?). The clearing
commodity brokers are Morgan Stanley & Co. Incorporated (?MS &
Co.?) and Morgan Stanley & Co. International Limited (?MSIL?).
The trading manager is Morgan Stanley Futures & Currency
Management Inc.(?MSFCM? or the ?Trading Manager?). Demeter, Morgan
Stanley DW, MS & Co., MSIL, and MSFCM are wholly-owned
subsidiaries of Morgan Stanley.

2. Related Party Transactions
The Partnership?s cash is on deposit with Morgan Stanley DW, MS &
Co., and MSIL in futures and forwards trading accounts to meet
margin requirements as needed. Monthly, Morgan Stanley DW pays
the Partnership interest income equal to 80% of its average daily
Net Assets for the month at a rate equal to the average yield on
13-week U.S. Treasury bills. The Partnership pays brokerage
commissions to Morgan Stanley DW. Management fees and incentive
fees (if any) incurred by the Partnership are paid to MSFCM.

3. Financial Instruments
The Partnership trades futures and forward contracts on physical
commodities and other commodity interests, including, but not
limited to, foreign currencies, financial instruments, metals,
energy, and agricultural products. Futures and forwards represent
contracts for delayed delivery of an instrument at a specified
DEAN WITTER DIVERSIFIED FUTURES FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

date and price. Risk arises from changes in the value of these
contracts and the potential inability of counterparties to perform
under the terms of the contracts. There are numerous factors
which may significantly influence the market value of these
contracts, including interest rate volatility.

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

The Partnership?s contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting Standards No.
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:
DEAN WITTER DIVERSIFIED FUTURES FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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, forwards, 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, reported as a
component of ?Equity in futures interests trading accounts? on the
Statements of Financial Condition, and their longest contract
maturities were as follows:

Net Unrealized Gains (Losses)
on Open Contracts Longest Maturities

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

Mar. 31, 2005 256,296 (510,188) (253,892) Dec. 2006 Jul. 2005
Dec. 31, 2004 323,480 193,652 517,132 Sep. 2005 Mar. 2005

The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership trades is limited to the amounts reflected
in the Partnership?s Statements of Financial Condition.
DEAN WITTER DIVERSIFIED FUTURES FUND II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Partnership also has credit risk because Morgan Stanley DW, MS
& Co., and MSIL act as the futures commission merchants or the
counterparties, with respect to most of the Partnership?s assets.
Exchange-traded futures and forward contracts are marked to market
on a daily basis, with variations in value settled on a daily
basis. Morgan Stanley DW, MS & Co., and MSIL, each as a futures
commission merchant for the Partnership?s exchange-traded futures
and forward contracts, are required, pursuant to regulations of
the Commodity Futures Trading Commission (?CFTC?), to segregate
from their own assets, and for the sole benefit of their
commodity customers, all funds held by them with respect to
exchange-traded futures and forward contracts, including an amount
equal to the net unrealized gains (losses) on all open futures and
forward contracts, which funds, in the aggregate, totaled
$5,807,850 and $6,162,127 at March 31, 2005 and December 31, 2004,
respectively. With respect to the 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 accounts
with the counterparty, which is accomplished by daily maintenance
of the cash balance in a custody account held at Morgan Stanley DW
DEAN WITTER DIVERSIFIED FUTURES FUND II
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

for the benefit of MS & Co. With respect to those off-exchange-
traded forward currency contracts, the Partnership is at risk to
the ability of MS & Co., the sole counterparty on all such
contracts, to perform. The Partnership has a netting agreement
with MS & Co. This agreement, which seeks to reduce both the
Partnership?s and MS & Co.?s exposure on off-exchange-traded
forward currency contracts, should materially decrease the
Partnership?s credit risk in the event of MS & Co.?s bankruptcy or
insolvency.

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

Liquidity. The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker, and MS & Co. and MSIL as
clearing brokers in separate futures and forwards trading accounts
established for the Trading Manager. Such assets are used as
margin to engage in trading and may be used as margin solely for
the Partnership?s trading. The assets are held in either non-
interest bearing bank accounts or in securities and instruments
permitted by the CFTC for investment of customer segregated or
secured funds. Since the Partnership?s sole purpose is to trade
in futures and forwards, it is expected that the Partnership will
continue to own such liquid assets for margin purposes.

The Partnership?s investment in futures and forwards may, from
time to time, be illiquid. Most U.S. futures exchanges limit
fluctuations in prices during a single day by regulations referred
to as ?daily price fluctuations limits? or ?daily limits?. Trades
may not be executed at prices beyond the daily limit. If the
price for a particular futures contract has increased or decreased
by an amount equal to the daily limit, positions in that futures
contract can neither be taken nor liquidated unless traders are
willing to effect trades at or within the limit. Futures prices
have occasionally moved the daily limit for several consecutive
days with little or no trading. These market conditions could
prevent the Partnership from promptly liquidating its
futures contracts and result in restrictions on redemptions.

There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions. For the periods covered by
this report, illiquidity has not materially affected the
Partnership?s assets.

There are no known material trends, demands, commitments, events,
or uncertainties at the present time that are reasonably likely to
result in the Partnership?s liquidity increasing or decreasing in
any material way.

Capital Resources. The Partnership does not have, nor expects to
have, any capital assets. Redemptions of units of limited
partnership interest (?Unit(s)?) in the future will affect the
amount of funds available for investments in futures and forwards
in subsequent periods. It is not possible to estimate the amount,
and therefore the impact, of future outflows of Units.
There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership?s capital resource arrangements at the
present time.

Off-Balance Sheet Arrangements and Contractual Obligations. The
Partnership does not have any off-balance sheet arrangements, nor
does it have contractual obligations or commercial commitments to
make future payments that would affect its liquidity or capital
resources.

Results of Operations
General. The Partnership?s results depend on the Trading Manager
and the ability of the Trading Manager?s trading programs to take
advantage of price movements in the futures and forwards markets.
The following presents a summary of the Partnership?s operations
for the three month periods ended March 31, 2005 and 2004, and a
general discussion of its trading activities during each period.
It is important to note, however, that the Trading Manager trades
in various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Manager or will be profitable in the future.
Consequently, the results of operations of the Partnership are
difficult to discuss other than in the context of the Trading
Manager?s trading activities on behalf of the Partnership during
the period in question. Past performance is no guarantee of
future results.

The Partnership?s results of operations set forth in the
financial statements on pages 2 through 11 of this report are
prepared in accordance with accounting principles generally
accepted in the United States of America, which require the use
of certain accounting policies that affect the amounts reported
in these financial statements, including the following: The
contracts the Partnership trades are accounted for on a trade-
date basis and marked to market on a daily basis. The difference
between their cost and market value is recorded on the Statements
of Operations as ?Net change in unrealized trading profit (loss)?
for open (unrealized) contracts, and recorded as ?Realized
trading profit (loss)? when open positions are closed out. The
sum of these amounts constitutes the Partnership?s trading
results. The market value of a futures contract is the
settlement price on the exchange on which that futures contract is
traded on a particular day. The value of foreign currency forward
contracts is based on the spot rate as of the close of business.
Interest income, as well as management fees, incentive fees, and
brokerage commission expenses of the Partnership are recorded on
an accrual basis.

Demeter believes that, based on the nature of the operations of
the Partnership, no assumptions relating to the application of
critical accounting policies other than those presently
used could reasonably affect reported amounts.

For the Quarter Ended March 31, 2005
The Partnership recorded total trading results including interest
income totaling $(777,854) and expenses totaling $111,428,
resulting in a net loss of $(889,282) for the quarter ended March
31, 2005. The Partnership?s net asset value per Unit decreased
from $3,430.91 at December 31, 2004 to $2,937.55 at March 31,
2005.

The most significant trading losses of approximately 15.3% were
recorded in the currency markets from positions in the euro
relative to the British pound and the U.S. dollar. During January
long positions in the euro versus the British pound and the U.S.
dollar incurred losses as the value of the euro reversed sharply
lower in what many analysts described as a ?corrective? move after
its strong upward trend during the fourth quarter of 2004. This
decline in the value of the euro was attributed to weak economic
data out of the European Union and a rebound in the value of its
main rival, the U.S. dollar. Additional losses were recorded
during February and March from both long and short positions in
the euro against these currencies as the value of the euro moved
without consistent direction amid conflicting economic data out of
Germany, the European Union?s largest economy. Elsewhere in the
currency markets, losses resulted from positions in the Singapore
dollar, Swedish krona, South African rand, and Swiss franc
relative to the U.S dollar, primarily during February and March,
as the value of the U.S. dollar moved in a trendless pattern amid
speculation that China would revalue its currency, negative
comments by Federal Reserve Chairman Alan Greenspan about the
considerable U.S. Current-Account deficit and U.S. dependence on
foreign investment, and the U.S. Federal Reserve's announcement of
a quarter-point increase in the federal funds rate. Additional
losses of approximately 1.7% were recorded in the global interest
rate futures markets, primarily during March, from short European
interest rate futures positions as prices reversed higher amid
strength in the euro towards the beginning of the month as
investors feared that continued strength in the currency could
restrict foreign exports. Prices were also pushed higher on the
expectations that Europe would continue to maintain a low-interest
rate environment, as well as economic concerns stemming from
surging energy prices. Further losses were experienced during
February from long positions in long-term U.S. interest rate
futures as prices declined in response to strong global economic
data and congressional testimony by Federal Reserve Chairman Alan
Greenspan, which supported Wall Street expectations for additional
interest rate hikes. Smaller losses of approximately 0.2% were
recorded in the global stock index futures markets, primarily
during January and March, from long positions in Hang Seng stock
index futures as equity prices in Hong Kong moved lower due to
weakness in the technology sector and fears that higher energy
prices will restrict the economic growth of the region. A
portion of the Partnership?s overall losses for the quarter was
offset by gains of approximately 2.6% in the energy markets during
March from long futures positions in natural gas as prices moved
higher in tandem with rising crude oil prices. Within the crude
oil markets, gains were recorded from long futures positions in
February and March as prices trended higher amid news of increased
demand from China, fears of terror attacks against production
facilities in the Middle East, cold weather in the Northeastern
U.S., and predictions from analysts at Goldman Sachs that oil
prices could reach $105 a barrel. Smaller gains of approximately
0.2% were recorded in the metals markets during February and March
from long positions in copper and aluminum as prices increased due
to news of continued strong demand from the developing economies
of Asia.

For the Quarter Ended March 31, 2004
The Partnership recorded total trading results including interest
income totaling $441,849 and expenses totaling $134,567, resulting
in net income of $307,282 for the quarter ended March 31, 2004.
The Partnership?s net asset value per Unit increased from
$3,523.50 at December 31, 2003 to $3,677.51 at March 31, 2004.

The most significant trading gains of approximately 5.2% were
generated in the global interest rate markets from long positions
in European and U.S. interest rate futures during February and
March. During February, global bond prices rallied after
central banks, such as the European Central Bank and U.S. Federal
Reserve, reported no need to raise interest rates due to a lack of
inflation. During March, prices trended higher due to uncertainty
in the global equity markets, disappointing U.S. economic data,
and safe-haven buying following the terrorist attack in Madrid.
Additional gains of approximately 3.0% were recorded in the
agricultural markets from long futures positions in corn as
growing U.S. exports and heightened demand from Asia pushed prices
higher during the quarter. Elsewhere in the agricultural markets,
gains were experienced from short cotton futures positions,
primarily during March, as prices trended lower due to rising
supply and technically-based selling. In the metals markets, gains
of approximately 1.9% were recorded throughout the quarter from
long futures positions in copper and aluminum as industrial metals
prices trended higher in response to greater demand from Asia
driven by a declining U.S. dollar. Smaller gains of approximately
0.6% were experienced in the energy markets, primarily during
February, from long futures positions in crude oil as low market
supply, falling inventory levels, and production-cut announcements
from OPEC caused prices to increase. A portion of the
Partnership?s overall gains for the quarter was offset by losses
of approximately 5.8% in the currency sector from positions in the
Japanese yen and Singapore dollar versus the U.S. dollar. During
February, losses were recorded from long positions in the Japanese
yen against the U.S. dollar as the value of the yen reversed
sharply lower after the elevation of Japan?s national
security alert and market intervention by the Bank of Japan, which
performed U.S. dollar buybacks after the release of economic data
demonstrating Japan?s improving Gross Domestic Product. Long
positions in the Singapore dollar versus the U.S. dollar recorded
losses as the value of the Singapore dollar weakened in tandem
with the value of the yen. Further losses were incurred during
March from newly established short positions in the Japanese yen
against the U.S. dollar as the yen reserved higher due to
speculation that the Bank of Japan would be relaxing its efforts
to weaken the yen in the future. Short positions in the Singapore
dollar experienced losses during March as its value again moved in
sympathy with the yen. Elsewhere in the currency markets, losses
were recorded, primarily in March, from positions in the euro
against the Japanese yen as the euro experienced significant
short-term price volatility.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures and forwards. The market-sensitive
instruments held by the Partnership are acquired for speculative
trading purposes only and, as a result, all or substantially all
of the Partnership?s assets are at risk of trading loss. Unlike
an operating company, the risk of market-sensitive instruments is
inherent to the primary business activity of the Partnership.

The futures and forwards traded by the Partnership involve varying
degrees of related market risk. Market risk is often dependent
upon changes in the level or volatility of interest rates,
exchange rates, and prices of financial instruments and
commodities, factors that result in frequent changes in the fair
value of the Partnership?s open positions, and consequently in its
earnings, whether realized or unrealized, and cash flow. Gains
and losses on open positions of exchange-traded futures and
forward contracts are settled daily through variation margin.
Gains and losses on off-exchange-traded forward currency contracts
are settled upon termination of the contract, however, the
Partnership is required to meet margin requirements equal to the
net unrealized loss on open contracts in the Partnership accounts
with the counterparty, which is accomplished by daily maintenance
of the cash balance in a custody account held at Morgan
Stanley DW for the benefit of MS & Co.

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

The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by the
Partnership to typically be many times the total capitalization of
the Partnership.

The Partnership?s past performance is no guarantee of its future
results. Any attempt to numerically quantify the Partnership?s
market risk is limited by the uncertainty of its speculative
trading. The Partnership?s speculative trading and use of
leverage may cause future losses and volatility (i.e., ?risk of
ruin?) that far exceed the Partnership?s experience to date under
the ?Partnership?s Value at Risk in Different Market Sectors?
section and significantly exceed the Value at Risk (?VaR?) tables
disclosed.

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

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

The Partnership accounts for open positions on the basis of mark
to market accounting principles. Any loss in the market value of
the Partnership?s open positions is directly reflected in the
Partnership?s earnings and cash flow.

The Partnership?s risk exposure in the market sectors traded by
the Trading Manager is estimated below in terms of VaR. The
Partnership estimates VaR using a model based upon historical
simulation (with a confidence level of 99%) which involves
constructing a distribution of hypothetical daily changes in the
value of a trading portfolio. The VaR model takes into account
linear exposures to risk including equity and commodity
prices, interest rates, foreign exchange rates, and correlation
among these variables. The hypothetical changes in portfolio value
are based on daily percentage changes observed in key market
indices or other market factors (?market risk factors?) to which
the portfolio is sensitive. The one-day 99% confidence level of
the Partnership?s VaR corresponds to the negative change in
portfolio value that, based on observed market risk factors, would
have been exceeded once in 100 trading days, or one day in 100.
VaR typically does not represent the worst case outcome. Demeter
uses approximately four years of daily market data (1,000
observations) and revalues its portfolio (using delta-gamma
approximations) for each of the historical market moves that
occurred over this time period. This generates a probability
distribution of daily ?simulated profit and loss? outcomes. The
VaR is the appropriate percentile of this distribution. For
example, the 99% one-day VaR would represent the 10th worst
outcome from Demeter?s simulated profit and loss series.

The Partnership?s VaR computations are based on the risk
representation of the underlying benchmark for each instrument or
contract and do not distinguish between exchange and non-exchange
dealer-based instruments. They are also not based on exchange
and/or dealer-based maintenance margin requirements.

VaR models, including the Partnership?s, are continually
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that the
VaR model is used to numerically quantify market risk for historic
reporting purposes only and is not utilized by either Demeter or
the Trading Manager in their daily risk management activities.
Please further note that VaR as described above may not be
comparable to similarly titled measures used by other entities.

The Partnership?s Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership?s open positions as a percentage of total net assets
by primary market risk category at March 31, 2005 and 2004. At
March 31, 2005 and 2004, the Partnership?s total capitalization
was approximately $5 million and $7 million, respectively.

Primary Market March 31, 2005 March 31, 2004
Risk Category Value at Risk Value at Risk

Equity (2.52)% (0.11)%

Interest Rate (1.59) (1.99)

Currency (1.14) (2.10)

Commodity (4.09) (4.32)

Aggregate Value at Risk (6.04)% (5.52)%

The VaR for a market category represents the one-day downside risk
for the aggregate exposures associated with this market category.
The Aggregate Value at Risk listed above represents the VaR of the
Partnership?s open positions across all the market
categories, and is less than the sum of the VaRs for all such
market categories due to the diversification benefit across asset
classes.

Because the business of the Partnership is the speculative trading
of futures and forwards, the composition of its trading portfolio
can change significantly over any given time period, or even
within a single trading day, which could positively or negatively
materially impact market risk as measured by VaR.

The table below supplements the quarter-end VaR set forth above by
presenting the Partnership?s high, low, and average VaR, as a
percentage of total net assets for the four quarter-end reporting
periods from April 1, 2004 through March 31, 2005.

Primary Market Risk Category High Low Average
Equity (2.52)% - % (1.13)%
Interest Rate (2.04) (0.60) (1.49)
Currency (2.31) (1.01) (1.43)
Commodity (4.09) (0.22) (1.82)
Aggregate Value at Risk (6.04)% (2.32)% (3.72)%

Limitations on Value at Risk as an Assessment of Market Risk
VaR models permit estimation of a portfolio?s aggregate market
risk exposure, incorporating a range of varied market risks;
reflect risk reduction due to portfolio diversification or
hedging activities; and can cover a wide range of portfolio
assets. However, VaR risk measures should be viewed in light of
the methodology?s limitations, which include, but may not be
limited to the following:
* past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
* changes in portfolio value caused by market movements may
differ from those of the VaR model;
* VaR results reflect past market fluctuations applied to current
trading positions while future risk depends on future
positions;
* VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
* the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.

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

The VaR tables provided present the results of the Partnership?s
VaR for each of the Partnership?s market risk exposures and on an
aggregate basis at March 31, 2005, and for the four
quarter-end reporting periods from April 1, 2004 through March 31,
2005. VaR is not necessarily representative of the Partnership?s
historic risk, nor should it be used to predict the Partnership?s
future financial performance or its ability to manage or monitor
risk. There can be no assurance that the Partnership?s actual
losses on a particular day will not exceed the VaR amounts
indicated above or that such losses will not occur more than once
in 100 trading days.

Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances. These balances and any market risk they may represent
are immaterial.

The Partnership also maintains a substantial portion
(approximately 100% as of March 31, 2005) of its available assets
in cash at Morgan Stanley DW. A decline in short-term interest
rates would result in a decline in the Partnership?s cash
management income. This cash flow risk is not considered to be
material.

Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality, and multiplier features of the Partnership?s market-
sensitive instruments, in relation to the Partnership?s net
assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures ? except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures ? constitute
forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act.
The Partnership?s primary market risk exposures, as well as the
strategies used and to be used by Demeter and the Trading Manager
for managing such exposures, are subject to numerous
uncertainties, contingencies, and risks, any one of which could
cause the actual results of the Partnership?s risk controls to
differ materially from the objectives of such strategies.
Government interventions, defaults and expropriations, illiquid
markets, the emergence of dominant fundamental factors, political
upheavals, changes in historical price relationships, an influx of
new market participants, increased regulation, and many other
factors could result in material losses, as well as in material
changes to the risk exposures and the risk management strategies
of the Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.

The following were the primary trading risk exposures of
the Partnership at March 31, 2005, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Equity. The primary market exposure of the Partnership at March
31, 2005 was to equity price risk in the G-7 countries. The G-7
countries consist of France, the U.S., Britain, Germany, Japan,
Italy, and Canada. The stock index futures traded by the
Partnership are by law limited to futures on broadly-based
indices. At March 31, 2005, the Partnership?s primary exposures
were to the DAX (Germany), S&P 500 (U.S.), Hang Seng (China), and
SPI 200 (Australia) stock indices. The Partnership is exposed to
the risk of adverse price trends or static markets in the
European, U.S., Chinese, and Australian stock indices. Static
markets would not cause major market changes, but would make it
difficult for the Partnership to avoid trendless price movements,
resulting in numerous small losses.

Interest Rate. The second largest market exposure of the
Partnership at March 31, 2005 was to the global interest rate
sector. Exposure was primarily spread across the Japanese, U.S.,
European, and Australian interest rate sectors. Interest rate
movements directly affect the price of the sovereign bond futures
positions held by the Partnership and indirectly affect the value
of its stock index and currency positions. Interest rate
movements in one country, as well as relative interest rate
movements between countries, materially impact the Partnership?s
profitability. The Partnership?s primary interest rate exposure
is generally to interest rate fluctuations in the U.S. and the
other G-7 countries. However, the Partnership also takes futures
positions in the government debt of smaller countries ? e.g.,
Australia. Demeter anticipates that the G-7 countries and
Australian interest rates will remain the primary interest rate
exposure of the Partnership for the foreseeable future. The
speculative futures positions held by the Partnership may range
from short to long-term instruments. Consequently, changes in
short, medium, or long-term interest rates may have an effect on
the Partnership.

Currency. The third largest market exposure of the Partnership at
March 31, 2005 was to the currency sector. The Partnership?s
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. Interest rate
changes, as well as political and general economic conditions
influence these fluctuations. The Partnership trades a number of
currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar. At March 31, 2005, the
Partnership?s major exposures were to the euro, British pound, and
Japanese yen currency crosses, as well as to outright U.S. dollar
positions. Outright positions consist of the U.S. dollar vs.
other currencies. These other currencies include major and
minor currencies. Demeter does not anticipate that the risk
associated with the Partnership?s currency trades will change
significantly in the future.

Commodity.
Energy. At March 31, 2005, the Partnership had market
exposure in the energy sector. The Partnership?s energy
exposure was primarily to futures contracts in crude oil and
natural gas. Price movements in these markets result from
geopolitical developments, particularly in the Middle East,
as well as weather patterns and other economic fundamentals.
Significant profits and losses, which have been experienced
in the past, are expected to continue to be experienced in
the future. Natural gas has exhibited volatility in price
resulting from weather patterns and supply and demand factors
and will likely continue in this choppy pattern.

Soft Commodities and Agriculturals. At March 31, 2005, the
Partnership had market exposure to the markets that comprise
these sectors. Most of the exposure was to the cotton, corn,
soybean, and coffee markets. Supply and demand inequalities,
severe weather disruptions, and market expectations affect
price movements in these markets.

Metals. At March 31, 2005, the Partnership had market
exposure in the metals sector. The Partnership's metals
exposure was to fluctuations in the price of base metals,
such as copper, aluminum, and zinc. Economic forces, supply
and demand inequalities, geopolitical factors, and market
expectations influence price movements in these markets. The
Trading Manager utilizes the trading system(s) to take
positions when market opportunities develop, and Demeter
anticipates that the Partnership will continue to do so.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at March 31, 2005:

Foreign Currency Balances. The Partnership?s primary foreign
currency balances at March 31, 2005 were in British pounds,
euros, Australian dollars, Hong Kong dollars, and Japanese
yen. The Partnership controls the non-trading risk of
foreign currency balances by regularly converting them back
into U.S. dollars upon liquidation of their respective
positions.

Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Manager, separately, attempt to
manage the risk of the Partnership?s open positions in essentially
the same manner in all market categories traded. Demeter attempts
to manage market exposure by diversifying the Partnership?s
assets among different market sectors and trading approaches, and
by monitoring the performance of the Trading Manager daily. In
addition, the Trading Manager establishes diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-
sensitive instrument.

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

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

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

PART II. OTHER INFORMATION

Item 5. OTHER INFORMATION
Departure of Directors or Principal Officers; Election of
Directors; Appointment of Principal Officers.

At a meeting of the Board of Directors of Demeter held on March
30, 2005, the following Directors of Demeter resigned, and the
Board of Directors accepted such resignations effective May 1,
2005: Ms. Louise M. Wasso-Jonikas and Messrs. Raymond A. Harris,
Todd Taylor, and William D. Seugling.

At that March 30, 2005 meeting of the Board of Directors of
Demeter, the Board of Directors elected two new Directors
effective May 1, 2005, subject to approval by and registration
with the National Futures Association: Ms. Shelley Hanan and Mr.
Harry Handler.

Item 6. EXHIBITS

3.01 Limited Partnership Agreement of the Partnership, dated
as of October 28, 1988, is incorporated by reference to
Exhibit 3.01 and Exhibit 3.02 of the Partnership?s
Registration Statement on Form S-1 (File No. 33-24662).
10.01 Management Agreement among the Partnership, Demeter
Management Corporation and Dean Witter Futures & Currency
Management Inc., dated as of October 28, 1988, is
incorporated by reference to Exhibit 10.02 of the
Partnership?s Registration Statement on Form S-1 (File
No. 33-24662).

10.02 Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW Inc., dated as of May
19, 2000, is incorporated by reference to Exhibit 10.01
of the Partnership?s Form 8-K (File No. 0-17446) filed
with the Securities and Exchange Commission on November
13, 2001.
10.03 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-
17446) filed with the Securities and Exchange Commission
on November 13, 2001.
10.04 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. 0-17446) filed with
the Securities and Exchange Commission on November 13,
2001.
10.05 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.
0-17446) filed with the Securities and Exchange
Commission on November 13, 2001.
10.06 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. 0-17446) filed with the
Securities and Exchange Commission on November 13, 2001.
31.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership
pursuant to 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.

SIGNATURE

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

Dean Witter Diversified Futures Fund II L.P.
(Registrant)

By: Demeter Management Corporation
(General Partner)

May 16, 2005 By:/s/Kevin Perry
Kevin Perry
Chief Financial Officer

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

DEAN WITTER DIVERSIFIED FUTURES FUND II
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)