DEAN WITTER PORTFOLIO STRATEGY FUND LP - 10-K Annual Report

Back to GetFilings.com

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

FORM 10-K

[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the year ended December 31, 2002 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 0-19046

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

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

DELAWARE 13-3589337
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

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

Name of each exchange
Title of each class on which registered

None None

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

Units of Limited Partnership Interest

(Title of Class)

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

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

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 a specified
date within 60 days prior to the date of filing: $101,029,510 at January 31,
2003.

DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2002

DOCUMENTS INCORPORATED BY REFERENCE

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

Documents Incorporated Part of Form 10-K

Partnership's Prospectus dated
May 12, 1997 I

Annual Report to Dean Witter
Portfolio Strategy Fund L.P.
Limited Partners for the year
ended December 31, 2002 II, III and IV

PART I
Item 1. BUSINESS
(a) General Development of Business. Dean Witter Portfolio Stra-
tegy Fund L.P. (the "Partnership") is a Delaware limited
partnership organized to engage primarily in the speculative
trading of futures contracts and forward contracts on physical
commodities and other commodity interests, including foreign
currencies, financial instruments, metals, energy and agricultural
products. The Partnership commenced operations on February 1,
1991.

The Partnership's general partner is Demeter Management
Corporation ("Demeter"). The non-clearing commodity broker is
Morgan Stanley DW Inc. ("Morgan Stanley DW"). The clearing
commodity brokers are Morgan Stanley & Co. Incorporated ("MS &
Co.") and Morgan Stanley & Co. International Limited ("MSIL").
Demeter, Morgan Stanley DW, MS & Co. and MSIL are wholly-owned
subsidiaries of Morgan Stanley. John W. Henry & Company, Inc. (the
"Trading Manager") is the trading manager of the Partnership.

Effective June 20, 2002, Morgan Stanley Dean Witter & Co. changed
its name to Morgan Stanley.

The Partnership's net asset value per unit of limited partnership
interest ("Unit(s)") as of December 31, 2002 was $3,166.00,
representing an increase of 26.7 percent from the net asset value
per Unit of $2,498.93 at December 31, 2001. For a more detailed
description of the Partnership's business see subparagraph (c).

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

(c) Narrative Description of Business. The Partnership is in the
business of speculative trading of futures and forwards, pursuant
to trading instructions provided by its Trading Manager. For a
detailed description of the different facets of the Partnership's
business, see those portions of the Partnership's prospectus,
dated May 12, 1997 (the "Prospectus"), incorporated by reference
in this Form 10-K, set forth below:
Facets of Business

1. Summary 1. "Summary of the Prospectus"
(Pages 1-12 of the
Prospectus).

2. Futures, Options and 2. "Futures, Options and
Forwards Markets Forwards Markets" (Pages
48-52 of the Prospectus).

3. Partnership's Commodity 3. "Investment Programs,
Trading Arrangements and Use of Proceeds, and
Policies Trading Policies" (Page
66 of the Prospectus)
and "The Trading Advisor"
(Pages 55-74 of the
Prospectus).

4. Management of the 4. "The Management Agreement"
Partnership (Pages 76-77 of the
Prospectus). "The
General Partner" (Pages
45-47 of the Prospectus),
"The Commodity Brokers"
(Page 75 of the
Prospectus) and "The
Limited Partnership
Agreement" (Pages 79-82
of the Prospectus).

5. Taxation of the Partner- 5. "Material Federal Income
ship's Limited Partners Tax Considerations" and
"State and Local Income
Tax Aspects" (Pages 88-96
of the Prospectus).

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

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

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

Item 3. LEGAL PROCEEDINGS
None.

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

PART II

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

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

(b) Holders. The number of holders of Units at December 31, 2002
was approximately 4,478.

(c) Distributions. No distributions have been made by the
Partnership since it commenced trading operations on February 1,
1991. Demeter has sole discretion to decide what distributions,
if any, shall be made to investors in the Partnership. Demeter
currently does not intend to make any distributions of Partnership
profits.

Item 6. SELECTED FINANCIAL DATA (in dollars)

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Liquidity - The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker, and MS & Co. and MSIL as
clearing brokers in separate futures and forwards trading accounts
established for the Trading Manager, which assets are used as
margin to engage in trading. The assets are held in either non-
interest bearing bank accounts or in securities and instruments
permitted by the Commodity Futures Trading Commission for
investment of customer segregated or secured funds. The
Partnership's assets held by the commodity brokers may be used as
margin solely for the Partnership's trading. 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 currency. 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.

The Partnership has never had illiquidity affect a material
portion of its assets. Furthermore, there are no material trends,
demands, commitments, events or uncertainties known at the present
time that will result in or that are reasonably likely to result
in the Partnership's liquidity increasing or decreasing in any
material way.

Capital Resources. The Partnership does not have, nor expect to
have, any capital assets. Redemptions of additional Units in the
future will affect the amount of funds available for investment in
futures and forwards in subsequent periods. It is not possible to
estimate the amount and therefore, the impact of future
redemptions of Units.
There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership's capital resource arrangements at the present
time. The Partnership has no off-balance sheet arrangements, nor
contractual obligations or commercial commitments to make future
payments that would affect the Partnership's liquidity or capital
resources. The contracts traded by the Partnership are accounted
for on a trade-date basis and marked to market on a daily basis.
The value of futures contracts is the settlement price on the
exchange on which that futures contract is traded on a particular
day. The value of foreign currency forward contracts is based on
the spot rate as of the close of business, New York City time, on
a given day.

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 or other profit opportunities in the
futures and forwards markets. The following presents a summary of
the Partnership's operations for the three years ended December
31, 2002 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 and how the Partnership has performed in the
past.

The Partnership's results of operations are set forth in financial
statements prepared in accordance with United States generally
accepted accounting principles, which require the use of certain
accounting policies that affect the amounts reported in these
financial statements, including the following: The contracts the
Partnership trades are accounted for on a trade-date basis and
marked to market on a daily basis. The difference between their
cost and market value is recorded on the Statements of Operations
as "Net change in unrealized profit/loss" for open (unrealized)
contracts, and recorded as "Realized profit/loss" when open
positions are closed out, and the sum of these amounts
constitutes the Partnership's trading revenues. Interest income
revenue as well as management fees, incentive fees and brokerage
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 other than those presently used
relating to the application of critical accounting policies are
reasonably plausible that could affect reported amounts.

At December 31, 2002, the Partnership's total capital was
$88,936,241, an increase of $10,016,134 from the Partnership's
total capital of $78,920,107 at December 31, 2001. For the year
ended December 31, 2002, the Partnership generated net income of
$19,856,770 and total redemptions aggregated $9,840,636.

For the year ended December 31, 2002, the Partnership recorded
total trading revenues, including interest income, of $31,602,392
and posted an increase in net asset value per Unit. The most
significant gains of approximately 18.5% were recorded in the
currency markets from long positions in the euro, Swiss franc,
and Australian dollar relative to the U.S. dollar as the value of
the dollar weakened during the second quarter, as well as in
December, amid investors' fears concerning increased tensions in
the Middle East and prolonged uncertainty regarding the U.S.
economy. Additional gains of approximately 12.8% were recorded
in the global interest rate futures markets from long positions
in Japanese, European, and U.S. interest rate futures as prices
trended higher during the second and third quarter amid continued
uncertainty in the equity markets and negative economic data.
Smaller gains of approximately 2.6% were recorded in the global
stock index futures markets from short positions in U.S. and
European stock index futures as prices continued to trend lower
throughout a majority of the year due to suspicions regarding
corporate accounting practices, weak economic data, and
geopolitical uncertainty. A portion of the Partnership's gains
was offset by losses of approximately 1.7% in the
agricultural futures markets from long positions in cotton
futures as prices moved without consistent direction during the
third quarter amid shifting supply and demand concerns. Smaller
losses were recorded in this market sector from positions in
sugar and coffee futures as prices moved erratically throughout
most of the year. In the metals futures markets, losses of
approximately 1.0% were recorded from positions in aluminum and
copper futures as an uncertain economic outlook resulted in
trendless price activity throughout most of the year. Total
expenses for the year were $11,745,622, resulting in net income
of $19,856,770. The net asset value of a Unit increased from
$2,498.93 at December 31, 2001 to $3,166.00 at December 31, 2002.

At December 31, 2001, the Partnership's total capital was
$78,920,107, a decrease of $16,369,784 from the Partnership's
total capital of $95,289,891 at December 31, 2000. For the year
ended December 31, 2001, the Partnership generated a net loss of
$5,224,453 and total redemptions aggregated $11,145,331.

For the year ended December 31, 2001, the Partnership recorded
total trading revenues, including interest income, of $3,109,230
and after expenses, posted a decrease in net asset value per
Unit. The most significant losses of approximately 8.4% were
recorded in the energy markets throughout the first nine months
of the year from trading in crude oil futures and its related
products as a result of volatility in oil prices due to a
continually changing outlook for supply, production, and demand.
Losses of approximately 1.2% were recorded primarily during the
fourth quarter from long positions in silver and gold futures as
prices reversed lower on the heels of sharp gains in the U.S.
stock market. Additional losses of approximately 0.9% were
experienced in the soft commodities from short positions in sugar
futures as prices reversed higher on supply concerns. Smaller
losses of approximately 0.7% were recorded from short positions
in the agricultural markets as prices increased on forecasts for
hotter and drier weather in the U.S. midwest. A portion of the
Partnership's losses was offset by gains of approximately 2.8%
recorded throughout a majority of the third quarter in the global
stock index futures markets from short positions in Nikkei, DAX,
and NASDAQ Index futures as the trend in equity prices continued
sharply lower amid worries regarding global economic uncertainty.
Gains of approximately 1.5% were experienced in the global
interest rate futures markets primarily throughout a majority of
the third quarter from long positions in short-term U.S. interest
rate futures as prices continued trending higher amid continued
concerns for the sluggish U.S. economy, interest rate cuts by the
U.S. Federal Reserve, and as investors sought a "safe haven" from
declining stock prices. Additional gains of approximately 1.2%
were recorded primarily during the fourth quarter as gains from
short position in the Japanese yen and the South African rand
versus the U.S. dollar more than offset losses attributed to
trading in the euro and the British pound. Total expenses
for the year were $8,333,683, resulting in a net loss of
$5,224,453. The net asset value of a Unit decreased from
$2,658.72 at December 31, 2000 to $2,498.93 at December 31, 2001.

At December 31, 2000, the Partnership's total capital was
$95,289,891, a decrease of $13,911,327 from the Partnership's
total capital of $109,201,218 at December 31, 1999. For the year
ended December 31, 2000, the Partnership generated net income of
$6,757,737, and total redemptions aggregated $20,669,064.

For the year ended December 31, 2000, the Partnership recorded
total trading revenues, including interest income, of $15,787,350
and posted an increase in net asset value per Unit. Overall,
three major themes developed during the year; the rise in energy
prices, the decline and revival of the euro, and the bond rally
caused by expectations of the central banks easing in the face of
an economic slowdown. All were interrelated and display how
different trends will feed on each other to create continual or
rotating opportunities across sectors. Energy positions were the
primary driver of performance, with gains of approximately 9.4%
in year to date performance for the Partnership. The price rise
in crude oil futures was due to a shortage of production to meet
the unexpected high demand around the world. The demand side of
the equation was the main driver of price. Futures positions in
global stock indices, currencies and interest rates also fared
well for the year. Positions in interest rate futures
benefited when, from a level of 4.75% in May of 1999, the Federal
Reserve Bank increased the target rate six times, reaching a high
of 6.5% in May of 2000. Given the lagged relationship between
changes in money and real economic activity and inflation, the
impact of the tightening was not fully realized until the fourth
quarter. All this upheaval created profitable opportunities in
the fourth quarter with a stock market sell-off matched by a
tremendous bond rally. Currencies benefited from the strong
trend in the euro, but the deterioration of the yen during the
last two months of 2000 from the economic problems in Japan was a
key boost to this sector. Metals and agricultural commodity
futures ended the year unprofitable. Metals primarily suffered
from positions in gold futures and agricultural commodities from
cotton futures. Total expenses for the year were $9,029,613,
resulting in net income of $6,757,737. The net asset value of a
Unit increased from $2,419.78 at December 31, 1999 to $2,658.72 at
December 31, 2000.

The Partnership's overall performance record represents varied
results of trading in different futures and forwards markets. For
an analysis of unrealized gains and (losses) by contract type and
a further description of 2002 trading results, refer to the
"Letter to the Limited Partners" in the Partnership's Annual
Report to Limited Partners for the year ended December 31, 2002,
which is incorporated by reference to Exhibit 13.01 of this
Form 10-K.

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

Credit Risk.
Financial Instruments. The Partnership is a party to financial
instruments with elements of off-balance sheet market and credit
risk. The Partnership may trade futures and forwards in a
portfolio of agricultural commodities, energy products, foreign
currencies, interest rates, precious and base metals, soft
commodities and stock indices. In entering into these contracts,
the Partnership is subject to the market risk that such contracts
may be significantly influenced by market conditions, such as
interest rate volatility, resulting in such contracts being less
valuable. If the markets should move against all of the
positions held by the Partnership at the same time, and if the
Trading Manager was unable to offset positions of the
Partnership, the Partnership could lose all of its assets and
Limited Partners would realize a 100% loss.

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

In addition to market risk, in entering into futures and forward
contracts there is a credit risk to the Partnership that the
counterparty on a contract will not be able to meet its
obligations to the Partnership. The ultimate counterparty or
guarantor of the Partnership for futures contracts traded in the
United States and the foreign exchanges on which the Partnership
trades is the clearinghouse associated with such exchange. In
general, a clearinghouse is backed by the membership of the
exchange and will act in the event of non-performance by one of
its members or one of its member's customers, which should
significantly reduce this credit risk. For example, a
clearinghouse may cover a default by drawing upon a defaulting
member's mandatory contributions and/or non-defaulting members'
contributions to a clearinghouse guarantee fund, established
lines or letters of credit with banks, and/or the clearinghouse's
surplus capital and other available assets of the exchange and
clearinghouse, or assessing its members. In cases where the
Partnership trades off-exchange forward contracts with a
counterparty, the sole recourse of the Partnership will be the
forward contracts counterparty.

There is no assurance that a clearinghouse, exchange or other
exchange member will meet its obligations to the Partnership, and
Demeter and the commodity brokers will not indemnify the
Partnership against a default by such parties. Further, the law
is unclear as to whether a commodity broker has any obligation to
protect its customers from loss in the event of an exchange or
clearinghouse defaulting on trades effected for the broker's
customers. Any such obligation on the part of a broker appears
even less clear where the default occurs in a non-U.S.
jurisdiction.

Demeter deals with these credit risks of the Partnership in
several ways. First, it monitors the Partnership's credit
exposure to each exchange on a daily basis, calculating not only
the amount of margin required for it but also the amount of its
unrealized gains at each exchange, if any. The commodity brokers
inform the Partnership, as with all their customers, of its net
margin requirements for all its existing open positions, but do
not break that net figure down, exchange by exchange. Demeter,
however, has installed a system which permits it to monitor the
Partnership's potential margin liability, exchange by exchange.
As a result, Demeter is able to monitor the Partnership's
potential net credit exposure to each exchange by adding the
unrealized trading gains on that exchange, if any, to the
Partnership's margin liability thereon.

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

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

See "Financial Instruments" under "Notes to Financial Statements"
in the Partnership's Annual Report to Limited Partners for the
year ended December 31, 2002, which is incorporated by
reference to Exhibit 13.01 of in this Form 10-K.

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

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures 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
central, not incidental, to the Partnership's main business
activities.

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. Fluctuations in market risk based upon these
factors result in frequent changes in the fair value of the
Partnership's open positions, and, consequently, in its earnings
and cash flow.

The Partnership's total market risk is influenced by a
wide variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.

The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e., "risk of ruin") that
far exceed the Partnership's experiences to date or any
reasonable expectations based upon historical changes in market
value.

Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
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, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures and forwards are settled daily through variation
margin.

The Partnership's risk exposure in the market sectors traded by
the Trading Manager is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include 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 historical observation period of the
Partnership's VaR is approximately four years. 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. In other words, one-day VaR for a portfolio is a number
such that losses in this portfolio are estimated to exceed the
VaR only one day in 100. VaR typically does not represent the
worst case outcome.

VaR is calculated using historical simulation. 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 does not distinguish between exchange and non-
exchange-traded instruments and is also not based on exchange
and/or dealer-based margin requirements.

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

The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by primary market risk category at December 31, 2002 and 2001. At
December 31, 2002 and 2001, the Partnership's total
capitalization was approximately $89 million and $79 million,
respectively.
Primary Market December 31, 2002 December 31, 2001
Risk Category Value at Risk Value at Risk

Currency (3.40)% (3.74)%

Interest Rate (1.88) (1.20)

Equity (0.30) (0.55)

Commodity (1.95) (0.87)

Aggregate Value at Risk (3.97)% (4.68)%

The VaR for a market category represents the one-day downside
risk for the aggregate exposures associated with this market
category. The aggregate VaR, listed above for the Partnership,
represents the aggregate 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.
The table above represents the VaR of the Partnership's open
positions at December 31, 2002 and 2001 only and is not
necessarily representative of either the historic or future risk
of an investment in the Partnership. Because the Partnership's
only business 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.
Any changes in open positions could positively or negatively
materially impact market risk as measured by VaR.

The table below supplements the December 31, 2002 VaR by
presenting the Partnership's high, low and average VaR, as a
percentage of total net assets for the four quarterly reporting
periods from January 1, 2002 through December 31, 2002.

Primary Market Risk Category High Low Average
Currency (3.85)% (0.83)% (2.50)%
Interest Rate (2.64) (1.80) (2.13)
Equity (0.75) (0.30) (0.55)
Commodity (1.95) (0.66) (1.35)
Aggregate Value at Risk (4.83)% (2.78)% (3.69)%

Limitations on Value at Risk as an Assessment of Market
Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership to typically be many times the total
capitalization of the Partnership. The value of the
Partnership's open positions thus creates a "risk of ruin" not
usually found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, give
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
? past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
? changes in portfolio value caused by market movements may
differ from those of the VaR model;
? VaR results reflect past trading positions while future risk
depends on future positions;

? VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
? the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.

The VaR tables above present the results of the Partnership's VaR
for each of the Partnership's market risk exposures and on an
aggregate basis at December 31, 2002 and 2001 and for the end of
the four quarterly reporting periods during calendar year 2002.
Since VaR is based on historical data, VaR should not be viewed
as predictive of the Partnership's future financial performance
or its ability to manage or monitor risk. There can be no
assurance that the Partnership's actual losses on a particular
day will not exceed the VaR amounts indicated above or that such
losses will not occur more than once in 100 trading days.

Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial.

At December 31, 2002, the Partnership's cash balance at Morgan
Stanley DW was approximately 88% of its total net asset value. A
decline in short-term interest rates will 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 December 31, 2002, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Currency. The primary market exposure of the Partnership at
December 31, 2002 was to the currency sector. The Partnership's
currency exposure was 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 large
number of currencies. At December 31, 2002, the Partnership's
exposures were to outright U.S. dollar positions. Outright
positions consist of the U.S. dollar vs. other currencies. These
other currencies include major and minor currencies. Demeter
does not anticipate that the risk profile of the Partnership's
currency sector will change significantly in the future. The
currency trading VaR figure includes foreign margin
amounts converted into U.S. dollars with an incremental
adjustment to reflect the exchange rate risk inherent to the
U.S.-based Partnership in expressing VaR in a functional currency
other than U.S. dollars.

Interest Rate. The second largest market exposure at December
31, 2002 was to the global interest rate complex. Exposure was
primarily spread across the U.S., European and Japanese interest
rate sectors. Interest rate movements directly affect the price
of the sovereign bond futures positions held by the Partnership
and indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially
impact the Partnership's profitability. The Partnership's
primary interest rate exposure is generally to interest rate
fluctuations in the U.S. and the other G-7 countries. The G-7
countries consist of France, the U.S., Britain, Germany, Japan,
Italy and Canada. However, the Partnership also takes futures
positions in the government debt of smaller nations - e.g.,
Australia. Demeter anticipates that the G-7 countries' and
Australian interest rates will remain the primary interest rate
exposures of the Partnership in the foreseeable future. The
speculative futures positions held by the Partnership may range
from short to long-term instruments. Consequently, changes in
short, medium or long-term interest rates may have an
effect on the Partnership.

Equity. The primary equity exposure at December 31, 2002 was to
equity price risk in the G-7 countries. The stock index futures
traded by the Partnership are by law limited to futures on
broadly-based indices. At December 31, 2002, the Partnership's
primary exposures were to the NASDAQ (U.S.), Euro Stoxx 50
(Europe) and DAX (Germany) stock indices. The Partnership is
primarily exposed to the risk of adverse price trends or static
markets in the U.S., European and Japanese stock indices. Static
markets would not cause major market changes but would make it
difficult for the Partnership to avoid being "whipsawed" into
numerous small losses.

Commodity.
Energy. At December 31, 2002, the Partnership's energy
exposure was shared primarily by futures contracts in crude
oil and its related products, and natural gas. Price
movements in these markets result from political
developments in the Middle East, weather patterns and other
economic fundamentals. Significant profits and losses,
which have been experienced in the past, are expected to
continue to be experienced in the future. Natural gas has
exhibited volatility in prices resulting from weather
patterns and supply and demand factors and will likely
continue in this choppy pattern.

Metals. The Partnership's metals exposure at December 31,
2002 was to fluctuations in the price of precious metals
such as gold and silver, and base metals, such as aluminum,
copper, nickel and zinc. Economic forces, supply and demand
inequalities, geopolitical factors and market expectations
influence price movements in these markets. The Trading
Manager, from time to time, takes positions when market
opportunities develop and Demeter anticipates that the
Partnership will continue to do so.

Soft Commodities and Agriculturals. At December 31, 2002,
the Partnership had exposure to the markets that comprise
these sectors. Most of the exposure was to the sugar, corn
and cotton markets. Supply and demand inequalities, severe
weather disruption and market expectations affect price
movements in these markets.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at December 31, 2002:

Foreign Currency Balances. The Partnership's primary for-
eign currency balances at December 31, 2002 were in Japanese
yen and euros. The Partnership controls the non-
trading risk of these 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 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are incorporated by reference to the
Partnership's Annual Report, which is filed as Exhibit 13.01
hereto.

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

Summary of Quarterly Results (Unaudited)

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

2002
March 31 $ (6,528,545) $ (8,152,808) $(261.46)
June 30 24,931,615 22,449,727 746.86
September 30 21,061,181 15,441,918 525.24
December 31 (7,861,859) (9,882,067) (343.57)

Total $ 31,602,392 $ 19,856,770 $ 667.07

2001
March 31 $ 11,037,937 $ 8,360,925 $ 237.35
June 30 (11,258,181) (13,199,432) (384.32)
September 30 5,153,009 3,160,453 96.19
December 31 (1,823,535) (3,546,399) (109.01)

Total $ 3,109,230 $ (5,224,453) $(159.79)

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

None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

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

Robert E. Murray, age 42, is the Managing Director of the
Strategic Products Group at Morgan Stanley and Chairman of the
Board of Directors of Demeter Management Corporation, a leading
commodity pool operator with approximately $1.7 billion in assets
across a variety of U.S. and international public and private
managed futures funds. Mr. Murray began at Dean Witter in 1984
and has been closely involved in the growth of managed futures at
the firm over the last 18 years. He is also the Chairman of the
Board of Directors of Morgan Stanley Futures & Currency
Management Inc., Morgan Stanley's internal commodity trading
advisor. Mr. Murray served as the Vice Chairman and a Director
of the Board of the Managed Futures Association and is currently
a member of the Board of Directors of the National Futures
Association. Mr. Murray received a Bachelors Degree in Finance
from Geneseo State University in 1983.

Jeffrey A. Rothman, age 41, is the President and a Director of
Demeter. Mr. Rothman is the Executive Director of Morgan Stanley
Managed Futures, responsible for overseeing all aspects of
the firm's managed futures department. He is also President and
a Director of Morgan Stanley Futures & Currency Management Inc.
Mr. Rothman has been with the managed futures department for
sixteen years and most recently held the position of National
Sales Manager, assisting Branch Managers and Financial Advisors
with their managed futures education, marketing, and asset
retention efforts. Throughout his career, Mr. Rothman has helped
with the development marketing and administration of
approximately 35 commodity pools. Mr. Rothman is an active member
of the Managed Funds Association and serves on its Board of
Directors.

Mitchell M. Merin resigned his position as a Director of Demeter.

Joseph G. Siniscalchi, age 57, is a Director of Demeter. Mr.
Siniscalchi joined Morgan Stanley DW in July 1984 as a First Vice
President, Director of General Accounting and served as a Senior
Vice President and Controller for Morgan Stanley DW's Securities
Division through 1997. He is currently a Managing Director
responsible for the Client Support Service Division of Morgan
Stanley DW. From February 1980 to July 1984, Mr. Siniscalchi was
Director of Internal Audit at Lehman Brothers Kuhn Loeb, Inc.

Edward C. Oelsner, III, age 61, is a Director of Demeter. Mr.
Oelsner is currently an Executive Vice President and head of the
Product Development Group at Morgan Stanley Investment
Advisors Inc., an affiliate of Morgan Stanley DW. Mr. Oelsner
joined Morgan Stanley DW in 1981 as a Managing Director in Morgan
Stanley DW's Investment Banking Department, specializing in
coverage of regulated industries and subsequently served as head
of the Morgan Stanley DW Retail Products Group. Prior to joining
Morgan Stanley DW, Mr. Oelsner held positions at The First Boston
Corporation as a member of the Research and Investment Banking
Departments from 1967 to 1981. Mr. Oelsner received an M.B.A. in
Finance from the Columbia University Graduate School of Business
in 1966 and an A.B. in Politics from Princeton University in
1964.

Richard A. Beech, age 51, is a Director of Demeter. Mr. Beech
has been associated with the futures industry for over 25 years.
He has been at Morgan Stanley DW since August 1984 where he is
presently an Executive Director and head of Branch Futures. Mr.
Beech began his career at the Chicago Mercantile Exchange, where
he became the Chief Agricultural Economist doing market analysis,
marketing and compliance. Prior to joining Morgan Stanley DW, Mr.
Beech worked at two investment banking firms in operations,
research, managed futures and sales management.

Raymond A. Harris, age 46, is a Director of Demeter and of Morgan
Stanley Futures & Currency Management Inc. Mr. Harris is
currently Managing Director in Global Products & Services at
Morgan Stanley. He previously served as Chief Accounting
Officer of Morgan Stanley Dean Witter Asset Management. From July
1982 to July 1994, Mr. Harris served in financial, administrative
and other assignments at Dean Witter Reynolds, Inc. and Dean
Witter, Discover & Co. From August 1994 to January 1999, he
worked in Discover Financial Services and the firm's Credit
Service business units. Mr. Harris has been with Morgan Stanley
and its affiliates since July 1982. He has a B.A. degree from
Boston College and an M.B.A. in Finance from the University of
Chicago.

Anthony J. DeLuca, age 40, is a Director of Demeter. Mr. DeLuca
is also a Director of Morgan Stanley Futures & Currency
Management Inc. Mr. DeLuca was appointed the Controller of Asset
Management for Morgan Stanley in June 1999. Prior to that, Mr.
DeLuca was a partner at the accounting firm of Ernst & Young LLP,
where he had Morgan Stanley as a major client. Mr. DeLuca had
worked continuously at Ernst & Young LLP ever since 1984, after
he graduated from Pace University with a B.B.A. degree in
Accounting.

Frank Zafran, age 47, is a Director of Demeter and of Morgan
Stanley Futures & Currency Management Inc. Mr. Zafran is an
Executive Director of Morgan Stanley and, in September 2002, was
named Chief Administrative Officer of Morgan Stanley's Global
Products & Services Division. Mr. Zafran joined the firm in 1979
and has held various positions in Corporate Accounting and
the Insurance Department, including Senior Operations Officer -
Insurance Division, until his appointment in 2000 as Director of
401(k) Plan Services, responsible for all aspects of 401(k) Plan
Services including marketing, sales and operations. Mr. Zafran
received a B.S. degree in Accounting from Brooklyn College, New
York.

Raymond E. Koch resigned his position as Chief Financial Officer
of Demeter.

Jeffrey D. Hahn, age 45, is the Chief Financial Officer of
Demeter. Mr. Hahn began his career at Morgan Stanley in 1992 and
is currently an Executive Director responsible for the management
and supervision of the accounting, reporting, tax and finance
functions for the firm's private equity, managed futures, and
certain legacy real estate investing activities. He is also Chief
Financial Officer of Morgan Stanley Futures & Currency Management
Inc. From August 1984 through May 1992, Mr. Hahn held various
positions as an auditor at Coopers & Lybrand, specializing in
manufacturing businesses and venture capital organizations. Mr.
Hahn received his B.A. in Economics from St. Lawrence University
in 1979, an M.B.A. from Pace University in 1984, and is a
Certified Public Accountant.

All the foregoing directors have indefinite terms.

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

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

(a) Security Ownership of Certain Beneficial Owners - At December
31, 2002, there were no persons known to be beneficial owners
of more than 5 percent of the Units.

(b) Security Ownership of Management - At December 31, 2002,
Demeter owned 312.413 Units of general partnership interest
representing a 1.11 percent interest in the Partnership.

(c) Changes in Control - None

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of "Notes to
Financial Statements", in the accompanying Annual Report to
Limited Partners for the year ended December 31, 2002, which is
incorporated by reference to Exhibit 13.01 of this Form 10-K. In
its capacity as the Partnership's retail commodity broker, Morgan
Stanley DW received commodity brokerage commissions (paid and
accrued by the Partnership) of $5,079,251 for the year
ended December 31, 2002.

Item 14. CONTROLS AND PROCEDURES
(a) As of a date within 90 days of the filing date of this
annual report, the President and Chief Financial
Officer of the general partner, Demeter, have evaluated
the effectiveness of the Partnership's disclosure
controls and procedures (as defined in Rule 13a-14 and
15d-14 of the Exchange Act), and have judged such
controls and procedures to be effective.

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

PART IV
Item 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and report of independent auditors,
all appearing in the accompanying Annual Report to Limited Partners
for the year ended December 31, 2002, are incorporated by reference to
Exhibit 13.01 of this Form 10-K:
? Report of Deloitte & Touche LLP, independent auditors, for the
years ended December 31, 2002, 2001 and 2000.

? Statements of Financial Condition, including the Schedules of
Investments, as of December 31, 2002 and 2001.

? Statements of Operations, Changes in Partners' Capital, and Cash
Flows for the years ended December 31, 2002, 2001 and 2000.

? Notes to Financial Statements.
With the exception of the aforementioned information and the information
incorporated in Items 7, 8, and 13, the Annual Report to Limited
Partners for the year ended December 31, 2002, is not deemed to be filed
with this report.

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

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

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

SIGNATURES

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
(Registrant)

BY: Demeter Management Corporation,
General Partner

March 31, 2003 BY: /s/ Jeffrey A. Rothman
Jeffrey A. Rothman, Director
and 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/ Robert E. Murray March 31, 2003
Robert E. Murray, Director and
Chairman

/s/ Jeffrey A. Rothman March 31, 2003
Jeffrey A. Rothman, Director and
President

/s/ Joseph G. Siniscalchi March 31, 2003
Joseph G. Siniscalchi, Director

/s/ Edward C. Oelsner III March 31, 2003
Edward C. Oelsner III, Director

/s/ Richard A. Beech March 31, 2003
Richard A. Beech, Director

/s/ Raymond A. Harris March 31, 2003
Raymond A. Harris, Director

/s/ Anthony J. DeLuca March 31, 2003
Anthony J. DeLuca, Director

/s/ Frank Zafran March 31, 2003
Frank Zafran, Director

/s/ Jeffrey D. Hahn March 31, 2003
Jeffrey D. Hahn, Chief
Financial Officer

CERTIFICATIONS

I, Jeffrey A. Rothman, President of Demeter Management
Corporation, the general partner of the registrant, certify that:

1. I have reviewed this annual report on Form 10-K of the
registrant;

2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;

b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of Demeter's
board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have
indicated in this annual report whether there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.

Date: March 31, 2003 /s/Jeffrey A. Rothman
Jeffrey A. Rothman
President, Demeter Management
Corporation, general partner
of the registrant

CERTIFICATIONS

I, Jeffrey D. Hahn, Chief Financial Officer of Demeter Management
Corporation, the general partner of the registrant, certify that:

1. I have reviewed this annual report on Form 10-K of the
registrant;

2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;

b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of Demeter's
board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have
indicated in this annual report whether there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.

Date: March 31, 2003 /s/Jeffrey D. Hahn
Jeffrey D. Hahn
Chief Financial Officer,
Demeter Management Corporation,
general partner of the
registrant

EXHIBIT INDEX

ITEM

3.01 Amended and Restated Limited Partnership Agreement of the
Partnership, is incorporated by reference to Exhibit A of
the Partnership's Prospectus, dated May 12, 1997, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933 on May
13, 1997.

10.01 Amended and Restated Management Agreement among the
Partnership, Demeter and John W. Henry and Company, Inc.,
dated as of May 12,1997 is incorporated by reference to
Exhibit 10.01 of the Partnership's Form 10-Q for the
quarter ended June 30, 2002 (File No. 0-19046) filed with
the Securities and Exchange Commission on August 12,
2002.

10.01(a) Amendment to Amended and Restated Management Agreement
between the Partnership and John Henry & Company, dated
November 30, 2000, is incorporated by reference to
Exhibit 10.01 of the Partnership's Form 8-K (File No. 0-
19046) filed with the Securities and Exchange Commission
on January 31, 2001.

10.02 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. 0-19046) 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-
19046) 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. 0-19046) 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.
0-19046) filed with the Securities and Exchange Commission
on November 13, 2001.

10.06 Amendment to Amended and Restated Management Agreement
between the Partnership and John W. Henry & Company,
Inc., dated as of November 30, 2000, is incorporated by
reference to Exhibit 10.01 of the Partnership's Form
8-K (File No. 0-19046) filed with the Securities and
Exchange Commission on January 3, 2001.

10.07 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. 0-19046) filed with the Securities and
Exchange Commission on November 13, 2001.

13.01 Annual Report to Limited Partners for the year ended
December 31, 2002 is filed herewith.

99.01 Certification by President of Demeter Management
Corporation, 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.

99.02 Certification by Chief Financial Officer of Demeter
Management Corporation, 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.

EXHIBIT 99.01

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Dean Witter Portfolio
Strategy Fund L.P. (the "Partnership") on Form 10-K for the
period ended December 31, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Jeffrey
A. Rothman, President, Demeter Management Corporation, general
partner of the Partnership, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
Section 13 or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.

By: /s/ Jeffrey A. Rothman

Name: Jeffrey A. Rothman
Title: President

Date: March 31, 2003

EXHIBIT 99.02

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Dean Witter Portfolio
Strategy Fund L.P. (the "Partnership") on Form 10-K for the
period ended December 31, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Jeffrey
D. Hahn, Chief Financial Officer, Demeter Management Corporation,
general partner of the Partnership, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
Section 13 or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.

By: /s/ Jeffrey D. Hahn

Name: Jeffrey D. Hahn
Title: Chief Financial Officer

Date: March 31, 2003

Portfolio
Strategy
Fund

December 31, 2002
Annual Report

[LOGO] Morgan Stanley

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

HISTORICAL FUND PERFORMANCE

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

INCEPTION-
TO-DATE ANNUALIZED
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 RETURN RETURN
FUND % % % % % % % % % % % % % %
- -----------------------------------------------------------------------------------------------------------------

Portfolio Strategy Fund 27.7 (6.4) 19.9 (5.4) 25.4 25.5 11.2 9.5 (6.9) 9.9 (6.0) 26.7 216.6 10.2
(11 mos)
- -----------------------------------------------------------------------------------------------------------------

DEMETER MANAGEMENT CORPORATION

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
ANNUAL REPORT
2002

Dear Limited Partner:

This marks the twelfth annual report for the Dean Witter Portfolio Strategy
Fund L.P. (the "Fund"). The Fund began the year trading at a Net Asset Value
per Unit of $2,498.93 and increased by 26.7% to $3,166.00 on December 31, 2002.
The Fund has increased by 216.6% since it began trading in February 1991 (a
compound annualized return of 10.2%).

Detailed performance information for the Fund is located in the body of the
financial report. 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.

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

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

I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is not a
guarantee of future results.

Sincerely,

/s/ Jeffrey A. Rothman
Jeffrey A. Rothman
President
Demeter Management Corporation
General Partner

PORTFOLIO STRATEGY FUND
[CHART]

Year ended December 31, 2002
----------------------------
Currencies 18.47%
Interest Rates 12.80%
Stock Indices 2.63%
Energies -0.54%
Metals -1.02%
Agriculturals -1.66%

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

FACTORS INFLUENCING ANNUAL TRADING GAINS:
.. In the currency markets, gains were recorded from long positions in the
euro, Swiss franc, and Australian dollar relative to the U.S. dollar as the
value of the dollar weakened during the second quarter, as well as in
December, amid investors' fears concerning increased tensions in the Middle
East and prolonged uncertainty regarding the U.S. economy.
.. In the global interest rate futures markets, gains resulted from long
positions in Japanese, European, and U.S. interest rate futures as prices
trended higher during the second and third quarter amid continued
uncertainty in the equity markets and negative economic data.
.. In the global stock index futures markets, gains were recorded from short
positions in U.S. and European stock index futures as prices continued to
trend lower throughout a majority of the year due to suspicions regarding
corporate accounting practices, weak economic data, and geopolitical
uncertainty.

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
.. In the agricultural futures markets, losses were incurred from long
positions in cotton futures as prices moved without consistent direction
during the third quarter amid shifting supply and demand concerns. Smaller
losses were also recorded from positions in sugar and coffee futures as
prices moved erratically throughout most of the year.
.. In the metals futures markets, losses were recorded from positions in
aluminum and copper futures as an uncertain economic outlook resulted in
trendless price activity among industrial metals throughout most of the year.

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

INDEPENDENT AUDITORS' REPORT

To the Limited Partners and the General Partner:

We have audited the accompanying statements of financial condition of Dean
Witter Portfolio Strategy Fund L.P. (the "Partnership"), including the
schedules of investments, as of December 31, 2002 and 2001, 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, 2002. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Dean Witter Portfolio Strategy Fund L.P. at
December 31, 2002 and 2001, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2002 in
conformity with accounting principles generally accepted in the United States
of America.

/s/ Deloitte & Touche LLP

New York, New York
February 14, 2003

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31,
----------------------
2002 2001
---------- ----------
$ $

ASSETS
Equity in futures interests trading
accounts:
Cash 80,285,823 75,412,074
Net unrealized gain on open contracts
(MS&Co.) 9,386,670 4,044,975
Net unrealized gain (loss) on open
contracts (MSIL) (254,553) 622,869
---------- ----------
Total net unrealized gain on open
contracts 9,132,117 4,667,844
---------- ----------
Total Trading Equity 89,417,940 80,079,918
Due from Morgan Stanley DW 299,734 89,791
Interest receivable (Morgan Stanley DW) 79,789 98,923
---------- ----------
Total Assets 89,797,463 80,268,632
========== ==========

LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 561,117 1,071,142
Accrued administrative expenses 150,444 143,619
Management fees payable 149,661 133,764
---------- ----------
Total Liabilities 861,222 1,348,525
---------- ----------

PARTNERS' CAPITAL
Limited Partners (27,778.636 and
31,185.087 Units, respectively) 87,947,142 77,929,319
General Partner (312.413 and
396.485 Units, respectively) 989,099 990,788
---------- ----------
Total Partners' Capital 88,936,241 78,920,107
---------- ----------
Total Liabilities and Partners' Capital 89,797,463 80,268,632
========== ==========

NET ASSET VALUE PER UNIT 3,166.00 2,498.93
========== ==========

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
2002 2001 2000
---------- ----------- ----------
$ $ $

REVENUES
Trading profit (loss):
Realized 26,053,334 12,923,334 (586,022)
Net change in unrealized 4,464,273 (12,575,739) 12,129,234
---------- ----------- ----------
Total Trading Results 30,517,607 347,595 11,543,212
Interest income (Morgan Stanley DW) 1,084,785 2,761,635 4,244,138
---------- ----------- ----------
Total 31,602,392 3,109,230 15,787,350
---------- ----------- ----------
EXPENSES
Brokerage commissions
(Morgan Stanley DW) 5,079,251 5,090,463 5,075,941
Incentive fees 4,521,723 1,035,312 --
Management fees 1,709,477 1,765,563 3,475,062
Transaction fees and costs 254,171 324,345 351,610
Administrative expenses 181,000 118,000 127,000
---------- ----------- ----------
Total 11,745,622 8,333,683 9,029,613
---------- ----------- ----------
NET INCOME (LOSS) 19,856,770 (5,224,453) 6,757,737
========== =========== ==========
NET INCOME (LOSS) ALLOCATION:
Limited Partners 19,623,459 (5,138,821) 6,620,108
General Partner 233,311 (85,632) 137,629
NET INCOME (LOSS) PER UNIT:
Limited Partners 667.07 (159.79) 238.94
General Partner 667.07 (159.79) 238.94

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

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

Partners' Capital,
December 31, 1999 45,128.639 107,807,427 1,393,791 109,201,218
Net income -- 6,620,108 137,629 6,757,737
Redemptions (9,288.062) (20,669,064) -- (20,669,064)
---------- ----------- --------- -----------
Partners' Capital,
December 31, 2000 35,840.577 93,758,471 1,531,420 95,289,891
Net loss -- (5,138,821) (85,632) (5,224,453)
Redemptions (4,259.005) (10,690,331) (455,000) (11,145,331)
---------- ----------- --------- -----------
Partners' Capital,
December 31, 2001 31,581.572 77,929,319 990,788 78,920,107
Net income -- 19,623,459 233,311 19,856,770
Redemptions (3,490.523) (9,605,636) (235,000) (9,840,636)
---------- ----------- --------- -----------
Partners' Capital,
December 31, 2002 28,091.049 87,947,142 989,099 88,936,241
========== =========== ========= ===========

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
2002 2001 2000
----------- ----------- -----------
$ $ $

CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) 19,856,770 (5,224,453) 6,757,737
Noncash item included in net
income (loss):
Net change in unrealized (4,464,273) 12,575,739 (12,129,234)
(Increase) decrease in operating
assets:
Due from Morgan
Stanley DW (209,943) (43,792) (45,999)
Interest receivable
(Morgan Stanley DW) 19,134 271,809 12,975
Increase (decrease) in operating
liabilities:
Accrued administrative expenses 6,825 48,555 (1,730)
Management fees payable 15,897 (27,858) (210,881)
----------- ----------- -----------
Net cash provided by (used
for) operating activities 15,224,410 7,600,000 (5,617,132)
----------- ----------- -----------

CASH FLOWS FROM
FINANCING ACTIVITIES
Decrease in redemptions payable (510,025) (612,146) (493,968)
Redemptions of Units (9,840,636) (11,145,331) (20,669,064)
----------- ----------- -----------
Net cash used for financing
activities (10,350,661) (11,757,477) (21,163,032)
----------- ----------- -----------
Net increase (decrease) in cash 4,873,749 (4,157,477) (26,780,164)
Balance at beginning of period 75,412,074 79,569,551 106,349,715
----------- ----------- -----------
Balance at end of period 80,285,823 75,412,074 79,569,551
=========== =========== ===========

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

SCHEDULES OF INVESTMENTS

DECEMBER 31, 2002 AND 2001

FUTURES AND FORWARD CONTRACTS: LONG GAIN/(LOSS) SHORT GAIN/(LOSS) NET UNREALIZED GAIN/(LOSS)
- ------------------------------ ---------------- ----------------- --------------------------
2002 PARTNERSHIP NET ASSETS: $88,936,241 $ $ $

Foreign currency 5,098,449 (136,246) 4,962,203
Interest Rate 2,961,503 (868,797) 2,092,706
Commodity 2,055,044 306,712 2,361,756
Equity (223,878) 31,348 (192,530)
--------- --------- ---------
Grand Total: 9,891,118 (666,983) 9,224,135
========= =========
Unrealized Currency Loss (92,018)
---------
Total Net Unrealized Gain per Statement of Financial Condition 9,132,117
=========
2001 PARTNERSHIP NET ASSETS: $78,920,107
Foreign currency:
Japanese yen/US dollar Mar. 02 -- 4,818,712 4,818,712
Other 68,720 (55,286) 13,434
Interest Rate (111,508) 754,259 642,751
Commodity (619,813) (222,303) (842,116)
Equity 90,760 -- 90,760
--------- --------- ---------
Grand Total: (571,841) 5,295,382 4,723,541
========= =========
Unrealized Currency Loss (55,697)
---------
Total Net Unrealized Gain per Statement of Financial Condition 4,667,844
=========

FUTURES AND FORWARD CONTRACTS: PERCENTAGE OF NET ASSETS # OF CONTRACTS /NOTIONAL AMOUNTS
- ------------------------------ ------------------------ --------------------------------
2002 PARTNERSHIP NET ASSETS: $88,936,241 %

Foreign currency 5.58* 358,668,224
Interest Rate 2.35 3,028
Commodity 2.66 3,019
Equity (0.22) 293
-----
Grand Total: 10.37
=====
Unrealized Currency Loss

Total Net Unrealized Gain per Statement of Financial Condition

2001 PARTNERSHIP NET ASSETS: $78,920,107
Foreign currency:
Japanese yen/US dollar Mar. 02 6.11 14,560,955,500
Other 0.01 421,529,299
Interest Rate 0.81 3,064
Commodity (1.07) 2,089
Equity 0.12 211
-----
Grand Total: 5.98
=====
Unrealized Currency Loss

Total Net Unrealized Gain per Statement of Financial Condition

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

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. Dean Witter Portfolio Strategy Fund L.P. (the "Partnership") is
a limited partnership organized to engage primarily in the speculative trading
of futures contracts and forward contracts on physical commodities and other
commodity interests, including foreign currencies, financial instruments,
metals, energy and agricultural products (collectively, "futures interests").
The Partnership's general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Morgan Stanley DW Inc.
("Morgan Stanley DW"). The clearing commodity brokers are Morgan Stanley & Co.
Incorporated ("MS&Co.") and Morgan Stanley & Co. International Limited
("MSIL"). Demeter, Morgan Stanley DW, MS&Co. and MSIL are wholly-owned
subsidiaries of Morgan Stanley.
John W. Henry & Company, Inc. ("JWH") is the trading manager for the
Partnership.
Effective June 20, 2002, Morgan Stanley Dean Witter & Co. changed its name to
Morgan Stanley.
Demeter is required to maintain a 1% minimum interest in the equity of the
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.

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

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

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

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

EQUITY IN FUTURES INTERESTS TRADING ACCOUNTS. The Partnership's asset "Equity
in futures interests trading accounts", reflected in the statements of
financial condition, consists of (A) cash on deposit with Morgan Stanley DW,
MS&Co. and MSIL to be used as margin for trading; and (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.

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

The Partnership, in the normal course of business, enters into various
contracts with MS&Co. and MSIL acting as its commodity brokers. Pursuant to
brokerage agreements with MS&Co. and MSIL, to the extent that such trading
results in unrealized gains or losses, the amounts are offset and reported on a
net basis on the Partnership's statements of financial condition.
The Partnership has offset the fair value amounts recognized for forward
contracts executed with the same counterparty as allowable under terms of the
master netting agreement with MS&Co., the sole counterparty on such contracts.
The Partnership has consistently applied its right to offset.

BROKERAGE COMMISSIONS AND RELATED TRANSACTION FEES AND COSTS. The Partnership
accrues brokerage commissions and transaction fees and costs on a half-turn
basis, at 80% and 100%, respectively, of the rates Morgan Stanley DW charges
parties that are not clearinghouse members. Brokerage commissions and
transaction fees are capped at 13/20 of 1% per month (a 7.8% maximum annual
rate) of the Partnership's month-end Net Assets applied on a per trading
program basis.

OPERATING EXPENSES. The Partnership bears all operating expenses related to
its trading activities, to a maximum of 1/4 of 1% annually of the
Partnership's average month-end Net Assets. These include filing fees,
clerical, administrative, auditing, accounting, mailing, printing and other
incidental operating expenses as permitted by the Limited Partnership
Agreement. In addition, the Partnership incurs a monthly management fee and may
incur an incentive fee. Demeter and/or Morgan Stanley DW bear all other
operating expenses, including expenses which would be incurred if the
Partnership was required to register as an investment company.

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

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 that is six months
after the closing at which a person becomes a Limited Partner, upon five
business 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.

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 the Partnership's revenues
and expenses for income tax purposes.

DISSOLUTION OF THE PARTNERSHIP. The Partnership will terminate on December 31,
2025 or at an earlier date if certain conditions set forth in the Limited
Partnership Agreement occur.

- --------------------------------------------------------------------------------
2. RELATED PARTY TRANSACTIONS
The Partnership pays brokerage commissions to Morgan Stanley DW as described in
Note 1. The Partnership's cash is on deposit with Morgan Stanley DW, MS&Co.,
and MSIL 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 MANAGER
Compensation to JWH consists of a management fee and an incentive fee as
follows:

MANAGEMENT FEE. The Partnership pays a monthly management fee equal to 1/6 of
1% per month (a 2% annual rate) of the Partnership's adjusted Net Assets, as
defined in the Limited Partnership Agreement, as of the last day of each month.
Prior to December 1, 2000, the management fee was equal to 1/3 of 1% per month
(a 4% annual rate).

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

INCENTIVE FEE. The Partnership pays a quarterly incentive fee equal to 20% of
the Partnership's new appreciation of its Net Assets as of the end of each
calendar quarter. Prior to December 1, 2000, the quarterly incentive fee was
equal to 15% of the Partnership's new appreciation of its Net Assets as of the
end of each calendar quarter. 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 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 to JWH on those redemptions in the month of such redemptions.

- --------------------------------------------------------------------------------
4. FINANCIAL INSTRUMENTS
The Partnership trades primarily futures contracts and forward contracts on
physical commodities and other commodity interests, including foreign
currencies, financial instruments, metals, energy and agricultural products.
Futures and forwards represent contracts for delayed delivery of an instrument
at a specified date and price. Risk arises from changes in the value of these
contracts and the potential inability of counterparties to perform under the
terms of the contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest rate
volatility.
The market value of contracts is based on closing prices quoted by the
exchange, bank or clearing firm through which the contracts are traded.

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

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 Standard 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 were
as follows:

NET UNREALIZED GAINS/
(LOSSES) ON OPEN CONTRACTS LONGEST MATURITIES
------------------------------ -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- --------- --------- ---------
$ $ $

2002 4,169,914 4,962,203 9,132,117 Dec. 2003 Mar. 2003
2001 (164,302) 4,832,146 4,667,844 Dec. 2002 Mar. 2002

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

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 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 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
contracts, including an amount equal to the net unrealized gains (losses) on
all open futures contracts, which funds, in the aggregate, totaled $84,455,737
and $75,247,772 at December 31, 2002 and 2001, respectively. With respect to
the Partnership's off-exchange-traded forward currency contracts, there are no
daily settlements of variations in value nor is there any requirement that an
amount equal to the net unrealized gains (losses) on open forward contracts be
segregated. 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 of 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.

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

NOTES TO FINANCIAL STATEMENTS
(concluded)

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

PER UNIT
---------

NET ASSET VALUE, JANUARY 1, 2002: $2,498.93
---------
NET OPERATING RESULTS:
Realized Profit 875.53
Unrealized Profit 150.18
Interest Income 36.49
Expenses (395.13)
---------
Net Income 667.07
---------
NET ASSET VALUE, DECEMBER 31, 2002: $3,166.00
=========
Expense Ratio 14.0%
Net Income Ratio 23.7%
TOTAL RETURN 26.7%

PRESORTED
FIRST CLASS MAIL
U.S. POSTAGE
PAID
PERMIT #374
LANCASTER, PA
Demeter Management Corporation
825 Third Avenue, 9th Floor
New York, NY 10022
[LOGO] Morgan Stanley

ADDRESS SERVICE REQUESTED

[LOGO] printed on recycled paper