DEAN WITTER PORTFOLIO STRATEGY FUND LP - 10-Q Quarterly Report

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

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2003 or

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

Commission File Number 0-19046

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

(Exact name of registrant as specified in its charter)

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

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

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

Yes X No___________

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2003

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
STATEMENTS OF FINANCIAL CONDITION

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
STATEMENTS OF OPERATIONS
(Unaudited)

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
STATEMENTS OF OPERATIONS
(Unaudited)

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
STATEMENTS OF CHANGES IN PARTNERS? CAPITAL
For the Six Months Ended June 30, 2003 and 2002
(Unaudited)

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS

June 30, 2003

(Unaudited)

The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Dean Witter Portfolio Strategy Fund L.P. (the ?Partnership?).
The financial statements and condensed notes herein should be read
in conjunction with the Partnership?s December 31, 2002 Annual
Report on Form 10-K.

1. Organization
Dean Witter Portfolio Strategy Fund L.P. 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, but not
limited to, foreign currencies, financial instruments, metals,
energy and agricultural products.

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Demeter, Morgan Stanley DW, MS & Co. and MSIL are wholly-owned
subsidiaries of Morgan Stanley. John W. Henry & Company, Inc.
(?Trading Manager?) is the trading manager to the Partnership.

2. Related Party Transactions
The Partnership?s cash is on deposit with Morgan Stanley DW, MS &
Co. and MSIL in futures and forwards trading accounts to meet
margin requirements as needed. Morgan Stanley DW pays interest on
these funds based on the prevailing rate on U.S. Treasury bills.
The Partnership pays brokerage commissions to Morgan Stanley DW.

3. Financial Instruments
The Partnership trades futures contracts and forward contracts on
physical commodities and other commodity interests, including, but
not limited to, foreign currencies, financial instruments, metals,
energy and agricultural products. Futures and forwards represent
contracts for delayed delivery of an instrument at a specified
date and price. Risk arises from changes in the value of these
contracts and the potential inability of counterparties to perform
under the terms of the contracts. There are numerous factors
which may significantly influence the market value of these
contracts, including interest rate volatility.

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

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

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

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

Net Unrealized Gains (Losses)
on Open Contracts Longest Maturities
Off- Off-
Exchange- Exchange- Exchange- Exchange-
Date Traded Traded Total Traded Traded
$ $ $
Jun. 30, 2003 (4,616,150) (3,309,677) (7,925,827) Jun. 2004 Sep. 2003
Dec. 31, 2002 4,169,914 4,962,203 9,132,117 Dec. 2003 Mar. 2003

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

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

Trading Commission (?CFTC?), to segregate from their own assets,
and for the sole benefit of their commodity customers, all funds
held by them with respect to exchange-traded futures contracts,
including an amount equal to the net unrealized gains (losses) on
all open futures contracts, which funds, in the aggregate, totaled
$99,727,727 and $84,455,737 at June 30, 2003 and December 31,
2002, 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.

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

Liquidity. The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker and MS & Co. and MSIL as
clearing brokers in separate futures and forwards trading accounts
established for the Trading Manager, 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 CFTC 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 currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.

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 of
limited partnership interest (?Unit(s)?) 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 and 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 and six month periods
ended June 30, 2003 and 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 set forth in the
financial statements on pages 2 through 11 of this report were
prepared in accordance with accounting principles generally
accepted in the United States of America, which require the use
of certain accounting policies that affect the amounts reported
in these financial statements, including the following: The
contracts the Partnership trades are accounted for on a trade-
date basis and marked to market on a daily basis. The difference
between their cost and market value is recorded on the Statements
of Operations as ?Net change in unrealized 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
commissions expenses of the Partnership are recorded on an
accrual basis.

Demeter believes that, based on the nature of the operations of
the Partnership, no assumptions relating to the application of
critical accounting policies other than those presently
used could reasonably affect reported amounts.
For the Quarter and Six Months Ended June 30, 2003
For the quarter ended June 30, 2003, the Partnership recorded
total trading revenues, including interest income, of $153,254
and, after expenses, posted a decrease in net asset value per
Unit. The most significant losses of approximately 2.5% were
recorded in the metals markets primarily during June from long
positions in gold futures as prices declined in response to the
rise of the U.S. dollar. In the energy markets, losses of
approximately 1.5% were recorded primarily during May from short
futures positions in crude oil as prices moved higher amid supply
concerns and renewed fears concerning security at Middle Eastern
refining facilities. Smaller losses of approximately 1.3% were
recorded in the agricultural markets during June from short
positions in cotton futures as increased exports and weather-
related supply concerns forced prices higher. A portion of the
Partnership?s overall losses was offset by gains of approximately
1.2% in the global stock index markets recorded during June from
long positions in U.S., Japanese, and European stock index
futures as equity prices rallied in response to the prospect of
lower interest rates and the release of positive economic data.
In the currency markets, gains of approximately 0.9% were
experienced primarily during April and May from long positions in
the euro and Australian dollar versus the U.S. dollar as the
value of these currencies strengthened against the U.S. dollar
amid uncertainty regarding the Bush Administration?s
economic policy, renewed fears of potential terrorist attacks
against American interests, and investor preference for non-U.S.
dollar denominated assets. Smaller gains of approximately 0.8%
were recorded in the global interest rate futures markets during
May from long positions in U.S. interest rate futures as prices
trended higher amid speculation of an interest rate cut by the
Federal Reserve and lingering doubts concerning a global economic
recovery. Total expenses for the three months ended June 30,
2003 were $2,396,924, resulting in a net loss of $2,243,670. The
net asset value of a Unit decreased from $3,643.92 at March 31,
2003 to $3,559.07 at June 30, 2003.

For the six months ended June 30, 2003, the Partnership recorded
total trading revenues, including interest income, of $16,691,792
and posted an increase in net asset value per Unit. Gains of
approximately 7.4% were rcorded in the global interest rate
markets from long positions in U.S., European, and Japanese
interest rate futures as prices trended higher during January,
February and May amid continued uncertainty in the global equity
markets and investor demand for fixed income investments. In the
energy markets, gains of approximately 4.9% were recorded
primarily during January and February from long positions in
natural gas futures as prices trended higher in response to
prolonged frigid temperatures in the northeastern and midwestern
United States. In the currency markets, gains of approximately
3.4% were experienced primarily during January, April and
May from long positions in the euro and Australian dollar versus
the U.S. dollar as the value of these currencies strengthened
against the U.S. dollar amid uncertainty regarding the Bush
Administration?s economic policy, increased tensions between the
U.S. and Iraq, and investor preference for non-U.S. dollar
denominated assets. Additional gains of approximately 3.3% were
recorded in the global stock index markets from short positions
in European and Japanese stock index futures during January and
March as prices moved lower on continuing economic uncertainty
and the war in Iraq. Additional gains in the sector were
provided during June from long positions in European and Japanese
stock index futures as prices rallied amid increased foreign
demand for equities, the release of positive economic data, and
renewed expectations for a U.S. interest rate cut. A portion of
the Partnership?s overall gains was offset by losses of
approximately 2.8% recorded in the metals markets from positions
in gold and silver futures as precious metals prices experienced
short-term price volatility throughout a majority of the first
half of the year. Elsewhere in the metals markets, short
positions in aluminum futures resulted in losses during May as
prices reversed higher, buoyed by a rebound in U.S. equity prices
and hopes for increased industrial demand. Additional losses of
approximately 1.9% were experienced in the agricultural futures
markets from short positions in corn futures as prices moved
without consistent direction during the first six months of the
year due to supply and demand concerns prompted by the
weather in the crop growing regions of the U.S. Total expenses
for the six months ended June 30, 2003 were $5,449,735, resulting
in net income of $11,242,057. The net asset value of a Unit
increased from $3,166.00 at December 31, 2002 to $3,559.07 at
June 30, 2003.

For the Quarter and Six Months Ended June 30, 2002
For the quarter ended June 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $24,931,615
and posted an increase in net asset value per Unit. The most
significant gains of approximately 36.7% were recorded in the
currency markets primarily during May and June from previously
established long positions in the euro, Swiss franc, Japanese
yen, and British pound relative to the U.S. dollar as the value
of these currencies strengthened against the U.S. dollar amid
falling equity prices, concerns regarding corporate accounting
integrity and weak economic data. Additional gains of
approximately 1.8% were recorded in the global stock index
futures markets from short positions in U.S. and European stock
index futures as prices decreased on geopolitical concerns and
uncertainty surrounding a global economic recovery. A portion of
the Partnership?s overall gains for the quarter was offset by
losses of approximately 2.6% in the energy markets primarily from
previously established long futures positions in crude oil as
prices moved lower following supply and demand concerns.
Weakness in crude oil resulted in newly established short
positions, adding to earlier losses when prices strengthened
during June over supply and demand concerns and renewed Middle
East tensions. Total expenses for the three months ended June
30, 2002 were $2,481,888, resulting in net income of $22,449,727.
The net asset value of a Unit increased from $2,237.47 at March
31, 2002 to $2,984.33 at June 30, 2002.

For the six months ended June 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $18,403,070
and posted an increase in net asset value per Unit. The most
significant gains of approximately 24.0% were recorded in the
currency markets primarily during May and June from previously
established long positions in the euro, Swiss franc and the
British pound relative to the U.S. dollar as the value of these
currencies strengthened against the dollar amid falling equity
prices, concerns regarding corporate accounting integrity, and
weak economic data. Additional gains of approximately 1.7% were
recorded in the energy markets, as the price of crude oil and its
related products increased sharply in March as ongoing political
unrest in the Middle East prompted supply concerns, thus
resulting in gains from previously established long futures
positions. A portion of the Partnership?s overall gains for the
first six months was offset by losses of approximately 2.3% in
the agricultural markets primarily from positions in sugar
futures as prices moved without consistent direction amid supply
and demand concerns. Additional losses of approximately
2.1% were recorded in the global interest rate futures markets
during April, as U.S. interest rate futures prices increased amid
questions regarding the strength of a global economic recovery,
resulting in losses from previously established short positions.
Total expenses for the six months ended June 30, 2002 were
$4,106,151, resulting in net income of $14,296,919. The net
asset value of a Unit increased from $2,498.93 at December 31,
2001 to $2,984.33 at June 30, 2002.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures and forwards. The market-sensitive
instruments held by the Partnership are acquired for speculative
trading purposes only and, as a result, all or substantially all
of the Partnership?s assets are at risk of trading loss. Unlike
an operating company, the risk of market-sensitive instruments is
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 experience 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 for a
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 do not distinguish between exchange and non-
exchange-traded instruments and are 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 June 30, 2003 and 2002. At
June 30, 2003 and 2002, the Partnership?s total capitalization
was approximately $96 million and $89 million, respectively.

Primary Market June 30, 2003 June 30, 2002
Risk Category Value at Risk Value at Risk

Interest Rate (1.78)% (2.64)%
Currency (1.77) (3.85)
Equity (0.85) (0.75)
Commodity (2.05) (0.66)
Aggregate Value at Risk (3.49)% (4.83)%

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

The table above represents the VaR of the Partnership?s open
positions at June 30, 2003 and 2002 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 quarter-end 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 July 1,
2002 through June 30, 2003.

Primary Market Risk Category High Low Average
Interest Rate (2.20)% (0.89)% (1.69)%

Currency (3.40) (0.82) (1.97)

Equity (0.85) (0.30) (0.53)

Commodity (2.05) (0.75) (1.52)

Aggregate Value at Risk (3.97)% (1.53)% (3.04)%

Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by the
Partnership to typically be many times the total capitalization of
the Partnership. The value of the Partnership?s open positions
thus creates a ?risk of ruin? not typically found in other
investments. The relative size of the positions held may cause
the Partnership to incur losses greatly in excess of VaR within a
short period of time, given the effects of the leverage employed
and market volatility. The VaR tables above, as well as the past
performance of the Partnership, give no indication of such ?risk
of ruin?. In addition, VaR risk measures should be viewed in light
of the methodology?s limitations, which include the following:
* past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
* changes in portfolio value caused by market movements may
differ from those of the VaR model;
* VaR results reflect past 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 June 30, 2003 and 2002, and for the end of the
four quarterly reporting periods from July 1, 2002 through June
30, 2003. 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 June 30, 2003, the Partnership?s cash balance at Morgan Stanley
DW was approximately 96% 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 June 30, 2003, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Interest Rate. The primary market exposure of the Partnership at
June 30, 2003 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 exposure of the Partnership for the
foreseeable future. The speculative futures positions held by
the Partnership may range from short to long-term instruments.
Consequently, changes in short, medium, or long-term interest
rates may have an effect on the Partnership.

Currency. The second largest market exposure of the Partnership
at June 30, 2003 was to the currency complex. The Partnership?s
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. Interest rate
changes as well as political and general economic conditions
influence these fluctuations. At June 30, 2003, the
Partnership?s exposure was mostly 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.

Equity. The Partnership?s equity exposure at June 30,
2003 was primarily to equity price risk in the G-7 countries.
The stock index futures traded by the Partnership are by law
limited to futures on broadly-based indices. At June 30, 2003,
the Partnership?s primary exposures were to the DAX (Germany),
Euro Stoxx 50 (Europe), and NASDAQ (U.S.) stock indices. The
Partnership is 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 June 30, 2003, the Partnership?s energy exposure
was primarily to 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 June 30, 2003
was to fluctuations in the price of precious metals, such as
gold and silver, and base metals, such as copper,
aluminum, 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 June 30, 2003, the
Partnership had exposure to the markets that comprise these
sectors. Most of the exposure was to the corn, sugar and
cotton markets. Supply and demand inequalities, severe
weather disruptions and market expectations affect price
movements in these markets.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at June 30, 2003:

Foreign Currency Balances. The Partnership?s primary foreign
currency balances at June 30, 2003 were in euros,
Australian dollars and Japanese yen. The Partnership
controls the non-trading risk of foreign currency balances
by regularly converting them back into U.S. dollars upon
liquidation of their respective positions.

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

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

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

(b) There have been no 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 II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
None.

Item 5. OTHER INFORMATION
Changes in Management. The following changes have been made to
the Board of Directors and Officers of Demeter:

Mr. Robert E. Murray resigned the position of Chairman of the
Board of Directors of Demeter.

Mr. Jeffrey A. Rothman, President and Director of Demeter, was
named Chairman of the Board of Directors of Demeter.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

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.

31.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to rules 13a-15(e) and 15d-15(e), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to rules 13a-15(e) and 15d-15(e),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

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

SIGNATURE

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

Dean Witter Portfolio Strategy Fund L.P.
(Registrant)

By: Demeter Management Corporation
(General Partner)

August 13, 2003 By:/s/ Jeffrey D. Hahn
Jeffrey D. Hahn
Director and Chief Financial Officer

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

DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)