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 0-19116

	DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.

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

           DELAWARE                                         13-3577501
(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: $56,764,461 at January 31,
2003.

	DOCUMENTS INCORPORATED BY REFERENCE
	(See Page 1)



<page>
<table>
DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2002
<caption>
                             Page No.

												<c>
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . .  1

Part I .

  Item  1.  Business . . . . . . . . . . . . . . . . . . . . . . .  2-5

  Item  2.  Properties . . . . . . . . . . . . . . . . . . . . . . .  5

  Item  3.  Legal Proceedings. . . . . . . . . . . . . . . . . . . .  5

  Item  4.  Submission of Matters to a Vote of Security Holders. . .  5

Part II.

  Item  5.  Market for the Registrant's Partnership Units
            and Related Security Holder Matters. . . . . . . . . . .  6

  Item  6.  Selected Financial Data. . . . . . . . . . . . . . . . .  7

  Item  7.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations. . . . . . . . . . 8-22

  Item 7A.  Quantitative and Qualitative Disclosures About
            Market Risk. . . . . . . . . . . . . . . . . . . . .  22-35

  Item  8.  Financial Statements and Supplementary Data. . . . .  35-36

  Item  9.  Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure. . . . . . . . . . . 36
Part III.

  Item 10.  Directors and Executive Officers of the Registrant .  37-41

  Item 11.  Executive Compensation . . . . . . . . . . . . . . . . . 42

  Item 12.  Security Ownership of Certain Beneficial Owners
            and Management . . . . . . . . . . . . . . . . . . . . . 42

  Item 13.  Certain Relationships and Related Transactions . . .  42-43

  Item 14.  Controls and Procedures. . . . . . . . . . . . . . . . . 43
Part IV.

  Item 15.  Exhibits, Financial Statement Schedules, and
            Reports on Form 8-K. . . . . . . . . . . . . . . . . .44-45
</table>

<page> 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
     June 30, 1992.                                    I

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

































<page> PART I
Item 1.  BUSINESS

(a) General Development of Business.  Dean Witter Diversified Fu-
tures Fund III L.P. (the "Partnership") is a Delaware limited
partnership organized to engage primarily in the speculative
trading of futures and forward contracts on physical commodities
and other commodity interests including foreign currencies,
financial instruments, energy products, and agriculturals. The
Partnership commenced operations on November 1, 1990.

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

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

<page> The Partnership's net asset value per unit of limited
partnership interest ("Unit(s)") as of December 31, 2002 was
$2,529.72, representing an increase of 28.64 percent from the net
asset value per Unit of $1,966.55 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 the Trading Manager.  For a
detailed description of the different facets of the Partnership's
business, see those portions of the Partnership's prospectus,
dated June 30, 1992 (the "Prospectus"), incorporated by reference
in this Form 10-K, set forth below:

   Facets of Business
     1.  Summary                  1.  "Summary of the Prospectus"
                                       (Pages 1-8).

     2.  Commodities Markets      2.  "The Commodities Markets"
                                       (Pages 52-59).

<page>
     3.  Partnership's Commodity  3.  "Trading Policies" (Pages
         Trading Arrangements and      48-49). "The Trading
         Policies                      Manager" (Pages 37-47).

     4.  Management of the        4. "The Management Agreement"
         Partnership                  (Pages 50-52).  "The
                                      General Partner" (Pages
                                      33-35) and "The Commodity
                                       Broker" (Pages 49-50).
                                      "The Limited Partnership
                                       Agreement" (Pages 61-65).

     5.  Taxation of the          5.  "Federal Income Tax
	         Partnership's Limited         Aspects" and "State and
	         Partners                      Local Income Tax Aspects"
                                       (Pages 70-77).


(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 have an internet
website, however, the SEC maintains a website that contains <page>
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.


















<page>


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 2,964.

(c) Distributions. No distributions have been made by the
Partnership since it commenced trading operations on April 14,
1988.  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.















<page>
<table>
<caption>

Item 6.  SELECTED FINANCIAL DATA (in dollars)


                     ________________For the Years Ended December 31,
                          2002         2001         2000         1999         1998  .


		<c>	<c>	<c>	<c>	<c>
Revenues/(Losses)
(including interest)        17,529,465		4,638,330	13,245,317	(1,033,483)	9,448,680


Net Income (Loss)           11,978,334		618,682	8,946,492	(6,483,053)	3,166,040


Net Income (Loss)
Per Unit (Limited
& General Partners)            563.17		20.74	350.70	(188.24)	91.27


Total Assets               52,399,998		44,099,605	49,191,101	49,917,104	65,687,386


Total Limited
Partners' Capital         50,740,355		42,633,308	47,524,395	   47,862,260	64,144,919


Net Asset Value Per
Unit                         2,529.72		1,966.55	1,945.81	1,595.11	1,783.35







</table>















<page>



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
<page> 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 in the
<page> 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
<page> 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 commission
expenses of the Partnership are recorded on an accrual basis.

<page> 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
$51,795,479, an increase of $8,341,939 from the Partnership's
total capital of $43,453,540 at December 31, 2001.  For the year
ended December 31, 2002, the Partnership generated net income of
$11,978,334 and total redemptions aggregated $3,636,395.

For the year ended December 31, 2002, the Partnership recorded
total trading revenues, including interest income, of $17,529,465
and posted an increase in net asset value per Unit.  The most
significant gains of approximately 20.5% were recorded from long
positions in European, Japanese, and U.S. interest rate futures
during the period from June through September, as well as in
December, as prices trended higher amid increased demand among
investors seeking the safety of fixed income investments.
Additional gains of approximately 18.4% were generated in the
currency markets from long positions in the Swiss franc, euro,
Japanese yen, and Swedish krona relative to the U.S. dollar as
the dollar weakened due to continued uncertainty regarding a U.S.
<page> economic recovery and global tensions.  Additional
currency gains were recorded from long positions in the euro
versus the British pound.  A portion of the Partnership's overall
gains was offset by losses of approximately 6.8% recorded in the
metals futures markets from positions in aluminum futures as an
uncertain economic outlook resulted in trendless price activity
among industrial metals throughout most of the year.  In the
agricultural futures markets, losses of approximately 1.8% were
incurred from long positions in cotton futures as prices moved
without consistent direction during the first and third quarters
amid shifting supply and demand concerns.  Total expenses for the
year were $5,551,131, resulting in net income of $11,978,334. The
net asset value of a Unit increased from $1,966.55 at December
31, 2001 to $2,529.72 at December 31, 2002.

At December 31, 2001, the Partnership's total capital was
$43,453,540, a decrease of $4,882,434 from the Partnership's total
capital of $48,335,974 at December 31, 2000.  For the year ended
December 31, 2001, the Partnership generated net income of
$618,682 and total redemptions aggregated $5,501,116.

For the year ended December 31, 2001, the Partnership recorded
total trading revenues, including interest income, of $4,638,330
and posted an increase in net asset value per Unit.  The most
significant gains of approximately 10.1% were recorded in the
<page> global interest rate futures markets throughout a majority
of the first quarter from previously established long positions
in U.S. interest rate futures as prices trended higher amid a
rattled stock market, shaky consumer confidence, positive
inflation data and interest rate cuts by the U.S. Federal
Reserve.  Additional gains were recorded primarily during August,
September and October from previously established long positions
in short and intermediate term U.S. and German interest rate
futures as prices continued trending higher following an interest
rate cut by the U.S. Federal Reserve and as investors sought a
"safe haven" from the decline in stock prices.  In soft
commodities, profits of approximately 5.5% were recorded
throughout a majority of the first and second quarters from
previously established short cotton futures positions as prices
continued moving lower on weak export sales and low demand.  A
portion of the Partnership's overall gains were partially offset
by losses of approximately 6.6% recorded in the currency markets
primarily during July from previously established short positions
in the euro as the value of the European common currency reversed
higher versus the British pound as hints of possible intervention
by the European Central Bank to support the euro remained.
During December, additional losses were recorded from previously
established long euro positions as its value reversed lower
relative to the British pound.  In the energy markets, losses of
approximately 2.5% were experienced throughout the first nine
<page> months of the year from positions 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.  Total expenses for the year were $4,019,648, resulting
in net income of $618,682.  The net asset value of a Unit
increased from $1,945.81 at December 31, 2000 to $1,966.55 at
December 31, 2001.

At December 31, 2000, the Partnership's total capital was
$48,335,974, a decrease of $191,594 from the Partnership's total
capital of $48,527,568 at December 31, 1999.  For the year ended
December 31, 2000, the Partnership generated net income of
$8,946,492, and total redemptions aggregated $9,138,086.

For the year ended December 31, 2000, the Partnership recorded
total trading revenues, including interest income, of $13,245,317
and posted an increase in net asset value per Unit.  In the
energy sector, profits of approximately 18.3% resulted primarily
from long positions in the natural gas and crude oil futures
markets.  Natural gas saw its price rise to record levels in
2000.  Recent low inventory levels, sluggish supply and cold
winter weather combined to push prices to such high levels.  In
the crude oil market, gains were realized from long positions
earlier in the year as prices rose to nine-year highs on a
combination of cold weather, declining inventories and increasing
<page> demand.  In addition, concerns about future output levels
from the world's leading producer countries added to the upward
price momentum.  Later in the year, however, profits resulted
from short positions as the price of crude oil futures fell on
expectations that Iraqi oil exports would resume and on fears
that the slowdown in the economy would curb demand while at the
same time increase supply. In the currency markets, gains of
approximately 13.4% were recorded primarily from short positions
in the euro, Swiss franc and Swedish krona as the value of these
European currencies weakened relative to the U.S. dollar amid
skepticism about Europe's economic outlook.  Strong economic data
out of the U.S. and interest rate hikes in the U.S. also boosted
the dollar and, subsequently, added to the euro's difficulties.
Later in the year as the bullish trend in the U.S. dollar
reversed, additional gains were recorded from long positions in
the euro, Swiss franc and Swedish krona versus the U.S. dollar as
a result of new confidence in the European economy and overall
skepticism regarding the U.S. economy.  Profits of approximately
1.7% were recorded in the agricultural markets primarily from
short positions in the corn market during the middle of the year
as the price of corn trended lower on favorable weather
conditions that resulted in good prospects for high crop yields.
A portion of these gains was offset by losses experienced in the
metals, stock index and soft commodities markets. The majority of
losses, approximately 7.0%, were experienced in the metals
<page> markets primarily from aluminum futures.  From a technical
standpoint, the price of aluminum traded in a very volatile
pattern throughout the year leaving little opportunity for the
development of trends.  In addition, long positions in this
market, particularly in the second half of the year, resulted in
losses as prices declined after concerns mounted that demand
would weaken amid a cooling of the U.S. economy.  Losses of
approximately 5.5% were recorded in the global stock index
futures markets.  The S&P 500 Index traded in a very choppy
pattern, resulting in losses for both long and short positions.
Contributing to this price pattern was uncertainty over the state
of the U.S. economy. Total expenses for the year were $4,298,825,
resulting in net income of $8,946,492.  The net asset value of a
Unit increased from $1,595.11 at December 31, 1999 to $1,945.81
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 contact 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.

<page> 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
financial instruments, 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 were 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.
<page> 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.

<page> 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 affected 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.
<page>
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.

<page> 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 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
<page> 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
<page> 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 <page>
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-<page>
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 capitali-
zation was approximately $52 million and $43 million,
respectively.





<page>

     Primary Market       December 31, 2002   December 31, 2001
     Risk Category         Value at Risk       Value at Risk

Currency                  (3.35)%             (2.28)%
Interest Rate             (2.48)              (0.98)
Commodity                 (2.25)              (0.88)
Equity                       -                   -
Aggregate Value at Risk   (4.72)%             (2.94)%

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.

<page>
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                           (3.35)%	 (2.25)%	 (2.73)%
Interest Rate                      (3.00)	 (1.16)	 (2.14)
Commodity                          (2.47)	 (0.97)	 (1.99)
Equity                             (0.16)	    -	 (0.07)
Aggregate Value at Risk            (4.72)%	 (3.46)%	 (4.08)%


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
<page> 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
<page> 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 84% 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-
<page> 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 exposure 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.

<page> 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, including cross-rates - i.e., positions
between two currencies other than the U.S. dollar.  At December
31, 2002, the Partnership's major exposures were to euro currency
crosses and 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.

<page> Interest Rate.  The second largest market exposure at
December 31, 2002 was to the global interest rate complex.
Exposure was primarily spread across the Japanese, German and
U.S. 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
G-7 countries and Australian interest rates will remain the
primary interest rate exposures of the Partnership for the
foreseeable future.  The speculative futures positions held by
the Partnership may range from short to long-term instruments.
Consequently, changes in short, medium or long-term interest
rates may have an effect on the Partnership.

Commodity.
Energy.  At December 31, 2002, the Partnership's energy
exposure was shared primarily by futures contracts in crude
<page> oil 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.

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 cotton,
coffee and corn markets.  Supply and demand inequalities,
severe weather disruption and market expectations affect
price movements in these markets.

Metals.  The Partnership's metals exposure at December 31,
2002 was to fluctuations in the price of precious metals
such as gold.  Economic forces, supply and demand
inequalities, geopolitical factors and market expectations
influence price movement 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.
<page>

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
foreign currency balances at December 31, 2002 were in
euros, British pounds and Japanese yen.  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 diversi-
fication guidelines, often set in terms of the maximum margin to
be committed to positions in any one market sector or market-
sensitive instrument.

<page> 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)


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

2002
March 31       $ 1,034,152      $   136,306         $   6.03
June 30          9,311,988        7,903,101           369.80
September 30     8,031,500        6,050,926           288.60
December 31       (848,175)      (2,111,999)         (101.26)

Total          $17,529,465      $11,978,334         $ 563.17

2001
March 31       $ 3,664,910      $ 2,708,834         $ 113.20
June 30           (474,713)      (1,606,782)          (66.76)
September 30     1,823,207          757,661            32.53
December 31       (375,074)      (1,241,031)          (58.23)

Total          $ 4,638,330      $   618,682         $  20.74



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

None.


<page> 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 MSFCM, 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 President and a Director of
Demeter. Mr. Rothman is the Executive Director of Morgan Stanley
<page> Managed Futures, responsible for overseeing all aspects of
the firm's managed futures department.  He is also President and
a Director of MSFCM. 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 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
<page> 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 MSFCM.
Mr. Harris is currently Managing Director of Global Products &
<page> 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 MSFCM.  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 MSFCM. Mr.
Zafran is an Executive Director of Morgan Stanley, and in
September 2002, was named Chief Administrative Officer of Morgan
Stanley's Global Products and Services Division. Mr. Zafran
joined the firm in 1979 and has held various positions in
Corporate Accounting and the Insurance Department, including
<page> 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 MSFCM. 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 of the foregoing directors have indefinite terms.


<page> 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 417.091 Units of general partnership interest,
representing a 2.04 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
<page> accrued by the Partnership) of $2,582,647 for the year
ended December 31, 2002. In its capacity as the Partnership's
Trading Manager, MSFCM received management fees of $1,461,168 and
an incentive fee of $1,231,206 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 Rules 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.






<page>
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.
<page>
	(c)	Exhibits
	Refer to Exhibit Index on Page E-1 to E-2.


<page> SIGNATURES

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

				DEAN WITTER DIVERSIFIED FUTURES FUND III 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





<page>  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 conditions
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):






<page>
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		BY: /s/	Jeffrey A. Rothman
							Jeffrey A. Rothman
							President, Demeter Management
							Corporation, general partner
							of the registrant


























<page> 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):





<page>
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     BY: /s/ 	Jeffrey D. Hahn
                                 	Jeffrey D. Hahn
                                 	Chief Financial Officer,
                                 	Demeter Management Corporation,
                                 	general partner of the
                                 	registrant
























	<page> EXHIBIT INDEX

ITEM

3.01	Amended and Restated Limited Partnership Agreement of the
Partnership, dated as of May 14, 1990, is incorporated by
reference to Exhibit A of the Partnership's Prospectus
dated June 30, 1992, filed with the Securities and
Exchange Commission pursuant to Rule 424(6)(3) under the
Securities Act of 1933 on July 14, 1992.

3.02	Amendment No. 1 to the Limited Partnership Agreement of the
Partnership dated as of May 14, 1990, is incorporated by
reference to Exhibit 3.02 of the Partnership's Quarterly
Report on Form 10-Q (File No. 0-19116) filed with the
Securities and Exchange Commission on august 14, 2002.

10.01	Management Agreement among the Partnership, Demeter
Management Corporation and Dean Witter Futures & Currency
Management Inc., dated as of July 12, 1990, is incorporated
by reference to Exhibit 10.02 of the Partnership's
Registration Statement on Form S-1, (File No. 33-34989)
filed on May 21, 1990.

10.02	Amendment No. 1 to the Management Agreement, dated as of
June 30, 1992, is incorporated by reference to Exhibit
10.02 of the Partnership's Quarterly Report on Form 10-Q
(File No. 0-19116) filed the Securities and Exchange
Commission on August 14, 2002.

10.03	Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW Inc., dated as of May 19,
2000, is incorporated by reference to Exhibit 10.01 of the
Partnership's Form 8-K (File No. 0-19116) filed with the
Securities and Exchange Commission on November 13, 2001.

10.04	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. 0-19116) filed with the
Securities and Exchange Commission on November 13, 2001.

10.05	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. 0-19116) filed with the
Securities and Exchange Commission on November 13, 2001.




<page>
10.06	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-
19116) filed with the Securities and Exchange Commission on
November 13, 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-
19116) 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 of 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 of 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.


























<page>
                                                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 Diversified
Futures Fund III 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




	   <page>
                                     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 Diversified
Futures Fund III 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


<PAGE>

                                                                    Diversified
                                                                        Futures
                                                                       Fund III

          December 31, 2002
          Annual Report








[LOGO] Morgan Stanley


<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III 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.

<TABLE>
<CAPTION>
                                                                                                      INCEPTION-
                                                                                                       TO-DATE   ANNUALIZED
                               1990   1991 1992 1993 1994 1995  1996  1997 1998  1999  2000 2001 2002   RETURN     RETURN
FUND                            %      %    %    %    %    %     %     %    %     %     %    %    %       %          %
---------------------------------------------------------------------------------------------------------------------------
<S>                          <C>      <C>  <C>  <C>  <C>  <C>   <C>   <C>  <C>  <C>    <C>  <C>  <C>  <C>        <C>
Diversified Futures Fund III  (1.7)   27.1 15.8 7.6  5.9  (4.0) (4.7) 12.2 5.3  (10.6) 22.0 1.1  28.6   153.0       7.9
                             (2 mos.)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

DEMETER MANAGEMENT CORPORATION

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

DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.
ANNUAL REPORT
2002

Dear Limited Partner:

  This marks the thirteenth annual report for the Dean Witter Diversified
Futures Fund III L.P. (the "Fund"). The Fund began the year at a Net Asset
Value per Unit of $1,966.55 and increased by 28.6% to $2,529.72 on December 31,
2002. The Fund has increased by 153.0% since it began trading in November 1990
(a compound annualized return of 7.9%).

  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 previous year.

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

<PAGE>

  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

<PAGE>

DIVERSIFIED FUTURES FUND III L.P.

                                     [CHART]

                      Year ended December 31, 2002
                      ----------------------------
Currencies                      18.39%
Interest Rates                  20.52%
Stock Indices                   -0.42%
Energies                        -0.23%
Metals                          -6.77%
Agriculturals                   -1.79%

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



FACTORS INFLUENCING MONTHLY TRADING GAINS:
..  In the global interest rate futures markets, gains resulted from long
   positions in German, Japanese, and U.S. interest rate futures during the
   period from June through September, as well as in December, as prices
   trended higher amid continued uncertainty in the equity markets and negative
   economic data.
..  In the currency markets, gains were recorded from long positions in the
   Swiss franc, euro, Japanese yen, and Swedish krona relative to the U.S.
   dollar as the dollar weakened during the second quarter, as well as in
   December, amid investors' fears concerning increased global tensions and
   prolonged uncertainty regarding the U.S. economy. Additional currency gains
   were recorded from long positions in the euro relative to the British pound.

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

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III 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 Diversified Futures Fund III 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 Diversified Futures Fund III
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

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.

STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                                   ----------------------
                                                      2002        2001
                                                   ----------  ----------
                                                       $           $
     <S>                                           <C>         <C>

                                    ASSETS

     Equity in futures interests trading accounts:
       Cash                                        46,500,445  43,450,856
       Net unrealized gain on open contracts
        (MS&Co.)                                    7,068,528   1,699,966
       Net unrealized loss on open contracts
        (MSIL)                                     (1,209,528) (1,104,116)
                                                   ----------  ----------
       Total net unrealized gain on open
        contracts                                   5,859,000     595,850
                                                   ----------  ----------
         Total Trading Equity                      52,359,445  44,046,706

     Interest receivable (Morgan Stanley DW)           40,553      52,899
                                                   ----------  ----------
         Total Assets                              52,399,998  44,099,605
                                                   ==========  ==========

                       LIABILITIES AND PARTNERS' CAPITAL

     LIABILITIES
     Redemptions payable                              359,654     422,181
     Accrued management fees (MSFCM)                  131,613     110,607
     Administrative expenses payable                  113,252     113,277
                                                   ----------  ----------
         Total Liabilities                            604,519     646,065
                                                   ----------  ----------

     PARTNERS' CAPITAL
     Limited Partners (20,057.688 and
      21,679.185 Units, respectively)              50,740,355  42,633,308
     General Partner (417.091 Units)                1,055,124     820,232
                                                   ----------  ----------
         Total Partners' Capital                   51,795,479  43,453,540
                                                   ----------  ----------
         Total Liabilities and
          Partners' Capital                        52,399,998  44,099,605
                                                   ==========  ==========

     NET ASSET VALUE PER UNIT                        2,529.72    1,966.55
                                                   ==========  ==========
</TABLE>

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

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                FOR THE YEARS ENDED
                                                   DECEMBER 31,
                                         ---------------------------------
                                            2002       2001        2000
                                         ---------- ----------  ----------
                                             $          $           $
     <S>                                 <C>        <C>         <C>
     REVENUES
     Trading profit (loss):
       Realized                          10,540,492  9,125,249   6,754,178
       Net change in unrealized           5,263,150 (5,769,529)  4,405,551
                                         ---------- ----------  ----------
                                         15,803,642  3,355,720  11,159,729
     Proceeds from Litigation Settlement  1,107,007     --          --
                                         ---------- ----------  ----------
        Total Trading Results            16,910,649  3,355,720  11,159,729
     Interest income (Morgan Stanley DW)    618,816  1,282,610   2,085,588
                                         ---------- ----------  ----------
        Total                            17,529,465  4,638,330  13,245,317
                                         ---------- ----------  ----------
     EXPENSES
     Brokerage commissions
      (Morgan Stanley DW)                 2,582,647  2,387,626   2,687,957
     Management fees (MSFCM)              1,461,168  1,419,604   1,366,025
     Incentive fees (MSFCM)               1,231,206     --          --
     Administrative expenses                155,000     99,000      91,000
     Transaction fees and costs             121,110    113,418     153,843
                                         ---------- ----------  ----------
        Total                             5,551,131  4,019,648   4,298,825
                                         ---------- ----------  ----------
     NET INCOME                          11,978,334    618,682   8,946,492
                                         ========== ==========  ==========
     NET INCOME ALLOCATION:
     Limited Partners                    11,743,442    610,029   8,800,221
     General Partner                        234,892      8,653     146,271
     NET INCOME PER UNIT:
     Limited Partners                        563.17      20.74      350.70
     General Partner                         563.17      20.74      350.70
</TABLE>

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

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

<TABLE>
<CAPTION>
                          UNITS OF
                         PARTNERSHIP   LIMITED      GENERAL
                          INTEREST     PARTNERS     PARTNER      TOTAL
                         -----------  ----------   ---------  ----------
                                          $            $           $
      <S>                <C>          <C>          <C>        <C>
      Partners' Capital,
      December 31, 1999  30,422.619   47,862,260     665,308  48,527,568
      Net income             --        8,800,221     146,271   8,946,492
      Redemptions        (5,581.543)  (9,138,086)     --      (9,138,086)
                         ----------   ----------   ---------  ----------
      Partners' Capital,
      December 31, 2000  24,841.076   47,524,395     811,579  48,335,974
      Net income             --          610,029       8,653     618,682
      Redemptions        (2,744.800)  (5,501,116)     --      (5,501,116)
                         ----------   ----------   ---------  ----------
      Partners' Capital,
      December 31, 2001  22,096.276   42,633,308     820,232  43,453,540
      Net income             --       11,743,442     234,892  11,978,334
      Redemptions        (1,621.497)  (3,636,395)     --      (3,636,395)
                         ----------   ----------   ---------  ----------
      Partners' Capital,
      December 31, 2002  20,474.779   50,740,355   1,055,124  51,795,479
                         ==========   ==========   =========  ==========
</TABLE>

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

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                  FOR THE YEARS ENDED DECEMBER 31,
                                 ----------------------------------
                                    2002        2001        2000
                                 ----------  ----------  ----------
                                     $           $           $
<S>                              <C>         <C>         <C>
CASH FLOWS FROM
 OPERATING ACTIVITIES
Net income                       11,978,334     618,682   8,946,492
Noncash item included in net
 income:
  Net change in unrealized       (5,263,150)  5,769,529  (4,405,551)
(Increase) decrease in operating
 assets:
  Interest receivable
   (Morgan Stanley DW)               12,346     128,061      (2,502)
Increase (decrease) in operating
 liabilities:
  Accrued management fees
   (MSFCM)                           21,006     (13,141)     (1,466)
  Administrative expenses
   payable                              (25)     47,939      (3,894)
                                 ----------  ----------  ----------
Net cash provided by operating
 activities                       6,748,511   6,551,070   4,533,079
                                 ----------  ----------  ----------

CASH FLOWS FROM
 FINANCING ACTIVITIES
Decrease in redemptions payable     (62,527)   (243,860)   (529,049)
Redemptions of Units             (3,636,395) (5,501,116) (9,138,086)
                                 ----------  ----------  ----------
Net cash used for financing
 activities                      (3,698,922) (5,744,976) (9,667,135)
                                 ----------  ----------  ----------
Net increase (decrease) in cash   3,049,589     806,094  (5,134,056)

Balance at beginning of period   43,450,856  42,644,762  47,778,818
                                 ----------  ----------  ----------

Balance at end of period         46,500,445  43,450,856  42,644,762
                                 ==========  ==========  ==========
</TABLE>

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

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.

SCHEDULES OF INVESTMENTS

DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
FUTURES AND FORWARD CONTRACTS:                                    LONG GAIN/(LOSS) SHORT GAIN/(LOSS) NET UNREALIZED GAIN/(LOSS)
------------------------------                                    ---------------- ----------------- --------------------------
2002 PARTNERSHIP NET ASSETS: $51,795,479                                 $                 $                     $
<S>                                                               <C>              <C>               <C>
Foreign currency                                                      4,577,722               --              4,577,722
Commodity                                                            (1,253,213)          75,138             (1,178,075)
Interest rate                                                         1,394,584               --              1,394,584
                                                                     ----------        ---------             ----------
  Grand Total:                                                        4,719,093           75,138              4,794,231
                                                                     ==========        =========
  Unrealized Currency Gain                                                                                    1,064,769
                                                                                                             ----------
  Total Net Unrealized Gain per Statement of Financial Condition                                              5,859,000
                                                                                                             ==========

2001 PARTNERSHIP NET ASSETS: $43,453,540
Foreign currency                                                     (1,473,968)       1,237,593               (236,375)
Commodity                                                              (903,403)         295,223               (608,180)
Interest rate                                                            --              274,250                274,250
                                                                     ----------        ---------             ----------
  Grand Total:                                                       (2,377,371)       1,807,066               (570,305)
                                                                     ==========        =========
  Unrealized Currency Gain                                                                                    1,166,155
                                                                                                             ----------
  Total Net Unrealized Gain per Statement of Financial Condition                                                595,850
                                                                                                             ==========
</TABLE>
<TABLE>
<CAPTION>
FUTURES AND FORWARD CONTRACTS:                                    PERCENTAGE OF NET ASSETS # OF CONTRACTS/NOTIONAL AMOUNTS
------------------------------                                    ------------------------ -------------------------------
2002 PARTNERSHIP NET ASSETS: $51,795,479                                     %
<S>                                                               <C>                      <C>
Foreign currency                                                            8.84*                   2,816,511,564
Commodity                                                                  (2.27)                            1504
Interest rate                                                               2.69                             1222
                                                                           -----
  Grand Total:                                                              9.26
                                                                           =====
  Unrealized Currency Gain

  Total Net Unrealized Gain per Statement of Financial Condition


2001 PARTNERSHIP NET ASSETS: $43,453,540
Foreign currency                                                           (0.54)                   2,188,563,000
Commodity                                                                  (1.40)                             980
Interest rate                                                               0.63                              740
                                                                           -----
  Grand Total:                                                             (1.31)
                                                                           =====
  Unrealized Currency Gain

  Total Net Unrealized Gain per Statement of Financial Condition

</TABLE>

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

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

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.

NOTES TO FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION.  Dean Witter Diversified Futures Fund III 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 (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"). The trading manager is Morgan Stanley Futures & Currency Management
Inc. ("MSFCM or the "Trading Manager"). Demeter, Morgan Stanley DW, MS&Co.,
MSIL and MSFCM are wholly-owned subsidiaries of Morgan Stanley .
  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.

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III 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.
  Each month, Morgan Stanley DW pays the Partnership interest income based upon
80% of its average daily Net Assets for the month at a rate equal to the
average yield on 13-week U.S. Treasury bills. 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.

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III 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 in 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 combined are capped at  13/20 of 1% per month (a maximum 7.8%
annual rate) of the Partnership's Net Assets as of the last day of each month.

OPERATING EXPENSES.  The Partnership bears all operating expenses related to
its trading activities, to a maximum of  3/5 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 monthly management fees and may
incur incentive fees. Demeter bears all other operating expenses.

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.

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)


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.

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

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.

LITIGATION SETTLEMENT.  On February 27, 2002, the Partnership received
notification of a preliminary entitlement to payment from the Sumitomo Copper
Litigation Settlement Administrator and received payment of this settlement
award in the amount of $1,107,007 as of August 30, 2002.

--------------------------------------------------------------------------------
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.
Management fees and incentive fees (if any) incurred by the Partnership are
paid to MSFCM.

--------------------------------------------------------------------------------
3. TRADING MANAGER
Demeter, on behalf of the Partnership, has entered into a management agreement
with MSFCM to make all trading decisions for the Partnership.

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

  Compensation to MSFCM by the Partnership consists of a management fee and an
incentive fee as follows:

MANAGEMENT FEE.  The monthly management fee is accrued daily at the rate of
1/4 of 1% per month of the Net Assets (a 3% annual rate), as defined in the
management agreement, at each month-end.

INCENTIVE FEE.  The Partnership pays a quarterly incentive fee to MSFCM equal
to 15% of the trading profits earned by the Partnership as of the end of each
calendar quarter. Trading profits represent the amount by which profits from
futures and forwards trading 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 trading profits
occur. In those months in which trading profits are negative, previous
accruals, if any, during the incentive period are reduced.

--------------------------------------------------------------------------------
4. FINANCIAL INSTRUMENTS
The Partnership trades futures contracts and forward contracts on physical
commodities and other commodity interests. Futures and forwards represent
contracts for delayed delivery of an instrument at a specified date and price.
Risk arises from changes in the value of these contracts and the potential
inability of counterparties to perform under the terms of the contracts. There
are numerous factors which may significantly influence the market value of
these contracts, including interest rate volatility.
  The market value of 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.

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.

NOTES TO FINANCIAL STATEMENTS
(continued)

  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:

<TABLE>
<CAPTION>
                    NET UNREALIZED GAINS/
                  (LOSSES) ON OPEN CONTRACTS    LONGEST MATURITIES
                ------------------------------ ---------------------
                            OFF-                            OFF-
                EXCHANGE- EXCHANGE-            EXCHANGE-  EXCHANGE-
           YEAR  TRADED    TRADED      TOTAL    TRADED     TRADED
           ---- --------- ---------  --------- ---------- ----------
                    $         $          $
           <S>  <C>       <C>        <C>       <C>        <C>
           2002 1,281,277 4,577,723  5,859,000 Sept. 2004 April 2003
           2001   832,227  (236,377)   595,850 June 2003  April 2002
</TABLE>

  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.
  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

<PAGE>

DEAN WITTER DIVERSIFIED FUTURES FUND III L.P.

NOTES TO FINANCIAL STATEMENTS
(concluded)

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 $47,781,722 and $44,283,083 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.

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

<TABLE>
<CAPTION>
                                                             PER UNIT:
                                                             ---------
<S>                                                          <C>
NET ASSET VALUE, JANUARY 1, 2002:                            $1,966.55
                                                             ---------
NET OPERATING RESULTS:
 Realized Profit                                                495.35
 Unrealized Profit                                              248.25
 Proceeds from Litigation Settlement                             52.22
 Interest Income                                                 29.19
 Expenses                                                      (261.84)
                                                             ---------
 Net Income                                                     563.17
                                                             ---------

NET ASSET VALUE, DECEMBER 31, 2002:                          $2,529.72
                                                             =========

 Expense Ratio                                                   11.6%
 Net Income Ratio                                                25.0%
TOTAL RETURN                                                     28.6%
</TABLE>

<PAGE>

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                    Demeter Management Corporation
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